Surety Bonds Are A One-Way Street, Promises Are Not Reciprocal

Monday, December 03, 2018 9:30 am
December 2018 - Volume 40 Number 12


Hunt Constr. Grp., Inc. v. Cobb Mech. Contrs., Inc., 2018 U.S. Dist. W.D. Tex. Lexis 179564 (October 18, 2018)

A surety attempted to sue the beneficiary of a construction bond it issued. But the court ruled that that bond promises are not reciprocal. In other words, the beneficiary owed no obligation to the surety under the bond.

General contractor Hunt Construction Group, Inc. (Hunt) entered into a mechanical subcontract with Cobb Mechanical Contractors (Cobb) for work on a Fairmont Austin Hotel construction project in Texas. In July 2016, Hunt issued a series of default notices to Cobb and subsequently terminated the subcontract for the project’s podium work on November 18, 2016.

Hunt immediately notified Liberty Mutual Ins. Co. (Liberty), the bond surety for Cobb’s project performance, of the termination. Hunt informed Liberty that it intended to hire another sub to perform the remainder of Cobb’s obligations and correct the defective work on the podium. On January 31, 2017, after several months of “investigation and review of Hunt’s claim,” Liberty formally denied Hunt’s claim under the performance bond and informed Hunt that the bo[..]