8 Important Items – Contractor Registration Bond Claims in Washington
By Matt McCafferty, McCafferty & Steinmark, PLLC
You are a supplier or subcontractor and are owed money on a Washington construction project. In addition to compelling payment via a breach of contract claim and/or construction lien claim (and/or other viable claims), you are also considering a contractor registration bond claim pursuant to RCW 18.27.040. Good plan.
Here are eight items to keep in mind:
1. Getting Started. Generally, a bond is a written promise by a surety for payment (and/or performance) of a contractor. To pursue a contractor registration bond claim for non-payment, you need to file a lawsuit in the appropriate Superior Court and then process the statutory process service through the Department of Labor & Industries via a certified mailing which includes three copies of the filed Summons and Complaint plus a $52.00 fee. This process is clearly set forth in the statute. At this point, you are off to the races.
2. Bond Size. The contractor registration bond will either be in the amount of $12,000.00 (general contractor) or $6,000.00 (specialty contractor). However, as a subcontractor or supplier, (1) the maximum recovery under a $12,000.00 contractor registration bond is $6,000.00, and (2) the maximum recovery under a $6,000.00 contractor registration bond is $4,000.00.
3. Don’t Wait Too Long. As a subcontractor or supplier bringing a contractor registration bond claim, don’t forget that you have a fairly short window to file your lawsuit: “one year from the date the claimed labor was performed and benefits accrued, taxes and contributions owing the state of Washington became due, materials and equipment were furnished, or the claimed contract work was substantially completed or abandoned, whichever occurred first.” RCW 18.27.040(3). This deadline is much shorter, for example than Washington’s general six-year statute of limitations for breach of a written contract.
4. Alone Is Best. The best-case scenario is that you are alone in pursuing a contractor registration bond claim. If there are other claimants against the same bond, then, you will face a potential pro-rata sharing of the bond, or, worse, you could be competing with a higher priority claimant (e.g., a residential homeowner). Because you want to avoid the situation of multiple contractor registration bond claimants, some embrace a strategy of moving early/quickly.
5. How It Might Play Out. Contractor registration bond claims usually play out in one of three manners. First, the contractor may ignore the claim resulting in you eventually accessing your share of the bond in short order. Second, the contractor may fairly quickly settle the claim such that the bond claim is dismissed. And, third, the contractor may hire an attorney and contest the claim on some basis (e.g., that your work or materials were defective, that your billing was improper, etc.).
6. Up, Not Down. You may pursue a contractor registration bond claim against a contractor above you in the project chain, and not against one below you. So, for example, if your subcontractor owes you money, you are not permitted to initiate a contractor registration bond claim against it.
7. Don’t Confuse With Other Bond Claims. Of course, a contractor registration bond claim is specific to a contractor registration bond and the applicable statute. Depending on the circumstances of a construction project, there could be other available bond claims. For example, on a Washington State public works project, you may have RCW 39.08 et seq. payment bond claim rights (in addition to retainage claim rights). You may have Miller Act payment bond claim rights for a Federal project. Or, sometimes on private projects, an owner or prime contractor will require a contractor to place a private payment (and/or performance) bond. If you strictly comply with the applicable statute and/or bond requirements, you may have rights against those bonds over and above any contractor registration bond claim.
8. Small Bond, Big Pressure. Admittedly, contractor registration bonds are quite small. So, if you are owed, say, $100,000.00, a successful contractor registration bond claim recovery isn’t going to put much of a dent in the obligation. However, a contractor registration bond claim can represent significant pressure against the contractor regardless of the small bond amount. In response to a claim, the Department of Labor & Industries, depending on the circumstances, may ultimately suspend the contractor’s license such that the contractor can no longer legally operate. Plus, an unpaid contractor registration bond claim judgment might impair the principal of the contractor in licensing a new contracting business.
If you have questions regarding Washington contractor registration (or other) bond claims, please feel free to contact Matt McCafferty – mjm@mccaffertysteinmark.com – (206) 728-0260. He has been assisting clients on construction and business law matters for nearly three decades.
This information has been prepared for general informational purposes only; is not legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship.