The Eighth Circuit has affirmed that Liberty Mutual’s bond obligation did not extend to a subcontractor
In a dispute arising from a federal power infrastructure project, the Eighth Circuit Court of Appeals ruled in favor of Liberty Mutual Insurance Company, finding that the insurer was not liable under a performance bond for payments sought by a subcontractor that lacked contractual privity. The April 2025 decision affirms a lower court ruling and reinforces the enforceability of assignment restrictions and formal contractual obligations in surety arrangements.
The litigation originated from the construction of the VT Hanlon Substation in Montrose, South Dakota, contracted by the US government through the Western Area Power Administration (WAPA). The original contractor, Isolux, failed to complete the project by the required deadline, prompting WAPA to terminate the contract. At the time, Liberty Mutual and the Insurance Company of the State of Pennsylvania (ISOP) had jointly issued both performance and payment bonds to secure Isolux’s obligations.
Following the termination, Liberty and ISOP, acting as sureties, engaged Professional Construction Consulting (PC2) to evaluate the site and identify a new contractor. Jeff Bruce—owner of two distinct entities, E&I Global Energy Services, Inc. and E&C Global, LLC—entered discussions with PC2. Ultimately, E&C was named in a March 2017 tender agreement and in the subsequent completion contract as the contractor responsible for finishing the project. E&I was listed in the contract as a subcontractor.
Though E&I performed the bulk of the work due to E&C’s inability to obtain a necessary bond, Liberty Mutual refused to pay E&I directly for certain items excluded from the base completion price. E&I and E&C jointly filed suit in February 2020, asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, fraud, deceit, and negligent misrepresentation.
The US District Court for the District of South Dakota granted summary judgment to Liberty Mutual on the unjust enrichment claim, finding that the plaintiffs had acknowledged a valid and enforceable contract, thereby precluding equitable remedies. Following a bench trial, the court ruled in favor of Liberty on all remaining claims. It held that Liberty’s payment obligation ran solely to E&C under the completion contract, and that there was no evidence of a valid assignment of contractual rights from E&C to E&I. The completion contract contained a non-assignment clause, barring the transfer of rights without prior written consent from both WAPA and the sureties. No such consent was ever provided.
The court further concluded that the plaintiffs’ fraud and misrepresentation claims failed due to lack of intent to deceive and the absence of justifiable reliance. Although Liberty’s agent had mistakenly indicated that certain project documents included all revisions, the court credited his testimony that he believed Bruce had access to the missing materials. Bruce acknowledged knowing he lacked complete documentation at the time of his bid but chose to proceed under WAPA’s direction. The court found that such awareness undermined any claim of reasonable reliance.
The district court also excluded a supplemental expert report that estimated an additional $3.69 million in “loss of enterprise value” damages. The court deemed the report untimely and not a proper supplement, emphasizing that the information it contained had been available earlier. The plaintiffs’ request for lesser sanctions, such as reopening discovery, was denied to avoid delaying the proceedings.
On appeal, the Eighth Circuit affirmed the district court’s rulings in their entirety. The appellate court held that the plaintiffs failed to timely request a jury trial and that the exclusion of the expert report was not an abuse of discretion. It also upheld the trial court’s findings that Liberty Mutual had no contractual obligation to E&I, that no valid assignment had been established, and that the fraud and misrepresentation claims lacked merit.
While the case did not interpret insurance policy language per se, it turned on obligations under a performance bond and a completion contract—core instruments in construction insurance. The decision reaffirms the legal significance of non-assignment clauses and strict adherence to formal contracting procedures in limiting surety liability. For insurers and surety providers, the ruling provides a clear illustration of how courts enforce the boundaries of liability based on documented contractual relationships and express consent requirements.
