GULF BUILDING LLC v. PHILADELPHIA INDEMNITY INSURANCE COMPANY (2023)

ORDER ON BENCH TRIAL

This action arises from the construction of the roof for the 550 Office Building and Parking Garage in Fort Lauderdale, Florida (“Project”). See Joint Pretrial Stipulation [ECF No. 52] at 1. A bench trial was held from March 29, 2023, through April 5, 2023. See Trs. of Bench Trial [ECF Nos. 132–36]. The Court has carefully considered the testimony of the witnesses, the exhibits admitted into evidence, the parties’ written submissions, and applicable law. Based on its review of the record and pursuant to Federal Rule of Civil Procedure 52(a)(1), the Court makes the following findings of fact and conclusions of law, resulting in an award to Plaintiff, Gulf Building LLC, in the sum of $248,000. The Court will enter a separate money judgment in favor of Gulf as required by Federal Rule of Civil Procedure 52(a), reserving jurisdiction to address Gulf's request for interest, costs, and attorneys’ fees.

BACKGROUND

Plaintiff, Gulf Building LLC (“Gulf”), and Blackhawk Properties & Investments, LLC (“Owner”) entered into a prime contract (“Prime Contract”) in which Gulf agreed to serve as the general contractor for the construction of the Project. Joint Pretrial Stipulation at 8; Trial Ex. J–3 [ECF No. 129–4]. Gulf and Therma Seal Roof Systems, LLC (“Therma Seal”) entered into a subcontract agreement (“Subcontract”) in which Therma Seal agreed to provide all required material, labor, equipment, permits, and supervision required to complete the roofing, flashing, sheet metal, and lightweight insulating concrete work for the Project in exchange for $248,000. See Joint Pretrial Stipulation at 1–2; Trial Ex. J–4 [ECF No. 129–5] at 1–15. Philadelphia Indemnity Insurance Company (“PIIC” or “Philadelphia”) issued a performance bond jointly and severally guaranteeing the full and faithful performance of Therma Seal's Subcontract obligations. Joint Pretrial Stipulation at 1–2; Trial Ex. J–5 [ECF No. 129–6].

The Owner provided Gulf with a report by Certified Roofing Specialists, Inc. (“Certified”) identifying alleged roofing deficiencies relating to Therma Seal's work on the Project (“Roofing Report”). Joint Pretrial Stipulation at 10; Trial Ex. P–217 [ECF No. 130–12]. On August 25, 2021, Gulf provided notice to Therma Seal and PIIC under the Subcontract and Performance Bond that Gulf was considering declaring Therma Seal in default of its Subcontract for failing to perform in accordance with its Subcontract, failing to honor its warranty, and failing to honor its indemnity obligations. Compl. [ECF No. 1] ¶ 15; Joint Pretrial Stipulation at 10; Trial Ex. P–21 [ECF No. 130–3]; Trial Ex. J–18 [ECF No. 129–10]. Gulf alleged that Therma Seal failed to respond to Gulf's notice, failed to investigate the Owner's claims, failed to respond to the Owner's claim, failed to begin any corrective work as required by the Subcontract, and failed to respond to Gulf's demand for indemnification and demand for repair. Compl. ¶ 16.

On September 14, 2021, Gulf declared Therma Seal in default of the Subcontract and terminated Therma Seal's Subcontract for default. Compl. ¶ 17; Joint Pretrial Stipulation at 10; Trial Ex. J–19 [ECF No. 129–11]. Gulf alleged that PIIC is jointly and severally bound to Gulf for the performance of the Subcontract. Compl. ¶ 24. On October 22, 2021, PIIC denied Gulf's performance bond claim. Joint Pretrial Stipulation at 10; Trial Ex. J–26 [ECF No. 129-14]. Gulf alleged that PIIC breached its obligations to Gulf under the Performance Bond by failing to proceed as provided in Section 5 of the Performance Bond and that PIIC's material breach caused Gulf to suffer damages, including, but not limited to, the past and ongoing costs and expenses to investigate and respond to claims relating to Therma Seal's non-conforming work and remedy any non-conforming work performed by Therma Seal. Compl. ¶¶ 25-26.

As set forth herein, the Court finds that Therma Seal defaulted under the Subcontract and PIIC breached the Performance Bond. PIIC is jointly and severally liable to Gulf for Gulf's damages caused by Therma Seal's failure to repair and remediate the defects and deficiencies identified in the Certified Roofing Report and resulting property damage; failure to honor the Subcontract warranties; and failure to indemnify Gulf. Gulf's damages exceeded $382,309 ¹ due to Therma Seal's default and PIIC's breach of the Performance Bond.

The Court will enter a Final Judgment in favor of Gulf and against PIIC for the penal sum of the bond in the amount of $248,000, plus interest, with costs and attorneys’ fees in an amount to be determined post-trial.

A. APPLICABLE CONTRACT DOCUMENTS

I. Gulf's Prime Contract

a. Gulf and its Subcontractor's Obligations to Perform According to the Contract Documents

Under the Prime Contract, Gulf agreed to fully execute its work in accordance with the contract documents. Trial Ex. J–3 [ECF No. 129–4] at 2, 25. The Prime Contract authorized Gulf to enter into subcontracts with other contractors to perform specific scopes of work:

§ 10.1 Those portions of the Work that [Gulf] does not customarily perform with [Gulf's] own personnel shall be performed under subcontracts or by other appropriate agreements with the [Gulf].

Id. at 8 (emphasis added). Gulf was contractually obligated to require each subcontractor—to the extent that the subcontractor was performing work on the Project—to be bound to Gulf by the terms of the Prime Contract:

§ 5.3 SUBCONTRACTUAL RELATIONS

By appropriate agreement, written where legally required for validity, [Gulf] shall require each Subcontractor, to the extent of the Work to be performed by the Subcontractor, to be bound to [Gulf] by terms of the Contract Documents, and to assume toward [Gulf] all the obligations and responsibilities, including the responsibility for safety of Subcontractor's Work, which [Gulf], by these Documents, assumes toward the Owner and Architect.

Id. at 33 (emphasis added).

Further, Gulf was expressly responsible to the Owner for acts and omissions of Gulf's subcontractors:

§ 3.3.2 [Gulf] shall be responsible to the Owner for acts and omissions of [Gulf's] employees, Subcontractors and their agents and employees, and other persons or entities performing portions of the Work for, or on behalf of, [Gulf] or any of its Subcontractors.

Id. at 26 (emphasis added).

b. Gulf's Warranties and Obligations to Owner for Defective Work

Gulf warranted to the Owner that the work—including work performed by its subcontractors—would be of good quality, new, conform to the requirements of the contract documents, and free from any defects:

§ 3.5 WARRANTY

[Gulf] warrants to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless the Contract Documents require or permit otherwise. [Gulf] further warrants that the Work will conform to the requirements of the Contract Documents and will be free from defects, except for those inherent in the quality of the Work the Contract Documents require or permit. Work, materials, or equipment not conforming to these requirements may be considered defective.

Id. at 27 (emphasis added). In addition, Gulf was obligated to correct any work that is found to be defective within the first year:

§ 12.2.2 AFTER SUBSTANTIAL COMPLETION

§ 12.2.2.1 In addition to the [Gulf's] obligations under Section 3.5, if, within one year after the date of Substantial Completion of the Work or designated portion thereof or after the date for commencement of warranties established under Section 9.9.1, or by terms of an applicable special warranty required by the Contract Documents, any of the Work is found to be not in accordance with the requirements of the Contract Documents, [Gulf] shall correct it promptly after receipt of written notice from the Owner to do so unless the Owner has previously given [Gulf] a written acceptance of such condition. The Owner shall give such notice promptly after discovery of the condition. During the one-year period for correction of Work, if the Owner fails to notify [Gulf] and give [Gulf] an opportunity to make the correction, the Owner waives the rights to require correction by [Gulf] and to make a claim for breach of warranty. If [Gulf] fails to correct nonconforming Work within a reasonable time during that period after receipt of notice from the Owner or Architect, the Owner may correct it in accordance with Section 2.4.

§ 12.2.2.2 The one-year period for correction of Work shall be extended with respect to portions of Work first performed after Substantial Completion by the period of time between Substantial Completion and the actual completion of that portion of the Work.

Id. at 46–47 (emphasis added). Notwithstanding Gulf's one-year obligation to correct any defective work, however, Gulf remained liable to the Owner for any non-conforming work or failure to comply with the Contract Documents:

§ 12.2.5 Nothing contained in this Section 12.2 shall be construed to establish a period of limitation with respect to other obligations [Gulf] has under the Contract Documents. Establishment of the one-year period for correction of Work as described in Section 12.2.2 relates only to the specific obligation of [Gulf] to correct the Work, and has no relationship to the time within which the obligation to comply with the Contract Documents may be sought to be enforced, nor to the time within which proceedings may be commenced to establish [Gulf]’s liability with respect to [Gulf's] obligations other than specifically to correct the Work.

Id. at 47 (emphasis added).

c. Gulf's Indemnity Obligations to Owner

Gulf agreed to indemnify and hold Owner harmless against claims, damages, losses, and expenses arising out of Gulf and its subcontractors’ work on the Project:

§ 3.18 INDEMNIFICATION

§ 3.18.1 To the fullest extent permitted by law [Gulf] shall indemnify and hold harmless the Owner, Architect, Architect's consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), but only to the extent caused by the negligent acts or omissions of [Gulf], a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity that would otherwise exist as to a party or person described in this Section 3.18.

Id. at 30–31 (emphasis added).

II. Therma Seal's Subcontract

a. Therma Seal's Scope of Work

Pursuant to the Subcontract between Gulf and Therma Seal, Therma Seal assumed toward Gulf the same obligations and responsibilities that Gulf assumed towards the Owner:

2.3 [Therma Seal] is bound to GULF by the Contract Documents and shall assume toward GULF with respect to [Therma Seal's] performance, the obligations and responsibilities, which GULF assumes towards the Owner. In case of conflicts, the Subcontract Agreement shall control, unless the contract Documents provide otherwise. [Therma Seal] shall have the benefits of those rights and remedies against GULF, which GULF by the Contract Documents, has against the Owner, except as may be provided otherwise herein. [Therma Seal] shall bind lower tier Subcontractors to the performance obligations and responsibilities [Therma Seal] assumes toward GULF.

Trial Ex. J–4 [ECF No. 129–5] at 4 (emphasis added).

Therma Seal broadly agreed to provide all required material, labor, equipment, permits, and supervision required to complete the roofing, flashing, sheet metal, and lightweight insulating concrete work for the Project:

Article 3 Scope of Work

3.1 GULF employs [Therma Seal], as an independent contractor, to perform the part of the Work which GULF has contracted with the Owner to provide on the Project as set forth in Exhibit “A” (“Scope of Work”). [Therma Seal] shall be responsible for layout and completion of all work included in this Agreement, including but not limited to providing all labor, materials, scaffolding, tools, hoisting facilities, cranes and equipment required to perform and complete the Work included in this Agreement, including but not limited to: All required Roofing, Flashing and Sheetmetal and Lightweight Insulating Concrete Work complete in accordance with the Contract Documents.

Id. (emphasis in original).

9. [Therma Seal] shall furnish and install all required material, labor, equipment, permits and supervision required to complete the scope of work: all required Roofing, Flashing and Sheetmetal and Lightweight Insulating Concrete work required by the Contract Documents complete.

Id. at 15 (emphasis in original).

Therma Seal's broad scope of work under the Subcontract included, among other things, the following:

• all required lightweight insulating concrete;

• all office building roofing including a fully adhered Single Ply FiberTite 50 XT Fleeceback Membrane over R-30 light weight insulating concrete;

• all tapered rigid insulation for the parking garage;

• all required sealants and caulking associated with the roofing work;

• all required overflow scuppers;

• all required engineering needed for roofing and flashing attachment design;

• equipment curbs and anchors furnished and installed by others will be flashed by Therma Seal;

• all required flashing and sealing for pipe penetrations, vents, flues, curbs, supports, legs, and roof davits;

• all required parapet wall metal copings, including wood blocking, sealants, and flashings;

• all required gutters and downspouts including scupper header boxes and boots;

• all required roof expansion joints;

• all required roofing at the low roof and canopies at the office building;

• all required base flashings, counterflashings, gravel stops, reglets, drip edges, cleats, roof expansion joints, roof expansion joint covers, and stack flashings;

• all required closeout documents, warranties, reports, certifications, including, but not limited to, manufacturer's 20 year no-dollar-limit warranty;

• removal of all debris and trash accumulated from the prosecution of the work;

• all required daily cleanup of jobsite;

• protection of adjacent finishes and structures;

• all corrective repairs resulting from Therma Seal's defective workmanship; and

• achievement of all specified tolerances and slopes for the end product roof.

Id. at 15–17.

Therma Seal agreed to check the correctness of contiguous work before beginning its own work and agreed that failure to detect or report discrepancies would preclude Therma Seal from recovery of any resulting cost, expense, and damage associated with the discrepancy:

4.3 Before proceeding with the Subcontract Work, [Therma Seal] shall check the correctness of contiguous work installed by others, and the failure to detect or report discrepancies will preclude the Subcontract from recovery of any resulting cost, expense of damage.

Id. at 5 (emphasis added).

Therma Seal warranted that it had carefully studied the plans, specifications, and other contract documents. Therma Seal agreed that failure to report discrepancies constituted acceptance by Therma Seal that the contract documents were adequate and that no claims could be made for said discrepancies:

19.2 Subcontractor Due Diligence. [Therma Seal] further warrants that it has carefully studied the plans, specifications and other Contract Documents and confirms that it has found the Contract Documents adequate for the intended purpose. Should during the course of [Therma Seal's] review of the Plans and Specifications discrepancies, conflicts or deficiencies be uncovered or should have been uncovered [Therma Seal] shall at once report in writing such discrepancies conflicts or deficiencies to GULF. Failure of [Therma Seal] to report such discrepancies, conflicts or deficiencies shall be understood as acceptance by [Therma Seal] that the Contract Documents are adequate and no claims will be made for such causes.

Id. at 12 (emphasis added).

b. Therma Seal's Warranties and Obligations to Gulf for Defective Work

Therma Seal guaranteed Therma Seal's work to the full extent of the contract documents. In addition, and without limiting Therma Seal's obligation to perform its work to the full extent of the contract documents, Therma Seal was also obligated to correct any work that is found to be defective within the first year:

Article 16 Guarantee

16.1 [Therma Seal] hereby guarantees the Work to the full extent of the provisions of the Contract Documents. Without limiting the generality of the preceding sentence, unless a longer period is provided in the Specifications or General Conditions, [Therma Seal] shall repair at its own expense and at the convenience of the Owner, any defects in workmanship or materials discovered within one (l) year from the date of the acceptance of the Work included in this Agreement.

Id. at 11 (emphasis added).

Therma Seal agreed that final payment by Gulf would not constitute acceptance of defective or deficient work—nor would it limit Therma Seal's duties to indemnify and defend Gulf and others:

1.8 Payments/Non-Acceptance. No payment made under this Agreement shall be conclusive evidence of the performance by [Therma Seal] of this Agreement, whether wholly or in part. No payment including final payment shall be construed to be an acceptance of defective Work or improper materials, nor shall entrance and use by the Owner constitute acceptance of the Work hereunder or any part thereof.

Id. at 4 (emphasis added).

c. Therma Seal and PIIC's Indemnity Obligations to Gulf

Therma Seal and PIIC also agreed as part of the Subcontract to indemnify and hold Gulf harmless from all claims, losses, demands, causes of action and the like (including attorneys’ fees, expert witnesses’ fees, and all dispute procedure costs), which may be asserted against Gulf resulting from or in connection with Therma Seal's failure to perform all work required within the scope of the Subcontract in strict accordance with the Subcontract:

Article 11 Liability for Damage and Personal Injury

11.1 To the fullest extent permitted by law, [Therma Seal] and its Surety, if any, agree to indemnify and hold GULF harmless of and from all claims, losses, demands, causes of action and the like (including attorney's fees expert witness fees and all dispute procedure costs), which may be asserted against GULF or its Surety by anyone other than [Therma Seal], and resulting from or occurring in connection with the failure of [Therma Seal] or any party for whom [Therma Seal] is responsible, to perform all Work required within the scope of this Subcontract in strict accordance with the Subcontract and Contract Documents․

11.3 [Therma Seal] agrees to (1) fully insure against, and (2) indemnify, defend (if requested by GULF) and hold harmless, GULF from and against any loss, damage or expense (including legal fees, expert witness fees, and other dispute procedure costs) incurred because of any injury, loss, or damage, of any kind or nature, to any property or person, whether employees or otherwise, and which damage, loss or injury arises out of or results from, or in connection with, in whole or in part, the Work provide for in this Agreement, or by reason of any act, omission, fault or negligence, whether active or passive, of [Therma Seal], whether on-site or otherwise, and including any injury, loss or damage caused, or alleged to be caused, in part by the act or omission of any party indemnified herein․

11.4 Independent of its duty to indemnify, as set out in Subparagraphs (11.1) and (11.2) above, Therma Seal undertakes a separate duty to defend GULF, if requested by GULF, with respect to the claims, losses and causes of action identified in Subparagraphs (11.4.1) and (11.4.2) herein. Therma Seal's duty to defend is defined as follows:

11.4.1 GULF, in its sole discretion and at its sole option, may defend any or all the covered claims, or tender to [Therma Seal] the defense of any or all of the covered claims. Upon any such tender, [Therma Seal] shall be bound and obligated to assume the defense of GULF and to pay, liquidate, discharge and satisfy; any and all settlements, judgments, awards or expenses resulting from or arising out of the claims covered by this paragraph, without reimbursement from GULF.

11.4.2 [Therma Seal's] duty to defend arises irrespective of the validity or invalidity of the claims made, and regardless of whether GULF undertakes to conduct its defense for a period of time or to participate in [Therma Seal's] defense of GULF or any party indemnified herein.

11.4.3 If GULF tenders the defense of a covered claim to [Therma Seal], and if [Therma Seal] fails or neglects to assume and diligently pursue the adequate defense thereof, GULF may compromise and settle or defend any such claim or action, and [Therma Seal] shall be bound and obligated to reimburse GULF for the amount expended in contesting, satisfying or settling any such claim, together with all reasonable attorneys’ fees, expert witness fees, and all other costs of any disputes proceeding or defensive action.

․

11.6 Neither final payment by GULF, nor acceptance of the work performed by [Therma Seal], nor the termination of this Agreement shall release or diminish the foregoing [Therma Seal] duties to indemnify and defend GULF and others.

Id. at 10 (emphasis added).

7. To the fullest extent permitted by law, [Therma Seal] agrees to indemnify and defend, if requested, [Gulf] or Owner, their agents, employees, servants and sureties, of and from any loss, damage, expense or cost (including legal fees, expert witness fees, and other dispute procedure costs) incurred as a result of:

A. Any injury, loss or damage, of any kind or nature, to any property or person, and which damage, loss or injury arises out of or in connection with, in whole or in part, the performance of [Therma Seal's] contract or by reason of any act, omission, fault or neglect, whether active or passive, of [Therma Seal] or anyone for whom [Therma Seal] is responsible, and including any injury, damage or loss caused, or alleged to be caused, in part by the act or omission or any party indemnified herein; or

B. Any failure of [Therma Seal] or of those for whom [Therma Seal] is responsible, to diligently, properly, timely, and fully perform each of the contract obligations imposed upon [Therma Seal] by this contract and by any other contract document made a part hereof.

Id. at 14 (emphasis added).

d. Gulf's Remedies upon Therma Seal's Default

Therma Seal agreed that, among other things, the following acts would constitute a breach of the Subcontract and grounds for termination: (1) Therma Seal's failure to supply enough skilled workers or materials to prosecute the work with promptness and diligence; (2) Therma Seal's failure to perform any part of the Subcontract; and (3) Therma Seal's assignment for the benefit of creditors. Following written notice to Therma Seal, Gulf had the right to terminate Therma Seal, complete the work at Therma Seal's expense, and hold Therma Seal liable for Gulf's damages including a reasonable allowance for overhead and profit as well as interest:

4.7 Failure to Prosecute. Should [Therma Seal] at any time refuse or neglect to supply a sufficient amount of skilled workmen or materials of the proper quality and quantity, or fail in any respect to prosecute the Work with promptness and diligence, or tend to cause by any action or omission the stoppage or delay of or interference with the work of GULF or of any other subcontractor on the Project, or fail in the performance of any of the agreements on its part contained herein, or become bankrupt or insolvent or go into liquidation either voluntarily or under an order of a court of competent jurisdiction or make a general assignment for the benefit of creditors or otherwise acknowledge insolvency, GULF shall be at liberty (but without obligation), after three (3) working days’ written notice to [Therma Seal], mailed or delivered to the last known address of the latter, to provide through itself or through others, any such labor or materials, and to deduct the cost thereof from any money due or thereafter to become due to [Therma Seal] under this Agreement. GULF shall be at liberty (but without obligation) to terminate the employment of [Therma Seal] for the said Work and to enter on the Project and take possession, for the purposes of completing the Work, of all materials, tools and equipment thereon, and to employ any other person or persons to finish the Work, and to provide materials therefore ․ In case of such termination of the employment of [Therma Seal], [Therma Seal] shall not be entitled to receive any further payment under this Agreement until the said Work shall be wholly finished, at which time, if the unpaid balance of the amount to be paid under this Agreement shall exceed the expense incurred by GULF in finishing the said Work, such excess shall be paid by GULF to [Therma Seal]; but, if such expense shall exceed such unpaid balance, then [Therma Seal] shall pay the difference to GULF. The expense incurred by GULF shall include the cost of furnishing materials and finishing the Work, including reasonable allowance for overhead and profit for Gulf's completion of subcontractors work also any damage incurred by the default of [Therma Seal]․ [Therma Seal] shall be liable to GULF for any and all damages, consequential and otherwise, arising out of any breach of this Agreement by [Therma Seal]. Any advances made by GULF pursuant to the terms of this Agreement shall bear interest from the date advanced at the maximum rate permitted by law.

Id. at 5 (emphasis added).

Therma Seal accepted responsibility for all the costs incurred by Gulf resulting from any breaches of the Subcontract:

10.7 [Therma Seal] accepts responsibility for all the costs incurred by GULF resulting from any and all breaches of this Agreement, and all covenants and conditions of this Agreement including any attorney's fees, court and other costs incurred as a result of a breach of this Agreement or any covenant or condition hereof, or as a result of [Therma Seal] making of a frivolous or exaggerated claim, and whether or not any litigation or arbitration proceeding shall have been initiated.

Id. at 9 (emphasis added). Therma Seal also agreed that Gulf is entitled to an administrative cost of 10% as a result of Therma Seal's default and/or bankruptcy:

1. In the event of a default and or bankruptcy on the part of Subcontractor, GULF will be paid by Subcontractor an administrative cost often (10%) percent of the Contract Amount remaining at the time of default and or bankruptcy plus all attorney fees incurred by GULF.

Id. at 14 (emphasis added).

III. PIIC's Performance Bond

Therma Seal—as a condition precedent to the award of the Subcontract—agreed to obtain and provide a Performance Bond in the amount of $248,000 guaranteeing the full and faithful performance of the Subcontract and including all obligations of Therma Seal and all required warranties:

Article 6 Bond

6.1 As a condition precedent to the award of this Agreement to [Therma Seal] by GULF, [Therma Seal] shall furnish to GULF a Performance and Payment Bond in the amount of $248,000.00 issued by a surety which currently holds an A.M. Best rating of AV or better and is acceptable to GULF, guaranteeing the full and faithful performance of the provisions of this Agreement including but not limited to delay damages; and any and all other obligations of [Therma Seal] hereunder including all required warranties․

Id. at 7 (emphasis added).

Therma Seal (as principal) and PIIC (as surety) issued the Performance Bond in the amount of $248,000 guaranteeing the full and faithful performance of the Subcontract, including, but not limited to, all required warranties. Joint Pretrial Stipulation at 1–2. The Performance Bond incorporated the Subcontract by reference. Therma Seal was bound to Gulf by the contract documents and assumed toward Gulf the same obligations and responsibilities which Gulf assumed towards the Owner.

§ 1 [Therma Seal] and [PIIC], jointly and severally, bind themselves, their heirs, executors, administrators, successors and assigns to the Owner for the performance of the [Subcontract], which is incorporated herein by reference.

Trial Ex. J–5 [ECF No. 129–6] at 2 (emphasis added).

PIIC's obligations under the Performance Bond arise after Gulf satisfies these conditions:

§ 3.1 [Gulf] first provides notice to [Therma Seal] and [PIIC] that [Gulf] is considering declaring a Contractor Default․

§ 3.2 [Gulf] declares a Contractor Default, terminates the Construction Contract and notifies [PIIC]; and

§ 3.3 [Gulf] has agreed to pay the Balance of the Contract Price in accordance with the terms of the Construction Contract to [PIIC] or to a contractor selected to perform the Construction Contract.

Id. at 2. Once Gulf satisfied Section 3 of the Performance Bond, PIIC was obligated to take action under Section 5 of the Performance Bond:

§ 5 When [Gulf] has satisfied the conditions of Section 3, [PIIC] shall promptly and at [PIIC's] expense take one of the following actions: ․

§ 5.1 Arrange for [Therma Seal], with the consent of [Gulf] to perform and complete the Construction Contract;

§ 5.2 Undertake to perform and complete the Construction Contract itself, through its agents or independent contractors;

§ 5.3 Obtain bids or negotiated proposals from qualified contractors acceptable to [Gulf] for a contract for performance and completion of the Construction Contract;

§ 5.4 Waive its right to perform and complete, arrange for completion, or obtain a new contractor and with reasonable promptness under the circumstances:

§ 5.4.1 After investigation, determine the amount for which it may be liable to [Gulf] and, as soon as practicable after the amount is determined, make payment to [Gulf]; or

§ 5.4.2 Deny liability in whole or in part and notify [Gulf], citing the reasons for denial.

Id. at 2. If PIIC did not proceed as provided in Section 5 with reasonable promptness, or PIIC denied liability, in whole or in part, Gulf was entitled to enforce any remedy available to it:

§ 6 If [PIIC] does not proceed as provided in Section 5 with reasonable promptness, the surety shall be deemed to be in default on this bond seven days after receipt of an additional written notice from [Gulf] to [PIIC] demanding that [PIIC] perform its obligations under this Bond, and [Gulf] shall be entitled to enforce any remedy available to [Gulf]. If [PIIC] proceeds as provided in Section 5.4, and [Gulf] refuses the payment or [PIIC] has denied liability, in whole or in part, without further notice [Gulf] shall be entitled to enforce any remedy available to [Gulf].

Id. at 2 (emphasis added).

B. GULF'S TRIAL WITNESSES

Gulf called five witnesses during its case in chief: (1) Mr. John Scherer, (2) Mr. Eric Squilla, (3) Ms. Kate Murphy, (4) Mr. Jerry Dumas, and (5) Mr. Gene Fall. Gulf also submitted designated deposition testimony of PIIC's corporate representative, Mr. Bryan Badeaux.

I. John Scherer's Testimony

Mr. Scherer is an owner of Gulf and also the President and CEO. Trial Tr. Mar. 29, 2023 [ECF No. 131] at 42. Mr. Scherer has been a Florida licensed general contractor since 2008. Id. at 42–43. Mr. Scherer serves as the licensed qualifier for Gulf and is responsible for the day-to-day operations of all the job sites, financial oversight, job safety, cleanliness, and performing work in accordance with the contract, plans, and specifications. Id. at 43–44. Gulf was established in 1991 and primarily performs commercial projects like the 550 office building project. Id. at 44.

Mr. Scherer generally testified about the project and the contract between Gulf and the Owner. The 550 Office Building and Parking Garage was a 7-story class A office building in downtown Ft. Lauderdale as well as a 7-story parking garage. Id. at 44–45. The project is in a very high-traffic area downtown across the street from the Broward County state courthouse. Id. at 45-46. Gulf was the general contractor responsible for hiring and managing subcontractors, performing work in accordance with the plans and specifications, and completing the project on budget and on schedule. Id. at 47–48. Gulf subcontracted out most of the physical construction work on its projects to various subcontractors. Id. at 48. Since Gulf does not hold a certified roofing contractors’ license with the State of Florida, Gulf was therefore required to subcontract all roofing work. Id. at 48. On each of Gulf's projects, however, it is liable to the Owner for the work of its subcontractors. Id. at 48.

Mr. Scherer testified that Gulf's standard procedure is to fully investigate any deficient work claims that it receives from a project's owner. Id. at 49. If the claim is credible, then Gulf notifies any responsible subcontractors and they are responsible for fixing their faulty work. Id. at 50. If the responsible subcontractor refuses, or is not otherwise able to fix their faulty work, Gulf remains liable to the project owner even if the work has been completed for more than one year. Id. at 49–51.

Mr. Scherer generally testified about the Subcontract between Gulf and Therma Seal. Trial Ex. J–4 [ECF No. 129–5]. Therma Seal's scope of work was for a complete roof system in accordance with the plans and specifications and flow down provisions binding Therma Seal to the same documents Gulf is bound to. Trial Tr. Mar. 29, 2023 [ECF No. 131] at 52–53. The Subcontract broadly included all required material, labor, equipment, permits, and supervision required to complete the roofing, flashing, sheet metal, and lightweight insulating concrete work for the Project. The Subcontract included broad terms intended to cover a complete watertight roof system. Id. at 56–57.

The project plans did not include every detail required by the roofing manufacturer—which, in this case, was Fibertite (also referred to as “Seamans”). It was the subcontractor's responsibility to make sure their work complied with FiberTite's specifications, and Gulf was required to hire a FiberTite authorized roofing subcontractor familiar with the FiberTite roofing details. Id. at 57. Each manufacturer has different requirements for how to install their roof system. Id. It was up to the subcontractor to properly engineer and design the roof system to work, including all the flashing. Id. at 57–58, 83. Gulf included broad design and engineering requirements in the Subcontract to ensure the subcontractor was responsible for properly installing the system according to FiberTite's specifications even if every detail was not shown on the drawings. Id. at 58.

Mr. Scherer testified that when a subcontractor—like Therma Seal—fails to properly perform its work, the subcontractor breaches its own subcontract and places the contractor—here, Gulf—in breach of its prime contract with the owner. Id. at 82–83. Gulf expects its subcontractors and the surety to honor their subcontract obligations, defend and indemnify Gulf from the owner's claims, investigate and respond to the owner's claims, fix any work that is found to not conform with the subcontract, notify any responsible sub-subcontractors, and reimburse Gulf for its damages. Id. at 70–72. If the subcontractor fails or cannot honor its subcontract, then Gulf is required to investigate, make the repairs, and charge the responsible subcontractor. Id. at 72–74.

Mr. Scherer testified about the events giving rise to Gulf's claim against PIIC. Therma Seal defaulted in multiple ways. Therma Seal failed to respond to a roof leak within four months of finishing the building; Therma Seal performed non-conforming work; Therma Seal failed to provide the appropriate warranty information; and Therma Seal went out of business and made an assignment for the benefit of creditors. Id. at 77–78. Accordingly, Gulf was required to terminate Therma Seal and notify PIIC as required under the bond. Id. at 78. After being notified by Gulf, PIIC did not accept any responsibility and denied all liability under the bond. Id. at 79–80. To honor its obligations to the Owner, Gulf was nonetheless required to remedy Therma Seal's deficient workmanship. Id.

Gulf first observed the roofing deficiencies with water coming out of roofs 3 and 4 on the lower east portion of the roof within months of completing the project. Id. at 91. Gulf received many complaints and questions about the leaking roof. Id. Gulf was required to repair the damage to the building and paint the stucco and staining down the east side of the building and sidewalk multiple times during the investigation into the origin of the water leakage. Id. at 90.

The Owner also observed the water damage from the roof and was concerned about the roofs installed by Therma Seal. The Owner provided Gulf a report prepared by Certified Roofing Specialists, Inc. (“Certified Roofing”) identifying the roofing deficiencies and resulting water damage, and repair recommendations and cost estimates. Id. at 92–93. Gulf was required to fix the issues as expected by the Owner. Id. at 97.

Gulf's team reviewed the Certified Roofing report and attributed the deficiencies to Therma Seal's scope of work. Id. at 99. Gulf reviewed Therma Seal's subcontract and confirmed that the items in the Certified Report clearly fell within Therma Seal's scope of work. Id. at 98. Mr. Scherer also testified to each of the items within the Certified Report and confirmed those items fell within Therma Seal's scope of work in the Subcontract. Id. at 99–115. Mr. Scherer did not attribute any of the items in the Certified Roof report to owner maintenance issues. Id. at 116. Mr. Scherer did not attribute any of the items in the Certified Roof Report to architectural design or engineering issues; the only design deficiencies were those caused by Therma Seal's poor workmanship. Id. at 115–116. Gulf attributed all the deficiencies to Therma Seal's scope of work. Id. at 116.

On August 25, 2021, Gulf provided Therma Seal with the Certified Report (dated July 12, 2021) and notified Therma Seal of a material breach of contract, breach of warranty, and the Owner's demand for repair of the defects and deficiencies identified in the Certified Roofing Report. Id. at 116; Trial Ex. P–21 [ECF No. 130–3]. Gulf directed Therma Seal to correct all defects and deficiencies listed in the Certified Roofing Report and demanded indemnification. Id. Therma Seal failed to investigate the Owner's claims, failed to perform corrective work required by its warranties, and failed to indemnify Gulf from the Owner's demands. Trial Tr. Mar. 29, 2023, at 117.

Gulf provided notice to PIIC that Gulf was considering declaring Therma Seal in default for failing to satisfy the Subcontract, failing to honor its warranties, and failing to honor its indemnity obligations. Id. at 118–120; Trial Ex. J–18 [ECF No. 129–10]. Philadelphia did not respond to Gulf within 3 days. Trial Tr. Mar. 29, 2023, at 120. Gulf terminated Therma Seal's Subcontract and notified PIIC on September 20, 2021. Id. at 121; Trial Ex. J–19 [ECF No. 129–11]; Trial Ex. J–21 [ECF No. 129–13]. Therma Seal never responded regarding the default or termination. Trial Tr. Mar. 29, 2023, at 122. Gulf demanded that PIIC promptly act under Section 5 of the Performance Bond. Id. at 125; Trial Ex. J–21 [ECF No. 129–13]. Gulf agreed to pay the balance of the contract price under the Subcontract to PIIC or to a contractor selected to complete the Subcontract. Id.

PIIC failed to timely investigate Gulf's claim, took no action to honor Therma Seals’ warranties or indemnify Gulf against the Owner's demands pursuant to the Subcontract, and denied Gulf's claim in full. Trial Tr. Mar. 29, 2023, at 129; Trial Ex. J–26 [ECF No. 129–14].

Because PIIC failed to remedy the roofing deficiencies and denied the claim, Gulf was still required to fix the roof. Trial Tr. Mar. 29, 2023, at 130. Gulf moved forward by obtaining proposals to address the Owner's demands and perform the work that the Certified Roofing Report considered necessary to correct Therma Seal's roofing deficiencies. Id. at 130–133. Gulf solicited multiple bids from replacement subcontractors. Id. at 80–81. However, the pool of interested subcontractors was limited and the COVID-19 pandemic caused significant material shortages at the time. Id.

Gulf ultimately hired Certified Roofing to complete the necessary roof repairs. Id. at 135; Trial Exs. P–210 [ECF No. 130–9], P–263 [ECF No. 130–13]. Gulf asked Certified Roofing to provide a roof that complied with all specs and plans, and to provide a watertight system in accordance with their report and the investigation that was performed after Therma Seal's breach. Trial Tr. Mar. 30, 2023 [ECF No. 132] at 30. Gulf started with replacing roofs 3 and 4. Trial Tr. Mar. 29, 2023, at 136; Trial Exs. P–88 [ECF No. 130–4], P–210 [ECF No. 130–9]. Gulf hired Certified Roofing to re-build the roof the same way that Gulf hired Therma Seal to build the roof in the first place. Trial Tr. Mar. 29, 2023, at 136. Mr. Scherer testified that he had no reason to pay Certified for a better or more expensive system than needed to correct Therma Seal's deficiencies. Trial Tr. Mar. 30, 2023, at 30. Mr. Scherer testified that Gulf did what was necessary to mitigate any type of further damage caused by Therma Seal's shoddy workmanship, and if Gulf did not do anything, the problems would have gotten much worse. Id.

Although Certified Roofing's initial report indicated and Gulf originally believed that certain portions of the roofs could be repaired, further investigation revealed that both roofs were completely saturated with water and required replacement. Trial Tr. Mar. 29, 2023, at 136. On August 29, 2022, Certified Roofing submitted a second proposal for the work necessary to remediate Therma Seal's deficient work on the remaining roof sections of the Project. Trial Ex. P–211 [ECF No. 130–10]. Gulf then entered into a change order for the remaining work required. Trial Tr. Mar. 29, 2023, at 154; Trial Ex. P–263. Certified was obligated to perform all the work in the change order, and Gulf was obligated to pay Certified for the amounts in the change order. Trial Tr. Mar. 29, 2023, at 155; Trial Ex. P–263. The change order brought the total value of work to approximately $350,000; however, the contract amount became $272,554 after deducting $75,000 that FiberTite contributed to Certified Roofing for repairs. Trial Tr. Mar. 29, 2023, at 155–56; Trial Ex. P–263 [ECF No. 130–13]; [ECF No. 140–2].

Mr. Scherer acknowledged that some of the work in the contract and change order was different than the original Certified Roofing Report. Trial Tr. Mar. 30, 2023, at 14. However, the changes were based on further investigation of the roofs; the discovery of additional water damage; FiberTite's position that it was not providing any warranty coverage for the garage roofs as a result of Thermal Seal's deficient work; and the fact that all the garage roofs required replacement. Id. at 14–21. Gulf owed the Owner a 20-year no dollar limit warranty from FiberTite and was in breach of its contract with the Owner as a result of FiberTite's warranty position. Trial Tr. Mar. 30, 2023, at 33–34. The Owner and Gulf found themselves without warranty coverage on the garage roofs as a result of Therma Seal's faulty workmanship. Trial Tr. Mar. 30, 2023, at 19.

Mr. Scherer testified that Gulf was seeking against Philadelphia the $102,000 original contract value for Certified Roofing, Trial Ex. P–210 [ECF No. 130–9], coupled with Change Order #1, Trial Ex. P–263 [ECF No. 130–13], thereby increasing the contract amount to $272,554. Trial Tr. Mar. 29, 2023, at 156. Mr. Scherer testified that the amounts attributable to Therma Seal's default were significantly more than that. Id.

II. Eric Squilla's Testimony

Mr. Squilla is a Vice President at Gulf. Trial Tr. Mar. 30, 2023, at 36. He has been in the construction business for 28 years and a Florida licensed general contractor for approximately 8 years. Id. As Vice President, he is responsible for turnkey delivery of projects, including day-to-day supervision of management and operations of construction projects. Id. at 36–37.

Regarding the Project, Mr. Squilla handled day-to-day operations from preconstruction through the certificate of completion, including project closeout and warranty administration. Id. at 37. He was also familiar with the roof construction that took place from approximately March 2019 through August 2020. Id. at 40; Trial Ex. D–4 [ECF No. 128–2].

Mr. Squilla knew David Wikel, the President of Therma Seal. However, after negotiating the subcontract with Mr. Wikel, Mr. Squilla did not recall ever having any further communications with Mr. Wikel regarding the project, never saw Mr. Wikel at the jobsite, and never saw Mr. Wikel at any project meetings. Trial Tr. Mar. 30, 2023, at 40–41. Mr. Wikel also never advised Mr. Squilla that he had been convicted of a felony involving construction in the middle of the project, which would have been of concern to Mr. Squilla. Id. at 42–43.

Mr. Squilla testified about his observations of Therma Seal's faulty work and the resulting damage. Id. at 44. Mr. Squilla testified that Therma Seal did not complete their punch list items, which resulted in incomplete work items and other poor-quality work. Id. Mr. Squilla further observed roofing deficiencies after construction. Id. Mr. Squilla observed missing flashings and water infiltration staining the exterior of the building, which he traced back to Therma Seal's deficient work. Id. at 45. When Mr. Squilla observed missing roofing and wall flashing in various parts of the roof, he documented the issues and submitted them to Therma Seal. Id. at 47–49; Trial Ex P–19 [ECF No. 130–1]; Trial Ex. P–20 [ECF No. 130–2]. Although Therma Seal initially installed flashing in the low areas of the roof and made band-aid repairs, Therma Seal did not correct the roofing issues that were causing the water permeation and staining. Trial Tr. Mar. 30, 2023, at 49–53. Gulf continued to repaint over the water damage, but the staining continued to reappear. Id. at 52–53. Mr. Squilla then engaged Jerry Dumas to further investigate the cause of the water damage and roofing deficiencies. Id. at 54.

III. Kate Murphy's Testimony

Ms. Kate Murphy is a manager of Blackhawk, the owner of the 550 Building. Trial Tr. Mar. 30, 2023, at 70. Blackhawk hired Gulf as the general contractor, and it was Gulf's responsibility to build the building based on the plans and specifications provided to them. Id. at 71.

The Owner learned of roofing issues in 2020. She was particularly concerned about the black stain dripping down the side of the building. Id. at 73. They consistently asked Gulf to address it and Gulf tried to do so. Id. The Owner initially called Therma Seal to make repairs, but the problem kept reoccurring and Therma Seal was nonresponsive. Id. at 74. The Owner then called a representative of FiberTite, who recommended Certified look at the roof. Id. The Owner then understood that the deficiencies and issues with the roof were greater than they initially thought and engaged Certified to conduct a full inspection of the roof. Id. at 75.

The Owner relied on Certified to properly assess the conditions of the roofs and understood that all the deficiencies identified in Certified's Roofing Report required repairs. Id. at 76–77. The Owner understood Gulf's contractual responsibilities as covering all repairs of the deficiencies discovered by Certified. Id. at 75–77. Accordingly, the Owner provided Gulf with a copy of the Certified Roofing Report and expected Gulf to perform the repairs. Id. at 78–79; Trial Ex. P–217 [ECF No. 130–12]. And, if Gulf did not do so, the Owner would consider Gulf in breach of contract. Trial Tr. Mar. 30, 2023, at 76.

The Owner did not expect Gulf to provide a superior roof than what was originally specified, nor did the Owner expect Gulf to perform work according to a different design than the original construction. Id. at 77. The Owner also did not expect Gulf to perform any owner maintenance items, as the Owner separately hired Certified to address those items or otherwise had its own maintenance personnel address other Owner issues. Id. at 79–80.

The Owner expressed grave concern when FiberTite denied the warranty claim and advised the Owner that the garages were not covered under the warranty. Id. at 81. The Owner required Gulf to address the warranty coverage issue for the parking garages as well. Id. at 82. It was the Owner's position that Gulf was responsible for making whatever repairs were necessary to provide the Owner with a full and enforceable warranty from FiberTite for the entire project. Id. at 84.

IV. Jerry Dumas’ Testimony

Jerry Dumas is a Senior Project Manager for Gulf. Mr. Dumas has been in construction for 20 years and is a Florida licensed general contractor. Id. at 91. As a senior project manager, Mr. Dumas drafts scopes of work for subcontractors and manages day to day operations for construction projects. Id. at 92.

Mr. Dumas was not involved in the original construction; however, he became involved during the tenant buildouts and the remedial roof work. Id. at 92. Mr. Dumas had been on the roof at least 20 times as part of the remediation. Id. at 93. He observed that the roof was not tapered properly to the drains with tapering at least an inch below the drains at several points; the insulation under the roof membrane felt soggy; wall flashing was missing; the caulking exhibited gaps large enough to reach a finger in and touch the counter flashing; and overall shoddy work on the roof workmanship. Id. at 93–94. He could feel the water beneath his feet during his inspection. Id. at 94.

When he received the Certified Roofing Report, he went on site and looked at all the roofs on the project to check the validity of the report. Id. at 94. He looked at each item on the report at the site and ultimately concluded that the Certified Roofing Report was valid. Id. at 95–96. Mr. Dumas then obtained multiple bids for the repair work. Id. at 97. He testified that the bidders all had challenges obtaining the materials within a reasonable time. Id. at 98–99. Mr. Dumas acknowledged that they purchased a 60-millimeter membrane even though Therma Seal installed a 50-millimeter membrane due to supply chain issues and a relatively similar cost. Id. at 98–99.

Mr. Dumas also testified that Certified's proposals were different than the original Certified Roof Report as a result of further investigation. Id. at 100–101. During further investigation, Mr. Dumas observed that Roof 3 was saturated and not properly sloped to the drains. Id. at 101. Gulf performed water testing and lifted the cold welds installed by Therma Seal and observed there were voids when they should have been welded. Id. at 101. Mr. Dumas also performed testing on Roof 4 by pulling off part of the wall system to confirm there was waterproofing. Id. at 102.

Mr. Dumas prepared the scope of work for Certified's Contract. Id. at 102–103; Trial Ex. P–210. The scope was based on what was necessary to correct the roofing deficiencies by the original roofer, Therma Seal. Trial Tr. Mar. 30, 2023, at 103. Shortly after entering into the contract, Mr. Dumas obtained another additional proposal to complete the remaining corrective work as a result of the original deficient installation. Id. at 106; Trial Ex. P–211 [ECF No. 130–10]. Mr. Dumas asked for pricing to make all the necessary repairs and a warranty on all roofs, including a warranty from FiberTite. Trial Tr. Mar. 30, 2023, at 106.

Mr. Dumas confirmed that the scope of work was limited to roofing-related items. Id. at 106–107. He did not include any work relating to deficiencies in stucco, waterproofing, or missing sealant. Id. at 115. He explained that the only work that may have been outside of the roofing scope of work was on Roof Section 7, section D, to pressure clean and paint the two-foot-high exterior walls. Id. at 116, 122. Mr. Dumas considered that paint work very minor and unrelated to the ponding that was observed as a result of the scupper issues on that roof. Id. at 122. Any stucco work to be performed by Certified was located at the flashing areas relating to damage caused by Therma Seal at the counterflashing—or otherwise required because of the roof repairs. Id. at 117–18, 122–23. Any other sealant repairs were also required in connection with the roof repair and replacement. Id.

With respect to the garage roofs, Mr. Dumas also observed water intrusion on those roofs such that an individual could nearly float on one of the roofs. Id. at 107–108. Accordingly, he believed that the replacement of the garage roofs was reasonable and necessary. Id. at 108. Mr. Dumas also prepared the Certified Change Order #1. Id. at 111; Trial Ex. P–263 [ECF No. 130–13]. He confirmed that the change order added $250,000 worth of work on top of the $102,000 original contract, and he reduced the contract amount by $75,000 to account for the FiberTite contribution, leaving a total contract balance between Gulf and Certified of $272,554. Id. at 111–12.

V. Gene Fall's Testimony

Gene Fall was designated by Gulf as a hybrid fact and expert witness. Mr. Fall is the owner, President, and CEO of Certified Roofing, a full-service commercial roofing contractor. Trial Tr. Mar. 31, 2023 [ECF No. 133] at 7. Mr. Fall has been in the construction industry since 1977. Id. He has been a Florida licensed roofing contractor since 1983 and a Florida licensed general contractor since 1999. Id. Mr. Fall holds a Florida inspectors license, Florida solar license, and licenses in several other states in the Southeast. Id. at 7–8. He has also been an authorized or certified applicator of FiberTite roof products for approximately 20 years. Id. at 8–9. Mr. Fall was familiar with the FiberTite manufacturer instructions and installation details. Id. at 9. He had installed the same system that Therma Seal was hired to install and knew the procedures for installing the system. Id. at 183.

Although Mr. Fall was designated as a hybrid witness to provide expert testimony at trial, he was not hired by Gulf to provide expert witness consulting services and was not paid for his witness testimony. Id. at 10.

Mr. Fall testified about his engagement by the Owner and his review of Therma Seal's roofing deficiencies. Overall, he deemed the quality of Therma Seal's workmanship out of ten “a three at best.” Id. at 11; Trial Ex. P–217. It was his general opinion that Therma Seal failed to properly install the roof and exhibited numerous workmanship deficiencies. Trial Tr. Mar. 31, 2023, at 11; 179–82. Mr. Fall was ultimately hired to repair or replace Therma Seal's defective workmanship. Id. at 11. Mr. Fall testified that all the work Gulf hired him to perform was a direct result of Therma Seal's shortcomings. Id. at 186–87; Trial Ex. P–217. In his professional experience, all the damages flowed from Therma Seal's workmanship deficiencies. Id.

Mr. Fall was first contacted by the Owner to investigate water problems related to the roof of the Project because the Owner was having water intrusion problems and concerns about the workmanship. Trial Tr. Mar. 31, 2023, at 14. Mr. Fall conducted approximately eight to ten site inspections. Id. at 15. He and his employees at Certified Roofing took photographs and provided a written report to the Owner of their findings. Id. at 16–17; Trial Exs. P–216, P–217.

Mr. Fall testified in detail about the defects in Therma Seal's work. Trial Ex. P–217. He addressed each Therma Seal deficiency on every roof in the Certified Roofing report and concluded that the deficiencies were a result of Therma Seal's faulty work or failure to fulfill an obligation to the general contractor. Id. Mr. Fall observed and identified the following Therma Seal deficiencies on all the roof sections—all of which required repair or replacement:

- Therma Seal failed to correct punctures or holes in the roof that are the roofer's responsibility to fix before turning the building over to the Owner or obtaining a manufacturer's warranty. Trial Tr. Mar. 31, 2023, at 30, 67, 181.

- Therma Seal failed to properly weld the seams throughout all the roofs on the project that resulted in a potential source of water intrusion. Id. at 28, 30, 49–50, 52, 53, 55, 67, 74, 75, 80, 81; 181–82.

- Therma Seal used improper materials. Id. at 32.

- Therma Seal failed to properly design and install flashings that caused water intrusion into the roof system. Id. at 33–39, 41, 43, 46, 61, 81, 181–82.

- Therma Seal failed to properly install the scupper and leader heads. Id. at 46, 65, 76.

- Therma Seal failed to properly install the coping caps, leading to water intrusion into the walls, parapets, and roof system. Id. at 50–51, 181.

- Therma Seal improperly installed flashing and sealing of penetrations and terminations. Id. at 31–39, 41, 42, 46, 56, 68, 81, 181–82.

- Therma Seal improperly terminated the flashing on the curbs, penetrations, and site screen. Id. at 33–37, 181.

- Therma Seal damaged stucco when it was installing counterflashing. Id. at 43, 67–68.

- Therma Seal failed to design and install the lightweight concrete and insulation on the roof to achieve the proper slopes of its membrane, which prevented the roof from draining and allowed ponding. Id. at 38, 54, 117–18, 125.

- Therma Seal spilled adhesive on the roof and contaminated the membrane. Id. at 43, 51.

- Therma Seal failed to install necessary counterflashings. Id. at 41.

- Therma Seal failed to install sacrificial pads pursuant to industry standard. Id. at 48.

Based on Mr. Fall's investigation, he concluded that water was permeating the roofing systems as a result of Thermal Seal's deficiencies. Id. at 56-59, 74, 75, 81, 82. Mr. Fall also ruled out other potential sources of water intrusion into the roof system. Id. at 57, 59. He water tested the walls outside of Roofs 3 and 4 and was comfortable that there was no concern about moving forward with installing the roof under the existing conditions. Id. at 88, 176.

Mr. Fall also testified about Certified Roofing's repair proposals, Trial Ex. P–88 [ECF No. 130–4]; Trial Ex. P–211, and repair contracts, Trial Exs. P–210, P–263. He originally put together a proposal for Roofs 3 and 4 because those were the items that the Owner wanted immediately addressed as water was bleeding out of the roof system and staining the building. Trial Ex. P–88; Trial Tr. Mar. 31, 2023, at 83–84. His proposal for Roof 3 was $42,477. He proposed that replacing the roof was a necessary result of the water intrusion relating to the Therma Seal deficiencies. Id. at 86; Trial Ex. P–88. Mr. Fall's proposal for Roof 4 was $59,767. He testified that replacing the roof was similarly necessary due to the water intrusion relating to the Therma Seal deficiencies. Id. Mr. Fall ultimately entered into a contract for the replacement of Roofs 3 and 4 based on his proposal. Trial Exs. P–210, P–88; Trial Tr. Mar. 31, 2023, at 86.

Mr. Fall then submitted a proposal for the work necessary to address the remaining Therma Seal deficiencies. Trial Ex. P–211; Trial Tr. Mar. 31, 2023, at 93–94. Mr. Fall believed all the proposed repairs were necessary as a result of the deficiencies caused by Therma Seal. Trial Tr. Mar. 31, 2023, at 95. The proposal was broken down by each roof, setting forth the scope of work to be performed on each roof, and addressing the same deficiencies noted in his report and subsequent investigation. Id. at 95–96; Trial Ex. P–217. Mr. Fall went through each roof section and testified about Therma Seal's deficiencies and the necessary repairs that were proposed. Trial Ex. P–217. The proposal was ultimately accepted by Gulf, and Certified entered into Change Order #1 to incorporate the remaining work into the contract. Trial Ex. P–263; Trial Tr. Mar. 31, 2023, at 96. The scope of work was determined by the investigation that Certified performed leading up to the July 2021 report, Trial Ex. P–217, and until the August 29, 2022, proposal, Trial Ex. P–211; Trial Tr. Mar. 31, 2023, at 96. Mr. Fall testified that the August 29, 2022, proposal, Trial Ex. P–211, and the Change Order #1, Trial Ex. P–263, reflected his ultimate opinions and recommendations on the necessary repairs due to Therma Seal's deficiencies. Trial Tr. Mar. 31, 2023, at 97. Mr. Fall also testified that, based on his 40 years of experience in the construction industry, the costs in his proposal, contract, and change order were eminently reasonable. Id. at 98.

Mr. Fall testified about the costs to perform certain items that were questioned by PIIC as potentially outside of Therma Seal's scope of work. As an owner and officer of Certified Roofing, Mr. Fall provided factual testimony regarding the costs in his proposal based on the particularized knowledge he had by virtue of his position with Certified Roofing. See United States v. Toll, 804 F.3d 1344, 1354–55 (11th Cir. 2015) (“a witness provides factual statements when he gives a summary of financial records” and “a business owner or office may provide lay opinion testimony because of the particularized knowledge that the witness has by virtue of his or her position in the business”). Regarding punctures, Mr. Fall testified there were only about 6 punctures on the project, which would have cost him about $200 to repair. Trial Tr. Mar. 31, 2023, at 31. Mr. Fall also noted one stucco location relating to an electrical box that he did not attribute to Therma Seal, but it would have cost him only $150 to repair. Id. at 46.

Mr. Fall testified about Therma Seal's failure to install sacrificial pads, and how they were required as industry standard; however, he noted these were minor items and they would cost him $450 to install. Id. at 48–49. He further testified that the proposal and contract included painting a wall on Roof 7 that cost $1,500; however, his opinion remained that water entered the roof system through the improperly installed scupper. Id. at 65. Mr. Fall testified there was some sheet metal on the roof that needed to be cleaned up, which was minimal and would cost $100, at most. Id. at 69. Mr. Fall testified that his contract included caulking the wall joint on Roof 10 because he believed it was necessary to repair Therma Seal's deficient work, which cost him approximately $2,500. Id. at 79–80. Finally, he confirmed that Certified was not hired to perform work according to a different design than what Therma Seal was required to do. Id. at 63.

C. PIIC'S TRIAL WITNESSES

PIIC called three witnesses in response to Gulf's case-in-chief: (1) Mr. Bryan Badeaux, (2) Mr. Derek Hodgin, and (3) Mr. Dave Wikel. PIIC also designated deposition testimony of two representatives from Seaman/FiberTite, Mr. Ralph Raulie and Mr. Jonathan Pierson.

I. Bryan Badeaux's Testimony

Mr. Badeaux was the corporate representative for PIIC. At the beginning of these proceedings, Mr. Badeaux held the title of Senior Surety Claims Counsel—until roughly seven months prior to trial, when his title changed to Surety Claims Manager. Trial Tr. Apr. 3, 2023 [ECF No. 134] at 5–6. As Senior Surety Claims Counsel and Surety Claims Manager, Mr. Badeaux was responsible for reviewing, responding, and making determinations on Gulf's performance bond claim. Id.

Mr. Badeaux agreed that Therma Seal and PIIC were jointly and severally bound for the performance of Therma Seal's subcontract. Id. at 47. He agreed that Therma Seal was obligated to perform its work correctly. Id. Mr. Badeaux also acknowledged that Therma Seal made a general assignment for the benefit of creditors, which is a specific act of default under the Subcontract. Id. at 58–59.

Mr. Badeaux acknowledged receipt of Gulf's claim notices but failed to timely respond because PIIC did not open the mail as frequently due to the COVID-19 pandemic. Id. at 15–16, 53–54; Trial Ex. J–18 [ECF No. 129–10]. When PIIC did receive Gulf's notice, PIIC had various options it could pursue to perform the repairs and complete the work. Trial Tr. Apr. 3, 2023, at 44–45. PIIC had not hired a general contractor or a licensed roofing contractor to evaluate the deficiencies nor had it obtained any proposals for the remedial work. Id. However, Mr. Badeaux contended there was no claim or demand by the Owner to Gulf to repair the deficiencies in Therma Seal's work identified in Certified Roofing's report. Id. at 62–63. Although Mr. Badeaux admitted in his deposition that at least some defects and deficiencies in the Certified Roofing Report related to Therma Seal's scope of work, he testified at trial that there were no workmanship issues relating to Therma Seal. Id. at 40–41, 45–46, 62–63; Badeaux Dep. [ECF No. 101–1] at 6, 9–10, 34–35. Although PIIC had the opportunity under the bond to determine the amount for which it may be liable to Gulf and deny liability in part, PIIC determined that it could not find anything that was covered under the bond for a Therma Seal default. Trial Tr. Apr. 3, 2023, at 50. PIIC did not perform and did not request to perform any destructive testing. Badeaux Dep. at 32.

PIIC then issued a denial of the claim in its entirety on October 22, 2021 and took no action with respect to the repair work. Trial Ex. J–26 [ECF No. 129–14]; Trial Tr. Apr. 3, 2023, at 65, 84. PIIC's denial letter questioned the validity of Gulf's claims pending receipt of additional information or a determination by a trier of fact. Trial Ex. J–26. PIIC's denial was based on its determination that some of the deficiencies may be the responsibility of the project owner or covered under a manufacturer's warranty, and that Gulf's notice letter arrived later than one year after Therma Seal had completed its work. Id.

II. Derek Hodgin's Testimony

Mr. Hodgin was a licensed engineer that PIIC hired to serve as an expert witness in this matter. Trial Tr. Apr. 3, 2023, at 101, 105–06. Mr. Hodgin was not a Florida licensed general contractor, roofing contractor, or an authorized installer of FiberTite products. Trial Tr. Apr. 4, 2023 [ECF No. 135] at 21. Mr. Hodgin generally testified about his observations and opinions regarding each roof.

Mr. Hodgin reviewed Certified's roofing report and made one visit to the Project in October 2022 that lasted between 1–2 hours. Trial Tr. Apr. 3, 2023, at 106–07; Trial Tr. Apr. 4, 2023, at 21, 29. Mr. Hodgin authored his report two weeks later without reviewing any other documents or performing any water testing or other destructive testing. Trial Tr. Apr. 4, 2023, at 21–22. Mr. Hodgin never reviewed Therma Seal's subcontract and did not know Therma Seal's contractual obligations. Id. at 22. He did not intend to review every minutiae of the roof installation, but was instead asked for his opinion on the Certified Report's identified deficiencies and what steps he thought were needed to remedy any deficiencies. Id. at 30. Mr. Hodgin was not hired or asked to render any opinions challenging the reasonableness of the costs that Certified proposed to perform the repair work. Id. at 35; Trial Ex. P–211.

During Mr. Hodgin's site visit, he observed dozens of areas marked by Certified that were improperly constructed, but he only specifically probed six faulty areas for open seams by running a paperclip across them. Trial Tr. Apr. 4, 2023, at 24–25. Mr. Hodgin acknowledged that he observed improper seams or cold welds that were a potential source of water intrusion. Id. at 24–26. However, he noted that he could not determine whether water was getting in through the seal unless the roof membrane were removed. Id. at 26. Mr. Hodgin also observed workmanship issues with the scuppers and flashing installed by Therma Seal that required repair. Id. at 27–28. Although Mr. Hodgin premised his opinions on his assumption that Therma Seal was not designing any type of flashing details and had no engineering responsibilities, he had not reviewed the subcontract or considered Therma Seal's contractual obligations. Id. at 31; Trial Ex. J–4 [ECF No. 129–5]. Further, although Mr. Hodgin provided opinions regarding construction sequencing, he had not reviewed any construction photographs, meeting minutes, project construction schedules, or had any discussions with individuals who had actually worked on the project. Trial Tr. Apr. 4, 2023, at 32.

Mr. Hodgin relied on Certified's investigation to determine how water was permeating the roofing system because Certified did a more thorough investigation. Id. at 33. Mr. Hodgin testified that he agreed with many of the findings in the Certified report. Id. For instance, he acknowledged that he agreed with Certified Roofing's report regarding the existing roofing conditions at the property. Id. Mr. Hodgin relied entirely on Certified to determine whether water was in the system, and he did not form any other opinions about how water may have entered any roofing systems. Id. at 69–70.

Mr. Hodgin did not consider Certified's August 29, 2022 repair proposal, Trial Ex. P–211, but he did testify at trial about the repairs in the report. On Roof 1, Mr. Hodgin agreed that the work shown in the proposal needed to be performed. Trial Tr. Apr. 4, 2023, at 35; Trial Ex. P–211. Mr. Hodgin agreed with Certified's findings regarding Therma Seal's deficiencies as to the welds and open seams. Trial Tr. Apr. 4, 2023, at 53. Namely, Therma Seal improperly terminated the membrane and failed to properly seal it, id.; used the wrong manufacturer materials and failed to properly flash those areas, id. at 54–55; failed to return and properly fix the penetrations at the sight screen curb, id. at 57–58; and failed to properly flash the roofing system to the walls, id. at 58–60.

Mr. Hodgin assumed that the improper slope of the roofing system was a design issue. He was not aware that Therma Seal's subcontract required Therma Seal to design the lightweight insulating concrete and tapered insulation, as well as design the proper slopes of the roof. Id. at 61–62; Trial Ex. J–4. Therma Seal was obligated to properly slope the roof to the drain, and it was not appropriate under the contract to simply leave the roofing system in a non-conforming condition. Trial Tr. Apr. 4, 2023, at 67. Mr. Hodgin acknowledged that Therma Seal had a broad scope of work that was intended to ensure Therma Seal was contractually responsible for everything they needed to properly install the roof. Id. at 68. He did not dispute that the scuppers were leaking, but did not know whether scuppers were part of Therma Seal's scope of work. Id. at 72. He acknowledged that Therma Seal performed poor workmanship on the flashing. Id. at 73. Mr. Hodgin did not know whether sacrificial pads were required by the manufacturer, but noted that if they were, they should have been added, and failure to do so would have been a Therma Seal deficiency. Id. at 73–74. Mr. Hodgin did not attribute any of the deficiencies on Roof 1 to owner maintenance issues or design issues. Id. at 74–75.

On Roof 2, Mr. Hodgin agreed that Certified's repair scope was reasonable. Id. at 35–36; Trial Ex. P–211. He noted the following deficiencies by Therma Seal: cold welds, missing coping caps, stucco, and sealant issues. Trial Tr. Apr. 4, 2023, at 74–75. Mr. Hodgin did not attribute any of the deficiencies on Roof 2 to owner maintenance issues or design issues. Id.

On Roofs 3 and 4, Mr. Hodgin did not dispute that those roofs were saturated and needed to be replaced. Id. at 36–37, 82; Trial Ex. P–210. Although Mr. Hodgin first testified that he did not attribute anything to Therma Seal, he did not test the seams and did not form any opinions as to how water was getting into the roofing system. Trial Tr. Apr. 4, 2023, at 76. Mr. Hodgin never stepped foot on Roofs 3 and 4, never observed Therma Seal's work on the roofs, and never looked at the walls or termination bars, the hat channels, the waterproofing on the wall, or Certified's repairs on the roofs. Id. at 76–81. Instead, Mr. Hodgin relied entirely on Certified's findings as to where water was permeating the roofing system. Id. at 77. Mr. Hodgin also noted there was a missing coping cap that was a potential source of water intrusion, but he was not aware that coping was included in Therma Seal's scope of work. Id. at 78–79. He acknowledged that the roofing system designed and installed by Therma Seal was not properly sloped to the drain. Id. at 84–85. He also identified improper edge metal flashings as a Therma Seal deficiency, and had no reason to dispute Certified's opinion that the deficiency was allowing water to migrate into the roofing system. Id. at 85. Mr. Hodgin did not attribute any of the deficiencies on Roof 3 or 4 to owner maintenance issues or design issues. Id. at 85–87.

On Roof 5, Mr. Hodgin did not look at that roof, deferred entirely to Certified Roofing's investigation, and did not express a basis to question Certified's proposal for roof repairs. Id. at 37; Trial Ex. P–211. He observed the same kinds of workmanship issues observed on other roofs. Id. at 87–88.

On Roof 6, Mr. Hodgin agreed that the roof needed to be replaced if Certified determined it was wet and had no opinion as to whether design issues caused water intrusion. Id. at 37–38, 88; Trial Ex. P–211. Mr. Hodgin never directly inspected Roof 6, never performed any testing, and never did anything to determine whether water was in Roof 6; he simply took a picture from a window. Trial Tr. Apr. 4, 2023, at 88–89, 94.

On Roof 7, Mr. Hodgin agreed the Certified repairs were reasonable. Id. at 39, 98; Trial Ex. P–211. Although Mr. Hodgin testified that he believed the stucco was not installed in that area, he never went on the roof or inspected it—even though he had access and could have asked for a ladder to perform an inspection. Trial Tr. Apr. 4, 2023, at 95–96. Mr. Hodgin agreed with Certified that the scupper and parapet walls constituted a Therma Seal deficiency. Id. at 96–97. And as with prior roofs, he did not attribute any of the deficiencies on Roof 7 to owner maintenance issues or design issues. Id. at 97.

On Roofs 8 and 9, Mr. Hodgin believed that minor repairs were necessary, but not a full roof replacement. Id. at 39; Trial Ex. P–211. He observed open seams and cold welds that were Therma Seal deficiencies. Trial Tr. Apr. 4, 2023, at 101, 104–05. Mr. Hodgin also noted deficiencies in the scuppers attributable to Therma Seal. Id. He acknowledged that Certified identified water in the roofing system, but did not go on the roof to investigate and chose to rely on Certified's investigation. Id. at 102–03. Mr. Hodgin did not attribute any of the deficiencies on Roofs 8 and 9 to owner maintenance issues or design issues. Id. at 107.

On Roof 10, Mr. Hodgin agreed that scupper repairs were necessary, and concurred this deficiency could have justified replacement of the entire roof as proposed by Certified. Id. at 39; Trial Ex. P–211. Mr. Hodgin observed open seams, cold welds, and scupper issues attributable to Therma Seal. Trial Tr. Apr. 4, 2023, at 104–06. He acknowledged that Certified identified water in the roofing system, but once again did not go on the roof to investigate it and chose to rely on Certified's investigation. Id. at 104. Mr. Hodgin did not attribute any of the deficiencies on Roof 10 to owner maintenance issues or design issues. Id. at 107.

On Roof 11, Mr. Hodgin agreed that there were deficiencies with Therma Seal's roof membrane making it vulnerable to water intrusion and in need of required repair, but he did not have sufficient information to agree on a full roof replacement. Id. at 40, 107; Trial Ex. P–211.

On Roof 12, Mr. Hodgin agreed that it needed to be replaced because it exhibited enough water trapped below it to resemble a waterbed. Id. at 40, 110. Mr. Hodgin acknowledged workmanship issues with the roof, but also believed there was a problem with how the roof terminated against the wall. Id. at 110. However, Mr. Hodgin was unsure as to whether the wall was concrete or a porous masonry wall. Id. at 111–12. He also opined there was a design issue on Roof 12 but failed to consider that Therma Seal was contractually responsible for all required engineering needed for roofing and flashing design. Id. at 114–15. Mr. Hodgin also failed to perform analysis relating to wind drive, rain, or the architects’ calculations. Id. at 116–17. He did not perform any destructive testing, did not review the wall, did not review the plan details, and did not in any way consider the gap between the office building and parking garage at Roof 12's location. Id. at 119–21.

III. Dave Wikel's Testimony

Mr. Wikel was the owner of Therma Seal and the license holder for Therma Seal at the beginning of the project. Id. at 136, 177. Mr. Wikel generally testified about his recollection of the project and limited involvement. However, Mr. Wikel's memory was limited and impacted by his ongoing personal issues following the collapse of Therma Seal. His testimony was also plausibly biased as a result of his ongoing indemnity obligations to PIIC, and his pledge of personal assets to PIIC to protect PIIC against Gulf's claim. Id. at 211–212. Mr. Wikel visited the job site three times and only attended one site meeting. Id. at 176. Mr. Wikel did not recall when the work was performed, but believed the work took place between early 2019 through February 2020. Id. at 177, 182; Trial Ex. D–4 [ECF No. 128–2].

At the time the roofing work stated on January 28, 2019, Mr. Wikel was the license holder for Therma Seal. On or about that time, the United States of America filed charges against him for accepting kickbacks on a federal courthouse project in St. Thomas. Trial Tr. Apr. 4, 2023, at 184; Information Ex. A [ECF No. 112–1]. Mr. Wikel did not report the charges to Gulf or to the Department of Business and Professional Regulation. Trial Tr. Apr. 4, 2023, at 184–85. On April 8, 2019, Mr. Wikel pled guilty to the charges and agreed that he knowingly and willfully paid kickbacks, namely that he paid money, a fee, a commission, or other compensation for the purpose of improperly obtaining or rewarding favorable treatment in connection with a contract with the United States. Id. at 188. Mr. Wikel never informed Gulf about his conviction or that his criminal conviction was a licensing violation, which could cause him to lose his roofing contractor's license. Id. at 189–90.

The charges against Wikel caused tension between him and his business partners, and impacted Therma Seal's operations. Id. at 187. Mr. Wikel's business partner, Michael Fuggetta, began working towards obtaining a roofing license to take over for Mr. Wikel. Ultimately, Mr. Fuggetta succeeded in becoming the license holder/qualifier for Therma Seal on June 12, 2019. Id. at 190; Exs. B, C [ECF Nos. 112–2, 112–3].

On March 2, 2020, Mr. Wikel was sentenced to 18 months in prison, followed by supervised release for 3 years. He was prohibited from performing any further federal construction work. Trial Tr. Apr. 4, 2023, at 185. In August 2020, Mr. Wikel and his business partners entered into a settlement agreement to separate from Therma Seal. Id. at 194.

On March 2, 2021, the Department of Business and Professional Regulation revoked Mr. Wikel's roofing license for being convicted of a felony and failing to report it to the Department. Id. at 178; Ex. F [ECF No. 112–6]. On March 18, 2021, Therma Seal field a Petition for Assignment for the Benefit of Creditors in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida. Trial Tr. Apr. 4, 2023, at 193; Ex. G [ECF No. 112–7]. Mr. Wikel's new company, Wolverine, took over ten to fifteen of Therma Seal's projects for one of Therma Seal's surety companies. Trial Tr. Apr. 4, 2023, at 179. However, Therma Seal had two jobs that were bonded by PIIC. PIIC did not allow Wolverine to complete those jobs and sued Mr. Wikel in February 2021 for reimbursement. Id. at 180–81.

Mr. Wikel then received notice of Gulf's claim from PIIC. Id. at 196. Therma Seal was out of business and Mr. Wikel was no longer affiliated with Therma Seal. Id. PIIC requested that Mr. Wikel assist with the claim because he was an indemnifier under the performance bond. Id. Mr. Wikel could not offer to make any repairs to the roofs, however, because he was not an authorized applicator of FiberTite systems. Id. He advised PIIC that he wanted to do repairs, but PIIC advised him that they had already decided to deny Gulf's claim. Id. at 198.

Mr. Wikel testified about the Therma Seal subcontract and acknowledged that Therma Seal was responsible for properly sloping the roofing system, all required sealants and caulking, overflow scuppers, and compliance with manufacturer details. Id. at 199–204. However, he also acknowledged that he only visited the site a few times. Id. He also testified about his May 22, 2017, indemnity agreement with PIIC and obligations to PIIC relating to Gulf's bond claim. Id. at 205–212. Therma Seal, Mr. Wikel, and Mr. Wikel's wife were required to indemnify PIIC from any losses under the performance bond. Id. PIIC filed a lawsuit against Mr. Wikel under the indemnity agreement in 2021, and then subsequently entered into a settlement agreement in August 2022, wherein PIIC required Mr. Wikel and his wife to pledge all of their personal assets to protect PIIC from Gulf's claim against Therma Seal's performance bond. Id.

IV. Ralph Raulie's Testimony

Mr. Raulie was the senior product and technical manager for Seaman and served as their corporate representative relating to the FiberTite roofing system. Raulie Dep. [ECF No. 103–1] at 3. He was responsible for managing the warranty claim for the FiberTite roofing system installed by Therma Seal. Id. Mr. Raulie testified that Therma Seal's roof work did not comply with FiberTite's standards. Id. at 10–11.

Mr. Raulie, on behalf of Seaman, concluded that the roofing contractor, Therma Seal, took advantage of the Owner and Gulf because the roof work exhibited myriad deficiencies that did not meet the project's specifications. Id. at 15. He testified that Therma Seal took advantage of Gulf, “shortchanged the building owner who was also paying for this building,” and “took advantage of the situation and left the ․ parties with a roof that was incomplete and had problems.” Id. at 34. At the end of Therma Seal's work, a punch list was generated that Therma Seal had to fix. Therma Seal signed a document representing that it had completed the work on the punch list. Id. at 32. However, Therma Seal's representation was inaccurate. Id. at 32, 39. In reviewing the punch list, Seaman observed punctures, rips, and tears that Therma Seal was required to correct to make the roof system watertight prior to Seaman issuing the warranty. Id. at 38–39.

Mr. Raulie explained that Seaman conducted an investigation of Therma Seal's roofing work and the alleged deficiencies, including looking for other sources of water to enter the building other than the roof. Id. at 15. Seaman observed counterflashing that was fabricated and installed by Therma Seal that was incomplete and allowing water into the roofing system. Id. at 32. Seaman also observed insufficient bonding of the membrane—a workmanship issue by Therma Seal contributing significantly to water intrusion. Id. at 33. Further, Seaman observed water permeating the system as a result of Therma Seal's improper sealing of the roofing system to the wall. Id. at 36. Seaman made sure to rule out other potential sources of water intrusion other than Therma Seal's roofing work. Id. at 35. Seaman observed in July 2021 that the roofing systems required replacement. Id. at 16.

Mr. Raulie testified that FiberTite was willing to contribute to the replacement. Id. at 16. However, Seaman took the position that the garage roofs were not covered by their manufacturer warranty because Therma Seal did not give Seaman sufficient notice regarding the roof issues and failed to properly fill out the registration documentation. Id. at 17, 35. In any event, Seaman understood that the garage roofs needed to be replaced and worked with Certified to come up with the repair scope. Id. at 34.

In September 2022, Seaman agreed to contribute $75,000 to the repairs being performed by Gulf and Certified, and agreed to issue a new warranty to cover all the roofs on the project after they were replaced by Certified. Id. at 30–31; [ECF Nos. 140–2, 140–3]. Seaman did not agree to contribute more or participate in affording coverage for the parking garage repairs other than issuing a new warranty on all the roofs, including the parking garage, after they were replaced by Certified. Id. at 31.

D. LIMITATIONS ON EVIDENCE

The Court limited trial evidence in accordance with its pre-trial orders governing discovery. Following the close of evidence on November 15, 2023, Gulf and Certified continued to investigate Therma Seal's deficiencies, finalize the complete remedial scope of work, and perform further repairs on the roof. In January 2023, Gulf and Certified executed Change Order #1 to cover the remediation of further roof repairs to the main office building roof and parking garage. Pl.’s Resp. in Opp'n to Def.’s Mot. to Strike [ECF No. 79] at 4–5.

On January 31, 2023, PIIC moved to strike evidence disclosed by Gulf after the close of discovery on November 15, 2022. Def.’s Mot to Strike Pl.’s New Damages Evid. Disclosed After the Close of Disc. [ECF No. 71]. That matter came before Magistrate Judge Strauss on February 16, 2023. [ECF No 83]. After considering the motion, the response, and oral arguments from counsel, Magistrate Judge Strauss ruled that the late disclosure of Certified Roofing's Change Order #1 was harmless and that any perceived harm could be cured by re-deposing Mr. Scherer and Mr. Fall. [ECF No. 86] at 14.

On February 3, 2023, Gulf filed a Motion for Extension of Time to Conduct Limited Discovery and Pretrial Disclosures. [ECF No. 78]. Gulf requested that the Court permit the parties to conduct limited discovery and supplement the pretrial disclosures relating to Gulf's project documents that were produced after the close of discovery as a result of the ongoing investigation and remedial work, and Gulf's further evidence of damages. Id. Gulf offered to make its witnesses available for deposition to adequately prepare for trial and eliminate any prejudice to PIIC. Id. at 2. This Court granted in part Gulf's motion. See [ECF No. 87]. The Court ordered Gulf to make Mr. Scherer and Mr. Fall available for re-deposition limited to the topic of the unsigned first change order produced on November 17, 2022, and the signed first change order produced on January 23, 2023. Id. The Court did not impose any other limitations on PIIC, and PIIC had the opportunity to question Mr. Scherer and Mr. Fall about the investigation that had been conducted up until the time the change order was signed on January 17, 2023, opinions formed up until January 17, 2023, as well as any aspect of the work that was performed or expected to be performed pursuant to the subject of the change order as of January 17, 2023. Trial Tr. Mar. 30, 2023, at 157–60.

PIIC re-deposed Mr. Scherer and Mr. Fall on March 2, 2023, and March 3, 2023, curing any perceived harm resulting from the disclosure of documents and evidence after the discovery deadline. Id. at 157–66. On March 3, 2023, Gulf filed a Motion for Continuance of Trial and Extension of Trial Deadlines to permit Gulf to complete the repairs at issue, as well as disclose and conduct any necessary discovery regarding all evidence relating to the ongoing construction for use at trial. [ECF No. 91]. On March 9, 2023, the Court denied Gulf's Motion for Continuance. [ECF No. 99].

During trial, the Court provided curative instructions to the parties and the witnesses to limit the testimony and evidence to the facts and circumstances of the project and corresponding opinions formed as of January 17, 2023. The Court also sustained objections and disregarded any testimony, opinions, or evidence of facts that occurred after January 17, 2023.

FINDINGS OF FACT

It is undisputed that this action arises from the construction of the Project pursuant to the Prime Contract between Gulf and the Owner, under which Gulf agreed to serve as the general contractor for construction of the Project. Trial Ex. J–3. Gulf and Therma Seal entered into the Subcontract under which Therma Seal broadly agreed to provide all required material, labor, equipment, permits, and supervision required to complete the roofing, flashing, sheet metal, and lightweight insulating concrete work for the Project. Trial Ex. J–4 at 15. PIIC issued a performance bond jointly and severally guaranteeing the full and faithful performance of Therma Seal's Subcontract obligations. Trial Ex. J–5.

Therma Seal's roof construction took place from approximately March 2019 through August 2020. Trial Tr. Mar. 30, 2023, at 40; Trial Ex. D–4. Shortly after Therma Seal started its work on the Project, Therma Seal's owner and license holder, David Wikel, was charged and ultimately convicted of a felony for accepting kickbacks on a federal courthouse project in the U.S. Virgin Islands. Trial Tr. Apr. 4, 2023, at 184; Exs. A, D, E [ECF Nos. 112–1, 112–4, 112–5]. Mr. Wikel did not report the charges or the conviction to Gulf or the Department of Business and Professional Regulation. Trial Tr. Apr. 4, 2023, at 184–85; Trial Tr. Mar. 30, 2023, at 42–43. The charges against Mr. Wikel caused tension between him and his business partners, negatively impacting Therma Seal's operations. Trial Tr. Apr. 4, 2023 at 187. In June 2019—during the Project—Therma Seal changed its license holder to Michael Fuggetta, who had just recently obtained his roofing license. Exs. B, C [ECF Nos. 112–2, 112–3].

While Therma Seal and its principals were dealing with Mr. Wikel's legal issues and other managerial problems, Therma Seal performed faulty work throughout the project and failed to comply with its contractual obligations. Gulf first observed roofing deficiencies in April 2020. See Trial Tr. Mar. 30, 2023, at 45. Gulf observed missing flashings by Therma Seal and water infiltration staining the exterior of the building due to Therma Seal's work. Id.; Trial Ex. P–19 [ECF No. 130–1]. Gulf documented the issues and submitted them to Therma Seal for repair. Trial Tr. Mar. 30, 2023, at 47–49; Trial Exs. P–19, P–20. Although Therma Seal made band-aid repairs, it did not correct the underlying roofing deficiencies that were causing the water permeation and staining. Trial Tr. Mar. 30, 2023, at 49–53. Gulf continued to repaint the water damage, but the staining continued to re-appear. Id. at 52–53.

On March 2, 2021, the Department of Business and Professional Regulation revoked Mr. Wikel's roofing license due to his felony conviction and failure to report said conviction to the Department. Trial Tr. Apr. 4, 2023, at 178; Ex. F [ECF No. 112–6]. On March 18, 2021, Therma Seal filed a Petition for Assignment for the Benefit of Creditors. Ex. G [ECF No. 112–7].

In July 2021, the Owner issued Gulf a Roofing Report by Certified identifying alleged roofing deficiencies relating to Therma Seal's work on the Project. Trial Tr. Mar. 29, 2023, at 92–93; Trial Tr. Mar. 30, 2023, at 78–79; Trial Ex. P–217. The Owner expected Gulf to complete the repairs and, if Gulf failed to do so, the Owner would consider Gulf in breach of contract. Trial Tr. Mar. 30, 2023, at 76. The Owner required Gulf to make any repairs necessary to obtain a full and enforceable warranty on the roofs from Seaman/FiberTite for the entire project. Id. at 82–84. Nonetheless, the Owner only expected Gulf to repair the roofs to the original specifications of the project, and did not expect any new design, or owner maintenance responsibilities. Id. at 77–88.

Gulf reviewed the Roofing Report, investigated the issues, and confirmed that each of the identified deficiencies fell within Therma Seal's scope of work in the Subcontract. Trial Tr. Mar. 29, 2023, at 99–115; Trial Tr. Mar. 30, 2023, at 95–96. The issues in the Roofing Report were not owner maintenance items nor attributable to any architectural engineering flaws. Trial Tr. Mar. 29, 2023, at 115–16. All the deficiencies in the Roofing Report were attributable to Therma Seal's scope of work. Id. at 116. Gulf was thus contractually obligated to remedy the roofing deficiencies set forth in the Roofing Report and the resulting damage. Trial Exs. J–3, J–4 [ECF Nos. 129–4, 129–5].

Gulf provided sufficient notice to Therma Seal and PIIC of its intent to declare Therma Seal in default of the Subcontract and trigger PIIC's surety duties via the Performance Bond. Trial Exs. P–21, J–18; Trial Tr. Mar. 29, 2023, at 116–20. Therma Seal was in default of its Subcontract for failing to perform in accordance with its Subcontract, failing to honor its warranty, and failing to honor its indemnity obligations. Id. Gulf directed Therma Seal to correct all defects and deficiencies listed in the Certified Roofing Report and demanded indemnification. Trial Tr. Mar. 29, 2023, at 116; Trial Ex. P–21.

Therma Seal failed to respond to Gulf's notice, failed to investigate the Owner's claims, failed to respond to the Owner's claim, failed to begin any corrective work as required by the Subcontract, and failed to respond to Gulf's demand for indemnification and demand for repair. Trial Tr. Mar. 29, 2023, at 77–78, 117–20. Likewise, PIIC failed to timely respond to Gulf's notice. Trial Tr. Mar. 29, 2023, at 120.

Gulf also provided sufficient notice to Therma Seal and PIIC declaring Therma Seal in default, Trial Ex. J–19, terminating the Subcontract, Trial Tr. Mar. 23, 2023, at 121; Trial Ex. J–19, notifying PIIC of the termination and default, Trial Tr. Mar. 29, 2023, at 125; Trial Ex. J–21, and agreeing to pay the balance of the contract price, id. Therma Seal never responded regarding the default or termination. Trial Tr. Mar. 29, 2023, at 122.

Gulf properly terminated Therma Seal's subcontract due to Therma Seal's breach. Therma Seal breached its subcontract in the following ways: (1) performing non-conforming work and failing to otherwise comply with the requirements of the Subcontract, industry standard, and the roofing manufacturer's requirements; (2) failing to remedy the non-conforming work; (3) becoming insolvent and making a general assignment for the benefit of creditors; and (4) failing to defend, indemnify, and hold Gulf harmless from the Owner's claims and demands.

By the terms of the Performance Bond, PIIC is jointly and severally bound to Gulf for the performance of the Subcontract and Therma Seal's default. Trial Ex. J–5. Despite Therma Seal's undisputed non-conforming work, insolvency, and termination for default, PIIC failed to timely investigate Gulf's claim and took no action to honor Therma Seal's warranties or indemnify Gulf against the Owner's demands pursuant to the Subcontract, resulting in its denial of Gulf's claim in full. Trial Tr. Mar. 29, 2023, at 129; Trial Ex. J–26. By the terms of the performance bond, PIIC waived its right to perform and complete, arrange for completion, or obtain a new contractor to correct the defects. Trial Ex. J–5. Gulf was entitled to enforce any remedy available to it and was entitled to reimbursement from PIIC. Id.

Because PIIC failed to remedy the roofing deficiencies and denied Gulf's claim, Gulf was required to hire others, including Certified Roofing, to remedy Therma Seal's non-conforming work and resulting damages to the Project. Trial Tr. Mar. 29, 2023, at 135; Trial Ex. P–210. Gulf obtained multiple bids for the repair work. Trial Tr. Mar. 30, 2023, at 97. Gulf hired Certified Roofing to provide a roof that complied with the specs and plans, and to provide a watertight system in accordance with their Roofing Report and the investigation that was performed after Therma Seal's breach. Id. at 30, 102. Gulf started by replacing roofs 3 and 4. Trial Tr. Mar. 29, 2023, at 136; Trial Ex. P–210. Gulf hired Certified Roofing to re-build the roof in the same manner that Gulf hired Therma Seal to build the roof in the first instance. Trial Tr. Mar. 29, 2023, at 136. Gulf did what was necessary to mitigate any type of further damage caused by Therma Seal's shoddy workmanship, and if Gulf had not taken action, the problems would have further deteriorated. Trial Tr. Mar. 30, 2023, at 30.

Although Certified Roofing's initial report indicated—and Gulf originally believed—that certain portions of the roofs could be repaired, further investigation and water testing revealed that both roofs were completely saturated with water and required total replacement. Id. at 101; Trial Tr. Mar. 29, 2023, at 136. On August 29, 2022, Certified Roofing submitted a second proposal for the work necessary to remediate Therma Seal's deficient work on the remaining roof sections of the Project. Trial Tr. Mar. 30, 2023, at 106; Trial Ex. P–211. Gulf then entered into a change order for the remaining work that needed to be performed. Trial Tr. Mar. 29, 2023, at 154; Trial Ex. P–263. Certified was obligated to perform all the work in the change order, and Gulf was obligated to pay Certified for the amounts in the change order. Trial Tr. Mar. 29, 2023, at 155; Trial Ex. P–263.

Gulf acknowledged that some of the work in the contract and change order was different than the original Certified Roofing Report. Trial Tr. Mar. 30, 2023, at 14. However, the changes were based on further investigation of the roofs, discovery of additional water damage, and Seaman/FiberTite's position that Seaman was not providing any warranty coverage for the garage roofs as a result of Thermal Seal's faulty work. Trial Tr. Mar. 30, 2023, at 14–21; 107–08.

Gulf incurred damages exceeding $382,309 ² to remedy Therma Seal's breaches due to PIIC's breach of the Performance Bond as follows:

- Certified Roofing Contract, Trial Ex. P–210 – $102,244

- Certified Roofing Proposal, Trial Ex. P–211, Certified Roofing Change Order #1, Trial Ex. P–263 – $245,310; and

- 10% Administrative Cost Under Subcontract Ex. A, Trial Ex. P–210 – $34,755.

Regarding the construction issues present in each specific roof section, the Court sets forth its findings as follows.

I. Roof Section No. 1

The Court finds that there is sufficient evidence in the Certified Roofing Report, Trial Exs. P–216, J–5, P–217, coupled with the testimony of the witnesses at trial, to establish by a preponderance of the evidence that Roof Section No. 1 contained defects and deficiencies that were within Therma Seal's scope of work and caused by Therma Seal's breach of the Subcontract. The Court also finds that Therma Seal and PIIC are responsible for Gulf's damages associated with Roof Section No. 1 in the amount of $40,545.00, as set forth in the Certified Subcontract, Trial Ex. P–210, Certified Proposal, Trial Ex. P–211, and Certified Change Order No. 1, Trial Ex P–263.

Therma Seal was responsible for providing a fully adhered membrane and all corrective repairs. Trial Ex. J–4 at 15–17. Therma Seal's work contained punctures and holes in the roofing system, which contributed to water infiltration.

The Court reproduces pictures below from the Certified Roofing Report for context. Trial Exs. J–15, [ECF No. 129–9], P–216, [ECF No. 130–11].

Therma Seal was responsible for “flashing equipment curbs and anchors” and “all required flashing and sealing for pipe penetrations, vents, flues, curbs, supports, legs, and roof davits.” But Therma Seal installed the wrong manufacturer's materials. Trial Ex. J–4 at 15; See also Trial Ex. J–15 at 7.

Therma Seal was responsible for “all required engineering needed for roofing and flashing attachment design.” Therma Seal was responsible for “all required base flashings, counterflashings, gravel stops, reglets, drip edges, cleats, roof expansion joints, roof expansion joint covers, and stack flashings ․ flashing equipment curbs and anchors,” and “all required flashing and sealing for pipe penetrations, vents, flues, curbs, supports, legs, and roof davits.” Trial Ex. J–4. Therma Seal failed to design and install proper flashings—causing water infiltration into the roofing system.

Therma Seal was responsible for “all required lightweight insulating concrete ․ all required engineering needed for roofing and flashing attachment design,” and achievement of all specified tolerances and slopes for the end product. Id. Therma Seal failed to properly slope the roof—causing ponding on the roof system.

Therma Seal was responsible for “all required base flashings, counterflashings, gravel stops, reglets, drip edges, cleats, roof expansion joints, roof expansion joint covers, and stack flashings ․ all required flashing and sealing for pipe penetrations, vents, flues, curbs, supports, legs, and roof davits,” and all required sealants and caulking associated with the roofing work. Id. Therma Seal failed to properly seal the roofing system, allowing water to infiltrate the roofing system through the seams.

Therma Seal was responsible for all the required daily cleanup of the jobsite but failed to clean up debris and adhesive spills on the roofing membrane. Id.

Therma Seal was responsible for the protection of adjacent finishes and structures, as well as all corrective repairs resulting from Therma Seal's defective workmanship. Id. The evidence establishes that Therma Seal damaged other subcontractors’ work during installation of the roofing system, which Therma Seal failed to repair.

Therma Seal was responsible for all required overflow scuppers, and all required gutters and downspouts including scupper header boxes and boots. Id. Therma Seal failed to properly install scuppers and leader heads, resulting in water leaking down the face of the building. Id.

Therma Seal was responsible for providing a fully adhered membrane in accordance with the manufacturer's requirements. Id. Therma Seal failed to properly weld the joints and left open seams throughout Roof Section No. 1 leading to water intrusion. Id.

Gulf hired Certified Roofing to remediate the defects in Roof Section No. 1 caused by Therma Seal. Trial Exs. P–210, P–211, P–263. Gulf hired Certified to install proper flashings, encapsulate the flashing on mechanical equipment curbs, apply proper flashing at the termination bars at the bump-out roof areas, repair abandoned penetrations, repair improperly installed flashings at sight screen walls, repair water in the roof system, probe and repair cold welds throughout the entire roof system, repair various punctures in the roof membrane, perform deficient sealant replacement, perform membrane repairs, perform minor stucco repairs at the sheet metal counter flashing, remove and replace improper/defective fasteners in the sheet metal coping cap flashing, and flash all sight screen legs. Id. Gulf was required to pay Certified Roofing $40,545.00 for this scope of work caused by Therma Seal's default and PIIC's breach of the performance bond. Id.

II. Roof Section No. 2

The Court finds that there is sufficient evidence in the Certified Roofing Report, Trial Exs. P–216, J–5, P–217, coupled with the testimony of the witnesses at trial, to establish by a preponderance of the evidence that Roof Section No. 2 contained defects and deficiencies that were within Therma Seal's scope of work and caused by Therma Seal's breach of the Subcontract. The Court also finds that Therma Seal and PIIC are responsible for Gulf's damages associated with Roof Section No. 2 in the amount of $18,415.00, as set forth in the Certified Subcontract, Trial Ex. P–210, Certified Proposal, Trial Ex. P–211, and Certified Change Order No. 1, Trial Ex. P–263.

Therma Seal was responsible for providing a fully adhered membrane and all corrective repairs. Trial Ex. J–4 at 15–17. Therma Seal's work contained punctures and holes in the roofing system, which contributed to the water infiltration. Trial Ex. P–217.

Therma Seal was responsible for “all required parapet wall metal copings, including wood blocking, sealants, and flashings” and “all required engineering needed for roofing and flashing attachment design.” Trial Ex. J–4. Therma Seal failed to install coping end caps allowing water to penetrate the membrane. See Trial Ex. P–217.

Therma Seal was responsible for “all required engineering needed for roofing and flashing attachment design ․ all required flashing and sealing for pipe penetrations, vents, flues, curbs, supports, legs, and roof davits ․ all required parapet wall metal copings, including wood blocking, sealants, and flashings,” and “all required sealants and caulking associated with the roofing work.” Trial Ex. J–4. Therma failed to properly seal the roofing membrane allowing water to infiltrate the roofing system. See Trial Ex. P–217.

Therma Seal was responsible for all required daily cleanup of the jobsite. Trial Ex. J–4. Therma Seal failed to clean up debris and adhesive spills on the roofing membrane. Trial Ex. P–217.

Gulf hired Certified Roofing to remediate the defects in Roof Section No. 2 caused by Therma Seal. Trial Exs. P–210, Ex. P–211, P–263. Gulf hired Certified to probe and repair “cold welds” throughout the entire roof system, perform repairs to the roof at the area of contamination where an excessive amount of roofing adhesive was spilled, replace deficient sealant at the sheet metal coping and counter-flashing, install sheet metal coping caps ends, perform minor stucco repairs at the sheet metal counterflashing to remediate damage caused by Therma Seal to the stucco, perform roof repairs to mitigate the excessive ponding, and remove and replace improper/defective fasteners in the sheet metal coping cap flashing. Id. Gulf did not hire Certified to perform any plumbing work. Gulf was required to pay Certified Roofing $18,415.00 for this scope of work caused by Therma Seal's default and PIIC's breach of the performance bond. Id.

III. Roof Section No. 3

The Court finds that there is sufficient evidence in the Certified Roofing Report, Trial Exs. P–216, J–5, P–217, coupled with the testimony of the witnesses at trial, to establish by a preponderance of the evidence that Roof Section No. 3 contained defects and deficiencies that were within Therma Seal's scope of work and caused by Therma Seal's breach of the Subcontract. The Court also finds that Therma Seal and PIIC are responsible for Gulf's damages associated with Roof Section No. 3 in the amount of $42,477.00, as set forth in the Certified Subcontract, Trial Ex. P–210, and Certified Proposal, Trial Ex. P–88.

Therma Seal was responsible for providing a fully adhered membrane system, “all required engineering needed for roofing and flashing attachment design ․ all required flashing and sealing for pipe penetrations, vents, flues, curbs, supports, legs, and roof davits ․ all required base flashings, counterflashings, gravel stops, reglets, drip edges, cleats, roof expansion joints, roof expansion joint covers, and stack flashings,” and “achieve specified tolerances and slopes for the end product.” Trial Ex. J–4. Therma Seal failed to properly seal joints and left opens seams throughout Roof Section No. 3, leading to water infiltration in the roofing system. Trial Ex. P–217. Therma Seal also failed to properly slope the roofing system to the drain. Id.

Gulf hired Certified Roofing to remediate the defects in Roof Section No. 3 caused by Therma Seal. Trial Exs. P–210, P–88. Gulf hired Certified to perform all necessary testing, engineering, and permitting, remove and discard existing roof and related accessories, install a new FiberTite roof assembly fully adhered in accordance with the local codes, install a tapered insulation system, install a new membrane, install necessary metals and flashing, remove debris from the roof, and issue a new contractor and manufacturer's warranty. Id. Gulf was required to pay Certified Roofing $42,477.00 for this scope of work caused by Therma Seal's default and PIIC's breach of the performance bond. Id.

IV. Roof Section No. 4

The Court finds that there is sufficient evidence in the Certified Roofing Report, Trial Exs. P–216, J–5, P–217, coupled with the testimony of the witnesses at trial, to establish by a preponderance of the evidence that Roof Section No. 4 contained defects and deficiencies that were within Therma Seal's scope of work and caused by Therma Seal's breach of the Subcontract. The Court also finds that Therma Seal and PIIC are responsible for Gulf's damages associated with Roof Section No. 4 in the amount of $59,767.00, as set forth in the Certified Subcontract, Trial Ex. P–210, and Certified Proposal, Trial Ex. P–88.

Therma Seal was responsible for “all required engineering needed for roofing and flashing attachment design ․ all required sealants and caulking associated with the roofing work”, and “all required base flashings, counterflashings, gravel stops, reglets, drip edges, cleats, roof expansion joints, roof expansion joint covers, and stack flashings.” Trial Ex. J–4. Therma Seal's work contained defective or missing flashings allowing water to infiltrate the roofing system.

Therma Seal was responsible for “all required engineering needed for roofing and flashing attachment design” and “achieve specified tolerances and slopes for the end product.” Trial Ex. J–4. Therma Seal failed to install sufficient insulation to slope the roof system towards the drains causing ponding and water infiltration.

Therma Seal was responsible for “all required parapet wall metal copings, including wood blocking, sealants, and flashings.” Trial Ex. J–4. Therma failed to properly attach the edge metal flashing allowing water infiltration. Trial Ex. P–217.

Therma Seal's defects and deficiencies resulted in the saturation of the roofing system. Id.

Gulf hired Certified Roofing to remediate the defects in Roof Section No. 4 caused by Therma Seal. Trial Exs. P–210, P–88. Gulf hired Certified to perform all necessary testing, engineering, and permitting, remove and discard existing roof and related accessories, install a new FiberTite roof assembly fully adhered in accordance with the local codes, install a tapered insulation system, install a new membrane, install necessary metals and flashing, remove debris from the roof, and issue a new contractor and manufacturer's warranty. Gulf was required to pay Certified Roofing $59,767.00 for this scope of work caused by Therma Seal's default and PIIC's breach of the performance bond. Id.

V. Roof Section No. 5

The Court finds that there is sufficient evidence in the Certified Roofing Report, Trial Exs. P–216, J–5, P–217, coupled with the testimony of the witnesses at trial, to establish by a preponderance of the evidence that Roof Section No. 5 contained defects and deficiencies that were within Therma Seal's scope of work and caused by Therma Seal's breach of the Subcontract. The Court also finds that Therma Seal and PIIC are responsible for Gulf's damages associated with Roof Section No. 5 in the amount of $4,865.00, as set forth in the Certified Subcontract, Trial Ex. P–210, Certified Proposal, Trial Ex. P–211, and Certified Change Order No. 1, Trial Ex. P–263.

Therma Seal was responsible for providing a fully adhered membrane and all corrective repairs. Trial Ex. J–4 at 15–17. Therma Seal's work contained punctures and holes in the roofing system, which contributed to the water infiltration. Trial Ex. P–217.

Therma Seal failed to properly seal joints and left opens seams throughout Roof Section No. 5, causing water infiltration in the roofing system. Id. Therma Seal also damaged other subcontractors’ work during installation of the roofing system, which it failed to repair. Id.

Gulf hired Certified Roofing to remediate the defects in Roof Section No. 5 caused by Therma Seal. Trial Exs. P–210, P–211, P–263. Gulf hired Certified to probe and repair cold welds throughout the entire roof system, perform minor stucco repairs at the sheet metal counter flashing to remediate damage done by Therma Seal during installation, remove and replace the deficient sealant, and remove and dispose of all remaining construction related debris on the roof. Gulf was required to pay Certified Roofing $4,865.00 for this scope of work caused by Therma Seal's default and PIIC's breach of the performance bond. Id.

VI. Roof Section No. 6

The Court finds that there is sufficient evidence in the Certified Roofing Report, Trial Exs. P–216, J–5, P–217, coupled with the testimony of the witnesses at trial, to establish by a preponderance of the evidence that Roof Section No. 6 contained defects and deficiencies that were within Therma Seal's scope of work and caused by Therma Seal's breach of the Subcontract. The Court also finds that Therma Seal and PIIC are responsible for Gulf's damages associated with Roof Section No. 6 in the amount of $48,385.00, as set forth in the Certified Subcontract, Trial Ex. P–210, Certified Proposal, Trial Ex. P–211, and Certified Change Order No. 1, Trial Ex. P–263.

Therma Seal was responsible for “all required engineering needed for roofing and flashing attachment design,” and “all required base flashings, counterflashings, gravel stops, reglets, drip edges, cleats, roof expansion joints, roof expansion joint covers, and stack flashings.” Trial Ex. J–4. Therma Seal failed to properly design and install the slope the roof and flashings in way that would prevent water from infiltrating the roofing system and flowing down the face of the building. Trial Ex. P–217.

Therma Seal failed to properly terminate the roofing membrane and allowed water to infiltrate the roofing system. Id.

Gulf hired Certified Roofing to remediate the defects in Roof Section No. 6 caused by Therma Seal. Trial Exs. P–210, P–211, P–263. Gulf hired Certified to obtain permits and engineering required for the project, safely mobilize and execute a complete tear off of the existing roof system, including safely removing debris, install a new tapered insulation system, install a new FiberTite membrane over the tapered layout, and flash all perimeters and install primary and secondary flashing. Id. The work for Roof Section No. 6 was performed at heights and with a limited crew, so the work could be performed safely. Id. Gulf was required to pay Certified Roofing $48,385.00 for this scope of work caused by Therma Seal's default and PIIC's breach of the performance bond. Id.

VII. Roof Section No. 7

The Court finds that there is sufficient evidence in the Certified Roofing Report, Trial Exs. P–216, J–5, P–217, coupled with the testimony of the witnesses at trial, to establish by a preponderance of the evidence that Roof Section No. 7 contained defects and deficiencies that were within Therma Seal's scope of work and caused by Therma Seal's breach of the Subcontract. The Court also finds that Therma Seal and PIIC are responsible for Gulf's damages associated with Roof Section No. 7 in the amount of $7,910.00, as set forth in the Certified Subcontract, Trial Ex. P–210, Certified Proposal, Trial Ex. P–211, and Certified Change Order No. 1, Trial Ex. P–263. Therma Seal was responsible for “all required parapet wall metal copings, including wood blocking, sealants, and flashings.” Trial Ex. J–4. Therma Seal failed to properly affix the parapet wall coping allowing water infiltration. Trial Ex. P–217.

Therma Seal was responsible for “all required engineering needed for roofing and flashing attachment design,” and “all required flashing and sealing for pipe penetrations, vents, flues, curbs, supports, legs, and roof davits.” Trial Ex. J–4. Therma Seal failed to properly design and flash roofing penetrations in Roof Section No. 7. Trial Ex. P–217.

Therma Seal was responsible for “all required base flashings, counterflashings, gravel stops, reglets, drip edges, cleats, roof expansion joints, roof expansion joint covers, and stack flashings.” Trial Ex. J–4. Therma Seal failed or improperly installed terminations and flashings. Trial Ex. P–217.

Therma Seal was responsible for “all required gutters and downspouts including scupper header boxes and boots.” Trial Ex. J–4. Therma Seal failed to properly install the scupper heads causing them to leak. Trial Ex. P–217.

Gulf hired Certified Roofing to remediate the defects in Roof Section No. 7 caused by Therma Seal. Trial Exs. P–210, P–211, P–263. Gulf hired Certified to apply FiberTite approved liquid flashing at the “termination bar” on the two bump-out roofs, apply FiberTite approved liquid flashing at the electrical riser penetrations, probe and repair cold welds throughout the entire roof system, pressure clean and painted the exterior walls of the stairwell penthouse roof, reattach the coping, adjust the leader head and scupper to stop staining, and remove and replace the improper/defective fasteners in the sheet metal coping cap flashing. Id. Gulf was required to pay Certified Roofing $7,910.00 for this scope of work caused by Therma Seal's default and PIIC's breach of the performance bond. Id.

VIII. Roof Section No. 8

The Court finds that there is sufficient evidence in the Certified Roofing Report, Trial Exs. P–216, J–5, P–217, coupled with the testimony of the witnesses at trial, to establish by a preponderance of the evidence that Roof Section No. 8 contained defects and deficiencies that were within Therma Seal's scope of work and caused by Therma Seal's breach of the Subcontract. The Court also finds that Therma Seal and PIIC are responsible for Gulf's damages associated with Roof Section No. 8 in the amount of $24,890.00, as set forth in the Certified Subcontract, Trial Ex. P–210, Certified Proposal, Trial Ex. P–211, and Certified Change Order No. 1, Trial Ex. P–263. Therma Seal was responsible for “all required sealants and caulking associated with the roofing work.” Trial Ex. J–4. Therma Seal failed to properly seal the roofing system. Trial Ex. P–217.

Therma Seal was responsible for providing a fully adhered membrane system according to the manufacturer requirements. Trial Ex. J–4. Therma Seal failed to properly seal the joints and left opens seams throughout Roof Section No. 8 that caused water infiltration and damage. Trial Ex. P–217.

Gulf hired Certified Roofing to remediate the defects in Roof Section No. 8 caused by Therma Seal. Trial Exs. P–210, P–211, P–263. Gulf hired Certified to obtain all permit and engineering required for the project, safely mobilize and execute a complete removal of the existing roof system, install a new FiberTite membrane over a new tapered insulation, appropriately flash all perimeters with flashing, remove and replace sealants, and dispose of all work-related materials. Id. Gulf was required to pay Certified Roofing $24,890.00 for this scope of work caused by Therma Seal's default and PIIC's breach of the performance bond. Id.

IX. Roof Section No. 9

The Court finds that there is sufficient evidence in the Certified Roofing Report, Trial Exs. P–216, J–5, P–217, coupled with the testimony of the witnesses at trial, to establish by a preponderance of the evidence that Roof Section No. 9 contained defects and deficiencies that were within Therma Seal's scope of work and caused by Therma Seal's breach of the Subcontract. The Court also finds that Therma Seal and PIIC are responsible for Gulf's damages associated with Roof Section No. 9 in the amount of $24,890.00, as set forth in the Certified Subcontract, Trial Ex. P–210, Certified Proposal, Trial Ex. P–211, and Certified Change Order No. 1, Trial Ex. P–263.

Therma Seal was responsible for providing a fully adhered membrane system according to the manufacturer requirements. Therma Seal failed to properly seal the joints and left opens seams throughout Roof Section No. 9 causing water infiltration.

Gulf hired Certified Roofing to remediate the defects in Roof Section No. 9 caused by Therma Seal. Trial Exs. P–210, P–211, P–263. Gulf hired Certified to obtain all permit and engineering required for the project, safely mobilize and execute a complete removal of the existing roof system, install a new FiberTite membrane over a new tapered insulation, appropriately flash all perimeters with flashing, remove and replace sealants, and dispose of all work-related materials. Id. Gulf was required to pay Certified Roofing $24,890.00 for this scope of work caused by Therma Seal's default and PIIC's breach of the performance bond. Id.

X. Roof Section No. 10

The Court finds that there is sufficient evidence in the Certified Roofing Report, Trial Exs. P–216, J–5, P–217, coupled with the testimony of the witnesses at trial, to establish by a preponderance of the evidence that Roof Section No. 10 contained defects and deficiencies that were within Therma Seal's scope of work and caused by Therma Seal's breach of the Subcontract. Id. The Court also finds that Therma Seal and PIIC are responsible for Gulf's damages associated with Roof Section No. 10 in the amount of $9,845.00, as set forth in the Certified Subcontract, Trial Ex. P–210, Certified Proposal, Trial Ex. P–211, and Certified Change Order No. 1, Trial Ex. P–263.

Therma Seal was responsible for providing a fully adhered membrane system according to the manufacturer requirements. Trial Ex. J–4. Therma Seal failed to properly seal the joints and left opens seams throughout Roof Section No. 10 causing water infiltration. Trial Ex. P–217.

Gulf hired Certified Roofing to remediate the defects in Roof Section No. 10 caused by Therma Seal. Trial Exs. P–210, P–211, P–263. Gulf hired Certified to obtain all permit and engineering required for the project, safely mobilize and execute a complete removal of the existing roof system, install a new FiberTite membrane over a new tapered insulation, appropriately flash all perimeters with flashing, remove and replace sealants, and dispose of all work-related materials. Id. Gulf was required to pay Certified Roofing $9,845.00 for this scope of work caused by Therma Seal's default and PIIC's breach of the performance bond. Id.

XI. Roof Section No. 11

The Court finds that there is sufficient evidence in the Certified Roofing Report, Trial Exs. P–216, J–5, P–217, coupled with the testimony of the witnesses at trial, to establish by a preponderance of the evidence that Roof Section No. 11 contained defects and deficiencies that were within Therma Seal's scope of work and caused by Therma Seal's breach of the Subcontract. The Court also finds that Therma Seal and PIIC are responsible for Gulf's damages associated with Roof Section No. 11 in the amount of $46,210.00, as set forth in the Certified Subcontract, Trial Ex. P–210, Certified Proposal, Trial Ex. P–211, and Certified Change Order No. 1, Trial Ex. P–263.

Therma Seal was responsible for providing a fully adhered membrane system according to the manufacturer requirements. Trial Ex. J–4. Therma Seal failed to properly seal the joints and left opens seams throughout Roof Section No. 11 causing water infiltration. Trial Ex. P–217.

Gulf hired Certified Roofing to remediate the defects in Roof Section No. 11 caused by Therma Seal. Trial Exs. P–210, P–211, P–263. Gulf hired Certified to obtain all permit and engineering required for the project, safely mobilize and execute a complete removal of the existing roof system, install a new FiberTite membrane over a new tapered insulation, appropriately flash all perimeters with flashing, and dispose of all work-related materials. Id. Gulf was required to pay Certified Roofing $46,210.00 for this scope of work caused by Therma Seal's default and PIIC's breach of the performance bond. Id.

XII. Roof Section No. 12

The Court finds that there is sufficient evidence in the Certified Roofing Report, Trial Exs. P–216, J–5, P–217, coupled with the testimony of the witnesses at trial, to establish by a preponderance of the evidence that Roof Section No. 12 contained defects and deficiencies that were within Therma Seal's scope of work and caused by Therma Seal's breach of the Subcontract. The Court also finds that Therma Seal and PIIC are responsible for Gulf's damages associated with Roof Section No. 12 in the amount of $19,355.00, as set forth in the Certified Subcontract, Trial Ex. P–210, Certified Proposal, Trial Ex. P–211, and Certified Change Order No. 1, Trial Ex. P–263.

Therma Seal was responsible for “all required engineering needed for roofing and flashing attachment design ․ all required base flashings, counterflashings, gravel stops, reglets, drip edges, cleats, roof expansion joints, roof expansion joint covers, and stack flashings,” and “all required parapet wall metal copings, including wood blocking, sealants, and flashings.” Trial Ex. J–4. Therma Seal failed to properly design and install flashings causing water infiltration.

Therma Seal was responsible for providing a fully adhered membrane system according to the manufacturer requirements. Trial Ex. J–4. Therma Seal failed to properly seal the joints and left opens seams throughout Roof Section No. 12 causing water infiltration. Trial Ex. P–217.

Gulf hired Certified Roofing to remediate the defects in Roof Section No. 12 caused by Therma Seal. Trial Exs. P–210, P–211, P–263. Gulf hired Certified to obtain all permit and engineering required for the project, safely mobilize and execute a complete removal of the existing roof system, install a new FiberTite membrane over a new tapered insulation, appropriately flash all perimeters with flashing, and dispose of all work-related materials. Id. Gulf was required to pay Certified Roofing $24,890.00 for this scope of work caused by Therma Seal's default and PIIC's breach of the performance bond. Id.

XIII. Breach of the Performance Bond

Under the Performance Bond, PIIC was jointly and severally liable for the defects and deficiencies in Therma Seal's work. Trial Ex. J–5. Gulf satisfied the notice requirements in the Performance Bond by notifying Therma Seal and PIIC that it was considering declaring a default, Trial Exs. P–21 [ECF No. 130–3], J–18 [ECF No. 129–10], declaring Therma Seal in default, Trial Ex. J–19 [ECF No. 129-11], terminating the Subcontract, id., notifying PIIC of the termination and default, Trial Ex. J–21 [ECF No. 129–13], and agreeing to pay the balance of the contract price, id.

The Court finds that Gulf satisfied the notice requirements and PIIC was obligated to take action under the Performance Bond. Trial Ex. J–5. PIIC failed to take any action to remedy Therma Seal's deficient work and PIIC wrongfully denied all liability. Trial Ex. J–26 [ECF No. 129–14]. Accordingly, PIIC waived its right to perform and complete, arrange for completion, or obtain a new contractor to correct the defects. Trial Ex. J–5. Gulf was entitled to enforce the remedies available to it. Id. PIIC is therefore liable for Gulf's damages caused by Therma Seal's default and PIIC's breach.

XIV. Damages

Recognizing the discovery limitations, the Court finds that there is sufficient factual evidence of defective work to conclude that Gulf's damages exceed $347,554 for the work performed by Certified Roofing. Gulf is also entitled to 10% administrative cost under the Subcontract's Exhibit A. The Court therefore finds that Gulf's total damages exceed $382,309, subject to a $75,000 reduction for Seaman's contribution and the penal sum of the performance bond.

CONCLUSIONS OF LAW

This is a straightforward breach of contract case in which PIIC as surety breached the terms of the Performance Bond by failing to indemnify Gulf after Therma Seal breached the Subcontract. The issue of law before the Court revolves around whether PIIC is liable under the Performance Bond for denying Gulf's claim after Gulf terminated Therma Seal for performing defective work; failing to remedy Therma Seal's non-conforming work; making an assignment for the benefit of creditors; and failing to indemnify and hold Gulf harmless from the Owner's claims and demands relating to Therma Seal's work.

In deciding the claims and defenses, the Court applied the “preponderance of the evidence” standard. U.S. ex. rel GLF Constr. Corp. v. FEDCON Joint Venture, No. 8:17-CV-01932-T-36AAS, 2021 WL 295408, at *69 (M.D. Fla. Jan. 28, 2021) (citing Lowery v. Ala. Power Co., 483 F.3d 1184, 1209 (11th Cir. 2007)). Satisfying the “preponderance of the evidence” standard requires the Court to believe that the existence of a fact is more probable than its nonexistence before it may find for the party who has the burden to persuade the Court of the fact's existence. See Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Tr. for S. Cal., 508 U.S. 602, 622 (1993). The preponderance of the evidence standard is not a high standard. United States v. Askew, 193 F.3d 1181, 1193 (11th Cir. 1999).

“In a contract action, a federal court sitting in diversity jurisdiction applies the substantive law of the forum state unless federal constitutional or statutory law compels a contrary result.” Tech. Coating Applicators, Inc. v. U.S. Fid. & Guar. Co., 157 F.3d 843, 844 (11th Cir. 1998). Florida law governs this contract dispute because “[a] bond is a contract, and, therefore, a bond is subject to the general law of contracts.” Am. Home Assur. Co. v. Larkin Gen. Hosp., Ltd., 593 So. 2d 195, 197 (Fla. 1992). And it is axiomatic that “[t]o prevail in a breach of contract action, a plaintiff must prove: (1) a valid contract existed; (2) a material breach of the contract; and (3) damages.” Deauville Hotel Mgt., LLC v. Ward, 219 So. 3d 949, 953 (Fla. 3d DCA 2017); see also Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1272 (11th Cir. 2009). “To constitute a vital or material breach, a party's nonperformance must ‘go to the essence of the contract.’ ” MDS (Can.) Inc. v. Rad Source Techs., Inc., 720 F.3d 833, 849 (11th Cir. 2013) (quoting Beefy Trial, Inc. v. Beefy King Int'l, Inc., 267 So. 2d 853, 857 (Fla. 4th DCA 1972)). “The purpose of a performance bond is to guarantee the completion of the contract upon default by the contractor.” Am. Home Assur. Co., 593 So. 2d at 198.

“The liability of a surety is coextensive with that of the principal.” Id. It is a general rule that when a bond describes another document in sufficient detail, the other document may be interpreted as part of the bond. Nat'l Fire Ins. Co. of Hartford v. Fortune Constr. Co., 320 F.3d 1260, 1275–76 (11th Cir. 2003). In the suretyship context, Florida courts use this doctrine of incorporation by reference to impose liability on a performance bond surety. Id. The Florida Supreme Court has held that sureties are liable under the performance bond for latent defects and completion of the construction contract in accordance with the terms of the contract. Fed. Ins. Co. v. Sw. Fla. Ret. Ctr., Inc., 707 So. 2d 1119, 1121 (Fla. 1998). “The intent of this guarantee is to have the financial responsibility of the surety standing behind the [ ] contractor's completion obligations.” Id. The surety's “promise that the project would be completed according to the terms and conditions of the construction contract means that [the surety] would be liable for defective work performed by the [ ] contractor upon the [ ] contractor's default.” Id.

I. Gulf is liable to the Owner for Therma Seal's deficient work.

As described above, Therma Seal's deficient work caused Gulf to breach its contract and warranty obligations to the Owner. The Prime Contract legally obligated Gulf to cure its breach and remedy Therma Seal's faulty work. The cost of Therma Seal's deficiencies should be borne by Therma Seal and its surety, PIIC.

Gulf was contractually responsible to “perform the work in accordance with the Contract Documents.” Trial Ex. J–3 [ECF No. 129–4]. Gulf was contractually “responsible to the Owner for acts and omissions of [Gulf's] employees, Subcontractors and their agents and employees, and other persons or entities performing portions of the Work for, or on behalf of, [Gulf] or any of its Subcontractors.” Id. Gulf expressly warranted “to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless the Contract documents require or permit otherwise.” Id. Gulf also expressly warranted

that the Work will conform to the requirements of the Contract Documents and will be free from defects, except for those inherent in the quality of the Work the Contract Documents require or permit. Work, materials, or equipment not conforming to these requirements may be considered defective.

Id. Gulf was also obligated to “require each Subcontractor, to the extent of the Work to be performed by the Subcontractor, to be bound to [Gulf] by terms of the Contract Documents, and to assume toward [Gulf] all the obligations and responsibilities, including the responsibility for safety of the Subcontractor's Work, which [Gulf], by these Documents, assumes toward the Owner and Architect.” Id.

At trial, Gulf established that Therma Seal's work was not in accordance with the requirements of the contract documents. Gulf was contractually responsible for the non-conforming work, regardless of when the non-conforming work was discovered. Id. Gulf has therefore shown that it was contractually liable to the Owner to remedy Therma Seal's faulty work.

II. Therma Seal defaulted on its subcontract.

Therma Seal breached its Subcontract by, among other things, (1) performing non-conforming work; (2) failing to remedy the non-conforming work; (3) becoming insolvent and making a general assignment for the benefit of creditors; and (4) failing to defend, indemnify, and hold Gulf harmless from the Owner's claims and demands. Therma Seal and its surety, PIIC, are responsible for the damages caused by Therma Seal's breaches.

Therma Seal is contractually bound to Gulf by the contract documents, and assumed toward Gulf, with respect to the Subcontractor's performance, the obligations and responsibilities, which Gulf assumed towards the Owner. Trial Ex. J–4. Therma Seal was responsible for all the required roofing, flashing, sheet metal, and lightweight insulating concrete work to complete the roof in accordance with the contract documents. Id. If Therma Seal failed in the performance of the Subcontract or became insolvent or made a general assignment for the benefit of creditors, Gulf had the right to terminate Therma Seal, complete the work, and charge Therma Seal accordingly. Id. Gulf also had the right to charge Therma Seal for all the expenses incurred, including the cost of furnishing materials and finishing the work, plus reasonable allowance for overhead and profit for Gulf's completion of Therma Seal's work and any other damage incurred by Therma Seal's default. Id. Therma Seal was liable to Gulf for any damages, consequential and otherwise, arising out of any breach of the Subcontract by Therma Seal. Id.

Therma Seal also agreed in the Subcontract to “indemnify and hold Gulf harmless of and from all claims, losses, demands, causes of action and the like (including attorneys’ fees expert witness fees and all dispute procedure costs), which may be asserted against Gulf and resulting from or occurring in connection with the failure of Therma Seal or any party for whom Subcontractor is responsible, to perform all Work required within the scope of the Subcontract in strict accordance with the Subcontract and Contract Documents.” Id.

Therma Seal became insolvent and made an assignment for the benefit of creditors shortly after David Wikel, former president of Therma Seal, was convicted of accepting kickbacks on a federal construction project. The Owner asserted a claim against Gulf in July 2021 alleging that Therma Seal failed to properly install the roof. The Certified Roofing Report and expert testimony proved that Therma Seal's non-conforming roof work caused water intrusion and other damages. Gulf provided Therma Seal with the Certified Roofing Report and demanded that Therma Seal remedy the non-conforming work and protect Gulf from the Owner's claims. Therma Seal took no action in response to Gulf's demands and breached its obligations under the Subcontract.

As a direct result of Therma Seal's breaches, Gulf was forced to terminate Therma Seal's Subcontract for default, investigate the Owner's claims, and hire others to correct the work and satisfy the Owner's claims. Therma Seal is liable for Gulf's damages caused by Therma Seal's breaches.

III. PIIC wrongfully denied Gulf's claim and is liable for Gulf's damages.

As a condition precedent to the award of the Subcontract, Therma Seal was required to furnish a performance bond “guaranteeing the full and faithful performance of the provision of this Agreement including but not limited to delay damages; and any and all other obligations of Subcontractor hereunder including all required warranties.” Trial Ex. J–4. PIIC's Performance Bond incorporated the Subcontract by reference. Trial Ex. J–5. PIIC agreed to be jointly and severally bound to Gulf for the performance of Therma Seal's Subcontract. Id. PIIC also agreed in the Subcontract to “indemnify and hold Gulf harmless of and from all claims, losses, demands, causes of action and the like (including attorneys’ fees expert witness fees and all dispute procedure costs), which may be asserted against Gulf and resulting from or occurring in connection with the failure of Therma Seal or any party for whom Subcontractor is responsible, to perform all Work required within the scope of the Subcontract in strict accordance with the Subcontract and contract documents.” Id.

Gulf provided the necessary notices to Therma Seal and PIIC, as described above, to trigger PIIC's obligations under the bond. Despite the clear default by Therma Seal, PIIC waived its right to perform and complete the work to remedy Thermal Seal's default, id., and wrongfully denied liability in whole. Gulf was entitled to enforce the remedies available to it including, but not limited to, hiring others to remedy Therma Seal's non-conforming work and resulting damages and then pursue recovery from Therma Seal and PIIC. See id. PIIC is liable for Gulf's damages caused by Therma Seal's default and breaches of the Subcontract.

IV. Gulf presented sufficient evidence of its damages.

Gulf proved its damages at trial. Gulf has valid and enforceable contractual obligations to the Owner, as well as to Certified Roofing, to perform roofing work to correct Therma Seal's deficient work. Gulf presented sufficient evidence of its repair proposal, repair contract, and change order supporting damages in the amount of $347,554, which is sufficient proof of damages under Florida law.

The Eleventh Circuit has recognized that “Florida courts allow contractors to recover when necessary repairs, occasioned by a breach, have not been started; the contractor must be able to show the anticipated cost with reasonable certainty.” Lazovitz, Inc. v. Saxon Const., Inc., 911 F.2d 588, 591 (11th Cir. 1990). Florida courts have generally found that the rules surrounding damages must be flexibly applied to provide fair compensation under the circumstances of each specific case. See, e.g., G.M. Brod & Co., Inc. v. U.S. Home Corp., 759 F.2d 1526, 1538 (11th Cir. 1985) (finding that proof of damages may be indirect and based on assumptions and estimates, as long as the assumptions rest on adequate data in a lost profits action); Christopher Adver. Grp., Inc. v. R & B Holding Co. Inc., 883 So. 2d 867, 871 (Fla. 3d DCA 2004) (finding that damages need not be calculated with mathematical exactness). Nothing in Florida law “compels the conclusion that damages for breach of a construction contract are not recoverable unless the plaintiff offers proof of the cost of completed repairs for the faulty construction.” Kritikos v. Andersen, 125 So. 3d 885, 888 (Fla. 4th DCA 2013). It is well established that estimates may be used to prove the cost of correcting construction defects when the work has not yet occurred. Id. (citing Davis v. Stow, 60 So. 2d 630, 631 (Fla. 1952); B & J Holding Corp. v. Weiss, 353 So. 2d 141, 143 (Fla. 3d DCA 1977) (rejecting notion that plaintiffs in a construction defects case needed to offer proof of “sums incurred to correct or repair the deficiencies” rather than estimates of what would “have to be incurred”)); Metalizing Tech. Servs., LLC v. Berkshire Hathaway Specialty Ins. Co., No. 22-20596, 2023 WL 385413, at *16 (S.D. Fla. Jan. 25, 2023) (same).

Florida courts regularly permit recovery of future economic damages if the damages are established with reasonable certainty and the trier of fact has enough evidence to reasonably calculate those damages. Auto-Owners Ins. Co. v. Tompkins, 651 So. 2d 89, 90–91 (Fla. 1995); GEICO Gen. Ins. Co. v. Dixon, 209 So. 3d 77, 82 (Fla. 3d DCA 2017); Volusia Cnty. v. Joynt, 179 So. 3d 448, 450 (Fla. 5th DCA 2015). In other words, future economic damages are recoverable if they are established with reasonable certainty. Nebula Glass Intern., Inc. v. Reichhold, Inc., 454 F.3d 1203, 1213 (11th Cir. 2006) (citing Auto-Owners Ins. Co., 651 So. 2d at 90–91). Indeed, “uncertainty of the amount or difficulty of proving the amount of damage with certainty is not necessarily a bar to recovery.” Metalizing Tech. Servs., LLC, 2023 WL 385413, at *16 (quoting Gov't of Aruba v. Sanchez, 216 F. Supp. 2d 1320, 1376 (S.D. Fla. 2002) (internal quotation marks omitted)). “Damages cannot be based on speculation or guesswork[ ] but must have some reasonable basis in fact.” Id. (quoting Air Caledonie Int'l v. AAR Parts Trading, Inc., 315 F. Supp. 2d 1319, 1340 (S.D. Fla. 2004)). “And recoverable damages are limited to those which ‘could have been reasonably expected to flow from the breach.’ ” Id. (citing Bland v. Freightliner LLC, 206 F. Supp. 2d 1202, 1211 (M.D. Fla. 2002)). Stated differently, “the injured party in a breach of contract action may recover damages that will put the party in the same position they would have been in had the other party not breached the contract.” See, e.g., Christie v. Royal Caribbean Cruises, Ltd., 497 F. Supp. 3d 1227, 1233 (S.D. Fla. 2020) (citing Capitol Env't Servs., Inc. v. Earth Tech, Inc., 25 So. 3d 593, 596 (Fla. 1st DCA 2009)).

“Recoverable damages are inclusive of ‘all damages that are causally related to the breach so long as the damages were reasonably foreseeable at the time the parties entered into the contract.’ ” Christie, 497 F. Supp. 3d at 1233 (quoting Capitol Env't Servs., 25 So. 3d at 596). “Damages are foreseeable if they are the proximate and usual consequence of the breaching party's acts.” Id. (internal quotation marks omitted). The parties need not contemplate the exact injury which occurred so long as the actual consequences could have been reasonably expected to flow from the breach. Id. When there are multiple concurrent causes of the injury, one cause does not negate any other cause of the injury. See Wallach v. Rosenberg, 527 So. 2d 1386, 1387–88 (Fla. 3d DCA 1988) (holding in the insurance context that multiple causes effectuating a loss do not necessarily negate any single cause or contributory act). If one of the defendant's breaches was a substantial factor in the plaintiff's damages, that defendant can be liable for the total harm. See Cedar Hills Props. Corp. v. E. Fed. Corp., 575 So. 2d 673, 678 (Fla. 1st DCA 1991) (quoting 5 Corbin on Contracts § 999 (1964)).

Gulf presented sufficient evidence to support a finding that Gulf incurred damages exceeding $382,309 as a result of Therma Seal and PIIC's breaches of the Subcontract and Performance Bond, respectively. Gulf was not necessarily required to present any proof of payments. Gulf satisfied its burden of proof by presenting estimates and binding contractual obligations to prove the cost of correcting Therma Seal's deficiencies, together with fact and expert testimony supporting the damages.

V. PIIC Failed to Prove any Affirmative Defenses

A. FiberTite's manufacturer warranty does not relieve PIIC of its obligations to Gulf.

PIIC seeks to avoid liability asserting that Therma Seal obtained a manufacturer's warranty covering some of Therma Seal's work. PIIC's position is legally and factually flawed. Therma Seal and PIIC are responsible for the contractual obligations owed to Gulf.

The Court cannot read into the warranties, the Subcontract, and the Prime Contract terms and provisions that are not there. Sw. E&T Suppliers, Inc. v. Am. Enka Corp., 463 F.2d 1165, 1166 (5th Cir. 1972) (holding that “Courts cannot read into a contract that which is not there”).³ Other third-party contracts are irrelevant to the parties’ contract; whether the contract was breached; the expectation of the parties; or issues of credibility. See, e.g, Sunshine Children's Learning Ctr., LLC v. Waste Connections of Fla., Inc., No. 21-62123, 2022 WL 7037230, at *2 (S.D. Fla. July 19, 2022) (finding request for production that sought non-party contracts and other understandings with non-parties irrelevant to whether the parties’ contract was breached). “One does not escape contract obligations by making another contract with a third party.” Tomlin v. Ceres Corp., 507 F.2d 642, 648 (5th Cir. 1975).

Further, alternative sources of recovery do not affect a breaching party's liability and are immaterial. See Fla. Drum Co. v. Thompson, 668 So. 2d 192, 193 (Fla. 1996) (“[T]he court further stated that in this case it was immaterial whether [plaintiff] had insurance coverage: the coverage could not have been set off against the [defendant's] own financial liability, nor would it have been material as to whether [plaintiff] had the financial resources to pay for the repairs.”). In analogous situations, alternative sources of recovery have been found to be irrelevant to the question of a defendant's liability for damages. See, e.g., Bombardier Aerospace Corp. v. Signature Flight Support Corp., 123 So. 3d 128, 132-33 (Fla. 5th DCA 2013) (finding that the amount of insurance coverage is not relevant to the issue of damages); Gold, Vann & White, P.A. v. DeBerry, 639 So. 2d 47, 54 (Fla. 4th DCA 1994) (citing Beta Eta House Corp v. Gregory, 237 So. 2d 163, 165 (Fla. 1970) (“existence or amount of insurance has no bearing on the issue of liability and damages and such reference was reversible error”)).

Therma Seal and PIIC remain contractually liable to Gulf for Therma Seal's breaches, regardless of the existence of another manufacturer's warranty. FiberTite did not agree to provide coverage for all of Therma Seal's non-conforming work. According to FiberTite, some of the deficiencies were outside the scope of the warranty. See [ECF No. 140–2]. FiberTite's corporate representative also testified that Therma Seal failed to properly fill out the warranty paperwork and failed to notify FiberTite that the garage portion of the project was to be inspected and covered by the warranty. As a result, FiberTite denied any responsibility for the garage repairs. According to the Certified Roofing Contract, the garage repairs total $125,190, none of which is being covered by FiberTite.

Notwithstanding, Gulf remained obligated to make the necessary repairs to provide the Owner with a 20-year manufacturer warranty on the office and garage roofs. FiberTite's $75,000 contribution is insufficient to cover all the damages caused by Therma Seal and PIIC's breaches. But Gulf was obligated to proceed with $347,554 of roofing work to correct Therma Seal's deficient work. PIIC remains obligated to pay the penal sum of the Performance Bond for Gulf's damages.

B. The Court finds by a preponderance of the evidence that Gulf's remediation work fell within the scope of Therma Seal's Subcontract.

PIIC failed to provide sufficient evidence to support its First, Fourth, Seventh, Eighth, and Twelfth Affirmative Defenses. Gulf proved at trial that the scope of Certified Roofing's remediation work was necessary to correct Therma Seal's deficiencies, which fell within the scope of work of the Subcontract. As detailed in Therma Seal's Subcontract, Therma Seal's broad scope of work included all required roofing, flashing, and sheet metal and lightweight insulating concrete work, including design and engineering of the flashing attachments. Trial Ex. J–4.

Certified Roofing identified in its Roofing Report defects in the roofing membrane, tapered rigid insulation, sealants and caulking, overflow scuppers, installation and engineering of the flashings, the parapet wall metal copings, and gutter and down spouts. Trial Exs. P–216, P–217. These items fall clearly within Therma Seal's scope of work in the Subcontract, and accordingly, PIIC is jointly and severally responsible for their repair under the Performance Bond.

Gene Fall testified at trial that Certified Roofing was not hired to perform (nor did Gulf ask Certified Roofing to perform) any plumbing work, waterproofing work, redesigned work, or betterment work on the Project. Certified Roofing was hired to install the roof and perform the repairs according to the original contract documents used by Therma Seal. Moreover, PIIC did not present sufficient evidence to support the contention that Gulf's work constituted betterment as opposed to necessary remediation. PIIC's expert did not disclose in his report or render any opinions on betterment.

PIIC failed to prove by a preponderance of the evidence that Gulf performed any work on the roof that fell outside the scope of work contained within Therma Seal's Subcontract. PIIC failed to prove that Gulf modified, changed, or altered the original design. Gulf only took action authorized by the Subcontract that was necessary to correct Therma Seal's non-conforming work, which PIIC was responsible for. As a result, PIIC failed to prove its First, Fourth, Seventh, Eighth, and Twelfth Affirmative Defenses and said defenses do not bar Gulf's recovery.

C. Therma Seal's deficient work and PIIC's refusal to act under the Performance Bond caused Gulf's damages.

PIIC failed to provide sufficient evidence to support its Second Affirmative Defense. The Court finds that Gulf did not cause its own damages. Gulf's damages were a direct result of Therma Seal's deficient work and PIIC's breach of its obligations under the Performance Bond.

D. Certified Roofing performed the remediation work according to the original design in the contract documents.

PIIC failed to provide sufficient evidence supporting its Third Affirmative Defense—that Gulf's damages were the result of a design deficiency that is outside of Therma Seal's scope of work. To the contrary, Gulf presented evidence that Therma Seal was contractually responsible for its own design. Although Mr. Hodgin testified generally about the design, he was unaware that Therma Seal was responsible for the design because he had not reviewed or considered Therma Seal's subcontract obligations. Therma Seal's scope of work included “all required engineering needed for roofing and flashing attachment design.” [ECF No. 129–5] at 16. Further, Gulf and Certified Roofing's witnesses testified at trial that Certified Roofing performed the remediation work in accordance with the original contract documents that Therma Seal was obligated to perform. Gulf and Certified Roofing did not redesign the roof. Because no redesign work occurred on the Project, PIIC's Third Affirmative Defense fails.

E. Gulf took reasonable steps to mitigate its damages.

PIIC failed to present sufficient evidence that Gulf failed to mitigate any damages. The Court finds that Gulf took reasonable steps to mitigate its damages in light of Therma Seal and PIIC's breaches.

Under Florida law, the doctrine of avoidable consequences (sometimes inaccurately identified as the “duty to mitigate” damages) commonly applies in contract actions. Sys. Components Corp. v. Fla. Dep't of Transp., 14 So. 3d 967, 982 (Fla. 2009). There is no “duty to mitigate,” because an injured party is not compelled to undertake any ameliorative efforts. Id. “The doctrine simply ‘prevents a party from recovering those damages inflicted by a wrongdoer that the injured party could have reasonably avoided.’ ” Id. (quoting Fla. Civ. Prac. Damages § 2.43, at 2–30 (6th ed. 2005)). The doctrine of avoidable consequences does not allow “damage reduction based on what ‘could have been avoided’ through Herculean efforts.” Id. (citing Thompson v. Fla. Drum Co., 651 So. 2d 180, 182 (Fla. 1st DCA 1995) (“Extraordinary efforts on the part of a plaintiff to mitigate are not required.”)). “Rather, the injured party is only accountable for those hypothetical ameliorative actions that could have been accomplished through ‘ordinary and reasonable care,’ without requiring undue effort or expense.” Id. (citing Graphic Assocs., Inc. v. Riviana Rest. Corp., 461 So. 2d 1011, 1014 (Fla. 2009) (the doctrine “prevents a party from recovering those damages inflicted by a wrongdoer which the injured party ‘could have avoided without undue risk, burden, or humiliation.’ ”); Royal Tr. Bank of Orlando v. All Fla. Fleets, Inc., 431 So. 2d 1043, 1045 (Fla. 5th DCA 1983) (same)).

The Court finds that Gulf took reasonable steps to ensure that the remedial work was competitively priced. The Court also finds that Gulf took reasonable steps to obtain contribution from the product manufacturer. PIIC erroneously asserted during trial that Gulf had an obligation to make additional efforts in pursuing Seaman for a larger contribution to the remediation efforts. However, in this instance, Gulf has put forth reasonable efforts to seek contribution from Seaman. Indeed, Seaman agreed to contribute $75,000 to the remediation of Therma Seal's faulty work and has refused to contribute any more money. [ECF No. 140–2]. PIIC received the benefit of Seaman's contribution and failed to proffer convincing evidence that more money could have been obtained. The doctrine of avoidable consequences does not require Gulf to engage in “undue effort or expense” or avoid damages through “undue risk and burden.” Sys. Components Corp., 14 So. 3d at 982. As a result, PIIC's Fifth Affirmative Defense has no merit.

F. Gulf satisfied all applicable conditions precedent prior to the commencement of this action—including providing timely notice under the Performance Bond.

The Performance Bond required that (1) Gulf provide notice to PIIC that it is considering declaring Therma Seal in default; (2) declare Therma Seal in default and notify PIIC; and (3) agree to pay the balance of the contract price in accordance with the terms of the Subcontract. Trial Ex. J–5. PIIC did not provide sufficient evidence that Gulf failed to comply with the required conditions precedent. Therefore, the Court finds that Gulf satisfied all the applicable conditions precedent in the Performance Bond.

Gulf satisfied the notice requirements in the Performance Bond by notifying Therma Seal and PIIC that it was considering declaring a default, Trial Exs. P–21, J–18, declaring Therma Seal in default, Trial Ex. J–19, terminating the Subcontract, id., notifying PIIC of the termination and default, Trial Ex. J–21, and agreeing to pay the balance of the contract price, id.

The Court finds that Gulf satisfied the notice requirements and PIIC was obligated to take action under the Performance Bond. PIIC failed to take any action to remedy Therma Seal's deficient work, and PIIC improperly denied all liability. Trial Ex. J–26. PIIC waived its right to perform and complete, arrange for completion, or obtain a new contractor to correct the defects. Trial Ex. J–5. Gulf was entitled to pursue the remedies available to it. Id. Gulf had the right to engage another roofing contractor, complete the Subcontract, and pursue the remedies that it had under the Subcontract. Therefore, PIIC's Sixth Affirmative Defense lacks merit.

G. Gulf's damages include a set-off for any money received from collateral sources and exceed the penal sum of the Performance Bond.

Gulf acknowledged that PIIC is entitled to a setoff of $75,000 for the money contributed to the remediation work by FiberTite. However, Gulf has proven by a preponderance of the evidence that its damages exceeded $382,309 as a result of Therma Seal's default. Even after the $75,000 credit claimed by Therma Seal, Gulf's damages exceed $307,309. Accordingly, Gulf is entitled to the penal sum of the Performance Bond.

Attorneys’ fees will be determined at a later date, but the Court notes that Gulf can seek to recover attorneys’ fees in excess of the penal sum of the Performance Bond in post-trial proceedings. PIIC's Ninth and Eleventh Affirmative Defenses lack merit.⁴

CONCLUSION

Gulf has shown by a preponderance of the evidence that PIIC breached the Performance Bond. PIIC is liable for the damages flowing from Therma Seal's default and PIIC's denial of Gulf's performance bond claim. Gulf is entitled to damages exceeding $382,309 subject to a $75,000 setoff as a result of PIIC's breach of the Performance Bond, and further subject to the $248,000 penal sum of the bond. The Court reserves jurisdiction to determine entitlement to and the amount of any attorneys’ fees, costs, and pre-judgment interest.

DONE AND ORDERED in Miami, Florida, this 30th day of August, 2023.

FOOTNOTES

1.   Gulf asserted that it incurred other damages relating to Therma Seal's default but was precluded from presenting evidence of those damages at trial as set forth in the record and prior Court Orders. Gulf's proven damages are to be reduced by $75,000 from a set off contribution by FiberTite and are also subject to the penal sum of the bond.

2.   Gulf incurred other damages relating to Therma Seal's default including, but not limited to, costs and repairs to other property caused by the roofing deficiencies, but Gulf was precluded from presenting evidence of those damages at trial as set forth in the record and prior Court Orders. Gulf's proven damages are reduced by a setoff of $75,000—a contribution made by FiberTite. See [ECF Nos. 140–2, 140–3].

3.   The Eleventh Circuit has adopted as precedent the decisions of the Former Fifth Circuit announced before October 1, 1981. See Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc).

4.   Defendant's Tenth Affirmative Defense regarding the limitation of PIIC's liability under the Performance Bond is not at issue. See Am. Answer and Affirmative Defenses, [ECF No. 33], at 4.

RODOLFO A. RUIZ II, UNITED STATES DISTRICT JUDGE