Dun Par Engineered Form Co. v. Vanum Constr. Co., 2013 Kan. App. LEXIS 75 (August 23, 2013), teaches the importance of collecting and reading subcontractor or for that matter any surety bonds supposedly procured for a construction project.
In the case, the job was a federal construction project in Fort Riley, Kansas. As it was a federal project, the general contractor obtained a Miller act bond that would afford payment protection to the sub-sub contractor level only. The general contractor likewise required its subcontractors to procure bonds for the job, and its subcontractor, Vanum Construction, did so. Had Vanum's bond followed the form of the Miller act bond procured by the general, there would be no issue. Instead, however, Vanum utilized a generic bond form used for private jobs, affording bond coverage only to entities directly contracting with Vanue, or able to place a lien within the jurisdiction.
The Kansas Court of Appeals held that because the job in question was a federal job, there were no lien rights within the jurisdiction of the actual project. Therefore, the plaintiff had no bond claim because it was not a "claimant" under the plain and unambiguous language of the bond itself.
This case teaches why it is so important to demand, read, and maintain a copy of all available surety bonds on a project. Such requests should be made up front, when relationships are still fresh and good, and styled as a pro forma ministerial function. For general contractors it is important to know this up front and make demands as necessary so that a subcontractor's bond coverage on any job at the very least mirrors that of the general's , and for subcontractors, if the bond form as in this case does not appear to provide any coverage, at least they will know and can take precautionary measures against letting payments get behind.
Link to the case here.
