How to Avoid Claims:
Avoiding claims on your bond is tantamount to your business’ success. Therefore, in order to protect you from claims, especially false claims, it is important to work with a surety bond producer who is knowledgeable and competent.
To review, a claim is when a client makes a formal accusation against you for something they feel you have done wrong, based on your contractual agreement. In order to avoid claims, you need to be certain, first, that you fulfill your contractual obligations. But, unfortunately sometimes, even if you fulfill your contractual obligations that does not mean that a client may not file a false claim against you. Working with a surety bond producer who will protect you and have your best interest at heart can be a comforting feeling during a stressful false claim.
A surety bond, although necessary, doesn’t protect you from claims. Instead, it protects the public from you not fulfilling your contractual obligations. Although the surety bond company will initially pay the claim, they will look to you for reimbursement (as stated in your indemnity agreement, which is an industry standard).
In order to avoid claims, it is important to follow government rules, fulfill all contractual agreements, document everything and, if a dispute arises, to try to resolve it with the complainant first.
If a claim is filed, both sides will be able to argue their case in front of the bonding company. If the bonding company agrees in your favor, they will help you fight it. But, if they believe that you have not followed government rules or fulfilled your contractual obligations, they will pay out the claim and then seek reimbursement from you.
Therefore, it is of the utmost importance for your business to choose a surety bond producer who has a proven history of customer service and loyalty. A great surety bond producer will:
Make sure you understand the suretyship and potential claim liabilities
Explain surety bond benefits (it is important that they explain why a particular surety bond is important for you to have).
Explain the indemnity agreement’s purpose.
Reinforce ways to avoid claims
Be able to explain legal language in layman’s terms.
It is important for you to assess if your surety bond producer is just looking for a quick sale or if they actually care about your business. We here at Surety Bond Professionals pride ourselves on our excellent customer service, decades of experience in the field and loyalty of past customers. Let us be in your corner and work with you when applying for your surety bond.
In summary:
Surety bonds are not meant to protect you, but instead protect the general public from you defaulting on your contractual agreement.
If a claim is filed (false or accurate) both sides will be able to argue their case to the surety bond company.
If found in your favor, the surety bond company will fight for you. If found against you, they will pay and seek reimbursement from you.
It is important to have a surety bond producer in your corner who is knowledgeable and can explain the different surety bond terms and legalities to you, in order to make sure that you understand the ramifications of not fulfilling your contractual obligations and following government rules.