Court of Appeals of Washington Applies Strict Adherence to Notice of Claim Provisions in a Private Construction Contract

An unpublished opinion previously issued by the Washington Court of Appeals, Cascade Civil Construction, LLC v. Jackson Dean Construction, Inc., reinforces strict compliance with notice of claim provisions in construction contracts, even where the underlying contract is between private entities.

Background

In Cascade, Jackson Dean Construction, Inc. ("Jackson Dean") entered into a prime contract with a company to build its new corporate headquarters in Washington. Jackson Dean subsequently entered into a subcontract with Cascade Civil Construction, LLC ("Cascade") to perform excavation and site utilities work.

The subcontract between Jackson Dean and Cascade included a Change Orders clause which allowed Jackson Dean to direct changes to Cascade's work. The clause noted that Cascade "shall have no claims for additional payments for … changes unless the … changed Work, and any time extension requested in connection with the change, have been approved in writing by both [Jackson Dean] and [Cascade] prior to the … changed work being performed."

The subcontract additionally included multiple notice of claim provisions. The provisions required Cascade to provide Jackson Dean with written notice of its intent to file a claim related to any change in Cascade's work. Under the notice of claim provisions, the notice provided by Cascade was required to contain information such as a statement of the claim, the portion of work known to be affected by the change, the cost and time ramifications thereof, and sufficient supporting information for Jackson Dean to evaluate the claim. The subcontract stated that the notice of claim requirement was intended to be an absolute condition precedent to Cascade's right to bring a claim against Jackson Dean.

Under the subcontract and accompanying schedule, construction was intended to begin in early 2020. Under the original project schedule, dewatering of the project site was to be installed prior to the start of excavation by Cascade. Because of the COVID-19 pandemic, the project was delayed. Construction resumed in April 2020. Jackson Dean issued a revised schedule which directed Cascade to begin excavation work in May. Pursuant to the new schedule, however, dewatering was to be performed after Cascade began excavation.

Shortly thereafter, Cascade communicated to Jackson Dean a number of potential issues arising from the requirement that dewatering take place after excavation. However, Cascade merely indicated that Cascade would "notify [Jackson Dean] when [Cascade] has been directly impacted." The parties further held meetings related to the schedule, wherein Cascade allegedly notified Jackson Dean of the cost impacts related to the performance of excavation work prior to dewatering. However, no evidence of the content of these meetings was produced by Cascade.

Cascade began timely performance of its scope of work. A couple of months later, in July 2020, Cascade issued a letter to Jackson Dean indicating that it had suffered cost and time impacts as a result of performing excavation prior to dewatering. In August, Cascade submitted a notice of claim for an additional $1,561,818.66 in costs and 133 days in additional time as a result of issues arising from the change to the schedule. Jackson Dean continually requested additional information related to the notice, which Cascade failed to provide.

In May 2021, Cascade recorded a claim of lien for Jackson Dean's failure to pay increased costs related to multiple change orders, including direction that dewatering be performed post-excavation. Cascade subsequently filed action in a Washington superior court to foreclose on the lien. Jackson Dean filed a motion for summary judgment asserting that Cascade failed to comply with the subcontract's notice of claim provisions. The trial court agreed and granted the motion for summary judgment. Cascade appealed the ruling.

Court of Appeals of Washington Decision

The Court of Appeals of Washington affirmed the superior court. The Court of Appeals found that in order for Cascade to submit a claim arising from changed or additional work, Cascade was required to have written approval prior to performing the changed work. Here, however, Cascade submitted its claim for a price adjustment after completing a substantial portion of the changed excavation work.

Moreover, the court determined that the notice of claim provisions of the subcontract required Cascade to provide notice of its intent to assert a claim for additional compensation prior to submitting such a claim. The court noted that while Cascade provided some written indication that its cost could increase due to changes to excavation, Cascade failed to provide a statement of its claim. Cascade further failed to provide an identification of the affected work, the cost and time ramifications, or a recovery plan as required under the subcontract. Thus, Cascade failed to satisfy the requisite notice of claim provisions. As a result, the Court of Appeals determined that Cascade's claim was barred by the terms of the subcontract.

Takeaway

While Cascade is an unpublished opinion, it provides a look at contractual notice of claim provisions in a new context. Since the decision rendered in Mike M. Johnson, Washington courts have required strict adherence to notice of claim provisions in construction contracts. However, contractor compliance with such provisions is typically analyzed under public construction projects between contractors and public owners. Cascade provides a stark reminder for contractors and subcontractors alike to pay close attention to contractual notice of claim provisions, regardless of whether the underlying project is public or private in nature.