Archive: January 15, 2008

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Court Rules Surety had Right to Settle Principal’s Claims Against Owner, Grants Motion for Summary Judgment

Court Rules Surety had Right to Settle Principal’s Claims Against Owner, Grants Motion for Summary Judgment

Liberty Mutual Ins. Co. v. Aventura Eng’g & Constr. Corp., 534 F. Supp. 2d. 1290 (S.D. Fla. Jan. 8, 2008)

The U.S. District Court for the Southern District of Florida has interpreted Florida law as allowing a surety to settle not only an owner’s claims on a performance bond, but also the principal’s claims against the owner.  In Aventura Eng’g, a surety completed construction of a project pursuant to an owner’s demand against a performance bond.  The principal, a general contractor, had allegedly defaulted on its contract with the owner, and thereafter refused the surety’s demands for indemnification.  The surety eventually executed a settlement agreement with the owner, whereby the surety exercised its power of attorney to execute a release of all claims that the contractor had against the owner growing out of the bonded contract. 

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