Insurer Not Entitled to Summary Judgment on Breach of Performance Bond Claim

Klewin Bldg. Co. v. Heritage Plumbing & Heating, Inc., 840 N.Y.S.2d 144 (N.Y. App. Div. 2007)

In this case, plaintiff was the construction manager for a building project and had entered into a subcontract with defendant Heritage Plumbing & Heating pursuant to which Heritage was required to supply plumbing materials and services for the project.  Defendant Hartford Fire Insurance Company provided a performance bond to Heritage for the benefit of Klewin.   Hartford’s obligations to Klewin under the bond would only arise upon certain conditions, including, among other things, Klewin’s declaration that Heritage had defaulted and a termination of Heritage’s right to complete the subcontract.

After Klewin declared Heritage in default and terminated Heritage’s rights to complete the subcontract, Klewin demanded that Hartford select which action it would take pursuant to the bond to guarantee the performance of the subcontract.  Hartford refused, claiming that Klewin failed to perform the conditions precedent giving rise to Hartford’s obligation to perform under the bond.

Klewin filed suit against Heritage and Hartford, alleging that Hartford breached the performance bond.  Hartford’s motion for summary judgment was denied, and Hartford appealed the ruling.

The appellate court affirmed, finding that Hartford was not entitled to summary judgment since it had failed to establish that any of the conditions precedent set forth in the performance bond were not satisfied by Klewin.