Thoughts on construction law from Christopher G. Hill, Virginia construction lawyer, LEED AP, mediator, and member of the Virginia Legal Elite in Construction Law
We have often discussed payment and performance bonds here at Construction Law Musings, most often in the context of payment bond claims relating to federal and state-owned. construction projects. A late 2020 case out of the Eastern District of Virginia federal court examined what happens after such a claim, in this case, based upon a developer’s subdivision bonds, is made and negotiations commence between the surety and the claimant. Specifically, Fidelity & Deposit Co. of Maryland v. Ramsgate Corp., et. al. looked at claims for indemnity by a surety and the principal/indemnitors in the event that the Surety settled such a claim.
In the Ramsgate case, Surety provided two separate subdivision subcontract bonds to Ramsgate. Pursuant to those bonds and the indemnity clause of its indemnity agreement, the Surety sought reimbursement of its $80,000.00 settlement payment to the local building authority that it paid to resolve what was originally a claim for over $420,000.00 by the City. The project was started in 2002 and after many years of failures to complete (according to the City of Suffolk), the City made its claim for expenses in 2017. Ramsgate claimed that it completed the subdivisions in 2003. Continue reading Is Settling a Bond Claim in the Face of a Seemingly Clear Statute of Limitations Defense Bad Faith?
It seems to be Miller Act time here at Construction Law Musings, not to mention in the Federal District Courts here in Virginia. Last week I discussed what sort of work can form the basis for a Miller Act claim. This week I am discussing the effect of a mandatory mediation contract clause on the same type of claim. I have discussed both the benefits and the possible negative consequences of the inclusion of such a clause in your construction contract.
The recent case out of the Norfolk, Virginia Federal District Court recently explored the related question of whether such a clause can be enforced in the context of a Miller Act claim. In United States of America, for the use of Precision Air Conditioning of Brevard Inc. v. Cincinnati Insurance Company, the Court was confronted with a possible conflict between the legal requirement that any waiver of the right to pursue a Miller Act claim must be explicitly waived in writing and the clear contractual language between the general contractor and the plaintiff stating that mediation was a condition precedent to suit.
The Miller Act is close to my heart here at Construction Law Musings. Payment bond claims under the Miller Act help protect subcontractors on construction projects where the national government or its agencies are the owners of the property and therefore mechanic’s liens are unavailable. Even where you follow the proper claims process under this statute, the question remains as to what sorts of costs can be included in the claim.
A recent case out of the Eastern District of Virginia federal court in Alexandria, VA gives some insight into the limits of claims under the federal Miller Act. In Dickson v Forney Enterprises, Inc. et. al., the Court looked at the question of whether the costs of a project manager’s purely clerical duties can be included and correspondingly whether performing those duties can extend the relevant one-year limitations period for filing suit.
Recently, the legal/construction blogosphere (if that’s still a word) has been discussing a move by Ohio State University to eliminate the need for construction payment and performance bonds on public projects for the university. Needless to say, this move is not popular with certain portions of the construction industry. In fact the Surety and Fidelity Association of America (SFAA) and the American Subcontractors Association (ASA) filed a joint action to require OSU to require bonding on their projects.
These matters have been discussed here at Construction Law Musings and by both of my pals Doug Reiser (@douglasreiser) and Chris Cheatham (@chrischeatham) on their respective blogs (linked above) so I won’t get into the specifics of the particular construction projects or the legislation. I do however, want to get thoughts of all of you great readers on the implications of this move.
Map of Virginia highlighting Hanover County (Photo credit: Wikipedia)
You may have thought that a Virginia “Little Miller Act” bond claim, like a mechanic’s lien, could only be brought by those that provide materials and labor incorporated into the construction project. If you did, you aren’t alone.
