A recent court decision involving a public construction project for the Miami-Dade County School District confirms that change orders must conform to the terms of the contract to be enforceable and that the deadline to bring claims relating to a public project is one year from completion.
In JD’s Asphalt Engineering Corp v. Arch Insurance Company, an asphalt subcontractor sued the holder of a payment and performance bond on a construction project over unpaid retainage and unpaid change orders. The subcontractor sought $11,606 in retainage and $19,890.00 in change orders.
In the trial-level litigation, the insurance carrier obtained summary judgement in its favor on the change orders, because the change orders were not made pursuant to the contractor terms. The appellate court affirmed this ruling in favor of the insurance carrier, recognizing that the contract between the subcontractor and general contract required all change orders to be in writing and signed, and yet the asphalt subcontractor’s change orders neither signed nor authorized.
Following a full trial on the retainage, the trial court found that the asphalt subcontractor’s claim was barred by section 255.05(10), Florida Statutes, which states:
An action for recovery of retainage must be instituted against the contractor or the surety within 1 year after the performance of the labor or completion of delivery of the materials or supplies; however, such an action may not be instituted until one of the following conditions is satisfied:
(a) The public entity has paid out the claimant’s retainage to the contractor, and the time provided under s. 218.735 or s. 255.073(3) for payment of that retainage to the claimant has expired;
(b) The claimant has completed all work required under its contract and 70 days have passed since the contractor sent its final payment request to the public entity; or
(c) At least 160 days have passed since reaching substantial completion of the construction services purchased, as defined in the contract, or if not defined in the contract, since reaching beneficial occupancy or use of the project.
(d) The claimant has asked the contractor, in writing, for any of the following information and the contractor has failed to respond to the claimant’s request, in writing, within 10 days after receipt of the request:1. Whether the project has reached substantial completion, as that term is defined in the contract, or if not defined in the contract, if beneficial occupancy or use of the project has occurred.2. Whether the contractor has received payment of the claimant’s retainage, and if so, the date the retainage was received by the contractor.3. Whether the contractor has sent its final payment request to the public entity, and if so, the date on which the final payment request was sent.
If none of the conditions described in paragraph (a), paragraph (b), paragraph (c), or paragraph (d) is satisfied and an action for recovery of retainage cannot be instituted within the 1-year limitation period set forth in this subsection, this limitation period shall be extended until 120 days after one of these conditions is satisfied.
In affirming the trial court’s ruling, the Third District Court of Appeal noted that the subcontractor completed its work on August 11, 2015 and that the architect certified the project substantially complete on August 22, 2015. While the subcontractor did some punch out work as late as October 2016, this was not sufficient to restart the one-year time limit contained in section 255.05(10), Florida Statutes. Because the subcontractor did not file suit on the retainage until July 19, 2017, the appellate court affirmed the rulings in favor of the insurance carrier.
While this case doesn’t establish any new law, it does illustrate that the failure of this subcontractor to follow the contract and manage deadlines resulted in a loss of $31,496, plus the attorneys’ fees it spent litigating, and likely the attorneys’ fees incurred by the insurance carrier. Always make sure to follow contract terms relating to change orders, and be mindful of deadlines to make claims.