Tag Archives: delay damages

RECOVERING DELAY RELATED DAMAGES FROM PUBLIC PAYMENT BOND

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One of the advantages to subcontractors of public payment bonds issued under the Federal Miller Act (or even the Little Miller Act) is that there is an argument for the recovery of unexecuted change orders and, and as it particularly pertains to this article, impact-related costs (whether delay or inefficiency / lost productivity). This should not be overlooked although language in the governing subcontract, etc. could dilute these arguments. However, having the argument and opportunity to recover impact-related costs from a payment bond is a huge upside.

 

If a subcontractor is owed money for inefficiency or delay, etc., and there is a public payment bond in place, it should not automatically forego pursuing these claims against the bond. Unlike a lien where these types of costs / damages are not lienable and could render an otherwise valid lien fraudulent in Florida, these are damages that could be pursued against a public payment bond. The subcontractor should carefully craft its argument in furtherance of maximizing its best chance to recover these types of damages.

 

For example, in the opinion of Fisk Elec. Co. v. Travelers Cas. and Sur. Co., 2009 WL 196032 (S.D.Fla. 2009), a subcontractor sought inefficiency / lost productivity damages against a payment bond surety that appeared to be issued under Florida Statute s. 255.05 (also known as Florida’s Little Miller Act). The payment bond surety moved to dismiss the subcontractor’s complaint arguing that these types of damages are not recoverable under the bond. The Southern District, relying on federal cases interpreting the Federal Miller Act, found that a subcontractor can pursue such damages against the payment bond for its out-of-pocket unreimbursed expenses. See, e.g, U.S. f/u/b/o Pertun Const. Co. v. Harvesters Group, Inc., 918 F.2d 915, 918 (11th Cir. 1990) (finding that subcontractor could recover under Federal Miller Act bond for out-of-pocket expenses resulting from prime contractor’s delay).

 

To maximize the recoverability for impact-related costs, the costs should be supportable costs that the subcontractor actually incurred in the performance of its contract work. Organizing the back-up supporting these costs and theory of the impact is critical and the subcontractor looking to pursue these costs from a public payment bond should consult counsel to best position its arguments to support recovery.  On the other hand, the prime contractor should ensure that its subcontract has contractual provisions that will make it challenging and provide hurdles for the subcontractor to recover such 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.

SUPPORTING CONSTRUCTION DEFECT DAMAGES WITH AN ESTIMATE

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One of the issues in construction defect disputes is whether the owner can prove damages with an estimate, which is often the case. Recently, in Kritikos v. John T. Anderson d/b/a Anderson Builders, et al., 38 Fla. L. Weekly D931a (Fla. 4th DCA 2013), the Fourth District Court of Appeals confirmed that an estimate as to the costs to repair construction defects can support a plaintiff’s (owner) damages. In other words, the plaintiff does not actually have to incur the costs to repair in order to be entitled to recover damages to correct a construction defect.

 
In this case, the contractor recorded a construction lien. The owner asserted, as a defense, that it is entitled to set-off the amount of the lien due to construction defects and delay-related damages. (The owner in this case ended up terminating the contractor when the project was substantially over budget and behind schedule.) It was the owner’s position that the defective work was subject to a design change so the measure of damages needed to be based on an estimate of what it would cost to complete the work (i.e., repair the defects) according to the original design / contract. The owner’s argument, as supported by the Fourth District, was based on precedent discussing an owner’s measure of damages when there is a construction defect, particularly the Florida Supreme Court decision of Grossman Holding Limited v. Hourihan, 414 So.2d 1037 (Fla. 1982) and the Second District Court of Appeals’ decision of Temple Beth Shalom & Jewish Center, Inc. v. Thyne Construction Corp., 399 So.2d 525 (Fla. 2d DCA 1981).  Both the cases of Grossman and Temple Beth Shalom maintain that the measure of damages when dealing with construction defects / unfinished construction contract is the reasonable cost to complete / repair per the original design / contract provided this does not result in economic waste. Kritikos, supra.

 
The key is that whether using an estimate or actual costs to support damages from a construction defect, the measure of damages is the reasonable cost to complete per the original design / contract (versus a subsequent and better design to repair the defects) provided that the repair costs do not amount to economic waste.

 
Interestingly, this case also discussed the owner’s set-off for delay damages. It is uncertain in this case whether the owner utilized any expert to establish delay damages, which is often and properly the case, or how the owner specifically presented the delay damages (as there is no discussion that there was a liquidated damages provision in the contract). The Fourth District simply stated: “Delay damages were properly presented to the jury. By their very nature, delay damages may not be subject to exact calculation, making the owner’s opinion of the value of his loss of use of his property admissible and relevant.” Kritikos, supra. Based on this limited statement, it would seem that these damages are not referring to liquidated damages or delays to the critical path of a construction schedule, but rather an owner (without any expert testimony) testifying as to “loss of use damages,” i.e., an owner testifying that due to the circumstances of the case, he/she was damaged by being not being able to utilize his residence. But, it is uncertain what the owner did to support these damages.

 

 

For more information on loss of use damages, please see: https://floridaconstru.wpengine.com/the-difference-between-lost-profit-and-loss-of-use-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.