The license bond statute specifically states that the bond is for the benefit, among others, of one who supplies “materials or equipment for the construction covered by the contract”. NRS 624.273(1)(c). The statute provides for the recovery of “the amount of damage the person suffered to the extent covered by the bond . . . .” There is no mention of any recovery beyond the materials and equipment, and interest and late fees are not damages. The legislature does not identify interest is not an item covered by the bond. Further, the recovery of interest depletes bond funds available to other potential claimants and the general purpose of the bond is to protect the citizenry of Nevada.
If the Nevada legislature wanted the bond to cover interest and late charges, it could have so provided as in the mechanic’s lien statute. The mechanic’s lien statute specifically allows an award of interest on the lien and against a lien release surety bond. NRS 108.237. In other contexts, the Nevada Supreme Court determined that interest and late fees are not recoverable because they are not mentioned in the applicable statute. Horizons at Seven Hills v. Ikon Holdings, 373 P.3d 66, 74 n. 8 (Nev. 2016) (“[T]here is no mention in . . . the statute . . . that late fees or interest . . . may be included . . . . We must presume that the Legislature intentionally excluded late fees and interest from the superpriority lien statute.”)
That interest and late fees are not mentioned in the license bond setting underscores the impropriety of such claims. In a lien situation, the court is also allowed to award “any other amounts the court may find justly due.” Id. Again, this language is absent from the license bond statute.
There may be some push back that prejudgment interest is allowed as a matter of right. NRS 99.040; Schoepe v. Pacific Silver Corp., 893 P.2d 388, 390 (Nev. 1995). However, this general prejudgment statute does not apply to money owed pursuant to NRS 624, which governs the license bond. NRS 99.040(2) (“The provisions of this section do not apply to money owed pursuant to chapter 624 of NRS which is governed by the provisions of NRS 624.630.”). Interest under NRS 624 is governed by NRS 624.630, which makes no mention of any bond liability for interest. Interest was awarded against a license bond surety when the surety was defending against its own liability (the principal was absent) and the surety failed to comply with discovery requests (the surety was sanctioned). Trustees of Plumbers & Pipefitters Union Local 525 Health & Welfare Tr. Plan v. Developers Sur. & Indem. Co., 120 Nev. 56, 60, 84 P.3d 59, 61 (2004). However, that case is distinguished from a situation where interest is asserted as part of a claim short of litigation and penalties for failure to comply with discovery rules.
The Nevada Supreme Court has not specifically decided whether interest or late fees are recoverable against a surety as part of a standard claim. There are certainly well-founded arguments that they are not covered under a Nevada contractor’s license bond. Here are the applicable provisions of the license bond statute:
1. Each bond or deposit required by NRS 624.270 must be in favor of the State of Nevada for the benefit of any person who:
(a) As owner of the property to be improved entered into a construction contract with the contractor and is damaged by failure of the contractor to perform the contract or to remove liens filed against the property;
(b) As an employee of the contractor performed labor on or about the site of the construction covered by the contract;
(c) As a supplier or materialman furnished materials or equipment for the construction covered by the contract; or
(d) Is injured by any unlawful act or omission of the contractor in the performance of a contract.
2. Any person claiming against the bond or deposit may bring an action in a court of competent jurisdiction on the bond or against the Board on the deposit for the amount of damage the person has suffered to the extent covered by the bond or deposit.
NRS 624.630. The interest provision provides:
Any money which is payable to a prime contractor, higher-tiered contractor or lower-tiered subcontractor pursuant to NRS 624.609, 624.610, 624.620, 624.624, 624.626 or 624.628 accrues interest from the time it becomes due at a rate equal to the higher of:
1. The rate agreed upon in the agreement between the parties; or
2. The rate equal to the prime rate at the largest bank in this State, as determined by the Commissioner of Financial Institutions on January 1 or July 1, as the case may be, immediately preceding:
(a) The time at which the agreement was signed; or
(b) If the agreement was oral, the time at which the terms of the agreement were agreed to by the parties, plus 4 percent until the date of payment.
Here are the applicable provisions of the mechanic’s lien statute:
1. The court shall award to a prevailing lien claimant, whether on its lien or on a surety bond, the lienable amount found due to the lien claimant by the court and the cost of preparing and recording the notice of lien, including, without limitation, attorney’s fees, if any, and interest. The court shall also award to the prevailing lien claimant, whether on its lien or on a surety bond, the costs of the proceedings, including, without limitation, reasonable attorney’s fees, the costs for representation of the lien claimant in the proceedings, and any other amounts as the court may find to be justly due and owing to the lien claimant.
2. The court shall calculate interest for purposes of subsection 1 based upon:
(a) The rate of interest agreed upon in the lien claimant’s contract; or
(b) If a rate of interest is not provided in the lien claimant’s contract, interest at a rate equal to the prime rate at the largest bank in Nevada, as ascertained by the Commissioner of Financial Institutions, on January 1 or July 1, as the case may be, immediately preceding the date of judgment, plus 4 percent, on the amount of the lien found payable. The rate of interest must be adjusted accordingly on each January 1 and July 1 thereafter until the amount of the lien is paid. Interest is payable from the date on which the payment is found to have been due, as determined by the court.
3. If the lien claim is not upheld, the court may award costs and reasonable attorney’s fees to the owner or other person defending against the lien claim if the court finds that the notice of lien was pursued by the lien claimant without a reasonable basis in law or fact. (Emphasis added).