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Balboa Insurance Company V. United States, 775 F.2d 1158 (Fed. Cir. 1985).
The Court of Appeals for the Federal Circuit was created to hear appeals from patent cases tried in the various district courts, as well as all appeals from certain specialized federal courts such as the Claims Court. Accordingly, for all practical purposes, the Federal Circuit is the final word on federal contract law, which is accepted as a benchmark for many other jurisdictions. The Balboa case presented the Court’s first opportunity to consider the Government’s duty, as owner on a construction contract, to protect the surety’s interest in contract funds if reasonably possible. The trend in pre-Federal Circuit appellate decisions had been to increasingly limit the Government’s obligation to the point of extinguishing it. However, the Federal Circuit was persuaded to reverse this trend, rendering one of the most-cited decisions in surety law today. The case firmly re-established the surety as an intrinsic but distinct party in the web of contractual relationships created by contract and bond and reaffirms a duty on the part of the Government to the surety to consider and protect the surety’s right to contract funds.
A. J. Kellos Construction Co. V. Balboa Insurance Company, 661 F.2d 402 (5th Cir. 1981).
The defendant surety exercised rights giving rise to a discharge sometime after a declaration of default, but before all of the obligee’s damages were known. The Court of Appeals held that the surety’s rights accrued as of the date of the default, and sustained the surety’s discharge. This case held for the first time that compensated sureties are entitled to certain statutory protection formerly only accorded uncompensated sureties.
Morrison Assurance Company, Inc. V. United States, 3 Cl.Ct. 626 (1983).
The plaintiff surety claimed that, although there was no formal default of its principal, it was a de facto completing surety by virtue of its financing arrangement with the principal. The Claims Court held that the fact that the surety left on-site supervision to the contractor, which had defaulted under its indemnity agreement, did not preclude a determination that the surety had taken over completion of the project so as to preclude the government from setting off the contractor’s tax deficiency from contract proceeds payable to the surety. Accordingly, a surety involved in financing its principal was held to have, nevertheless, incurred such costs as a completing surety and was entitled to the equitable subrogated rights of a completing surety.
Allstate Ins. Co. v. Hamler, 247 Ga.App. 574 (2001):
Insurer suspected fraud regarding homeowner’s insurance claim based upon initial investigation. Insurer asked the insured to submit to an examination under oath and to provide documentation regarding the claim and regarding her financial status, in order to investigate a motive for fraud. Insured refused to submit certain financial information. Court held the insured’s failure to provide material financial information was a breach of the contract of insurance and relieved insurer of obligation to pay homeowner’s insurance claim.