Subcontractor’s Bond Claim Barred For Failure to Provide Proper Notice

Subcontractor’s Bond Claim Barred For Failure to Provide Proper Notice

Jason Callicoat - Querrey & Harrow, Ltd. - Chicago - October 23, 2020

            The U.S. Court of Appeals, sitting in Chicago, recently held that a subcontractor could not recover any money from the general contractor’s bond because the subcontractor failed to strictly comply with the 90-day notice requirement contained in the Miller Act, 40 USC § 3131, et seq. In A&C Construction & Installation, Co. WLL v. Zurich Am. Ins. Co., 963 F.3d 705 (7th Cir. 2020), the court explainedJason Callicoat that the Miller Act seeks to protect subcontractors against non-payment for work performed on federal government construction projects by requiring the general contractor to provide a payment bond. If the subcontractor is not fully paid for its work, it can make a claim on that bond, but it must provide notice of non-payment within 90 days of the last day the subcontractor worked on the project.

            The subcontractor in this case claimed it was not paid about $8.5 million for construction work it performed on an airbase in Qatar. The subcontractor filed suit under the Miller Act, seeking to recover from the general contractor’s bond. The bond company argued that the subcontractor’s last day of work on the project was, at the latest, May 16, 2016. The subcontractor provided its notice of nonpayment on August 16, 2016, which was 91 days later.

The subcontractor argued that its last day of work was actually February 28, 2017, the project’s completion date. The subcontractor claimed that its equipment was still on-site for others’ use and that it continued to supervise one of its own subcontractors on the project through the final completion date. As a result, the subcontractor argued that it needed to provide its notice within 90 days of February 28, 2017.

            The court decided that the subcontractor’s notice was invalid, even if the court assumed that the last day of work was February 28, 2017. The court explained that the 90-day notice requirement was a strict pre-condition to the right to bring a civil lawsuit to obtain payment from the bond. The Miller Act was unambiguous on the timing of the notice requirement, and the court decided that it had to enforce the Act as it was written. Because August 16, 2016, was not “within 90 days” of February 28, 2017, the subcontractor did not provide the proper written notice in compliance with the Miller Act. As a result, the appellate court held that the lower court was correct in granting summary judgment against the subcontractor.  

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