Thompson & Slagle

Surety Law Attorneys For New York

We help you minimize your risk and protect your project. We’re experts on surety law in New York.

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Surety Law

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Protection

Surety Law Protects Your Construction Projects

When it comes to certain types of construction, there is something called a surety bond that many agencies require to complete the financing of the project.

Whenever there is a need for a surety bond, it’s important to consult with attorneys that understand surety law to ensure your protection.

The Thompson Law Group has extensive experience in processing and resolving payment and performance of surety bond claims- from their initial inception to the final disposition.

We provide complete legal representation of surety clients that can include the following:

  • Factual investigation and legal evaluation of alleged defaults by bond principals
  • Procurement to complete performance when appropriate
  • Enforcement of indemnity and subrogation rights
  • Perform, obtain, and coordinate engineering evaluations
  • Negotiate agreements for completed surety bond contracts
  • Administrate contracts
  • Resolve disputes related to surety bonds

Our law firm has the capacity to provide any or all of these services in a format that best suits the client’s needs.

We work with any principals involved in the surety bond which can involve contractors, construction companies, government agencies, insurance companies, and other parties.

Security

What is Surety Law?

As simply as possible, surety law is the promise by one party to step in and assume responsibility for the financial obligations of another party if that person or company fails to meet their obligations.

Typically, a surety bond (also called a surety) is a promise from a guarantor to pay an obligee a set amount of money if the principal fails to meet their defined obligation. That obligation is usually the promise of the principal to fulfill a contract.

A surety bond involves three parties:

The principal: This is the person or company that purchases a bond and agrees to perform the work in a well-defined and financially responsible manner.

The obligee: this is the company, person or agency that requires the principal to purchase the bond for a service to be performed. The obligee is often a government agency.

The surety: this is often an insurance agency that is guaranteeing the work of the principal and is assuming the liability for any claims against the principal up to the full amount of the bond.

When it comes to the liabilities around building and construction projects, it’s essential that you are properly protected from risk. Let us help you protect your investment. Call for a free consultation today.

Experience

Why Choose Thompson Law Group?

Members of the firm have been involved in several cases of general interest to the surety industry, including several landmark cases. We have the experience and expertise you need when dealing with surety law cases.

A sampling of some of these cases follows:

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 the 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.

 

Morrison Assurance Company v. Preston Carroll Co., Inc., 254 Ga. 608, 331 S.E.2d 520 (1985); rev’g. 173 Ga. App. 412, 326 S.E.2d 486 (1985).

The plaintiff claimed that certain critical rights were not available to compensated sureties and that the defendant surety could not be discharged based on those rights. The Georgia Supreme Court was persuaded that the State Legislature, by eliminating the distinction between compensated and uncompensated sureties, had not intended also to eliminate the protections that were available to compensated sureties at common law. Accordingly, the defendant, a compensated surety, was still entitled to assert those codified common law rights and receive a discharge.

 

Giardiello, et al. v. Balboa Insurance Company, 837 F.2d 1566 (11th Cir. 1988).

The plaintiffs, in this case, were trustees of labor union fringe benefit trust funds. Amongst the plaintiffs’ contentions was that a bonding company was automatically an “employer” of its principal’s employees, as that term is defined by federal statute, for purposes of determining direct liability for unpaid trust fund contributions. The Court of Appeals was persuaded that a surety on a contract bond would not be considered a statutory employer of its principal’s employees, solely because of its status as surety.

 

Commercial Casualty Insurance Company v. Carothers Construction Company, Civil Action No. 91-227-2-MAC(DF) (M.D. Ga., January 21, 1992).

Obligee initiated arbitration with the principal on contract bond but did not make surety a party. Obligee did, however, notify surety of proceedings and that obligee would consider surety bound by result. Surety filed declaratory judgment action seeking determination that adverse award against principal would not be conclusive as to surety. District Court agreed that, under Georgia law, a judgment against a principal on a contract bond would not be conclusive as to the surety’s liability.

 

Amwest Surety Insurance Company v. Republic National Bank, 977 F.2d 122, 18 UCC Rep. Serv.2d 843 (4th Cir. 1992).

Surety was secured by a letter of credit. Surety drew down the entire amount of letter of credit, but, at the urging of the principal, returned part of the funds to issuing bank to be “put back into” letter of credit. Bank later refused to pay, arguing that it had fully performed. District Court granted summary judgment to Bank, but Court of Appeals reversed, holding that Bank had been unjustly enriched.

 

Amwest Surety Insurance Company v. Ernst & Young, 677 So.2d 409 (Fla. Dist. Ct. App. 1996).

The firm obtained reversal on appeal of a summary judgment which had been granted the defendant accounting firm. The case established that an accountant may be liable to a surety for negligence in preparing an audited financial statement if the accountant knows that the statement will be used to obtain bonds and if the surety does in fact issue bonds in reliance upon the statement. This case is the first reported case in Florida holding that an accountant may be held liable to a surety for negligence in connection with the preparation of audited financial statements for the surety’s principal.

 

Gulf Insurance Company v. GFA Group, Inc., 554 S.E. 2d 746 (Ga. App. 2001).

On appeal from a grant of summary judgment against the surety, the surety asserted that a payroll services company, which advanced money for payroll to a contractor on a public project, was not a proper claimant on a payment bond. The claimant payroll services company was granted summary judgment at the trial court level claiming that it had provided “labor” to the project. The Court of Appeals agreed with the surety, holding that the provision of administrative services and lending funds do not amount to the provision of labor under the bond and applicable Little Miller Act statute. This was a case of first impression under the Georgia statute.

 

Kvaerner Construction, Inc. v. American Safety Casualty Insurance Co., 847 So.2d 534, (Fla. App. 2003).

A Florida appellate court considered for the first time whether the general contractor could recover from the surety of a subcontractor for breach of its obligations under the performance bond, when the subcontractor was not licensed, as required by Florida law, to perform the work, and the general contractor knew the subcontractor was not licensed, but allowed it to perform the work contracted for anyway. Under the Florida statute requiring certain subcontractors to obtain licenses for work, any contract with an unlicensed contractor was deemed void and unenforceable. The Fifth District Court of Appeals for the State of Florida held that because (1) the general contractor knew the subcontractor was unlicensed, (2) a license was required for the work covered by the performance bond, and (3) any contract with an unlicensed contractor and/or subcontractor is void and unenforceable as a matter of public policy, the general contractor could not indirectly recover on a void contract under the performance bond generally guaranteeing the contract.

 

We’ve helped clients from all around New York including New York City, Buffalo, Rochester, Yonkers, Syracuse, and Albany. When you need attorneys who are experts at surety law, call the Thompson Law Group. We’re here to help.

 

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