You’re a subcontractor working on a project that involves a performance and payment bond. The general contractor isn’t paying you for your work. What do you do? You sue the general contractor for breach of contract and the bonding company on the bond. Can you do anything else? Maybe.
Some states recognize a “bad-faith” claim on performance and payment bonds. A bad faith claim arises from the acts of the bonding company. Bad faith may consist of the bonding company: 1) misrepresenting material facts regarding coverage, 2) failing to reasonably respond to a claim, 3) refusing to pay a claim without conducting a reasonable investigation, 4) failing to settle a claim promptly once liability has become clear, 5) failing to provide reasonable explanation for denial of a claim, 6) appealing an adverse judgment for purpose of delaying or reducing payment, or 7) engaging in burdensome litigation for purpose of delaying or reducing payment.