Sharply-Divided Washington Supreme Court Holds That Sureties, Like Insurers, Must Pay Attorney Fees to Prevailing Parties When They Wrongfully Deny Coverage

King Cnty. v. Vinci Constr. Grands Projets/Parsons RCI/ Frontier-Kemper, JV, No. 92744-8, 2017 Wash. LEXIS 743 (July 6, 2017).

King County contracted with three construction firms (collectively, “VPFK”) to construct a tunnel.  The contract required substantial completion by November 14, 2010 (the “contract time”).  It also required VPFK to secure a performance bond from five surety companies, under which the sureties were to remedy any default in VPFK’s performance.

VPFK experienced difficulties with its tunnel-boring equipment and was unable to dig nearly as fast as estimated.  When it became clear that VPFK would not achieve substantial completion by the contract time, King County declared VPFK in default.  The sureties refused King County’s request for a cure, arguing that because the contract time had not passed, no default had yet occurred.

King County filed a breach of contract action against VPFK and the sureties, who denied coverage and adopted all of VPFK’s defenses.  A jury found in favor of King County and awarded nearly $130 million in damages. Continue reading “Sharply-Divided Washington Supreme Court Holds That Sureties, Like Insurers, Must Pay Attorney Fees to Prevailing Parties When They Wrongfully Deny Coverage”

Eleventh Circuit Affirms Decision Under Florida Law Barring Contractor’s Performance Bond Claim for Failure to Comply With Notice Provisions in the Bond and in the Subcontract

Int’l Fidelity Ins. Co. v. Americaribe-Moriarty JV, 2017 U.S. App. LEXIS 3628 (11th Cir. Feb. 28, 2017)

Americaribe-Moriarty Joint Venture (“Americaribe”) entered into a subcontract with Certified Pool Mechanics I, Inc. (“CPM”) for construction of a pool in a mixed-use development that Americaribe was building in Miami, Florida. CPM provided a performance bond, issued by International Fidelity Insurance Company and Allegheny Casualty Company (collectively, “Fidelity”) as security for performance of the pool subcontract.  According to Americaribe, CPM failed to perform its obligations under the pool subcontract.  As a result, Americaribe terminated CPM, made a claim on the performance bond, and contemporaneously hired a replacement contractor (“Dillon”) to complete CPM’s scope of work.

In the event of default by CPM, the subcontract required three days’ written notice before undertaking completion of CPM’s work. The bond incorporated the subcontract by reference and also required a further, but undefined, period of time after CPM’s termination during which Fidelity could evaluate options for responding to CPM’s alleged default.  In the event that Fidelity did not conduct such an evaluation with reasonable promptness, Americaribe could declare a default by Fidelity upon seven days’ written notice.  Although Americaribe provided the written notices of default, it proceeded to complete CPM’s work with Dillon before the notice periods expired. Continue reading “Eleventh Circuit Affirms Decision Under Florida Law Barring Contractor’s Performance Bond Claim for Failure to Comply With Notice Provisions in the Bond and in the Subcontract”

Federal District Court in Missouri Holds Contractor’s Failure to Declare Subcontractor in Default Bars Recovery on Performance Bond (Earlier Decision Vacated)

Curtiss-Manes-Schulte, Inc. v. Safeco Insurance Company, 2015 U.S. Dist. LEXIS 57836 (W.D. Mo. May 4, 2015) 

In this opinion, the United States District Court for the Western District of Missouri (i) vacated its earlier order denying the surety’s motion for summary judgment (see earlier post) and (ii) held that the contractor’s failure to formally declare the sub-contractor in default precluded the contractor from recovering from the subcontractor’s performance bond surety.  The dispute involved the contractor, Curtiss-Manes-Shulte, Inc. (“CMS”) and Safeco Insurance Company of America (“Safeco”), who provided a performance bond to Balkenbush, CMS’s mechanical subcontractor. Continue reading “Federal District Court in Missouri Holds Contractor’s Failure to Declare Subcontractor in Default Bars Recovery on Performance Bond (Earlier Decision Vacated)”