Put on your thinking cap and take a shot at this latest FIA Surety Challenge – based on a real life case.
Details:
- In January a standard Performance and Payment bond was issued for the general contractor. The GC hired a subcontractor and the sub bought materials from a supplier.
- The last materials were provided by the supplier in July.
- The sub encountered a serious financial disruption, resulting in money owed to the supplier. They told the suppplier what was going on, “we hope to pay you shortly.” Time passed…
- The state in question has a 120 day lien law (the time allowed to file a lien after the last completed work or supplied materials.)
- In July, the supplier filed a Preliminary Notice to File Lien – a normal precautionary step performed by all suppliers.
- In December, the supplier ran out of patience and filed an actual lien and made a payment bond claim.
FIA Surety Challenge question: If you were the claims rep, how would you respond to this claim, and why? Should it be paid? Click for “think music.”
OK, your answer please?
This one is a little complicated. The preliminary notice is not an actual lien. A lien was eventually filed, but it was late, needed to be filed no later than November. When filed, such a lien has no legal effect.
With the lien period expired, and no valid lien on file, the claimant has missed an element required to make an enforceable bond claim.
Unfortunately for this claimant, they waited too long to act and missed their window of opportunity. There is a legal basis for declination of the claim.
FIA Surety / First Indemnity of America Ins. Co., a Palomar Company
2740 Rt. 10 West, Suite 205
Morris Plains, NJ 07950
Office: 973-541-3417
A Carrier Providing Contract, Site and Subdivision Bonds up to $10,000,000!
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