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By: Thomas H. Welby Gregory J. Spaun Published: August 2021

Failure to Include Monetary Demand Dooms Contractor's Claim for Delay Damages

Several months ago, this column told of the harsh consequences faced by a contractor who did not strictly follow the notice provisions of his contract, and how such failure ultimately doomed an otherwise valid claim of over $2 million. This month, we note of the case of BG National Plumbing & Heating v New York City School Construction Authority, where an appellate court similarly doomed a contractor’s monetary claim. However, this case, unlike that previous case, involved a statutory, rather than a contractual, notice of claim.

Background

In May of 2012, BG National Plumbing and Heating was awarded a contract to perform electrical upgrades for the New York City School Construction Authority. The work was scheduled to take 730 days, and BG received its Notice to Proceed from the SCA on June 18, 2012. Eighteen months into its work, BG filed a Notice of Claim against the SCA, claiming that it was entitled to an extension of the contractual completion date by 243 days because of certain SCA-caused delays. Crucially, this Notice of Claim did not include any monetary demand.

In September of 2014, BG sued the SCA, filing a summons with notice (an abbreviated document that does not require one to set forth its damages in detail). The parties attempted to work out their dispute (which included completing the project, which occurred on December 9, 2015), and they agreed that BG could file its complaint (the document in which a party is required to set forth the details of their claim) once it received an expert’s report detailing what those damages were. BG received that report on March 13, 2017, and it filed its complaint on October 3, 2017, seeking $2,455,740 in delay damages. The SCA then moved to dismiss BG’s lawsuit, arguing that as the Notice of Claim failed to apprize the SCA of the monetary claim, BG was prohibited from pursuing it in court. In response to the motion, on July 17, 2018, BG cross-moved to amend its Notice of Claim to include the monetary claim.

Decision

The motion court granted the SCA’s motion, denied BG’s cross-motion, and dismissed BG’s complaint, finding that the Notice of Claim filed by BG was defective in that it failed to set forth BG’s claimed damages in detail. In doing so, the motion court noted that damages are generally ascertainable upon the substantial completion of a construction project, which occurred here in December of 2015. However, even giving BG the benefit of the doubt, the motion court noted that BG received the expert report setting forth its delay damages in March of 2017, and even assuming that its claim was not ascertainable until that date, saw that BG failed to take any action until it was faced with a motion to dismiss its lawsuit sixteen months later.

BG appealed, and the appellate court affirmed the court below. In doing so, the appellate court held that while a Notice of Claim can be amended to correct good faith and non-prejudicial mistakes, it cannot substantively change the theory of liability—which the proposed amended Notice of Claim would do by, for the first time, including a monetary component. The appellate court also noted the “inordinate delay” between the time when BG first became aware of the nature and extent of its damages, and when it acted to amend its Notice of Claim.

Comment

When seeking to make a claim against the public purse, there are—in additional to contractual provisions requiring notice—often statutory or other regulatory provisions requiring contractors to make notice of their claim. These provisions can be found scattered in various statutes (in this case, Section 1744 of the Public Authorities Law, which requires a Notice of Claim to be filed before suing the New York City School Construction Authority) or, in the case of some cities and counties, buried deep in their city/county charters. As we saw in BG National, failure to strictly comply with these statutory provisions can be just as fatal as failing to comply with contractual notice provisions. Accordingly, contractors who believe that they have claims against a public owner would be well advised to consult with experienced construction counsel to be sure that their claims are asserted in a way that complies with both the contractual and statutory/regulatory notice of claim provisions.

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