Timing is everything when it comes to claims in the construction industry. Missing a deadline can be devastating to a contractor’s right to payment. When working on federal projects, these deadlines are governed by the Federal Miller Act, and they’re strictly enforced.
This was a hard lesson learned recently for a Louisiana contractor working on a federal dredging project. The contractor had incorrectly relied on a surety’s request for additional information and ended up filing a lawsuit to enforce their claim against the payment bond a few days late.
Miller Act bond claim enforcement deadline
The Federal Miller Act requires general contractors to post a payment bond to guarantee that all subs and suppliers on a federal project get paid. Securing the right to make a claim against the bond on a federal project is, in the most basic sense, a 2-step process.
First, a notice of your claim must be sent to the general contractor within 90 days of the claimant’s last date of furnishing labor and/or materials to the project. Second, a lawsuit to enforce the claim if unpaid needs to be filed no later than one year from the claimant’s last furnishing date.
That being said, once a formal notice of the claim has been served, the surety who provided the bond will likely reach out to gather more information to help investigate the claim. While this additional correspondence can help expedite your claim, these are not mandated by law. Claimants should not assume that ongoing discussions with a surety will in any way affect the deadlines required under the Federal Miller Act.
A recent case highlights this issue. A Louisiana contractor on a federal dredging project filed their lawsuit to enforce their claim a few days after the deadline. The case ended up in the Fifth Circuit Court of Appeals for the Southern District of Texas. Where the court refused to allow the untimely claim, despite the contractor’s pleas that they were misled by the surety’s correspondence.
Contractor misses enforcement deadline of Miller Act claim
The case in question is Diamond Services Corp. v. Travelers Casualty & Surety Co. of America.
- Owner: US Army Corp. of Engineers (USACE)
- Surety: Travelers Casualty & Surety Co. of America (Travelers)
- General Contractor: T.W. LaQuay Marine, LLC (TW)
- Contractor: Diamond Services Corp. (Diamond)
TW was awarded a contract by the USACE for a dredging project along the Texas Gulf Coast. Pursuant to the Miller Act requirements, TW posted a payment bond issued by Travelers. As the project progressed, TW leased a vessel from Great Lakes Dock and Dredge (Great Lakes). However, the vessel was damaged during use.
Great Lakes and TW jointly bid out the repairs necessary for the completion of the project. Diamond was awarded the contract, but explicitly disclaimed liability for the costs of the repairs in writing and informed Diamond that their contract was with TW, not Great Lakes.
Diamond completed the repairs on March 24, 2020, and submitted an invoice to TW for $23,781.19 for the work. TW never objected to the invoice, but also never made payment. Subsequently, Diamond submitted a claim against the payment bond.
Travelers responded by sending a claim form along with a letter requesting additional information on January 7, 2021. Diamond filled out the form with a full explanation and support of the claim. Travelers eventually denied the claim on March 26. Upon receipt of the denial, Diamond filed suit to enforce their claim on the bond on March 29, which is one year and five days after the last date they furnished labor and/or materials to the project.
Diamond acknowledged that the claim was filed outside the statute of limitations for actions to enforce claims against a bond, but argued the defense of equitable estoppel.
Equitable estoppel is a legal defense that is defined as a “legal constraint preventing the first party from gaining advantage over the second party if the second party claims injury due to reliance on misrepresentations by the first party.”
However, the court dismissed the claim stating that the claim was barred by the statute of limitations, and equitable estoppel did not apply. Diamond appealed.
On appeal, Diamond continued to assert their defense of equitable estoppel. They argued that the letter they received from Travelers requesting additional information represented that an investigation was being made into their claim. Diamond stated that they relied on this representation, which is why they decided not to file suit earlier.
The appeals court was not swayed. Under the Miller Act, a party asserting equitable estoppel defense must show that it was misled to its detriment. The court then turned to the letter itself:
“The January 7 letter gave no promise of a response, made no representations that Diamond would be paid or that Travelers would engage in claim negotiations with Diamond, and explicitly reserved ‘all rights and defenses . . . includ[ing], without limitation, defenses that may be available under any applicable notice and suit limitation provisions.’ … Because Diamond’s reliance on the January 7 letter in delaying filing suit was unreasonable, equitable estoppel does not rescue its claim.”
Given all this evidence, the appeals court concluded that Diamond failed to prove that the letter requesting additional info was a representation that Diamond reasonably relied on in deciding not to bring suit within the statutory period.
In the court’s own words, Diamond “failed to plead that the January 7 letter from Travelers requesting additional information on the claim was a representation that Diamond reasonably relied on in deciding not to bring suit within the statutory limitations period.”
Don’t mess around with your deadlines
This is an important lesson for any contractors working on federal projects — or any bonded project for that matter. When dealing with a surety, a follow-up response is virtually guaranteed. Responding to these requests for info and submitting their preferred claim form can be helpful for the surety to investigate the claim, but do not consider these responses as a promise to pay or the start of the negotiation process. This is the surety’s standard operating procedure and has no effect on your statutory deadlines.
The law’s the law. If your deadline is steadily approaching, and you haven’t received a response from the surety, do not hesitate. File your enforcement action, otherwise you may lose out on a valuable payment bond claim.