What’s the Difference Between Bonds and Insurance? Part 2
The first part of this article went over the application process and parties involved in bonds and insurance. A Raleigh contractor lawyer explains the difference between bonds and insurance when claims are involved in this part.
Insurance and bonds handle claims very differently. Put simply, insurance companies expect to pay claims and bond companies do not expect to pay claims.
When a claim needs to be made against insurance, the contractor is normally the person to file the claim. The insurance company is paid a premium by the contractor and ultimately expects to pay if something goes wrong on the jobsite.
Because the contractor does not want to fail in constructing the project, the bonding company does not plan to pay out to the owner. If there is a claim made against the bond due to failure of the contractor, the surety has to pay the owner on behalf of the general contractor. In that case, the general contractor is supposed to pay the money back to the surety.
A bond claim can make the general contractor’s life more difficult. Bonding in the future depends on the ability of the contractor to solve any problems with the owner instead of being paid by the bonding company. If the situation is such that the bond company has to pay the claim, it is unlikely the contractor will have enough liquid assets to pay back the surety. It may signal the end of the construction business.
Help with Claims
Cotney Attorneys & Consultants is knowledgeable in insurance and bond law. We help our clients with insurance claims and any construction-related bonds. We can help you with all the necessary documents for a bond claim, including preliminary, final, and Miller Act notices.
Our Raleigh construction law firm can advise you on how to handle a bond or insurance issue. Contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.