Bond claims can be a contractor's worst nightmare, and are something everyone wishes to avoid. There are steps you can take beforehand to protect yourself, like making sure everyone is on the same page and creating a thorough contract document spells everything out. However, it may not be enough to prevent problems from occurring. Here are six steps you can take to protect yourself once things start to go wrong.

1. Negotiate before bringing in the bond company.

Unresolved issues on a project can strain even the best of relationships between parties involved in a project. Sometimes an objective third party is necessary in disputes, but filing a claim and bringing in the bond company gives the bond company control over whatever agreement is reached. It's better for everyone to try to come to an agreement before getting others involved.  

2. Don't withhold pay on this project because of unmet obligations elsewhere

Contractors, subcontractors, suppliers and even owners are known to work together on multiple projects. If someone is performing their obligations on one project and not another, however, you cannot refuse to pay them for projects where they have held up their end of the contract.

3. Go back through the contract to make sure you understand it

Before you file a claim (or respond to a claim filed against you), read through the contract again. It will tell you if you've fulfilled all your conditions and if someone has failed to fulfill theirs.  

4. Keep an eye on the bond claim timeline

There is a specific timeline and set of procedures that must be followed when filing a bond claim. Once you get receive notice, check into when and how it was filed. State and federal laws have differing timelines, but the claim can be invalidated if the paperwork is not filled out or filed properly. 

5. Document everything 

This should start with the first conversations you have and end with the completed project. Emails, photos, invoices, confirmation of payment and other records will be important in establishing that you did what you were supposed to do.

6. Know your indemnity

Check the general indemnity agreement you signed when you started working with the bond company. Did you sign on behalf of the company, or under your own name? If you did the latter, you personally will be asked to help reimburse the bond company for what they spend to get the project finished.

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