A "Stark" Reality on Claim Notice Provisions in Indiana

Although states vary widely in their respective treatment of contractual claim notice provisions and how rigidly they will be enforced, one Indiana court has made it clear that such provisions are to be strictly followed. Indiana contractors wishing to have their claims for additional costs considered and ultimately paid should be wary of, and prepared to comply with, their contract's notice requirements regardless of how burdensome they believe them to be.

In Starks Mechanical, Inc. v. New Albany-Floyd County Consolidated School Corp., 845 N.E.2d 936 (2006), the Indiana Court of Appeals construed the widely used AIA A201 General Conditions and affirmed summary judgment in favor of the owner on the contractor’s claim in excess of $1.3 million. Starks (the contractor) quickly discovered material design defects and immediately submitted its first of many Requests for Information providing notice of (a) the design defects, (b) delays accompanied by the defects, and (c) requesting time extensions and change orders related to the defects. Additional notices were provided as the project progressed and additional problems encountered. Importantly however, none of the written notices included Starks' costs for additional work until nearly two years after the defects were first discovered.

The A201 required that claims be made in writing within 14 days and that, in the case of continuing delay, the claim and its estimated and associated costs be updated and submitted weekly. The owner moved for summary judgment based upon Starks' failure to provide timely written notice and the motion was granted. The Court of Appeals later affirmed. Although Starks immediately became aware of design deficiencies, it waited nearly two years to request compensation based upon the defects. Starks' notice was untimely, which was fatal to the claim. Notably, Starks' argument that its numerous Requests for Information constituted sufficient written notice under the contract was rejected. Although the requests identified design defects, they did not in any way suggest that Starks was putting the owner on notice of a claim for additional payment. As a result, Starks' $1.3 million claim never made it to the jury.

Posted by: Brian M. Falcon

Categories: Claims / Dispute Resolution, Construction Contracts, Federal and State Procurement / Bid Disputes