[author:Daniel Towns]

In All Seasons Landscaping, Inc. v. Travelers Cas. & Sur. Co. of Am., a Connecticut court considered for the first time whether the performance of warranty work tolls the statute of limitations on payment bond claims. The court ruled that it does not. It dismissed subcontractor All Seasons Landscaping, Inc.’s (ALS’s) bond claim because ALS admitted that it last performed non-warranty work on the project more than one year before filing suit, meaning the statute of limitations barred its claim.

ALS began performing invasive species removal and control work for a Connecticut Department of Transportation (DOT) intersection improvement project in February 2018. Travelers Casualty & Surety Company of America (Travelers) issued the payment bond for the project. ALS completed its removal work in August 2018. ALS’s subcontract permitted the DOT to hold back 60% of its payments to assure ALS would warranty the work, which ALS did with site checks performed between June 2019 and May 2020.

In March 2020, ALS completed a claim form and certification of claim against the Travelers payment bond in which it attested that it last performed non-warranty work on July 31, 2019. At trial, however, ALS attempted to portray its 2019-2020 site checks as part of its “core contractual obligations.” The court rejected ALS’s position that the certification of claim “mischaracterized” the site checks as warranty work, reasoning that ALS could not have intended to commit perjury in a sworn statement. It held that those site checks were, in fact, warranty work.

Connecticut General Statute Section 49-42(b) governs Connecticut’s one-year limitation period on payment bond claims. It provides that “no … suit may be commenced after the expiration of one year after the last date that materials were supplied or any work was performed by the claimant.” The statute gives no guidance on whether “work” or “materials” as used in Section 49-42(b) include warranty work, and the parties and appellate court could find no authorities on point in Connecticut. However, Connecticut models its payment bond act after the federal Miller Act (40 U.S.C. §§ 270a-270d), and Connecticut General Statute Section 49-42 is known as the “Little Miller Act.” The Connecticut Supreme Court consistently follows federal courts’ Miller Act rulings, “as Connecticut finds [its] ‘Little Miller Act’ … closely aligned.”

Following the majority rule in the federal circuits, the court held that remedial work, repairs, and inspections of work already completed fall outside the definition of “work” or “materials,” and therefore, such work did not toll the statute of limitations. ALS’s payment bond claim was untimely.

This case presents important lessons for both subcontractors and developers, including:

• Claim forms matter, especially when submitted as sworn statements. ALS lost partly because it submitted a certified claim form that contradicted its later position.
• Contractual obligations must be structured to account for statutes of limitations on bond claims. The fact that ALS’s subcontract allowed the withholding of 60% of ALS’s payments until completion of final warranty inspections caused ALS to lose its claim on the payment bond due to the running of the statute of limitations.

Structuring subcontracts to avoid this situation is mutually beneficial since developers generally want subcontractors to not only complete their work, but also perform any necessary warranty work. Subcontractors want to provide warranties, but they do so at their own risk if their subcontracts allow withholding of payments during the warranty period, which may extend past the statute of limitations. Drafting subcontracts appropriately can give both developers and subcontractors greater security and reliability of outcome. While there may be no such thing as a free warranty, smart contract drafting can benefit both parties.

Reprinted from LexisNexis with permission. Copyright 2023 LexisNexis. All rights reserved.