Construction Payment and Performance Bond Bad Faith Litigation: Bringing or Defending Claims Amid Differing State Standards

While fundamental differences between suretyship and insurance may support an argument against bad faith tort claims against construction payment and performance bond sureties, not all courts are receptive to this line of reasoning and the law is by no means certain and settled. Some states allow extra-contractual claims under common law or statutory law (or both) while others do not.

There is little case law regarding bad faith claims for performance bonds under the Miller Act or state counterparts, although some case law in the context of payment bonds suggests that these acts do not provide exclusive remedies, so the door is open to argue in favor of bad faith claims against sureties.

Whether representing construction project owners or sureties, counsel must understand the theories and arguments courts have accepted, or rejected, in assessing bad faith claims against bond sureties, and what conduct courts have considered in supporting a finding of bad faith.

Listen as our authoritative panel of construction and insurance counsel discusses bad faith liability theories applicable to construction performance and payment bond sureties, and what theories and arguments have been accepted and rejected by courts on both sides of the issue. The panel will provide perspectives of both construction owners bringing bad faith claims and sureties defending these claims.

1. Evolution of bad faith claims against construction payment and performance bond sureties
2. Fundamental differences between insurance and suretyship
3. Statutory vs. common law bad faith claims against sureties
4. Bad faith claims and the Miller Act
5. Jurisdictions finding bad faith claims applicable to sureties
6. Jurisdictions finding bad faith claims inapplicable to sureties

The panel will review these and other key issues:

• What arguments have been accepted by courts finding that bad faith claims may be brought against construction payment and performance bond sureties?
• What arguments have been rejected by courts regarding bad faith claims against construction payment and performance bond sureties?
• What case law exists regarding bad faith claims for performance bonds under the Miller Act or state counterparts?