Surety Bond Quarterly - Summer 2015 - 27

Feature

CLASS ACT

Surety Team's Cooperative Efforts Enable School to Open on Time
WHEN A SUBCONTRACTOR is unable
to complete a construction project,
the relationship between the sub's
bonding company and the job's
general contractor can start out
strained and go downhill from there.
In some cases their disagreements
develop into a battle that ends up in
prolonged litigation.
But there are exceptional projects when all of the interested parties pull together to turn a potential
disaster into an unqualified success. During the construction of the
new Gaithersburg High School in
Maryland, the active role played by
the agency, Insurance Associates,
Inc., and the surety, The Hartford,
facilitated a speedy resolution of a
subcontractor default.
Warning signs
HESS Construction began building
the 420,000-square-foot Gaithersburg
High School in the summer of 2011,
with completion required by the first
day of school in August 2013. The
mechanical subcontractor was C&H
Mechanical. Although construction
manager HESS had some reservations about C&H, it was obliged to
accept low bidder C&H because
C&H was pre-approved by the client,
Montgomery County Public Schools.
Insurance Associates had a double
interest in the project. It was the bonding agent for HESS, and, because it
had acquired the agency that originally wrote the surety bond through
The Hartford, for C&H Mechanical
as well.

The first indication of trouble
came with C&H's inability to maintain adequate manpower on the job
to remain on schedule. In the fall of
2012, Insurance Associates learned
that suppliers hadn't received payment from C&H for previous equipment deliveries to the job site and
that the vendors were refusing
to ship anything more until they
were paid.
"That brought everything to a
head," said Stephen A. Spencer,
President of Insurance Associates,
which is based in Rockville, Maryland.
"C&H came to us, trying to tell us that
they were fine, but we knew things
were not going well." After a meeting
with C&H, HESS and Montgomery
County Public Schools, Insurance
Associates advised the mechanical
contractor to contact The Hartford.
"Because of our relationship with
HESS, we wanted to make sure that
things went as smoothly as possible,"
Spencer continued. "We asked The
Hartford to jump on this very quickly.
Many times in these processes there
are a lot of letters back and forth, and
it takes a while. But in this case the
school had to be open at a certain
time, so we facilitated meetings with
C&H, HESS, Montgomery County
Schools and The Hartford."
Fast response
The Hartford had already been
keeping an eye on C&H's finances.
"Prior to C&H reaching out to us in
early November 2012, our underwriting office, concerned about the

Steve Spencer, left, and Aldo
Pasquariello of the NASBP Member firm
Insurance Associates.

company's financials, had required
that the project be put into an escrow
account process," said Gary Judd,
Director of Claim Management. The
money HESS paid to C&H went into
the escrow, but it soon became apparent that the available funds would not
be enough to settle the past-due bills
and maintain payroll.
The situation was unusual, however, because C&H, at the urging of
Insurance Associates, didn't wait for
vendors or HESS to file a claim before
contacting The Hartford.
"Typically, when a claim comes
from a vendor, there's a lot of

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27


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Table of Contents for the Digital Edition of Surety Bond Quarterly - Summer 2015

NASBP Upcoming Meetings & Events
2015-2016 NASBP Executive Committee
From the CEO - There is Poetry in Surety Claims, Surely
Practical Insights: What You Need to Know - Hiding in Plain Sight: Specifications as a Source of Risk
Profile: President Susan Hecker
Developing Your Leadership Vision
Liability Issues - Can Public Owners be Held Liable to Subcontractors and Suppliers for Failure to Require General Contractors to Obtain Required Payment Bond?
An Introduction to Probate Bonds
Class Act - Surety Team’s Cooperative Efforts Enable School to Open on Time
NASBP’s Attorney Advisory Council - Participants Opine on Current Risk Management Challenges and Business Opportunities
The AIA Describes Updated and Expanded Design-Build Documents Family
Contractor Practices That may Result in Construction Claims to Recover for Delays and increased Costs
NASBP Annual Meeting Speakers - Veterans can benefit private sector, but need help finding jobs
Index to Advertisers
Surety Bond Quarterly - Summer 2015 - cover1
Surety Bond Quarterly - Summer 2015 - cover2
Surety Bond Quarterly - Summer 2015 - 3
Surety Bond Quarterly - Summer 2015 - 4
Surety Bond Quarterly - Summer 2015 - 5
Surety Bond Quarterly - Summer 2015 - 6
Surety Bond Quarterly - Summer 2015 - 2015-2016 NASBP Executive Committee
Surety Bond Quarterly - Summer 2015 - From the CEO - There is Poetry in Surety Claims, Surely
Surety Bond Quarterly - Summer 2015 - 9
Surety Bond Quarterly - Summer 2015 - Practical Insights: What You Need to Know - Hiding in Plain Sight: Specifications as a Source of Risk
Surety Bond Quarterly - Summer 2015 - 11
Surety Bond Quarterly - Summer 2015 - Profile: President Susan Hecker
Surety Bond Quarterly - Summer 2015 - 13
Surety Bond Quarterly - Summer 2015 - Developing Your Leadership Vision
Surety Bond Quarterly - Summer 2015 - 15
Surety Bond Quarterly - Summer 2015 - Liability Issues - Can Public Owners be Held Liable to Subcontractors and Suppliers for Failure to Require General Contractors to Obtain Required Payment Bond?
Surety Bond Quarterly - Summer 2015 - 17
Surety Bond Quarterly - Summer 2015 - 18
Surety Bond Quarterly - Summer 2015 - 19
Surety Bond Quarterly - Summer 2015 - 20
Surety Bond Quarterly - Summer 2015 - 21
Surety Bond Quarterly - Summer 2015 - An Introduction to Probate Bonds
Surety Bond Quarterly - Summer 2015 - 23
Surety Bond Quarterly - Summer 2015 - 24
Surety Bond Quarterly - Summer 2015 - 25
Surety Bond Quarterly - Summer 2015 - 26
Surety Bond Quarterly - Summer 2015 - Class Act - Surety Team’s Cooperative Efforts Enable School to Open on Time
Surety Bond Quarterly - Summer 2015 - 28
Surety Bond Quarterly - Summer 2015 - 29
Surety Bond Quarterly - Summer 2015 - NASBP’s Attorney Advisory Council - Participants Opine on Current Risk Management Challenges and Business Opportunities
Surety Bond Quarterly - Summer 2015 - 31
Surety Bond Quarterly - Summer 2015 - The AIA Describes Updated and Expanded Design-Build Documents Family
Surety Bond Quarterly - Summer 2015 - 33
Surety Bond Quarterly - Summer 2015 - Contractor Practices That may Result in Construction Claims to Recover for Delays and increased Costs
Surety Bond Quarterly - Summer 2015 - 35
Surety Bond Quarterly - Summer 2015 - NASBP Annual Meeting Speakers - Veterans can benefit private sector, but need help finding jobs
Surety Bond Quarterly - Summer 2015 - 37
Surety Bond Quarterly - Summer 2015 - Index to Advertisers
Surety Bond Quarterly - Summer 2015 - cover3
Surety Bond Quarterly - Summer 2015 - cover4
Surety Bond Quarterly - Summer 2015 - outsert1
Surety Bond Quarterly - Summer 2015 - outsert2
Surety Bond Quarterly - Summer 2015 - 43
Surety Bond Quarterly - Summer 2015 - 44
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