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Surety and Fidelity Law
Surety and Fidelity Law
Our Surety and Fidelity Bond Practice Group includes attorneys with a variety of experience in complex legal matters involving sureties and their various bonds. We bring knowledge and experience in surety and related fidelity law matters, working as a team with our clients to satisfy their varied goals for individual matters. Our practice spans the range of surety bonds, with a focus on construction bonds, fidelity bonds and miscellaneous bonds involving probate, estates, trusts and guardianships.
We regularly advise our surety clients respecting the variety of bond claims made against them, including assistance with developing bond claim defense strategies, or as necessary, litigation strategies and defense. When necessary, we also help develop strategies for negotiating with or pursuing principals and indemnitors. Our practice for sureties includes representation of our surety clients in matters from bond formation to litigation, and from collateral establishment to enforcement.
Examples of our surety related services include:
• Negotiation and preparation of agreements of indemnity. We assist sureties with preparing and revising indemnity agreements with their principals and indemnitors, including negotiating the provisions of these agreements.
• Securing collateral for the surety. We assist sureties with determining available collateral assets of principals and indemnitors, and assist with the preparation of security instruments such as deeds of trusts and financing statements. We also take action as necessary to enforce against those collateral assets.
• Principal default review and actions. We assist sureties with developing strategies for addressing probable or noticed defaults by principals to help minimize risk and loss, and related advice to help proactively address noticed or likely defaults.
• Completion actions. We assist sureties with creating the most cost effective and efficient means of completing their obligations owed to obligees, and then negotiating and preparing related documents with the obligees, completion contractors, consultants, and other parties as necessary, including tender, takeover, completion, tripartite, and similar related agreements.
• Claims defense through tenders. We work with sureties in considering their defense tenders to principals to help them expedite defense and more seamlessly achieve mutual related claim goals and defenses of both principals and sureties.
• Defense of construction bonds, including bid, payment and performance bonds, subdivision, erosion and sediment control, land disturbance, and permit bonds. We regularly give advice regarding all manner of construction bond claims, and assert the rights and defenses of our surety clients with respect to them; both by or against obligees and other third-parties, such as lower tier claimants.
• Defense of fidelity bonds. We regularly provide advice to surety clients regarding the defense of the many types of fidelity and public official bonds, help to develop defense strategies respecting those claims, and, if necessary to defend related litigation. These have included claims of fraud and misrepresentation by bank loan officers and misfeasance by public official.
• Defense of claims on estate, probate and related judicial bonds. We often advise surety clients regarding the many types of estate and probate bonds, and defend fidelity claims made under them; appearing regularly in local courts, and before probate officers such as commissioners of accounts. We prepare or coordinate the preparation of required probate documents including inventories and accounting for estates, trusts and guardianships when the fiduciary is unwilling or unable to prepare them. We also defend actions for forfeiture of these bonds by locating estate assets and establishing credits for legitimate expenditures by the fiduciary. In the event of a bond forfeiture, we secure judgments against the principals and assist in locating assets, establishing liens on these assets, and collecting the judgments.
Further examples of surety experience and related engagements include:
• Bid bond claims: Contractors frequently underbid work or make bid mistakes putting their bid bond at risk. We have assisted sureties in developing strategies to approach owner/obligees with solutions to forfeiture of the bid bond, negotiating settlements of bid bond claims, and defending those claims when negotiations fail. We recently developed defenses to an obligee’s bid bond claim for a Federal procurement and convinced the agency to forego the claim against the bid bond. We also have assisted principals in the preparation of withdrawal requests because of bid mistakes, and have experienced Government Contract attorneys to assist in those and other aspects of federal, state, and local government contracting matters.
• Performance bond claims: Unfortunately, with the recent economic climate, contractor/principals are increasingly going out of business. We have helped our surety clients review indemnity agreements to preserve collateral and other assets assuring their later availability to the surety. We have also frequently assisted in the negotiation and preparation of contracts with project obligees to tender completion to other contractors, takeover the completion and enter into completion agreements with completion contractors, and negotiate other hybrid tripartite agreements to establish other more effective and less costly means of meeting bond obligations. Recently, we developed a series of takeover, completion and tripartite agreements regarding the completion of multiple federal, state and local government contracts of a principal that went out of business in North Carolina. We assisted our surety’s engineering consultant in the preparation of re-let documents, including completion contracts, and then negotiated and drafted a variety of completion agreements for the individual projects to match the obligee’s requirements and the determined means to finish the work expeditiously and economically. Similar engagement examples includes our working with a surety to evaluate and enforce a defaulted principal’s contract rights against several local government owners in Virginia, and obtain disputed contract balances to offset the surety’s ongoing losses on those and other projects.
• Payment bond claims: Similarly, contractors/principals are defaulting in increasing numbers with respect to lower tier obligations; and we are also seeing an increase in lower tier claims even when contractor/principal is solvent. We have helped our surety clients review these payment bond claims and develop strategies for defense or negotiation, and have prepared release and assignment documents in exchange for payments. Where matters could not be resolved, we have assisted in the development of defense strategies, prepared responsive pleadings, and litigated disputed claims. We regularly assist surety client in the investigation of varied lower tier bond claims against multiple principals unable to pay those of lower tier to them. For those with merit, we negotiated pre-litigation settlement of their claims, and for those with defenses, we prepared claim denials, and when litigation was nevertheless filed defended those claims in court.
• Probate bond claims: Lay persons with little experience who are appointed as the personal representative for an estate or a minor often fail to understand what is required of them. These individuals often fail to comply with their duties to properly manage and account for assets entrusted to them. We regularly assist surety clients with the defense of probate and estate bond claims respecting executors and administrators of estates. This often includes assisting with the preparation of the necessary inventories, accountings and other reports and locating and securing the assets of the estate or the defaulting principal. We have ongoing matters before courts and commissioners of accounts throughout Virginia and North Carolina to both defend claims against probate bond claims and to secure judgments against defaulted principals.
• Public official bond claims: Various jurisdictions require fidelity bonds for public officials, particularly for law enforcement officers. We have assisted our surety clients to defend various claims for dereliction of duties, such as claims by prisoners for prisoner abuse. One example includes our defense of abuse claims against a North Carolina sheriff by one of his prisoners, for which we developed the defense strategy and ultimately obtained dismissal of the bond claims.
Vandeventer Black’s Surety Practice Group includes licensed attorneys who have handled surety matters in Virginia, North Carolina, Maryland, the District of Columbia, and California, and we also have attorneys licensed in various other jurisdictions, including New York, West Virginia, Ohio, Pennsylvania, and Hawaii. For jurisdictions in which we are not licensed, we have coordinated defense through local counsel, and assisted in the determination of defense strategies, and oversight of local counsel actions. We have similarly coordinated defenses for principals of our sureties when they needed independent counsel to avoid “salvage” action conflicts, and avoiding default judgment against the principal which was necessary to preserve the surety’s rights and defenses.
We have been helping clients since 1883, and have developed long established relationships with judges and other court officers throughout Virginia and North Carolina in particular that are invaluable in defending our surety clients and helping avoiding defaults of their bonds.
While disputes are an unfortunate aspect of surety bonding, we focus on preventive law to help our clients evaluate risks, and avoid disputes, or for those risks and disputes that cannot be avoided we help identify them early to develop prompt, effective and cost-efficient solutions. For construction related bonds, our surety team members include veteran attorneys with construction field experience, and project costing, scheduling and management skills, and also include lawyers holding engineering degrees, a registered professional engineer and a registered architect. Our surety attorneys also include trained and certified mediators and arbitrators.