Berks Products Corp. v. Arch Insurance Co.
2013 Pa. Commw. LEXIS 254
| Pa. Commw. Ct. | 2013Background
- Skepton Construction was prime contractor for a public school project and procured a 100% payment bond from Arch Insurance to secure payment to suppliers and subcontractors.
- Skepton subcontracted concrete work to R.A. Tauber, which in turn purchased materials from Berks Products; Berks alleges Tauber failed to pay $52,679.26 for materials supplied.
- Berks sued Arch (the surety) on the payment bond to recover the unpaid $52,679.26 after Tauber went bankrupt; Arch raised the Prompt Pay Act "safe harbor" (62 Pa.C.S. § 3939(b)) asserting Skepton paid Tauber in full, barring Berks’ claim.
- Arch’s payment bond stated it would remain in force until both the principal and any subcontractor "promptly shall pay in full" all amounts due to claimants — language broader than standard bonds that typically render the bond void when the principal pays.
- After affidavits were exchanged (Berks’ affidavits stating nonpayment; Skepton’s president claiming payment), the trial court granted summary judgment to Berks, concluding Arch’s bond language waived the safe-harbor protection and no genuine issue of material fact remained.
- Commonwealth Court affirmed, holding the bond’s explicit language waived section 3939(b) protection, Trumbull was distinguishable, and the ruling did not conflict with the Bond Law.
Issues
| Issue | Plaintiff's Argument (Berks) | Defendant's Argument (Arch) | Held |
|---|---|---|---|
| Whether Arch’s bond waived the Prompt Pay Act "safe harbor" | Bond language requires both prime and subcontractors to pay; thus safe harbor waived and Arch remains liable | Safe harbor applies because Skepton paid Tauber, barring Berks’ claim under §3939(b) | Bond language effectively waived safe harbor; judgment for Berks affirmed |
| Whether Trumbull controls to bar recovery | Trumbull is inapplicable; Trumbull did not involve similar bond language | Trumbull requires applying safe harbor where subcontractor was paid | Trumbull is distinguishable; does not override the bond’s plain language |
| Whether the decision contravenes the Bond Law (public-works bond scheme) | Enforcing the bond’s terms furthers Bond Law’s purpose to protect suppliers | Bond Law limits cannot be expanded by bond language | Court: enforcing the bond terms here is consistent with Bond Law’s remedial purpose |
| Whether a genuine factual dispute exists about payment to Tauber/Berks | Affidavits show Berks unpaid $52,679.26 | Skepton affidavit claims it paid Tauber in full | Court found no genuine dispute precluding summary judgment in favor of Berks |
Key Cases Cited
- Keefer v. Lombardi, 102 A.2d 695 (Pa. 1954) (sures are construed liberally for third-party beneficiaries)
- Poole v. Great American Ins. Co., 182 A.2d 509 (Pa. 1962) (ambiguous bond language construed in favor of obligees)
- J.C. Snavely & Sons, Inc. v. Web M & E, Inc., 594 A.2d 333 (Pa. Super. 1991) (bond language controls surety liability; bond voids when principal pays all labor/materials per its terms)
- Trumbull Corp. v. Boss Constr., Inc., 768 A.2d 368 (Pa. Cmwlth. 2001) (safe-harbor barred supplier’s claim where general contractor paid subcontractor; extrinsic waiver issues remanded)
- Diener Brick Co. v. Mastro Masonry Contractor, 885 A.2d 1034 (Pa. Super. 2005) (joint-payee agreement can create a direct duty by general contractor to pay a material supplier, waiving safe-harbor protection)