Payment Bonds on Public Jobs
Under State Finance Law §137(1), all sizable public jobs in New York require a payment bond to assure any recovery from the prime contractor or one of its subcontractors. If they become judgment-proof, the payment bond is often the only means of collection. Under a recent amendment, §137(4)(b) permits a law suit against the bonding company for up to one year after the improvement has been completed and accepted by the public owner. However, a company that furnished labor or materials to the subcontractor of the prime contractor, in other words, a sub-sub, has an additional, strict time limit that must be met! §137(3) requires that a sub-sub must give written notice to the prime contractor within 120 days from the date on which the last of the labor was performed or the last of the material was furnished. The notice must state with “substantial accuracy the amount claimed and the name of the party to whom the material was furnished or for whom the labor was performed.” Merely advising that the job will be liened is not a sufficient notice. (Ulster Electric Supply Co. v. Maryland Casualty Co., 30 N.Y.2d 712, 713 . The notice need not mention or threaten that any bond claim is being made. (American Bldg. Contrs. Assoc., Inc. v. Mica & Wood Creations, LLC, 23 A.D.3d 322, Second Dept. ).
This notice to the prime contractor has to be personally delivered or sent by registered mail. Ordinary mail or fax is not allowed unless the prime contractor essentially admits receipt of the notice. (Precision Dev. of Chappaqua, Inc. v. Hartford Fire Ins. Co., 10 Misc. 3d 1055(A), 2005 NY Slip Op 51965(U), Sup. Ct. Westchester Cty.)
If there are many deliveries of supplies to the job, on open account or under separate orders, the notice can be given within 120 days of the last delivery, rather than after each delivery (Specialty Prods. & Insulation Co. v. St. Paul Fire & Marine Ins. Co., 99 N.Y.2d 459, 465-466 ), but that only applies to a bond expressly under State Finance Law §137, not a private bond. For a private bond, the 120 days notice must be given after each delivery. (Haun Welding Supply, Inc. v. National Union Fire Ins. Co., 222 A.D.2d 1099, Fourth Dept. ).
If there is any doubt of the existence of a payment bond or the name of the bonding company, a freedom of information request should be served upon the municipal agency sponsoring the job.