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Surety Bond Fraud in The Construction Industry


Fraudulent activities have proliferated across a wide range of industries, and the surety bond industry is no exception.

One of the most at-risk surety bonds are the construction surety bonds.  

Con artists have long posed challenges for companies. Other parties involved in the construction surety bond underwriting process are left dealing with hefty financial problems if these cons are successful.

Building Safety

However, these scams are not unavoidable. Keep yourself from becoming a victim of surety bond fraud by examining every aspect of your underwriting process, from the legitimacy of the bond company to tracking their outcomes in case claims are filed against their bonds.

There are three types of construction surety bonds (also classified as contract bonds): bid, performance, and payment bonds.

The surety company providing underwriting services for these should serve under the legal mandates of state laws. The terms and services provided by the bond company are indirectly defined by these laws.

What you need to watch out for…

In case of construction bond underwriting, the surety provides contractors and subcontractors with the bonds that best suit their project.

Since you rely on the terms of the bond to deal with any fallouts related to labor rights, district and city building regulations and so on, it is imperative that you ask the questions necessary to ascertain potential sureties’ performance. Complete the following:

  • Examine their credentials
  • Learn about their experience in construction bond underwriting
  • Get to know how the underwriters facilitate the process
  • Take into account their legal know-how regarding surety regulations

Additionally, contractors, architects, and engineers can ascertain the legitimacy of their surety bonds using the bond number against the US Treasury list. However, it is important to know that if relevant officials aren’t doing their job, this simple check may not be enough to ensure your safety.

Common construction surety bond frauds include surety companies with similar sounding names. The “knock-offs” intentionally fail to correct clients about their credentials, and issue worthless bonds.

Another common fraud—concerning the safety of obligees—is forged bid, payment and performance surety bonds. These are typically forged by principals who are denied services from traditional bonding sources.

Doing your bond and bond underwriter homework will help you identify any legal complexities that would otherwise go unnoticed.

Working with a suitable bonding company…

Choose a qualified and reputable team of underwriters for your contract surety bond needs and minimize security hassles. BondPro is incredibly vigilant. Reach out today to learn all about it!

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