Every time they begin a project, contractors know that they could face a number of unexpected variables that impact their ability to work. Whether they face delays or other concerns under the contract, the owner might claim the contractor is in default.

If the obligee of the surety bond files a claim about a performance issue and declares the contractor in default, the surety will investigate the claim. Understanding the details involved in this step is critical for contractors facing these complex circumstances.

Three steps to expect in the investigation

The surety’s investigation is a critical step in this process. After all, the findings from this investigation can often streamline the procedure of obtaining a resolution for all parties.

Even so, contractors in New York should understand the process of the investigation, so they can prepare and protect their own best interests. During the investigation, the surety will:

  • Review the contract: The surety will carefully reassess the terms and details of the surety bond and the contract to specify the obligations of all parties before moving forward. It is often beneficial for the contractor to review the terms of the contract and their obligations under New York law as well.
  • Evaluate the progress: Then, the surety will analyze the progress the contractor has made on the project in accordance with the terms laid out in the contract. They will likely visit the project site to assess this.
  • Obtain statements: It is common for the surety to speak with both the contractor and the owner to understand both sides of the situation. This is only one reason why contractors should keep precise records of the project and milestones since it can help support their statement and defend against such a claim.

Essentially, the purpose of the investigation is to determine whether or not the claim is valid before any parties move forward. Therefore, the surety should conduct this investigation with an impartial and balanced approach.

Cooperation is critical

In the process of the surety’s investigation, it is often in the contractor’s best interests to maintain open communication with the surety and cooperate – especially if contractors believe that the owner improperly declared them in default.