Category Archives: Uncategorized

BONA FIDE DISPUTE DEFEATS VIOLATION OF PROMPT PAYMENT ACT

Posted on by

Most, if not all, jurisdictions, including the federal government, have what is known as a “Prompt Payment Act.”  The objective is to ensure prompt payment. If prompt payment is not made, the Prompt Payment Act provides for interest penalties, as well as potentially other costs such as attorney’s fees.

But the thing is, it’s not as simple as untimely payment to support the recourse and interest penalties the applicable Prompt Payment Act affords. And the teeth associated with the applicable Prompt Payment Act are not as sharp as perhaps the party claiming untimely payment prefers.

A recent case out of the federal arena where the contractor claimed Prompt Payment Act recourse due to untimely progress payments from the government explains that the teeth of the Act are fully negated by a “bona fide” dispute:

[The contractor] bears the burden to establish that the progress payments were erroneously withheld. PPA interest will be paid if the Government receives a proper payment request and “there is no disagreement over quantity, quality, or Contractor compliance with any contract term or condition, or requested progress payment amount.”

The prompt payment regulations at…do not require the Government to pay interest penalties if payment delays are due to disagreement between the Government and the Contractor over the payment amount or other issues involving contract compliance, or on amounts temporarily withheld or retained in accordance with the terms of the contract.

However, to avoid PPA interest:

“[T]here must be, at the time payment of an invoice is delayed, a ‘present basis for delaying payment which is related to an objective discernible dispute.”’ All that is required to raise a bona fide dispute concerning contract compliance is that the government’s questions be raised in good faith. That a contractor may ultimately prevail on the merits does not defeat an otherwise proper payment withholding if there is such a good faith dispute.

F.O.G., LLC v. Department of the Interior, CBCA 8203, 2026 WL 1191881 (CBCA 2026) (internal citations omitted).

Take a look at the underlined language and keep this in mind.

A bona fide dispute raised in good faith will defeat the recourse in the Prompt Payment Act, which is what occurred in this case. (Naturally the dispute needs to be in good faith for there to be a bona fide dispute.) Moreover, just because the party claiming untimely payment prevails on the merits does not mean the dispute was not bona fide, meaning prevailing on the merits does not support a violation the Prompt Payment Act.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

RIPENESS OF NEGLIGENCE CLAIM AGAINST INSURANCE BROKER

Posted on by

A recent case supports the principle that a negligence claim against your insurance broker is NOT ripe until your insurance coverage dispute is resolved. In this case, a plaintiff sued his carrier in a coverage dispute and his insurance broker in negligence. The trial court denied the negligence claim and the broker moved for a petition for a writ of certiorari arguing that the claim against it isn’t ripe because there hasn’t been a determination of coverage. If there is coverage, then the claim against the broker become moot. If there isn’t coverage, then the negligence claim against the broker becomes at-issue. The appellate court agreed that the proper remedy for the premature claim against the broker was dismissal without prejudice.  See Burlington Insurance Group, LLC v. Gordon, 51 Fla.L.Weekly D156d (Fla. 2d DCA 2026).

There are times when you think your insurance broker messed up which resulted in you not being covered for something you thought you were otherwise covered for with insurance. You may be right. But if there is coverage, and you determine there is coverage, then your broker did not do anything wrong. Consult with counsel if you believe your insurance broker may have been negligent to determine the best path forward. Just because the carrier denied coverage does not necessarily mean the broker did anything wrong.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

QUICK NOTE: DOCTRINE OF REASONABLE EXPECTATIONS DOES NOT APPLY TO INSURANCE POLICIES

Posted on by

The doctrine of “reasonable expectations” does NOT apply to insurance policies.  Catalina West Homeowners Association, Inc. v. First Community Ins. Co., 50 Fla.L.Weekly D1318a (Fla. 3d DCA 2025).  ” ‘Under this doctrine, the insured’s expectations as to the scope of coverage is upheld provided that such expectations are objectively reasonable.’   The insured is entitled to all the coverage he or she may have reasonably expected — without due regard to the actual language provided by that policy or the risk underwritten.” See id. (internal citations omitted).

However, in Florida, this doctrine of reasonable expectations has been rejected by Florida’s Supreme Court when it comes to interpreting insurance policies. See, supra, Catalina West Homeowners Association. “Instead, Florida courts must focus on the plain language of the insurance policy and give effect to those express terms.  The parties’ unexpressed intent or desires have no effect. We strongly reject any attempts to revive this doctrine or fundamentally change how Florida courts interpret insurance policies.” See id. (internal citations omitted).

An illustration can be found in Catalina West Homeowners Association, a non-construction dispute. A homeowner was ambushed and killed by assailants at his home that gained access to the development. The homeowner’s estate sued the association for negligent security. The association had a businessowners policy that excluded coverage for physical abuse. The insurance company filed a declaratory relief action that it had no obligation to defend or indemnify the association because of the physical abuse exclusion. The trial court agreed as did the appellate court. One of the argument raised was the doctrine of reasonable expectations, i.e., that there was the expectation that the association would have coverage for this claim. “There is no basis in law or fact for this Court to rewrite the insurance contract in the manner advocated by [the association]. The policy is unambiguous. It excludes “physical abuse,” which is where someone actually, attempts, or threatens cruel and violent treatment to another person’s body resulting in physical injury. An ambush and shooting squarely qualify.”  See, supra, Catalina West Homeowners Association.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

QUICK NOTE: EICHLEAY DAMAGES (UNABSORBED HOME OFFICE OVERHEAD)

Posted on by

In the previous posting, I discuss the Civilian Board of Contract Appeals’ case of Quality Trust, Inc.  That case deals with a claim known as constructive suspension.  However, the case also discusses unabsorbed home office overhead damages known as Eichleay damages, which are hard damages to prove.  Below describes the elements a party MUST prove to substantiate Eichleay damages:

The Eichleay formula is used to calculate the amount of unabsorbed home office overhead a contractor can recover when the [G] overnment suspends or delays work on a contract for an indefinite period.”  To establish entitlement to Eichleay damages, the contactor must show three elements: (1) “there must have been a government-caused delay of uncertain duration;” (2) “the delay extended the original time for performance or that, even though the contract was finished within the required time period, the contractor  incurred additional costs because he had planned to finish earlier;” and (3) “the contractor  must have been on standby and unable to take on other work during the delay.”  Importantly, in claims for Eichleay damages, similar to a suspension of work claim, the alleged government-caused delay cannot be “concurrent with a delay caused by the contactor or some other reason.” 

Quality Trust, Inc. v. Department of the Interior, 2025 WL 1092348 (CBCA 2025) (internal citations omitted).

Keep these elements in mind when you think you have a basis for unabsorbed home office overhead damages / Eichleay damages.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

ADMISSIONS IN ANSWERS TO CONSTRUCTION LAWSUITS MATTER

Posted on by

Ogden v. Defelice, 50 Fla.L.Weekly D937d (Fla. 5th DCA 2025), is a construction case that doesn’t talk about construction issues. Go figure. Nonetheless, it does touch upon two worthy considerations: (i) admissions in answers to lawsuits; and (ii) fictitious names. Both issues apply to construction disputes.

In this case, plaintiff sued a person d/b/a (doing business as) a fictitious company that focuses on kitchen countertops. After an amended complaint, the person filed an answer to the lawsuit that admitted the allegation regarding him doing business as a fictitious company. The case proceeded to a bench trial and the person got a judgment entered against him. The person later tried to vacate the judgment arguing that the judgment never should have been entered against him, but another company. This argument was rejected:

Admissions in pleadings “are accepted as facts without the necessity of supporting evidence.  Phrased differently, a pleading admission has “ ‘the effect of withdrawing a fact from contention.’”  It “release[s] the opposing party from its burden to prove” that fact. 

Applying these principles, ]the person’s] “clear and unequivocal” answer to the amended complaint forecloses any notion that he is the wrong defendant.  He “agree[d]” and “admit[ted]” that the parties formed a contract, that he received payment pursuant to the contract, and that he started work the following day. These binding admissions cannot be reconciled with his allegation — raised months after the trial — that another party was the correct defendant.

Ogden, supra (internal citations omitted).

Additionally, the appellate court noted if a person does business as a fictitious company, the judgment will be against the person, and it is not equivalent to piercing the corporate veil. “A fictitious name is just that — a fiction involving the name of the real party in interest, and nothing more.  It has no independent legal existence.  Therefore, as the trial court found, [t]here was no veil to pierce.” Ogden, supra (internal citations and quotations omitted).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

FLORIDA RECOGNIZES TWO TYPES OF SUBROGATION: (1) CONVENTIONAL SUBROGATION; AND (2) EQUITABLE SUBROGATION

Posted on by

A note on subrogation.

There are two types of subrogation recognized in Florida: (1) conventional subrogation; and (2) equitable subrogation.

“‘Conventional subrogation arises or flows from a contract between the parties establishing an agreement that the party paying the debt will have the rights and remedies of the original creditor.’” Certain Underwriters at Lloyd’s, London a/s/o Restoration Hardware, Inc. v. Crisco, Commercial Industrial Roof Services Company, 2025 WL 712060, *2 (M.D.Fla. 2025) (citation omitted).

When pursuing a conventional subrogation claim, the subrogee needs to identify and substantiate the contract “‘establishing an agreement that the party paying the debt [subrogee] will have the rights and remedies of the original creditor [subrogor].’” Id.

This would be the circumstance of an insurance carrier pursuing subrogation pursuant to an insurance policy (i.e., a contract).

“‘Equitable subrogation is generally appropriate where: (1) the subrogee made the payment to protect his or her own interest, (2) the subrogee did not act as a volunteer, (3) the subrogee was not primarily liable for the debt, (4) the subrogee paid off the entire debt, and (5) subrogation would not work any injustice to the rights of a third party.’ When seeking to sue under equitable subrogation, the subrogee…is required to establish all five elements.” Crisco, Commercial Industrial Roof Services Company, supra, at *2 (citations omitted).

When pursuing equitable subrogation, the subrogee needs to identify and substantiate that it paid the entire debt of the subrogor. Id.

In Crisco, Commercial Industrial Roof Services Company, the trial court dealt with cross motions for summary judgment. The case involved a property insurance carrier pursuing subrogation against a roofer due to flooding damage caused to the insured. As a threshold question, the trial court noted that the insurer failed to identify and substantiate its basis of subrogation. This threshold question is important because, as the trial court noted, if the insurer fails to prove this at trial the defendant roofing company would be entitled to a motion for directed verdict. Now, while conventional subrogation should be the basis based on the property insurer’s insurance policy/contract with its insured, the insurer simply relied on statements of subrogation from its lawyer. There was no evidence to support the subrogation basis. The trial court maintained statements by a party’s counsel in motions are not evidence to support that a party can bring a claim as a subrogee. See Crisco, Commercial Industrial Roof Services Company, supra, at *3.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

MAKE SURE YOU COMPLY WITH FLORIDA’S PRE-SUIT NOTICE REQUIREMENTS FOR CONSTRUCTION DEFECTS

Posted on by

Welcome to Florida! If you deal with construction defects in Florida, then you know, or certainly should know, about Florida Statutes Chapter 558.  Chapter 558  contains the pre-suit notice requirements before instituting a construction defect lawsuit. They are a “must know” if you practice in the construction defect world. While I may not be a huge proponent for the Chapter or view it as value-added when you factor in numerous considerations, how I feel is of no moment.  The pre-suit requirements are still the governing “law of the land” for Florida construction defects lawsuits. A recent case demonstrates this point.

In Moss & Associates v. Daystar Peterson, 50 Fla.L.Weekly D509a (Fla. 3d DCA 2025), a condominium unit owner sued the condominium association and general contractor in a lawsuit grounded on construction defects. The unit owner claimed his unit was damaged by water intrusion due to the contractor’s faulty workmanship regarding renovations and repairs to common areas of the condominium. There was not a dispute as to the unit owner’s failure to comply with the pre-suit notice requirements of Florida Statues Chapter 558.  The general contractor moved to stay the lawsuit pending the unit owner’s compliance with the pre-suit notice requirements. The trial court denied the stay request.  On appeal, the Third District Court of Appeal held that Chapter 558’s pre-suit notice requirements were a statutory requirement that the unit owner had to comply with in order to institute a construction defect lawsuit. Thus, the Third District quashed the trial court’s order and granted the stay. (“By [the trial court] instead concluding that no stay was yet required, the trial court failed to apply the plain language of section 558.003, thereby departing from the essential requirements of the law.”).

Here is why this case is important.  The unit owner did not hire the contractor to construct or perform work to the condominium or the condominium’s common elements. Notwithstanding, the trial court held the unit owner was still deemed a “claimant” under Chapter 558 and, therefore, needed to comply with the pre-suit notice requirements in Chapter 558. This cements the fact that the pre-suit notice requirements for construction defects are not to be overlooked.

If you are dealing with a construction defect claim, make sure you are utilizing construction counsel to help navigate Chapter 558’s pre-suit notice requirements and so that your defect claim is maximized.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

THERE ARE CONSEQUENCES TO EXECUTED DOCUMENTS SUCH AS THE ACCORD AND SATISFACTION DEFENSE

Posted on by

A federal government contractor in Jackson Construction Co., Inc. v. U.S., 62 Fed.Cl. 84 (Fed.Cl. 2024) sought delay damages against the government. It lost. The reason for the loss is a crucial reminder that documents parties sign ALWAYS matter. ALWAYS!!

In Jackson Construction Co., the contractor’s delay claim was premised on relocating a waterline. The contractor, however, received additional money for relocating the waterline, but no additional time, and this was memorialized in a modification to the contract (i.e., a change order). In executing the modification for the additional work, the contractor did NOT reserve rights for time or money. Indeed, the modification reflected that the monetary adjustment constitutes full compensation for the additional work including delay, namely:

The contract period of performance remains the same. It is further understood and agreed that this adjustment constitutes compensation in full on behalf of the contractor and his subcontractors and suppliers for all costs and markup directly or indirectly, including extended overhead, attributable to the change order, for all delays related thereto, and for performance of the change within the time frame stated.

Jackson Construction Co., supra, at 90.

The contractor made a few arguments to try to overcome the modification it agreed to.  All failed.

An “executed bilateral modification with a release provision usually constitutes an accord and satisfaction unless that release is either ambiguous or limited in scope.” Jackson Construction Co., supra, at 92.

An ‘accord’ is a contract under which both parties agree that one party will render additional or alternative performance in order to settle an existing claim made by the other party, and ‘satisfaction’ is the actual performance of the accord. The party asserting an accord and satisfaction defense must establish four elements: (1) proper subject matter; (2) competent parties; (3) a meeting of the minds; and (4) consideration.

Id. (internal citation omitted).

The contractor could reserve rights in a modification to avoid the accord and satisfaction defense. Without the reservation of rights, “the Court must focus on whether or not the parties’ objective manifestations of intent demonstrate that they reached a meeting of the minds with respect of additional claims.” Id. at 93.

Here, the contractor did not reserve its rights in the modification it executed. Thus, the contractor did not preserve its delay claim for the additional waterline relocation. To this point, there was no evidence that the contractor intended to reserve rights to assert a delay claim at the time it executed the modification.

While the contractor looked to avoid the accord and satisfaction defense by arguing the release in the modification was ambiguous and procured through government misrepresentation, the court was having none of this. There was no evidence of any misrepresentation or ambiguity.

The contractor further argued that it signed the modification due to economic duress.

A party asserting economic duress must show more than economic tension or financial harm. Jackson Construction Co., supra, at 95.  “A party asserting economic duress must prove that: (1) its acceptance of the other party’s terms was involuntary; (2) the circumstances permitted no alternative but to accept the terms; and (3) the acceptance resulted from the coercive acts of the other party.” Id.  The contractor could not prove any of those elements.

The key takeaway is that parties need to appreciate what they execute and that there are consequences to executing documents. The contractor could have reserved rights. It did not. As a result, the contractor had to rely on weak arguments that it had no evidence to support…all because of the consequences of the modification the contractor signed.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

IMPROPER MEANS EXCEPTION AND TORTIOUS INTERFERENCE CLAIMS

Posted on by

Last week, I discussed a case (here) that involved a federal district court (trial court) denying a motion to dismiss on a negligent supervision claim.

In this same case, the plaintiff, a subcontractor/fabricator, also sued the defendants–parent company of a prime contractor and two entities the prime contractor hired to inspect the subcontractor’s fabricated units–for tortious interference of the subcontractor’s contract with the prime contractor. The defendants moved to dismiss this tortious interference claim which gave rise to another interesting discussion by the trial court relating to the burden to plead and prove tortious interference claims. This discussion is worthy to remember the next time you not only want to plead a tortious interference claim, but want to be in a position to put on evidence to prove the claim at trial.

“Under Florida law, the elements of a tortious-interference-with-contract claim are: ‘(1) the existence of a contract, (2) the defendant’s knowledge of the contract, (3) the defendant’s intentional procurement of the contract’s breach, (4) absence of any justification or privilege, and (5) damages resulting from the breach.’” Bautech USA, Inc. v. Resolve Equipment, 2023 WL 4186395 (S.D.Fla. 2023) (citation omitted).

With respect to the fourth element underlined above, “absence of any justification or privilege,” the tortious interference must be UNJUSTIFIED meaning the third party “must be a third party, a stranger to the business relationship.” Id. (citation omitted). “[A] defendant is not a stranger to a business relationship, and thus cannot be held liable for tortious interference, when it has a supervisory interest in how the relationship is conducted or a potential financial interest in how a contract is performed.” Id. (citation omitted).

Notwithstanding, this does NOT mean there is an absolute privilege to interfere with a contract even if you are not a stranger to the business relationship. Bautech, supra (citation omitted).

In those circumstances in which there is a qualified privilege to interfere with a business relationship, the privilege carries with it the obligation to employ means that are not improper. In the case of officers or employees of a contracting party, the privilege is ‘destroyed where an employee acts solely with ulterior purposes, without an honest belief that his actions would benefit the employer, and the employee’s conduct concerning the contract or business relationship is not in the employer’s best interest.’ Put another way: the ‘privilege to interfere with a third party’s conduct does not include the purposeful causing of a breach of contract.”

Id. (internal citations omitted).

This exception is referred to as the “improper means exception.” Id.

However this “improper means exception” does not apply to an agent of the party to the contract. Id. (citation omitted).

Here, the defendants were not strangers to the subcontractor’s contract with the prime contractor as they were involved in the supervision of the subcontract or, regarding the parent entity of the prime contractor, had a financial interest. But this does not mean the tortious interference claims fails because the plaintiff alleged (and would need to prove withe evidence) the defendants acted with improper means to satisfy the improper means exception, and the plaintiff did not allege that any of the defendants were agents of the prime contractor. Based on the improper means exception, the trial court found the plaintiff did assert a viable tortious interference claim against the defendants…to be decided at a later date.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

BREACH OF DUTY OF GOOD FAITH AND FAIR DEALING PACKAGED WITH CONTRACT DISPUTES ACT CLAIM

Posted on by

An interesting opinion on a motion to dismiss came out of the United States Court of Federal Claims dealing with the claim that the government breached its duty of good faith and fair dealing in administering the prime contract.  The contractor’s argument was that the government breached its duty of good faith and fair dealing by denying the contractor’s claim under the Contract Disputes Act (CDA).  This was a creative claim and argument that deserves consideration because it tied in the contracting officer’s denial of the CDA claim for additional money with a breach of the duty of good faith and fair dealing.

In this case, Aries Construction Corp. v. U.S., 2023 WL 2146598 (Fed. Cl. 2023), a prime contractor was hired for a water pipeline construction project. The contractor encountered unexpected difficult site conditions that required additional equipment and labor. The contractor informed the contracting officer and alleged it was instructed to proceed with the additional equipment and labor.  The contractor submitted a claim under the CDA but the contracting officer denied the claim.  The contractor pursued the claim in the United States Court of Federal Claims arguing the government breached the contract and, of interest, breached its duty of good faith and fair dealing.

The government moved to dismiss the breach of good faith and fair dealing claim arguing that besides failing to state a cause of action the Court of Federal Claims had no jurisdiction because the breach of the duty of good faith and fair dealing was not properly presented to the contracting officer under the CDA.  The Court of Federal Claims denied the government’s motion.

Jurisdiction

For a CDA claim to the contracting officer to be ‘the same’ as a claim in this Court, the claims must be based on the same basic theory, arise from the same operative facts, and seek the same relief. By the same token, this Court ‘treat[s] requests as involving separate claims if they … assert grounds that are materially different from each other factually or legally. [The government] does not appear to dispute that [the contractor] presented the same operative facts to the contracting officer and sought the same relief. The question, rather, is whether [the contractor] presented the same basic legal theory to the contracting officer.

Aries Construction, supra, at *2 (internal citations omitted).

The Court of Federal Claims held that it has jurisdiction if the claim in the Court arises from the same operative facts and claims basically the same relief as the CDA claim submitted to the contracting officer even if different legal theories of recovery are sought by the contractor.  Id. (quotations omitted). “If the contracting officer was on notice of the factual and legal substance, the contractor may assert a ‘slightly different legal theory[y] when he sues.”  Id.

Breach of Duty of Good Faith and Fair Dealing

For purposes of a breach of good faith and fair dealing claim against the government, the contractor must show:

[T]hat ‘a specific promise’ in the contract was ‘undermined by the government. The promise must be grounded in the terms of the contract, because ‘what the duty entails in part on what the contract promises (or disclaims). [The contractor] must also show ‘subterfuge[]’ or ‘evasion[],’ such as ‘evasion of the spirit of the bargain, lack of diligence and slacking off, willful rendering of imperfect performance, abuse of a power to specify terms, [or] interference with or failure to cooperate in the other party’s performance. Against the government, such claims ‘typically involve some variation on the old bait-and-switch’ or ‘government action … specifically designed to reappropriate the benefits the other party expected to obtain from the transaction[.]’

Thus, a claim for breach of good faith and fair dealing must include (1) a specific promise that was undermined, plus some combination of (2) subterfuge, evasion, or dishonesty, and (3) reappropriation of a reasonably expected benefit. If the [contractor] presented such facts to the contracting officer with a claim for money, then the contracting officer had sufficient notice of a good faith and fair dealing claim, even if the current legal packaging is ‘slightly different.”

Aries Construction, supra, at *3.

Denying Government’s Motion to Dismiss

The contractor’s CDA claim was premised on an equitable adjustment due to it being instructed to perform additional work to overcome unexpected site conditions. “The contracting officer was therefore on notice that if he denied an equitable adjustment to which [the contractor] was entitled, [the contractor] could allege that the government reappropriated the contract’s promised benefits.  That, in turn, meant the contracting officer was on notice of the facts and general legal basis that could support a claim for breach of duty of good faith and fair dealing.” Aries Construction, supra, at *3.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.