QUESTION
Does a bond holder have to pay against a "second-tier" supplier's claim?
Asked on Aug 28th, 2012 on Business Law - Maryland
More details to this question:
Our HVAC supplier company supplied over $20,000 work of merchandise for a government job. Mechanical contractor went bankrupt and did not pay our invoices. The General Contractor refuses to talk to us, even though they had to get a bond for the job.
We sent all of the unpaid invoices and proof of delivery to the insurance company holding the bond. The insurance company is still "investigating," the matter, but a response letter from the general contractor stated that they did not feel we were allowed to collect on the bond because we were a "second-tier" supplier and did not have a right to collect.
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In general, the general contractor's bond insures the performance of the general contractor to its customer (in this case, the government). The bond does not guaranty that subcontractors of the general contractor will pay their vendors. It does not even guaranty that subcontractors of the general contract will be paid by the GC.
Answered on Aug 28th, 2012 at 4:46 PM