Missed Your Notice Period for a Statutory Bond? By Larry Leiby and David S. Hawkins When seeking recovery under a payment bond one of the factors to be considered is whether the bond meets the requirements of a Florida Statute (e.g., 255.05 for state, county, and municipal work; and 713.23, or 713.245 for private work), or is a common law bond not complying with one of the statutes. The notice requirements may differ significantly depending upon the language in the bond. Another significant difference between the two, for bonds issued by a contractor before October 1, 2001, is that the statute of limitations is five years, rather than one year for a statutory bond. This statute of limitations on common law bonds was changed in 2001 so that there is only a one-year statute of limitations on bonds now issued, whether statutory or common law. One would presume that when contracting on a public job of more than $200,000 that all bonds issued would be statutory pursuant to Fla. Stat. 255, which requires a performance and payment bond on all state, county or municipal jobs of $200,000 or more. However this would be a mistake. In American Home Assurance Company v. Plaza Materials Corporation, 2002 WL 360015, (Fla. 2nd DCA 2002) the trial court reaffirmed that a bond issued in accord with the Florida Department of Transportation standard contract bond form 375-02-27 was not a statutory bond but rather a common law bond. In this case a supplier to a subcontractor on a FDOT project sought recovery from the contractor’s payment bond after both the general and the sub had filed for bankruptcy. The supplier had not complied with the 45 and 90-day notice requirements of Fla. Stat. 255.05(2). If the Court had found that the bond was a statutory bond the supplier’s claim would have been barred. The appellate court affirmed the trial court’s holding that the bond was a common law bond, thereby allowing the supplier to recover. The Court’s rationale for finding the bond to be a common law bond rested on four factors. First the bond did not recite the complete address of the surety as required by Fla. Stat. 255.05(2). Second the bond arguably did not contain an adequate description of the project. Third the bond afforded greater coverage of claims than what Fla. Stat. 255.05(1) required. Fourth, and what the Court found to be most important, was that the bond did not identify the notice and time limitations of Fla. Stat. 255.05(2) as required. As a result the Court upheld the supplier’s right to recover. Whether you are seeking recovery from a bond, or whether you are the contractor or surety giving the bond on a public project, it is important to keep in mind that your rights and liabilities are governed by the terms of the bond and not the statute, unless the bond meets all the requirements of the applicable statute. |
