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Sompo International U.S. Insurance to Acquire Lexon Surety Group

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Sompo International, a Bermuda-based specialty provider of property and casualty insurance and reinsurance, announced today that its U.S. Insurance platform has reached an agreement to purchase the operating subsidiaries of Lexon Surety Group LLC (Lexon). \ Lexon, the second largest independent surety insurer in the U.S., is comprised of Lexon Insurance Company, Bond Safeguard Insurance Company, and Fortress National Group LLC. The group has been offering a broad array of commercial and contract surety bonds, court and probate bonds, and U.S. Custom bonds through a nationwide network of agents since 2001. Mr. Christopher Sparro, CEO of U.S. Insurance at Sompo International, who will be appointed Chairman of the Lexon Board, commented, “Lexon has a strong reputation in the surety market, and this acquisition will position us to substantially accelerate the growth of our U.S. primary surety portfolio and our presence in this specialized market. Lexon’s team brings to the table strong distribution relationships with a nationwide network of agents and brokers as well as specialty expertise across their surety and bond offerings, which are highly complementary to Sompo International’s existing product capabilities.” Mr. Jack Kuhn, CEO of Global Insurance at Sompo International, added, “This acquisition is another step in the ongoing expansion of our U.S. Insurance capabilities into markets that complement our current operations. Lexon’s culture and business mix will be an excellent addition to our existing surety insurance group, allowing us to provide additional product capabilities to our valued customers, and creating value for our combined operations and our business partners. We look forward to welcoming the Lexon team to Sompo International.” Mr. David Campbell, President of Lexon, stated, “The Lexon Surety Group employees are very pleased to join the Sompo International organization. Lexon’s organic growth to a top ten surety insurer was made possible by Lexon’s highly experienced staff and my cofounders, Brook Smith and PVM Ventures. Combining Lexon’s proven customer-oriented service and Sompo International’s financial strength will provide Lexon and Sompo International with a formidable platform in the surety insurance industry.” Lexon’s staff and office locations will be retained. Mr. Campbell will continue in his role as President of Lexon and will be appointed Vice Chairman of the Lexon Board. Mr. Brian Beggs of Sompo International will become the Chief Executive Officer of Lexon. The transaction is expected to close in March of 2018, following regulatory approvals. TigerRisk Capital Markets & Advisory served as financial advisor and Cadwalader, Wickersham & Taft LLP served as legal advisor to Sompo International. Hales Securities, LLC served as exclusive financial advisor and Bingham Greenebaum Doll LLP served as legal advisor to Lexon. http://www.sompo-intl.com/news/sompo-international-us-insurance-acquire-lexon-surety-group

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Developers Surety and Indemnity Co. (AmTrust) seeks reimbursement from Parkwood Pointe Associates, others

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PITTSBURGH – A California company that issues performance bonds alleges that two entities and an individual have failed to perform their obligations under a bond. Developers Surety and Indemnity Co. filed a complaint on Dec. 19, 2017, in the U.S. District Court for the Western of Pennsylvania against Parkwood Pointe Associates LLC, Blackwood Pointe Associates LLC and David Cherup citing indemnification and reimbursement. According to the complaint, in 2002 the plaintiff furnished bonds to M Squared Development with Crescent Township as obligee for a project. The suit states that the defendants executed an indemnity agreement. The plaintiff holds Parkwood Pointe Associates LLC, Blackwood Pointe Associates LLC and Cherup responsible because the defendants allegedly have failed and refused to perform their obligations to indemnify and hold the plaintiff harmless in connection with the demands of the bond. The plaintiff seeks judgment against the defendants for damages, expenses, court costs, and any further relief this court grants. It is represented by Paul T. DeVlieger of Devlieger Hilser PC in Philadelphia. U.S. District Court for the Western District of Pennsylvania case number 2:17-cv-01647-MPK https://pennrecord.com/stories/511306155-developers-surety-and-indemnity-co-seeks-reimbursement-from-parkwood-pointe-associates-others

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5th Circ. Affirms $1M Award In Contractor’s Coverage Dispute

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Law360, New York (December 13, 2017, 7:03 PM EST) — Oklahoma Surety Co. is still on the hook for roughly $1 million in damages for denying coverage to a general contractor over a shoddy workmanship suit after the Fifth Circuit on Tuesday affirmed a lower court’s ruling that found the insurer had breached its duty to defend. A three-judge panel unanimously affirmed a district court’s finding that Oklahoma Surety had a duty to defend Lyda Swinerton Builders Inc., as well as a $1 million damages award to LSB. https://www.law360.com/articles/994253/5th-circ-affirms-1m-award-in-contractor-s-coverage-dispute

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Travelers unit needn’t pay public project subcontractor

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A federal appeals court has reversed its earlier ruling and held a Travelers Cos. Inc. unit is not obligated to pay a subcontractor in a public project under its payment and performance bonds. The complex case involves Pearl, Mississippi-based McMillan-Pitts Construction Co. L.L.C., which was selected as the prime contractor on a public project to construct an office building at the Mississippi State University Delta Research and Extension Center in Stoneville, Mississippi, according to court papers in JSI Communications v. Travelers Casualty & Surety Co. of America. McMillan-Pitts was required to obtain payment and performance bonds as surety for the project, and did so from Travelers Casualty & Surety, according to the ruling. Separately, a Tackett creditor unrelated to the project served a writ of garnishment on McMillan-Pitts seeking access to any funds McMillan-Pitts owed Tackett. McMillan-Pitts tendered to the court the $19,445.16 it still owed Tackett for its work on the project, and obtained a judgment from a chancery court releasing it from any further liability on its subcontract with Tackett. Shortly afterwards, JSI notified both McMillan-Pitts and Travelers it was seeking payment under the project’s payment bond for Tackett’s nonpayment of JSI’s invoice. In November 2012, Travelers denied JSI’s claim on the bond on the grounds the McMillan-Pitt’s chancery court judgment released it of any obligations under its subcontract with Tackett. JSI filed suit against Travelers, and the U.S. District Court in Jackson, Mississippi, ruled in Travelers’ favor. A three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans unanimously overturned the ruling in 2015. “We do not interpret the (chancery court) judgment as having any effect on obligations under the payment bond,” said the ruling. “Accordingly, we conclude that JSI is entitled to recovery under the bond and summary judgment on liability for the invoiced amount (it) should have been granted in the amount of $36,346.09,” said the panel, in remanding the case for further proceedings. On remand, the U.S. District Court ruled in Travelers favor, denying JSI’s bad faith and punitive damages claim. A unanimous-three judge appeals court panel affirmed this ruling on Friday. “The district court determined that Travelers demonstrated an arguable reason for denying JSIs’ claim and that JSI failed to meet its burden to show otherwise” said the panel’s ruling. Travelers “met its low burden for showing a reasonable justification for its action. JSI, now with the burden to demonstrate that Travelers’s reasons are not legitimate, fails to persuade,” said the panel, in affirming the lower court ruling. http://www.businessinsurance.com/article/20171212/NEWS06/912317883/Travelers-need-not-pay-public-project-subcontractor-JSI-Communications

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Trisura Reviews Construction Lien Act (Bill 142)

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Canadian Surety Brokers and Bill 142 TORONTO, Dec. 8th, 2017 /insPRESS/ – The Construction Lien Act, Bill 142, which recently passed after an 87-0 vote in the Ontario Legislature brings about several long awaited improvements for the Ontario construction industry. While the new legislation is limited to Ontario, it has the potential for national ramifications as other provinces continue to update their lien acts which include grappling with prompt payment. The new legislation presents a significant opportunity for brokers to assist their clients in understanding and navigating some of the potential impacts that the new legislation may have. Here is a basic rundown of Bill 142: Long overdue updates to 35 year-old legislation that includes payment protection throughout the construction pyramid Contractors and sub-contracts now have security and assurance regarding timelines for payment Mandatory performance and payment bonds on publicly funded projects over a threshold contract price (similar to the Miller Act in the United States) The adjudication process will now provide an opportunity for resolution of construction disputes without disruption of project schedule and will assist in avoiding costly legal battles No-exceptions rule to hold-back release deadlines means a no-exceptions rule to when contractors and sub-contractors get paid Mandatory payment protection for sub-trades Not only does this present an opportunity for brokers to lead the discussion with existing clients on how the above will impact their business but it will result in a new group of contractors reaching out for brokers support and advice in preparing to provide bonds where they otherwise may not have been required in the past. This is a generational opportunity that has the potential to increase the Ontario surety premium pool in a material way. Early in the lien act review process, The Surety Association of Canada commissioned a report by The Canadian Centre for Economic Analysis (CANCEA) which provided an impartial look at the value of surety bonds in Canada. The findings strongly supported the economic value of surety bonds in protecting the construction process and the wider economy. This report was instrumental in demonstrating the value of our industry’s primary product. Throughout this process, Trisura has had members of various working groups participating in discussion and development related to the surety bonds and their role in the lien act review. We are certainly excited at the outcome and look forward to further developments as regulations are crafted, as this is where all the details will be contained about the new act. As the construction landscape continues to shift, Trisura continues to innovate with new offerings like our e-bond Platform which was launched in 2017 to provide Trisura brokers and contractors access to a free online platform to procure their electronic bonds. We’ve also developed the Contractors Bond Program which provides brokers with the ability to obtain modest surety credit for their clients through a streamlined, online process. As always, we remain committed to you, our broker partners, and the Canadian construction industry as a whole and look forward to supporting you through this transition. https://www.canadianunderwriter.ca/inspress/trisura-reviews-construction-lien-act-bill-142/

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Lynn M. Schubert to Retire as SFAA President

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WASHINGTON, Dec. 11, 2017 /PRNewswire/ — The Surety & Fidelity Association of America (SFAA) announced that President Lynn M. Schubert will retire on December 31, 2018. Ms. Schubert will continue to lead the SFAA through the end of her tenure and also will assist the Search Committee to be established by the Board of Directors in finding her replacement to ensure a smooth transition. Ms. Schubert has served as president of the SFAA since 1996, becoming the first woman to head a national insurance trade association. Over her 22 years of leadership, Ms. Schubert transformed the organization to meet the needs of its members in the modern world. The Surety Association of America originally provided statistical and actuarial materials for its members and regulators, gradually adding services such as bond form review, advocacy and promotion. In 1996, the search committee had a vision to enhance its mission by promoting and preserving the use of surety and fidelity bonds. Ms. Schubert embraced that vision and passionately promoted the industry through the Surety Information Office, SFAA communications, various publications, both federal and state level advocacy, legal advocacy, developing strategic partnerships and testifying before Congress and state legislatures on the benefits of bonding. Under her leadership, Ms. Schubert relocated the organization from New Jersey to Washington, D.C. in order to better serve its members and established an in-house Government Affairs department. She grew the organization by offering services to foreign affiliates, subscribers and legal advisors. Recognizing changing demographics in the U.S., Ms. Schubert led the association to create the Model Contractor Development Program to make surety bonds more accessible to emerging contractors and The Surety Foundation, the 501c3 arm dedicated to the development and expansion of the industry through offering internships and scholarships to minority students. On the international level, SFAA through Ms. Schubert, was a founding member of the International Surety Association, where she continues to serve on the Executive Committee. She played an integral role in helping to develop the International Chamber of Commerce’s Uniform Rules for Contract Bonds & Model Forms to promote conditional bonds over demand guarantees. These rules have been supported by the World Bank, the Inter-American Development Bank, the European Commission and the United Nations Commission on International Trade and Law. “I have known Lynn Schubert for many years and have been fortunate to work closely with her for the last several,” said Ross Fisher, Head of Specialty Commercial Businesses and SFAA Chair. “She has been a visible and influential leader for our industry. During her tenure she built an excellent team and helped to ensure that the mission and important work of our industry and the many participants is understood, valued and constantly improving. She has been a thought partner and a friend to many in our business and I thank her for her service, her commitment and her inspired leadership.” “The last 22 years with the SFAA have been an honor and so fulfilling,” said Ms. Schubert. “The success of the SFAA is a result of the commitment and work of its members and staff. I have been so fortunate to work with so many wonderful board members, members, foreign affiliates, partners and staff throughout my tenure. I am excited to watch the future of surety and fidelity unfold over the next 22 years.” Ms. Schubert was a recipient of the 2017 Trending 40’s Top Association CEOs, the 2015 Martin J. Andrew Award for Lifetime Achievement from the American Bar Association Fidelity & Surety Law Committee, the Women Builders Council 2008 Champion Award, and the 2008 Private Sector Leadership Award of the Jamaica Business Resource Center for work in leading the surety industry in efforts to assist women and minority contractors to become bondable businesses. She has been a frequent international lecturer on the topics of fidelity and surety bonds, antitrust, procurement, and diversity and inclusion. The Surety & Fidelity Association of America (SFAA) is licensed as a rating or advisory organization in all states and it has been designated by state insurance departments as a statistical agent for the reporting of fidelity and surety experience. SFAA serves as a trade association of more than 400 insurance companies that write the vast majority of surety and fidelity bonds in the U.S. http://markets.businessinsider.com/news/stocks/Lynn-M-Schubert-to-Retire-as-SFAA-President-1010993276

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Insurer wins reversal of seven-figure judgment in surety bond case

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Lexon Insurance Company appealed a trial court decision and got it overturned An insurance company won a reversal of a court decision that the company breached about $7.7 million of surety bond contracts in connection with a residential development in Cape Coral. In 2005, Lexon Insurance Company issued two surety bonds of about $7.7 million to ensure the completion city-ordered site improvements at the Village at Entrada residential development in Cape Coral in case the developer failed to do so. The project’s original developer stopped paying a general contractor in 2007, putting Village at Entrada in limbo until 2012, when a company called Coco of Cape Coral LLC bought the project for $6.2 million. About seven months after Coco bought the project, the city filed a lawsuit against Lexon for breach of contract and subsequently assigned its claims to Coco. The court sided with Coco entered a judgment against Lexon in March 2016. On appeal, however, attorneys with law firm Greenspoon Marder successfully argued that the claim by Coco came after the expiration of a five-year statute of limitations that began in 2007 when the original developer abandoned the Village at Entrada project. The Second District Court of Appeal of Florida on Nov. 29 agreed with that argument and reversed the trial court’s judgment against Lexon. The Greenspoon Marder team that represented Lexon included shareholders John H. Pelzer and Victor Kline with the assistance of Bruce L. Maas of Harris Beach, PLLC, in Pitsford, New York. – Mike Seemuth https://therealdeal.com/miami/2017/12/10/insurer-wins-reversal-of-seven-figure-judgment-in-surety-bond-case/

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Canada: Court Restates Law On The Defence Of Material Alteration To Guarantees

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Ms. Zuk provided a personal guarantee for the business her husband founded (“Silverado”). Ms. Zuk was also an accountant, and was Silverado’s sometime bookkeeper and shareholder prior to her divorce from Mr. Zuk, Silverado’s principal. When Silverado defaulted on its loans, RBC called on the guarantee. Ms. Zuk argued that there had been material alterations to the credit advanced to Silverado, which absolved her of liability under the guarantee in respect of those later advances. In considering this defence, the Court provided a comprehensive restatement of the law on the defence of material alteration. The Court applied a two-step test: are the challenged alterations to the underlying loan arrangement material? and does the language of the guarantee permit the material alterations? When discussing how to apply this test, the Court set out the law on the duty of disclosure to a guarantor, specific vs. continuing/all accounts guarantees, and compensated vs. accommodation sureties. Each of these three factors influences the Court’s interpretation of the guarantee and the level of scrutiny the Court will capply to the language of the guarantee. In this case, the Court found it relevant that Ms. Zuk had an interest in Silverado, which the Court found made her a compensated guarantor – similar to a bond company. She was not an accommodation surety, like a spouse who receives no compensation for his or her guarantee. These latter types of sureties receive more protection from the Court and the terms of such guarantees will be construed more strictly. The Court found that the guarantee was a continuing/all accounts guarantee that had explicitly contemplated the type of alteration that in fact occurred. This case is notable for all guarantors as a restatement of the law on the defence of material alteration, and it is also helpful when drafting guarantees that the parties contemplate might evolve over time. http://www.mondaq.com/canada/x/653964/Insolvency+Bankruptcy/Court+Restates+Law+On+The+Defence+Of+Material+Alteration+To+Guarantees

Canada: Court Restates Law On The Defence Of Material Alteration To Guarantees Read More »

Old Republic Surety Increases Limits of Their Fastbond Program

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Old Republic Surety Company announced today that they have increased the limits of their FastBond product. Old Republic Surety’s Fastbond program has increased from $250,000 to $400,000 for the credit-only. Additionally, the single limit/aggregate of their FastBond program has increased from $750,000 to $1,250,000. Old Republic Surety’s FastBond program is designed for smaller, growing contractors, or for contractors who have occasional bond needs. The underwriting of their FastBond program is primarily credit based. Surety bonds based primarily on credit, or FastBonds, simplify the bonding process for independent agents as well as for contractors. Our FastBond program has been extremely successful since its inception,” states Alan Pavlic, President and COO of Old Republic Surety, “We strive to respond to the needs of the marketplace. Our strong underwriting principles will help ensure that this program continues to be a tremendous asset for our appointed agents and their contractors”. Old Republic Surety’s FastBond program targets fast turn projects for all construction trades. Old Republic Surety Company is a standard market for general contractors, supply contractors, and all major subcontractor trades. The company writes bond programs in all 50 states and has a contract bonding capacity of $50 million. Insurance contracts are underwritten and issued by Old Republic Surety Company, rated “A” by A.M. Best. Contract bonds guaranty the performance and fulfillment of all undertakings promised in a contract. About Old Republic Surety Company Old Republic Surety Company ranks among the nation’s top underwriters of contractors’ performance and payment bonds, miscellaneous surety, and commercial fidelity, offering thousands of types of bonds. More than 4,000 independent insurance agencies market Old Republic Surety financial indemnity products throughout the United States. Headquartered in Brookfield, Wisconsin, Old Republic Surety Company is part of the Old Republic General Insurance Group, the largest business segment within Old Republic International Corporation, one of the nation’s 50 largest publicly held insurance organizations. http://markets.businessinsider.com/news/stocks/Old-Republic-Surety-Increases-Limits-of-Their-Fastbond-Program-1008947343

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Developers Surety and Indemnity Co. (AmTrust) seeks damages over alleged breach of indemnity agreements

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PITTSBURGH – A surety bond issuer alleges it was damaged by several contractors/subcontractors because of a breach of indemnity agreements. Developers Surety and Indemnity Co. (Amtrust) filed a complaint on Oct. 19 in the U.S. District Court for the Western District of Pennsylvania against Iron City Constructors Inc., Iron City Constructors Inc. as general partner of MV Holdings, Chrisellie Corp., et al. alleging breach of contract, breach of indemnity agreement and other counts. According to the complaint, the defendants were either general contractors or subcontractors for projects in Pennsylvania. The suit states the defendants applied for surety credit from the plaintiff in 2009 and 2011. The plaintiff holds Iron City Constructors Inc., Iron City Constructors Inc. as general partner of MV Holdings, Chrisellie Corp., et al. responsible because the defendants allegedly breached their contractual agreement with the plaintiff by failing to indemnify, exonerate and save the plaintiff from loss and reimburse it as demanded. The plaintiff seeks damages, court costs, interest and any further relief the court grants. It is represented by W. Alan Torrance Jr. of Dickie, McCamey & Chilcote P.C. in Pittsburgh. https://pennrecord.com/stories/511254202-developers-surety-and-indemnity-co-seeks-damages-over-alleged-breach-of-indemnity-agreements

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