Claim on Payment & Performance Bond

[MollieP]

In a quick nutshell: We obtained a bond on a 3 year maintenance contract. Due to issues with the customer, we cancelled the contract and the customer accepted the cancellation. Almost a year later, they made a claim on the bond. The bond company denied the claim. The customer has not responded whatsoever after their initial claim letter. The contract term has expired and I am being told the bond has expired. The bonding company holds a letter of credit from my bank that I have to keep renewing, although everything is expired. Shouldn't this be over with the expiration of the contract and bond or is my only option to file suit for the customer to release the bond? We've spent a ton of money on this already and I can't imagine having to spend more on filing suit. It is absolutely causing problems with us obtaining other bonds, etc. We're in MO. Any thoughts?

[Admin]

It sounds like the surety still feels that the bond still has potential for a claim. You need to get a letter from the obligee (whoever you posted the bond to) that is released in full. That should allow them to begin the process of returning your collateral.

I am astonished that the agent you worked with didn't inform you of this. Surely, it was not our agency that wrote the bond for you, as our agents would have guided you through this better.

Good luck and let me know if you have any further questions.

[MollieP]

Thank you so much for your reply. When the bond company previously sent the paperwork to release the bond, the obligee did not fill it out. I just recently asked my attorney that since the bond company denied the claim, can we not send the release paperwork to them again letting them know that it needs to be signed or we will be forced to file suit. He hasn't responded to me yet, but I would think we should try that first.

When purchasing the bond, I went through my regular insurance agent, who went through another agent, who went through the bond company and I do not get help there at all.

I'll keep pressing on re-submitting the release paperwork to the obligee. Thank you again for taking the time to respond!

[Admin]

I'm glad we could help. After all, that's the purpose of these forums!

Keep us posted on the outcome and let us know if we can help going forward.