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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

Westchester Fire Insurance Company, v. SMC Construction Corporation et al

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
1:15-cv-04756 Search Pacer
ACE Group party(s): 
Court Type: 
Federal
US District Court: 
Eastern District of New York
Date Filed: 
Aug 14 2015

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.    This Court possesses the power to declare the respective rights and other legal
relations of Westchester and the Defendants as requested herein pursuant to 28 U.S.C. § 2201(a).
3.    This Court has personal jurisdiction over the defendants because all defendants
are residents of the State of New York, Defendant SMC Construction Corporation’s principal
place of business is in the County of the Suffolk, and Defendant Diamante Realty, LLC’s
principal place of business is in the County of the Suffolk.
4.    Venue is proper over the Defendants pursuant to 28 U.S.C. §1391 (b)( 1) because
all defendants are residents of the State of New York, Defendant SMC Construction
Corporation’s principal place of business is in the County of the Suffolk, and Defendant
Diamante Realty, LLC’s principal place of business is in the County of the Suffolk.

THE PARTIES

5.    Westchester, whose address is 436 Walnut Street, Philadelphia, PA 19106 is a
corporation organized and existing under the laws of the Commonwealth 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.
6.    Upon information and belief, Defendant SMC Construction Corp. (“SMC”),
whose address is 77 Gazza Boulevard, Farmingdale, NY, 11735 is a corporation organized and
existing under the laws of the State of New York.
7.    Upon information and belief, Defendant Diamante Realty, LLC (“Diamante”),
whose address is 77 Gazza Boulevard, Farmingdale, NY, 11735 is a limited liability company
organized and existing under the laws of the State of New York.
8.    Upon information and belief, Defendant Salvatore Coppola is an individual
residing at 3 Debbie Gate Street, Fanningville, NY 11738.

THE AGREEMENTS OF INDEMNITY

9.    SMC was at all relevant times engaged in the construction business in connection
with construction projects. SMC was required provide perfonnance and payment bonds in
connection with certain construction contracts.
10.    On or about September 7, 2005 the defendants SMC and Salvatore Coppola, in
partial consideration of, and as an inducement to Westchester for the execution by Westchester
of certain 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, to:
“exonerate, indemnify and keep indemnified the Surety from and against any
and all liability and/or expense 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 Bonds, (2) By
reason of the failure of the Principals or Indemnitors to perform or comply
with the covenants and conditions of this Agreement of (3) In enforcing any
of the covenants and conditions of this Agreement. Payment by reason of the
aforesaid causes shall be shall be made to the Surety by the Principals and
Indemnitors as soon as liability exists or is asserted against the Surety,
whether or not the Surety shall have made any payment therefor. Such
payment shall be equal to the amount of reserve set by the Surety. 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 disbursed, or that it
was necessary or expedient to make such disbursements, whether or not such
liability, necessity or expediency existed; and that the vouchers or other
evidence of any such payments made by the Surety shall be prima facie
evidence of the fact and amount of the liability to the Surety.”
See Para. SECOND: INDEMNITY of Agreement of Indemnity dated September 7, 2005,
annexed hereto as Exhibit A.
11.    On or about June 15, 2009 the defendants SMC, Diamante and Salvatore
Coppola, in partial consideration of and as an inducement to Westchester for the execution by
Westchester of certain 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,
“...exonerate, hold harmless, indemnity and keep indemnified SURETY from
and against all claims, demands and liability for losses, costs, and expenses of
whatsoever kind or nature, including but not limited to court costs, counsel fees,
costs of investigation, accountant fees, engineer or construction management
fees, together with interest thereon at the maximum rate allowed by law, which
SURETY may sustain or incur by reason of or in consequence of the:
A.    Execution or procurement of the execution of BOND(s);
B.    Failure by PRINCIPAL(s) or ESIDEMNITOR(s) to perform or comply with
any of the covenants or conditions of this AGREEMENT;
C.    Any Event of Default hereto;
D.    Enforcement of any covenant of this AGREEMENT;
E.    Performance of any investigation, attempt or attainment of any release in
connection with any BOND(s) or any loss or unpaid premium in connection
with any BOND(s);
F.    Prosecution or defense of any action or claim in connection with any
BOND(s), whether Surety, at its own discretion, elects to employ counsel
of its own solicitation or permits or requires PRINCIPAL(s) or
INDEMNITOR(s) to make arrangements for SURETY’S legal
representation;
G.    Attempt to recover losses or expenses paid or incurred in comiection with
this AGREEMENT, CONTRACT(s) and/or BOND(s)..
See, TfTHIRD of Agreement of Indemnity dated June 15, 2009, annexed hereto as Exhibit B.
12.    Following the Defendants’ execution of the Agreements of Indemnity, SMC
obtained payment bonds and performance bonds from Westchester for multiple projects. In
addition, Westchester, at the request of SMC, issued numerous lien discharge bonds filed in
connection with the various projects.
13.    Asa result of claims made against the various bonds issued by Westchester,
Westchester has incurred losses of $3,298,896.
14.    As of May 20, 2015, Westchester has incurred $742,493.90 in expenses, including
legal expenses, in resolving the claims and litigation in connection with claims asserted against
Westchester’s bonds.
15.    Westchester has recovered monies, to date, of $287,271.60.
16.    Westchester’s combined losses and expenses total $4,041,389.90. Deducting
Westchester’s recovery of $287,271.60, the Defendants, pursuant to the Indemnity Agreements
are obligated to indemnify Westchester in the amount of $3,754,118.30.

AS AND FOR A FIRST CAUSE OF ACTION
(Breach of Contract)

17.    Westchester repeats and re-alleges the allegations set forth in paragraphs 1
through 16 as though set forth at length herein.
18.    Defendant SMC entered into numerous contracts with public entities.
19.    At the request of Defendants, Westchester, as Surety, executed numerous
performance and payment bonds for various projects throughout area.
20.    On numerous projects that SMC had contracted, SMC failed to pay subcontractors
and suppliers. Liens were filed against the project monies. Westchester, at the request of the
Defendants, issued numerous lien discharge bonds.
21.    The Bonds were executed and delivered by Westchester, as Surety, in
consideration of and in reliance upon, among other things, the written Agreements of Indemnity.
22.    Thereafter, Westchester resolved claims asserted against its various bonds and
thereby incurring losses.
23.    Westchester demanded indemnity from the Defendants, but no response was
received.
24.    Westchester was sued by various subcontractors on the bonds Westchester issued.
Westchester, pursuant to the terms of the Agreements of Indemnity, tendered its defense to SMC.
While SMC initially agreed to defend Westchester in these actions, SMC failed to defend
Westchester in these cases when their counsel was disbarred and SMC failed to obtain new
counsel, in breach of the Agreements of Indemnity.
25.    By reason of having executed the various performance and payments bonds and
lien discharge bonds and the terms of the Agreements of Indemnity, Westchester is entitled to
indemnification and exoneration of bond losses in the sum of $3,754,118.30 plus statutory
interest pursuant to the CPLR for which Defendants are liable to Westchester under the aforesaid
Agreements of Indemnity.

AS AND FOR A SECOND CAUSE OF ACTION

(Indemnification for Fees and Expenses!
26.    Westchester repeats and re-alleges each and every allegation contained in
paragraphs 1 through 25 as though herein at length set forth.
27.    Defendants executed Agreements of Indemnity whereby they each, jointly and
severally, agreed to personally indemnify Westchester for all losses and/or expenses of
whatsoever kind or nature, including interest, court costs and counsel fees.
28.    Plaintiff has incurred and will continue to incur fees, costs and expenses,
including but not limited to legal fees and expenses. Pursuant to Agreements of Indemnity,
Defendants are obligated to exonerate, hold harmless, indemnify and keep indemnified the
Surety from and against all losses, costs fees and expenses including court costs and attorney’s
fees.

AS AND FOR A THIRD CAUSE OF ACTION

(Injunction to require SMC to Complete and File Close-Out Documents!
29.    Westchester repeats and reiterates each and every allegation contained in
paragraphs 1 through 28 as though herein at length set forth.
30.    One of the projects for which Westchester issued performance and payment bond,
as well as numerous lien discharge bonds, was the SUNY-Farmingdale project (the “SUNY
Project”).
31.    In connection with the issuance of the lien discharge bonds, SMC executed an
Assignment of Monies Due in favor of Westchester.
32.    While the SUNY Project was eventually physically completed, SMC failed to file
certain close out documents, including but not limited to a final requisition. SUNY will not
release tire balance of the contract monies absent the filing of a final requisition with all required
close out documents.
33.    Westchester, because it was not the contractor, cannot complete the remaining
documentation. Upon information and belief, SMC’s books and records contain the information
needed to complete the final requisition.
34.    Westchester has made repeated requests to SMC to complete and file the
remaining documentation so that the remaining contract funds may be released to the Surety.
35.    SMC has refused to complete and file the final requisition.
36.    Westchester has no other way of obtaining the contract monies it is entitled to.
37.    The Defendants directly benefit from any recovery by the Surety of the contract
monies being held on the SUNY Project.
38.    By reason of having executed the aforesaid bonds, and SMC’s assignment of the
SUNY Project contract monies, it is respectfully requested that the Court direct the officers of
SMC to complete and submit all outstanding documentation due for the SUNY Project and
provide any and all documents and information necessary for the close out of the SUNY Project
and turn-over of contract monies remaining on the SUNY Project to Plaintiff.
WHEREFORE, Westchester Fire Insurance Company respectfully requests judgment as
follows:
i.    on the First Cause of Action in the sum of $3,754,118.30 plus interest for
performance and/or payment bond losses;
ii.    on the Second Cause of Action to indemnify Plaintiff for all loss
adjustment expenses, costs and fees including attorney’s fees incurred and
to be incurred by Plaintiff in a sum not yet determined;
iii.    on the Third Cause of Action for an injunction directing SMC and
Salvatore Coppola to complete and submit all documentation required to
close out the SUNY Project and the payment of the remaining contract
monies to Plaintiff; and,
iv.    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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