Dave Hammargren and Inga Schuchard Win a Significant Construction Industry Decision

The U.S. Eighth Circuit Court of Appeals affirmed a significant decision in favor of Travelers Casualty and Surety Company of America, represented by David Hammargren and Inga Schuchard. An Iowa federal district court granted summary judgment to Travelers in July 2017. In the underlying lawsuit, the plaintiff, a water district, claimed that ultraviolet disinfectant equipment installed during construction of a bonded wastewater treatment project was defective, was never brought to a fully operational state, and claimed that Travelers, which had taken over the project after the original contractor defaulted, breached its obligations under a performance and maintenance bond as well as the principal’s construction agreement.

The district court determined that the plaintiff was unable to prove the equipment was defective, and also concluded that Travelers fulfilled its obligations under the construction agreement and the performance and maintenance bond. Importantly, the district court ruled that the plaintiff’s project engineer could not reject the equipment years after the engineer had declared the project substantially complete, and months after the warranty period had expired, without any determination that the equipment was defective. The district court dismissed all claims against Travelers, and the plaintiff appealed.

The Eighth Circuit Court of Appeals affirmed the district court’s decision.  The appellate court confirmed that the plaintiff was unable to prove a defect, and was subsequently unable to unilaterally reject the equipment under the terms of the construction agreement.  Dave Hammargren noted, “This decision reaffirms that a project engineer does not have unlimited power to reject work that was approved and certified as complete by the engineer years earlier.”

The order can be found here:  http://media.ca8.uscourts.gov/opndir/19/01/172732P.pdf