Southwood Builders, Inc. v. Peerless Insurance Co
In Southwood Builders, Inc. v. Peerless Insurance Co., 235 Va. 164, 366 S.E.2d 104, 109, 4 Va. Law Rep. 2105 (Va. 1988), the Virginia Supreme Court construed the same definition of claimant contained in American Casualty's payment bond. In Southwood, the subcontractor (United) could not afford to hire another crew to ensure that its work would be completed on schedule. Id. at 105.
Consequently, the general contractor (Southwood) and United agreed that Southwood would pay for an additional crew hired by United and deduct the expense from United's progress payments. Id. at 105-06.
In affirming the judgment of the trial court dismissing the suit on other grounds, the court also concluded that Southwood was not a proper claimant: The payment bond was designed to protect a claimant as defined in the bond, which included only those having "a direct contract with the Principal for labor, material, or both, used or reasonably required for use in the performance of the contract." Southwood had no such relationship with United. Southwood was United's general contractor. Southwood did not supply labor or materials to United. In essence, Southwood lent money to United, which United used to pay for labor and materials. Id. at 109.