Court Holds Action on Performance Bond Accrues Upon Contractor’s Acceptance of Subcontractor’s Work and Payment for that Work in Full

BDI Constr. Co. v. Hartford Fire Ins. Co., 2008 WL 4568075 (Fla. Dist. Ct. App. Oct. 15, 2008)

In BDI Construction Co., a subcontractor filed a third party action on a sub-subcontractor’s performance bond.  The surety moved for summary judgment claiming that the agreed five-year statute of limitations under Florida Statute Section 95.11(2)(b) began to run when the subcontractor accepted the sub-subcontractor’s work as complete and paid for the work in full.  The subcontractor on the other hand argued that the statute of limitations began to run when the entire project was completed and accepted by the owner.  The subcontractor relied on the Florida Supreme Court’s opinion in Fed. Ins. Co. v. Southwest Florida Retirement Ctr., Inc., 707 So. 2d 1119, 1121 (Fla. 1998), which stated that Section 95.11 “as it applies to an action on a performance bond, accrues on the date of acceptance of a project as having been completed according to the terms and conditions set out in the construction contract.”
 

The Third DCA noted that Federal Insurance, Co. did not deal with a dispute between a contractor and a subcontractor, nor a situation where the owner refused to accept the project as completed.  Therefore, the court held that in the context of a subcontract, where a contractor accepts the work of a subcontractor and pays for that work in full, the action on performance bond accrues when the subcontractor finishes its work.  The court interpreted the holding in Federal Insurance, Co. in this context to mean that the “project” is the sub-contracted work, and the construction contract is the sub-contract.