Liberty Mutual Wins $411k in Surety Bond Dispute with Active Fire Sprinkler
New York, NY – August 2, 2025 – Liberty Mutual Insurance Company has secured a significant legal victory, compelling its client, Active Fire Sprinkler NYC, LLC, to pay $411,972 in a surety bond dispute. The ruling, handed down by New York’s Appellate Division, Second Department on July 30, 2025, underscores the enforceability of indemnity agreements in surety bond cases, reinforcing the importance of clear contracts and thorough documentation for insurers.
The dispute originated in March 2011, when Active Fire Sprinkler and related parties entered into an indemnity agreement with Liberty Mutual. Under the terms, Liberty Mutual issued surety bonds to guarantee Active Fire’s obligations on construction projects, with the condition that Active Fire would reimburse the insurer for any losses, fees, costs, or expenses incurred, including legal fees if enforcement became necessary. When Active Fire failed to cover losses on these bonds, Liberty Mutual sought to recover the amount paid out to claimants.
The case reached a turning point when the appellate court upheld the lower court’s decision, affirming Liberty Mutual’s right to indemnification. According to New York law, a surety is entitled to reimbursement upon proof of payment, provided the payment was not made in bad faith or deemed unreasonable. Liberty Mutual presented compelling evidence, including the indemnity agreement, bond issuance records, payment documentation, and an affidavit from a regional vice president detailing the payments. The court found this sufficient to establish Liberty Mutual’s claim, while Active Fire failed to present any substantial counterarguments to dispute the payments’ validity.
This ruling serves as a critical reminder for insurance professionals and contractors alike. “Clear indemnity agreements and meticulous record-keeping are paramount,” said a Liberty Mutual spokesperson. “This case demonstrates that New York courts will uphold an insurer’s right to recover losses when the proper documentation is in place.” The decision highlights Liberty Mutual’s robust approach to surety bonds, a cornerstone of its business as the world’s largest surety provider, underwriting bonds for contractors and businesses across various industries.
For Active Fire Sprinkler, the $411,972 judgment represents a significant financial setback, potentially impacting its operations and reputation in the construction industry. The case also underscores the risks contractors face when failing to meet obligations under surety agreements, as courts are likely to enforce indemnification clauses when evidence is clear.
Liberty Mutual continues to lead the surety market, offering bonds to businesses of all sizes, from small contractors to multinational corporations. With operations in over 15 countries and a strong financial backing as a Fortune 100 company, the insurer remains a trusted partner for construction projects worldwide. This victory further solidifies its reputation for protecting its financial interests through well-structured agreements and rigorous legal enforcement.
For more information on surety bonds and their implications, industry professionals can refer to resources from the National Association of Surety Bond Producers (NASBP) or contact Liberty Mutual’s National Bond Center.