When a subcontractor goes unpaid on a public project, the subcontractor will almost always demand to be paid by the surety that issued the payment bond for the project. Sureties have many defenses to bond claims.
One of their favorite defenses is that the surety’s liability is coextensive with that of its principal’s (i.e., prime contractor’s) liability under the subcontract. In other words, sureties like to argue that unless the prime contractor is liable under the subcontract, the surety has no liability to the subcontractor for unpaid work.
Many courts have addressed the above “coextensive liability” argument and at least some have generally agreed that the surety’s liability is coextensive with the prime contractor’s liability. But there are courts that have found exceptions to that general rule under the federal law governing performance and payment bonds on most federal projects–the Miller Act.Continue Reading Surety Liability – Not Always Limited to the Principal’s Liability