Surety law

Subscribe to Surety law

When a party to a construction contract is faced with nonperformance of another party, often the desire to keep the project moving takes precedence in responding to the performance default. Problems arise, however, when the party who is owed the performance acts without first considering the terms and conditions of the written instruments governing the parties’ relationship on the project. For example, a construction contract may require the posting of payment and performance bonds guaranteeing, among other things, the performance of the bonded contract work by obligating the guarantor – a surety – to arrange for the completion of the work.  Where a party fails to perform as promised, the party promised the performance should first review the language of both the construction agreement and any associated surety bonds before taking action, so as not to lose the benefits of the contract and/or bonds, as was the case in Arch Ins. Co. v. Graphic Builders, LLC, No. CV 19-12445-NMG, 2021 WL 534807 (D. Mass. Feb. 12, 2021).
…
Continue Reading Obtaining the Benefits of a Performance Bond: Tread Carefully

It’s been said that as California goes, so goes the nation. If so, general contractors throughout the country may soon be taking on more responsibility for the unpaid wages of the workers on their construction projects than they might have expected. As of January 1, 2018, Assembly Bill 1701 makes general contractors liable for the unpaid wages of any employee who furnishes labor to or through the general contractor in furtherance of the prime contract; no matter the tier.

A.B. 1701 amended Section 218.7 of the California Labor Code so that general contractors on private construction projects “assume, and [are] liable for any debt” of a subcontractor of any tier for unpaid wages, fringe benefits or other employee contributions. The driving force behind the legislation was the labor unions. The legislation does not provide for a private right of action to the unpaid employees but instead permits the Commissioner of Labor to file suit on behalf of an unpaid employee(s) and also allows labor unions to sue for unpaid wages or benefits. There is a one year statute of limitations for such claims.…
Continue Reading California and Maryland Have Enacted Legislation Essentially Making The General Contractor the Guarantor for All Wages on the Project – Should Sureties Be Concerned?

My last article examined strategies for construction managers facing an owner bankruptcy. Now, looking through the lens of the owner, let’s examine best practices when it is the contractor who has filed for bankruptcy.

Throughout New England and the United States the construction industry continues to thrive with several new projects underway and on the horizon. Last month, Dodge Data & Analytics projected that total U.S. construction will increase in 2017 by five percent. Lenders and sureties continue to aggressively underwrite contractors and subcontractors allowing businesses to grow quickly. But growing too quickly can lead to cash flow and labor allocation issues both of which are ingredients for a project bankruptcy.

…
Continue Reading Recipe for a Project Bankruptcy: Part 2 The Contractor in Bankruptcy Through the Lens of the Owner

My last article examined strategies for construction managers facing an owner bankruptcy. Now, looking through the lens of the owner, let’s examine best practices when it is the contractor who has filed for bankruptcy.

Throughout New England and the United States the construction industry continues to thrive with several new projects underway and on the horizon. Last month, Dodge Data & Analytics projected that total U.S. construction will increase in 2017 by five percent. Lenders and sureties continue to aggressively underwrite contractors and subcontractors allowing businesses to grow quickly. But growing too quickly can lead to cash flow and labor allocation issues both of which are ingredients for a project bankruptcy.

…
Continue Reading Recipe for a Project Bankruptcy: Part 2 The Contractor in Bankruptcy Through the Lens of the Owner

A recently proposed bill to reduce the retainage amount for certain public work contracts to five percent and to allow a claimant to recover reasonable attorney’s fees and costs from a payment bond surety that fails to timely respond to a claim was unanimously approved by the General Assembly’s General Law Committee on March 11,…

Sureties writing public construction bonds under Chapter 149A in the Commonwealth of Massachusetts should pay close attention to Mass. Bill No. 3889, which seeks to create a Public Construction Surety Bond State Guarantee Fund.  The Fund would guarantee payment to claimants who have obtained judgment on their claims in a court of competent jurisdiction where…

There is legislation pending, Senate Bill 948, that would permit the Department of Administrative Services (the “DAS”) to waive the public bonding requirements for small, emerging and minority contractors. The Act would apply to projects less than $500,000 and would require participation by the contractor in a surety bond guarantee program – also created by…

A bill is wending its way through the Connecticut Legislature that would encourage greater participation by minority contractors on public works projects. The bill, Senate Bill 830, would require that by October 2015 the Department of Administrative Services create a new surety bond guarantee program for emerging contractors. “Emerging contractors” is politispeak for minority-owned…

In a unanimous decision issued in the case of Electrical Contractor’s Inc. v. Insurance Company of the State of Pennsylvania, SC 19105 (2014), the Connecticut Supreme Court recently declared that a public works payment bond surety does not forfeit its substantive defenses to a bond claim by failing either to pay or deny…