MAY 2018 BAD FAITH CASES: SURETY NOT SUBJECT TO PENNSYLVANIA’S BAD FAITH STATUTE (Philadelphia Federal)

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The plaintiff contracted with a construction firm to perform work at a project in Phoenixville, Pennsylvania, and obtained performance and payment bonds from a surety. The contractor did not complete the project on time, and the surety proposed a plan for completion, which the plaintiff found wanting. It sued for breach of contract and bad faith.

The surety argued that surety companies are not insurers under Pennsylvania’s bad faith statute. The Court agreed, and dismissed the bad faith claim. The Court reasoned that “suretyship and insurance contracts are widely different . . . [and there is no] direct contractual relationship and no such promise of prompt, expeditious payment[]” with a surety. While the Court acknowledged that the parties were in direct contractual relationship with another, the defendant never assumed the role of insurer.

Date of Decision: May 2, 2018

Charlestown Township v. United States Surety Co., United States District Court, Eastern District of Pennsylvania, Civil Action No. 17-5469, 2018 U.S. Dist. LEXIS 74498 (E.D. Pa. May 2, 2018) (Ditter, J.)

 

 

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