A contractor’s recovery from an owner for damages suffered by its subcontractor is limited in certain circumstances. The Severin doctrine provides that a general contractor cannot sue an owner on behalf of one of its subcontractors to recover monies due to the subcontractor unless the general contractor is itself liable to the subcontractor.
The Background. In Severin v. United States, the plaintiff-contractor agreed with the defendant-federal government to build a post office in which plaster column models and ornamental work were to be supplied by the government. The contractor filed suit to recover delay damages resulting from the late delivery of owner-supplied materials. The claims were made by the contractor on its own behalf, as well as on the behalf of its subcontractor. Finding that most of the loss was suffered by the plaintiffs’ subcontractor, the court held that plaintiffs could recover for their damages but were precluded for recovering for their subcontractor’s damage because assignments of such claims were forbidden by a federal statute.
A Transportation Example. The Severin doctrine has been applied in the highway and transportation industry. For example, in Aetna Bridge v. Rhode Island DOT, the contractor on a bridge project had failed to include a material supplier in its list of vendors to the DOT. The subcontractor prepared an additional 70 shop drawings for total of 1,650 additional hours for which it sought additional compensation. The claim was presented by the contractor to the DOT. Although the claim went through arbitration, ultimately the Supreme Court of Rhode Island remanded the case to the superior court to determine whether the claim was simply a "pass-through" claim or a claim involving other liability between the contractor and the subcontractor.
Pass-Through-Plus. There is a reason why I call the Severin doctrine a pass-through-plus claim. In presenting a claim to an owner for damages allegedly suffered by a subcontractor, a contractor must be careful that the claim is not solely a pass-through claim. The contractor must have some remaining liability to the subcontractor for the damages in order to properly present the claim to the owner for payment. A well drafted liquidation agreement will generally accomplish this purpose. Otherwise, the claim may be denied pursuant to the Severin doctrine.