Washington Supreme Court Affirms Brightwater Decision Regarding Application of Olympic Steamship to Sureties

by Stoel Rives LLP
Contact

On July 6, 2017, the Washington Supreme Court confirmed that the equitable rule announced in Olympic Steamship—providing for attorney fees where the insurer compels the insured to take legal action—applies to performance bond sureties on public projects.[1]  In King County v. Vinci Construction Grands Projects/Parsons RCI/Frontier-Kemper, the Court affirmed the trial court’s award of over $14 million in attorney fees and costs against sureties of a public works contract.[2]

In 2006, King County contracted with a joint venture of three construction companies to build the piping/conveyance system for the new Brightwater wastewater treatment project.  The joint venture contractor submitted a performance bond from five surety companies.  Under the contract, if the contractor was in default, the sureties were obligated to step in and remedy the default.  When the project was delayed, King County declared the contractor in default and asked the sureties to cure.  They refused, claiming that the contractor was not in default.

At trial, the sureties adopted the contractor’s defense that no default had occurred. The jury, however, sided with King County, awarding $130 million in damages (the largest commercial jury verdict in Washington state history) against the contractor and sureties, jointly and severally.  Relying on Olympic Steamship and Colorado Structures,[3] which applied the Olympic Steamship rule to sureties, the trial court awarded over $14 million in attorney fees and costs against the sureties (believed to be the largest attorney fee award in Washington history).  The trial court rejected the sureties’ argument that King County’s fees should be allocated between “contractor” and “surety” issues on the ground that, by adopting all of the contractor’s defenses, the sureties had prevented such an allocation.

The contractor and sureties appealed the award of fees, arguing that RCW 39.04.240[4] provided the exclusive fee remedy for public works contracts, thus barring the equitable rule announced in Olympic Steamship.  They further argued that, even if Olympic Steamship applied, the fees should be segregated between the contractor and surety claims.  The Washington Court of Appeals affirmed the trial court’s judgment in its entirety.[5]  The Washington Supreme Court granted the sureties’ petition for review.[6]

The Supreme Court held that the rule announced in Olympic Steamship applied to the suretyship context, affirming its prior plurality opinion in Colorado Structures.  Moreover, the Court held that the fee remedy in RCW 39.04.240 did not exclude other remedies in public works contracts.

Thus, the Court affirmed the award of fees because King County was forced to assume the burden of legal action to obtain the benefit of the performance bond. Moreover, the trial court did not abuse its discretion in declining to segregate the attorney fees because the sureties adopted the entirety of the contractors’ defenses against breach, and the issues of breach and coverage under the bond shared a “common core of facts.”

This case has important implications for contractors and performance bond sureties. Sureties will face the prospect of attorney fees in cases where, as here, the owner is compelled to take legal action to obtain the benefit of the bond.  Moreover, sureties may be jointly and severally liable for the full award of fees where the breach and coverage claims are intertwined and indistinguishable.

Congratulations to the construction and design, litigation, and appellate teams at the Seattle office of Stoel Rives LLP for their impressive work on this historic decision.

[1] Olympic S.S. Co. v. Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991) (plurality opinion).

[2] King Cty. v. Vinci Constr. Grands Projects/Parsons RCI/Frontier-Kemper, No. 92744-8, 2017 WL 2876138 (Wash. July 6, 2017) (en banc).

[3] Colo. Structures, Inc. v. Ins. Co. of W., 161 Wn.2d 577, 598, 167 P.3d 1125 (2007).

[4] RCW 39.04.240 applies the attorney fee award provisions of RCW 4.84.250 through RCW 4.84.280 to public works contracts.

[5] King Cty. v. Vinci Constr. Grands Projects/Parsons RCI/Frontier-Kemper, 191 Wn. App. 142, 184, 189, 364 P.3d 784 (2015).

[6] King Cty. v. Vinci Constr. Grands Projects/Parsons RCI/Frontier-Kemper, 186 Wn.2d 1008, 380 P.3d 459 (2016).

 

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.

© Stoel Rives LLP | Attorney Advertising

Written by:

Stoel Rives LLP
Contact
more
less

Stoel Rives LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.