PHILADELPHIA – A federal judge has entered a multimillion-dollar default judgment plus interest against a Delaware man in an insurance-based breach of contract lawsuit.

On Nov. 23, Judge Jan E. DuBois ruled judgment was entered in favor of plaintiff Arch Insurance Company and against defendant John O’Brien in the sum of $3,489,270.17, plus post-judgment interest of $821.92 per day, based on the contractual interest rate provided in the indemnity agreement.

This case arises out of a contractual dispute over an indemnity agreement. Defendant O’Brien and others agreed to indemnify plaintiff Arch Insurance Company for the issuance of a large performance bond, but O’Brien did not meet his financial obligations under the indemnity agreement, or respond to plaintiff’s complaint seeking reimbursement.

On or about March 16, 2011, O’Brien and other signatories entered into an indemnity agreement in Delaware, in favor of plaintiff. The indemnity agreement was for plaintiff to issue Performance Bond No. SU1105638, connected to ongoing construction work at One World Trade Center in New York Center, in the initial penal sum of $57,376,145.00, naming Falcon Steel Company as principal.

Falcon then defaulted on its obligations under the Performance Bond.

Under the agreement, O’Brien agreed to exonerate and indemnify plaintiff from and against all losses and expenses, including attorneys’ fees, that plaintiff sustained as a result of executing the Performance Bond.

Per the terms, “(a) O’Brien was jointly and severally liable with the other indemnitors for any obligation, (b) Plaintiff was entitled to settle any claim that was brought against it on the Bond and the decision was binding on the indemnitors, and (c) Plaintiff was entitled to pre- and post-judgment interest at the contractual rate of 10 percent per annum or the maximum rate permitted by applicable law if less than 10 percent.”

After Falcon’s failure to fulfill its obligations, plaintiff entered into a Settlement Agreement with the beneficiary under the Performance Bond. Plaintiff paid the Performance Bond beneficiary $3,000,000 on Dec. 29, 2014 and incurred attorneys’ fees and costs to investigate, defend, and resolve the claim, and enforce the indemnity agreement – which presently total $128,858.17.

The plaintiff sought to recover those funds and contacted O’Brien on numerous occasions to be reimbursed for those expenditures, to no avail.

DuBois said O’Brien’s joint and several liability for contractual indemnification through a default judgment based on Federal Rule of Civil Procedure 55, though it did not establish the amount of damages necessary to compensate for said liability.

“First, plaintiff is entitled to recover the $3,000,000 payment made to the beneficiary under the Performance Bond in settlement of the underlying claim on the Bond. Additionally, plaintiff is entitled to reimbursement for the $128,858.17 it has paid in legal fees and other expenses to resolve the underlying Performance Bond claim and enforce the Indemnity Agreement,” DuBois said.

“Defendant O’Brien’s liability is reduced by the $30,000 recovered from other indemnitors. The Court awards plaintiff $3,098,858.17 as indemnification for its settlement payment and legal fees and expenses related to the settlement, and enforcement of the indemnity agreement,” DuBois added.

DuBois further outlined the plaintiff only sought pre-judgment interest on the $3,000,000 settlement payment, with such interest having accumulated to $390,412.00 as of Nov. 23.

“The Court awards plaintiff $390,412.00 in pre-judgment interest. The Court also awards plaintiff interest from the date of this order at the per diem rate of $821.92,” DuBois said.

Therefore, DuBois entered a final judgment of $3,489,270.17, plus daily of interest $821.92.

The plaintiffs are represented by Patrick R. Kingsley and Chelsea Biemiller of Stradley Ronon Stevens & Young, in Philadelphia.

U.S. District Court for the Eastern District of Pennsylvania 2:16-cv-01983

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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