BONDS AND INSURANCE IN TEXAS CONSTRUCTION –
A PRIMER

1. Introduction and Perspective 1
2. The Prevalence/Availability of Performance and Payment Bonds in Construction in Texas 1
3. Understanding the Underwriting of Bonds 2
4. Bonds and Suretyship – What bonds are and what they are not 3
5. Default/The Surety's Involvement 7
6. Default – What the Obligee Should Expect From the Surety 8
7. Default – What the Defaulting Contractor (Principal) should Expect From the Surety 10
8. Completing the Defaulted Project 12
9. A Surety's Equitable Rights (Use of the Contract Balance, Materials and Equipment on Site) 14
10. Actions Against Sureties – Performance Bonds 15
11. Actions Against Sureties - Payment Bonds 16
12. Limitations/Actions Against Sureties 17
13. Insurance for Owners/Contractors – Highlights 18

Abstract

The greater emphasis will be on the use of bonds in the construction industry in Texas rather than on insurance coverages. Much has been published from the viewpoint of the surety and for the, use of claims persons and lawyers representing bonding companies. For example, the American Bar Association has, only in the last month or two, published an exhaustive (particularly along with the citations therein to other published articles) guide for the surety claims person in handling defaults. This presentation will be from the viewpoint of the owner or other bond obligee and the defaulting contractor (principal). The primary purpose is to set forth the essentials of the legal and economic impact of performance and payment bonds and to also alert contractors, owners and their attorneys as to what to expect from the surety in a default situation.

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