ILNews

Court answers question on subcontractors' ability to recover

Michael W. Hoskins
January 1, 2007
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The Indiana Supreme Court today delved into the meaning of "subcontractor" and determined that performance bond coverage for third parties only goes so far.

Stemming from a certified question from the U.S. District Court for the Northern District of Indiana, justices considered: "Does a performance bond required by and issued in accordance with Ind. Code §8-23-9-9 afford coverage to a third-tier claimant?"

Chief Justice Randall T. Shepard wrote the opinion saying the statute does not afford that coverage, noting that a subcontractor is "any person or organization entering into a contract with a contractor to furnish labor and materials used in the actual construction of a state highway project."

Further in the decision, he wrote: "Accordingly, a claimant who does not share privity of contract with the contractor or a subcontractor is not entitled to the coverage of a performance bond issued under §8-23-9-9."

Justice Brent Dickson dissented without a separate opinion. The 4-1 decision came down in Alberici Constructors, Inc. v. Ohio Farmers Insurance Co., 94S00-0612-CQ-488, which involved a federal contract dispute relating to an Indiana Department of Transportation bridge project near Bluffton.

Contractor Primco secured a performance bond with defendant Ohio Farmers Insurance Co. and later entered purchase agreements with three other companies for needed materials. The third, Hillsdale Fabricators or Alberici Constructors, delivered bridge pieces but was not paid by the second company, Gateway Bridge. The insurance company rejected a claim by Alberici, saying it was "too far removed to have standing." Alberici ultimately sued the insurance company in federal court, arguing that it could recover under the state's performance bond statute.

"Without a bright line defining where surety coverage extends, contractors would face an incalculable risk of liability for claims made by distantly remote suppliers or laborers on contracts made without contractor approval," the chief justice wrote, later adding that the statute doesn't extend coverage under a performance bond to any entity more remote than a second-tier laborer or material supplier.

However, he added that this holding doesn't mean parties working on state highway projects are left without any way to ensure payment. Advance payments or some other "financial understanding" could be reached, as well as additional contract arrangements to extend that coverage, the chief justice wrote. The General Assembly could also amend the statute, he wrote.
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  1. Thank you, John Smith, for pointing out a needed correction. The article has been revised.

  2. The "National institute for Justice" is an agency for the Dept of Justice. That is not the law firm you are talking about in this article. The "institute for justice" is a public interest law firm. http://ij.org/ thanks for interesting article however

  3. I would like to try to find a lawyer as soon possible I've had my money stolen off of my bank card driver pressed charges and I try to get the information they need it and a Social Security board is just give me a hold up a run around for no reason and now it think it might be too late cuz its been over a year I believe and I can't get the right information they need because they keep giving me the runaroundwhat should I do about that

  4. It is wonderful that Indiana DOC is making some truly admirable and positive changes. People with serious mental illness, intellectual disability or developmental disability will benefit from these changes. It will be much better if people can get some help and resources that promote their health and growth than if they suffer alone. If people experience positive growth or healing of their health issues, they may be less likely to do the things that caused them to come to prison in the first place. This will be of benefit for everyone. I am also so happy that Indiana DOC added correctional personnel and mental health staffing. These are tough issues to work with. There should be adequate staffing in prisons so correctional officers and other staff are able to do the kind of work they really want to do-helping people grow and change-rather than just trying to manage chaos. Correctional officers and other staff deserve this. It would be great to see increased mental health services and services for people with intellectual or developmental disabilities in the community so that fewer people will have to receive help and support in prisons. Community services would like be less expensive, inherently less demeaning and just a whole lot better for everyone.

  5. Can I get this form on line,if not where can I obtain one. I am eligible.

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