What a payment bond claim is and when you file one

A payment bond is a may provide that a contractor or supplier will pay you for work or materials you provided on a construction project. When the contractor doesn't pay, you file a claim against the bond instead of suing the contractor directly. The bond issuer—usually a surety company—then pays you if your claim is valid.

Payment bonds exist because many construction projects involve multiple layers: a general contractor, subcontractors, material suppliers, and laborers. If the general contractor runs out of money or disappears, the people who did the work have a way to get paid without waiting for a lawsuit to finish.

You typically file a payment bond claim when a contractor or subcontractor owes you money for work completed or materials delivered and has not paid after a reasonable time. The bond covers unpaid wages, unpaid invoices for labor or materials, and sometimes equipment rental.

Key Takeaways

  • Payment bonds on federal projects are required by law; on private projects they are optional but common on larger jobs.
  • You must send written notice to the contractor and the surety company within a specific window—usually 30 to 90 days depending on the project type—or lose your right to claim.
  • The surety company investigates your claim and decides whether to pay, deny, or negotiate a settlement.
  • Federal payment bond claims have different rules and shorter deadlines than private project claims.
  • If the surety denies your claim, you can sue the surety company or the contractor, but the bond amount is the maximum you can recover.

Federal projects versus private projects: different rules and deadlines

Federal construction projects—those funded by the U.S. government or using federal money—require payment bonds by law under the Miller Act. Private projects do not require them, though owners often demand them on larger jobs as a condition of the contract.

On a federal project, you have one year from the date the bond was issued to file a claim. On a private project, the deadline is usually 30 to 90 days from the date you last provided work or materials, but the exact window depends on what the bond document says. Read your contract or the bond paperwork to find the deadline that applies to your project.

Federal bonds also cover a broader group of claimants: general contractors, subcontractors, material suppliers, and laborers can all file. Private bonds sometimes limit who can claim. Always check the bond document to confirm you are covered.

How to file a payment bond claim

Start by gathering proof of what you are owed: invoices, delivery tickets, timesheets, photos of work completed, and any correspondence with the contractor about payment. You will need to show the date of the work or delivery, the amount owed, and evidence that you completed the work or delivered the materials as agreed.

Send a written notice of claim to both the contractor and the surety company. The notice must include your name and contact information, a description of the work or materials you provided, the dates, the amount owed, and the date you last provided work or materials. Send it by certified mail or a method that creates proof of delivery. Do not rely on email alone unless the bond document explicitly allows it.

Find the surety company's name and address on the bond document itself or ask the project owner or general contractor for it. If you cannot locate the surety, contact the contractor's insurance broker or the bonding company that issued the contractor's performance bond—they often issue payment bonds as well.

Keep copies of everything you send. The surety company will use your notice to open a file and begin investigating your claim.

What the surety company does after you file

Once the surety receives your notice, they will investigate whether your claim is valid. This means they will contact the contractor, review the contract, check whether you actually performed the work or delivered the materials, and verify the amount you claim is owed.

The surety may ask you for additional documentation: signed contracts, purchase orders, proof of delivery, bank statements showing the contractor did not pay, or photos of completed work. Respond promptly and provide everything they request. Delays in your response can slow the process.

The surety has no legal deadline to pay or deny your claim, but most resolve claims within 30 to 60 days if the facts are clear. If the claim is disputed—for example, if the contractor says the work was defective or incomplete—the investigation can take longer.

The surety will either pay your claim, deny it, or offer a settlement. If they pay, the check goes to you or, in some cases, to you and the contractor jointly. If they deny it, they will send you a written explanation of why.

Why a surety company might deny your claim

A surety can deny your claim for several reasons. The most common are: you missed the filing deadline, you did not provide proper written notice, you are not covered by the bond (for example, you are a laborer on a private bond that only covers suppliers), or the contractor disputes that the work was completed or was completed correctly.

The surety may also deny the claim if you were paid in part but claim the full amount, or if you failed to mitigate your damages—meaning you did not take reasonable steps to minimize your loss, such as stopping work when it became clear the contractor would not pay.

If the surety denies your claim, you have the right to sue the surety company in court. You can also sue the contractor directly for the unpaid amount. However, the bond amount is the maximum you can recover; you cannot recover more than the face value of the bond even if your damages are larger.

The difference between payment bonds and performance bonds

A performance bond guarantees that the contractor will complete the work according to the contract. A payment bond guarantees that the contractor will pay suppliers, subcontractors, and laborers. They are separate bonds with different purposes.

If a contractor abandons a project halfway through, the performance bond pays the owner to hire someone else to finish the work. The payment bond pays the people who did work before the contractor stopped paying. You may need to file claims on both bonds if the contractor failed to complete the work and failed to pay for what was done.

What to do if the surety denies your claim or pays only part of it

If the surety denies your claim, request a written explanation and review it carefully. Sometimes denials are based on a misunderstanding—for example, the surety may have missed your notice or misread the deadline. If you believe the denial is wrong, you can ask the surety to reconsider and provide additional evidence.

If the surety still refuses to pay, you can file a lawsuit against the surety company. You will need to prove that your claim was valid, that you filed it on time, and that the surety's denial was improper. Lawsuits are expensive and slow, so consider whether the amount owed justifies the cost.

You can also sue the contractor directly for the unpaid amount. This is often faster than suing the surety, but the contractor may not have money to pay a judgment. The advantage of suing the surety is that they have the bond funds available.

If the surety pays only part of your claim, you can negotiate for the rest or pursue the remaining balance through a lawsuit against the contractor.

Frequently Asked Questions

What is the deadline to file a payment bond claim?

On federal projects, you have one year from the date the bond was issued. On private projects, the deadline is usually 30 to 90 days from your last date of work or delivery, but check the bond document for the exact deadline. Missing the deadline means you lose the right to claim against the bond.

Can I file a payment bond claim if I am a laborer, not a contractor?

Yes, on federal projects. Federal payment bonds cover laborers, subcontractors, suppliers, and general contractors. On private projects, it depends on the bond language—some exclude laborers or only cover suppliers. Check the bond document or ask the project owner.

What if I do not know who the surety company is?

Ask the general contractor, the project owner, or the contractor's insurance broker. The bond document itself will name the surety. If you cannot locate it, contact your state's department of insurance or the bonding company that issued the contractor's performance bond—they often issue payment bonds as well.

Can the surety company refuse to pay if the contractor says the work was defective?

Yes. If the contractor disputes that the work was completed correctly or at all, the surety will investigate. You may need to provide evidence that the work met the contract requirements. If the dispute cannot be resolved, you may need to sue to prove your claim.

What is the maximum amount I can recover from a payment bond claim?

The maximum is the face value of the bond itself. If the bond is for $100,000 and you are owed $150,000, the bond will pay only $100,000. You can sue the contractor for the remaining $50,000, but the contractor may not have funds to pay.