Salvage by the Surety

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American Bar Association, 1998 - Law - 339 pages
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Contents

THE SURETYS RIGHTS TO OBTAIN SALVAGE EXONERATION REIMBURSEMENT SUBROGATION AND CONTRIBUTION
1
II The Suretys Exoneration Rights and Salvage
3
A CommonLaw Exoneration
4
B Quia Timet
5
C Restatement Third of Suretyship And Guaranty 1995
7
III The Suretys Reimbursement Indemnity Rights and Salvage
8
B The Suretys Salvage Rights Under the Agreement of Indemnity
10
2 The Suretys Loss Kinds and Damages
11
6 Concurrent Delays
177
7 No Damage and Liquidated Damage Clauses
178
D The Disruption Claim
179
E The Suspension of Work Claim
180
F The Acceleration Claim
181
2 Elements of Acceleration
182
a Excusable Delay
183
V Checklist
184

C The Suretys Enforcement of Its Rights of Reimbursement Indemnity Under The Agreement of Indemnity
12
2 The Suretys PreLoss Rights to Protect Salvage
15
3 Suits For Reimbursement After The Suretys Losses Are Incurred
21
D Indemnitor Defenses
27
2 Defenses Addressed By Provisions In Many Agreements of Indemnity
28
3 Additional Defenses to Liability Under The Agreement of Indemnity
29
IV The Suretys Subrogation Rights and Salvage
30
A The Legal Background for The Suretys Subrogation Rights
31
2 Conditions Precedent to The Suretys Subrogation Rights
33
B Competition With Other Parties For The Remaining Contract Funds
36
C Pursuit of The Remaining Contract Funds
38
2 The Suretys Notice
39
D Pursuit of Other Claims And Assets
40
2 The Suretys Claims Against Third Parties
41
4 The Suretys Claim to Inventory And Materials Stored at The Project Site
42
5 The Suretys Claim to The Equipment of The Principal
43
VI Conclusion
44
SELECTED BIBLIOGRAPHY EXONERATION
46
SELECTED BIBLIOGRAPHY REIMBURSEMENT
49
SELECTED BIBLIOGRAPHY SUBROGATION
56
SELECTED BIBLIOGRAPHY CONTRIBUTION
61
A TOAST TO THE UNDERWRITERS THE UNDERWRITING PROCESS AND SALVAGE BY THE SURETY
63
II Good Underwriting
64
1 Full Name
65
5 Financial Statement
66
7 Updated Financial Statements
67
8 Letters to the Accountant
68
12 List of Insurance Policies
69
14 Letters of AcceptanceAcknowledgment of Receipt
70
16 References
71
18 PatentsRoyalties
72
20 Bond ProducerSurety Correspondence and Authorizations
74
21 Obligees Documentation and Correspondence
75
3 Business TypeRelated Entities
76
5 Waiver of Homestead Exemption
77
7 AddressesLegal Description of Real Property Holdings
78
11 Release of Retainage
79
14 PostBonding Relationship Monitoring
80
A Types of Collateral
81
3 Deeds of TrustMortgages
82
4 Equipment
83
5 Stocks and Bonds
84
4 Pledgors Ownership and Indemnity
85
IV Funds Administration
86
V Third Party Arrangements
88
C Joint Control Agreements
89
VI Involvement in Claims ProceduresInteraction Between Claims and Underwriting
90
B In Favor of Interaction
91
VII Conclusion
92
THE PRINCIPALS CONTRACT CLAIMS AS SALVAGE A PRIMER
93
A The Suretys Recovery Rights to its Principals Construction Claims
96
B The Relative Merits of the Various Sources of Entitlement
99
C Claim Recoveries vs Contract Funds
104
D Federal Projects
107
E Performance Bond vs Payment Bond
111
F Bankruptcy
116
III Evaluating the Principals Construction Claims
120
1 Labor Costs
127
3 Management and Administrative Personnel Expense
128
4 Interest
129
6 Profit
130
B Review of the Contract Documents
133
1 Construction Contract Changes
137
b Authority to Order a Change
138
c Requirement for Change Order to be in Writing
140
d The Cardinal Change
143
e Constructive Change
144
g Contractors Duty to Perform Pending Resolution of Claim
146
i Pricing of Changed Work
147
IV Claims
148
1 The Owners Implied Warranty Liability
149
b Design Versus Performance Specifications
150
d Contractor Reliance on Defective Design
151
f The Owners Implied Warranty Liability of Design in Various Situations
152
g The Owners Implied Warranty of Contract Time in Relation to Work
153
2 Ambiguous Specifications
154
b The Contractors Ambiguity Detection Duty
155
c Rules for Resolving Specification Ambiguity Beyond the Contractors Detection Duty
156
d Reliance on Latent Ambiguity
159
B Changed Conditions
160
b Owner Breach of Implied Warranty
161
d Owner Withholding of Superior Knowledge
162
2 Allocation of Risk Under the Differing Site Conditions Clause
163
b The Site Investigation Duty
164
c Scope of Coverage
165
d Owner Disclaimers
167
3 Notice Requirements
169
a Impact of Prejudice
170
C The Delay Claim
171
2 The Duty of Cooperation and Noninterference
172
3 Contract Clauses
173
c Acts of God
174
5 Excusable DelayTime and Money Compensable Delay
175
2 Has the Surety Taken Steps to Perfect All Security Interests Provided Under Its General Agreement of Indemnity?
185
5 Can It Be Argued that All Claim Proceeds are Trust Funds?
186
9 Does the Principal Allege that It Is Entitled to Monies Due Because of the Performance of Extra Work?
187
11 Does the Principal Claim that It Is Entitled to Extra Work as a Result of Encountering Unforeseen Conditions?
188
14 Does the Owner Have Any Justifiable Basis Upon Which to Make a Claim Against the Principal Thus OffSetting Any Eventual Recoveries?
189
APPENDIX A
190
BIBLIOGRAPHY SALVAGE
195
THE SEARCH FOR ASSETS WHAT IS OUT THERE AND HOW CAN IT BE FOUND
201
II How To Search For and Find Assets of The Principal and The Indemnitors
203
B Private Investigative Services
204
A The Search For Assets The Underwriting Stage
205
2 Private Investigative Services
206
IV Conclusion
208
THE SURETYS CLAIMS AGAINST THIRD PARTIES
209
II The Suretys Claims Against Professionals and Others Who Provided Services or Materials to The Principal or The Obligee
210
1 Types of Financial Statements
211
2 Theories of Liability
212
3 Damages
217
4 Surety Cases
218
5 Practical Considerations for the Surety
220
B Design Professionals Architects and Engineers
222
1 The Privity Issue
223
2 The Suretys Subrogation Rights Getting Around the Privity Problem
225
4 Claims by Sureties
227
C Lending Institutions
230
2 The Privity Issue
232
4 Damages
233
1 Subrogation
234
2 Assignment
237
A The CGL Policy
239
B Distinction Between Suretyship and Insurance
240
C Overlap Between Insurance and Bond Coverage
241
D The Suretys Subrogation Rights Against the Principals Insurer
245
E Inverse Salvage The Suretys Use of The Principals Insurance to Cover Legal and Investigative Expenses
247
F Preserving the Right to Subrogation
248
IV The Suretys Use of Fraudulent Transfer Laws to Recover Assets From Third Parties
249
A Fraudulent Transfer Laws
250
2 Bankruptcy Code Section 548
251
B Overview of the Recovery Process
252
2 Return the Asset to the Transferor
253
V Conclusion
254
SELECTED BIBLIOGRAPHIES
255
USE OF THE PRINCIPALS INSURANCE
258
USE OF FRAUDULENT TRANSFER LAWS
262
ENVIRONMENTAL CONCERNS OF THE SURETY SEEKING SALVAGE
263
II The Regulatory Schemes
265
A Federal Law
266
2 RCRA
272
3 Other Federal Regulations
273
Impact of Hazardous Waste Laws on Salvage
275
B The Secured Creditor Exemption of CERCLA
276
C Fleet Factors
278
D Authority to Control Versus Actual Control Progeny of Fleet Factors
279
2 Authority to Control Test
282
E Piercing The Corporate Veil
284
1 Protection for Sureties
286
G The 1992 EPA Rule Is Overturned
287
H The Current EPA Enforcement Policy
288
J Recent State Legislation
292
IV ThirdParty Defense
294
V Recommendations for the Surety Seeking Salvage
296
B Preforeclosure The EPA Test
297
C Foreclosure Stage
299
D PostForeclosure Phase
300
VI Conclusion
302
SELECTED BIBLIOGRAPHY
303
THE IMPACT OF THE BANKRUPTCY CODE ON THE SURETYS PURSUIT OF SALVAGE
305
I Introduction
306
B Effect of the Automatic Stay
308
II The Claims Administration Process
309
B The Treatment of Reimbursement Rights Under the Code
312
C Exceptions to Recognition of Reimbursement Rights Under the Code
313
D When and Why Must the Surety File a Proof of Claim
314
E What Information Must the Proof of Claim Include
316
F What Happens After Filing the Proof of Claim
317
G The Distribution
318
III Increasing Distribution to the Surety
319
A What Is Property of the Estate
320
B Ways to Increase the Estate
321
2 Preferences
322
3 Fraudulent Transfers
323
4 Other Powers of the Trustee
324
C Ways To Increase The Suretys Share of the Estate
325
2 Review Administrative Expenses
326
D What To Do When The Trustee or DebtorInPossession Is Not Pursuing Increasing the Estate or Challenging Claims
327
2 DebtorInPossession Fails To Act
328
IV Assignment of the Claim
330
A Information Is The Key To The Decision To Sell
331
B The Sale Process
332
V DischargeDischargeability Issues
334
B The Surety Is Subrogated to the Right to Object to the Dischargeability of the Debt Owed To Bond Claimants
335
VI Conclusion
339
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