By Gregory R. Veal November 30, 2018 Articles

If you deal with computer crime coverages, you may have heard of the Medidata case. In that case a federal judge in the Southern District of New York, affirmed by the Second Circuit Court of Appeals, decided that a computer fraud policy covered loss involving a social engineering scheme. After Medidata some may ask whether the distinction between computer fraud and social engineering coverages has been completely eliminated. The good news is that Medidata should not have wide influence or application. 

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The Impact on Sureties of Rising Construction Employment

By David A. Harris October 31, 2018 Articles

Recent employment data released by The Associated General Contractors of America shows that construction employment has continued to grow. Overall construction employment in the U.S. was up 4.3% in the last year. Pay has also increased with average construction salaries 10% higher than average for private-sector employees in the U.S. How does rising construction employment impact sureties? Read More

Protecting Indemnity Rights in Arbitration

By David A. Harris September 25, 2018 Articles

Through choice or compulsion, sureties often end up in arbitration proceedings involving a claimant and the principal. The principal and surety’s joint participation in the arbitration requires precautions to prevent the loss of indemnity rights.

Arbitration will invariably involve some document setting forth the scope and breadth of the proceedings. Often expressed in a consent order or arbitration agreement, default language used between two contractors might say that the parties agree to submit to arbitration “any and all claims or disputes they have against one another” related to the project or contract at issue. 

Broad language defining the scope of the arbitration could later haunt the surety when it seeks to enforce its indemnity rights and recoup attorneys’ fees and costs involved in the arbitration or even recover losses and expenses incurred on other bonds.

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Tax Reform and Divorce

By Marilyn Kapaun and Courtney Bain September 7, 2018 Articles

Whether you are heading down the aisle or on the road to divorce, the new tax law could affect you in a dramatic way.

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By Jack Burch July 20, 2018 Articles

Every once in a while a bond may be issued which does not precisely identify the obligee by its formal name. For example, it may identify the obligee as Big Contractor Company, when that is a trade name and the correct name of the obligee is ABC, Inc., d/b/a/ Big Contractor Company. Sometimes a bond may state that the principal is Electrical Contracting when in fact the correct name is Electrical Contracting of Georgia, Inc.

 More rare, but once in a blue moon, the surety may not be precisely identified. For example, it may recite the name as Surety Casualty, when in fact it is really Surety Casualty Insurance Company of Massachusetts. Since bonds are subject to the Statute of Frauds, the question then becomes whether parole evidence can be introduced to correct a misnomer.

 In the recent case Colonial Oil Indus., Inc. v. Lynchar, Inc., S17G1788, 2018 WL 3014466 (Ga. June 18, 2018), the Georgia Supreme Court held that testimony could be used to fix a misnomer caused by the use of a trade name in a guaranty, and that the Statute of Frauds did not bar a witness from testifying as to the identity of the real parties. Since there is no distinction in Georgia between suretyship and guaranty, under O.C.G.A. § 10-7-1, this holding applies to bonds.

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War Story: Bank Shakedown?

By Greg Veal June 14, 2018 Articles

Have you ever battled a lender over priority to contract funds? [Sure you have.] And have you ever taken collateral or collected indemnity without knowing the source of the funds? [Same answer.] But have you ever been sued by a bank for taking collateral or collecting indemnity? When faced with demands for collateral and indemnity, indemnitors may voluntarily grant the surety a security interest in properties previously conveyed to family or controlled entities without consideration. Indemnitors may even post cash collateral or make payments against their liability under the GAI. A disappointed lender, learning of those transactions, could then sue the surety—it has happened.

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