If you are an unpaid sub-subcontractor on a federal government project, don’t forget to provide notice of your claim to the general contractor within 90 days and file a lawsuit no later than one year after last furnishing labor or material to the project or you will lose your payment bond rights. That’s exactly what happened in a recent federal court decision in which a sub-subcontractor lost its right to assert its $8.5 million claim against the co-sureties that issued a payment bond because the sub-subcontractor failed to give notice within 90 days and file a lawsuit within one year of last furnishing labor or material on a federal government project.
In United States ex rel. A&C Constr. & Installation Co. WLL v. Zurich Am. Ins. Co., Case No. 17 C 4307, 2019 WL 4034639 (N.D. Ill. Aug. 27, 2019), a sub-subcontractor provided mechanical and fire-suppression work on a project for the U.S. Army Corps of Engineers. After much disagreement on the project, the subcontractor terminated the sub-subcontractor. The sub-subcontractor then served an $8.5 million notice of claim 91 days after last working at the site and filed a lawsuit against, among others, the co-sureties that issued the payment bond for the project.
The co-sureties filed a motion for summary judgment and argued that the sub-subcontractor had lost its rights under the payment bond because the sub-subcontractor failed to provide the required notice of claim within 90 days and file a lawsuit to enforce its payment bond rights within one year of last working at the site. The court noted that the sub-subcontractor provided notice 91 days after last performing work (one day late) and filed a lawsuit one year and 22 days after the date of the last work (22 days late). Ultimately, the court agreed with the sureties, granted the motion for summary judgment, and held that the sub-subcontractor had lost its rights under the payment bond.
Bottom Line: Public payment bond deadlines are strictly enforced. Don’t forget to provide timely notice and, if necessary, file a lawsuit within the required deadlines. Otherwise, you may lose your rights under the payment bond and lose one of the best ways to ensure payment on federal government projects.