Liberty Mutual: Bonded Contractor Stonewalled Us

dredgeanddock.com

Bulkheads, similar to this soundly construction one in Maryland built by Rehbein Enterprises, proved to be a costly problem to Intercoastal Contracting.

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A North Carolina contractor lost a big lawsuit, ran into financial trouble and then stonewalled surety Liberty Mutual Insurance Co. for a short while before filing for protection from its creditors in U.S. bankruptcy court.

That is the picture that emerges of Intercoastal Contracting Inc., a Castle Hayne, N.C.-based heavy construction general contractor that started as a diving company in 1987, from a lawsuit against it in August by Liberty Mutual. The contractors downfall is also recorded in other legal documents and lawsuits.

During a year when contractor failures have spiked, sureties are often forced to step in to finish projects while their contractor clients are in financial free fall. Because the surety almost always has the right under its agreement with the contractor to be compensated in full for its losses, the relationship can become strained. And when all the complexities of a bankruptcy are factored into the equation, the projects may languish.

When a suretys contractor files for bankruptcy protection, the surety enters an alternative universe where the simple can become complex and the complex nearly unmanageable, wrote co-authors Patrick J. OConnor, Jr., a Minneapolis attorney, and Kim McNaughton, who at the time was a regional vice president for bond claims for Liberty Mutual Surety. They wrote about the subject in a 2009 journal article.

Despite having filed for protection from its creditors in August, Intercoastal had continued work on the Buddy Phillips Bridge in Jacksonville for the North Carolina Dept. of Transportation.

Then, in early October, NCDOT announced that Intercoastal had suspended work on the bridge and that if Intercoastal couldnt resume work NCDOT would work with Liberty Mutual to find a replacement contractor.

Liberty Mutual had already apparently reached the end of its legal rope with Intercoastal.

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Liberty Mutual: Bonded Contractor Stonewalled Us