Insurance company denies payment under performance bond: Breach of contract: Bad faith: Settlement

Law Reporter, Dec 2000

Perini Bldg. Co. v. Insurance Co. of the W., Nev., Clark County 8th Jud. Dist. Ct., No. A385586, Mar. 29,2000.

The Insurance Company of the West (ICW) provided Penni Building Company with performance and payment bonds worth $6 million on behalf of a millwork company for the null and case work subcontract on a building project. About a month before the project's completion, the millwork company defaulted on its subcontract. Perini requested that ICW complete the mill and case work subcontract under the performance bond. ICW investigated the claim, but refused to act on it. Perini subsequently hired another company to complete the subcontract before the deadline. The cost to complete the work was $2.5 million above the remaining contract balance.

After completion of the project, Perini submitted a claim to ICW under the performance bond demanding the cost of completion. ICW denied the claim based on the 41 percent disparity between the first company's bid and the next lowest bid. ICW also claimed that there was overpayment on the subcontract by Perini. Additionally, ICW demanded the amount it paid under the payment bond to the first millwork company's subcontractors and material suppliers.

Perini sued ICW, alleging breach of contract and surety bad faith. Defendant counterclaimed for damages for the amount paid under the payment bond.

The parties settled at mediation for $4 million.

Plaintiff's expert was Hugh E. Reynolds Jr., coverage/bad faith standards, Indianapolis, Ind.

Defendant's experts in surety bond claims were Mike Tomeo and Tom Tomeo, both of Irvine, Cal.

Plaintiffs Counsel

*Robert D. Martin, Las Vegas, Nev. *Noah G. Allison, Las Vegas, Nev. David Lipsky, Newport Beach, Cal.

Documents in this case are available through the Court Documents section in the back of this issue, courtesy of Mr. Allison.