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Cardi Corp. v. State

Superior Court of Rhode Island

July 30, 2014

CARDI CORPORATION, Plaintiff,
v.
STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS, DEPARTMENT OF ADMINISTRATION, DIVISION OF PURCHASES and THE HANOVER INSURANCE GROUP, INC., Defendants.

For Plaintiff: Jeremy Ritzenberg, Esq.

For Defendant: Carl E. Fumarola, Esq.Anne T. Turilli, Esq.

DECISION

SILVERSTEIN, J.

Cardi Corporation (Cardi) brings this suit against The Hanover Insurance Group, Inc. (Hanover), among others, for declaratory judgment and breach of contract. Currently before the Court is Hanover's Motion for Summary Judgment (Motion) pursuant to Super. R. Civ. P. 56 as to both counts. Cardi opposes Hanover's Motion as to both counts.

I

Facts and Travel

The instant case revolves around a highway construction project which included the construction of the Providence River Bridge (the Project), a new 900 foot bridge over the Providence River. In the contract (the Contract) between the Rhode Island Department of Transportation (RIDOT) and Cardi, Cardi was the Prime Contractor for the Project. Cardi later entered into a subcontract agreement (the Subcontract) with National Eastern Company (NEC) to supply structural steel beams and other steel materials required for construction of the bridge. The Subcontract required NEC to perform its work in accordance with the requirements and specifications of the Contract. NEC agreed to indemnify Cardi for all losses incurred by Cardi on account of NEC's work.

In furtherance of the Subcontract, Cardi required that NEC obtain a payment bond and a performance bond covering the work. Hanover issued Performance Bond #1735673 and Payment Bond #1735672 (the Bonds). Under the terms of the Bonds, Hanover bound itself to Cardi and agreed to pay Cardi, up to the value of the Bonds, for any damages suffered by Cardi as a result of any payment or performance failure on the part of NEC.

The Bonds are standard American Institute of Architects (AIA) A312 bonds[1]. The Bonds name NEC as the contractor, Cardi as the owner, and Hanover as the surety. The performance bond provides that the surety's obligation under the bond shall arise after:

"3.1 The Owner has notified the Contractor and the Surety . . . that the Owner is considering declaring a Contractor Default and has requested and attempted to arrange a conference with the Contractor and the Surety to be held not later than fifteen days after receipt of such notice to discuss methods of performing the Construction Contract . . .; and
"3.2 The Owner has declared a Contractor Default and formally terminated the Contractor's right to complete the contract. Such Contractor Default shall not be declared earlier than twenty days after the Contractor and the Surety have received notice as provided in Subparagraph 3.1." See Performance Bonds, attached to the Aff. of John A. McDevitt.

Under the requirements of the Contract, NEC was to coat the steel with a specific thickness of zinc coating in order to protect the steel from corrosion. RIDOT engaged a quality assurance consultant to inspect each piece of steel at NEC's facility before it was permitted to leave. NEC coated the steel with zinc, and thereafter, the steel was delivered and installed. RIDOT paid Cardi for the steel and the zinc coating, which amounted to $779, 400. Cardi then paid NEC for NEC's application of the zinc coating, which equaled a sum of $649, 500. About one year later, in May 2006, RIDOT raised questions as to whether the zinc coating had been properly applied to the steel. RIDOT engaged a consultant to examine the sufficiency of the coating. That consultant found that the coating on approximately fifty percent of the steel was not in accordance with the specifications as set forth in the Contract.

In early 2008, RIDOT provided its consultant's report to Cardi. Thereafter, RIDOT deducted the $779, 400 it previously paid Cardi from other monies due to Cardi on the Project along with the expenses for the inspector—which equaled $38, 100—for a total sum of $817, 500. Cardi immediately provided the consultant's report to NEC.

On December 11, 2008, Cardi filed its original Complaint against Hanover (Complaint). On April 10, 2012, Hanover filed its Motion on grounds that Cardi's claim was barred by the two-year statute of limitations as contained in the Bonds. Hanover claimed that NEC completed performance on the Project in August 2006 and thus, when the suit was brought in December 2008, it was outside the two-year period that Cardi had to bring its claim. As a response, Cardi provided the Court with evidence that demonstrated that NEC performed work past August 2006. See Aff. of Paul J. Grimaldi ¶¶ 2-5 (Grimaldi Aff.). Hanover withdrew its Motion in order to conduct additional discovery. After conducting such discovery, Hanover renewed its Motion.

In December 2006, questions were raised as to NEC's original work on certain access hatches, specifically whether the access hatches were strong enough to hold the weight of people standing on them. See Grimaldi Aff. ¶ 2. NEC inspected the access hatches and proposed a retrofit that would reinforce the existing mesh with steel reinforcement clips. Grimaldi Aff. ¶¶ 2-3 & Ex. A. NEC had previously worked on the access hatches pursuant to the approved shop drawings. See id. Therefore, NEC characterized the reinforcement work as "extra work" that "would be done at no additional cost to the State of Rhode Island." Id. at Ex. A. In January 2007, NEC submitted its proposal and sent it to Cardi, who then sent it to RIDOT for approval. Id. at ΒΆ 3 & Ex. A. The work was completed after RIDOT approved NEC's proposal. However, NEC's proposed and approved work was not the work that was performed. Photographs show ...


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