This is a story that I noticed in another news outlet a few days ago. It’s interesting because the contractor has chosen to sue its surety after the surety demanded all remaining contract balances on a large school project to complete under a performance bond.
In the lawsuit, the contractor seeks damages for lost bonding capacity, an inability to bid new work, and punitive damages.
This article shows that the financial troubles started for the contractor on a separate highway project. When a subcontractor defaulted, filed a lien, and was terminated, the owner of that project began to withhold funds from the contractor sufficient to cover the lien. The contractor tried to buy a bond from its surety to provide security over the lien and allow further payments, but the surety refused.
The withholding caused cash flow problems for the contractor. To exacerbate the issue, the contractor claims the school owner began to slow pay the contractor and was 60 days late in making a payment. As a result, the contractor claims is terminated the school project for breach by the owner. The owner apparently disagreed and terminated the contract and made a demand on the surety to perform. When the surety apparently accepted its performance bond obligations, the contractor sued.
The refusal of the surety to provide a bond around the lien and then the acceptance of the performance bond obligations are the impetus for the contractor’s suit against its surety. This case is interesting. To the extent it remains publicized, I’ll continue to follow it and provide updates.
Here is an article from | ENR: Engineering News Record | McGraw-Hill Construction
Contractor Lashes Out at Surety as Projects Go Awry | ENR: Engineering News Record | McGraw-Hill Construction.
…and here is a link to a story in the local newspaper with additional details about the dispute and lawsuit.