A federal appeals court has reinstated litigation against a Financial Services Group Inc. unit in connection with a surety bond issued to a federal subcontractor.

Hughesville, Maryland-based Aarow/IET LLC is a subcontractor that performed electrical work on the Basic School Student Officer Quarters at Marine Corps Base Quantico in Virginia under a May 2014 agreement with San Diego-based Harper Construction Co., according to Thursday’s ruling by the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, in United States Ex Rel. Aarow/IET LLC v. Hartford Fire Insurance Co. and Harper Construction Co.

Hartford unit Harford Fire Insurance Co. provided a payment bond to Aarow and other subcontractors supplying labor and materials to Harper in accordance with the requirements of the Miller Act, which protects companies working on federal construction projects.

Under the subcontract, Aarow agreed to perform building and site electrical work for the base contract amount of $5,345,000 as well as similar work for an additional phase of the project.

During its work on the project, Aarow gave Harper at least one written notice of a claim seeking an additional $2.9 million for additional time, labor and other costs, the ruling said.

After Harper refused to pay, Aarow filed suit against Hartford in U.S. District Court in Alexandria, Virginia, seeking recovery under its payment bond under the Miller Act. An amended complaint subsequently added Harper as a defendant, charging it with breach of contract.

The district court dismissed the case, which was reinstated by a unanimous three-judge appeals court panel.

The district court had determined that based on Aarow’s “request for equitable adjustment,” its claim against Harper was not a breach of contract claim but a delay claim, which was barred by the subcontract, the ruling said.

“Contrary to the court’s ruling, the REA does not clearly state a delay claim,” the ruling said. “In these circumstances, where the REA is ambiguous … we cannot endorse the court’s reliance on the REA” to dismiss Aarow’s breach of contract claim, it said.

The district court’s dismissal of the Miller Act claim rested on the premise that Aarow had failed to state a breach of contract claim against Harper. According to the district court, Aarow had therefore failed to state a Miller Act claim against Hartford.

“The court erred in dismissing the breach of contract claim, meaning that the first of those premises was faulty,” the ruling said.

“On that ground, we conclude that the court also erred in dismissing the Miller Act claim,” the panel said in vacating the district court ruling and remanding the case for further proceedings.

Attorneys in the case did not respond to requests for comment.