Practice Areas

Practice Area Details

Business And Commercial Litigation

Fidelity & Surety

The area of fidelity and surety bond litigation requires a high level of skill, experience, and discretion. Although often discussed in the same context as insurance, litigation arising from bonds requires unique knowledge and experience in a different area of the law. Our partners heading up this department manage teams who have this unique knowledge and are dedicated to this specialized and demanding category of work.

Management of fidelity and surety bond litigation creates special problems in California because the matters can involve extra-contractual and bad faith allegations leading to exposures far in excess of the bond amount. When necessary, we combine the unique knowledge and experience of this group with lawyers from our bad faith/extra-contractual practice group to minimize the company’s exposure.

On the surety side, we have experience on subdivision performance, payment and maintenance bonds, Miller Act payment and performance bonds, financial guarantee bonds, notary and oil exploration bonds, and all aspects of construction bonds. In recent litigation, a hospital sued the principal on a bond for allegedly failing to provide and properly install the mechanical parts of a cogeneration plant designed to provide electricity to the hospital and generate excess electricity for sale. The suit claimed that the bonding company had acted in bad faith. We successfully defended the surety company against these allegations and settled the case under the normal bond provisions.

Our fidelity bond experience includes investigation and litigation arising from inventory theft from high tech companies and thefts from financial institutions through sophisticated fraudulent loan schemes involving loan officers, appraisers, and borrowers with ties to organized crime. In one action we represented the issuer of a fidelity bond who refused to pay a $6.5 Million claim alleging an elaborate scheme involving fraudulent equipment lease transactions. This matter involved both actions on the bond and allegations of bad faith. The case was originally filed in state superior court, but we were able to negotiate a more favorable settlement following removal to federal court.

Bond litigation involves the potential for subrogation against the principal or other wrongdoers once payment is made. We have handled numerous subrogation and collection actions following payment under bonds including actions against banks and other financial institutions for honoring checks and other negotiable instruments bearing forged signatures, and against principals and subcontractors arising out of payment under construction surety bonds.