The Indiana Court of Appeals has affirmed that a contractor and insurance company owe the city of New Castle more than $900,000 in damages and attorney fees for breaching a construction contract.
In Dave's Excavating, Inc. and Liberty Mutual Insurance Co. v. City of New Castle, Indiana, No. 33A04-1104-PL-199, Dave’s Excavating and Liberty Mutual, which guarantied Dave’s performance with its performance bond, appealed the Henry Circuit Court’s decision granting summary judgment in favor of New Castle in its lawsuit for breach of contract. Dave’s was awarded a contract for a sanitation project but stopped work at one point because of “differing subsurface conditions” in accordance with Section 4.03 of the contract. Dave’s sought review from the engineer of the project as to how to handle the unexpected physical conditions of the land. The project engineer responded that Dave’s should return to work, but Dave’s interpreted the contract that the engineer should conduct an investigation before Dave’s resumed work.
The dispute led to delays in work and caused New Castle to have to hire another contractor to finish the work. New Castle filed suit against Dave’s for breach of construction contract and sought payment of the performance bond in the amount of $427,524.54 from Liberty Mutual.
The appellate court affirmed summary judgment in favor of the city, finding that Dave’s did breach the contract. The contract required that the city “review the pertinent condition,” which it did when the engineer reviewed the claim and determined that Dave’s wasn’t entitled to a price or time adjustment and should continue working, wrote Judge Edward Najam. Despite what Liberty Mutual argued, the contract did not require the city to “investigate” the physical site.
With regards to the performance bond, Liberty Mutual failed to exercise any of its options to mitigate under the performance bond. The evidence showed Liberty Mutual did not act promptly to assert its rights under the performance bond, as was required under Section 4.4. Liberty Mutual also specifically directed the city to mitigate its damages, which it did by hiring another contract to complete the project.
The judges also upheld the award of attorney fees for the city.