Paying a claim

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What happens when a surety pays a claim?

[marietta68]

What happens when a surety pays a claim?

Upon receipt of a claim, the bond company will notify the principal that a claim was received, transmitting a copy of the claim as well as a copy of the indemnity agreement executed by the principal when the bond was written. Bond company will remind the principal of its duty to hold the bond company harmless from loss. From there, the lawyers get involved - the statutes in the state in which the bond is written will determine how quickly the claim is resolved (is there a mandatory time frame within the bond itself? Is the claim a result of a dispute between parties?)

If the surety does make payment, they'll have made a public filing of the indemnity agreement to secure their interest in the assets of the principal. Then they'll initiate their legal remedies to recover their expenses. The bond company obviously doesn't want to pay claims but will do its best to be an advocate for the principal in the case of a dispute - honest, forthright communication is always best.