INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
General contractor fails to prove any harms
It looks like construction contracts can be difficult to reach completion. That can be easy to understand, since large projects often involve complex tasks and are subject to aggressive deadlines. In this case, rather than insurance, construction bonds were involved.
The Western Area Power Admin-istration (WAPA) required a power substation in a part of South Dakota. It hired a company, Isolux, to build it. Note: A substation is part of an electrical grid that helps modify and distribute electricity received from a power plant.
Isolux secured both a performance bond and a payment bond for the project. Both were issued by Liberty Mutual Insurance Company. These bonds were to assure that the contractor would, one, complete the project and, two, pay what was owed to subcontractors employed by the project.
Isolux reached out to E&I Global Energy Services (E&I Global) and E&C Global, LLC (E&C Global), both operated by a single owner (and referred to hereinafter jointly as “the Global companies”) asking that they join the project as a subcontractor. Shortly after coming aboard the substation project, the Global companies’ owner visited the site. After examining the work and plans available at the time, he was unsure if the project was viable.
Months later, WAPA terminated its contract with Isolux, as it decided insufficient progress had been made on the substation construction. That act resulted in Liberty executing its performance bond.
The Global companies, a WAPA representative, and a new contracting firm hired by Liberty as an investigator were all involved in assessing the project and deciding on a new lead contractor.
Various discussions and exchanges of existing project documents and plans occurred among the parties. In the end, the Global companies’ owner made a submission to complete the substation. Later, a completion contract was executed showing E&C Global as the contractor and E&I Global as the subcontractor.
The contract included an assignment clause that a valid assignment could only occur with the written consent of the sureties and WAPA. It turned out that E&I Global had to take over as lead contractor because E&C Global was unable to secure a bond that was needed under the completion contract.
WAPA later found that the Global companies were no more effective than the original general contractor. Determining that the project would not be completed within the time it required, WAPA terminated E&I Global. The Global companies sued Liberty under five separate grounds: breach of completion contract, breach of good faith and fair dealing, unjust enrichment, fraud and deceit and negligent misrepresentation.
After a district court ruled on all five counts in favor of Liberty, the plaintiffs responded by appealing the following trial court orders: denial of jury trial, exclusion of an expert report, rejection of their contract breach claim, and rejections of the fraud/deceit, negligence and unjust enrichment claims.
The higher court made fairly quick work of the plaintiffs’ complaints. With regard to:
Denial of jury trial, the court found that the plaintiffs merely did not request a jury trial on time and, further, failed to present a valid explanation of why they were late. The court also did not see how a bench trial was prejudicial.
Exclusion of an expert report, the plaintiffs challenged the trial court’s refusal to allow expert testimony of economic losses suffered by the Global companies. The high court reviewed the lower court action. It agreed that the plaintiffs could have submitted the expert’s information at the time it submitted other testimony. It also agreed that allowing a late submission would have delayed the trial and created extra time and expense for the defendant who would have to examine that information.
Rejection of contract breach claim, while E&I Global did have evidence that it suffered economic loss, it could not be presented as the assignment of rights from E&C Global to E&I Global was done without the consent of the sureties and Liberty.
Rejections of the fraud/deceit, negligence claims, technically, a WAPA representative failed to hand over some project planning documents to the Global companies. However, the completion agreement was signed with the Global companies’ knowledge that information was missing. Further, there was no evidence that the WAPA representative intended deception and the Global companies did not rely on any missing information.
Unjust enrichment claim, both the lower and high courts agreed that the opportunity for unjust enrichment only exists when a valid, enforceable contract is unavailable. Since a legitimate contract was always in existence among the parties, the argument was moot.
In light of the above, the higher court ruled in favor of the defendants on all counts, affirming the lower court rulings.
E&I Global Energy Services, Inc. and E&C Global, LLC v. Liberty Mutual Insurance Company—US Court of Appeals, Eighth Circuit—No. 23-3739—April 4, 2025.
