Reager & Adler Lawyers Win Decision for Supplier Client

In a case recently argued before the Commonwealth Court of Pennsylvania, Reager & Adler prevailed on behalf of a supplier client who had provided substantial amounts of material to a public project for which it was left unpaid.  Payment to contractors, subcontractors and suppliers on a public project in Pennsylvania is governed by the Commonwealth Procurement Code.  Contractors who have contracts with public owners must provide both performance and payment bonds from surety companies licensed to do business in Pennsylvania.  The performance bond protects the public owner in the event the contractor fails to perform; while the payment bond is for the protection of subcontractors and suppliers, essentially ensuring payment. This is important as subcontractors and suppliers providing value to public projects are precluded from seeking payment through the assertion of mechanics liens. 

Within the Commonwealth Procurement Code, there is a provision which has come to be known as the Safe Harbor Provision, which generally insulates a general contractor and its surety from any liability to a sub-subcontractor or supplier if it has made payment to its own subcontractor for the work or materials supplied by the sub-subcontractor or supplier. 

The question presented to the Commonwealth Court was whether this Safe Harbor Provision could be waived by contractors and their sureties by the specific language included by the surety in its payment bond.  In the case of Berks Products Corporation v. Arch Insurance Company, the Commonwealth Court agreed with the arguments made on behalf of Berks Products and in so doing affirmed a decision by the Court of Common Pleas of Northampton County awarding Berks Products the amount it was due for the material provided for the project, despite the surety’s assertion of the Safe Harbor Provision.  Because this favorable decision was achieved only by arguing the specific language used by Arch in its payment bond, we encourage potential claimants to review specific bond language with experienced counsel at Reager & Adler. 

Read the Commonwealth Court's Opinion.

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Harrisburg Magazine Readers' Choice 2011