Preventing And Defending “Strike Suits” Against Sureties And Fidelity Carriers

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Introduction -

Recent years have seen an increase in what can be described as “strike suits” against sureties — i.e., lawsuits designed primarily to recover inflated attorney fees from a surety as part of an otherwise routine bond claim. This has become commonplace across the country in jurisdictions where attorney fees are recoverable by bond claimants. The question of when bond claimants are entitled to attorney fees is beyond the scope of this paper which will presume at least an argument in favor of attorney fees, and will use the Florida statutory scheme as an example. See, e.g., Florida Statutes §627.428(1) (authorizing attorney fee award in favor of an insured, which in Florida includes a bond claimant).

Experience has shown an easily identifiable pattern for these types of “strike suits.” Early detection of potentially problematic litigation is very beneficial because steps can be taken to mitigate the abusive tactics designed to prolong and extend routine claims litigation. While much of the advice in this paper is just a reinforcement of good claims handling practices, adhering to those best practices is crucial when an aggressive plaintiff’s attorney has targeted your bond.

Aggressive attorney fee claims occur across the entire range of bond types, although motor vehicle dealer bonds and other consumer-related bonds seem to be frequent targets. One explanation for this perceived phenomena is that aggressive “consumer lawyers” tend to lead this charge against sureties — as opposed to lawyers more focused on construction industry clients. However, payment bond “strike suits” are more common now, and any bond type is potentially at risk.

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Published In: Civil Procedure Updates, Civil Remedies Updates, General Business Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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