To collect on a surety bond, you file a written claim with the surety company that issued the bond, prove that the bonded party (the principal) failed to meet its obligations, document your damages, and do it all before the deadline that applies to your bond type. Your recovery is capped at the bond’s penal sum, so the money at stake is knowable from the start. The details differ depending on whether you’re claiming against a performance bond, a payment bond, or a license and permit bond, and federal construction claims run on a tighter clock than most.
Confirm the Bond Covers Your Situation
Before anything else, be sure you’re the party the bond protects and that your loss is the kind of loss the bond covers. Bonds don’t cover everyone harmed by a bad actor; they cover the “obligee,” the party the bond was written to protect.
A performance bond protects the project owner when a contractor fails to complete work according to the contract. If you’re the owner and the contractor walked off the job, you’re in the right place. Subcontractors and suppliers cannot claim against a performance bond.
A payment bond protects subcontractors and material suppliers who supplied labor or materials and weren’t paid. On public projects, where mechanic’s liens aren’t available against government property, the payment bond is often the only meaningful remedy for unpaid work.
A license and permit bond protects consumers or the public from a bonded business that breaks the laws governing its industry. Auto dealer bonds, contractor license bonds, and mortgage broker bonds all work this way. If a bonded business defrauded you or violated the licensing rules and you were harmed, you can file.
Matching your situation to the right bond type matters because the surety will deny a claim from someone the bond doesn’t protect, no matter how sympathetic the facts.
Find the Bond and Its Penal Sum
You need the bond number, the surety company’s name, and the bond’s penal sum. The penal sum is the maximum the surety will pay on all claims against that bond. If a bond has a penal sum of $100,000 and your provable damages are $150,000, the bond will yield at most $100,000; the remaining $50,000 would have to come from the principal directly, if the principal can pay at all.
If you don’t have a copy of the bond, the obligee who required it usually has one on file. For a licensing bond, that’s typically the state agency that issued the license. For a construction bond, that’s the project owner. On federal construction projects, the Miller Act requires performance and payment bonds on all contracts exceeding $100,000, and the payment bond amount generally equals the total contract price unless the contracting officer sets a lower figure.1Office of the Law Revision Counsel. 40 USC 3131 – Bonds of Contractors of Public Buildings or Works
For license and permit bonds, the penal sum is set by statute or regulation and often bears no relationship to what the principal might actually cost you. Knowing the ceiling early lets you weigh whether the recovery justifies the time and cost of pursuing it.
Meet the Deadline That Applies to Your Bond
Missing a deadline destroys otherwise valid claims. The windows are shorter than most people expect, and on payment bonds the notice clock can run out before you fully realize you have a problem.
Federal Miller Act Projects
For payment bond claims on federal construction projects, three deadlines matter, and they track your relationship to the general contractor:
- You cannot sue on the payment bond until at least 90 days after you last performed labor or supplied materials.2Office of the Law Revision Counsel. 40 USC 3133 – Rights of Persons Furnishing Labor or Material
- If you supplied a subcontractor rather than the general contractor, you must give written notice to the general contractor within 90 days of your last work or delivery, stating the amount claimed and identifying who you supplied.2Office of the Law Revision Counsel. 40 USC 3133 – Rights of Persons Furnishing Labor or Material
- Any lawsuit on the payment bond must be filed no later than one year after your last day of labor or delivery.2Office of the Law Revision Counsel. 40 USC 3133 – Rights of Persons Furnishing Labor or Material
State and Local Projects
All 50 states have their own bonding statutes for state-funded construction, commonly called “Little Miller Acts,” and they vary. Some require bonds on projects as low as $25,000; others set the threshold at $100,000 or higher. Many states require subcontractors and suppliers to send a preliminary notice before beginning work, and failing to do so can disqualify a later bond claim entirely. Deadlines to file a payment bond claim after project completion run from 75 days to one year depending on the state. Check the specific statute in your state as early in the project as you can.
License and Permit Bonds
Statutes of limitation for license and permit bond claims generally follow the state’s limitation period for written contracts, usually three to six years. Some bonds and licensing statutes set shorter deadlines of their own, so read the bond language and the statute that required it.
Build Your Claim File Before You Contact the Surety
Sureties investigate before they pay. The quality of your documentation shapes how fast and how well the investigation goes. Put the file together before you file, not after the surety starts asking questions.
- Bond information: the bond number, the principal’s full legal name, and the surety’s name and contact information.
- Contracts and agreements between you and the principal, including change orders, amendments, and purchase orders.
- Invoices and payment records showing what you were owed, what was paid, and what remains outstanding.
- A written description of the default with specific dates. “The contractor stopped showing up” is not enough. “The contractor last performed work on March 12 and has not returned despite written demands on March 20 and April 3” is.
- Proof of damages: financial losses, costs to complete unfinished work, costs to correct defective work, backed by receipts, bids, or expert estimates.
- Correspondence with the principal about the default — every letter, email, and text — showing you tried to resolve it before turning to the bond.
Send the Claim to the Surety
File the claim with the surety company, not with the principal and not with the obligee who required the bond. Many sureties have a claims department and a specific claim form. If no form exists, a detailed written letter covering everything above works. Address it to the claims department and put the bond number at the top.
Send it by a method that creates proof of delivery. Certified mail with return receipt is the standard. Some sureties accept online submissions or email, but unless the surety’s own instructions direct you there, use certified mail so a third party has recorded when the claim arrived. For federal payment bond claims, the statute specifically requires notice by a means providing “written, third-party verification of delivery.”2Office of the Law Revision Counsel. 40 USC 3133 – Rights of Persons Furnishing Labor or Material
Keep copies of everything you send. If a deadline dispute arises later, the delivery receipt is the evidence that protects you.
What the Surety Does Next
Once your claim is in, the surety investigates. Expect the surety to review your documents, contact the principal for its version, and often ask you for more information. On performance bond claims, an investigator may inspect the job site. On payment bond claims, the focus is verifying the amounts owed through invoices, lien waivers, and payment histories.
There is no universal statutory timeline for how long the investigation can take. A straightforward payment dispute may resolve in weeks; a complex performance bond default on a multi-phase project can take months. Industry practice calls for the surety to acknowledge the claim promptly, keep you updated, and decide within a reasonable period.
The investigation ends one of three ways: the surety pays in full, offers a negotiated settlement for less than the full amount, or denies the claim. On performance bonds, “payment” isn’t always a check. The surety may arrange for the original contractor to finish the work with your consent, hire a replacement contractor, or solicit bids and pay you the difference between those costs and the remaining contract balance, up to the penal sum.
If the Claim Is Denied
A denial is not always the end. The surety will send a written letter explaining the reason. Common ones include insufficient documentation of the default, the claim falling outside the bond’s coverage, a missed notice or filing deadline, or a genuine factual dispute between you and the principal that the surety isn’t positioned to resolve on paper.
Read the letter carefully. If the surety identified gaps in your evidence, you can often supplement your claim and ask for reconsideration. If the problem is a coverage dispute or a factual disagreement the surety won’t resolve in your favor, the next step is legal action. Depending on the bond’s terms and applicable law, that means arbitration or a lawsuit against the surety, and the deadlines to bring it can be tight. An attorney with surety experience is worth the fee on any claim large enough to justify it.
Sureties have a duty to investigate fairly and pay valid claims within a reasonable time. Courts in a number of states have held that surety bonds are sufficiently similar to insurance that the implied duty of good faith and fair dealing applies, which can expose a surety to damages beyond the penal sum, including consequential damages and, for egregious conduct, punitive damages. Bad faith claims are hard to win because the surety is entitled to investigate and to deny claims it reasonably believes are invalid. The line is between a defensible coverage dispute and stonewalling. If you believe a surety is dragging its feet or ignoring evidence to avoid paying, document every call, every unanswered email, and every unreasonable delay. That record is the foundation of any bad faith claim you bring later.