Construction-Related Claims Barred by "No Damages for Delay" Clause

On September 28, 2017, Justice Knipel of the Kings County Commercial Division issued a decision in Pabco Construction Corp. v. Liberty Mutual Insurance Co., 2017 NY Slip Op. 32045(U), dismissing a claim based on a construction contract's "no damages for delay" clause, explaining:

The validity of the plaintiffs claim, as pleaded against the surety in this action, is determined by the validity of its claim against the GC under the subcontract agreement, dated Oct. 20, 2008 (hereafter, the subcontract). The subcontract includes the "no damages for delay" clause which is a type of an exculpatory clause. . . .

Clauses in construction contracts which preclude contractors from recovering damages for delay in the performance of the contract are generally valid and enforceable. There are exceptions to this general rule, and a clause which purports to preclude damages for all delays resulting from any cause whatsoever will not be read literally. Thus, despite a clause barring damages for delay, damages may be recovered for: (1) delays caused by the contractee's bad faith or its willful, malicious, or grossly negligent conduct, (2) uncontemplated delays, (3) delays so unreasonable that they constitute an intentional abandonment of the contract by the contractee, and (4) delays resulting from the contractee's breach of a fundamental obligation of the contract. However, the clause exonerates the defendant for delays caused by inept administration or poor planning, a failure of performance by the defendant in ordinary, garden variety ways, or a failure of performance resulting from ordinary negligence, as distinguished from gross negligence.

The plaintiffs claim, as pleaded in this action, alleges none of the enumerated exceptions to the enforceability of the "no damages for delay" clause. Accordingly, the plaintiff's complaint is dismissed with leave to amend.

(Internal quotations and citations omitted).