It's important for bonded clients to be proactive in the event any obligees make delay claims or other claims because of COVID-19.
Allstar Surety and National Claim Services want to share with you and your contractors a list of best practices your contractor clients should be aware of during this time.
During this time, It's important for your contractors to prepare themselves for any future issues that may cause a disruption in their business. The key to this is understanding their contracts by reading themand looking specifically for any Force Majeure clauses - anything to do with shutdown delays, including government shutdowns &/or dictated by the owner/obligee, lack of supply availability, etc. If nothing specific is mentioned, they can look for other clauses in the general conditions or other sections of the contract.
Unless stated in the contract, your contractor typically will have the responsibility to continue performing on a job unless the contract states an "Act of God" or similar clause. If the contract does not address this type of extraordinary risk (COVID-19), then typically your contractor will have a duty to perform.
Documentation is key for your contractors during this time. By documenting thoroughly, they can compare pre-COVID-19 timelines to current timelines. If there were delays prior to COVID-19, it may be more difficult for your contractor to submit for additional time to complete the job.
The following are examples of reasons that may be considered for an excusable delay:
- the entire nation is under a National Emergency Order
- employee illness
- material supply disruption
- site-access restrictions
- government orders
- other parties (subs, owners, architect, engineer) demobilizations
- necessity for laborers to have sufficient space/separation for them to work under the social distancing recommendations
Don' forget that delay or non-performance may be covered by a contractor's other policies. It's important to review insurance coverages for business interruption and other clauses in the instance that issues arise. Contractors may be able to seek assistance outside of their bond through other liability carriers. A liability insurer’s duty to defend (not surety’s duty) is very broad.
In the instance of a materials-related delay, it's important to note that under the Federal Acquisition Regulations (FAR), a delay may be considered non-excusable if materials are/were available from a different source. Currently, there is not a significant lag time in securing materials, but it can be expected as summer approaches.
Open communication with owners and or general contractors is important during this time. Providing notices to owners early and often will keep lines of communication open and help all parties involved to be aware of current and foreseeable issues.
- READ THE CONTRACT
- KEEP GOOD DOCUMENTATION
- PROVIDE NOTICES EARLY
- PRIORITIZE COMMUNICATION