Filer Beware: Erroneous or Overstated Verified Lien Statements are Subject to Forfeiture
Posted January 30, 2026 in Construction Law, Contracts, Mechanics Liens
Filer Beware: Erroneous or Overstated Verified Lien Statements are Subject to Forfeiture
A significant recent case law development in Colorado affecting payment/performance bonds and related security on construction projects arises from the Colorado Court of Appeals’ 2024 opinion in Ralph L. Wadsworth Construction Co. v. Regional Rail Partners, 2024 COA 78 (22CA2154), which has important implications for bonded claims on public works projects.
Case Background & Core Clarification
In Wadsworth, a subcontractor on a large public infrastructure project filed a verified statement of claim against the prime contractor and then on the substituted surety bond pursuant to the Colorado Public Works Act (C.R.S. §§ 38-26-101 et seq.). A verified statement of claim functions similarly to a lien on public project funds and allows withholding of amounts due. The subcontractor’s claim sought millions for alleged unpaid labor, materials, and related costs.
The court for the first time clarified two pivotal points under the Act in the context of bonded security:
- Scope of a Valid Verified Statement of Claim:
Only amounts that are actually due and unpaid for “labor, materials, sustenance, or other supplies used or consumed” qualify. The court held that claims including unliquidated amounts such as delay damages, lost profits, overhead, and disputed change orders are not “due” for purposes of a verified statement of claim. - Consequences of Excessive Claims Under Public Works Act:
Under C.R.S. § 38-26-110, a claimant forfeits all rights to the amount claimed—including rights against any substituted performance or payment bond—if the claimant knowingly files a claim for an amount greater than what is due and without reasonable possibility that it is due. The court found the subcontractor’s amended claim excessive as a matter of law, meaning all amounts claimed were forfeited, even those that arguably were due, and the claim against the bond was invalidated accordingly.
Practical Takeaways for Practitioners
- Carefully Limit Verified Claims: When filing a verified statement of claim (or substituting a bond), only include liquidated amounts actually due at the time of filing. Items like delay damages or disputed change order amounts should not be included because they are not “due” in the statutory sense.
- Know the Forfeiture Risk: An excessive claim can eliminate a contractor’s right to collect any of the amounts claimed—not just the excessive portion—from the public entity or the surety.
- Bond Claims Mirror Statutory Lien Requirements: Because the verified claim mechanism and substituted bond share the same statutory basis, missteps in preparing the verified claim may invalidate bond claims as well.
Ongoing Legal Development
The Colorado Supreme Court has accepted review of this case (2024SC000537) to address whether forfeiture applies only to statutory remedies or also to all available legal remedies, and whether disputed amounts like delay damages may ever be included in verified claims. The outcome could further refine how payment and performance security operates on public projects.
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