Journal Article

RECENT DEVELOPMENTS IN FIDELITY AND SURETY LAW

Camarota, Francis, Daily, Megan, Pickett, Mark L., Jr, Boylan, Abigail, Etcheverry, Justin E, Zurborg, William, Harris, David A, Beauchamp, Steven, Berry, Matthew R, Bilodeau, Kelsey M

2025

Overview

Defenses In VEC, Inc. v. Joyce Electrical, Inc.,20 a contractor sought to enforce a master subcontract agreement that was executed nine weeks after the subcontractor had commenced work. 21 The subcontractor and its surety asserted the agreement was void and unenforceable.22 The court found a genuine issue of material fact as to the existence of consideration for, and thus the enforceability of, the agreement.23 The subcontractor and surety also sought declaratory relief limiting the claim for liquidated damages.24 The court denied the motion, finding that the subcontract \"holds a subcontractor liable for delay damages in the same way that the [c]ontractor may be liable to the owner\" and \"does not purport to limit the contractor's potential recovery from a subcontractor to exclusively those damages. After a bench trial, the court found that the contractor was in default because \"it failed to provide the upper floors of the site available for installation (free of current debris and protrusions into the window openings),\" which was a material term of the bonded contract.29 In LeChase Construction Services, LLC v. Argonaut Insurance Co.,30 the surety moved for summary judgment on a performance bond claim because it was not brought within one year from the date of default as mandated by the language of the performance bond.31 Under New York law, \"to the extent that provisions of a surety bond issued by a compensated surety are ambiguous, courts construe them against the surety. \"34 Since the term \"default\" was not defined in the performance bond, \"it cannot be said that there is no dispute [principal] was in default under the terms of the contract at that point,\" and the court denied the surety's motion for summary judgment.35 In E&I Global Energy Services, Inv. v. Liberty Mutual Insurance Co.,36 the court found the surety not liable for claims of fraud and negligent misrepresentation brought by a completion contractor who executed a completion contract lower than its initial bid. \"47 In Grand Medford Estates, LLC v. Town of Brookhaven,48 two developers sought release of a cash deposit and performance bond, which were posted to guarantee performance of civil and highway improvements associated with the development of separate subdivisions.49 The developers argued that the town imposed additional, unlawful requirements beyond the scope of the guarantees as conditions precedent to release the bonds.50 The court granted the town's motion to dismiss, first holding that the developers' takings claim was not ripe because the developers did not plead that they properly applied to the town to release the bonds and further failed to allege that the town acted malicious or in bad faith.51 The court then held that the developers' due process challenge was not meritorious, because the code and New York law affords the town discretion in determining when and whether to release a developer from a performance bond, and that the release of the bonds is governed by New York contractual law, not constitutional law.52 The court further dismissed the developers' equal protection claim, because they failed to allege an official policy adopted by the town that authorized the town to selectively impose additional requirements on developers before the bonds could be released.53 In Bakken Contracting, LLC v. Venue at Werner Park, LLC,54 the court denied a developer's motion for summary judgment against a performance bond surety.55 The developer argued that the surety breached the performance bond with respect to defective and nonconforming plumbing work.56 The surety argued that, because the developer and contractor disagree about whether nonconforming products were installed, there has been no determination that the contractor failed to perform under the bonded contract.57 Additionally, the developer offered no evidence that it has already

• Publisher: American Bar Association
• Subject: Arbitration / Breach of contract / Commercial arbitration / Construction contracts / Jurisdiction / Laws, regulations and rules / Subcontractors / Surety bonds / Trials