Fidelity and Surety

Practice Contacts

Gordon & Rees has one of the preeminent fidelity and surety practices in the United States. Our attorneys have investigated, negotiated and litigated claims under all types of fidelity and financial institution bonds and crime coverages, professional liability policies, and surety bonds, throughout the U.S. and internationally. We handle all phases of fidelity and surety disputes and professional liability claims and offer advice and counsel on all fidelity, financial institution, surety, D&O and professional liability matters, from the first notice of default or claim to final resolution. Our core strengths include:

  • Investigation:  We conduct in-depth field investigations to assess facts and documentation relevant to complex claims. Our familiarity and experience with financial, design and construction professionals and other experts help insurers and sureties evaluate the facts and discharge their obligations economically and efficiently.

  • Coverage Analysis and Negotiation:  Our attorneys are intimately familiar with developments in fidelity and surety law and professional liability coverage and applicable policy and bond forms. Our analysis of legal issues can help evaluate options and risks and negotiate prompt and reasonable settlements, often without the need for expensive litigation. 

  • Litigation, Arbitration and Alternative Dispute Resolution:  When settlement is not possible or warranted, we are able to litigate or arbitrate the most complex and document intensive claims efficiently and thoroughly. Combining thorough legal analysis with an aggressive litigation strategy, we can often resolve disputed claims cost effectively by dispositive motion.

The representation we provide extends to U.S. and London-based carriers, underwriters, and reinsurance companies:

  • Carriers:  We represent carriers in connection with claims of employee dishonesty and other coverages under financial institution bonds, fidelity bonds, Mortgage Broker/Banker Bonds, and crime policies. We provide legal analysis of coverage, assist in the investigation of claimed losses, negotiate settlement of claims, and litigate or arbitrate claims.
  • U.S. and London Underwriters:  We represent U.S. and London underwriters, as coverage and monitoring counsel, in connection with claims under director and officer liability and other professional liability policies and bonds.     
  • Sureties:  We represent sureties in connection with claims of obligees under performance bonds; claims by subcontractors and material suppliers under payment bonds and in related mechanics lien litigation; and completion problems of troubled contractors (financing, takeovers and relets, protective bids, buy-backs and other alternatives), including negotiations with architects, engineers, financing banks, co-sureties and public and private owners.

    We also represent sureties in connection with the investigation and litigation of financial guarantee bonds and claims under all types of miscellaneous bonds, including probate bonds, customs bonds, public officials bonds and appeal bonds.  We counsel carriers in the complexities of limited partnerships and related guarantees and indemnification and security agreements, as well as liquidation of partnerships.
  • Fidelity: we represent fidelity and surety clients in salvage matters throughout the U.S. We pursue salvage claims against banks under Articles 3 and 4 of the Uniform Commercial Code, and against accountants and other professionals who may have contributed to fidelity losses.  We also pursue salvage claims against contractual indemnitors and bond principals, and against project owners, architects, engineers, contractors and others who may have contributed to project losses or delay.
  • Reinsurance:  We also represent reinsurance companies in many fidelity and surety matters, including liquidation of primary and reinsuring carriers.

Our attorneys participate actively in national fidelity and surety organizations, such as the Fidelity and Surety Committees of the American Bar Association (Vice-Chair) and the International Association of  Defense Counsel, the Surety Claims Institute (Program Chair) and the Fidelity Law Association (Advisor). We also lecture at and write for fidelity and surety industry educational programs throughout the U.S., including national programs on commercial crime policies and financial institution bonds (Editor/Program Chair).

Representative Fidelity matters include:

  • National coverage and monitoring counsel for Lloyd’s of London syndicates in connection with mortgage broker bonds and professional liability policies.
  • Won summary judgment in the Eastern District of Michigan on behalf of our client, a domestic insurer, in connection with a $10 million warehouse lending claim under a Financial Institution Bond. The insured sought coverage for losses sustained after its borrower induced it to advance money on a warehouse line of credit based upon forged promissory notes.  This decision is the first published case addressing the compensability of warehouse lending losses.  Flagstar Bank, FSB v. Federal Insurance Co., 2006 WL 3343765 (E.D.Mich. November 17, 2006).
  • Won dismissal of complaint by the state court in Illinois and successfully defended the appeal in our representation of a domestic insurer in connection with a claim by a mortgage broker under a  Form 15 Mortgage Broker Bond. The insured sought coverage for liability arising from fraudulent loan packages compiled by brokers and relied upon by lenders. The decision by the Illinois Appellate Court is one of the leading cases relied upon by the fidelity industry relating to coverage for indirect losses.  RBC Mtg. Co. v. National Union, 812 N.E.2d 728 (Ill. App. 2004).
  • Won dismissal of claim and successfully defended appeal in our representation of a fidelity insurer in a $5 million forgery claim arising from a lending fraud perpetrated by an insurance broker. Following denial of coverage, litigation ensued, but resolved without discovery or extensive litigation. First Ins. Corp. v. Federal Ins. Co., 284 F.3d 799 (7th Cir. 2002).
  • Represented an international fidelity insurer in a $40 million fidelity claim arising from a health insurance fraud perpetrated on the federal government by four employees of a regional health insurance company. Our comprehensive research and analysis of the coverage issues enabled the insurer to settle the claim, before litigation, for $65,000.

Representative Surety matters include:

  • An insolvent general contractor, with foundation and pre-cast concrete subsidiaries, failed to complete 23 projects in six states, leaving more than $200 million of outstanding work. We arranged for completion through a combination of buy-outs, relets and financing of the contractor and successfully pursued claims against owners on projects around the country.
  • The largest commercial contractor in Indiana defaulted on more than a dozen bonded projects. We assisted the surety in completing the projects and paying hundreds of material suppliers and subcontractors. We litigated claims against a bankruptcy trustee concerning payments made by the debtor prior to bankruptcy and concerning the surety’s right to receive contract funds held by project owners.
  • The owner of a professional baseball stadium asserted that defects in the retractable roof necessitated redesign and replacement of components of the roof. We investigated and defended the warranty claims under a subcontract performance bond.