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Who Decides Arbitrability: The Court or The Arbitrator?

By John V. Burch & David A. Harris June 7, 2019 Articles

When parties to a construction contract agree to arbitrate and the surety’s bond incorporates that contract by reference, does a court or does the arbitrator decide whether the surety must join in arbitration? Some very recent cases have important implications for sureties facing this question, and it turns out that who decides the issue may turn on how the question is framed. Read More

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

PAYMENT BOND MYTHBUSTERS

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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SURETIES ARE NOT FIDUCIARIES

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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