Liberty Mutual Insurance Company recently scored a significant legal victory when New York’s Appellate Division ruled in its favor. The case revolved around Liberty Mutual seeking to recover over $400,000 related to surety bonds for construction projects undertaken by Active Fire Sprinkler NYC, LLC.
The legal dispute traces back to March 2011 when Active Fire and its affiliates signed an indemnity agreement with Liberty Mutual. This agreement stated that Liberty Mutual would issue surety bonds for the construction work, and in return, Active Fire would reimburse the insurer for any losses, including legal fees if needed.
After issuing several bonds, Liberty Mutual faced claims and ultimately paid out $411,972.10. However, Active Fire and the other parties involved did not reimburse the insurer. In May 2022, Liberty Mutual took legal action to recover the amount owed, along with additional costs and attorneys’ fees.
Initially, the case hit a snag in September 2023 when a Kings County Supreme Court denied Liberty Mutual’s motion for summary judgment. The court ruled that the insurer did not adequately support its claims with necessary business records. However, Liberty Mutual pushed back, arguing that the court had overlooked key evidence.
By December 2023, the situation changed. The Supreme Court agreed to reconsider the case, ultimately granting Liberty Mutual summary judgment for the full amount owed. The court also referred the matter of attorney fees to a referee for calculation.
Active Fire appealed the decision, but the appellate court upheld the ruling. The judges noted that New York law supports a surety’s right to indemnification if they can prove payment, unless it can be shown that the payment was made in bad faith or was unreasonable. Liberty Mutual presented solid documentation, including the indemnity agreement and payment records, which the court found sufficient. The defendants, on the other hand, could not present any factual disputes to challenge the evidence.
This case serves as a reminder for those in the insurance industry, especially regarding surety bonds and commercial claims. It highlights the importance of having clear agreements and thorough documentation. Liberty Mutual’s experience shows that when insurers maintain proper records, courts are more likely to enforce indemnity agreements and support recovery efforts.