Pinner Construction, In Lawsuit Against Arch Insurance Manager, Alleges Manager Committed Fraud After Arch Denied Performance Bond Coverage

ANAHEIM, Calif., Dec. 10, 2020 /PRNewswire/ -- Pinner Construction, a leading public building construction company based in Anaheim, California, has sued an Arch Insurance Company manager for allegedly fraudulent representations concerning Pinner's right to bring in substitute subcontractors to complete the HVAC-plumbing work after the subcontractor on which Arch underwrote a performance bond allegedly walked off the job.

An arbitrator subsequently found that the subcontractor was unlicensed in California and thus defaulted under the subcontract terms, despite the fact Arch underwrote the subcontractor performance bond. Yet, as Pinner alleged in its case, Arch still unjustifiably refused to honor the full payment on the bond.

In its lawsuit, Pinner alleges that an Arch manager told Pinner it could bring in substitute subcontractors to finish the work on HVAC-plumbing for a branch of a California public hospital on which Pinner was working. But then Arch allegedly repudiated that representation and used the substitution of the new subcontractors as the basis to deny Pinner's claim on the defaulting subcontractor's insurance bond. 

Pinner's separate civil suit outside of the arbitration claimed fraudulent inducement by the Arch manager, who is alleged to have initially said Pinner could bring in the substitute contractors before being countermanded by Arch senior management. 

Pinner also alleges, as part of its fraud case against the Arch manager, that after the complaint was filed, the apparent owner of the subcontractor that defaulted, Alan Othman, told two Pinner witnesses that Arch management told him to lie. Othman allegedly told these two witnesses that he was told he should call himself a "consultant" and not disclose the truth – that Othman was the "indemnitor" of Arch's policy with Pinner.

Pinner also sent a letter to the National Association of Insurance Commissioners ("NAIC") about these facts and concerns about possible bad faith and fraud by Arch in its litigation against Arch. See the letter here. 

NAIC is the national standard-setting and regulatory support organization for all state insurance commissioners. The letter asked for an investigation if the verdict shows that Arch committed fraud, and thus, could affect its license status in each state.    

In its letter to NAIC, Pinner also pointed to other instances it had learned from other private attorneys whose clients were allegedly denied performance bond claims by Arch, resulting in litigation, legal expenses, and settlements. A spokesman for Pinner said that if this is an intentional pattern and practice Arch utilizes to avoid paying on its bond fully, then that could constitute fraudulent bad faith and possible loss of state insurance licenses.

"Throughout its 100-year-plus history, my client, Pinner Construction, has never once had to initiate legal proceedings against an insurance company on a performance bond," said Lanny J. Davis, attorney for Pinner Construction.

See Claims Journal article from December 9, 2020 here.

Contact: Alex Lange
[email protected]
(202) 480-4309

SOURCE Lanny Davis