The Cobb Law Group is pleased to announce that construction attorneys Mark Cobb and Christopher Thurman will be presenting at an upcoming seminar on Georgia construction law. The course is organized by The Seminar Group and is called Construction Law in Georgia. It will be held on October 1, 2015 in Atlanta, Georgia.
This programs is designed for construction professions who want to mitigate risks on their projects. As the seminar brochure describes,
At this seminar, experienced construction attorneys will teach you how to comply with Georgia’s complex lien laws, how to collect on a judgment, and how to mitigate the harmful risks of bankruptcy. Our experts will also discuss the pitfalls of public construction contracts including government compliance programs and the significant risk of false claims, as well as recent insurance concerns impacting the construction industry.
Anatomy of the Georgia Claim of Lien: Using his decades of experience of filing and enforcing mechanics and materialmen’s liens throughout Georgia, Mark Cobb will begin the first session by presenting Anatomy of a “Claim of Lien” based upon his Georgia Material Supplier Collection Handbook. During this live presentation, Mark will offer practical guidance and useful tips that you can take back to your office and immediately implement. Specifically, he will focus on the following topics which are essential for every lien claimant to know and understand:
- Georgia’s Notice of Commencement–What it is and Common Mistakes During Preparation
- When to Send a Notice to Contractor and Notice to Owner (also sometimes called Notice of Furnishing)
- Essential Elements to Include in a Claim of Lien in Georgia
- Common Mistakes Made When Preparing and Filing Liens
- Advantages of Filing a Lien
- What amounts are lienable
- Lien Enforcement Through the Judicial Process (i.e., foreclosure of liens in Georgia)
- How to Perfect a Lien in Georgia
- What Happens to a Lien After it is Perfected
Project Insurance Needs: Every construction project–whether large or small–has insurance issues, and attorney Christopher Thurman will close the session with his presentation on “Recent Concerns for Everyday Insurance Matters”. He will offer tips and current legal trends regarding the various types of insurance available and how to make certain that you are covered when you need to be. His presentation will include the following topics:
- Sufficient Minimum Coverage
- Certificates of Insurance and Copies of Endorsements
- Additional Insureds
In addition to Mark and Christopher’s presentations, other experienced construction lawyers will present on such important topics as The Nuts and Bolts of Collections, Bankruptcy in the Construction Industry, Immigration Issues, What Contractors Need to Know About Labor & Employment Laws and How to Deal with FLSA Claims, and Public Construction Contract Law Update.
Collecting on a Judgment: Have you ever received a judgment against another party and wanted to collect against that judgment? If so, then the following topics will be covered in this engaging seminar: When and Where to Record a Judgment Obtained Against an Owner, Contractor, Subcontractor, or Supplier; How to Domesticate a “Foreign Judgment” in Georgia; How to Transfer a Georgia Judgment to Another State for Collection; the Most Effective Ways to Collect on a Judgment (including going against bank accounts, the debtor’s other projects, and wage garnishments); How to Discover Assets by Serving Post-Judgment Written Discovery such as Interrogatories and Requests for the Production of Documents, Taking Debtors’ Post Judgment Depositions; Tips for Asset Searches; as well as “Front-End” Planning Tips to Help Ensure a Successful Collections Process.
Bankruptcy & Construction Law: During the Great Recession, bankruptcy impacted many construction projects, and the seminar covers topics such as: How Does a Debtor’s Bankruptcy Filing Impact my Claim for Payment? What Happens to My Judgment if Bankruptcy is Filed? Can I Pursue Payment in Bankruptcy Court? Strategies and Tactics for Collecting “Around” the Bankruptcy Court; How to Deal with Lying, Cheating or Stealing in Bankruptcy (including fraudulent transfers of assets)?
Immigration & Construction Issues: Georgia’s construction industry is fraught with immigration minefields, and this topic will help educate and answer employers’ questions including the following: Does E-Verify Apply to the Construction Industry? Are There Legal Ways to Employ Undocumented Workers on a Construction Project? What are the Penalties for Using Undocumented Workers? Can Construction Workers in Georgia Obtain Work Visas? What if a Construction Worker has Children Born in the U.S. – Does That Impact His or Her Status?
Employment Law & Construction: Keeping a job site safe and secure requires a great deal of knowledge and work. At the seminar, business owners will learn about such vital issues as: Maintaining a Diverse Workforce Free from Harassment, Discrimination, and Retaliation; Accommodating Employees with Disabilities; Dealing with Family, Medical, and Military Leave Issues; Understanding the National Labor Relations Board’s Broad View of “Protected Concerted Activity;” and Applying the Fair Labor Standards Act to the Construction Industry.
Current Law: New laws are always being passed by the legislatures and administrative agencies, and older laws are being interpreted by courts and tribunals. Thus, the presentation current issues in construction law will cover such topics as New Federal Regulations Impacting the Construction Industry, Recent Georgia Legislation; The Who/What/When of Bid Protests; False Claims; Regulatory Compliance Programs; as well as a thorough Case Law Update on interpretations and changes to existing laws.
Continuing Education Accreditation: This course has been approved by the Commission on Continuing Lawyer Competency of the State Bar of Georgia for mandatory continuing legal education credit in the amount of 6.1 regular hours. This course has been approved by The American Institute of Architects for 6.25 LU’s. The Seminar Group is an AIA CES Approved Provider. This course has been approved by the IRMI for 7.0 hours of CRIS reaccreditation credits. Contractors and engineers may qualify for continuing education hours through the American Institute of Constructors or the Construction Management Association of America.
For more information about this incredible seminar on Georgia’s Construction Law, Mechanics Liens, Materialmen’s Liens, and related issues, please click here > >
The Georgia General Assembly adjourned sine die on April 2, the 40th and last day of the 2015 legislative session. From that date, Governor Deal had 40 days to sign or veto the 312 bills that successfully passed both houses. To date, the Governed has signed 193 and vetoed 8 bills. This is the first year of a biennial session, meaning that any bill that is still on the table (not voted on) at midnight of sine die can be resumed next year without starting the process over for that particular bill.
One such bill of note to the construction industry is SB 191 regarding Call Before You Dig requirements. This bill would prohibit local governments from varying from the utility and sewer marking requirements of the “Statewide Call Before You Dig” law. Allowing local governments to adopt alternative requirements for marking underground services could lead to 159 county and hundreds of municipal standards with which workers would need to be familiar. If this bill is taken up again next session, it only needs to pass the House before being considered by the Governor.
More successful bills this session include The Partnership for Public Facilities and Infrastructure Act, SB 59 , which was signed into law on May 5. The so-called P3 Act allows the state, state agencies, and local governments to partner with the private section to finance, construct, and operate qualifying projects. As such projects are broadly defined as “meeting a public purpose or public need,” many types of projects may qualify, ranging from airports to courthouses to wastewater facilities. The private sector may submit both solicited and unsolicited proposals to participating government entities. Specific guidelines and processes for submission to local governments and state-level entities are provided for legislatively.
HB 170: Transportation Funding Act of 2015 , sponsored by Representative Jay Roberts, was signed into law by the Governor on May 4th. This law provides significant transportation infrastructure funding – $1 billion – to improve and repair existing roads and bridges. This law will address the maintenance backlog plaguing Georgia’s infrastructure and will fund projects such as pothole filling, road resurfacing, and bridge buttressing. Transportation officials successfully argued that $1 billion is the minimum amount needed to bring the roads and bridges up to standards. These funds will be generated by a 6 cents gas tax, a $5/night hotel stay fee, and additional fees on electric vehicles and heavy trucks. This new law also allows counties to propose additional sales tax for local projects. In addition to addressing motorist safety and mobility concerns, this new law is expected to create jobs.
HB 341 relating to certification of certain professionals by the Building Officials Association of Georgia (BOAG) was signed into law on May 6. This law applies to qualified inspectors of state building, plumbing, and electrical codes. While such inspectors were previously required to hold ICC certifications, BOAG certifications with certain testing requirements will not also be acceptable. BOAG represents local government building code officials and those involved in building design, construction, testing, and research of the code industry.
HB 255 , signed into law on May 4, requires that Georgia only acknowledge green building standards that give equal credits to Georgia timber products. This means that any state building project seeking green certification may only use the certification systems that equally credit Georgia forest products under the Sustainable Forestry Initiative, the American Tree Farm System, and the Forest Stewardship Council. While heralded as a win for state economic development, critics are concerned that it is an infringement on the free market as many of the green certification systems will no longer be a viable option for many state construction projects.
We are thrilled to confirm that Cobb Law Group’s rates are among the most competitive in the nation! In the September 2014 edition of the ABA Journal (the official journal of the American Bar Association), reveals the national averages of attorneys’ hourly rate.
At large law firms (those with 400 or more attorneys), senior partners charge an average of $724 per hour! At smaller firms, senior partners bill an average of $445 per hour. Since we are a small firm offering “big firm” services, our clients will be pleased to learn that we are significantly lower than the $445 average rate for a firm our size, and we are nowhere near the costs associated with hiring a large law firm.
The poll, also include the typical rates for “partner” and associates. The partner rates range from $385 to $581 per hour. We are pleased to say that even our “senior partner” rates are significantly lower than other, comparable firms “partner”rates! And the associate rates which range from $274 to $400 per hour are not even in our vocabulary. In other words, in every category, we offer much better rates than our peers.
We knew that we offered top-notch legal services at an exceptional value, but the report (issued by BTI Consulting Group) confirms this for us. One thing that the ABA Journal article did not discuss was the fees for those attorneys specializing in a particular area. Even thought this article did not mention this topic we are confident that firms which focus in particular areas and become know for their innovative work are able to charge more. Thus, our legal fees are likely even better if we could compare them side-by-side with a true competitor.
As our existing client pool understands, our firm is very unique: not only do we focus on our clients’ needs, but by limiting our practice to Georgia construction law, we are able to know and understand one area very well–we are not having to”reinvent-the-wheel”. In addition, we speak regularly at local, state and national continuing education events. That is why clients who hire us to draft their construction contracts, to file mechanics and materialmen’s liens to help them collect the money they are owed, to make payment bond claims or to handle a Miller Act claim find that we are able to assist them more quickly and with fewer problems because we spend so much of our time doing the same thing for other clients. All of this experience leads to lower over legal costs.
True, legal fees can be expensive, but the staff and lawyers at the Cobb Law Group are constantly striving to reduce our expenses and pass the savings on to our clients. Our employees are rewarded for innovative or streamlining procedures which can reduce workload and improve client satisfaction.
In addition to learning from our employees, we also welcome ideas from our clients and try to implement them to work more efficiently. For example, recently, a client wanted us to create a “form”demand letter to send to its past due customers; plus, they wanted us to produce a quick, but affordable alternative to a customized letter. We were able to create a unique letter for that client and offer the form at a reduced rate in exchange for a high-volume. We strive daily to offer the best services at the best rates. And, if you have any questions regarding our rates, please contact us today.
This is an exciting week at the Cobb Law Group; our materialmen’s lien and payment bond lawyer, Mark Cobb, will be attending the ABA (American Bar Association)’s Forum on the Construction industry’s Annual Meeting in New Orleans! The topic of the 2014 Annual Meeting is “Beat the Blues: Counseling the Client During the Course of the Ongoing Construction Project” and will be held April 10 – 12.
The speakers are always of the highest caliber and the topics are vital to maintain the cutting-edge theories applied to construction law, lien and bond issues. Topics this year include the following:
- Getting the Troubled Project Back on Course
- Owner’s Discovery of Defective Work in Progress
- Triaging the Disruptive Labor Dispute
- Impossibility or Impracticability as an Excuse to Performance
- When to Call in Reinforcements
- When to Call in the Surety
- Advice on how to Handle Mid-Project Financing Problems
- The Double-Edged Sword of Tracking Project Claims & Delays
- The Delicate Balance Between Managing the Project vs. Managing the Claim
- Practical Guidance on Handling Mid-Project Insurance issues
- Avoiding Compliance Traps When Administering Federal Contracts with Minority and Other SBA Regulated Entities
- Supplier Down! The Fallout of a Major Material Supplier Repudiation or Insolvency
- Construction Litigation
- When Reasonable People Differ: Keeping the Project on Track
- When to Advise the Client to Terminate the Construction Contract
- Project Counsel’s Ethical and Professional Obligations Versus the Eternal Quest for Project harmony and Cooperation
In addition to these fantastic legal educational opportunities, Mark also enjoys the networking opportunity to meet and discuss various legal issues with construction attorneys from across the country.
This particular annual meeting, too, has special excitement for the Cobb Law Group as the ABA is officially launching its new book “Construction Contracting” for which Mark Cobb was a co-author. This book is a comprehensive practical and legal guide for the attorney representing specialty trade subcontractor and construction material suppliers.
by Mark A. Cobb
Virginia Construction Lawyer, Christopher G. Hill, maintains the highly-regarded blog “Construction Law Musings”. He recently honored the Cobb Law Group by requesting that Mark Cobb write a guest post. Mark chose to write about some pending Georgia legislation which is based on a Virginia statue. Sen. Lindsey Tippins (R-Marietta) recently introduced S.B. 269 which, if passed, would give Georgia mechanics and materialmen’s liens priority over a deed to secure debt by requiring distributions from a foreclosure sale to first be used to satisfy the liens. The impact of this legislation has a tremendous benefit to Georgia lien claimants, and we urge our readers to contact their legislators to vote in favor of this bill. To learn more about this bill, please read Mark’s guest blog > >
by Mark A. Cobb
In its December 3, 2013 ruling, the U.S. Supreme Court took a very important stand in favor of subcontractors! For those of us watching Atlantic Marine Construction Co., Inc. v. United States District Court for the Western District of Texas, et al. closely, we were delighted to see that the Supreme Court upheld the laws of twenty-four states (which impacts every state) to limit the uses of forum-selection clauses in construction contracts.
What is a Forum Selection Clause? Forum selection clauses are very common in all types of contracts as they establish the jurisdiction where a dispute related to the contract will occur. In other words, for example, a California general contractor and a subcontractor from Alabama working on a project in Georgia might agree in their subcontract agreement that any and all disputes related to their contract will be resolved in Georgia as that is the project’s location. This makes sense as both parties were working in Georgia, the building in dispute is in Georgia, many of the witnesses were or are in Georgia, and it involves Georgia real estate.
Do Forum Selection Clauses in Construction Contracts Differ from Forum Selection Contracts in Other Business Agreements? Yes, and that’s the impact of this case. In the most general terms, forum selection clauses in commercial contracts tend to be enforceable. Construction contracts, however, have very significant public policy consideration as well as issues related to state and federal laws. Specifically, many states have enacted statutes which either void or make voidable forum selection clauses in construction contract. States have singled out construction contracts due to public policy related to the situs of the project among other reasons.
Why do Some States Limit the Terms of Forum Selection Clauses? Imagine in the example above regarding the California general contractor, that the contract selected California as the proper jurisdiction for all disputes. It might not be as fair for many reasons including California’s natural tendency to favor its citizens (in the case the general contractor); frequently, the general contractor has deeper pockets than the specialty subcontractor so to require the Alabama subcontractor to enforce its rights in California could be very expensive, the costs to fly witnesses located in the project’s location (Georgia) is time-consuming and expensive, and, frequently, subcontractors have limited opportunity to negotiate the terms of their contracts. Furthermore, and perhaps most importantly, the dispute would involve a construction site or building located in Georgia. Thus, many state legislatures have put limits onto the use of forum selection clauses in construction contracts.
What Happened in the Recent Case Decided by the Supreme Court? In Atlantic Marine Construction Co., Inc. v. U.S. District Court for the Western District of Texas, a Virginia-based general contractor, Atlantic Marine, hired a subcontractor named J-Crew Management, Inc, a Texas corporation, to build a child care facility in Fort Hood, Texas. And, the subcontract between Atlantic Marine and J-Crew contained a forum-selection clause requiring that all disputes “shall be litigated in the Circuit Court for the City of Norfolk, Virginia, or the United States District Court for the Eastern District of Virginia, Norfolk Division.”
J-Crew, in turn, subcontracted some of its work to sub-subcontractors who were located in or near Fort Hood, Texas (very close to the project). All of J-Crew’s work was performed in Texas, and all of the sub-subcontractors work was performed in Texas. At the close of the project, however, J-Crew was owed almost $160,000 even though it had timely completed its work. In order to recover the amount due, J-Crew brought suit against the general contractor in Texas (in the federal district where the project was located). The general contractor, Atlantic Marine, citing the forum-selection clause contained in the construction subcontract, moved to dismiss or transfer J-Crew’s case to federal court in Virginia.
The Trial Court’s Decision: Because the project occurred solely in Texas, the claim arose in Texas, all of the participants had been in Texas, and most of the evidence concerning the claim was located in Texas, the trial court agreed with J-Crew and refused to transfer venue to Virginia. Furthermore, the Texas legislature had enacted a statute which states that construction contracts for improvements to real property located in Texas are “voidable by the party obligated by the contract to perform the construction” if the contract requires litigation in another state.
Federal Appeals Court Upholds State Law: In response to the trial court’s ruling, Atlantic Marine appealed to the Federal Court of Appeals to seek enforcement of the forum-selection clause, but the appeals court agreed with the trial court. Finally, Atlantic Marine appealed to the U.S. Supreme Court, which granted review. The Supreme Court heard oral arguments in the case in October and handed down their ruling this week.
Why The U.S. Supreme Court Upheld the Trial Court’s Decision: The Supreme Court recognized states rights in not overruling the Court of Appeals Decision. And, in fact, the Supreme Court’s holding states that when a federal court considers the forum for a case, “the court should not consider the parties’ private interests aside from those embodied in the forum-selection clause; it may consider only public interests.” By authorizing public policy as a part of a court’s decision to transfer or dismiss a case, the Supreme Court recognized state sovereignty as well as the need for public interest to enforce states laws.
Important Lessons for Subcontractors and Suppliers: Although Atlantic Marine did not render all forum selection clauses in construction contracts unenforceable, it does permit a balance between parties’ rights to contract and public policy. In addition, Atlantic Marine is a great reminder of the importance that even a seemingly insignificant subcontract term can hold in a construction contract. Frequently, forum-selection provisions are buried deep within the “boiler plate” terms of the construction contract; parties entering into contract must pay attention to each of these terms including the forum selection clauses.
Georgia construction attorney Mark Cobb has been asked to be a presenter at the construction law seminar, “CONTRACTOR SURVIVAL 101″, sponsored by the Associated General Contractors (AGC) of Georgia held on Wednesday, December 18, 2013 in Tifton, Georgia.
According to the AGC Georgia’s information brochure, “Construction firms are faced with difficult legal, accounting and insurance issues exacerbated by the shrinking markets and lower profit margins. AGC Georgia has assembled a team of experts in these fields to share professional experiences and answer your questions.”
The seminar is intended to assist construction professionals with some of the important legal and accounting needs faced by the industry. In addition to a question-and-answer session, the following five topics will be the central focus of this seminar:
- Common Sense Surety and Financial Risk Management
- Internal Controls and Best Practices for Contractors
- Tax Law Updates
- Georgia Lien Law
- Sound Practices for Prime Contractors to Implement When Working with Specialty Contractors
Mark Cobb is honored to be a part of this important, educational program and to be leading the discussion on Georgia Lien Law and Sound Practices for Prime Contractors to Implement. In doing so, Mark will be highlighting several important topics such as:
- Understanding Legal Rights
- Georgia’s Statutory Notice Scheme including Notices of Commencement, Notices to Contractors, and Notices to Owners
- Effectiveness and Forms for Interim and Final Lien Waivers and Releases
- Affidavits of Nonpayment
- Private Project Payment Bonds
- Bonding of Specialty Contractors
- Detailed Schedule of Values
- Language in Subcontracts
- Reports from Subcontractors and Suppliers
- Obtaining Proper Paper Work from Specialty Subcontractors
- Confirming Worker’s Compensation Insurance
Contractor Survival 101 is open to everyone, and there is a discount for AGC Georgia members. This educational construction law seminar begins at 10:00 a.m. and will finish at 3:00 p.m. (lunch is included in the registration price). To learn more about the speakers or topics or to download registration information, please view Upcoming Events on the AGC Georgia website by clicking here – – >
In addition, you may contact the Cobb Law Group directly for additional information. We look forward to seeing you there.
Huffington Post journalist, Radley Balko has written a very interesting article for the most recent issue of the American Bar Association’s ABA Journal regarding the evolution of America’s police from friendly public servants to pseudo-military; to read this article, please click here > >
If you would like to read more, the article’s author, Radley Balko, has written a book entitled Rise of the Warrior Cop: The Militarization of America’s Police Forces; if you are interested in reading this click on the following link.
Don’t forget to leave your comments regarding this interesting and important topic.
by Mark A. Cobb
On July 1, most of the 2013 Georgia legislative changes take effect including a very crucial amendment to Georgia’s lien laws.
Earlier, this year, our state legislature approved and our Governor signed in to law, an amendment to the Georgia Mechanics and Materialmen’s Lien Statutes which allows lien claimants the right to include all of their contract costs in their lien amount. Thus, as of today, it is clearer that the law allows lien claimants to include such amounts as pre-judgment interest, general condition costs, mobilization, de-mobilization, and profits in the amount they claim in the form of a lien. Specifically, Part 3 of Article 8 of Chapter 14 of Title 44 of the Official Code of Georgia Annotated, relating to liens of mechanics and materialmen, was amended by revising Code Section 44-14-361, relating to creation of liens and property to which lien attaches. The following is the revised O.C.G.A. Section 44-14-361 (the changes to the current statute are indicated underlined) which takes effect today:
(a) The following persons shall each have a special lien on the real estate, factories, railroads, or other property for which they furnish labor, services, or materials:
(1) All mechanics of every sort who have taken no personal security for work done and material furnished in building, repairing, or improving any real estate of their employers;
(2) All contractors, all subcontractors and all materialmen furnishing material to subcontractors, and all laborers furnishing labor to subcontractors, materialmen, and persons furnishing material for the improvement of real estate;
(3) All registered architects furnishing plans, drawings, designs, or other architectural services on or with respect to any real estate;
(4) All registered foresters performing or furnishing services on or with respect to any real estate;
(5) All registered land surveyors and registered professional engineers performing or furnishing services on or with respect to any real estate;
(6) All contractors, all subcontractors and materialmen furnishing material to subcontractors, and all laborers furnishing labor for subcontractors for building factories, furnishing material for factories, or furnishing machinery for factories;
(7) All machinists and manufacturers of machinery, including corporations engaged in such business, who may furnish or put up any mill or other machinery in any county or who may repair the same;
(8) All contractors to build railroads; and
(9) All suppliers furnishing rental tools, appliances, machinery, or equipment for the improvement of real estate.
(b) Each special lien specified in subsection (a) of this Code section may attach to the real estate of the owner for which the labor, services, or materials are furnished if they are
furnished at the instance of the owner, contractor, or some other person acting for the owner or contractor and shall include the value of work done and materials furnished in any easement or public right of way adjoining said real estate if the work done or materials furnished in the easement or public right of way is for the benefit of said real estate and is within the scope of the owner’s contract for improvements to said real estate.
(c) Each special lien specified in subsection (a) of this Code section shall include the amount due and owing the lien claimant under the terms of its express or implied contract, subcontract, or purchase order subject to subsection (e) of Code Section 44-14-361.1.
(d) Each special lien specified in subsection (a) of this Code section shall include interest on the principal amount due in accordance with Code Section 7-4-2 or 7-4-16.
In addition to this important update to Georgia’s lien laws, most of Georgia’s new statutes also take effect today including the amendment to Georgia’s constitution to allow the state to authorize new charter schools over the objection of local school boards, and a $2,000 increase in the amount of tax-free income married couples filing jointly may claim as an exemption.
Every construction project, whether large or small, comes with risks. Contractors, subcontractors and materialmen worry whether payment will be made; conversely, project owners, developers and general contractors worry that subs and suppliers will properly perform. Fortunately, there are several statutory and common law rights which help alleviate some of these stresses including mechanics and materialmen’s liens, payment bonds and performance bonds.
Payment bonds (sometimes also called surety bonds or construction bonds) and performance bonds are essentially insurance contracts between three parties:
- the Obligee (the project owner which is often a governmental agency)
- the Principal (the purchaser of the policy which is often the general contractor
- the Surety (the underwriter which is usually an insurance company)
Payment bonds offer assurances to those on lower tiers (such as subcontractors and suppliers) that they will be paid for the work or the materials which they supply; performance bonds offer assurance to those on higher tiers (such as owners or prime contractors) that the work will be completed. On private projects, payment bonds and performance bonds are optional; however, on State of Georgia public works projects and federal public works projects, payment bonds and performance bonds may be mandatory.
There are new, additional types of insurance products which are increasingly becoming available. There are several different names by which these new products are known, but two of the more common names are ConstructAssure and Subguard.
These insurance products are sold by the surety to general contracts (so there are only two parties involved), and it functions as subcontractor default insurance which offers protection to the general contractor against unbonded first tier subcontractors. In other words, it can be seen as an indemnification policy wherein the surety agrees to indemnify the general contractor in the event that a subcontractor fails to perform.
As with all insurance policies, there are advantages and disadvantages to their use. Often cited examples of the advantages include the following:
- general contractors appreciate that their indirect losses (office, overhead, mobilization, etc.) as well as their direct losses can be included in the claim;
- the policy may stipulate that indirect costs are a percentage of the direct costs (for example 10% or 20%); thus, the claimant does not have to prove their indirect losses;
- claims are paid quickly which helps the contractor as well as the project;
- the contractors pre-qualify the subcontractors;
- these policies tend to be much less expensive because they have a high deductible (frequently ranging from $250,000 to $1,000,000 whereas there are no deductibles with payment bonds or surety bonding; and
- a policy may be issued for a specific project or it may cover all of a general contractor’s project for a year (or renewal term).
Does These Subcontractor Indemnification Policies Replace Payment Bonds? Most Georgia state and municipal public works projects and most federal public works projects require payment bonds and have set minimum standards for the bonds. Subguard and similar policies do not meet these minimum requirements, thus, public works projects still require payment bonds. This does not, however, preclude a general contractor from having a Subguard policy in place on a public project.
If you have any questions about bonding on private construction projects in Georgia or state or federal projects in Georgia, please feel free to contact the construction bond attorneys at the Cobb Law Group via email or by calling toll free 1-866-960-9539