As construction claim lawyers, we are always on the lookout for insurance policies or “bonds” that might satisfy our client’s claim. On federal projects, this includes performance and payment bonds known as Miller Act bonds. These bonds, which take their name from the federal Miller Act that requires them on all federal contracts over $100,000, protect the government and subcontractors if the contractor defaults. In that situation, subcontractors who are owed money can sue both the defaulting contractor and the insurance company or “surety” who issued the Miller Act payment bond. The surety effectively “steps into the shoes” of the defaulting contractor and becomes liable for the contractor’s debt. In some cases, the surety can actually become liable for more than the contractor’s debt.
That’s what happened in an unpublished opinion released earlier this month by the U.S. Court of Appeals for the DC Circuit in a case styled United States of America, for the use and benefit of American Civil Construction, LLC v. Hirani Engineering & Land Surveying and Colonial Surety Company, 2025 WL 88664 (D.C. Cir. Jan. 14, 20215). That case involved a U.S. Army Corps of Engineers project to construct a levee flood wall in Washington, D.C. As with many projects that become cases, the job was plagued by “delays, unexpected modifications and technical snafus.” After the Corps of Engineers terminated the prime contractor for default, one of the subcontractors filed suit against the contractor and its surety to recover for unpaid work.
As to the contractor, the trial court found that the subcontractor’s claim was capped by the contract price under D.C. law. As a result, the subcontractor was awarded a judgment against the contractor in the amount of only $568,000. As to the surety, however, the trial court held that the subcontractor’s claim was not capped by the amount remaining on the contract. Rather, as to the surety, the subcontractor was entitled to equitable relief under a quantum merit theory for the full reasonable value of its services. Under that theory, the trial court awarded the subcontractor nearly $2.6 million against the surety, roughly 5 times the amount awarded against the contractor. On appeal, the D.C. Circuit rejected the surety’s objection to differing awards:
[Q]uantum meruit damages against the surety under the Miller Act can exceed expectation damages against the prime contractor under D.C. law for the same construction project. That is because the Miller Act provides protection beyond what ordinary contract law affords, requiring payment bonds on federal government contracts and entitling subcontractors to recover the full value of their services and materials, including those resulting from delays not contemplated under the written contract.
The case is a good reminder to watch for insurance policies or bonds that may satisfy a recovery, and to consider alternative theories that could maximize recovery. A copy of the court’s decision is available here.