BEGL Construction Company, Inc. et al. v. Los Angeles Unified School District and Star Insurance Com
154 Cal.App.4th 970; 2007 Cal.App. LEXIS 1432 (2007)
In August 2000, the Los Angeles Unified School District (the “District”) entered into a public works construction contract with BEGL Construction Company, Inc. (“BEGL”) for a seismic retrofit of the Science Building at its Los Angles Center for Enriched Studies (“LACES”) and demolition and reconstruction of the LACES West Arcade. Because the project was a public work, BEGL was required to post a performance bond and a payment bond. Subsequently, after BEGL commenced performing work, the West Arcade was removed from the scope of the contract.

Continue Reading California Court Upholds Recovery of Lost Profits Due to Impaired Bonding Capacity

Menorah Home and Hosp. for the Aged and Infirm v. Fireman’s Fund Ins. Co.
2007 U.S. Dist. LEXIS 27684 (E.D.N.Y., April 13, 2007)
The District Court for the Eastern District of New York held that a liquidating agreement between an Owner and a Surety was valid and enforceable, even though it permitted the Owner to retain any recovery it obtained from the third-party, rather than having money pass-through to the surety.
The case arose out of a project to build and renovate facilities for Menorah Home and Hospital for the Aged and Infirm (“Owner”). The Owner entered into a contract with J.A. Jones Construction Group, LLC (“Jones”) for the Project. When Jones defaulted, Fireman’s Fund Insurance Company (“FFIC”), Jones’ surety, took over and completed the Project. The Owner subsequently sued FFIC alleging that FFIC had breached its performance bond obligations by failing to complete the Project in a timely manner and correct deficiencies in the work performed by Jones.
Continue Reading NY District Court Enforces Liquidating Agreement Between Owner And Surety That Permitted Owner To Retain Recovery Obtained From Third Party To Satisfy Owner’s Claim For Damages Against Surety

Titan Stone, Tile & Masonry v. Hunt Construction Group, Inc.
Civ. No. 05-3362, 2007 U.S. Dist. LEXIS 19489 (D.N.J. March 19, 2007)
The Court decided several motions for summary judgment filed by a prime contractor to claims of a subcontractor. Among the motions decided, the Court addressed the duty of good faith and fair dealing attendant to an obligation to evaluate payment applications, the breadth of a “pay-if-paid” clause, whether a monthly release executed with a payment application barred claims for extra work performed after the pay period in the attendant payment application and whether the plaintiff adequately plead its claim for violation of the New Jersey Trust Fund Act.
Continue Reading NJ Court Denies Contractor Summary Judgment On Subcontractor’s Claim For Contract Balances And Compensation For Extra Work – Duty Of Good Faith And Fair Dealing, “Pay-If-Paid” Clause, Payment Release, And New Jersey Trust Fund Act Considered

Carolina Casualty Insurance Company, et al. v. R.L. Brown & Associates, Inc., et al.
No. 1:04-CV-3537-GET, 2006 U.S. Dist. LEXIS 5261 (N.D. Ga. January 25, 2006)
In Carolina Casualty Insurance Company, et al. v. R.L. Brown & Associates, Inc., et al., No. 1:04-CV-3537-GET, 2006 U.S. Dist. LEXIS 5261 (N.D. Ga. January 25, 2006), a dispute arose between a surety that had provided a performance bond on a public works project and the project’s program manager. After the owner declared the general contractor in default for defective work, the surety finished the underlying contract under the terms of the performance bond. The owner sought additional damages from the surety. In an agreement settling those claims for additional damages, the owner assigned to the surety all of its own claims against third parties arising out of the defective construction and supervision of the project.
Continue Reading Construction Manager Sued For Failure To Ensure Quality Of Contractor’s Work Could Not Sue Contractor’s Surety For Indemnity Or Contribution

Ed Kimber Heating & Cooling, Inc. v. Travelers Casualty & Surety Co.
No. 3:03cv2111 (SRU), 2006 U.S. Dist. LEXIS 3323 (D. Conn. Jan. 26, 2006)
Trataros Construction, Inc. (“Trataros”), the general contractor on a school addition and renovation project, subcontracted with Ed Kimber Heating & Cooling, Inc. (“Kimber”) for the performance of HVAC and plumbing work. Travelers Casualty & Surety Co. (“Travelers”) issued payment and performance bonds as the surety for Trataros.
Continue Reading Contractor’s Continued Acceptance of Subcontractor’s Performance Waives Right To Terminate

Beckwith Machinery Company v. Asset Recovery Group, Inc.
2005 Pa. Super. 429, 2005 Pa. Super. LEXIS 4276 (Pa. Super. Ct. 2005)
In Beckwith Machinery Company v. Asset Recovery Group, Inc., et al., 2005 Pa. Super. 429 (Pa. Super. Ct. 2005), the Court held that invoices for major repairs in the nature of capital improvements to heavy construction equipment were not covered by the terms of a payment bond. The Court reasoned that the repairs referenced in the invoices at issue could not be classified as ordinary maintenance performed for consumption over the course of the project, but rather were services which a contractor would retain the benefit of on the completion of work to be used by him in a like manner on subsequent projects.
Continue Reading Payment Bond Does Not Cover Major Repairs to Heavy Construction Equipment Akin to Capital Improvements

Cates Constr., Inc. v. Talbot Partners et al.,
1999 Cal. LEXIS 4847 (Co. July 29, 1999)
In 1989, defendant Talbot Partners (“Talbot”) hired plaintiff Cates Construction, Inc. (“Cates”) to build a condominium project in Malibu, California. The construction contract required Cates to have the project ready for occupancy in eight months. The contract also required Cates to furnish a performance bond and a labor and materials bond, both of which were subsequently issued by Transamerica Insurance Company (“Transamerica”).
Continue Reading The Supreme Court of California holds that an obligee may not recover in tort for a surety's breach of covenant of good faith and fair dealing implied in a performance bond.