In United States ex rel. Aarow/IET LLC v. Hartford Fire Insurance Company, an electrical subcontractor sued a general contractor and the payment bond surety for $2.9 million in additional labor costs incurred on a federal government project. The subcontractor alleged that the general contractor mismanaged the project and disrupted the subcontractor’s work. The general contractor filed a motion to dismiss, which the trial court granted because, among other reasons, the trial court believed that a no-damages-for-delay clause in the parties’ contract barred the subcontractor’s claim.
On appeal, the court vacated the trial court’s decision and held that the no-damages-for-delay clause did not bar the subcontractor’s claim. The court reasoned that although the subcontractor’s request for equitable adjustment it submitted to the general contractor, which was attached to the complaint, repeatedly referred to “delays” the subcontractor encountered, the subcontractor’s allegations that it was asserting a disruption claim were sufficient to avoid the no-damages-for-delay clause. Thus, the subcontractor’s disruption claim could go forward and the parties would have to continue litigating the case.
Bottom Line: If you are a contractor or subcontractor facing a no-damages-for-delay clause, you may potentially be able to avoid that clause by characterizing your claim as a disruption, inefficiency, or other claim. But ultimately, you will have to convince the court that your claim is not a delay claim. Notably, the Aarow court left open the question of whether a disruption claim is the same as a delay claim. If the court concluded that delay and disruption claims are the same thing, then the court would likely conclude that the subcontractor’s disruption claim is barred by the no-damages-for-delay clause in the parties’ contract.
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