International Fidelity Insurance Company v. Americaribe-Moriarty JV
681 F. App'x 771
| 11th Cir. | 2017Background
- Americaribe (owner/contractor) subcontracted pool work to CPM; Fidelity issued a performance bond for CPM that expressly incorporated the subcontract.
- The subcontract required a three-day written notice before the contractor could take possession and hire others to complete work after subcontractor default (§12.2(a)).
- The bond contained a multi-step termination/notice scheme: owner must notify contractor and surety, declare default and notify surety, and agree to pay the balance; then the surety has options to complete the work (§§3–5) and the owner must give an additional seven-day notice before the surety is in default (§6).
- Americaribe sent a termination notice to CPM and Fidelity on September 21, 2015, but had already engaged Dillon Pools (proposal Sept. 16–17) and Dillon began on-site work by Sept. 23; Americaribe paid Dillon for late-September invoices.
- Fidelity denied the claim, asserting Americaribe breached the bond by commencing replacement work before giving Fidelity the opportunity to elect its remedies; district court granted Fidelity summary judgment and Americaribe appealed.
Issues
| Issue | Americaribe's Argument | Fidelity's Argument | Held |
|---|---|---|---|
| Whether the bond incorporates the subcontract’s notice/termination terms | Bond and subcontract together govern; Americaribe complied by notifying Fidelity of termination | Bond incorporates subcontract; incorporation makes subcontract notice terms binding on surety | Bond did incorporate the subcontract; incorporation governs notice requirements |
| Whether Americaribe complied with the subcontract’s three-day notice before hiring replacement | Americaribe’s notice on Sept. 21 was sufficient and did not impede Fidelity | Americaribe hired Dillon and allowed work/payments before the three-day/selection periods expired, breaching notice terms | Americaribe breached the three-day notice requirement by engaging Dillon and permitting work/payments before the period elapsed |
| Whether Americaribe deprived Fidelity of its election rights under §5 by immediately hiring Dillon | Americaribe: actions did not prevent Fidelity from electing §5 options; payments were largely for suppliers/permits | Fidelity: Americaribe’s hiring and payments thwarted Fidelity’s ability to choose among remedies | Court held Americaribe’s actions thwarted Fidelity’s election rights under §5, relieving Fidelity of liability |
| Whether Fidelity was relieved of liability on the bond due to Americaribe’s procedural breaches | Americaribe: Fidelity was in default for not acting with reasonable promptness under §5/§6 | Fidelity: Americaribe failed to give required notice and began replacement work, discharging surety | Court held Fidelity not liable because Americaribe failed to comply with notice provisions, stripping the surety of its bargained-for rights |
Key Cases Cited
- Lage v. Ocwen Loan Servicing LLC, 839 F.3d 1003 (11th Cir. 2016) (summary judgment reviewed de novo; view evidence for nonmovant)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment legal standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (materiality and genuineness standards for summary judgment)
- Nat’l Fire Ins. Co. of Hartford v. Fortune Const. Co., 320 F.3d 1260 (11th Cir. 2003) (doctrine of incorporation by reference imposes subcontract obligations on surety)
- Am. Home Assurance Co. v. Larkin Gen. Hosp., Ltd., 593 So. 2d 195 (Fla. 1992) (bonds are contracts and governed by contract law)
- OBS Co. v. Pace Const. Corp., 558 So. 2d 404 (Fla. 1990) (a writing that refers to another document incorporates that document into the contract)
- Dooley & Mack Constructors, Inc. v. Developers Sur. & Indem. Co., 972 So. 2d 893 (Fla. 3d DCA 2007) (incorporation applied to notice requirements in bonds and subcontracts)
- Ins. Co. of N. Am. v. Metro. Dade Cty., 705 So. 2d 33 (Fla. 3d DCA 1997) (failure to comply with bond notice provisions relieves surety of liability)