A Virginia subcontractor is taking Manhattan Construction and Federal Insurance Company to court over more than $700,000 in unpaid work and extra costs on a federal project – a dispute that puts the spotlight on surety providers and the way payment bonds work in the real world.
Filed on Sept. 3 in the US District Court for the Eastern District of Virginia, the lawsuit from Hamilton Iron Works, Inc. (HIW) tells a story that will sound familiar to many in the insurance and construction business. HIW says it signed on to provide structural steel and miscellaneous metals detailing, fabrication, and erection for the DLA Aviation, Operations Center Phase 2 at the Defense Supply Center in Richmond, Virginia, under a $7.7 million subcontract with Manhattan Construction Company, LLC (MCC). The project was for the Department of the Army, US Army Corps of Engineers, Norfolk District, and, as required for federal projects, MCC provided a payment bond with Federal Insurance Company (FIC) as surety.
But according to HIW, things didn’t go as planned. The company claims it performed its scope of work in a professional, timely, and workmanlike manner, but after accounting for all payments made by or on behalf of MCC, there is an unpaid subcontract principal balance of $303,440.69, exclusive of change orders, interest, attorneys’ fees, and costs. That’s just the start. HIW also says the project was subject to numerous and substantial changes and delays, leading to extra work, labor, and materials at the request of MCC. HIW asserts that it submitted timely change order requests for the additional work performed, with the total value of pending change orders listed as $405,370.00.
HIW’s complaint lists the change orders by number, description, date, and amount, including items such as “RFI 41” dated September 24, 2021, for $751.00, “Elevator roof changes” dated July 19, 2022, for $29,154.00, and “RTU Platform Changes” dated August 22, 2022, for $168,269.00. According to HIW, MCC directed the company to perform this extra work and, in some instances, confirmed in writing that it would compensate HIW, but has refused to approve and process the change orders.
HIW alleges that MCC’s ongoing refusal to approve and process the pending change order requests is a violation of the duty of good faith and fair dealing under Virginia law. The complaint states that HIW demanded payment pursuant to the terms of the subcontract, which MCC has failed and refused to pay. HIW claims damages in the amount of at least $708,810.69, plus pre- and post-judgment interest, attorneys’ fees, and costs.
HIW also claims that, under the terms of the payment bond and the Miller Act, FIC is jointly and severally liable to pay HIW for all work performed and all services provided for which HIW has not been paid. HIW alleges that all conditions precedent to bringing an action on the payment bond have been performed or have occurred.
HIW is seeking judgment for breach of contract against MCC and on the payment bond against FIC, in the amount of at least $708,810.69, including attorneys’ fees, costs, and pre- and post-judgment interest at the maximum legal rate, as well as any other relief to which it is entitled.
At the time of filing, this case is at the complaint stage, and all statements are allegations made by HIW. MCC and FIC have not yet responded to the complaint. The outcome of this dispute will depend on further proceedings in the United States District Court for the Eastern District of Virginia.
