Bond Issuer Lacks Authority to Release Claims Related to Construction
Eaton Elec., Inc. v. Dormitory Auth. of New York, 852 N.Y.S.2d 363 (N.Y. App. Div. 2008)
In this case, plaintiff contracted with Dormitory Authority of New York to perform electrical work in the renovation of a library. Plaintiff experienced delays and financial problems, eventually forcing it to assign its payment interest in the construction contract to AXA Global Risks U.S. Insurance Company in exchange for financial assistance. Later, in return for payment from Dormitory Authority, AXA executed a release to discharge Dormitory Authority from any claims of liability in relation to the underlying construction project. That release later became problematic when plaintiff sought an additional $12 million from Dormitory Authority as reimbursement for unanticipated and unforeseen additional costs incurred on the project. Dormitory Authority moved for summary judgment, arguing that AXA had released it from any such liability. The Supreme Court denied Dormitory Authority’s motion, reasoning that AXA lacked authority to release any such claims. Read More