368 F. Supp. 3d 350
D. Conn.2019Background
- Arch Insurance issued multiple surety bonds (including $47,050,000 performance and payment bonds for the Hartford minor‑league stadium) for projects principal by Centerplan/Center Earth; defendants (several related entities and the Landinos) executed General Indemnity Agreements (2010 and a revised January 2016 agreement) in Arch's favor.
- The 2016 Indemnity Agreement expressly allows Arch sole discretion to settle claims, treats Arch's vouchers as prima facie evidence, and entitles Arch to indemnification for disbursements made in good faith (including if made under the belief of liability).
- From 2015–2017 Arch received numerous payment and performance bond claims (including many on the Hartford Stadium Project), paid millions to resolve claims and to complete the project, and demanded indemnification and collateral; defendants refused.
- Arch sued (contractual indemnification, common‑law indemnification, collateral security, exoneration/quia timet, and financial disclosure). Defendants counterclaimed, alleging bad faith and other tort/statutory claims.
- Arch moved for summary judgment on all counts; Court considered whether (a) the indemnity contracts (particularly the 2016 agreement) required indemnification for Arch’s payments, (b) Arch acted in bad faith, (c) Arch was entitled to collateral/security relief, and (d) disclosure relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Contractual indemnification (Are Arch's payments recoverable under the Indemnity Agreements?) | Arch: the indemnity language (esp. 2016 agreement) unambiguously requires indemnification for losses and payments made in good faith; vouchers are prima facie evidence. | Defendants: the Bonds and project contracts (DBA, Multiple Obligee Rider) limit or negate Arch's liability so Arch cannot recover for voluntary payments. | Held: For Arch. The 2016 indemnity governs; it does not incorporate bond/DBA limits; Arch produced prima facie evidence of payments and good faith, so summary judgment on Count I granted. |
| Bad faith defense (Did Arch act in bad faith in settling/performing?) | Arch: conducted extensive investigation with consultant before payments; settlements and takeover were reasonable/expedient to mitigate loss. | Defendants: Arch ignored pay‑if‑paid defenses, failed adequate investigation, acted self‑interested in settling and later entering takeover. | Held: For Arch. Defendants failed to raise admissible evidence of improper motive or willful misconduct; self‑interest or disputed reasonableness alone insufficient to show bad faith. |
| Collateral security / specific performance (May Arch demand/post collateral under the agreements?) | Arch: indemnity provisions (2010 & 2016) permit demand for collateral when Surety in its sole discretion determines potential liability; specific performance appropriate because legal remedies inadequate. | Defendants: liability disputes and alleged bad faith defeat collateral demand. | Held: For Arch. Collateral clauses clear; collateral is interim relief and not contingent on established liability; specific performance ordered as to collateral/security and disclosure. |
| Financial disclosure (Does Arch get access to Indemnitors' financials?) | Arch: agreements grant Arch unrestricted access to indemnitors' financial records “at any and all times.” | Defendants: did not contest. | Held: For Arch. Summary judgment granted; defendants ordered to produce financial disclosures per Exhibit R. |
Key Cases Cited
- PSE Consulting, Inc. v. Frank Mercede & Sons, Inc., 267 Conn. 279 (Conn. 2004) (Connecticut law: contract interpretation principles; surety entitled to indemnity under indemnity agreement language and implied duty of good faith governs analysis).
- Gundle Lining Constr. Corp. v. Adams Cnty. Asphalt, Inc., 85 F.3d 201 (5th Cir. 1996) (summary judgment appropriate on enforcement of indemnity where surety made payments and principal failed to rebut good‑faith showing).
- Fidelity & Deposit Co. v. Bristol Steel, 722 F.2d 1160 (6th Cir. 1983) (surety entitled to reimbursement under express indemnity terms even absent actual principal liability).
- Transamerica Ins. Co. v. Bloomfield, 401 F.2d 357 (6th Cir. 1968) (upholding right of surety to compromise claims and treating vouchers as prima facie evidence; settlements not per se against public policy).
- American Motorists Ins. Co. v. United Furnace Co., Inc., 876 F.2d 293 (2d Cir. 1989) (collateral security enforcement and equitable relief appropriate where claims pending and surety faces potential exposure).