Vanguard Energy Partners LLC v. The Hanover Insurance Co.

Surety - Performance Bonds - Defenses
Surety - Bad Faith/Claim Handling

Vanguard Energy Partners LLC v. The Hanover Insurance Co., 2020 U.S. Dist. Lexis 136030 (D. N.J. July 31, 2020) denied the surety's motion to dismiss the action for failure to state a claim.  The surety issued bonds for a subcontractor on two projects.  On both projects the subcontractor defaulted and the obligee performed or arranged for performance of the remaining work.  The surety argued that the obligee breached the bonds' requirements by performing work to complete the bonded subcontracts before declaring the principal in default and before providing reasonable notice to the surety.  The court thought that at the motion to dismiss stage, the obligee's allegations sufficiently alleged its claims and denied the surety's motion to dismiss the breach of contract claims.  The obligee also asserted extra contractual claims for bad faith, violation of Mass. Gen. Laws ch. 93A, §§2 and 11, and breach of the implied covenant of good faith and fair dealing.  The surety argued that the extra contractual claims should be dismissed because the surety did not have any obligations under the bond.  The court denied the motion to dismiss as to the three extra contractual claims because the surety's argument failed as to the underlying breach of contract claims and the surety "has not asserted an independent reason as to why the remaining claims should be dismissed."