Payment Bond Does Not Cover Claim for Lost Work Opportunity

A subcontractor claiming that the general contractor failed to use and pay for a minimum number of workers made a claim against the GC’s payment bond, for the value of the workers not hired. A federal court has held that the Miller Act bond does not cover that claim. It may be a valid breach of contract claim, but it did not represent the value of labor or materials supplied but not paid for.

On a project for the US Navy, a subcontract called for the sub to supply workers to the GC, and stated that the sub will “have a minimum of 12 consecutive weeks to provide a minimum of 20 workers over the 12 weeks period.” The GC hired twenty or more workers for several weeks, but after seeking to renegotiate the deal or reach an agreed payout number, unilaterally reduced the number of workers being hired. The sub sued the GC and its payment bond surety, and the surety moved for summary judgment.

As the court noted, the Miller Act is intended to protect those providing labor or materials that have not been paid for. But the Miller Act is not intended to cover any breach of contract claim, if the claim is not based on the value of labor, materials and the like supplied to the project: “Because [the sub] seeks damages arising out of an agreement to pay for twenty laborers not actually used—rather than "labor performed" or "materials furnished"—the Miller Act does not provide the remedy.” This might be a viable claim for breach of contract, but it was not a viable claim against the payment bond.

The case is Allan Spear Constr., LLC v. Caddell Constr. Co. (DE), LLC, 2018 U.S. Dist. LEXIS 32128 (D. S.C., Feb. 28, 2018) (Lexis subscription required).

About Stan Martin

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Stan Martin holds a law degree and an undergraduate degree in architecture. He has been involved with the construction industry for more than 45 years, working in construction prior to law school and beginning his construction law practice. During his career, he has been actively involved with the Associated General Contractors of Massachusetts, the Boston Society of Architects, the American Arbitration Association, and the Massachusetts Building Congress.

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