Recent Case Law: Contesting Discharge for Trust Fund Violations

By John V. Burch April 3, 2019 Articles

Indemnity Agreements typically contain a trust provision stating that contract funds received are trust funds. A recent bankruptcy case out of Florida analyzed whether that language was enough to create a trust, and if so, whether a violation of that trust might bar discharge of an individual indemnitor’s debts in bankruptcy. Read More


By John V. Burch and David A. Harris March 6, 2019 Articles

Many of the so-called hard and fast “rules” that we “know” to be true related to payment bond claims have exceptions, subtleties, and cases in which the rules simply do not apply. This year at the Southern Surety & Fidelity Claims Conference, John V. Burch and David A. Harris will bust several payment bond myths. In this newsletter, we will preview two of these myths.

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By Gregory R. Veal February 1, 2019 Articles

Sureties are not fiduciaries. This bedrock concept should be as solid as “suretyship is a tri-partite relationship” and “the surety’s duties can be no greater than its principal’s.” A fiduciary must elevate its beneficiary’s interests above anyone else’s, including its own. How can a surety be a fiduciary when it necessarily owes duties to principal and to obligee/claimants, whose interests clearly conflict? Often indemnitors will insist on defending, and even claiming, against sureties based on alleged breach of fiduciary duty. The theory crops up especially when a surety exercises its right, under the general indemnity agreement, to settle its principal’s affirmative claims. Efforts to apply fiduciary duties to sureties continue to fail almost everywhere, including – just nine days ago - the Louisiana federal court.  

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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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