Fidelity & Surety

Keith Flanagan, Partner

Keith Flanagan, Partner

We appreciate the opportunity to introduce to you the Fidelity and Surety Practice Group of Clausen Miller.  We are one of the pre-eminent fidelity and surety firms in the U.S.  We hope the accompanying materials help acquaint you with our practice.  We invite you to contact any of our attorneys if you have any questions about the firm or if we can assist you professionally.

SUMMARY OF PRACTICE
BIOGRAPHIES AND PUBLICATIONS
NATIONAL FIDELITY AND SURETY ORGANIZATIONS
LEGAL SERVICES
RECENT FIDELITY ASSIGNMENTS
RECENT SURETY ASSIGNMENTS

 

A. SUMMARY OF PRACTICE

For more than half a century, Clausen Miller attorneys have investigated, negotiated and litigated claims under all types of surety bonds, fidelity and financial institution bonds and crime coverages throughout the U.S. and internationally.  We handle all phases of fidelity and surety disputes.

  • We represent carriers in connection with claims of employee dishonesty and other coverages under financial institution bonds, fidelity bonds, Mortgage Broker/Banker Bonds, and crime policies.  We provide legal analysis of coverage, assist in the investigation of claimed losses, negotiate settlement of claims and litigate or arbitrate claims.
  • We represent U.S. and London underwriters, as coverage and monitoring counsel, in connection with claims under director and officer liability and other professional liability policies.   
  • We represent sureties in connection with claims of obligees under performance bonds; claims by subcontractors and material suppliers under payment bonds and in related mechanics lien litigation; and completion problems of troubled contractors (financing, takeovers and relets, protective bids, buy-backs and other alternatives), including negotiations with architects, engineers, financing banks, co-sureties and public and private owners.
  • We also represent sureties in connection with the investigation and litigation of financial guarantee bonds and claims under all types of miscellaneous bonds, including probate bonds, customs bonds, public officials bonds and appeal bonds.  We counsel carriers in the complexities of limited partnerships and related guarantees and indemnification and security agreements, as well as liquidation of partnerships.
  • We represent fidelity and surety clients in salvage matters throughout the U.S. We pursue salvage claims against banks under Articles 3 and 4 of the Uniform Commercial Code, and against accountants and other professionals who may have contributed to fidelity losses.  We also pursue salvage claims against contractual indemnitors and bond principals, and against project owners, architects, engineers, contractors and others who may have contributed to project losses or delay.
  • We also represent reinsurance companies in many fidelity and surety matters, including liquidation of primary and reinsuring carriers.

 

B. BIOGRAPHIES AND PUBLICATIONS

Widely published, Clausen Miller attorneys have shaped the development of the law for the fidelity and surety defense community.  A list of their authoritative publications is attached.  If you would like copies of any of the papers we would be pleased to provide them.

 

C. NATIONAL FIDELITY AND SURETY ORGANIZATIONS

Our attorneys participate actively in national fidelity and surety organizations, such as the Fidelity and Surety Committees of the American Bar Association (Vice-Chair) and the International Association of  Defense Counsel, the Surety Claims Institute (Program Chair) and the Fidelity Law Association (Advisor).  We also lecture at and write for fidelity and surety industry educational programs and national institutes throughout the U.S., including the National Institute on Fidelity Bonds (Editor/Program Chair) and the National Institute on Financial Institution Bonds (Faculty).

 

D. LEGAL SERVICES

We advise and counsel on all fidelity, financial institution, surety, D&O and professional liability matters, from the first notice of default or claim to final resolution.

Investigation: We conduct in-depth field investigations to assess facts and documentation relevant to complex claims.  Our familiarity and experience with financial, design and construction professionals and other experts help insurers and sureties evaluate the facts and discharge their obligations economically and efficiently.

Coverage Analysis and Negotiation: Our attorneys are intimately familiar with developments in fidelity and surety law and applicable policy and bond forms, and our analysis of legal issues can help evaluate options and risks and negotiate prompt and reasonable settlements, often without the need for expensive litigation.  Sample opinion and denial letters, representative of some our professional services, are available).

Litigation, Arbitration and Alternative Dispute Resolution: When settlement is not possible or warranted, we are able efficiently and thoroughly to litigate or arbitrate the most complex and document intensive claims.  Combining our thorough legal analysis with an aggressive litigation strategy, we can often resolve disputed claims cost effectively by dispositive motion.

 

E. RECENT FIDELITY ASSIGNMENTS

We have represented major international fidelity insurers in connection with claims by financial institutions involving fraudulent repurchase and reverse repurchase agreements arising from the failure of major secondary government securities dealers; fraudulent collateralized mortgage obligations; forged negotiable instruments and fraudulent securities; fraudulent arbitrage and securities trading; and losses resulting from the input of fraudulent computer data and from theft of confidential information.  Recent cases have involved:

  • Representation of a domestic insurer in connection with a claim by a mortgage broker under a  Form 15 Mortgage Broker Bond.  The insured sought coverage for liability arising from fraudulent loan packages compiled by brokers and relied upon by lenders.  We obtained dismissal of the complaint by the state court in Illinois and successfully defended the appeal.  The decision by the Illinois Appellate Court is one of the leading cases relied upon by the fidelity industry relating to coverage for indirect losses.  RBC Mtg. Co. v. National Union, 812 N.E.2d 728 (Ill. App. 2004).
  • Representation of 13 international fidelity carriers in a $52 million fidelity claim, involving parallel proceedings in England and the U.S.  Working closely with English counsel and employing an aggressive litigation strategy, we resolved both claims by dispositive motion, concluding this large claim without any payment by the insurers.  New Hampshire Ins. Co. v. Phillips Elec. [1999] 1 Lloyd’s Rep. 66; [1997] 1 Lloyd’s Rep. 58; and 728 N.E.2d 656 (Ill.App. 2000); 692 N.E.2d 1268 (Ill.App. 1998).
  • Representation of fidelity insurer in a $5 million forgery claim arising from a lending fraud perpetrated by an insurance broker.  Following denial of coverage, litigation ensued.  We successfully moved to dismiss the claim (which was affirmed on appeal), resolving the claim without discovery or extensive litigation.  First Ins. Corp. v. Federal Ins. Co., 284 F.3d 799 (7th Cir. 2002).
  • Representation of an international fidelity insurer in a $40 million fidelity claim arising from a health insurance fraud perpetrated on the federal government by four employees of a regional health insurance company. Our comprehensive research and analysis of the coverage issues enabled the insurer to settle the claim, before litigation, for $65,000.

 

F. RECENT SURETY ASSIGNMENTS

Our representation of contract sureties has likewise involved a variety of claims arising from the default of contractors on major construction projects.  Recent cases have involved:

  • An insolvent general contractor, with foundation and pre-cast concrete subsidiaries, failed to complete 23 projects in 6 states, leaving more than $200 million of outstanding work.  Clausen Miller arranged for completion through a combination of buy-outs, relets and financing of the contractor and successfully pursued claims against owners on projects around the country.
  • The largest commercial contractor in Indiana defaulted on more than a dozen bonded projects.  We assisted the surety in completing the projects and paying hundreds of material suppliers and subcontractors.  We litigated claims against a bankruptcy trustee concerning payments made by the debtor prior to bankruptcy and concerning the surety’s right to receive contract funds held by project owners.
  • The owner of a professional baseball stadium asserted that defects in the retractable roof have necessitated redesign and replacement of components of the roof.  We investigated and defended the warranty claims under a subcontract performance bond.