Massachusetts High Court Voids Advance Waiver of Subcontractor Bond Rights

Last month, the Massachusetts Supreme Judicial Court held that a contract provision that required a subcontractor to waive its bond rights for work to be performed on a public project was void and unenforceable.

The court explained its ruling by noting, among other things, that the bond requirement set forth in M.G.L. c. 149 § 29 was designed to benefit subcontractors who work on public construction projects, as these subcontractors lack the right obtain a mechanic's lien. The court noted that Massachusetts already prohibits advance mechanic's lien waivers, and the same policy reasoning should apply to prohibit advance waivers of bond claims.

Contractors and subcontractors should be aware that the court only discussed claims involving bonds supplied pursuant to M.G.L. c. 149 § 29, and this ruling does not necessarily apply to other payment bonds.

A copy of the court's decision in the matter of Costa v. Brait Builders Corporation and Arch Insurance Company (SJC-11011) can be found here. For further information, please contact Ken Rubinstein at 617-226-3868 or William Whitney at 603-410-1571

The Nuts and Bolts of Accountants Liability Insurance

Most wise accountants purchase professional liability insurance to protect them against claims that may arise during the course of their professional duties.  This insurance will generally protect accountants regardless of whether the claims occur in the context of tax, planning, auditing, or other accounting work.  Nonetheless, Accountants Liability Insurance will not necessarily protect against all claims that can arise, and while insurance carriers are usually required to defend their insureds from claims that are even tangentially related to an accountants’ practice, the insurance carrier may not be required to pay any judgment or settlement that results.

Most policies exclude certain types of claims altogether.
Accountant’s professional liability policies cover only certain claims – typically described as claims for damages caused by any act, error, omission or personal injury arising out of the rendering of professional accounting services.  Should such a claim appear, consult your broker.  You may have other policies that could apply.  Your broker will tell you, though, that APL policies contain several specific exclusions from coverage.

Criminal and similar acts are excluded.
Physically or sexually assaulting a client does not constitute “professional services.”  Defrauding a client with a Ponzi scheme or lying to a client about the returns an accountant failed to file will also likely fail the test of coverage.  If the claim includes these allegations, the insurer will probably defend the case but will otherwise reserve its rights.  A final adjudication of such wrongful acts will undo your coverage.

Contractual claims are excluded.
By including allegations of breach of contract, a claimant may benefit from a longer statute of limitations.  While many APL policies exclude “contractual liability,” the caselaw increasingly blurs the distinction between the actions.  Experienced attorneys for claimants take this into account when drawing up complaints.