Item #06 Aurhority for the City Attorney to file suit seeking recovery of bonded additional costs associated with the failure of Mercon Construction to complete the work related to the Pioneer Key I Rehabilitation Project , a Centel of Good Li
AGENDA ITEM COVER SHEET
Meeting Date: October 18, 2011
Item #
Reviewed By:
Contact Name: Al Butler, CIP Manager / Department Director: e C: 4/4
Contact Number: 407 - 905 -3100 x1543 City Manager:
Subject: Authority for the City Attorney to file suit seeking recovery of bonded additional costs
associated with the failure of Mercon Construction Co. to complete the work related to the Pioneer Key
I Rehabilitation Project should the bonding company, Lexon Insurance Co., fail to satisfactorily settle
the City's claim against the performance bond. (District 3: Johnson)
Background Summary:
The Pioneer Key I Rehabilitation Project was originally awarded by the Ocoee City Commission under Bid No.
B11 -02 on January 4, 2011 at a cost of $1,600,018.28 to Mercon Construction Co. The Notice of Award was
issued on January 5, 2011 and the contract was fully executed on February 1, 2011, which was also the effective
date of a payment and performance bond issued by Lexon Insurance Co. in the full amount of the contract.
The preconstruction conference was held on February 9, 2011, at which time the contractor requested that the
Notice to Proceed be delayed for 30 days in order to allow sufficient time to plan the construction work, secure
shop drawings, order major material components, and do other preparatory work. Following the company's on-
site review of the project, Mercon submitted a proposed change order in the amount of $457,485.00 for what it
considered to be justified additional costs related to its revised understanding of the scope of work. City staff
rejected this proposal on March 9, 2011 and asked the contractor to confirm its intent to honor the contract at the
original price by March 11, 2011. Rather than provide such confirmation, Mercon notified the City on March 11,
2011, through its attorney, that the company was terminating the contract. After giving proper notice and the
opportunity for Mercon to honor its obligations, the City issued notice of termination to Mercon on April 5, 2011.
The City Commission then awarded the work to the second - lowest bidder, Pospiech Contracting, Inc., at its April
19, 2011 meeting at a price of 1,783,162.60, which was $183,144.32 higher than the Mercon contract price. The
City then notified the Mercon performance bonding company, Lexon Insurance Co., of the City's claim against the
bond for Mercon's failure to perform. Among other costs, the City incurred the additional cost of construction
equal to the increase in contract price. Except for asking for contract documents, Lexon has not responded to the
claim in a meaningful way.
Issue:
Should the City Commission authorize the City Attorney to file suit against the Lexon Insurance Co. in order to
enforce the performance bond that firm issued on behalf of Mercon Construction Co., which failed to fulfill its
obligations under the project contract?
Recommendations
Staff recommends that the City Commission authorize the City Attorney to file suit to enforce its claim against the
performance bonding company, the Lexon Insurance Co. Such a suit would only be brought if negotiations are not
satisfactorily concluded. Should negotiations remain at an impasse, the City Attorney would file suit against the
Lexon Insurance Co. in Circuit Court seeking recovery of the City's additional costs associated with the failure of
Mercon Construction Co. to fulfill its obligations, as insured by the Lexon performance bond.
Attachment:
Payment and performance bond issued by Lexon Insurance Co. on behalf of Mercon Construction Co. in order tc
protect the City of Ocoee and others from a failure for Mercon to adequately meet its obligations under the
construction contract it signed with the City of Ocoee on February 1, 2011.
Financial Impact:
The contract price increase incurred by the City was $183,144.32. The City may incur the cost of filing the suit
and pursuing its claim in the courts should it become necessary to do so; however, Florida law and the language
of the performance bond provide the means for the City to recover its attorney's fees should it prevail. Project
funds are sufficient to cover the expected legal fees.
Type of Item: (please marls with an "x")
Public Hearing For Clerk's Dept Use:
Ordinance First Reading Consent Agenda
Ordinance Second Reading Public Hearing
Resolution Regular Agenda
X Commission Approval
Discussion & Direction
Original Document/Contract Attached for Execution by City Clerk
Original Document/Contract Held by Department for Execution
Reviewed by City Attorney N/A
Reviewed by Finance Dept. N/A
Reviewed by ( ) N/A
2
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SECTION 00610
PERFORMANCE BOND #1032061
KNOW ALL MEN 13Y THESE PRESENTS that Mercon Construction Company
(hereinafter referred to as "Principal "), and
Lexon Insurance Company , a corporation organized under the laws of the State of Texas
and licensed to do business in the State of Florida , (hereinafter referred to as
"Surety "), and held and firmly bound unto the City of Ocoee, Florida, as Obligee, (hereinafter
referred to as "Obligee "), in the Penal Sum of $1,600,018.28 , for the payment of which
sum well and truly made, Principal and Surety bind themselves, their heirs, personal
representatives, successors and assigns, jointly and severally, firmly by these presents,
WHEREAS, Principal has by written agreement dated Fa ury [ -1 I ,entered into a
contract, (hereinafter referred to as the "Contract ") with Obligee for the construction of Pioneer
Key Phase I Mobile Home Park Rehabilitation Project (hereinafter referred to as the "Project ") in
accordance with the plans and specifications prepared by Inwood Consulting Engineers, Inc.,
dated November, 2010; and
NOW, THEREFORE, THE CONDITIONS OF THIS OBLIGATION IS SUCH THAT IF
Principal shall well and truly perform all the undertakings, covenants, terms, conditions, and
agreements of said Contract including, but not limited to, the making of payments to persons or
entities providing labor, materials or services to Principal under the Contract, within the tune
provided therein, and any extensions thereof that may be granted by the Obligee, and also during
the life of any warranty or guaranty required under said Contract, and shall also well and truly
perform all undertakings, covenants, terms, conditions, and agreements of any and all duly
authorized and modifications of said Contract that may hereafter be made, and shall pay,
compensate, indemnify and save harmless the said Obligee of and from any and all loss, damage
and expense, or from any breach or default by Principal under the Contract, including, but not
limited to, liquidated damages, damages caused by delays in performance of the Principal,
expenses, cost and attorneys' fees, including appellate proceedings, that Obligee sustains
resulting directly or indirectly from failure of the Principal to perform the Work identified by the
Contract, then this obligations shall be null and void; otherwise, it shall remain in full force and
effect and Surety shall be liable to Obligee under this Performance Bond,
The Surety's obligations hereunder shall be direct and immediate and not conditional or
contingent upon Obligee's pursuit of its remedies against Principal, and shall remain in full force
and effect notwithstanding (I) amendments or modifications to the contract or contract entered
into by Obligee and Principal without the Surety's knowledge or consent; (ii) waivers of
compliance with or any default under the Contract granted by Obligee to Principal or by
Principal to Obligee without the Surety's knowledge or consent; (iii) the discharge of Principal
from its obligations under the Contract as a result of any proceeding initiated under The
Bankruptcy Code of 1978, as the same may be amended, or any similar state or federal law, or
any limitation of the liability of Principal or its estate as a result of any such proceedings; or (iv)
any other action taken by Obligee or Principal that would, in the absence of this clause, result in
the release or discharge by operation oflaw of the Surety from its obligations hereunder,
Project B11 -02 00610 1
In the event that the Surety fails to fulfill its obligations under this Performance Bond,
then the Surety shall also indemnify and save the Obligee harmless from any and all loss,
damage, cost and expense, including reasonable attorneys' fees and other legal costs for all trial
and appellate proceedings, resulting directly or indirectly from the Surety's failure to fulfill its
obligations hereunder. This paragraph shall survive the termination or cancellation of this
Performance Bond. The obligations set forth in this paragraph shall not be limited by the Penal.
Sum of this Bond.
Any changes in or under the Contract or the Contract and compliance or noncompliance
with any formalities connected with the Contract or the Contract or the changes therein shall not
affect Surety's obligations under this bond, and Surety hereby waives notice of any such changes.
Further, Principal and Surety acknowledge that the Penal Sum of this bond shall increase or
decrease in accordance with approved changes or modifications to the Contract.
The said Principal and the said surety agree that this bond shall inure to the benefit of all
persons supplying labor and material in the prosecution of the work provided for in the said
subcontract, as well as to the Obligee, and that such persons may maintain independent actions
upon this bond in their own naives.
IN WITNESS WHEREOF, the Princi al and Surety have executed this instrument under
their several seals on the l day of ' (2.: , 2011, the name and corporate seal
of each corporate party being hereto affixed and these presents fully signed by its undersigned
representative, pursuant to the authority of its governing body.
Signed, sealed and delivered
in the presence of:
Mercon Construction_Cnmpan_y Principal
By: - / ����� SEAL)
i? { , 4 , (Official Title)
( ;
`ikeIo p Ir}s' Company Surety
B �" �; �' (SEAL)
John D. Weisbrot, Attorney -In -Fact (Official Title)
NOTES: If Principal and Surety are corporations, the respective corporate seal should be affixed and
attached.
Surety shall execute and attach a certified copy of Power of Attorney Appointing Individual
Attorney -In -Fact for execution of Performance Bond on behalf of Surety.
END OF SECTION
Project B11 -02 00610 2
Statutory Payment Bond •
Pursuant to Florida Statutes, 255.05, et seq.
KNOW ALL MEN BY THESE PRESENTS, THAT Mercon Construction Company
(hereinafter called the "Principal "), as Principal, and Lexon Insurance Company , a
corporation organized and existing under the laws of the State of Texas , hereinafter
called the "Surety "), as Surety, are held and firmly bound unto the City of Ocoee, Florida,
(hereinafter called the "Obligee "), by bond number 1032061 in the sum of
One Million Six Hundred Thousand Eighteen Dollars and 28 Cents ($ 1,600,018.28 ), for
the payment of which sum well and truly to be made, the said Principal and Surety bind
themselves, and their respective heirs, administrators, executors, successors and assigns, jointly
and severally, firmly by these presents.
WHEREAS, the Principal has entered into a written Contract with the Obligee dated
F ratt, i t , 2011 to perform, as Contractor, Pioneer Key Phase I Mobile Home Park
Rehabilitation Project in accordance with the Contract and Contract Documents, which Contract
and Contract Documents are hereby incorporated herein by reference.
NOW, THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH, that if the
Principal promptly makes payments to all claimants, as defused in Section 255.05 (1), Florida
Statutes, that provide or furnish the Principal with labor, materials, or supplies, used directly or
indirectly by Principal in the prosecution of the work provided for in the contract, then this
obligation shall be null and void; otherwise it shall remain in full force and effect.
The Principal and the Surety agree that this Bond shall inure to the benefit of all
claimants, as defined in Section 255.05 (1),.Florida Statutes, that provide or furnish the Principal
with labor, materials, or supplies, used directly or indirectly by Principal in the prosecution of the
work provided for in said Contract, and that any such claimant may maintain an independent
action upon this Bond in its own name.
The provisions of Florida Statutes, Section 255.05, et seq. are hereby incorporated herein
by reference and made a part of this payment bond including, but not limited to, the notice and
time limitation provisions in subsection (2), Any action instituted by a claimant under this bond
for payment must be in accordance with the notice and time limitation provisions in Section
255.05 (2), Florida Statutes.
IN WITNESS WHEREOF, the above bounden parties have executed this instrument
under their several seals this i 1 - day of , 20j1, the name and
corporate seal of each corporate party being hereto affi and these presents duly signed by its
undersigned representative, pursuant to authority of its governing body.
Project B11 -02 00620 t
Mercon Construction C. la • - ny (Seal)
(Princ'.al)
By
1 ✓, = �111/•'" -
p gnature)
1;?:(454
Wita ss or Secretary's Attestation
Lexon Insurance Company (Seal)
(Surety)
B-•, Join Q. Weipbrot, Attorney -In -Fact
1 N n!e&Tit1e)
ti.
(Signature)
b V 1
Witness or Secretary's Attestation
*Attach Power-Of-Attorney
END OF SECTION
Project BI 1 -02 00620 2
POWER OF ATTORNEY LX
Lexon Insurance Company
KNOW ALL MEN BY THESE PRESENTS, that LEXON INSURANCE COMPANY, a Texas Corporation, with its principal office in
Louisville, Kentucky, does hereby constitute and appoint: John D. Weisbrot, Patricia A. Tinsman * * * * * * * * * * * * * * * * * * * * * * **
************************************************************* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * **
its true and lawful Attorney(s) -In -Fact to make, execute, seal and deliver for, and on its behalf as surety, any and all bonds, undertakings or
other writings obligatory in nature of a bond.
This authority is made under and by the authority of a resolution which was passed by the Board of Directors of LEXON
INSURANCE COMPANY on the 1st day of July, 2003 as follows:
Resolved, that the President of the Company is hereby authorized to appoint and empower any representative of the Company or
other person or persons as Attorney -In -Fact to execute on behalf of the Company any bonds, undertakings, policies, contracts of indemnity
or other writings obligatory in nature of a bond not to exceed $2,500,000.00, Two - million five hundred thousand dollars, which the Company
might execute through its duly elected officers, and affix the seal of the Company thereto. Any said execution of such documents by an
Attorney -In -Fact shall be as binding upon the Company as if they had been duly executed and acknowledged by the regularly elected
officers of the Company. Any Attorney -In -Fact, so appointed, may be removed for good cause and the authority so granted may be revoked
as specified in the Power of Attorney.
Resolved, that the signature of the President and the seal of the Company may be affixed by facsimile on any power of attorney
granted, and the signature of the Vice President, and the seal of the Company may be affixed by facsimile to any certificate of any such power
and any such power or certificate bearing such facsimile signature and seal shall be valid and binding on the Company. Any such power so
executed and sealed and certificate so executed and sealed shall, with respect to any bond of undertaking to which it is attached, continue
to be valid and binding on the Company.
IN WITNESS THEREOF, LEXON INSURANCE COMPANY has caused this instrument to be signed -by .its President, and its
Corporate Seal to be affixed this 2nd day of July, 2003.
LEXON INSURANCE COMPANY
r' .
O : 0 `. TEXAS •` . . f BY
(/ �
><; INSURANCE : z ! David E. Campbell
• COCOMPANY �/
President
— �..• ACKNOWLEDGEMENT
On this 2nd day of July, 2003, before me, personally came David E. Campbell to me known, who being duly sworn, did depose and
say that he is the Pnstruresident
ment on LEXON
of the COMPANY, the
authority of his corporation
his off ce under the By-laws l above instrument; that
of said corporation.
he executed sa
"OFFICIAL SEAJ.t �n
MAUREEN K. AYE ; ` J / � -�� C. `—' i
Notary Public, State of Illinois Mauren K. Aye
My Commission Expires 09/21/13 Note Public
CERTIFICATE
I, the undersigned, Secretary of LEXON INSURANCE COMPANY, ATexas Insurance Company, DO HEREBY CERTIFY that the
original Power of Attorney of which the foregoing is a true and correct copy, is in full force and effect and has not been revoked and the
resolutions as set forth are now in force.
Signed and Sealed at Lombard, Illinois this ; Day of r '-)ei.A -4 , 20 /
A
O ` . . TEXAS D 1
Y I
> : INSURANCE z
�1� COMPANY /4 i Donald D. Buchanan
Secretary
"WARNING: f claim n ng any materially false information, or conceals for the pu pose of misleading, information concern ng fact mate
statement
al thereto, commits a fraudulent insurance act, which is a crime and subjects such person to criminal and civil penalties.'
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Foreign Profit Corporation
LEXON INSURANCE COMPANY
Filing Information
Document Number F95000006088
FEI /EIN Number 760128873
Date Filed 12/13/1995
State TX
Status ACTIVE
Last Event NAME CHANGE AMENDMENT
Event Date Filed 06/20/2003
Event Effective Date NONE
Principal Address
10002 SHELBYVILLE ROAD
SUITE 100
LOUISVILLE KY 40223 US
Changed 11/07/2003
Mailing Address
10002 SHELBYVILLE ROAD
SUITE 100
LOUISVILLE KY 40223 US
Changed 11/07/2003
Registered Agent Name & Address
CHIEF FINANCIAL OFFICER
P.O. BOX 6200 32314 -6200
200 E. GAINES ST.
TALLAHASSEE FL 32399 -0000 US
Officer /Director Detail
Name & Address
Title VPD
SEMROW, GREGORY E
256 JACKSON MEADOWS DR, STE 201
HERMITAGE TN 37076 -
Title CD
DIERUF, THOMAS A
10000 SHELBYVILLE ROAD, STE 100
LOUISVILLE KY 40223
Title SD
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BUCHANAN, DONALD D
10000 SHELBYVILLE ROAD, STE 100
LOUISVILLE KY 40223
Title PD
CAMPBELL, DAVID E
256 JACKSON MEADOWS DR, STE 201
HERMITAGE TN 37076
Title VTD
CULBERTSON, ROSE M
10002 SHELBYVILLE ROAD, STE 100
LOUISVILLE KY 40223
Title VD
LAUER, PHILIP G
10002 SHELBYVILLE ROAD, STE 100
LOUISVILLE KY 40223
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2010 02/17/2010
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