Indiana Construction Law Update: Effective July 1, 2012

There’s another change underway to Construction Law,  this  time  in  the state of Indiana.  Indiana has modified the timing for contractors, subcontractors, and material suppliers to make claims against public project retention/contract proceeds and/or the payment bond provided for on Indiana public projects.

Currently, in order to be considered timely, claims against retention/contract proceeds and the public payment bond in Indiana must be filed within sixty (60) days from the date the last materials or labor are supplied to the project by ANY contractor, subcontractor or supplier. These criteria have changed. Starting July 1, 2012, a person making a claim against retention/contract proceeds or a public payment bond is required to file its claim, and to serve a copy of the claim on the contractor, within sixty (60) days of the claimant’s last date.

In addition to this potentially shorter time window for making a claim on a public project, the Indiana courts have also recently supported the enforceability of onerous pay-if-paid clauses in their state. These Pay-if paid clauses are nasty provisions—they shift the risk of owner/general contractor non-payment to lower-tiered parties in the contract chain.  Of further concern to subcontractors and suppliers is the fact that in Indiana, a surety is entitled to assert the same defenses as its principal, including a pay-if-paid clause.  The fact that a surety can use a pay-if-paid defense compounds subcontractor/supplier risk—this is because the bond is often relied upon as security, in the event of an owner/general contractor payment default.

Please contact a WFJ Construction Attorney to discuss the impact of the changes on your business, and look to the Indiana Section of the WFJ Client Extranet for a complete explanation of the changes. We’ll continue to keep you updated on changes in Construction Law!

Michael DuPont