Bonding in Montana

A surety bond is a 3-party promise. The contractor (principal) pays a surety company for a bond that a customer, subcontractor, or a public body (obligee) can draw against if the contractor breaks the rules the bond covers. The surety pays valid claims up to the face value. The contractor then owes the surety for what the surety paid out. A bond protects the public. It is not insurance for the contractor. Montana does not require a statewide license bond for individual electricians or plumbers at the Business Standards Division, and no statewide HVAC license exists. Montana's Construction Contractor Registration program at the Department of Labor & Industry focuses on workers' compensation verification rather than a surety bond. Bonds in Montana show up in 3 distinct places. Keep them separate. 1. Municipal contractor bonds. Montana cities and counties sometimes require a small surety bond for contractor registration inside the jurisdiction. Amounts vary. Verify with the city's building or licensing department before you post. Source: Montana League of Cities and Towns (https://www.mtleague.org/) for municipal directory; individual city websites for current bond amount. 2. Public works payment and performance bonds (Montana's Little Miller Act, MCA 18-2-201). Under Montana Code Annotated (MCA) 18-2-201, the contractor on a public construction contract must execute a performance bond and a payment bond in amounts prescribed by statute before starting work. The performance bond protects the public body if the contractor fails to complete. The payment bond protects subcontractors and suppliers. Both bonds must be written by a surety authorized in Montana. These are project bonds, not license bonds. Source: Montana MCA Title 18 Chapter 2 (https://leg.mt.gov/bills/mca/title_0180/chapter_0020/parts_index.html). 3. Mechanic's-lien bonds (MCA 71-3). A contractor or property owner can post a surety bond under MCA Title 71 Chapter 3 to release a construction lien from a property. The claim attaches to the bond instead of the real estate. This is a project-specific lien tool, not a license bond. Construction Contractor Registration. Separate from bonds, Montana requires every person or firm performing construction work with employees to register with DLI under MCA 39-9 and to maintain active workers' compensation coverage. Construction Contractor Registration is verified through the ERD contractor registry (https://erdcontractors.mt.gov/). It is not a surety bond; it is a workers'-comp and wage compliance mechanism. Premium math. A surety charges an annual premium, typically 1 percent to 3 percent of the bond face value for a contractor with strong credit and no prior claims. Weaker credit, tax liens, prior surety losses, or a new business can push the rate to 5 percent to 10 percent or more. A $5,000 municipal bond at 2 percent is $100 per year. Project payment and performance bonds on Montana public works are priced per job, usually 0.5 percent to 3 percent of the contract price. What claims look like. A homeowner, subcontractor, or public body files a complaint with the issuing authority or sues in state court. If the claim falls within the bond's coverage and is reduced to a judgment or administrative order, the surety pays and then pursues the contractor for reimbursement. Bond, insurance, and workers' compensation are separate requirements. A Montana contractor carries any applicable municipal or project bond, general liability insurance at whatever level the work and contract require, Montana Construction Contractor Registration with active workers' comp coverage under MCA 39-71 (Workers' Compensation Act), and any board-required license (state electrician or plumber, where applicable).