A.A. Bellucci Constr. Co. v. United States Surety Co.
2010 U.S. Dist. LEXIS 8369 (M.D. Pa., Feb. 2, 2010)

CSI Engineering, DC, P.C. (“CSI”) entered into a contract with a division of the U.S. Department of Labor to act as the general contractor for one of its construction projects. In turn, CSI subcontracted a portion of the work to A.A. Bellucci (“Bellucci”). The contract between CSI and Bellucci required mediation and arbitration to resolve disputes between them. To secure payment to all of its subcontractors, including Bellucci, CSI furnished Miller Act payment bonds from United States Surety Company (“Surety”) and U.S. Specialty Insurance Company (“Speciality”).
Continue Reading U.S. District Court in Pennsylvania Stays Miller Act Suit Against Sureties Pending Arbitration Where Sureties Stipulate to Be Bound By Decision in Arbitration Between Contractor and Subcontractor

Hunt Construction Group, Inc. v. National Wrecking Corporation
587 F.3d 1119; 2009 U.S. App. LEXIS 25909 (2009)

Plaintiff, Hunt Construction Group (“Hunt”), commenced an action against one of its subcontractors, National Wrecking Corporation (“National”) and against two sureties (the “Sureties”) on National’s performance bond. The Sureties argued that Hunt failed to give timely notice of default depriving the Sureties of a realistic opportunity to exercise their rights under the bond to cure National’s defective performance.
Continue Reading DC Court of Appeals Holds Contractor’s Failure to Declare Subcontractor in Default and Provide Subcontractor’s Surety with Notice Before Taking Over Completion of Subcontractor’s Work Released Surety from Liability

U.S. for Use and Benefit of Greenmoor, Inc. v. Travelers Casualty and Surety Co.
2009 U.S. Dist. LEXIS 113153 (W.D. PA 12/04/2009)

The Court held that a properly terminated subcontractor was nevertheless entitled to payment for contract work and extras performed prior to termination, less certain offsets for contractor’s damages. Subcontractor was also entitled to interest at 1% per month under a prompt payment statute, but because it was properly terminated was not entitled to lost profit on the terminated portion of the subcontract.
Continue Reading US District Court for Western District of PA Holds Contractor Owes Properly Terminated Subcontractor Payment for Work Performed Prior to Termination Plus CASPA Interest

U.S. ex rel Pioneer Construction v. Pride Enterprises
2009 U.S. Dist. LEXIS 110935 (M.D. Pa., November 27, 2009)

The court denied the contractor’s claim for summary judgment, which was based on the theory that the subcontractor’s claims were barred by the releases it submitted with partial payment requests, holding that the contractor’s submission of the subcontractor’s claims to the government as part of an equitable adjustment request supported an inference that the parties by course of performance did not regard the releases as barring the claims. Further, the court held that notwithstanding Pennsylvania law to the contrary, federal law allows recovery of delay costs under a Miller Act payment bond.
Continue Reading US District Court for Middle District of Pennsylvania Holds Course of Performance May Vitiate Partial Payment Releases and Delay Costs May Be Recovered Under Federal Miller Act Payment Bond

Kiski Area Sch. Dist. v. Mid-State Surety Corp.
2008 Pa. LEXIS 2260 (Dec. 17, 1988)

Kiski Area School District (“the District”) entered into an agreement with contractor, Lanmark, for the construction and renovation of an elementary school. Mid-State Surety Corporation (“Midstate”) provided a performance bond for the project naming Lanmark as principal and the District as obligee.

The District became dissatisfied with the quality and timeliness of Lanmark’s work, declared it in default, withheld final payment and demanded that Mid-State assume responsibility for the remaining work. The District did not remit the remaining contract balance to Mid-State. Lanmark filed suit against the District seeking payment of the contract balance (the “Lanmark Matter”). The District counterclaimed and joined Mid-State. The District also filed a separate action against Lanmark and Mid-State (“the District Matter”), which was stayed pending resolution of the Lanmark Matter.
Continue Reading Pennsylvania Supreme Court Holds That, Absent Express Reservation Of Rights, Release Of Contractor Also Discharges Surety

RLI Insurance Company v. Indian River School District
2008 U.S. Dist. LEXIS 43303 (D. Del. June 3, 2008)
In this case, the United States District Court for the District of Delaware held that a surety’s claim against an architect and construction manager for improper approval of payments to the principal was barred by the economic loss doctrine. Additionally, the court held that the surety was not released of its liability to the owner where the owner wrongfully paid the contractor, as the owner had made those payments in reliance on certifications from the architect and the construction manager.
Continue Reading U.S. District Court in Delaware Holds Surety’s Claims Against Construction Manager and Architect Barred by Economic Loss Doctrine; Surety Liable on Performance Bond Where Owner Overpays Contractor in Good Faith Reliance on Architect’s and Construction Manager’s Certifications

Sloan Constr. Co. v. Southco Grassing, Inc.
2008 S.C. LEXIS 99 (S.C. Mar. 24, 2008)
The South Carolina Department of Transportation (SCDOT) contracted with general contractor Southco Grassing, Inc. in connection with state highway maintenance project and, in accordance with the applicable statutory bond requirements, Southco provided a payment bond for the benefit of its subcontractors and suppliers in the full contract amount. Subsequently, Southco entered into a subcontract with subcontractor Sloan to perform asphalt paving work. In June 2001, before the paving work was completed, Southco’s payment bond was cancelled when the bond’s issuer became insolvent. Notice of the insolvency and cancellation was provided to SCDOT and SCDOT requested in writing that the Southco provide a replacement bond within seven days. Southco did not reply. In the meantime, Sloan completed its work, but in January 2002 notified SCDOT that it still had not received payment from Southco for its subcontract valued at approximately $52,000 and that the payment bond had never been replaced. In March 2003, despite that it had not made full payment to Sloan, Southco advised SCDOT that it had made all payments on the project, and SCDOT released final retainage to Southco.
Continue Reading Supreme Court of South Carolina Finds Public Owner’s Failure to Require General Contractor’s Compliance with Statutory Bond Requirements Supports Cause of Action by Subcontractor Against Owner under South Carolina Statute

Current Builders of Florida, Inc. v. First Sealord Surety, Inc.
2008 Fla. App. LEXIS 4698 (April 2, 2008)
The Court of Appeals of Florida held that a jury finding that a contractor which terminated a subcontractor failed to provide notice in accordance with the terms of a performance bond was sustainable, given that the contractor did not tender the remaining contract balance to the surety or give it an opportunity to provide for the completion of the work. Accordingly, the surety’s obligations under the bond were not triggered.
Continue Reading Florida Court Holds That Contractor’s Failure To Provide Notice Of Default In Accordance With Terms Of Performance Bond Discharged Surety From Its Obligations

Hunt Construction Group, Inc. v. National Wrecking Corp.
2008 U.S. LEXIS 27859 (D.D.C. Apr. 8, 2008)
The United States District Court for the District of Columbia discussed the split of authority on the issue of when a surety’s obligations are triggered under a performance bond, ultimately holding that a surety is liable only if timely notice is given of the obligee’s default, allowing the surety to exercise its options under the performance bond.
Hunt Construction Group (“Hunt”) was the prime contractor on a hotel construction project in Washington, D.C. National Wrecking Corporation (“NWC”) subcontracted with Hunt to perform excavation and other work on the hotel project. In April 2004, approximately five months after entering into the subcontract, NWC completed the work. Hunt alleged that NWC delayed in completing the excavation work, and as a result, Hunt was required to accelerate other parts of the work, so that it incurred costs in excess of $800,000 due to NWC’s delay.
Continue Reading DC District Court Finds Excavator’s Surety Not Liable Where Prime Contractor Delayed Notifying Surety of Excavator’s Default Until After Excavator’s Work Was Complete

John A. Russell Corp. v. Fine Line Drywall, Inc. and Acstar Insurance Co.
2008 U.S. Dist. LEXIS 13098 (D.Vt., February 21, 2008)
The United States District Court for the District of Vermont held that only a material breach of contract constitutes a default triggering the year-long period provided by 8 V.S.A. § 3663 for commencing an action.
In John Russell Corp., Subcontractor began work on the metal framing and gypsum drywall systems of a project in November 2003 and ceased work on November 10, 2004. Prior to beginning work, Subcontractor secured a performance and payment bond (the “Bond”) with Contractor as obligee. During the Fall of 2004, Subcontractor’s presence at the job site was sporadic. Daily work logs indicated that Subcontractor was absent from the job site on six occasions during September and October 2004, the periods of absence ranging from one to five days. After November 10, 2004, Subcontractor never returned to the work site. Contractor made repeated attempts to contact Subcontractor to determine whether it planned to complete performance of its obligations under the Subcontract. Subcontractor did not respond to any of those attempts and had no further communication with Contractor. By early December 2004, Contractor “suspected [that Subcontractor had] abandoned the project.”
Continue Reading U.S. District Court in Vermont Holds That Material Breach of Contract Required to Constitute Default Under Performance Bond So As to Trigger Surety Obligation and Commence Running of Statute of Limitations – Nonmaterial Breaches Preceding Abandonment Did Not Commence Running of Statute, So That Case Was Not Time Barred