Zurich American Insurance Co., co-plaintiffs sue Puerto Rican construction firms
The dispute involves alleged breaches of indemnity agreements linked to a $103.6 million Puerto Rico Aqueduct & Sewer Authority infrastructure project.
A high-stakes legal dispute involving construction projects and multimillion-dollar liabilities has emerged as Zurich American Insurance Co., along with Fidelity and Deposit Co. of Maryland, XL Specialty Insurance Co., and XL Reinsurance America, filed a lawsuit in the U.S. District Court for the District of Puerto Rico.
The plaintiffs accuse several Puerto Rican companies, including L.P.C.&D. Inc., Las Piedras Construction Corp., and Caribbean Raceway Park, of breaching indemnity agreements tied to a $103.6 million Puerto Rico Aqueduct & Sewer Authority (PRASA) infrastructure project in Naguabo.
These agreements, dating back to 2004, secured performance and payment bonds for the project to ensure contractor obligations and completion.
Central to the litigation are performance and payment bonds issued by the insurance firms. Zurich and XL allege that the defendants failed to indemnify them for losses and provide required collateral.
The dispute was triggered by Soletanche Inc., a subcontractor, which filed claims for unpaid work. This led to a series of judgments against the contractor and the sureties.
Puerto Rican appellate courts upheld a ruling awarding Soletanche more than $2.3 million in damages, intensifying the plaintiffs’ liabilities.
The plaintiffs assert that the defendants have:
- Failed to pay $5.6 million in collateral demanded to secure losses.
- Refused to indemnify costs associated with defending against Soletanche’s claims.
- Denied access to financial records required under the indemnity agreements.
In their complaint, the sureties emphasize their exposure to significant ongoing losses, estimating liabilities exceeding $5.6 million. These include attorneys’ fees, investigative costs and projected future expenses. They seek specific performance, requiring the defendants to deposit funds and provide access to financial records as stipulated in the agreements.
To protect their position, the plaintiffs also seek injunctive relief, including asset freezes and liens on the defendants’ properties, to secure funds for satisfying judgments and liabilities. Additionally, they are demanding full reimbursement for all losses and expenses incurred related to the PRASA project.
