Bond Claims: When the last day worked isn’t always the last day for payment bond claims

01/05/2011

Both federal and Virginia bond claim limitations periods to file suit for a bond claim that tie to the last day work or materials were furnished (both statutes have a one year limit). But the actual last day work or materials were furnished is not necessarily the last day for purposes of that one year limit, as confirmed in a recent Federal Court decision out of the Alexandria Division of the Eastern District of Virginia last month.

That case involved a subcontractor who sought to recover for alleged payments due from its general contractor, and the general contractor’s surety, under the project’s “Miller Act” payment bond. The subcontractor’s last payment application was dated July 28, 2009, although its last certified payroll record date indicated work through August 26, 2009. The subcontractor did not file suit until over a year later, on September 24, 2010.

The subcontractor sought to avoid the limitations period by claiming that it returned to the site in June 2010 to replace a sidewalk. It claimed that work was part of the original subcontract work instead of warranty work, and that its last date for limitations period should accordingly run from June 2010. The judge disagreed and dismissed the subcontractor’s payment bond claim.

In doing so the judge noted that the last certified payroll record was the August 2009 date, and that moreover it was not probable that the subcontractor would have redone the sidewalk at its own expense (it hadn’t charged for the June work) unless it was warranty work. But the judge went on to note whether the work was characterized as warranty work or not wasn’t dispositive; rather the keys in that case were that 1) the last pay application was July 2009, which showed 100% billing, and that 2) the June 2010 sidewalk work was done without protest or other suggestion that it was change work or otherwise somehow original subcontract work.

The overall result is not surprising because the basic principal has been that corrective or repair work does not extend the one year limit for Federal bond claims since 1983, but what was surprising is that the court dismissed the case at the initial pleading stage based on the information in the complaint itself, which the judge concluded confirmed that as a matter of law the last day of work did not include the claimed sidewalk work.

Lesson learned: In considering your payment bond rights, keep the one year limit in mind and only include original contract work; correction of defective work or repairs following inspection of the work do not count to extend the period in which you must act to preserve your claim. In that regard, payment applications and certified payroll records, and the information in them, can be used to establish the last day.

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