SAFECO GRANTED COLLATERAL SECURITY BUT MUST SUBTRACT CLAIMS ACTUALLY PAID
The case involves the interpretation and enforcement of a collateral security provision of an indemnification agreement relating to Safeco’s service as a surety on construction contracts. Following the District Court’s grant of plaintiff Safeco’s motion for summary judgment regarding its right to collateral security and the Second Circuit’s subsequent dismissal of an appeal for lack of jurisdiction, defendant M.E.S. filed a motion for reconsideration on the grant of summary judgment. M.E.S. argued that a recent document production showed that plaintiff’s collateral security demand is not based on estimated loss exposure, but rather on “actual claimed losses,” which are treated differently under the terms of the parties’ indemnity agreements.
The court cited a number of authorities, including reinsurances cases, which dictate that where claims have actually been paid, Safeco has an adequate remedy at law in the enforcement of the indemnification clause and is not entitled to the equitable remedy of specific performance of the collateral security provision. The District Court directed Safeco to provide the Court with its collateral security demand in an amount net of paid claims. Safeco Ins. Co. of Am. v. M.E.S., Inc., Case No. 09-3312 (E.D. N.Y. Oct. 4, 2010).
This post written by John Black.
