A municipal utility district hired a contractor to build a wastewater station and required performance and payment bonds from Great American Insurance. When the contractor defaulted, the district sued the surety for breach of good faith and fair dealing. The Texas Supreme Court ruled that commercial sureties have no common law duty of good faith and fair dealing to bond obligees, meaning you cannot sue a surety for bad faith the way you could sue an insurance company. This limits your legal options if a surety refuses to pay a valid claim.
You cannot sue a commercial surety for bad faith or breach of good faith and fair dealing—only for breach of the bond's actual terms
Read your bond documents carefully because the surety's only obligation is what the bond explicitly states, not implied duties of fairness