Cozen O’Connor: Surety

Surety

Cozen O’Connor has broad experience providing surety-related counseling, investigation, strategic analysis and underwriting advice as well as extensive experience in mediation, arbitration and litigation of surety matters. Collectively, members of the firm’s surety practice have decades of experience representing surety companies, owners, general and sub-contractors as well as labor and material suppliers in connection with issues involving bid, performance and payment bonds throughout the United States and internationally. Most often surety bonds apply to construction projects, however, surety bonds have varied applications, and are used in conjunction with many industry sectors not just those that are construction related. For example, surety bonds may guarantee performance of a broad range of obligations such as software development contracts, environmental compliance, tax compliance and other government obligations, and payment of judgments guaranteed by supersedeas appeal bonds. Our attorneys have substantial experience representing clients involved in these and virtually every other type of financial guarantee bond.

ADDRESSING YOUR NEEDS

We recognize that, at a minimum, representations involving surety bonds present a potentially complex relationship among three parties: principal, surety and obligee, each of whom may simultaneously have interests in common with one or more of the other parties. For instance, the situation may involve third party indemnitors and rights to collateral, which have the potential to put continuing business relationships in jeopardy. We help our clients to quickly, but thoughtfully, evaluate the problematic situation with the goal of arriving at a practical, efficient resolution that serves our client’s needs, and recognizes the importance of maintaining valuable business relationships. Where a situation is amenable to a negotiated resolution, as it often is, we then help our client achieve that resolution on terms that serve our client’s fundamental interests. If litigation is necessary, we have the capability and depth of experience to vindicate our client’s rights in court. On many occasions, our well known and respected capability to litigate any matter can facilitate a favorable non-litigated resolution.

Because each surety claim presents its own unique set of complexities, our surety practice takes a cross-disciplinary approach to serve our clients. We have the ability to draw upon Cozen O’Connor’s decades of experience and bench strength in the areas of construction and construction defect litigation, professional liability litigation (including architect and engineer liability), bankruptcy, coverage and subrogation. On the transactional side, our lawyers have broad experience in the negotiation of financing, standstill and takeover agreements as well as indemnity and security arrangements at both the underwriting and work-out stages of a surety relationship. Whether the project is public or private, involves the Miller Act, little Miller Act, common law bonds, or the broad range of surety guarantees in virtually any other form, we have the experience to effectively represent our clients’ interests.

WHAT WE DO

We pride ourselves on our ability to respond quickly and effectively when our clients need us.

Our offices located throughout the United States, London and Toronto are staffed with attorneys seasoned in crisis management. Whether we are counseling a surety that must decide whether to meet the next payroll of a financially strapped principal, or a general contractor threatened with an imminent termination due to the alleged default of its subcontractor, Cozen O’Connor has the unique ability to put “boots on the ground” within a matter of hours almost anywhere to advise our client as to critical next steps. In addition, our attorneys provide assistance in preserving documents, securing property and negotiating arrangements to keep a project from grinding to a halt over a limited dispute, thereby avoiding or mitigating substantial potential damages while preserving the client’s remedies going forward.

OUR EXPERIENCE

The types of engagements our attorneys have handled for surety clients include:

  • Defense of a major metropolitan city regarding claims arising from interstate highway construction.
  • Representation of a surety with respect to the declared default of a major subcontractor on a public sports stadium project for a major professional sports team.
  • Prosecution of developer’s claims against the U.S. General Services Administration in connection with the construction of a federal courthouse.
  • Successful resolution, with no loss to the surety, of a multimillion-dollar payment bond claim involving a Chilean governmental owner, an American construction company and a Japanese guarantor.
  • Participation in a multinational, multi-hundred-million-dollar performance, payment bond, and construction dispute arising from the construction of multiple petrochemical projects for a foreign government-owned monopoly.
  • Representation of a public owner involving claims for significant cost overruns and delays in the construction of a $35 million chemical facility.
  • Representation of a major contractor regarding the default by a bonded subcontractor on a federal project and the negotiation of the takeover arrangement with the surety involving claims in excess of $2 million.
  • Representation of a surety in a multimillion-dollar bankruptcy litigation involving rights to collateral and an appeal bond allegedly procured on the basis of the principal’s fraud.
  • Representation of a surety in multimillion-dollar governmental claims based on alleged defaults in software systems development contracts.
  • Representation of sureties in U.S. Customs and Federal Maritime Bond claims involving rights to collateral, co-sureties and indemnitor negotiations.
  • Representation of sureties in multimillion-dollar environmental bond claims, related Chapter 11 bankruptcy proceedings, rights to collateral and negotiation of post-petition surety and collateral transactions.
  • Representation of sureties in defense of claims under purchase and forward pricing agreements, and future delivery arrangements.

Publications

Are Surety Agreements Insurance? Federal Courts Weigh in [The Legal Intelligencer]

November 27, 2013

When is insurance not insurance? According to both Merriam-Webster and Black's Law Dictionary, insurance is a "contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril." Under that definition, "insurance" would include surety agreements, where one party agrees to indemnify another party if a third party defaults on a debt or fails to perform on a contract. But not so fast. A recent Pennsylvania federal court decision dismissed a bad-faith claim against a surety, finding that a surety bond is not "insurance" in Upper Pottsgrove Township v. International Fidelity Insurance, No. 13-1758 (E.D.Pa. Oct. 2, 2013).