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Rodin, the thinking man


Bonding company “Proofs of Claim” and “Affidavits” with regard to payment bond claims
November 10, 2005

Bond principals - your customers - seem to be dropping with the same frequency and determination of the falling leaves in the Northeast in the autumn of 2005. Therefore, having the security for your contract claim in a payment bond may be the only realistic opportunity you have of getting paid if your customer (subcontractor) or the general contractor is bonded. (Always be mindful of the possibility of two payment bonds when you are second tier, defined as being a supplier or subcontractor to another subcontractor.)

At our firm, I have the dubious, unwanted and very distasteful task of being a de facto legal coroner on potential bond claims on an alarmingly frequent basis. You see, bond claimants have a mental fixation that if they write to the bonding company within one year from when they last work, this is all that is necessary to do for them to present and collect on a payment bond. (After the claim has sat for month after month at the bonding company – as it generally will - the erstwhile claimant is often a bit vague on what action to take next.)

The bonding companies help in creating an attitude of hopefulness and confusion. After you have sent them one or two letters, they will send you a “Proof of Claim” or “Affidavit” form to sign. This will call for a fair amount of information: when did you make deliveries; how much have you billed; how much have you been paid; what are you currently looking for; and, when did you last work. Frequently, they will ask you to attach relevant documents and invoices. You will be asked to sign this under the pains and penalties of perjury, often before a notary public.

Now, at this point, the claimant thinks ‘they’re getting ready to pay me’! This would seem a reasonable assumption, particularly when one compares this to various insurance situations and claims where such an assumption often proves to be true.

Please be very clear about two things:

First of all , as a matter of fact and law, a surety bond is not an insurance policy. Suretyship is simply not insurance. (The difference is explained in other articles on this site.)

Secondly , the only reason the bonding company requests this document is so that they can get you to commit to a number for the maximum amount of the claim and also have a sworn statement as to your last date of performance. That way, when you finally realize that you have to sue, it will be harder to make claim for those incomplete change orders and claims you would have been willing to forego had you simply been paid your base contract. And, if you get it to a lawyer too late, it will be harder for you to change the ‘last date of delivery’, which is frequently the bonding company’s only legal defense to the payment of claims. (The cynical among us might say that another reason the bonding companies send out these forms is to lull the bond claimant into a false sense of security so that the claimant stays away from a lawyer who better understands the process.)

As these documents are often reviewed, filled out and signed with no assistance of counsel, some folks don’t understand that getting this information for those purposes is the bonding company’s only motivation in requesting you to fill out such forms. They think, fairly reasonably, that this is the last step necessary to get paid. Yet, in the majority of situations, this is the absolutely last thing in the corporate bonding company’s profit-focused mind. (Please remember that within the surety industry, the following is considered a joke: “Hi! I am from the bonding company and I am here to help you!”)

Two ideas for you, gentle internet surfer.

First , there is nothing inherently wrong with filling out these forms, provided that you understand the purpose of the bonding company’s requesting you to do so. For a variety of reasons, this can be a helpful step in the bond claim process, particularly when the matter subsequently goes into suit. (You might consider trying to get the bonding company to commit in writing to when they will pay you or to at least when they will give you a final decision on your claim as a condition to your filling this form out and sending it in.)

Secondly, please keep in mind that the only way one can "file on the bond" is to sue the bond, which necessarily means filing an action in court. Bonding companies do have a legal and contractual obligation to pay your claim while it is still a claim. However, you are reading nothing new by my saying that some bonding companies do not pay easily and the fact that there have been a number of contacts back and forth between the claimant and the surety does not, in the ordinary course, excuse the claimant (that would be you) from meeting the statute of limitations by suing the bond in a timely manner as required either by an express term of the bond or by the statute the bond is given under (in a Miller Act or ‘little Miller Act’ situation on a public job, federal or state.)


Anatomy of a Complex Litigation
June 6, 2005

We all know that today’s business tools – primarily, the fax machine and the E-mail – have speeded up the pace of business life. The “LAW” is still, however, a reflective profession. The lawyer thinks – he ponders: it is his stock in trade.

Accordingly, we offer for the contemplation and sober pondering of the busy contractor today a very real "slice of life" docket report from an actual Sauer & Sauer case in the past. Many contractors do not really have a good idea of how a legal case begins, what happens in the middle, and how it ends. The great, great majority of cases settle before judgment. The more active, hard-fought dispute will typically end up looking very much like this case, represented by the following docket report:

Click here to view the docket report

 
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