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WESTCHESTER FIRE INSURANCE COMPANY, v. ANNEX GENERAL CONTRACTING, INC. et al

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Case Number: 
2:14-cv-05747 Search Pacer
ACE Group party(s): 
Court Type: 
Federal
US District Court: 
Eastern District of New York
Date Filed: 
Oct 1 2014

Plaintiff, Westchester Fire Insurance Company (hereinafter referred to as
"Westchester" or "Surety"), as and for its Complaint in the above-captioned civil action,
alleges the following:

JURISDICTION AND VENUE
1. This Court has subject matter jurisdiction over this matter pursuant to 28
U.S.C. § 1332 in that this is an action between citizens of different states and the
amount in controversy exceeds $75,000.00, exclusive of interest and costs.
2. Venue is proper in this Court pursuant 28 U.S.C. §1391 (b)(1) because a
substantial part of the events or omissions giving rise to the claim occurred in this
district.
THE PARTIES
3. Westchester is a corporation organized and existing under the laws of the
State of Pennsylvania and is duly authorized to conduct business within the State of
New York as a Surety, and to execute and issue Surety Bonds in the State of New York.
4. Upon information and belief, Defendant Annex General Contracting Inc.
("Annex"), is a corporation organized and existing under the laws of the State of New
York.
5. Upon information and belief, Steven J. Saggese (hereinafter referred to as
"Saggese") is an individual residing at 101 Riverside Dr., Suffolk, VA 23435.

THE INDEMNITY AGREEMENT
6. Annex was at all relevant times engaged in the construction business in
connection with construction projects. Annex was required to provide performance and
payment bonds in connection with its construction contracts for public projects.
7. On or about July 11, 2006, the defendants Annex and Saggese in partial
consideration of and as an inducement to Westchester for the execution by Westchester
of bonds or undertakings, did duly execute an Agreement of Indemnity, by the terms of
which Defendants undertook and agreed, jointly and severally, among other things, as
follows that:
SECOND: INDEMNITY - The Principals and Indemnitors shall
exonerate, indemnify, and keep indemnified the Surety from and
against any and all liability for losses and/or expenses of
whatsoever kind or nature (including, but not limited to, interest,
court costs, and counsel fees) and from and against any and all
such losses and/or expenses which the Surety may sustain and
incur: (1) By reason of having executed or procured the execution
of the Bonds, (2) By reason of the failure of the Principals or
Indemnitors to perform or comply with the covenants and conditions
of this Agreement or (3) In enforcing any of the covenants and
conditions of this Agreement.
See, Indemnity Agreement, U SECOND, annexed hereto as EXHIBIT "A".
8. Pursuant to the Agreement of Indemnity, the Indemnitors further agreed,
jointly and severally:
In the event of any payment by the Surety the Principals and
Indemnitors further agree that in any accounting between the
Surety and the Principals, or between the Surety and the
Indemnitors, or either or both of them, the Surety shall be
entitled to charge for any and all disbursements made by it in
good faith in and about the matters herein contemplated by
this Agreement under the belief that it is or was liable for the
sums and amounts so disbursed, or that it was necessary or
expedient to make such disbursements, whether or not such
liability, necessity or expediency existed..."
See, ]d. U SECOND.
9. Following the Indemnitors' execution of the Agreement of Indemnity,
Annex entered into at least two construction contracts (the "Bonded Contracts") and
obtained certain payment and/or performance bonds from Westchester in connection
with the construction projects (the "Bonded Projects").

AS AND FOR A FIRST CAUSE OF ACTION
10. Westchester repeats and realleges the allegations set forth in paragraphs
1 through 9 as though set forth at length herein.
11. On or about November 28, 2005, defendant Annex as contractor and the
Roosevelt Union Free School District as owner entered into a construction project
known as "New Ulysses Byas Elementary School Sitework/Asbestos Abatement and
Demolition Contract 5 - UBES -1 SED Project: 28-02-08-03-0-033-001" (hereinafter
referred to as the "New Ulysses" Project).
12. The New Ulysses Byas Elementary School is located in Nassau County.
13. At the request of Defendants, Westchester, as Surety, executed a
Performance Bond and a Payment Bond No. K07179480 each in the penal sum of
$1,399,999.93 naming Annex as Principal and for the benefit of the Roosevelt Union
Free School District ("District") as obligee.
14. The Bond was made, executed and delivered by Westchester, as Surety,
in consideration of and in reliance upon, among other things, the written Agreement of
Indemnity.
15. Defendant Annex failed to complete the New Ulysses Project.
16. On or about November 5, 2009, the District terminated Annex from the
New Ulysses Project and required Westchester to perform and complete the project
pursuant to its performance bond obligations.
17. Westchester was required to engage with a completion contractor and
negotiate terms of a takeover agreement with the District pursuant to its performance
bond obligations, resulting in a performance bond loss in the sum of $140,884.37.
18. Annex also failed to pay certain suppliers and/or subcontractors for labor
and materials used on the project.
19. Various vendors for the New Ulysses Project filed claims with Westchester
for labor, materials, supplies and/or services provided to defendant Annex. Westchester
made substantial payments, including direct payments to subcontractors and suppliers,
who had filed the claims, resulting in a payment bond loss in the sum of $50,000.
20. On July 10, 2013, counsel for Westchester sent a letter demanding that
the defendant indemnitors Annex and Saggese pay for the losses Westchester
sustained. No response was received.
21. By reason of having executed Bond No. K07179480, Westchester is
entitled to indemnification and exoneration of bond losses in the sum of $190,884.37
plus statutory interest pursuant to the CPLR for which Defendants Annex and Saggese
are liable to Westchester under the aforesaid Agreement of Indemnity.

AS AND FOR A SECOND CAUSE OF ACTION
22. Westchester repeats and realleges the allegations set forth in paragraphs
1 through 21 as though set forth at length herein.
23. On or about November 20, 2008, defendant Annex as contractor and the
New York Department of Transportation, as owner entered into a construction project
known as "Preventive Drainage Maintenance, Clean, Repair, Replace F.A. PORoj. No.
L240-0808-053" in Suffolk County (hereinafter referred to as the "Preventive Drainage"
Project).
24. At the request of Defendants, Westchester, as Surety, executed a
Performance Bond and Labor and Material Bond No. K08223853 each in the penal
sum of $852,265.00 naming Annex as Principal and for the benefit of the Department of
Transportation (hereinafter referred to as "DOT") as obligee.
25. The Bond was made, executed and delivered by Westchester, as Surety,
in consideration of and in reliance upon, among other things, the written Agreement of
Indemnity.
26. Defendant Annex failed to complete the Preventive Drainage Project.
27. The DOT gave Annex repeated chances to return and complete the
Preventive Drainage project, including holding two hearings in Albany, but Annex failed
to progress work in the 26 months since the contract award.
28. On or about June 24, 2011, the DOT terminated Annex from the
Preventive Drainage Project and required Westchester to perform and complete the
project pursuant to its performance bond obligations.
29. Westchester was required to engage with a completion contractor
pursuant to its performance bond obligations, resulting in a performance bond loss in
the sum of $525,845.32.
30. Westchester recovered the sum of $131,850.99 on the Preventive
Drainage Project, thereby resulting in net bond losses in the sum of $394,019.33.
31. On July 10, 2013, counsel for Westchester sent a letter demanding that
the defendant indemnitors Annex and Saggese pay for the losses Westchester
sustained. No response was received.
32. By reason of having executed Bond No. K08283853, Westchester is
entitled to indemnification and exoneration of bond losses in the sum of $394,019.33
plus statutory interest pursuant to the CPLR for which Defendants Annex and Saggese
are liable to Westchester under the aforesaid Agreement of Indemnity.

AS AND FOR A THIRD CAUSE OF ACTION
33. Westchester repeats and reiterates each and every allegation contained in
paragraphs 1 through 32 as though herein at length set forth.
34. Saggese executed an Agreement of Indemnity whereby he agreed to
personally indemnify Westchester for all losses and/or expenses of whatsoever kind or
nature, including interest, court costs and counsel fees as well as reserves established
by the Surety.
35. Westchester retained the law firm of Gottesman, Wolgel, Malamy, Flynn &
Weinberg, P.C., now known as Gottesman, Wolgel, Flynn, Weinberg & Lee, P.C.
(hereinafter referred to as "Gottesman") in connection with the New Ulysses and
Preventive Drainage Projects.
36. Westchester, as Surety is entitled to be indemnified, exonerated and held
harmless by virtue of its status as Surety for all attorney fees and expenses to date of
not less than $130,238.93 which includes $128,927.85 for Gottesman legal fees and
expenses, $976.88 for Legal Solutions bill review, and $334.20 for Ikon copy services.
37. Westchester hired Surety & Construction Services, an engineering
consultant firm in connection with the New Ulysses and Preventive Drainage Projects.
As a result, Westchester incurred expenses in the sum of $55,487.03 for Surety &
Construction Services' professional assistance.
38. Westchester hired Smart Devine, a forensic accounting services firm to
assist Westchester in completing the New Ulysses and Preventive Drainage Projects.
Westchester incurred expenses in the sum of $1,742.16 for Smart Devine's professional
assistance.
39. Westchester also incurred bond loss expenses in the sum of $395.46 for
travel expenses and reimbursements to Ace American Insurance for travel to the DOT
hearing in Albany and expenses in the sum of $210 for Worldwide search results.
40. By reason of having executed Bond No. K07179480 and Bond No.
K08283853, Westchester is entitled to indemnification and exoneration of all fees and
expenses in the sum of $188,073.58 plus statutory interest pursuant to the CPLR for
which Defendants Annex and Saggese are liable to Westchester under the aforesaid
Agreement of Indemnity.

AS AND FOR A FOURTH CAUSE OF ACTION
41. Westchester repeats and reiterates each and every allegation contained in
paragraphs 1 through 40 as though herein at length set forth.
42. By reason of having executed the aforesaid bonds, in the course of
Westchester's responses to the claims made against the bonds, and in enforcing its
rights under the Agreement of Indemnity and for the instant lawsuit herein, Westchester
will continue to incur attorneys fees and expenses for which Annex and Saggese are
liable to Westchester under the aforesaid Agreement of Indemnity.
43. Westchester, as Surety, is entitled to be indemnified, exonerated and held
harmless by virtue of its status as Surety for all attorney fees and expenses for an
amount not yet determined plus interest but are continuing to be incurred, including but
not limited to commencing the within lawsuit.

AS AND FOR A FIFTH CAUSE OF ACTION
44. Westchester repeats and reiterates each and every allegation contained in
paragraphs 1 through 43 as though herein at length set forth.
45. Annex and Saggese executed an Agreement of Indemnity whereby they
agreed to personally indemnify the Surety for all losses and/or expenses of whatsoever
kind or nature, including interest.
46. Based on the foregoing, Westchester is entitled to judgment against the
Defendants Annex and Saggese jointly and severally in the sum of at least
$772,977.28, comprising of $190,884.37 in New Ulysses bond losses, $334,019.33 in
Preventive Drainage bond losses and $188,073.58 in fees and expenses, plus interest
from the date Westchester made the last payment bond loss on June 14, 2012.

AS AND FOR A SIXTH CAUSE OF ACTION
47. Westchester repeats each and every allegation set forth in paragraphs 1
through 46 of its Complaint as if set forth at length herein.
48. As between Westchester and Annex, Westchester is secondarily obligated
under the Bonds, while Annex is primarily obligated under the Bonds, and otherwise
owes a duty to Westchester to procure the discharge of all obligations arising under the
Bonds.
49. Annex has failed and refused, and continues to fail and refuse, to satisfy
the obligations to Westchester arising under the Bonds.
50. Westchester is entitled to be exonerated and indemnified by Annex for any
and all losses incurred under the Bonds.
8
51. As a result of Annex's failure to honor its obligations arising under the
Agreement of Indemnity and the Bonds, Westchester has sustained and will continue to
sustain damages in at least the principal amount of $772,977.28.

AS AND FOR A SEVENTH CAUSE OF ACTION
52. Westchester repeats each and every allegation set forth in paragraphs 1
through 51 of its Complaint as if set forth at length herein.
53. As a result of having executed the Bonds, and as a result of the defaults of
Annex under its contracts for which the Bonds were furnished, Westchester has been
required to make payments to satisfy the obligations of Annex to the Roosevelt Union
Free School District and DOT as well as subcontractors and suppliers of Annex for the
New Ulysses and Preventing Drainage Projects.
54. To the extent that Westchester has made payments to extinguish Annex's
debts and obligations arising from the contracts for which the Bonds were furnished,
Westchester has, and will, become subrogated to the rights of, among others, those
whom it has paid in connection with the Bonds.
55. As a result, Annex's failure to honor its obligations under the contracts for
which the Bonds were issued, Westchester has sustained damages in the sum of not
less than the amount of $772,977.28.
WHEREFORE, Westchester Fire Insurance Company respectfully requests
judgment as follows:
i. on the First Cause of Action in the sum of $190,884.37 plus interest
for bond losses on the New Ulysses Project;
ii. on the Second Cause of Action the sum of $394,019.33 plus
interest for bond losses on the Preventive Drainage Project;
iii. on the Third Cause of Action for attorneys fees and expenses of not
less than $188,073.58;
iv. on the Fourth Cause of Action for attorneys fees and expenses not
yet determined plus interest;
v. on the Fifth Cause of Action for interest pursuant to the CPLR
running from the date of the last bond payment on June 14, 2012;
vi. on the Sixth Cause of Action requiring Defendants Annex and
Saggese , jointly and severally, to exonerate Westchester for the
sum of $772,977.28 for all losses, costs, expenses, consultant and
attorneys' fees and costs of court incurred by Westchester, together
with the legal interest pursuant to the CPLR;
vii. on the Seventh Cause of Action for subrogation against Annex and
Saggese, jointly and severally, in an amount equal to any payment
made by Westchester under the Bonds to satisfy the obligations on
Annex's behalf in connection with the contracts for which the Bonds
were furnished at the request of Annex in the sum of $772,977.28
plus interest; and
viii. that Plaintiff have such other and further relief as the Court may
deem just and proper, together with the costs and disbursements of
this action.

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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