Construction Group Wins Summary Judgment on Indemnity Claims and Defeats Bad Faith Claims
A team of lawyers from the Construction and Surety Practice Group recently obtained summary judgment in favor of its client, Arch Insurance Company, on indemnity claims arising out of a botched construction project for a new baseball stadium in Hartford, Connecticut. Federal district court Judge Vanessa Bryant entered judgment for $39 million in favor of Arch in granting Arch’s motion for summary judgment against its principal, Centerplan Construction Company, LLC, and several other indemnitors, including Centerplan’s owner Robert Landino. In doing so, Judge Bryant rejected the indemnitors’ contention that Arch had acted in bad faith in responding to the City of Hartford’s demand on Arch’s performance bond following the City’s default-termination of Centerplan from the stadium construction project.
Arch had issued performance and payment bonds for Centerplan on its design build contract for the new stadium, part of the City’s plans for the overall development of the “Downtown North” section of Hartford. Under its contract, Centerplan was obligated to complete its work so that the stadium would be ready in March for Opening Day of the 2016 baseball season. After certain changes and delays, the City and Centerplan agreed to extend the completion date to the middle of May, 2016, but by the beginning of June the work was still not complete and the City default-terminated Centerplan on June 6, 2016. The City immediately demanded that Arch complete the project pursuant to its performance bond. Arch retained an independent construction consultant, Cashin, Spinelli and Ferretti, LLC, and thoroughly investigated its principal’s alleged default.
In October, 2016 Arch entered into a Takeover Agreement with the City, whereby it agreed to complete the project by the start of the 2017 baseball season. Arch contracted with a completion contractor, Whiting-Turner Contracting Company, to complete the project and had the stadium open and ready for play by Opening Day of the 2017 baseball season. The new stadium has been an unqualified success since its opening, consistently breaking records for attendance and selling out most of its games.
Arch filed a complaint for indemnity against the indemnitor defendants in November, 2016. The defendants denied liability on the grounds that Arch supposedly acted in bad faith in paying the numerous performance and payment bond claims that had been asserted against it under the Centerplan bonds. The defendants also filed counterclaims against Arch for breach of contract, breach of the implied covenant of good faith and fair dealing, surety bad faith, tortious interference with contract and violations of the Connecticut Unfair Trade Practices Act, which Arch moved to dismiss.
After considering Arch’s motion for summary judgment, motion to dismiss, and the testimonial evidence presented during four days of hearings on Arch’s motion for prejudgment remedies under Connecticut statute, the court dismissed all of the defendants’ counterclaims and granted Arch’s motion for summary judgment. In her 63 page memorandum opinion, Judge Bryant held that Arch’s rights were governed by the terms of the indemnity agreements which had been executed by the indemnitor/defendants, and not by the terms of the bonds which Arch had executed (as had been argued by the defendants). As to the payments made by Arch under the bonds, the court held that “Arch introduced unrefuted evidence in support of its contention that these payments were made in good faith….
In testimony before the court at the prejudgment remedy hearing [Arch’s representative] explained the exhaustive process Arch used to fully investigate the status of the Hartford Stadium Project and the Bond claims….. This evidence constitutes prima facie evidence showing the Arch made good faith investigation and is also prima facie evidence of the Defendants’ liability under the Indemnity Agreements.” The court concluded “[b]ecause Defendants have failed to provide evidence from which a jury could reasonably conclude that Arch acted on the Hartford Stadium payment and performance bonds in bad faith, there is no dispute as to an issue of material fact, and Arch is entitled to indemnity for payments on these claims as a matter of law.”
Bill Taylor was lead counsel for Arch on this matter, assisted by Justin Proper, Craig O’Neill and Zachary Roth.