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Westfield, NJ
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Fidelity & Surety
General Description: The onset of a fidelity or surety claim is a bad time to retain counsel at the low end of the learning curve. Industry wide, these claims are well known to raise the most specialized and complicated of issues and challenges—Are there alternatives to the typical project takeover, where the surety reserves rights, but basically rolls over and plays dead? Does the criminal guilty plea of a principal inevitably doom any viable defenses to a fidelity claim? Are there worthwhile third party claims against others?—These are questions our fidelity and surety lawyers grapple with every day. The answers are seldom obvious. Lindabury, McCormick, Estabrook & Cooper fields a team of eight lawyers, who collectively have decades of experience negotiating, settling and litigating fidelity and surety claims. In any given year, our combined portfolio of claims reaches well into eight figures. Our lawyers are routinely retained for local and regional fidelity and surety matters of every level. We also are increasingly being asked to handle matters on a national level. We have listed some representative examples of cases for which we have been retained below. Our attorneys also regularly draw upon their knowledge and experience to lecture to national audiences on fidelity and surety matters of interest to the industry, including appearances before the Surety Claims Institute, National Bond Claims Association, Defense Research Institute and the American Bar Association. Their articles and papers have been published and cited over the years, including most recently, the Journal of the International Association Defense Counsel. Our attorneys are sensitive to the demanding economic climate in which our clients do business. A fidelity and surety practice is neither form book nor assembly line. Claims almost always have a high cost potential if they are not managed effectively. We strive to control costs from the onset of a matter by identifying likely problem areas and then working with the client to develop a plan to meet them. Finally, our broad-based practice positions us as a firm of breadth as well as depth. In our experience, the responsible handling of fidelity and surety claims often entails an interdisciplinary approach. In fidelity law, issues in finance, banking and accountancy almost always arise. In surety work, environmental concerns and bankruptcy and tax issues are commonplace, and the fundamentals of building construction are critical. Our attorneys regularly call upon other attorneys in the firm to provide the necessary expertise in these sub-specialties. With these additional resources, we know we can provide our clients with comprehensive representation and the best chance for a successful outcome.
Representative Fidelity Cases
Title Company Embezzlement Successful prosecution of matter of first impression before State Supreme Court. Established as a matter of New Jersey law the definition of an “employee” under standard crime policy. Claim had been brought by major creditor of bankrupt insured corporation after principal/proprietor had absconded with trust funds. Failed Loan Portfolio Claim in connection with bad loans made by allegedly dishonest senior lending officer. Principal, borrower and others had pled guilty to federal bank crimes. Financial institution had failed and was taken over by regulators. Matter settled one day into trial for a small fraction of the insurer’s exposure. Criminal Bank President Bank president and senior lending officer had been caught allegedly deceiving Board of Directors and ultimately pled guilty to federal bank crimes. Discovery in matter revealed significant inconsistencies in claim stance taken by bank management. Fractional settlement resolved matter without going to trial. Inventory Fraud Intricate scheme devised by Director of Purchasing to create bogus paper trail for subway train supplies and components that supposedly never existed. Unfortunately, before he could be questioned to any material degree, the principal committed suicide. The matter was dismissed before trial. Securities Fraud Bank was sued for approximately $500 million in connection with allegedly false and misleading disclosures made in public filings with SEC. Senior bank management was targeted as wrongdoers, and recompense was sought, in part, under financial institution bond in connection with loans by overseas subsidiaries to third world countries. Ultimately, the bank was convinced not to pursue the claim. Ponzi Scheme Representation of one of the State’s largest financial institutions in connection with check cashing scheme by stockbroker that cheated customers, collectively, out of approximately $10 million. Although more than thirty independent lawsuits were brought, some of which were tried, payment of claims never exceeded the bank’s deductible. Forgery / Counterfeit Successful litigation of the nation’s foremost case on establishing the outer parameters of forgery and counterfeit coverage, particularly as these relate to the concept of proximate causation.
Representative Surety Cases
Road Improvement Contract Successfully resisted Court challenge to statutory prematurity defense to a payment bond claim. The claimant advanced novel and as yet untested ideas under New Jersey statutory law. The Court granted summary judgment to the surety. College Dormitory Renovations Representation of surety in connection with a $30,000,000 claim arising out of renovation of dormitory housing at a state university in New England. Matter is ongoing. State Prison Recovery of six-figure settlement from design professionals arising out of erroneous drawing details in construction of high security detention facility. This occurred after replacement of prior surety counsel during whose tenure the design professionals took a “no pay” stance. Structural Steel Failure Mid-six figure settlement with New York State Agency following takeover by surety of general construction project at facility for the criminally insane. Although the principal had been terminated for cause after essentially abandoning the project, further research disclosed fundamentally unconstructable project because of flawed structural steel drawings. Process Plant Defense of $20 million cost overrun claim in connection with construction of sludge dewatering plant. An intractable claimant pushed the matter into 85 days of hearings, at the end of which an award was made for almost exactly the very amount that the client had offered in settlement three years previously. Condominium Project Mid-eight figure claim by developer of avant garde condominium project on Hudson River pier. Principal was North Carolina based steel fabricator who claimed that tardy deliveries were the result of inadequate or conflicting design by structural subconsultants. The litigation also required extensive analysis of market forces and their relationship to the project’s debacle. The matter settled after discovery for approximately ten percent of the surety’s exposure. Asbestos Prosecution of claim in arbitration involving asbestos remediation project. At outset, potential sources of recovery were defunct. Through negotiations, parties were added with $6.8 million in potential insurance coverage. Casinos / Faulty Windows Two matters involving the Trump organizations in Atlantic City. In one, a combination of poor design and shoddy installation brought about a window wall system with widespread problems. The owner demanded that all windows be replaced, but ultimately settled its eight figure claim for a small fraction of the whole. Indemnity Resolved a six-figure indemnification claim seeking recovery of the costs the surety incurred following its principal’s default termination. Federal Project (DVA) Representing surety in connection with a dispute regarding completion obligation. Project is ongoing. School Construction Representing surety in the takeover and completion of two school projects involving $3.5 million of construction. Negotiated seven figure indemnification claim thereby avoiding a loss to the surety. Project is ongoing. Penal Sum Issues Defending surety in connection with a penal sum claim following a disputed default termination. The owner’s damages are in excess of two times the bond’s penal sum. Litigation is ongoing. Union Claims Negotiating a seven figure indemnification claim for the surety. Also defending surety against a claim in excess of $300,000 for union benefits. Litigation is ongoing. Takeover / Changes Successfully negotiated a takeover agreement with the New York City School Construction Authority. After the surety completed the work, we negotiated a six-figure recovery for the surety on claims of additional work thereby avoiding litigation. Public Housing Counseled the surety in its takeover and completion of a $3.5 million public housing rehabilitation project for the New York City Housing Authority. This resolution avoided litigation. |
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Related Practices: Alternative Dispute Resolution Attorneys: · Donohue, Barry J. · Frisch, Edward J. · Levine, Eric B. · Russell, Kevin J. · Vitali, Greg K. 2006 Fidelity & Surety Party
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