How much does the surety pay if the GC defaults?

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Dennis Brunner

November 23, 2019 00:48

When a GC defaults/goes bankrupt and the actual project cost is higher than the amount the project is covered for, what does the surety pay? The actual cost or the coverage amount?

I assume a surety bond works somewhat like insurance and that if the project is covered for $500k but the actual cost is $750k, the surety will only pay $500k and the owner will have to come up with the remaining $250k. Does anyone know if that is correct? I never even heard the word surety until I began studying for CE.

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  Rashmi Mehadia November 28, 2019 20:01

  it is my understanding that Surety will only pay for the coverage which is $500K in the scenario you mention 

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