The Expert Podcast

If you have surety bonds on your construction projects, make sure you abide by the terms of the bond or the trigger terms in the contract to ensure you retain your coverage. Here's a project where a general contractor had a three-million-dollar surety bond to cover them and their subcontractors. The insurance company was released from having to pay on that bond because the general contractor did not terminate the subcontractor due to faulty workmanship. They were made aware that the subcontractor was doing things incorrectly, allegedly according to this article, and they didn't take fast enough action to remove that risk from their surety. By doing that, it released the surety company from having to pay out on the bond.

This is obviously something they had knowledge of, so you want to make sure you're aware of what's going on with your construction projects. It's an important wake-up call: just because you have a bond doesn't mean that you're completely out of the woods. You want to make sure that you're abiding by the terms of the contract yourself, and if you're aware of risks, you're not allowing them to extend or continue on a project. At that point, the bond may not protect you or obligate the way you thought it would.