07.10.2017

Washington Supreme Court Extends Olympic Steamship to Sureties in Public Works Contract

In King County v. Vinci Constr. Grands Projects, et al.,  __Wn.2d __, __ P.3d __ (July 6, 2017), the Washington Supreme Court was asked to review an award of nearly $15 million in attorney fees against five surety companies following a jury trial for breach of contract in a public works project.  In a six to three decision, the Washington Supreme Court ruled attorney fees under Olympic S.S. Co. v. Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991) (“Olympic Steamship Fees”), which arguably had been restricted to disputes where an insured is a prevailing party in a lawsuit that is forced by an insurer’s refusal to defend or pay the claim, may be applied in the context of a dispute with sureties on a performance.

In 2006, King County contracted with three construction firms to expand its wastewater treatment system. One of the contractors, VPFK, did not perform its portion of the work by the performance deadline contained in the contract. VPFK had a performance bond that obligated the sureties to step in and “promptly remedy the default in a manner acceptable to [King County],” if VPFK did not perform under the contract.

After King County declared VPFK to be in default, the County requested that the sureties either cure VPFK’s default themselves or agree to fund a new contractor to complete VPFK’s work. The sureties, however, responded that performance was not required under the bond because no breach had occurred.

King County filed suit against VPKF and one of its sureties.  VPKF’s other sureties intervened.  Together, the five sureties denied coverage and adopted all of VPFK’s defenses against breach of contract.  The matter proceeded to trial, and the jury found in favor of King County. As part of the relief awarded after the trial, the court awarded $15 million in Olympic Steamship Fees. Moreover, the trial court held, as a basis for awarding the County all of its legal fees, that it didn’t matter if the fees were incurred in pursuing claims against VPKF or the sureties. Because King County’s claim against the sureties was intertwined and indistinguishable from its claim against VPFK, the county could recover all of its fees under Olympic Steamship.

Posted by Jennifer Dinning