Recent New York Decision Reaffirms Limits To Surety's Liability On A Delay Claim Made Under A Payment Bond

A recent decision by the Supreme Court, New York County, reaffirmed the law as it applies to important issues relating to a surety's defenses to a claim for delay damages made under a payment bond. In Advanced Automatic Sprinkler Co., Inc. v. Seaboard Surety Co., Inc., No. 650321/2001, N.Y.L.J. 1202678994141, at *1 (Sup. Ct. New York County Dec. 3, 2014), the Court (Hon. Marcy Friedman) granted the defendant surety's motion for summary judgment dismissing the subcontractor's claim for delay damages, holding, among other things, that the no-damages-for-delay clause in the subcontract precluded recovery of delay damages where the delays caused by the non-party prime contractor were foreseeable.

Facts

Dart Mechanical Corporation ("Dart") was hired by the Department of Sanitation of the City of New York ("DSNY") as the prime HVAC contractor for the refurbishing of two separate garage buildings located in Brooklyn for a contract price of $11.644 million. Defendant Seaboard Surety Company ("Seaboard") issued a payment bond to Dart to secure payment obligations to Dart's subcontractors and suppliers. Shortly thereafter, Dart entered into a subcontract with plaintiff Advanced Automatic Sprinkler Co., Inc. ("Advanced") for $1.23 million for Advanced to install automatic sprinklers and other fire safety infrastructure in the two garages.

Advanced brought an action against Seaboard to recover $642,636 for delay damages pursuant to the payment bond Seaboard issued to Dart. According to the complaint, Dart, DSNY, and others, caused substantial delays in the project by: (1) denying Advanced access to the project site; (2) failing to correct a flawed design; (3) failing to adhere to the established project schedule; (4) failing to perform their work in a timely manner; (5) failing to properly coordinate and supervise the work at the project; and (6) failing to replace a prime electrical contractor on the project in a timely manner, knowing the project would be affected.

Seaboard's Motion for Summary Judgment

Seaboard moved for partial summary judgment, pursuant to CPLR § 3212, to dismiss Advanced's claim for recovery of delay damages under the payment bond on the grounds that (1) Advanced failed to comply with notice requirements contained in the subcontract; (2) Advanced's claims were untimely under the subcontract and the payment bond; (3) delay damages were barred by a no-damages-for-delay clause in the subcontract and (4) as a surety, Seaboard's...