N. Am. Specialty Ins. Co. v. Carson Stone & Supply, LLC

Decision Date25 September 2020
Docket Number8:18-CV-360
Citation489 F.Supp.3d 917
Parties NORTH AMERICAN SPECIALTY INSURANCE COMPANY, Plaintiff, v. CARSON STONE & SUPPLY, LLC, Scott Carson, and Adrianne Carson, Defendants.
CourtU.S. District Court — District of Nebraska

Daniel A. Ellerbrock, Pro Hac Vice, David H. Gregerson, Pro Hac Vice, Gregerson, Rosow Law Firm, Minneapolis, MN, Michael L. Moran, Robert S. Keith, Engles, Ketcham Law Firm, Omaha, NE, for Plaintiff.

David D. Ernst, Jeffrey A. Nix, Pansing, Hogan Law Firm, Omaha, NE, for Defendants.

MEMORANDUM AND ORDER

Brian C. Buescher, United States District Judge

I. INTRODUCTION

North American Specialty Insurance Company ("NAS") sued Carson Stone & Supply, LLC (Carson Stone); Scott Carson, and Adrianne Carson1 for breach of an indemnity agreement arising out of two surety bonds issued by NAS with Carson Stone as bond principal. NAS also asserted an alternative theory of recovery based on legal and equitable subrogation. The parties have filed cross-motions for summary judgment on the breach-of-contract issue. For the reasons stated herein, the Court grants NAS's summary-judgment motion and denies Carson's.

II. BACKGROUND2

NAS is a New Hampshire corporation, with its principal place of business in New Hampshire. Filing 1 at 1; Filing 43 at 2. Carson Stone is a Nebraska limited liability company owned by Scott Carson with its principal place of business in Elkhorn, Nebraska. Filing 22 at 1. Adrianne Carson is a former employee of Carson Stone and co-signed the indemnity contract at issue. Filing 44 at 11, 302.

Carson was hired as a subcontractor by Meyer Carlisle Leapley Construction, Inc. ("MCL") for the project known as the Cloisters on the Platte. Filing 44 at 43. As part of its contract, MCL required Carson to obtain a surety bond guaranteeing its performance. Filing 44 at 43. NAS issued two surety bonds with Carson as principal. The first was a performance bond with MCL as obligee and the second was a payment bond with a supplier of Carson's, Cold Spring Granite, as obligee. Filing 44 at 14-15. Carson signed an indemnity agreement with NAS as consideration for the surety bonds. Filing 44 at 7. The parties executed the indemnity agreement in March 2016. Filing 44 at 7-13. It was signed by Scott and Adrianne Carson on behalf of Carson Stone. Filing 44 at 10-11. It is undisputed that as president and sole owner, Scott Carson had the authority to execute the indemnity agreement on behalf of Carson Stone. Filing 44 at 312.

The indemnity agreement provided that Carson would "exonerate, hold harmless, and indemnify" NAS against "any and all [l]oss" incurred by reason of NAS becoming surety to Carson Stone. Filing 44 at 7. Covered loss was defined to include "any liability, loss, costs, damages, attorneys’ fees, consultants’ fees, and other expenses including interest, which [NAS] may sustain or incur by reason of, or in consequence of, the execution of the Bonds." Filing 44 at 7. It expressly included the following:

(a) any sums paid or liabilities incurred in the settlement of claims; (b) expenses paid or incurred in connection with the investigation of any claims; (c) sums paid in attempting to procure a release from liability; (d) expenses paid or incurred in the prosecution or defense of any suits; (e) any judgments under the Bonds; (f) expenses paid or incurred in enforcing the terms of this Agreement; (g) sums or expenses paid or liabilities incurred in the performance of any Bonded contract or related obligation; and (h) expenses paid in recovering or attempting to recover losses or expenses paid or incurred.

Filing 44 at 7.

According to the indemnity agreement, Carson would be found in default if NAS "receive[d] notice of a claim, breach or default under a Bonded contract" or if Carson "fail[ed] to diligently prosecute the work under any Bonded contract." Filing 44 at 7. The agreement provided that in the event of a default, Carson agreed to assign all of its rights under the MCL and Cold Spring contracts to NAS. Filing 44 at 7. Finally, the indemnity agreement stated that NAS "shall have the right to decide and determine in its sole discretion whether any claim, liability, suit or judgment made or brought against [NAS] or [Carson] on any Bond shall or shall not be paid, compromised, resisted, defended, tried or appealed." Filing 44 at 8. Furthermore, NAS's decision to settle or litigate a claim under either the performance or payment bond was to "be final, binding and conclusive upon [Carson]." Filing 44 at 8.

Following execution of the indemnity agreement and bond contracts, Carson began its work on the Cloisters on the Platte project. Filing 44 at 320-21. Carson was charged with providing the labor, material, equipment, and supervision necessary to furnish and install a number of granite slabs and columns for a series of sculptures. Filing 44 at 350; Filing 44 at 319-20. Carson initially agreed with MCL that it would complete its work on the granite bases for the sculptures by August 16, 2016, and would complete all of the remaining work on the various sculptures sites as a whole by September 27, 2016. Filing 44 at 324, 351, 357. Carson failed to meet these deadlines. Filing 44 at 325.

On September 13, 2016, Carson sent MCL an email promising to "have everything fabricated [and] ready for installation by 12-31." Filing 44 at 359. According to Carson, the "[w]orst case scenario would be completion in mid April" 2017. Filing 44 at 359. These new deadlines came and went, and in mid-April 2017, Carson promised to have various granite pieces delivered to the jobsite throughout May 2017 and to complete the final work by the end of June. Filing 44 at 360. However, by August 2017, one year after the originally agreed-upon completion date, Carson still had not procured or installed various granite pieces and the work remained unfinished. Filing 44 at 335-36, 344.

On August 17, 2017, MCL submitted a claim against the performance bond issued by NAS asserting that Carson had not met its contractual obligations by failing to timely complete its work on the Cloisters on the Platte project. Filing 44 at 16. MCL ended up hiring Carson's installation subcontractor, Creative Structures, to complete the remaining work. Filing 44 at 16. In response to MCL's bond claim, NAS hired an expert consultant, Frank Alampi, to investigate and evaluate MCL's claim. Filing 44 at 328, 364. Alampi has degrees in mechanical engineering and business and is a surety-claims consultant who has consulted on hundreds of construction projects. Filing 44 at 363-64. Alampi conferred with both MCL and Carson regarding the work remaining to be done and arranged for Carson to deliver material in its possession to the jobsite to be used by Creative Structures in completing the project. Filing 44 at 328-29. Alampi also conferred with Carson regarding Creatives Structures’ proposed fees and Scott Carson opined that "[t]he hourly rates for the scope of work ... were fair and reasonable." Filing 44 at 330.

After Creative Structures had completed the project, MCL sent NAS a demand for $174,050.95, which it claimed represented the total cost of additional granite material, Creative Structures’ work, and MCL's own labor in completing the project. Filing 44 at 94-122, 182. Alampi twice emailed a copy of MCL's demand and supporting documents and asked for Carson's input regarding the costs and if Carson felt it had any defense to payment. Filing 44 at 123, 153, 331. Carson never responded. Filing 44 at 384. Instead, Alampi conducted his own review of MCL's demand and disputed the reasonableness of some of the costs, including a portion of the work that he believed was outside the scope of Carson's original contract and a portion of MCL's labor costs which he found excessive. Filing 44 at 91, 374-75, 384. Alampi negotiated with MCL and eventually NAS settled its claim with MCL for a reduced amount of $125,637.64. Filing 44 at 5, 86-88.

In December 2017, NAS also received a claim against the payment bond it had issued with Cold Spring Granite as obligee. Filing 44 at 83. Cold Spring claimed that Carson had failed to pay it $9,664 for four granite slabs Carson had ordered and picked up in April 2016, and $3,690 for four additional granite slabs which Carson had ordered but never picked up. Filing 44 at 216. Cold Spring also produced correspondence with Carson in which Carson repeatedly promised to pay the outstanding $9,664, but never followed through. Filing 44 at 221, 227, 341.

Upon receiving Cold Spring's demand, Alampi sent a copy to Carson and asked for its response. Filing 44 at 282. Carson informed Alampi that it would pay Cold Spring in order to resolve the dispute. Filing 44 at 282, 341. Carson claims not to recall if it paid Cold Spring in January 2018, but it appears it did not as Cold Spring continued to demand this amount. Filing 44 at 341. Later, Carson's attorney also offered to settle with Cold Spring for $9,664, which offer Cold Spring accepted, but again, Carson did not pay. Filing 44 at 341, 405-08. NAS eventually settled with Cold Spring for $9,664. Filing 44 at 5, 89.

On July 5, 2018, after having settled the bond claims with both MCL and Cold Spring, NAS made a demand upon Carson for payment $161,900.71 pursuant to the indemnification agreement. Filing 44 at 387-88. NAS claimed this amount consisted of the $125,637.64 and $9,664 payments made to MCL and Cold Spring respectively, $16,285.13 paid to Alampi his time and costs investigating the bond claims, and $10,313.94 expended in legal feels during the investigation and settlement of the bond claims. Filing 44 at 5-6, 387-88. Carson refused to pay NAS and NAS filed the present suit asserting breach-of-contract and subrogation causes of action. Filing 44 at 6; Filing 1. Both parties have moved for summary judgment.

III. ANALYSIS
A. Standard of Review

"Summary judgment is appropriate when the evidence, viewed in the light most favorable to the nonmoving party, presents no genuine issue of...

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