Massachusetts Superior Court: Commonwealth has a Duty to Verify General Contractors’ Payment Bonds on Construction Projects

The plaintiffs in Kapiloff’s Glass, Inc. et.al. v.University of Massachusetts (UMASS), et.al were all specialty contractors on a project at the University of Massachusetts Lowell where they were contracted to furnish and install metal windows, interior glass, roofing materials, and custom laser curtains respectively.  The project’s general contractor was required by state statute to furnish a subcontractor payment bond at the onset of construction.  When the plaintiff’s work was completed in a timely manner, the general contractor failed to issue full payment for the work and suit was filed against the general contractor and its surety.  At that time, the plaintiffs learned the surety was not licensed in Massachusetts, never registered with Division of Insurance as required by law, and was in fact a false business entity without assets. Multiple judgement have been entered against the general contractor and surety in the amount of $500,000 and neither party has responded or made payment on the judgments.

M.G.L. c. 149, § 29  states in part that: “Officers or agents contracting in behalf of the commonwealth...for the construction…of public buildings or other public works…shall obtain security by bond in an amount not less than one half of the total contract price, for payment by the contractor and subcontractors for labor performed or furnished and materials used or employed therein [.]”  The current dispute primarily centers around the meaning of “officer” and “agent” in the statute.  The plaintiffs argue that “officer” and “agent” applies to the Commonwealth while the defendants argue that the terms relate to the general contractor.  The Court found in its denial of the defendants motion to dismiss that in the plain language of the statute, general contractors are not in fact “officers or agents” of the government but operate in their own self-interest. The Court further found that if the legislature intended such a duty to be only for general contractors, it would have stated such by using the term general contractor, which is used expressly throughout the statute.

The Court further stated that the Commonwealth owes a duty to the plaintiffs as expressed through the history of the M.G.L. c. 149, § 29 through multiple Supreme Judicial Court rulings.  These rulings establish that the statute protects subcontractors, not the Commonwealth.  Furthermore, the Commonwealth was in the best position to protect the plaintiffs because as subcontractors, they had no access to the bond information during the bid process.   The Commonwealth has its own insurance division where a cursory inspection would have shown that the surety was “not licensed, solvent, or registered to conduct business in Massachusetts and accordingly could not supply a payment bond that would adequately protect plaintiffs.” 

This is a case of first impression in Massachusetts.

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The author, Brendan Carter, is a contributor to The Dispute Resolver and a former Student Division Liaison to the Forum on Construction Law.  He is an attorney and a Senior Consultant with Navigant’s Global Construction Practice based out of Boston, MA.  He may be contacted at 617.748.8311 or brendan.carter@navigant.com.