The opinion of the court was delivered by: David G. Larimer United States District Judge
Vincenzo LaBarbera, a/k/a Vincent LaBarbera, individually and d/b/a LaBarbera Excavating and LaBar Enterprises of Rochester, Inc., (hereinafter "LaBarbera") was the general contractor on a construction project for the Monroe County Water Authority ("Water Authority"). Plaintiff, Shannon Kennerson, d/b/a Kennerson Lawn & Landscaping Associates ("Kennerson") was engaged by LaBarbera as a subcontractor on the project. When LaBarbera failed to timely pay Kennerson for work performed, Kennerson commenced this action for labor and materials in New York State Supreme Court. The Internal Revenue Service was also named as a defendant, and it removed the action to this court.
In addition to LaBarbera, Kennerson named Selective Insurance Company of America ("the Surety") as a defendant. The Surety previously executed a performance bond on the project guaranteeing payment of labor and materials. Because LaBarbera defaulted on some of its obligations, the Surety made payments on the bond, including a $35,000 payment to Kennerson.
Pursuant to an Indemnity Agreement with LaBarbera, the Surety seeks indemnification from LaBarbera for payments that the Surety made to Kennerson on the performance bond. On its cross-claim for this relief against LaBarbera, the Surety now moves for summary judgment.
In pertinent part, the Indemnity Agreement provides as follows:
3. INDEMNITY; PAYMENTS; LOANS; EVIDENCE. The Indemnitors hereby jointly and severally covenant, promise and agree to exonerate, indemnity and save harmless Surety . . . from and against any and all liability, loss, cost, damage, and expense of whatsoever kind of nature . . . which Surety may sustain, incur be put to or to which it may be exposed (1) be reason of having executed any Bod or other instrument . . . (2) by reason of the failure of any one or more of the Indemnitors to perform or comply with the promises, covenants and conditions of this Agreement or, (3) in enforcing any of the promises, covenants of conditions of this Agreement. The liability of the Indemnitors shall extend to and include the amount of all payments, together with interest thereon at the rate of prime as published by the Wall Street Journal . . . plus two points from the date of such payments, made by Surety under Surety's belief that: (1) Surety was or might be liable therefor or (2) the payments were necessary or advisable to protect any of Surety's rights or to avoid or lessen Surety's liability or alleged liability . . . Indemnitors agree that the vouchers or other evidence of such payments sworn to by a duly authorized representative of Surety shall be prima facie evidence of the fact and extent of the liability of the Indemnitors to Surety.
7. SETTLEMENTS AND COMPROMISES. Surety shall have the right to adjust, settle or compromise any claim, demand, suit or judgment upon any of the Bonds procured or executed by it and Surety's decision thereon shall be final and binding upon the Indemnitors . . .
Indemnity Agreement, Dkt. #26, Att. 2, Exh. A.
Subsequent to the execution of the bonds, the Surety received claims from several suppliers and subcontractors on the project whom LaBarbera had failed to pay. Upon investigation and verification of their claims, the Surety duly paid the suppliers and subcontractors a net sum of $99,541.90. This figure included an offset of $11,250.00, which represented part of a $38,994.96 sum received by the Surety from the construction project owner. (While the Surety affirms that the remainder of that sum was returned directly to LaBarbera in May 2003, LaBarbera disputes that allegation).
After this action was filed, the Surety repeatedly attempted to gain information from LaBarbera, through their counsel, to assist with the evaluation and defense of plaintiff's claims. The Indemnitors -- specifically Mr. LaBarbera -- proved to be unreachable, either by the Surety or by their own counsel. Based on review by its own attorney and its analysis of the Kennerson claims, and given the lack of any assistance from LaBarbera in responding to the claim and the fast-approaching trial date in New York State Supreme Court, where the action was venued at the time, the Surety elected to settle the Kennerson claim. Although Kennerson's claim totaled more than $41,000, the Surety negotiated a settlement of Kennerson's claim in the amount of $35,000, which was duly paid in consideration for a complete release of claims by Kennerson.
Relying on the terms of the Indemnity Agreement, the Surety now requests summary judgment against LaBarbera with respect to its second and fourth cross-claims, which respectively relate to the net loss of $80,011.47 in payment on the Labor and Materials Payment and Performance bonds, and the $35,000 settlement payment to plaintiff. The Surety further moves for summary judgment dismissing the cross-claim asserted against it by the defendant Water Authority, on the grounds that the Water Authority is not a beneficiary under the Labor and Materials Payment and Performance bonds.
For the reasons set forth below, the Surety's ...