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Payment Bond Claim Procedure

Document Type: Procedure
Version: 1.0
Last Updated: February 2026
Distribute To: AR Team, Project Managers, Legal

Purpose​

Establish the process for making claims against payment bonds on public works and bonded private projects when payment is not received.

What is a Payment Bond?​

A payment bond is a surety bond that guarantees payment to subcontractors, suppliers, and laborers on a construction project. The surety (bonding company) agrees to pay claimants if the bonded contractor fails to pay.

Key Parties​

PartyRole
PrincipalContractor who obtained the bond
ObligeeProject owner (beneficiary)
SuretyBonding company guaranteeing payment
ClaimantParty making claim (sub, supplier)

When Payment Bonds Are Required​

Public Works (Generally Required)​

  • Federal projects (Miller Act): Over $150,000
  • California state projects: Over $25,000
  • Local agency projects: Varies by agency

Private Works​

  • Not required by law
  • May be required by owner or lender
  • Check contract documents

Who Can Make a Bond Claim?​

First Tier (Direct relationship with bonded contractor)​

  • Subcontractors
  • Material suppliers
  • Equipment lessors
  • Laborers

✅ Generally have direct claim rights

Second Tier (No direct relationship)​

  • Sub-subcontractors
  • Suppliers to subcontractors
  • Lower-tier claimants

⚠️ May have claim rights with proper notice

Third Tier and Below​

  • Generally NO claim rights on most bonds
  • Check specific bond language

Bond Claim Requirements​

Preliminary Notice Requirements​

California Public Works:

  • Preliminary notice required within 20 days of first work
  • For SECOND TIER claimants (no direct contract with GC)
  • First tier may not need preliminary notice (check bond)

Federal (Miller Act):

  • Written notice to prime contractor
  • Within 90 days of last work
  • Required for claimants without direct contract

Claim Deadlines​

Bond TypeNotice DeadlineLawsuit Deadline
California Public20 days (2nd tier)6 months from completion
Miller Act (Federal)90 days (2nd tier)1 year from last work
Private BondsPer bond termsPer bond terms

Step-by-Step Bond Claim Process​

Step 1: Identify the Bond​

Find Bond Information:

  1. Request copy from GC or owner
  2. Check project documents
  3. Public works: Request from awarding agency
  4. Federal: SAM.gov or agency records

Bond Information Needed:

  • Surety company name
  • Bond number
  • Bond amount (penal sum)
  • Principal (contractor) name
  • Obligee (owner) name

Step 2: Verify Claim Eligibility​

  • Claimant type eligible (check bond language)
  • Work was on bonded project
  • Preliminary notice sent (if required)
  • Claim amount documented
  • Deadline not passed

Step 3: Send Notice to Contractor (If Required)​

For Miller Act (Federal) - 2nd Tier Claimants:

Must send written notice within 90 days of last furnishing work

Notice Content:

  • Amount claimed
  • Name of party for whom work was done
  • Description of work
  • Date of last work

Service Method:

  • Any means providing written receipt
  • Certified mail recommended

Step 4: Prepare Bond Claim​

Bond Claim Content:

  1. Claimant Information

    • Company name and address
    • Contact person

  2. Project Information

    • Project name and location
    • Contract number
    • Bond number

  3. Principal Information

    • Contractor name (who you have contract with)
    • GC name (if different)

  4. Claim Details

    • Description of work/materials furnished
    • Amount claimed
    • Dates of work
    • Payment history

  5. Supporting Documentation

    • Contract or purchase order
    • Invoices
    • Proof of delivery/completion
    • Preliminary notice (if applicable)
    • Correspondence regarding payment

Step 5: Submit Claim to Surety​

Send Claim To:

  • Surety company (address on bond)
  • Copy to principal (contractor)
  • Copy to obligee (owner) - recommended

Service Method:

  • Certified mail, return receipt
  • Keep proof of delivery

Step 6: Surety Investigation​

What to Expect:

  1. Surety acknowledges receipt (typically 15-30 days)
  2. Surety investigates claim
  3. Surety may request additional documentation
  4. Surety contacts principal for response

Cooperate with Investigation:

  • Respond promptly to requests
  • Provide all documentation
  • Be accurate and thorough

Step 7: Resolution or Litigation​

Possible Outcomes:

1. Payment by Surety

  • Surety pays claim
  • You sign release
  • Surety pursues principal for reimbursement

2. Denial of Claim

  • Surety denies in writing
  • You may file lawsuit
  • Deadline: 1 year from last work (Miller Act) or per bond terms

3. Settlement

  • Negotiated partial payment
  • Document agreement in writing
  • Execute appropriate releases

Bond Claim Letter Template​

[Your Company Letterhead]

[Date]

VIA CERTIFIED MAIL - RETURN RECEIPT REQUESTED

[Surety Company Name]
[Address]
[City, State ZIP]

RE:    PAYMENT BOND CLAIM
       Bond No.: [Bond Number]
       Principal: [General Contractor Name]
       Project: [Project Name]
       Location: [Project Address]
       Owner: [Owner/Public Entity Name]

Dear Claims Department:

The undersigned hereby makes a claim against the above-
referenced payment bond.

CLAIMANT INFORMATION:
Company: [Your Company Name]
Address: [Your Address]
Contact: [Name]
Phone: [Phone]
Email: [Email]

CONTRACT RELATIONSHIP:
The claimant furnished labor, services, equipment, and/or 
materials under contract with:
[Name of party who hired you]

DESCRIPTION OF WORK/MATERIALS FURNISHED:
[Detailed description of work performed or materials supplied]

DATES OF WORK:
First Date: [First day of work]
Last Date: [Last day of work/delivery]

AMOUNT CLAIMED:
Original Contract: $[Amount]
Change Orders: $[Amount]
Total Earned: $[Amount]
Less Payments Received: $[Amount]
AMOUNT DUE: $[Amount]

SUPPORTING DOCUMENTATION ENCLOSED:
☐ Copy of contract/purchase order
☐ Invoices (list attached)
☐ Proof of delivery/completion
☐ Preliminary notice and proof of service
☐ Correspondence regarding payment
☐ Lien waivers provided to date

DEMAND:
Demand is hereby made for payment of the above amount 
pursuant to the terms of the payment bond.

Please contact the undersigned to discuss resolution of 
this claim.

Sincerely,

_________________________________
[Your Name]
[Your Title]
[Your Company Name]

Enclosures: As noted above

cc: [General Contractor Name] (Principal)
    [Owner Name] (Obligee)

Miller Act Claim (Federal Projects)​

Special Requirements​

Notice to Contractor (90 days):

  • Required for claimants without direct contract with GC
  • Must be in writing
  • Sent within 90 days of last furnishing work

Lawsuit Deadline:

  • No earlier than 90 days after last work
  • No later than 1 year after last work

Where to Sue:

  • U.S. District Court
  • District where contract was performed

California Public Works Bond Claim​

Deadlines​

ClaimantPreliminary NoticeLawsuit
1st Tier (direct contract with GC)Not required6 months
2nd Tier (sub-sub, supplier to sub)Within 20 days6 months

Stop Notice vs. Bond Claim​

On public works, you can pursue BOTH:

  • Stop notice against project funds
  • Bond claim against payment bond

Bond Claim Checklist​

Before Filing​

  • Bond obtained and reviewed
  • Claimant eligibility verified
  • Preliminary notice confirmed (if required)
  • Amount owed calculated
  • Documentation gathered
  • Deadline verified

Filing​

  • Claim letter prepared
  • Supporting documents attached
  • Sent to surety (certified mail)
  • Copy to principal
  • Copy to obligee
  • Proof of service retained

After Filing​

  • Response tracked
  • Information requests answered promptly
  • Lawsuit deadline calendared
  • Settlement discussions documented
  • Attorney engaged if needed

Common Bond Claim Mistakes​

❌ Avoid:

  • Missing notice deadlines
  • Failing to identify the bond
  • Incomplete documentation
  • Wrong claimant identification
  • Missing lawsuit deadline

✅ Best Practices:

  • Identify bond at project start
  • Send preliminary notice immediately
  • Keep meticulous records
  • File claim promptly when payment delayed
  • Consult attorney for large claims
  • Preliminary Notice Procedure
  • Stop Notice Procedure
  • Mechanics Lien Procedure
  • Collections Procedure

Federal:

  • Miller Act (40 U.S.C. § 3131-3134)

California:

  • Civil Code § 9550-9566 (Public Works Payment Bonds)
  • Civil Code § 8600-8614 (Private Works Payment Bonds)

This document provides general information. Consult with legal counsel for specific situations.

Template provided by support.construction. Verify current law with legal counsel.