Federal Court Construes 90-Day Notice Requirement for Claims

What action is legally sufficient to fulfill a 90-day notice requirement on a Miller Act payment bond claim? How will a court interpret the notice provisions in the relevant contract and subcontract documents? In a recent federal district court decision, the court reviewed and strictly construed the relevant contractual provisions, rejecting the subcontractor’s creative attempts to perform an end-run around them. In Aarow/IET LLC v. Hartford Fire Insurance Co., et al., 2021 U.S. Dist. Lexis 122345 (E.D. Va. June 29, 2021), the court rejected all of the subcontractor/plaintiff’s arguments that it gave sufficient notice of a claim under the subcontract; and the court granted the motions for summary judgment of the contractor and surety defendants.

Harper Construction Company (Harper) was awarded a federal government construction contract, and Harper subcontracted with Aarow/IET, LLC (Aarow/IET) to perform the electrical work on the project (Subcontract). Hartford Fire Insurance Company (Hartford) issued a Miller Act payment bond on behalf of Harper for the contract with the government.

Sixteen months after the project was completed, Aarow/IET sued Harper and Hartford, claiming that Harper breached the cooperation clause of the Subcontract; and, as a result, it was entitled to recover $1.5 million from Harper and, regardless of Harper’s liability, from Hartford under its payment bond.

Harper moved for summary judgment on the grounds that, among other things, Aarow/IET failed to provide notice of its claim within ninety days, as required under the Subcontract. Hartford moved for summary judgment on the grounds that its liability is contingent on Harper’s liability and it is entitled to judgment in its favor to the same extent as Harper.

In response to Harper’s contention that Aarow/IETs failed to provide proper notice, Aarow/IET asserted that it provided timely and sufficient notice of its claim within the 90-day notice period through its daily reports and that, in any event, it timely filed its claim within six years, as authorized under the contract.

The court reviewed the Subcontract, which provided that either the subcontractor or the contractor must give the other written notice of a claim within 90 days of the occurrence of the event on which the claim is based. Aarow/IET argued that it did not have 90 days–but six years–to file a claim with Harper. Aarow/IET based its contention on a provision in the contract between Harper and the government, which provides that a claim by the contractor must be made in writing and submitted within six years after accrual of the claim.

The court agreed with the defendants, rejecting Aarow/IET’s argument, and opined that the provision providing for six years to file a complaint applied only to the prime contractor and the government. The court observed that the Subcontract explicitly required that notice of any claim be given within 90 days of the date of an occurrence.

In addition, Aarow/IET claimed that its daily reports were sufficient to provide the requisite notice, even after conceding that nothing in the daily reports mentioned giving notice of a claim, the nature of any claim, or the amount of any claim. Aarow/IET contended that that 90-day notice requirement constituted a forfeiture clause and should be narrowly and strictly construed against Harper so that the daily reports would be considered sufficient notice of a claim under the Subcontract.

The court disagreed with Aarow/IET’s contention and stated that the Subcontract’s 90-day notice requirement “clearly and unambiguously applied to all claims of whatever nature; it allows for no other reasonable interpretation; and it must be enforced as written.” Therefore, the court held the reports did not provide proper notice. Based on these and other findings, the court granted Harper’s motion for summary judgment.

The court then turned to Hartford’s motion for summary judgment, beginning with the well-recognized tenet: “In general, a surety assumes only the liability of its principal.” The court cited several cases for the proposition that a “surety’s liability under the Miller Act is measured by the general contractor’s liability under the construction contract.” The court observed that Aarow/IET’s claim against Harper was based on Harper’s breach of the Subcontract’s cooperation clause and that Hartford’s liability under its payment bond was contingent on the success of that claim. Accordingly, the court, held, as Aarow/IET was not entitled to recover against Harper, it could not recover against Hartford. Thus, Hartford’s motion for summary judgment was granted.

The author of this article is Martha Perkins, General Counsel at NASBP. She can be reached at mperkins@nasbp.org or 240.200.1270.

This article is provided to NASBP members, affiliates, and associates solely for educational and informational purposes. It is not to be considered the rendering of legal advice in specific cases or to create a lawyer-client relationship. Readers are responsible for obtaining legal advice from their own counsels, and should not act upon any information contained in this article without such advice.