Supreme Court, Monroe County
Pay-when-Paid — Void as Against Public Policy
Kovalky-Carr Electric Supply Co., Inc. v. Hartford Casualty Insurance Company and EastCoast Electric LLC
Background: The defendant is the general contractor for a project at the State University at Brockport. A labor and material payment bond was issued by the defendant Hartford. The plaintiff commenced an action to recover sums owed by the defendant EastCoast for material it supplied. EastCoast made a partial payment. The plaintiff filed a notice of lien with the New York state comptroller. The plaintiffs moved to for summary judgment, the defendants cross-moved to amend their answer.
Ruling: The Supreme Court granted summary judgment in favor of the plaintiff. While the defendants argued that the plaintiff failed to include several items of work that precluded final payment, the plaintiff argued that the defendant cannot withhold payment because it has not been paid by the owner. The court held that a pay-when-paid provision which forces the subcontractor to assume the risk that the owner will fail to pay the general contractor is void and unenforceable as contrary to public policy.
Adam K. Karns of Relin Goldstein & Crane for the plaintiff; Max Kinsky of Adams Bell Adams for the defendants