Title: National Union Fire v. Bramble

State: maryland

Issuer: Maryland Supreme Court

Document:

National Union Fire Insurance Co. of Pittsburgh v. David A. Bramble, Inc., No. 150,
September Term, 2004.
National Union Fire Insurance Co. of Pittsburgh v. Wadsworth Golf Construction Co. of the
Midwest, No. 151, September Term, 2004.
Contract Law.  Compensated Suretyship – Construction Payment Bond.  Construction
payment bonds involving compensated corporate sureties are subject to interpretation
according to the tenets applicable to all other contracts.  Provision in payment bond requiring
compensated corporate sureties to answer a claim within 45 days of receipt and detailing
which amounts are undisputed, disputed, and the grounds for dispute precludes challenge to
claims where the 45-day period is not satisfied.  To interpret the language otherwise would
result in the provision being rendered nugatory, which violates a long standing principle in
Maryland contract law.  Therefore, the entirety of the claims submitted were undisputed.  
IN THE COURT OF APPEALS OF
MARYLAND
 No. 150 
September Term, 2004
NATIONAL UNION FIRE
INSURANCE COMPANY OF
PITTSBURGH, PA., et al.
V.
DAVID A. BRAMBLE, INC.
__________________________________
No. 151
September Term, 2004
NATIONAL UNION FIRE
INSURANCE COMPANY OF
PITTSBURGH, PA., et al.
V.
WADSWORTH GOLF
CONSTRUCTION COMPANY OF THE
MIDWEST
__________________________________
Bell, C.J.
Raker
Wilner
Cathell
Harrell
Battaglia
Eldridge, John C., (Retired
Specially Assigned)
JJ.
Opinion by Battaglia, J.
            Filed:    July 21, 2005
1
Neither Clark nor MEDCO is a party in the underlying action giving rise to this appeal
and neither is involved in the action before this Court.
In the present case we are asked to determine the effect of a general contractor’s
payment bond surety’s failure to fulfill a contractual provision requiring it to answer a
subcontractor’s payment claim within 45 days after receiving that claim.  We determine that
the language of the payment bond requires the sureties to delineate those portions of the
claim that they intend to dispute within the 45-day period and that, under the language of the
bond, a failure to do so results in the entirety of the claim being undisputed.  We hold that
Wadsworth Golf Construction Company of the Midwest and David A. Bramble, Inc. are
entitled to judgment against the sureties because, under the terms of the payment bond, the
sureties are precluded from disputing Wadsworth and Bramble’s claims, and thereby, we
affirm the judgments of the Court of Special Appeals.
Background
Common Facts
On November 22, 1999, Clark Construction Group, Inc. (“Clark” or “the general
contractor”) contracted with Maryland Economic Development Corporation (“MEDCO” or
“the owner”) to serve as general contractor to oversee the construction of the Hyatt Regency
Chesapeake Bay Resort in Cambridge, Maryland.1  For the purpose of guaranteeing the
completion of the construction, Clark executed a surety bond (or “payment bond”) in favor
of MEDCO in the amount of $70,864,000.00.  Issued jointly by National Union Fire
Insurance Company of Pittsburgh, PA (“National Union”), Federal Insurance Company
2
(“Federal”), and Fidelity and Deposit Company of Maryland (“Fidelity”) (collectively “the
sureties”), the payment bond, provided by Clark, was a “form” surety bond, specifically
identified as Document A312 from the American Institute of Architects, and was provided
by Clark.  No alterations were made to the original language of the payment bond.  
The payment bond secured Clark’s obligation to pay subcontractors for all labor,
material, and equipment costs necessary to construct the resort should it default or MEDCO
fail to make payment to Clark.  Among its many provisions were:
4  The Surety shall have no obligation to Claimants under this
Bond until:
4.1 Claimants who are employed by or have a direct contract
with the Contractor have given notice to the Surety . . . and sent
a copy, or notice thereof, to the Owner, stating that a claim is
being made under this Bond and, with substantial accuracy, the
amount of the claim.  
* * * 
6  When the claimant has satisfied the conditions of Paragraph
4, the Surety shall promptly and at the Surety’s expense take the
following actions:
6.1 Send an answer to the Claimant, with a copy to the Owner,
within 45 days after receipt of the claim, stating the amounts that
are undisputed and the basis for challenging any amounts that
are disputed.  
6.2 Pay or arrange for payment of any undisputed amounts.  
Wadsw orth Facts
Eight days after the bond was executed, on November 30, 1999, Clark subcontracted
3
with Wadsworth Golf Construction Company of the Midwest (“Wadsworth”) to build, for
over ten million dollars, an 18-hole golf course and to complete excavation and rough
grading work for all buildings, parking lots, and roads located on the resort.  During the
course of construction, the base amount of the contract was increased to over five million
dollars, and Clark requested that Wadsworth complete additional work, not included in the
base amount, worth $138,714.45.  
Wadsworth completed the construction of the golf course and the required site work
sometime before March 2002, and Clark made periodic progress payments to Wadsworth as
MEDCO paid Clark.  When the work was completed, Wadsworth unsuccessfully attempted
to collect $720,963.45 still owed by Clark. 
On March 23, 2002, Wadsworth notified the sureties by certified letter of its claim
under the payment bond for the amount that Clark had failed to pay.  Ten days later, Federal
Insurance Company responded to Wadsworth’s claim, stating:
Please be advised that American International Group (“AIG”) is
the lead surety with regard to this matter.  As a result, by copy
of this letter, I am forwarding a copy of your letter to Susan
Hellerman of AIG for her review and investigation and request
that she keep me apprised of the status of her investigation.
Federal Insurance Company writes this letter with a full
reservation of its rights and with the understanding that any
actions we have taken or may take do not constitute a waiver of
any defenses available under the bond or applicable law,
including specifically any defenses pertaining to statutes of
limitation or timely filing or appropriate notices.
By letter dated April 5, 2002, AIG acknowledged receipt of Wadsworth’s claim
4
through a letter addressed to Wadsworth and copied to Clark.  AIG requested that Wadsworth
document its claim against the payment bond by submission of a completed Proof of Claim
form, which was enclosed with the letter, and that Wadsworth attach supporting
documentation such as subcontracts, signed purchase orders, and signed invoices.  The letter
also stated:
Please be advised that this action is taken at this time without
waiver of or prejudice to any of the rights and defenses, past or
present, known or unknown which either the above referenced
Surety (National Union Fire Insurance Company) or Principal
(The Clark Construction Group, Inc.) may have in this matter.
On May 3, 2002, Wadsworth submitted to AIG the completed Proof of Claim form
and copies of the subcontract, billing and payment documentation, and notice letters.  Shortly
thereafter, AIG notified Wadsworth by letter that it had received the documents, and that it
would “immediately take[] this matter up with the above referenced Principal (The Clark
Construction Group, Inc.), in order to ascertain their position on [the] claim as presented.”
The letter further stated: “ [AIG] will be in contact with you in due course regarding
[Clark’s] position on the Proof of Claim as presented by your company on the above
reference bond.”  Wadsworth, however, received no further information from AIG or the
sureties regarding its claim, despite having sent a second letter, on July 23, 2002, requesting
an answer to its claim.
On November 6, 2002, Wadsworth filed a single count complaint in the Circuit Court
for Dorchester County against the sureties.  The complaint alleged breach of contract and
2
Wadsworth later voluntarily reduced this amount to $720,963.45.  At the subsequent
motions hearing, Wadsworth did not request, and the court did not award, pre-judgment
interest.
5
sought $752,738.72 under the payment bond for labor and materials for which Clark did not
pay, plus pre- and post-judgment interest.2  That same day, Wadsworth also filed a motion
for summary judgment, arguing that the sureties were not entitled to challenge its claim under
the payment bond because the sureties had not answered Wadsworth’s claim and had
delineated the grounds for dispute here and the amounts within 45 days of receiving it.
Wadsworth appended the affidavits of its vice-president, Brian R. Cunfer, and attorney,
Stephen P. Lagoy, to its Motion, which verified the accuracy of the exhibits attached to the
proof of claim and attested to their knowledge of the allegations in the complaint.
In response, the sureties filed a motion to stay the proceedings pending the outcome
of litigation that Clark had instituted against MEDCO.  The sureties also filed a cross-motion
for summary judgment, raising two grounds for relief: (1) pursuant to Article 4.j. of the
subcontract, the money Clark owed to Wadsworth was not yet payable because MEDCO had
not paid Clark; and (2) the sureties’ payment obligation under the terms of the payment bond
arose only when Clark failed to pay amounts due at the time the claim was submitted.
Appended to the sureties’ motion was the affidavit of Michael Mansager, employed by Clark
as the Project Executive responsible for the management and oversight of Clark’s contract
with MEDCO, who averred that Clark had paid Wadsworth “all sums currently due and
owing.”
6
On April 28, 2003, a hearing on the motions was held at which time Judge Marvin
Smith, sitting by special assignment, granted the motion on alternative grounds, the first
being that Wadsworth was entitled to the money under the terms of the bond, and the second
being public policy.  A written order embodying the court’s judgment was subsequently
entered on the docket on May 5, 2003.  On May 28, 2003, the sureties filed a notice of appeal
to the Court of Special Appeals.
The Court of Special Appeals affirmed Judge Smith’s conclusion that the bond
language operated to preclude the sureties from disputing the claims submitted by
Wadsworth due to their failure to comply with Paragraph 6 of the payment bond because
Paragraph 6 “provides the surety 45 days to dispute a subcontractor’s claim for payment and,
if the surety does not answer within that time period,” the surety cannot thereafter dispute the
claim.  National Union Fire Insurance Co. of Pittsburgh v. Wadsworth Golf Construction
Company of the Midwest, 160 Md. App. 257, 274, 863 A.2d 347, 357 (2005).  Moreover, the
opinion noted that its construction of Paragraph 6 was consistent with the purpose of such
bonds, which is to “insure that claimants who perform work are paid for their work in the
event that the principal does not pay.”  Id.  The court concluded that to interpret Paragraph
6 otherwise would render the provision nugatory.  Because the sureties did not appeal from
the alternative ground for Judge Smith’s determination, public policy, the Court of Special
Appeals did not address that ground.   
Bramble Facts
3
The request for $500,00.00 was thereafter reduced to $327,035.13.  
7
On May 16, 2000, Clark subcontracted with David A. Bramble, Inc. (“Bramble”) to
provide water and sewer piping systems at the resort.  The subcontract provided that Clark
would pay Bramble a base price of $2,055,00.00, which was increased by $400,000.00
during the construction process.  Bramble completed the required site work in March of
2002, at which time Bramble unsuccessfully attempted to collect the monies that it believed
were outstanding from Clark. 
On June 14, 2002, Bramble notified the sureties by letter of its claim for payment
under the bond, in the amount of $455,511.53.  Nearly one month later, Federal responded
to Bramble’s claim by sending a letter that was identical in content to that sent to Wadsworth,
stating that it forwarded the claim to the lead surety, AIG.  At some point thereafter, AIG
requested that Bramble document its claim under the payment bond by submitting a
completed Proof of Claim form along with materials supporting its assertion.  On April 22,
2003, Bramble submitted the form to AIG.  
On April 25, 2003, AIG informed Bramble by letter that the amount of the claim
should be reduced to $336,334.63.  Bramble received no additional correspondence from the
sureties regarding its claim until after suit was filed.  At the end of April, Bramble filed a
single count complaint in the Circuit Court for Dorchester County against the sureties
alleging breach of contract and seeking $500,000.003 in damages, plus pre-judgment and
post-judgment interest.  Bramble then filed a motion for summary judgment, which the
8
sureties opposed.  In a hearing on June 12, 2003, Judge Smith granted summary judgment
in favor of Bramble relying on his holding in Wadsworth.  The sureties filed a timely appeal
with the Court of Special Appeals presenting questions identical to those in the Wadsworth
case.  In an unreported opinion, the Court of Special Appeals, relying entirely upon its
reasoning in Wadsworth, affirmed the entry of summary judgment.   
The sureties filed a petition for a writ of certiorari on January 14, 2005 in both cases
and presented the following question, which we have reformulated for clarity purposes:
Whether the Circuit Court improperly granted Wadsworth and
Bramble’s Motions for Summary Judgment based on the terms
of Paragraph 6 of the payment bond, which requires the sureties
to answer a submitted claim within 45 days of receipt and detail
the amounts which are disputed and which are not.
On March 11, 2005, we granted the petitions and issued the writs.  National Union v.
Wadsworth, 385 Md. 511, 869 A.2d 864 (2005); National Union v. Bramble, 385 Md. 511,
869 A.2d 864 (2005).  Because we determine that the language of Paragraph 6 of the
payment bond requires that the sureties answer a subcontractor’s claim and delineate the
portions of the claim that they intend to dispute within 45 days after the claim is submitted
and that the sureties failed to do so, we find that Wadsworth and Bramble are entitled to
judgment under the bond and affirm the judgments of the Court of Special Appeals.  Our
determination, like that of the Circuit Court, is based solely on an interpretation and
application of the language of the payment bond.
Discussion
9
Primarily, the sureties contend that their failure to answer Wadsworth and Bramble’s
claims within the 45-day period set forth in Paragraph 6 indicates that the entirety of the
claims were being disputed.  They argue that if they are not able to dispute the claim of the
subcontractor, then they could be forced to make payment for claims not properly covered
by the bond.  Moreover, the sureties assert that to determine otherwise could result in the
subcontractors receiving a windfall at the expense of other legitimate claimants entitled to
recover under the terms of the bond.  The sureties suggest that it would be more appropriate
to award the subcontractors consequential damages arising from the breach of contract.
Finally, the sureties contend that the result of the Circuit Court’s grant of summary judgment
is punitive and inconsistent with the long standing principle in Maryland law prohibiting the
courts from expanding the scope of a bond or insurance policy. 
Conversely, Wadsworth and Bramble assert that Judge Smith’s determination that the
plaintiffs were entitled to recover was supported by the facts adduced in support of their
motions for summary judgment.  Wadsworth and Bramble argue that because the sureties
breached the provision of the contract governing the procedures for investigating claims, the
sureties were precluded from raising any defense on the merits relating to coverage or
otherwise.  Therefore, Wadsworth and Bramble assert that Judge Smith properly granted their
motions.
The History and Fundamental Principles of Suretyship
At the outset, we shall examine our understanding of the fundamental principles
4
The Law Merchant denotes the English unwritten body of law that developed from
the “unrecorded customs and practices of the merchants.”  Woods, supra, at 8.  
10
governing surety bonds.  A surety bond is a “tripartite agreement among a principal obligor,
his obligee, and a surety.”  General Motors Acceptance Corp. v. Daniels, 303 Md. 254, 259,
492 A.2d 1306, 1309 (1985); Atlantic Contracting & Material Co., Inc. v. Ulico Casualty
Co., 380 Md. 285, 299, 844 A.2d 460, 468 (2004).  It is a “three party arrangement intended
to provide personal security for the payment of a debt or performance of an obligation.”
William H. Woods, Historical Development of Suretyship from Prehistoric Custom to a
Century’s Experience with the Compensated Corporate Surety, in THE LAW OF SURETYSHIP
3 (Edward G. Gallagher ed., 2000).  Baldwin’s Century Edition of Bouvier’s Law Dictionary
(1948) defines “surety” as: “A person who binds himself for the payment of a sum of money,
or for the performance of something else, for another.”  
Uncompensated personal suretyship “was the dominant form of security in early Rome
. . . [and Roman law] provided the surety with certain unique rights and defenses in order to
encourage individuals to voluntarily undertake the risks inherent in this form of security.”
Woods, supra, at 6.  A personal surety was not compensated and “was motivated by duty
rather than profit.”  Id.  Traditional uncompensated personal suretyship was also preeminent
in England and was governed by three distinct legal traditions: the Common Law, Equity,
and the Law Merchant, the commercial common law.4  Id. at 8.  In the American colonies,
the law of suretyship was plagued with often conflicting and unsettled rules emanating from
11
these diverse bodies of English law.  Id. at 20.  Because the colonies were not “important
centers of international trade with established mercantile customs,” the principles governing
suretyship adopted in England were not widely used.  Id. at 21.  It was not until the
nineteenth century that a significant need for suretyships developed in the United States.
Compensated corporate suretyship by contract, which is the form of suretyship present
in the case at bar, originated in England prior to the American Revolution.  Id. at 26.  In
1837, William L. Haskins, an American, published a pamphlet entitled, “Considerations on
the Project and Institution of a Guarantee Company, on a New Plan, with some general views
on Credit, Confidence and Currency” in which “the organization of a company named, ‘The
New York Guarantee Co.’ was proposed.”  Id. at 27, quoting Willis D. Morgan, The History
and Economics of Suretyship, 12 Cornell L. Q. 153, 164-65 (1926).  Haskins stated the
purpose of his company as “to guarantee the payment of notes and other written obligations
or contracts, whether of individuals, corporations, or private associations.”  Id.  Thus,
Haskins has been credited with having “first conceived of the [compensated] corporate
surety.”  Id.  American Surety Co., the first company in the United States devoted exclusively
to surety underwriting, was incorporated in New York on April 14, 1884, and in 1887, was
the first United States corporation to write a contract surety bond.  Id.   
With the emergence of the compensated corporate surety as a business entity, it was
necessary to create rules of interpretation for surety bonds.  Shortly after the turn of the
twentieth century, this Court indicated that a surety “whose obligation is deliberately entered
5
Strictissimi juris is a term of art meaning “to be interpreted in the strictest manner.”
BLACK’S LAW DICTIONARY, “strictissimi juris” (8th ed. 2004).
12
into, as a commercial transaction, and with the exclusive view to the pecuniary profit
resulting from it,” Smith v. Turner, 101 Md. 584, 587-88, 61 A. 334, 336 (1905), might
expect to receive treatment different from that which had been afforded an uncompensated
personal surety, which was favored by the law.  Subsequently, the principle was explicitly
stated in Southern Md. Nat’l Bank v. Nat’l Surety Co., 126 Md. 290, 94 A. 916 (1915):
The doctrine that a surety is a favorite of the law, and that a
claim against him is strictissimi juris [5] does not apply where the
bond or undertaking is executed upon consideration by a
corporation organized to make such bonds or undertakings for
profit.
Id. at 293, 94 A. at 916 (footnote added).  Furthermore, in A/C Electric Co., Inc. v. Aetna
Insurance Co., 251 Md. 410, 416, 247 A.2d 708, 711-12 (1968), quoting Maryland Cas. Co.
v. Fowler, 31 F.2d 881, 884 (4th Cir. 1929), we stated:
‘The rule is well settled . . . that a compensated surety is in
effect an insurer, that its contract will be construed as an
insurance contract most strongly in favor of the party or parties
protected thereby, that forfeiture on technical grounds will not
be favored, and that the strictissimi juris rule of the law of
suretyship will not be applied for its protection.’
In Berry v. United States Fidelity & Guaranty Co., 249 Md. 150, 157, 238 A.2d 907, 910
(1968), this Court noted that:
A paid surety which is a surety or bonding company is usually
considered to be in the same class as an insurance company, its
contract being held to be in the nature of insurance and to be
13
construed according to the rules applicable to insurance
contracts.
Id.  
Interpretation of Paragraph 6
In Dutta v. State Farm Insurance Co., 363 Md. 540, 556, 769 A.2d 948, 957 (2001),
we addressed the principles applicable to the interpretation of surety bonds.  “In the
interpretation of the meaning of an insurance contract, we accord a word its usual, ordinary
and accepted meaning unless there is evidence that the parties intended to employ it in a
special or technical sense.”  Id. at 556, 769 A.2d at 957, quoting Cheney v. Bell National Life
Insurance Co., 315 Md. 761, 766, 556 A.2d 1135, 1138 (1989).  Consistent with that
observation, insurance contracts are construed as ordinary contracts.  Id., citing Litz v. State
Farm, 346 Md. 217, 224, 695 A.2d 566, 569 (1997); North River Insurance Co. v. Mayor &
City Council of Baltimore, 343 Md. 34, 39, 680 A.2d 480, 483 (1996).  Ordinary principles
of contract interpretation apply.  Kendall v. Nationwide Insurance Co., 348 Md. 157, 165,
702 A.2d 767, 770-71 (1997).  Accordingly, if no ambiguity in the terms of the insurance
contract exists, a court will enforce those terms.  Id. at 171, 702 A.2d at 773. Therefore,
[a] court construing an agreement under this test must first
determine from the language of the agreement itself what a
reasonable person in the position of the parties would have
meant at the time it was effectuated.  In addition, when the
language of the contract is plain and unambiguous there is no
room for construction, and a court must presume that the parties
meant what they expressed.  In these circumstances, the true test
of what is meant is not what the parties to the contract intended
it to mean, but what a reasonable person in the position of the
14
parties would have thought it meant.  Consequently, the clear
and unambiguous language of an agreement will not give []way
to what the parties thought that the agreement meant or intended
it to mean.
Wells v. Chevy Chase Bank, F.S.B., 377 Md. 197, 224-25 n.12, 832 A.2d 812, 828 n.12
(2003).  Moreover, this Court has adhered to the principle that we will not unnecessarily read
contractual provisions as meaningless:
A recognized rule of construction in ascertaining the true
meaning of a contract is that the contract must be construed in
its entirety and, if reasonably possible, effect must be given to
each clause so that a court will not find an interpretation which
casts out or disregards a meaningful part of the language of the
writing unless no other course can be sensibly and reasonably
followed.
DirectTV, Inc. v. Mattingly, 376 Md. 302, 320, 829 A.2d 626, 637 (2003), quoting Sagner
v. Glenangus Farms, Inc., 234 Md. 156, 167, 198 A.2d 277, 283 (1964).  See also Bausch
& Lomb, Inc. v. Utica Mut. Ins. Co., 330 Md. 758, 782, 625 A.2d 1021, 1033 (1993); Dahl
v. Brunswick Corp., 277 Md. 471, 478-79, 356 A.2d 221, 226 (1976).  
In the present case, Paragraph 6 of the payment bond states:
When the Claimant has satisfied the conditions of Paragraph 4
[furnished written notice to the Contractor and sent a copy, or
notice, to the Owner within 90 days after work was completed
and when not paid within 30 days, sent a notice to the Surety
and Owner stating that a claim is being filed under the bond],
the Surety shall promptly and at the Surety’s expense take the
following actions:
6.1 Send an answer to the Claimant, with a copy to the Owner,
within 45 days after receipt of the claim, stating the amounts that
are undisputed and the basis for challenging any amounts that
15
are disputed.
6.2 Pay or arrange for payment of any undisputed amounts.
The sureties do not contest the fact that they breached the requirements of Paragraph 6.
Instead, they argue that when they failed to answer within the 45-day period of Paragraph 6,
the entirety of the claim was disputed.  We disagree.
The language of Paragraph 6.1 requires the sureties to do three things: answer the
Claimant’s claim, define what amounts are undisputed, and list the bases for challenging the
payment of any amounts that are disputed.  This language necessarily required the sureties
to communicate with Wadsworth and Bramble, with a copy of the correspondence to the
owner, concerning what portions of the submitted claim are subject to dispute.  Although the
lead surety, AIG, responded to Wadsworth and Bramble’s claims, acknowledging receipt,
the sureties failed to explicate which parts of the claims were disputed and undisputed as
mandated by the language of the bond within the time allotted.  
To satisfy Paragraph 6.1, the sureties were required to, in their answer, state the
amounts that were undisputed and the basis for challenging the claims that were disputed.
Although the sureties corresponded with Wadsworth and Bramble during the 45-day period
set forth in Paragraph 6.1, the record contains no evidence that the sureties attempted to
comply with the language of the bond.  The sureties argue that because they failed to
explicate both the amounts that are undisputed and those subject to challenge, the function
of the paragraph is to render the entirety of the claim in dispute.  Paragraph 6 does not,
16
however, simply require that the sureties state which portions of the claim are disputed and
which are not; they must also specifically delineate the grounds underlying the dispute.  This
places a greater burden on the sureties with respect to those amounts they wish to challenge
as compared to those parts of the claim that are undisputed, the latter of which the sureties
must only list.  Therefore, it would not be consistent with the plain meaning of the provisions
of Paragraph 6 to interpret it to permit the sureties to dispute a claim in its entirety through
inaction.
If we were to adopt the sureties’ interpretation of Paragraph 6, we would be rendering
the 45-day time requirement essentially nugatory.  This runs afoul of our long-standing tenet
of contractual interpretation that provisions of a contract are to be interpreted, if possible, so
as to give effect to all.  DirectTV, Inc. v. Mattingly, 376 Md. 302, 320, 829 A.2d 626, 637
(2003), quoting Sagner v. Glenangus Farms, Inc., 234 Md. 156, 167, 198 A.2d 277, 283
(1964).  See also Bausch & Lomb, Inc. v. Utica Mut. Ins. Co., 330 Md. 758, 782, 625 A.2d
1021, 1033 (1993); Dahl v. Brunswick Corp., 277 Md. 471, 478-79, 356 A.2d 221, 226
(1976).  The primary purpose of Paragraph 6 is to better facilitate the timely payment of
claims under the bond, as we recently delineated:
The reasonable behavior required of a surety acting in good faith
is not meant to foster reluctance on a surety’s part to satisfy
bond claims.  We agree with the court in General Accident
Insurance Co. of America v. Merritt-Meridian Construction
Corp., 975 F. Supp. 511, 516 (S.D.N.Y. 1997), which explained:
Sureties enjoy such discretion to settle claims
because of the important function they serve in
17
the construction industry, and because the
economic incentives motivating them are a
sufficient safeguard against payment of invalid
claims.  The many parties to a typical construction
contract 
– 
owners, 
general 
contractors,
subcontractors, and sub-subcontractors – look to
sureties to provide assurance that defaults by any
of the myriad other parties involved will not result
in a loss to them.  Courts have recognized that ‘as
a practical matter the suppliers and small
contractors on large construction projects need
reasonably prompt payment for their work and
materials in order for them to remain solvent and
stay in business.’  (Citations omitted)
Atlantic Contracting, 380 Md. at 314, 844 A.2d at 476-77.  In Moore Bros. Co. v. Brown &
Root, Inc., 207 F.3d 717, 723 (4th Cir. 2000), the United States Court of Appeals for the
Fourth Circuit similarly stated the purpose of such bonds:
[T]he very purpose of securing a surety bond contract is to
insure that claimants who perform work are paid for their work
in the event that the principal does not pay.  To suggest that
non-payment by the Owners absolves the surety of its obligation
is nonsensical, for it defeats the very purpose of a payment
bond.
(Emphasis in original).    
The 45-day time period and the specificity of the procedures to dispute a claim as
mandated in Paragraph 6 of the payment bond directly embody that purpose.  To decide that
the sureties, by inaction through time and effort, could dispute the entirety of a claim ad
infinitum, would greatly undermine the bond’s purpose of safeguarding those entities that
supply goods and labor to the general contractor.  The requirements  of Paragraph 6 function
18
to insure that subcontractors and sub-subcontractors are not forced to absorb the risk of non-
payment over a protracted period by the contractor and the owner, through no fault of their
own. 
A paid surety is classified as an insurance company, and as such, courts tend to
construe contracts involving compensated sureties in favor of the party who benefits under
the bond.  A/C Electric Co., 251 Md. at 418, 247 A.2d at 712.  In the present case, the
sureties are compensated corporate sureties.  Therefore, to construe the language of
Paragraph 6 in a manner favorable to the party whose interests are protected by the bond is
proper under M aryland law.  Our determination is consistent with that tenet.  
The sureties argue that such an interpretation results in a potential expansion of the
coverage of the bond because they would be forced to pay for claims that are beyond the
scope of the bond’s coverage.  Although we recognize that we may not take action to expand
the coverage of a bond through judicial action, see Mayor & City Council of Baltimore v.
Fidelity and Deposit Co. of Maryland, 282 Md. 431, 441, 386 A.2d 749, 754 (1978), there
is nothing in the record to indicate that the sureties asserted that any portion of Wadsworth
and Bramble’s claims was beyond the scope of the bond’s coverage within the 45-day period
delineated in Paragraph 6.  By the plain language of the bond, the sureties are precluded from
arguing otherwise.  Therefore, the Circuit Court correctly granted summary judgment in
favor of Wadsworth and Bramble. 
Conclusion
19
Under the terms of Paragraph 6, the sureties were required to delineate which portions
of Wadsworth and Bramble’s claim were disputed and failed to do so.  Therefore, the effect
of the provisions in Paragraph 6 is that the entirety of the claim is undisputed and the sureties
are required to promptly pay the claims submitted by Wadsworth and Bramble.  Thus, we
affirm the judgments of the Court of Special Appeals.  
JUDGMENTS 
OF 
THE 
COURT 
OF
SPECIAL APPEALS AFFIRMED.  COSTS IN
BOTH 
COURTS 
TO 
BE 
PAID 
BY
PETITIONERS.