About Kelly M. Davis Esq.

Kelly M. Davis is the owner of Kelly M. Davis & Associates, LLC. She grew up around the construction industry and knew once she opened her practice she would help construction related businesses.

Payment Bond Claims – Part 2

Last month I started a series about the Payment Bond Process in Texas.  You can find the last article here:  Payment Bond Claims – Part 1.   We went over the time frames of notices and what has to be included.  This time I would like to go over what kind of items you can include in a Bond Claim.

One item that can be included is labor.  Chapter 2253.001 (5) of the Statute says: “Public work labor” means labor used directly to carry out a public work.  That’s pretty self-explanatory, but of course people have tried to get paid on aspects that pertain to labor but may not be direct labor.

The following situations have been tested in the courts and have been deemed covered by the bond:   1) Labor paid out on a commission basis qualifies; and 2) where labor is furnished by a temp agency then the temp agency qualifies to make a claim on the bond.

The following examples are a few scenarios that have been deemed not covered by the bond;  1) Plans that were provided but were never used on the construction project; 2) Insurance premiums that are normally held, such as workers compensation and liability coverage; 3)and, of course, funds.

Another item that can be included is materials. Chapter 2253.001 (6) of the Statute says:

“Public work material” means:

(A)  material used, or ordered and delivered for use, directly to carry out a public work;

(B)  specially fabricated material;

(C)  reasonable rental and actual running repair costs for construction equipment used, or reasonably required and delivered for use, directly to carry out work at the project site;  or

(D)  power, water, fuel, and lubricants used, or ordered and delivered for use, directly to carry out a public work.

Like the items I discussed above in labor, the courts have distinguished between materials that may or may not qualify and the following has been held up through the courts.  Materials that the courts have found to qualify include items that might be rented or leased for a job but are off-site, such as a rock crusher located at a quarry that could not be moved to the actual jobsite.  One can also claim a leased piece of equipment that will be used exclusively for a specific job and then returned when the job is complete.    However, the courts have stated that materials that might be purchased and used in the normal course of business for a construction business are not allowed to be claimed.

Next time I will try and cover some other situations that have been litigated through the courts.

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