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Bonding and Insurance

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Recent Issues

  SUBCONTRACT INVOLVED MORE THAN FINANCING – RULED NOT A SHAM
A subcontractor contracted out the entire scope of work and financed the performance of the lower-tier sub for a fee. But, the subcontractor was contractually obligated to accomplish the work and was not merely a financier. This was a legitimate subcontract for purposes of recovering against a Miller Act payment bond.
  CUSTOM FABRICATION TRANSFORMS SUPPLIER INTO SUBCONTRACTOR

For purposes of public works payment bond protection, a party is a subcontractor, not a material supplier, if it is responsible for custom fabrication of items in accordance with the project drawings and specifications. The custom fabricator need not perform any work on site in order to be a subcontractor.
  BID BOND NOT CONDITIONED ON SUBCONTRACTING RELATIONSHIP
A disclosure letter from a low bidder stating that the bid bond surety assumed the bidder would award a subcontract to an existing client of the surety did not render the bond unenforceable. The bond was proper on its face and the low bid was responsive.
  PAYMENT SURETY LIABLE FOR SUB’S ATTORNEY FEES AND INTEREST
A broad form payment bond guaranteed not only payment of subcontractors for materials and labor, but also payment for the prime contractor’s breach of any obligation to the subs. A subcontractor could recover against the bond for attorney fees and interest authorized under the terms of the subcontract covered by the bond.
 
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