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</o:shapelayout></xml><![endif]--></head><body lang=EN-US link=blue vlink=purple><div class=WordSection1><p class=MsoNormal><span style='color:#1F497D'><o:p> </o:p></span></p><div><div style='border:none;border-top:solid #B5C4DF 1.0pt;padding:3.0pt 0in 0in 0in'><p class=MsoNormal><b><span style='font-size:10.0pt;font-family:"Tahoma","sans-serif"'>From:</span></b><span style='font-size:10.0pt;font-family:"Tahoma","sans-serif"'> Sakwa, Stuart H. [mailto:Shsakwa@arnstein.com] <br><b>Sent:</b> Wednesday, April 18, 2012 4:48 PM<br><b>To:</b> Bruce Partington<br><b>Subject:</b> RE: [RPPTL-constructionlaw] Performance bond liability question<o:p></o:p></span></p></div></div><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Arial","sans-serif";color:blue'>While the sub may be in default, the problem in going against the surety may be failure to timely notify the surety of the default and give it an opportunity to cure. If the sub failed to provide the required insurance, the GC should have stopped the sub from performing the work until the insurance was provided and/or given the surety notice that the insurance hadn't been provided. </span><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'> <o:p></o:p></span></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Arial","sans-serif";color:blue'>If notice was not given until after the event giving rise to the claim that required insurance coverage, the surety was not given an opportunity to cure the default.</span><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'> <o:p></o:p></span></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Arial","sans-serif";color:blue'>I believe under the A312, you may have a notice issue because the bond gives the surety the right to step in and cure the defect. If it was a performance bond that just required the surety to indemnify the gc, then the claim may be okay.</span><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'> <o:p></o:p></span></p><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Arial","sans-serif";color:blue'>There are some cases in Bruner & O'Connor which distinguish between the two types of performance bonds. </span><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p><div><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'> <o:p></o:p></span></p></div><div><p class=MsoNormal><strong><span style='font-size:12.0pt;font-family:"Century Gothic","sans-serif";color:#00009C'>Stuart H Sakwa</span></strong><span style='font-size:12.0pt;font-family:"Times New Roman","serif";color:#00009C'> </span><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><br></span><span style='font-size:10.0pt;font-family:"Century Gothic","sans-serif"'>Attorney at Law<br></span><span style='font-size:13.5pt;font-family:"Bookman Old Style","serif";color:#00009C'>A</span><span style='font-size:10.0pt;font-family:"Bookman Old Style","serif";color:#00009C'>RNSTEIN</span><span style='font-size:12.0pt;font-family:"Bookman Old Style","serif";color:#00009C'> </span><span style='font-size:10.0pt;font-family:"Bookman Old Style","serif";color:#00009C'>&</span><span style='font-size:12.0pt;font-family:"Bookman Old Style","serif";color:#00009C'> </span><span style='font-size:13.5pt;font-family:"Bookman Old Style","serif";color:#00009C'>L</span><span style='font-size:10.0pt;font-family:"Bookman Old Style","serif";color:#00009C'>EHR</span><span style='font-size:12.0pt;font-family:"Bookman Old Style","serif";color:#00009C'> </span><span style='font-size:10.0pt;font-family:"Bookman Old Style","serif";color:#00009C'>LLP</span><span style='font-size:12.0pt;font-family:"Bookman Old Style","serif";color:black'> </span><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p></div><div><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><a href="http://www.arnstein.com/"><span style='font-size:10.0pt;font-family:"Century Gothic","sans-serif"'>www.arnstein.com</span></a><o:p></o:p></span></p></div><div><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'> <o:p></o:p></span></p></div><div><div><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Century Gothic","sans-serif"'>515 North Flagler Drive <o:p></o:p></span></p></div><div><div><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Century Gothic","sans-serif"'>Sixth Floor <o:p></o:p></span></p></div><div><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Century Gothic","sans-serif"'>West Palm Beach, Florida 33401-4323<br>Phone: 561.650.8484<br>Mobile: 954.261.9598 </span><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p></div></div></div><div><p class=MsoNormal><span style='font-size:10.0pt;font-family:"Century Gothic","sans-serif"'>Fax: 561.802.3082<br></span><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><a href="mailto:Shsakwa@arnstein.com"><span style='font-size:10.0pt;font-family:"Century Gothic","sans-serif"'>Shsakwa@arnstein.com</span></a></span><span style='font-size:10.0pt;font-family:"Century Gothic","sans-serif"'><br><br>Offices in Illinois, Florida, and Wisconsin</span><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'> <o:p></o:p></span></p></div><div><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'> <o:p></o:p></span></p></div><p class=MsoNormal><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></p><div class=MsoNormal align=center style='text-align:center'><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><hr size=2 width="100%" align=center></span></div><p class=MsoNormal style='margin-bottom:12.0pt'><b><span style='font-size:10.0pt;font-family:"Tahoma","sans-serif"'>From:</span></b><span style='font-size:10.0pt;font-family:"Tahoma","sans-serif"'> <a href="mailto:constructionlaw-bounces@lists.flabarrpptl.org">constructionlaw-bounces@lists.flabarrpptl.org</a> [<a href="mailto:constructionlaw-bounces@lists.flabarrpptl.org">mailto:constructionlaw-bounces@lists.flabarrpptl.org</a>] <b>On Behalf Of </b>Bruce Partington<br><b>Sent:</b> Wednesday, April 18, 2012 5:34 PM<br><b>To:</b> RPPTL constructionlaw<br><b>Subject:</b> [RPPTL-constructionlaw] Performance bond liability question</span><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p></o:p></span></p><p class=MsoNormal>Please reply directly to <a href="mailto:bpartington@cphlaw.com">bpartington@cphlaw.com</a><o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>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.” <o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>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.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>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.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal><i>Bruner and O’Connor</i> (§ 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.<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>Any thoughts?<o:p></o:p></p><p class=MsoNormal><o:p> </o:p></p><p class=MsoNormal>Thanks.<o:p></o:p></p><p class=MsoNormal><b><span style='font-size:13.5pt;color:#0000A0'><o:p> </o:p></span></b></p><p class=MsoNormal><b><span style='font-size:13.5pt;color:#0000A0'>Bruce D. Partington</span></b><span style='font-size:10.0pt;color:black'><o:p></o:p></span></p><p class=MsoNormal><span style='font-size:10.0pt'>Clark</span> <span style='font-size:10.0pt'>Partington<span style='color:black'><o:p></o:p></span></span></p><p class=MsoNormal><a href="mailto:bpartington@cphlaw.com" title="blocked::mailto:bpartington@cphlaw.com"><span style='font-size:10.0pt'>bpartington@cphlaw.com</span></a><span style='font-size:10.0pt'><o:p></o:p></span></p><p class=MsoNormal><span style='font-size:10.0pt'>Direct: 850-432-1399<o:p></o:p></span></p><p class=MsoNormal><span style='font-size:10.0pt'>Fax: 850-432-7340<o:p></o:p></span></p><p class=MsoNormal><i><span style='font-size:9.0pt'>*Board Certified in Construction Law<o:p></o:p></span></i></p><p class=MsoNormal><span style='font-size:10.0pt'> <o:p></o:p></span></p><p class=MsoNormal><span style='font-size:7.5pt'>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. 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