[RPPTL-constructionlaw] Performance bond liability question

[Ty G. Thompson]

Hi Bruce, the answer should be no.  See the American Home v. Larkin decision.  The performance bond is there to guarantee construction only . . . .and nothing more.

Ty G. Thompson
Board Certified Construction Attorney | Mills Paskert Divers
100 North Tampa Street, Suite 2010 | Tampa, Florida 33602
813-769-4802 (direct) | 813-229-3500 (firm) | 813-229-3502 (facsimile)
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From: constructionlaw-bounces at lists.flabarrpptl.org [mailto:constructionlaw-bounces at lists.flabarrpptl.org] On Behalf Of Bruce Partington
Sent: Wednesday, April 18, 2012 5:34 PM
To: RPPTL constructionlaw
Subject: [RPPTL-constructionlaw] Performance bond liability question

Please reply directly to bpartington at cphlaw.com<mailto:bpartington at cphlaw.com>

Subcontractor provides performance bond on AIA A312 form listing the GC as the "Owner" and the sub as the "Contractor."  The bond defines "Contractor Default" as "failure of the Contractor . . . to perform or otherwise to comply with the terms of the Construction Contract." "Construction Contract is a defined term broadly covering the "Agreement between the Owner and the Contractor [so, here, the subcontract], . . . including all Contract Documents and changes thereto."

One of the obligations under the subcontract was to provide certain liability insurance coverages.  Apparently, those coverages were not provided, and the absence of one or more of those coverages is going to result in substantial liability to the GC.  GC has made a claim on Sub's liability policy but the liability carrier has denied coverage and said go away.

So, here's the question - would the performance bond surety be liable to GC for damages incurred because of the sub's failure to provide the contractually required insurance coverage?  It would seem clearly to be a "default" under the contract which is the subject of the bond, which would trigger surety liability.

Bruner and O'Connor (§ 12.35, n. 6) point out this issue but don't indicate any resolution or settled (or unsettled) principles.  They cite two old cases (1965, 1941) which on review don't actually even address the question (I don't know why they were even cited, frankly).  I've found no other cases in Florida or elsewhere on this point yet, but have been looking for a while.

Any thoughts?

Thanks.

Bruce D. Partington
Clark Partington
bpartington at cphlaw.com<mailto:bpartington at cphlaw.com>
Direct: 850-432-1399
Fax: 850-432-7340
*Board Certified in Construction Law

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