Berkley Regional Insurance Company v. Murray et al

Filing 39

MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 1/20/2016. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
BERKLEY REGIONAL INSURANCE
COMPANY

:

v.

:

Civil Action No. DKC 15-0563

:
EDWARD J. MURRAY, et al.
:
MEMORANDUM OPINION
Presently pending and ready for resolution in this surety
indemnification case is a motion for summary judgment filed by
Plaintiff

Berkley

“Surety”).

Regional

Insurance

(ECF No. 38).

Company

(“Plaintiff”

or

Other pending motions include: a

partial motion for summary judgment filed by Plaintiff (ECF No.
6); a motion for extension of time filed by Defendant Timothy E.
Murray

(ECF

No.

23);

and

Plaintiff (ECF No. 35).
deemed necessary.

a

motion

for

sanctions

filed

by

The court now rules, no hearing being

Local Rule 105.6.

For the following reasons,

Plaintiff’s motion for summary judgment will be granted.

The

other pending motions will be denied as moot.
I.

Background
A.

Factual Background

Plaintiff
surety

bonds

is

an

insurance

on

behalf

of

company
PowerMax

that
and

issued

multiple

ServiceMax,

two

contracting companies that sometimes worked together on the same

projects.1

(ECF Nos. 38 ¶ 1; 38-4, at 1).

Plaintiff issued the

surety bonds on behalf of the two companies in connection with
various

construction

projects

they

(ECF Nos. 38-7 through 38-17).

were

hired

to

undertake.

To obtain Plaintiff’s services

as a surety for PowerMax and ServiceMax, Defendants Edward J.
Murray, Jean A. Murray, Timothy E. Murray, Matthew W. Murray,
and Donna R. Murray (collectively, “Defendants”), as well as
non-Defendants Kurt and Margaret Boyd, signed indemnification
agreements in 2008 and 2014 (the “Agreements”).2
38-6).

(ECF Nos. 38-5;

The Agreements provide that Defendants will indemnify

Plaintiff for claims made against surety bonds that Plaintiff
issues on behalf of both PowerMax and ServiceMax.

Specifically,

the Agreements provide that:
[t]he Undersigned, jointly and severally,
shall exonerate, hold harmless, indemnify,
and keep indemnified the Surety from and
against any and all liability arising from
any cause of action, claim, cost, damage,
debt, demand, expenditure, liability, loss,
1

Sureties serve an important function in the construction
industry. “The many parties to a typical construction contract
–
owners,
general
contractors,
subcontractors,
and
subsubcontractors – look to sureties to provide assurance that
defaults by any of the myriad other parties involved will not
result in a loss to them.”
Gen. Acc. Ins. Co. of Am. v.
Merritt-Meridian Const. Corp., 975 F.Supp. 511, 516 (S.D.N.Y.
1997).
2

On December 10, the court administratively closed the case
as to Defendant Pamela Murray after being notified that she had
initiated bankruptcy proceedings. (ECF No. 37). There are two
additional signatories to the Agreements, but they are not
defendants in this case.
2

payment, obligation, or penalty of any kind
whatsoever, including without limitation,
interest
costs,
court
costs,
costs
to
compromise or settle any claim, expert fees,
investigative
costs
and
the
fees
and
expenses of attorneys, accountants and other
professionals or service providers of any
nature whatsoever, whether or not alleged,
asserted,
awarded,
contingent,
incurred,
potential, threatened, matured or unmatured,
and shall reimburse Surety for any payment
by it, related to or by reason of: (i) this
Agreement,
a
Contract
or
Bonds
and/or
Surety’s procuring or enforcement of same or
the prosecution, investigation, or defense
of any Claim against or by Surety; . . . or
(iv) the occurrence of an Event of Default
and any prosecution, investigation, defense
or settlement of the same by Surety.
(ECF Nos. 38-5 ¶ 1.01; 38-6 ¶ 1.01).

The Agreements further

provide that:
Indemnitors shall pay over to the Surety,
its successors and assigns, all sums of
money which the Surety shall pay or cause or
be paid or may be potentially liable to pay
related to or by reason of an Indemnified
Claim; such payment to be made to the Surety
as soon as Surety notifies Indemnitor to
deposit such funds with Surety, whether or
not the Surety established or increased any
reserve or shall have paid out such sum or
any part thereof or not; and Surety is
hereby authorized to use such funds, or any
part thereof, in payment or settlement of
any such demand, claim, liability, loss,
charges,
costs
and
expenses
or
other
obligations Indemnitors may be liable to
Surety under the terms of this Agreement. .
. . Surety may apply any unused funds as
collateral security to any other Bond or
obligation of the Indemnitor under this
Agreement.

3

(ECF Nos. 38-5 ¶ 1.02; 38-6 ¶ 1.02).

The Agreements also assign

collateral security to Plaintiff from Defendants, and if the
collateral “is not sufficient to protect Surety’s interests or
if Surety deems itself insecure, Surety may call for additional
collateral . . . satisfactory to Surety, and the Undersigned
shall furnish [a]dditional [c]ollateral immediately upon demand
by Surety.”

(ECF Nos. 38-5 ¶¶ 3.01, 3.02; 38-6 ¶¶ 3.01, 3.02).

In March 2014, after Plaintiff issued the surety bonds,
PowerMax filed for bankruptcy.

(ECF No. 38-4, at 10).

In light

of the bankruptcy, PowerMax and ServiceMax defaulted on many of
their obligations, resulting in multiple claims to be brought
against the bonds Plaintiff issued on their behalf.
Plaintiff

has

paid

bond

claims

totaling

To date,

$1,978,967.32,

recovering $412,481.74, for a net loss of $1,566,485.58.

while
In

addition, Plaintiff has incurred attorney and consultant fees of
$290,399.56.

Plaintiff asserts that Defendants are liable, as

of November 30, 2015, for its net damages of $1,856,885.14.
(Id. at 12-13).

As directed by the Agreements, Plaintiff sent

two demand letters to Defendants requesting that they provide
collateral

to

cover

the

claims.

(ECF

Nos.

38-23;

38-24).

Defendants did not respond to Plaintiff’s letters and have not
provided collateral or indemnification.

In addition, Plaintiff

contends that Defendants have “taken steps to deplete” potential

4

collateral,

including

selling

property

owned

by

Defendants.

(ECF No. 38-4, at 14-15).
B.

Procedural History

Plaintiff
February

27,

filed

a

to

(ECF

2015.

complaint

1).

No.

commence
The

this

action

complaint

on

seeks

contractual indemnity (Count I), quia timet declaratory judgment
(Count II), and specific performance (Count III).

On March 12,

2015, Plaintiff filed a partial motion for summary judgment.
(ECF No. 6).

Defendants then answered the complaint (ECF Nos.

14; 22; 25) and filed a response in opposition to the partial
motion

for

summary

judgment

(ECF

Nos.

Plaintiff replied (ECF Nos. 17; 30).

16;

26),

to

which

On April 28, Defendant

Timothy E. Murray filed a motion for extension of time.
No.

23).

On

November

17,

one

day

before

discovery

(ECF

closed,

Plaintiff filed a motion for sanctions against Defendants for
their failure to provide responses to discovery requests.
No. 35).
summary

(ECF

On December 18, Plaintiff filed the pending motion for
judgment.

(ECF

No.

38).

The

time

to

respond

in

opposition has passed, and Defendants have not responded.
II.

Standard of Review
Summary judgment is appropriate under Federal Rule of Civil

Procedure Rule 56(a) when there is no genuine dispute as to any
material

fact,

and

the

moving

party

is

judgment in its favor as a matter of law.
5

plainly

entitled

to

Even where, as here,

the nonmoving party fails to respond, the requested relief is
not automatically granted.

See Fed.R.Civ.P. 56(e).

Rather, the

court must “review the motion, even if unopposed, and determine
from what it has before it whether the moving party is entitled
to summary judgment as a matter of law.”

Custer v. Pan Am. Life

Ins. Co., 12 F.3d 410, 416 (4th Cir. 1993).
III. Analysis
Plaintiff

seeks

summary

judgment

as

to

its

contractual

indemnity claim (Count I) and its specific performance request
(Count

III).3

Plaintiff

argues

that,

under

the

unambiguous

language of the Agreements, Defendants are liable for payments
Plaintiff has made to bond claimants and for fees and expenses
incurred.

Plaintiff also contends that specific performance is

warranted in light of the uncertain “prospect of hundreds-ofthousands of dollars in additional claims.”

(ECF No. 38-4, at

21).
A.

Indemnification Liability (Count I)

“Indemnity agreements such as those at issue in this case
are

valid

and

enforceable

under

New

York

Law.”4

Merritt-

3

According to Plaintiff, Count II will be rendered moot if
the court grants summary judgment on Counts I and III.
4

The Agreements contain a choice of law provision stating
that the Agreements “shall be governed, construed and enforced
in accordance with the laws of the State of New York.”
(ECF
Nos. 38-5; 38-6).
Defendants do not contest the validity of
this provision, and the court sees no reason to question it.
6

Meridian, 975 F.Supp. at 515-16; see also First Nat’l Ins. Co.
of

Am.

v.

Joseph

(N.D.N.Y. 2004).

R.

Wunderlich,

Inc.,

358

F.Supp.2d

44,

51

“New York courts have upheld such contractual

provisions, and ‘payments made by sureties under such provisions
are scrutinized only for good faith and reasonableness as to
amount paid.’”

Lumbermens Mut. Cas. Ins. Co. v. Darel Group

U.S.A. Inc., 253 F.Supp.2d 578, 585 (S.D.N.Y. 2003) (quoting
Acstar Ins. Co. v. Teton Enters., Inc., 670 N.Y.S.2d 588, 589
(N.Y.App.Div. 1998)).
unambiguous,

a

court

“As long as the indemnity agreement is
must

give

effect

to

the

express

terms

contained therein and such interpretation is a matter of law
which

may

be

determined

on

a

motion

for

summary

judgment.”

First Nat’l Ins. Co., 358 F.Supp.2d at 52.
Here, the Agreements unambiguously require that Defendants
indemnify Plaintiff for the claims paid against the surety bonds
and for costs and fees associated with such payments.
38-5 ¶ 1.01; 38-6 ¶ 1.01).

(ECF Nos.

In their response to Plaintiff’s

earlier partial motion for summary judgment, Defendants argue
that

the

Agreements

“were

not

agreements

to

[Plaintiff] for claims on bonds issued to ServiceMax.”

indemnify
(ECF No.

See Nat'l Glass, Inc. v. J.C. Penney Props., Inc., 336 Md. 606,
610 (1994) (“[I]t is generally accepted that the parties to a
contract may agree as to the law which will govern their
transaction.”).
7

16, at 4).5
unambiguous

This argument is unpersuasive in light of the
language

of

the

Agreements.

The

terms

of

the

Agreements apply to all the “undersigned” parties, which include
Defendants, PowerMax, and ServiceMax.
The

2008

Agreement

provides

(ECF Nos. 38-5; 38-6).

that

ServiceMax,

ServiceMax’s

President Kurt Boyd, and Margaret Boyd “shall have no liability
. . . for bonds on behalf of PowerMax,” but there is no such
provision

limiting

Defendants.

the

liability

or

duties

(See ECF No. 38-5 ¶ 21).

of

PowerMax

and

The Agreements clearly

show that Defendants agreed to indemnify Plaintiff for bonds
issued on behalf of both PowerMax and ServiceMax.

Furthermore,

the Agreements give Plaintiff “the exclusive right in its name
and/or

the

name

of

any

Indemnitor

to

decide

and

determine

whether any [i]ndemnified [c]laim, or any claim . . . shall or
shall

not

be

prosecuted,

paid,

tried

compromised,
or

settled,

appealed,

and

resisted,
Surety’s

the

defended,
decision

thereon, absent fraud, shall be final, conclusive and binding
upon the Indemnitors.”
Such

discretion

relationships,
claims

and

because

construction

of

is

(ECF Nos. 38-5 ¶ 2.01; 38-6 ¶ 2.01).
a

sureties
the

industry,

cornerstone
“enjoy

important
and

the

surety-contractor

discretion

function

because

5

such

of

they

to

serve

economic

settle
in

the

incentives

Pamela Murray also responded to the partial motion for
summary judgment (ECF No. 26), but she has been removed as a
defendant (ECF No. 37).
8

motivating them are a sufficient safeguard against payment of
invalid claims.”
First

Nat’l

Merritt-Meridian, 975 F.Supp. at 516; see also

Ins.

F.Supp.2d at 585.
are

liable

to

Co.,

358

F.Supp.2d

at

52;

Lumbermens,

253

Thus, absent fraud or bad faith, Defendants

Plaintiff

under

the

unambiguous

terms

of

the

Agreements.
Defendants have not responded to the pending motion, have
not alleged bad faith or fraud, and do not dispute any material
facts surrounding Plaintiff’s payment of the claims.
Plaintiff

has

submitted

a

declaration

of

Nancy

Moreover,
Manno,

its

Assistant Vice President for Surety Claims, attesting that the
payments “were made after [Plaintiff] conducted a good faith
investigation
other

things,

into

the

asserted

a

review

of

claims

which

documentation

included,

submitted

by

among
the

claimants and consultation with PowerMax and/or ServiceMax about
the claims.”

(ECF No. 38-1 ¶ 8).

The fact that Plaintiff has

recovered a significant sum also evidences a lack of bad faith.
Accordingly, because there is no indication of bad faith or
fraud, Plaintiff has “demonstrated entitlement to judgment as a
matter of law by submitting several bond contracts [(ECF Nos.
38-7 through 38-17)] and the indemnification agreements” (ECF
Nos. 38-5; 38-6), as well as proof of payment (ECF Nos. 38-18;
38-19), and “correspondence which demonstrated that [Defendants]
failed to so indemnify [Plaintiff]” (ECF Nos. 38-23; 38-24).
9

Utica Mut. Ins. Co. v. Magwood Enters., Inc., 790 N.Y.S.2d 179,
180 (N.Y.App.Div. 2005); see also Utica Mut. Ins. Co. v. Cardet
Const.

Co.,

Inc.,

981

N.Y.S.2d

118,

121

(N.Y.App.Div.

2014)

(holding that the lower court erred in not granting summary
judgment for the plaintiff after the plaintiff put forth similar
evidence as exists here).
Plaintiff is also entitled to recover the requested costs
and

attorneys’

fees

under

the

Agreements.

The

Agreements

unambiguously require Defendants to indemnify Plaintiff for fees
and costs, including “court costs, costs to compromise or settle
any claim, expert fees, investigative costs and the fees and
expenses of attorneys, accountants and other professionals or
service providers of any nature whatsoever.”
1.01; 38-6 ¶ 1.01).

(ECF Nos. 38-5 ¶

Plaintiff provides multiple declarations

attesting to the reasonableness of the fees and costs expended.
(ECF

Nos.

38-1;

38-2).

Plaintiff

provides

extensive

documentation regarding the fees and costs, and they appear to
be

reasonable.

(ECF

Nos.

38-20;

38-21).

Accordingly,

Defendants are liable for the fees and costs Plaintiff expended
in connection with the claims made against the surety bonds.
See

First

“attorney

Nat’l
fees,

Agreement”);

Ins.
costs,

Co.,
and

358
other

F.Supp.2d
consulting

at

57

costs

(awarding
under

the

Am. Motorists Ins. Co. v. Pa. Beads Corp., 983

F.Supp. 437, 442 (S.D.N.Y. 1997) (awarding fees because they
10

“appear

to

have

been

incurred

at

arm’s

length

and

appear

reasonable”).
B.

Specific Performance (Count III)

Plaintiff

also

requests

a

“judgment

for

specific

performance determining that . . . [Defendants] are and were
required to post collateral security to [Plaintiff] as demanded
and/or are and were prohibited from encumbering their assets as
a

result

of

[Plaintiff’s]

[Plaintiff’s] approval.”
law,

a

plaintiff

is

collateral

demand

(ECF No. 38, at 5).
entitled

to

specific

and

without

“Under New York
performance

of

contractual obligations if (1) there is a valid contract; (2)
plaintiff has substantially performed under the contract and is
willing

and

able

to

perform

its

remaining

obligations;

(3)

defendant is able to perform its obligations; and (4) plaintiff
has no adequate remedy at law.”
J.

United

Elec.

Contracting

U.S. Fidelity and Guar. Co. v.
Corp.,

62

F.Supp.2d

915,

921

(E.D.N.Y. 1999) (citation omitted).
Here, Plaintiff has shown that a judgment granting specific
performance is warranted.

First, there is no dispute that the

Agreements are valid contracts requiring Defendants to continue
to indemnify Plaintiff and post the requested collateral.

In

addition to the indemnification provisions discussed in detail
above,

the

collateral

unambiguous
security

to

language

of

Plaintiff

and

11

the

Agreements

provides

that

assigns
if

the

collateral “is not sufficient to protect Surety’s interests or
if Surety deems itself insecure, Surety may call for additional
collateral . . . satisfactory to surety, and the Undersigned
shall furnish [a]dditional [c]ollateral immediately upon demand
by Surety.”
“Courts

in

(ECF Nos. 38-5 ¶¶ 3.01, 3.02; 38-6 ¶¶ 3.01, 3.02).
New

York

have

routinely

upheld

the

validity

collateral security clauses and enforced their terms.”
Fidelity, 62 F.Supp.2d at 922 (citations omitted).

of

U.S.

In addition,

it is undisputed that Plaintiff has substantially performed on
its obligations by paying the claims made against the bonds.
Plaintiff also avers that Defendants own property, allowing them
to perform their obligation of posting collateral.

Finally,

Plaintiff has demonstrated a lack of an adequate legal remedy
due to the uncertainty of future claims.

Legal remedies are not

sufficient because Plaintiff’s “obligations under the bonds are
continuing,

[and]

ascertainable.”

the

total

Id. at 923.

loss

to

[Plaintiff]

is

not

yet

Accordingly, summary judgment will

be granted in favor of Plaintiff on Count III.
IV.

Conclusion
For the foregoing reasons, the motion for summary judgment

filed by Plaintiff will be granted.
will be denied as moot.

The other pending motions

A separate order will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
12