The National Surety Corporation was surety for a prime contractor which had contracted to build certain works in the Bahama Islands for the United States Government. The contractor had obtained equipment from the appellant on a rental basis with a further stipulation in the rental contract that the contractor would assume all responsibility for loss of the equipment. The equipment was sent by ship to the construction site and while in route was lost at sea without fault of either party and without salvage. The appellants brought suit against the surety under the Miller Act to collect the value of the equipment. The trial court dismissed the complaint on the grounds that the loss was not material furnished in the prosecution of the work, as required by the Miller Act and the bond filed in conformity therewith. Held: Judgment reversed. The court, being unable to cite a case extending the Miller Act to cover such a loss, relied on the highly remedial nature of the act for reason to support their holding and cited the case of Illinois Surety Co. v. John Davis Co.
It is submitted that the interpretation given to the Miller Act by the present case, in effect, makes the surety on a bond required by the Miller Act a general insurer against loss of equipment used, but not owned, by the contractor. This in turn broadens the scope of liability of the limited surety and reduces the chances of those supplying labor and material used or expected to be used in the construction from collecting their full claims. The penalty required under the bonds required by the Miller Act could be increased to cover these additional claims. However this would in turn raise the premiums payable by the contractor to the surety, a factor anticipated and included in the bid of the contractor and ultimately paid by the government as part of the costs of construction. Either result seems contrary to the purpose of the Miller Act and the intent of Congress in adopting it.
Charles F. Noren,
Creditors’ Rights—Liability of Surety for Lost Rental Equipment,
39 Neb. L. Rev. 447
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