In case of a claim, who does the surety bond pay first?

In the context of surety bonds, the project owner is typically the first party to be compensated in the event of a claim. This is because the surety bond is designed to protect the project owner against any potential financial loss resulting from the contractor's failure to fulfill their obligations under the contract. The bond acts as a guarantee that the contractor will complete the project according to the agreed specifications and timelines.

If a violation occurs, such as the contractor's inability to perform their duties or pay for labor and materials, the project owner can make a claim against the bond. The surety company, which underwrites the bond, will assess the claim and reimburse the project owner for legitimate costs incurred due to the contractor's default.

While laborers and subcontractors may also have rights to claims, they typically fall under the protection of mechanics' liens rather than direct payment priority from the surety bond. The chain of priority in payment from a surety bond usually directs funds first to the party that holds the contractual relationship with the bonded contractor, which is the project owner.