Contractor Loses Bad Faith Argument Against Surety

The Sixth Circuit Court of Appeals recently affirmed that a surety did not act in bad faith when it settled the claim of its principal contractor against the State of Michigan related to disputes on a prison construction project. Great American Ins. Co. v E.L. Bailey & Co., et. al. (November 2016).

In this case, the State hired E.L. Bailey & Company to construct a kitchen in a prison in Ypsilanti. Great American Insurance Company (GAIC) provided performance and payment bonds ensuring Bailey’s performance and payment to subcontractors. In turn, Bailey agreed to indemnify GAIC for payments or expenses GAIC incurred under the bonds and to post sufficient collateral to protect GAIC from claims. The indemnity agreement between Bailey and GAIC also gave GAIC the right to settle on Bailey’s behalf any claim concerning the prison contract.

Disputes arose on the project and Bailey never finished the work. The State and GAIC agreed to have another contractor complete the project. The State withheld payment to Bailey asserting liquidated damages (“LDs”) for Bailey’s failure to timely perform. Bailey disputed the LDs, blaming delays on the State and its architect. The parties sued each other in the Michigan Court of Claims (Lawsuit #1). On the eve of facilitation, GAIC informed Bailey that it had settled Bailey’s claims against the State, with the State agreeing to pay GAIC $358,000 as final payment under the construction contract.

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An ADC Construction Classic – The Timeless Gingerbread House

You never know what might spark a student’s interest in construction. Such was the case on December 21, 2016, when 10th grade students in the Academy of Design and Construction (ADC) at Grand Rapids Public Schools’ Innovation Central High School enthusiastically embraced their studies in the classic holiday short course favorite – gingerbread house construction. Aileen Leipprandt, an ADC mentor, offers the following account of the students’ successful project.

After spending approximately two minutes in a design charrette guided by Ashley Dunneback (Tower Pinkster), the team broke ground. The first order of business was assembly and installation of the pre-fabricated wall panels (graham crackers). Field fabrication of the panels (snapping the crackers into proper dimensions) proceeded without incident largely due to the pre-scored panels. Attempts to customize panel size by sawing with hand tools (plastic knives) was only marginally successful due to breakage and quickly abandoned. Consistency of the principal fastener (icing) played a crucial role in affixing the panels to the structure (ok, we admit that a shoe box provided well-needed structural support).

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