[RPPTL-constructionlaw] Performance bond liability question

Thu Apr 19 06:30:41 PDT 2012

That was my thought, too, Ed (different bond form, different language).  But I’m going to review Larkin again.  

For the benefit of the group, I had someone request I forward around responses that had come just to me.  I’ll do that shortly.

Bruce D. Partington

Clark Partington

bpartington at cphlaw.com <mailto:bpartington at cphlaw.com> 

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From: constructionlaw-bounces at lists.flabarrpptl.org [mailto:constructionlaw-bounces at lists.flabarrpptl.org] On Behalf Of Whelan, Ed
Sent: Thursday, April 19, 2012 4:31 AM
To: RPPTL constructionlaw
Cc: RPPTL constructionlaw
Subject: Re: [RPPTL-constructionlaw] Performance bond liability question

Bruce/Ty

I disagree - Larkin dealt with the old AIA A311 form that did not include coverage for delay or lds or latent defects 

The AIA A312 form does.  I think the answer depends on the specific damage - if the damage is a latent defect and the A312 form was not changed, then yes bond is liable - but only for 5 year SOL.  I dont think you can require the surety to provide a missing completed ops  coverage but for the 5 year SOL period your  bond coverage should cover any damage/defect claims directly. 

May also want to look at the agent that issued an improper COI and perhaps pursue them 

Ed 

Sent from my iPhone

On Apr 18, 2012, at 8:43 PM, "Ty G. Thompson" <tthompson at mpdlegal.com> wrote:

	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)

	www.mpdlegal.com 

	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

	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

	NOTICE: This e-mail message and any attachments are private communication sent by the law firm of Clark Partington Hart Larry Bond & Stackhouse, and may contain confidential, legally privileged information meant solely for the intended recipient. If you are not the intended recipient, you are hereby notified that any use, dissemination, distribution or copying of this communication is strictly prohibited. Please notify the sender immediately by replying to this message, and delete the e-mail and any attachments from your system. Thank you.

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