In a unanimous decision issued in the case of Electrical Contractor’s Inc. v. Insurance Company of the State of Pennsylvania, SC 19105 (2014), the Connecticut Supreme Court recently declared that a public works payment bond surety does not forfeit its substantive defenses to a bond claim by failing either to pay or deny a claim within the statutorily prescribed 90-day period. The decision was issued in a lawsuit brought by a subcontractor and defended by Robinson+Cole on behalf of the payment bond surety. The ruling resolves a split of decisions at the Superior Court level and clarifies the rules of the road for both claimants and sureties.
The Court applied well-established canons of statutory interpretation to find that the statutory language stating that a surety “shall” pay or deny a claim within 90 days, absent a specific penalty for noncompliance, rendered the provision directory, rather than mandatory. Rather than finding an implied default provision, the Court held that a claimant who does not receive payment or a denial within 90 days should deem its claim as having been denied and may then bring suit. The Court’s decision was supported by public policy considerations, including the avoidance of an unwarranted windfall to the claimant resulting from a nonprejudicial delay in the surety’s response. In addition, the Court noted that a surety’s efforts to investigate a claim may often be hindered or delayed while it awaits information from the claimant and its bond principal.
To learn more about this decision read our article “Connecticut Supreme Court Rejects Effort to Read Default Liability Provision into Public Works Payment Bond Law.”