Am. Home Assurance Co. v. Larkin General Hosp.

Am. Home Assurance Co. v. Larkin General Hosp.

Opinion

 [*196]  McDONALD, J.

We have for review American Home Assurance Co. v. Larkin General Hospital, Ltd., 571 So. 2d 124 (Fla. 3d DCA 1990), in which the district court certified direct conflict with United States Fidelity & Guaranty Co. v. Gulf Florida Development Corp., 365 So. 2d 748 (Fla. 1st DCA 1978). ¹ The issue is whether a surety on a performance bond can be held liable for consequential delay damages caused by the contractor's default. We hold that ] a surety cannot be held liable for delay damages due to [**2]  the contractor's default unless the bond specifically provides coverage for delay damages. ²

Larkin General Hospital, Limited (Larkin) entered into a contract with a contractor, H Corporation/Cazo-Ardivan Joint Venture II (H Corporation), for the construction of improvements at the Larkin General Hospital in Dade County. American Home Assurance Company (American) executed and issued a performance bond to Larkin. The construction contract required the work to commence on or about January 1, 1983 and to be substantially completed no later than May 31, 1984. As of May 31, 1984, the project was slightly over eighty percent [**3]  complete. Larkin, however, did not terminate the contract at this time. On November 23, 1985, eighteen months after the projected completion date, a dispute arose between Larkin and H Corporation. Larkin immediately terminated the contract and gave American notice of the default. American elected not to complete the project, and Larkin had the contract completed using another contractor.

In February 1986, Larkin brought suit against American for breach of the performance bond. Subsequently, H Corporation, pursuant to the terms of the construction contract, filed a demand for arbitration. In March of 1988, the arbitration panel entered a net award against H Corporation and in favor of Larkin in the amount  [*197]  of $ 1,860,545. Larkin filed an application to confirm the arbitration award against H Corporation and American which the trial court granted. The trial court held that American's liability to Larkin included delay damages. The trial court entered a corrected final judgment for $ 2,314,579.58 and, thereafter, assessed attorney's fees against American for amounts incurred by Larkin in the arbitration confirmation proceedings.

On appeal the Third District affirmed the trial [**4]  court but certified conflict with the First District Court of Appeal's decision in Gulf Florida. The First District held in Gulf Florida that, under the terms of a performance bond, a surety was not liable for damages caused by delays in completing the contract. 365 So. 2d at 751.

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