Bonding company files lawsuit against Wewahitchka over fire station controversies

The bonding company acting as the surety for the incomplete Wewahitchka fire station has filed a federal lawsuit against the city.

The move comes less than a month after the bonding company, Fair American Insurance and Reinsurance Company, opened a lawsuit against the fire station’s former contractor, Winterfell Construction Inc..

According to city officials, FAIRCO’s move was unexpected, with all three parties looking to enter into early mediation in the coming weeks.

“We all agreed to stand down,” Michelle Jordan, Wewahitchka’s attorney, told the city’s commissioners during their regular meeting on November 29. “We were not going to pursue discovery. We were not going to be pushing litigation while we were trying to get this mediation.”

On November 11, Wewahitchka sent a formal notice of default to FAIRCO, claiming that all conditions to trigger FAIRCO’s action on the bond had been met by the city at that time.

It laid out the city’s intent to legally declare FAIRCO in default of the bond should action not be taken by the bonding company to uphold the bond. According to Jordan, these efforts were suspended in order that the parties might come together for mediation.

“(The city is) holding off on filing their complaint against the bond company because we keep our word when we say we’re going to stand down while this is being scheduled,’ she said. “We don’t sneakily file cases after we say that we’re not going to do anything.”

FAIRCO’s actions against the city come in the wake of a months-long legal battle between Wewahitchka and Winterfell Construction, in which the two parties are suing each other for breach of contract after the termination of Winterfell as the contractor for the project in January, 2022.

In late October, FAIRCO filed a lawsuit against Winterfell in the United States District Court North Florida Division seeking to have the contractor pay the collateral due in the sum of $460,000, which they had not received as of Nov. 29. 

FAIRCO’s complaint against the city came nearly a month later, filed in the same court as their complaint against Winterfell.

In this suit, the bonding company is not seeking any damages. Instead, it asks for declaratory relief, or a clear judicial decision on two specific issues, which they say are creating controversy between themselves and the city.

The complaint against the city names two counts: one questioning whether the surety is required to demolish and rebuild the fire station under the bond, and the other involving whether the city is able to retain damages from the balance of the contract.

Under the first count, the bonding company suggests that while the city has “demanded” they begin to work towards the demolition and reconstruction of the fire station, delays in city processes have prevented them from determining whether such drastic actions are warranted and whether they are obligated to such actions under the bond.

FAIRCO centers their argument on suggestions that the city’s engineer had failed to fully disclose the severity of the construction defects at the time of the complaint’s filing and that the bonding company had received conflicting information from the city. 

“There’s a repair in theory that we’re not certain can actually be executed,” said Jordan, explaining the city’s viewpoint on the matter to the city commissioners. “We have to find an engineer who’s willing to either draw up new plans or sign off on the plans that have been drawn up, and sign their name on it and back up the viability of that plan.”

“That’s what we said in our demand letter. We said, either you bring in an expert engineer to draw up these plans and you bring in a replacement contractor or you tear this building down, and you start over… There’s only two options.”

FAIRCO’s complaint suggests that this determination is up to the bond company to make, not the city.

Further, it holds that the company has been unable to make a decision without access to the city’s redesign of the floor slab of the building, which was improperly constructed, according to inspections referenced in the complaint.

The second count in FAIRCO’s complaint against the city seeks a judgment on whether the city can retain liquidated and special damages against the balance of the contract, as the city claims it is able to do under the original contract for the construction of the fire station.

“From the beginning, we have told them that we will pay them or the replacement contractor the contract balance minus our liquidated and special damages that we’re allowed to enforce under the original contract,” said Jordan. 

But in their complaint, FAIRCO alleges that the city has not met the requirements to claim this contractual right, stating that delays in the completion of the work arose from the city’s own conduct.

“Although the termination (of Winterfell as the fire station’s contractor) occurred in January of 2022, the city did not comply with… the bond and trigger the surety’s bond obligations until August of 2022, nearly eight months later,” it reads.

“Further, the surety has been repeatedly hampered in its efforts to proceed to bid the completion work and elect its completion option because the city has not promptly provided its new remedial design for the floor slab.”

The city argues that they are able to claim the right under the origins contract for the firehouse’s construction.

“When the bond company has to step in, in this case, with this default, they step into the shoes of the contractor, so they then are subject to whatever the terms of the original contract are,” said Jordan.

“Our contract with Winterfell allowed us to set off against his proceeds our liquidated and special damages.”

The Wewahitchka commissioner agreed to continue towards mediation despite FAIRCO’s lawsuit. 

FEMA, who is providing the funding for the fire station, has given an extension for the project through next October.

FAIRCO could not be reached for comment in time for publication of this article.