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CONWAY, SC (WBTW) – An insurance company has filed a lawsuit against Horry County Schools and others alleging they haven’t been paid nearly $3 million for work on schools. The lawsuit was filed by Selective Insurance Company of America on Monday, the lawsuit says. Horry County Schools, MetCon Construction, Inc., Firstfloor Energy Positive, LLC, Travelers Casualty and Surety Company of America, and others are listed as defendants. Horry County Schools reportedly entered into five separate construction contracts with FirstFloor Energy Positive to build schools, according to the lawsuit. Selective Insurance alleges that when the construction scheduled was increased to complete schools on time, the changes impacted Hester Drywall, the drywall company that reportedly worked on the schools, and they eventually went out of business. Selective Insurance also says they took over after the drywall company went into default and provided replacement crews to finish schools and supplies for the work. “Selective, pursuant to the terms and conditions of the Hester-Selective Indemnity Agreements, is the acknowledged and recognized successor and beneficiary of any such sums which were owed to Hester Drywall for work performed for or on its behalf pre-default and for which one or more of the Defendants have heretofore failed to timely provide to Hester Drywall pre-default and which is still owed as of the date of the filing hereof.” Selective Insurance is asking for about $792,000 they say is due for their work after Hester Drywall left the project as well as nearly $2.7 million in services they say was completed before the drywall company left. The insurance company also claims in the lawsuit they haven’t been paid as of the date the lawsuit was filed. “One or more of the Defendants is/are all negligently, willfully, wantonly, intentionally, and wrongfully withholding the said funds they are separately and/or collectively holding from Selective even though they know or reasonably should know those funds are due.” The lawsuit also states First Floor Energy Positive issued bonds to pay for projects at the following schools: Carolina Forest Middle School for about $45 million, Socastee Middle School for about $43 million, Socastee Elementary School for about $37 million, St. James Intermediate School for about $47 million, and Myrtle Beach Middle School for about $46 million. There are 14 causes of action listed in the lawsuit including: Declaratory Judgment Action Against All Of The Defendants Constructive Trust Against All Of The Defendants Surety Bond Claim Against All Defendants – HCSD-Firstfloor Energy Construction Contracts Surety Bond Claim Against All Defendants – Firstfloor Energy-Metcon/TA Loving Construction Contracts Breach of Contract – Pay Applications – Against Metcon-TA Loving, MetCon, TA Loving, and Firstfloor Energy Positiv Unjust Enrichment Against All Of The Defendants Equitable Accounting Against All Defendants https://www.wbtw.com/news/grand-strand/insurance-company-files-lawsuit-against-horry-co-schools-others-claiming-nearly-3m-owed-for-work/1694057617

While physical construction on the new Washburn Tech East campus is at a standstill, educational offerings will start as scheduled Jan. 7 at a temporary location, officials announced Monday. The Antioch Family Life Center, 1921 S.E. Indiana Ave., will host classrooms until construction is complete on Washburn Tech East, 2014 S.E. Washington St. “We wanted to do everything we could to fulfill the promise we made that we would start in January,” Washburn University president Jerry Farley said during a news conference in front of the Antioch center. In September, Champion Builders was declared in default on its construction contract to build Washburn Tech East. Since then, no work has been done on the project as the bonding company, The Hartford, searched for a new contractor. Farley indicated work could resume soon. “I’ve been advised today that there are a couple of little details left, and our target now is to get work underway again by the end of this week,” he said. “If that can occur, we should be able to take possession of the building in the first few days of May. “A lot of people have worked really hard to get the project back on track.” In the meantime, all programs and classes scheduled for early next year at Washburn Tech East will be offered at the temporary location, which is just north of the construction site. Programs will include building technology, health aid, commercial truck driving and GED classes, along with English as a second language courses. “To East Topeka, what this means is that [Washburn] is keeping their word to the community that they’re going to supply education over here on this side,” said The Rev. T.D. Hicks, pastor of Antioch Missionary Baptist Church. “They didn’t allow this obstacle to stop them from going forward.” When officials broke ground in March on the East Topeka Learning Center, which is home to Washburn Tech East, Farley called the project “a dream for a number of people for many, many years.” Despite the recent challenges, Farley said officials remained committed to turning the dream into reality. “We want to make this a great success,” Farley said. “It’s going to depend on all of us to make sure that students come to this center, because if we don’t have students, we’re not going to have people to go fill jobs that we know are waiting out there. “I’ve heard so many times how many jobs are available now in this area, and we want to make sure we can help as many people into those jobs with qualifications that will make them wonderful employees.” Hicks also announced Monday a collaboration with the YMCA to provide child care at the facility. “One of the goals we have at the life center is to remove all excuses, and we know that child care is an excuse for individuals to say they can’t go back to school,” Hicks said. YMCA president and CEO John Mugler said the organization will offer full-day day care at Antioch, starting with a nursery. “And we’re really excited about the opportunity for a summer camp to add to the four locations we already have,” he added. Washburn Tech East is a partnership with Washburn Tech, GO Topeka and the Joint Economic Development Organization. Once completed, the 11,000-square-foot facility will provide space for up to 400 students per year. Prospective students can call (785) 670-2200 for more information. Financial aid and scholarships are available to qualifying students. https://www.cjonline.com/sports/20181217/washburn-tech-east-sets-up-temporary-classrooms-at-antioch-family-life-center

One key lesson from Carillion’s demise is that risk mitigation tools may not provide the level of protection that contractors may need but the answer may be found in surety bonds When the UK’s second largest construction company declared insolvency on 15 January 2018 it sent shockwaves throughout the industry, with an estimated 25,000 to 30,000 subcontractors and other suppliers owed approximately £1 billion ($1.4 billion). It is understood the company started losing money on some of its more prestigious contracts and ran up significant debt in order to offset these losses. Analysts argue the company overreached and took on too many risky contracts as it fought to stay afloat. And eventually the losses, payment delays and debts caught up with Carillion. In 2017 it issued three profit warnings within a span of five months and wrote off over £1 billion on its contracts, making it even more difficult to manage and service its debts. Even the announcement the firm had been awarded the £1.4 billion HS2 contract was not enough to halt its demise. “It was a big hit to the sector but with hindsight it didn’t necessarily come as a huge surprise,” says Tomas Zapletal, head of UK surety at Swiss Re Corporate Solutions. “When you’re extending payment terms to your suppliers and your creditors for no valid reason that’s a warning sign that this company is perhaps under pressure.” As the fallout continues, the insolvency has highlighted the many pressures that main contractors are under. While insolvency within the largest UK contractors was not as big an issue during the financial crisis as some had predicted, Carillion shows many of the inherent difficulties remain. According to analysis by Construction News, conditions have deteriorated over the past 12 months “lending weight to fears that Carillion’s collapse is unlikely to be the last among the UK’s biggest firms”. “It’s not easy to be a main contractor working for demanding customers, and at the same time managing the supply chain and the subcontractors,” thinks Zapletal. “In a market that’s quite competitive the margins gets squeezed to such an extent that there isn’t much headroom for companies like that to manoeuvre.” Carillion has also drawn attention to the importance of surety bonds when it comes to protecting governments, private owners and lenders from contractor defaults. “If you’re looking to build a new prison, hospital or motorway you want to make sure that the contractor that you appoint will be there to complete the project, be that next year or five years down the line,” says Zapletal. “It’s a risk governments face when they appoint private sector companies and it’s important for them to be prepared for defaults.” “Surety bonds give them extra protection they need,” he adds. “The bonds are there to compensate the government for losses or damages suffered under those contracts as a result of the contractor defaulting. For sureties, the contractor is the risk and the government is looking for a third-party guarantee that if the contractor defaults the government will be able to call on that guarantee and look for compensation.” Surety bonds have a number of benefits in comparison to other risk mitigation tools, such as irrevocable letters of credit (LOCs) for instance, helping to bridge the gap between contractors and the banks and injecting liquidity into the system. And unlike LOCs, completion of the construction project remains a key goal of a surety bond, which remain in force for the duration of the contract, in addition to the provision of financial protection. https://www.strategic-risk-europe.com/could-surety-bonds-have-saved-carillions-subcontractors-from-millions-in-financial-loss/1428682.article

FORT WAYNE, Indiana, Oct. 5 — The U.S. Attorney for the Northern District of Indiana, Thomas L. Kirsch II, issued the following news release: United States Attorney Thomas L. Kirsch II announced today a pre-suit settlement under the False Claims Act for fraudulently submitted claims payable with federal Blight Elimination Program funds for demolition work not performed properly. During 2008, the United States Department of the Treasury (Treasury) created the Troubled Asset Relief Program (TARP) to stabilize the economy during the financial crisis. During 2010, Treasury created the Hardest Hit Fund, Blight Elimination Program (BEP), one of several TARP programs, which funded the demolition of abandoned and blighted residential properties in designated cities. The Special Inspector General for TARP (SIGTARP) is responsible for investigating fraud, waste, and abuse in the BEP. The State of Indiana, through the Indiana Housing and Community Development Authority, administered the BEP program in Indiana using federal BEP funds. The City of Fort Wayne, Indiana (Fort Wayne) was a BEP program partner that awarded contracts to Martin Enterprises, Inc. (Martin) to demolish houses on blighted properties using federal BEP funds. Martin and its surety, Philadelphia Indemnity Insurance Company, have agreed to pay $61,016 to resolve the United States’ claims under the False Claims Act for fraudulently submitting claims for federal BEP funds for demolition and fill work done in Fort Wayne from February-September 2017. Specifically, after demolition, instead of filling the excavation sites with clean fill as required by the contract, Martin filled the excavation sites with construction debris and then falsely billed and received payments from the federal BEP program as if they had used clean fill. Under the settlement, Martin repays the $30,508 of federal BEP funds that Martin received for the fraudulently billed claims, and also pays a civil penalty of $30,508. “We will not tolerate dishonest contractors who seek to enrich themselves at the expense of federal taxpayers,” said United States Attorney Thomas L. Kirsch II. “My Office’s Affirmative Civil Enforcement Unit will continue to require contractors who submit fraudulent claims for federal government funds to reimburse the government for their ill-gotten gains and also pay civil penalties under the False Claims Act.” “Dumping of potentially contaminated building material on blighted properties by the only Hardest Hit Fund-paid demolition contractor in Fort Wayne put residents and communities at risk while fleecing taxpayers,” said Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program. “I thank U.S. Attorney Kirsch and his Office’s Affirmative Civil Enforcement Unit for standing with SIGTARP in the fight against fraud in TARP’s Blight Elimination Program.” This settlement was reached as a result of an investigation by the United States Attorney’s Office for the Northern District of Indiana and the Special Inspector General for the Troubled Asset Relief Program of the United States Department of the Treasury. Assistant United States Attorney Wayne T. Ault handled the settlement negotiations. https://insurancenewsnet.com/oarticle/settlement-with-martin-enterprises-inc-and-its-surety-for-submitting-false-claims-for-demolition-work-under-the-u-s-treasurys-blight-elimination-program#.XEYDdFxKiUk

Surety—Standing in the Shoes of Subcontractor—Is Barred From Asserting Defense of Concurrent Delay Because Subcontractor Failed to Seek a Time Extension as Required by the Subcontracts Fid. & Deposit Co. of Md. v. Travelers Cas. & Sur. Co. of Am., 2018 U.S. Dist. LEXIS 162265 (D. Nev., September 21, 2018) Clark County School District (“CCSD”) hired Big Town Mechanical (“Big Town”) as general contractor to perform HVAC upgrades at five schools. Big Town in turn hired F.A.S.T. Systems (“FAST”) to complete low-voltage work at the schools. Big Town obtained performance bonds from Travelers Casualty and Surety Company of America (“Travelers”) and FAST obtained performance bonds from Fidelity & Deposit Company of Maryland (“F&D”). Following FAST’s default on its subcontracts, F&D opted to complete FAST’s work and hired a substitute subcontractor, Perini. In May 2012, Perini notified Big Town that it had “substantially completed” all of FAST’s work. After Big Town refused payment, F&D filed suit against Big Town and Travelers in early 2013. In May of 2013, CCSD rejected Big Town’s final payment application, stating that the project was incomplete and claiming there were significant defects in the work. CCSD then sued Travelers seeking specific performance and liquidated damages for delay. Travelers eventually settled CCSD’s suit but through its counterclaim sought reimbursement from F&D for its settlement plus costs expended to complete the project. F&D moved for partial summary judgment, asserting that because Big Town contributed to the delays in completing the HVAC work, Travelers—standing in Big Town’s shoes—could not establish that FAST caused the liquidated damages to accrue. F&D argued that any delays attributed to FAST ran concurrent to delays caused by Big Town and therefore FAST was not the “but for” cause of the liquidated damages. Relying on California Court of Appeal’s decision in Greg Opinksi Construction, Inc. v. City of Okadale, 132 Cal. Rptr. 3d 170 (Cal. Ct. App. 2011), Travelers argued in response that where a subcontractor fails to comply with mandatory subcontract procedures pertaining to requesting an extension of the subcontract time, the subcontractor is responsible for all delay damages and loses the right to assert that others caused the delay. The District Court agreed, finding that FAST’s exclusive remedy for delay was to request an extension pursuant to the subcontracts and that failure to request an extension would act as a waiver of a claim for delay damages. The Court reasoned that this provision was intended to allocate the risk of delay costs. Accordingly, the Court held that FAST’s failure to request an extension of time as specified in the subcontracts precluded F&D from asserting the concurrent-delay defense. F&D argued that it was not bound by the time-extension provision in the subcontracts because those provisions were in the Big Town-FAST subcontracts, to which F&D was not a party. The Court rejected this argument on the grounds that F&D took over performance once FAST defaulted and therefore stood in FAST’s shoes. F&D then argued that it could not comply with the time-extension provisions because once CCSD declared Big Town in default, the subcontracts were terminated. The Court also rejected this argument because Big Town’s default occurred a year-and-a-half after FAST’s default and a year after F&D’s team declared the work complete. https://www.jdsupra.com/legalnews/concurrent-delay-surety-standing-in-the-28203/

NEW ORLEANS — Lexon Insurance Co. is seeking more than $2 million in surety bonds after Baby Oil, a Louisiana oil and gas producer, filed for bankruptcy in 2017, according to court documents. The lawsuit was filed in the Eastern District of Louisiana against a Thibodaux, Louisiana, couple who owns company, Baby Oil Inc., which sought Chapter 7 bankruptcy protection in September 2017. Four counts were filed by the plaintiff on Aug. 3, who according to the filing, was “named as a creditor of Baby Oil,” and who had issued “certain surety bonds on behalf of Baby Oil.” The defendant, Kris Suard, was listed as the president, treasurer, and a director of Baby Oil. Suard’s husband, Louis O’Neil Suard, was also listed as a defendant in the lawsuit as indemnitor. In March 2007, the defendants executed a General Agreement of Indemnity (GAI) in favor of Lexon. In the terms, according to the filing, the defendant had agreed “to indemnify and save harmless Lexon for any claims, demands, losses, costs or expense arising out of any surety bonds executed by Lexon on behalf of Baby Oil.” According to the filing, the bonds totaled $2,267,224. The plaintiff “has received multiple claims” against the bonds that were issued on behalf of Baby Oil, which “constitute liabilities, costs and expenses, which Lexon has and/or will incur by reason having executed bonds on behalf of Baby Oil,” the lawsuit states. The Louisiana Office of Conservation, State of Louisiana, was listed in several claims within the court document; the three listed claims totaled $2,521,760. The four counts filed by the plaintiff against the Suards included breach of general agreement of indemnity (Count 1), exoneration (Count II), attorney’s fees and costs (Count III), and breach of contract — failure to pay bond premiums (Count IV). The plaintiff is seeking a judgment in its favor on Count I in amount “ascertained to equal or exceed the sum of $2,267,224, “plus interest and such additional losses, costs and expenses, including attorneys’ fees.” In Count II, the plaintiff is “seeking a judgment of exoneration in its favor against the Defendants” in the amount listed above. The plaintiff is also seeking a Breach of Contract, Failure to Pay Bond Premiums in Count IV, and allege that the defendants are in material breach of the GAI and have “failed and/or refused to pay Lexon the sum of $94,318 in overdue bond premiums,” as well as losses, additional premiums, costs and expenses, including attorney’s fees. U.S. District Court, Eastern District of Louisiana Civil Action No. 2:18-cv-07383 https://louisianarecord.com/stories/511528391-lexon-insurance-seeks-2-million-in-surety-bonds-in-baby-oil-bankruptcy