January 12, 2004

Connecticut Supreme Court Upholds Trial Court’s Finding That Surety Had Not Proven Indemnification and Had Breached Its Covenant of Good Faith and Fair Dealing

Connecticut Supreme Court

Mercede, a general contractor hired to construct an assisted living facility in Stamford, Connecticut, furnished the owner of the project a labor and materials payment bond. After the steel subcontractor filed for bankruptcy, PSE, the steel erection sub-subcontractor, filed suit against Mercede and the surety for the balance of the original contract plus reimbursement for extras. The surety ultimately settled with PSE even though Mercede disputed PSE’s claims for extra work and Mercede had not been paid by the owner for the balance of contract sums owed PSE. Mercede refused to pay the surety under the indemnity agreement. At trial, the surety had not proven its claim for indemnification and this appeal followed.

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