M.E.S., Inc. v. Safeco Insurance Company of America

In M.E.S., Inc. v. Safeco Insurance Company of America, 2018 U.S. App. LEXIS 35151 (2d Cir. December 14, 2018), the Corps of Engineers issued Cure Notices to the bond principal for failures on three projects. The Corps subsequently terminated each contract for default and made a bond demand on the surety to complete the remaining work for each project. The surety incurred losses in responding to the claims. The surety sued the principal and indemnitors seeking recovery under the indemnity agreement. The bond principal and indemnitors initiated a separate action against the surety alleging that the surety acted inappropriately by attending the cure meetings. The trial court dismissed the claims brought by the principal and indemnitors, who appealed the decision. The Court of Appeals affirmed the dismissal. It stated that the claim that the surety acted inappropriately was "particularly frivolous" as the cure notice required the attendance of the surety company. The Court of Appeals found no good faith basis for the plaintiffs' arguments that the surety had no right to perform under the bonds. The Court sua sponte awarded the surety double costs as sanctions against the plaintiffs.