National Union Fire v. Bramble

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National Union Fire Insurance Co. of Pittsburgh v. David A. Bramble, Inc., No. 150, September Term, 2004. National Union Fire Insurance Co. of Pittsburg h v. Wad sworth G olf Construction Co. of the Midwest, No. 151, September Term, 2004. Contract Law. Compensated Suretyship Construction Payment Bond. Construction payment bonds involving co mpensated corp orate sureties are subject to interpretation according to the tenets ap plicable to all other contracts. Provision in payment bond requiring compensated corporate sureties to answer a claim within 45 days of receipt and detailing which amounts are undisputed, disputed, and the grounds for dispute precludes challenge to claims where the 45-day period is not satisfied. T o interpret the language otherwise would result in the provision being rendered nugatory, which violates a lon g standing principle in Maryland contract law . Therefo re, the entirety of th e claims sub mitted we re undisputed. IN THE COURT OF APPEALS OF MARYLAND No. 150 September Term, 2004 NATIONAL UNION FIRE INSURANCE COMPANY OF PITTS BUR GH, PA ., et al. V. DAVID A. BRAMBLE, INC. __________________________________ No. 151 September Term, 2004 NATIONAL UNION FIRE INSURANCE COMPANY OF PITTS BUR GH, PA ., et al. V. WADSWORTH GOLF CONSTRUCTION COMPANY OF THE MIDWEST __________________________________ Bell, C.J. Raker Wilner Cathell Harrell Battaglia Eldridge, John C., (Retired Specially Assigned) JJ. Opinion by Battaglia, J. Filed: July 21, 2005 In the present case we are asked to determine the effect of a general contractor s payment bond surety s failure to fulfill a contractual provision requiring it to answe r a subcontractor s payment claim within 45 days after receiving that claim. We determine that the language of the payment b ond requires the sureties to delineate those portions of the claim that they intend to dispute w ithin the 45-day period and that, under the language of the bond, a failure to do so results in the entirety of the claim being undisputed. We hold that Wadsworth Golf Construc tion Compan y of the Midwest an d David A . Bramble, Inc. are entitled to judgment against the sureties because, under the terms of the payment bond, the sureties are preclud ed from d isputing Wadsw orth and Bramble s claims, and thereby, we affirm the judgments of the Court of Special Appeals. Background Comm on Facts On Novem ber 22, 199 9, Clark C onstruction Group, In c. ( Clark or the general contractor ) contracted with Maryland Economic Development Corporation ( MEDCO or the owner ) to serve as general contractor to oversee the construction of the Hyatt Regency Chesapeake Bay Resort in Cambridge, Maryland.1 For the pu rpose of g uaranteeing the completion of the construction, Clark executed a surety bond (or payment bond ) in favor of MED CO in the am ount of $70,864 ,000.00. Issued jointly by National Union Fire Insurance Company of Pittsburgh, PA ( National Union ), Federal Insurance Company 1 Neither Clark nor MEDCO is a party in the underlying action giving rise to this appeal and neithe r is involved in the action b efore this C ourt. ( Federal ), and Fidelity and De posit Company of Maryland ( Fidelity ) (collectively the sureties ), the payment bond, provided by Clark, was a form surety bond, specifically identified as Document A312 from the American Institute of Architects, and was provided by Clark . No alte rations w ere ma de to the origina l langua ge of th e payme nt bond . The payment bond secured C lark s obligation to pay subcontractors fo r all labor, material, and equip ment costs necessary to construct the resort should it default or MEDCO fail to make payment to Clark. Among its many provisions were: 4 The Surety shall have no obligation to Claimants under this Bond u ntil: 4.1 Claimants w ho are em ployed by or hav e a direct con tract with the Contra ctor have g iven notice to the Surety . . . and sent a copy, or notice thereof, to the Owne r, stating that a cla im is being made under this Bond and, with substantial accuracy, the amou nt of the claim. *** 6 When the claimant has satisfied the conditions of Paragraph 4, the Surety shall promptly and at the Surety s expense take the following actions: 6.1 Send an answer to the Claim ant, with a co py to the Owner, within 45 days after receipt of the claim, stating the amounts that are undisputed and the basis for challenging any amounts that are disp uted. 6.2 Pay o r arrang e for pa yment of any und isputed amou nts. Wadsw orth Facts Eight days after the bond was executed, on November 30, 1999, Clark subcontracted 2 with Wadsw orth Golf Construc tion Com pany of the M idwest ( Wadsworth ) to build, for over ten million dollars, an 18-hole golf course and to complete excavation and rough grading work for all buildings, parking lots, and roads located on the resort. During the course of construction, the base amount of the contract was increased to over five million dollars, and Clark requested that Wadsworth complete additional work, not included in the base am ount, w orth $1 38,714 .45. Wadsw orth completed the con struction of the golf course and the required site wo rk sometime before M arch 200 2, and Cla rk made p eriodic prog ress paymen ts to Wadsworth as MEDCO paid Clark. When the w ork was completed, Wadsworth unsuccessfully attempted to collec t $720,9 63.45 s till owed by Clark . On March 23, 2002, Wadsw orth notified the sureties by certified letter o f its claim under the payment bond for the amount that Clark had failed to pay. Ten days later, Federal Insurance Company responded to Wadsworth s claim, stating: Please be advised that American International Group ( AIG ) is the lead surety with regard to this matter. As a result, by copy of this letter, I am fo rwarding a copy of your letter to Susan Hellerman of AIG for her review and investigation and request that she keep me apprised of the status of her investigation. Federal Insurance Company writes this letter w ith a full reservation of its rights and with the understanding that any actions we have taken or may take do not constitute a waiver of any defenses available un der the bon d or applica ble law, including specifically any defenses pertaining to statutes of limitation or timely filing or appropriate notices. By letter dated April 5, 2002, AIG acknowledged receipt of Wadsworth s claim 3 through a letter addressed to Wad sworth and cop ied to Clark. AIG requested th at Wadsw orth document its claim against the payment bo nd by subm ission of a c ompleted Proof of Claim form, which was enclosed wit h the letter, and that Wadsworth attach supporting documentation such as subcontracts, signed purchase orders, and signed invoices. The letter also stated: Please be advised that this action is taken at this time without waiver of or prejudice to any of the rights and defenses, past or present, known or unknown which either the above referenced Surety (National Union Fire Insurance Company) or Principal (The Clark Co nstruction Group, Inc.) m ay have in this matter. On May 3, 2002, Wadsw orth submitted to AIG the completed Proo f of Claim form and copies of the subcontract, billing and payment do cumenta tion, and no tice letters. Shortly thereafter, AIG notified Wadsworth by letter that it had received the documents, and that it would immediately take[] this matter up with the above re ferenced Principal (Th e Clark Construc tion Grou p, Inc.), in orde r to ascertain their position on [the] cla im as pr esented . The letter further stated: [AIG] will be in contact with you in due course regarding [Clark s] position on the Proof of Claim as presented by your company on the above reference bond. Wadsworth, however, received no further information from AIG or the sureties regarding its claim, despite having sent a second letter, on July 23, 2002, requesting an answer to its claim. On November 6, 2002, Wadsworth filed a single count complaint in the Circuit C ourt for Dorchester County against the sureties. The complaint alleged breach of contract and 4 sought $752,738.72 under the payment bond for labor and materials for which Clark did not pay, plus pre- and post-judgment interest. 2 That same day, Wadsworth also filed a motion for summary judgment, arguing that the sureties were not entitled to challenge its claim under the payment bond because the sureties had not answered Wadsworth s claim and had delineated the grounds for dispute here and the amounts within 45 days of receivin g it. Wadsw orth appended the affidavits of its vice-president, Brian R. Cun fer, a nd attorn ey, Stephen P. Lagoy, to its Motion , which ve rified the acc uracy of the e xhibits attach ed to the proof of claim and attested to their k nowled ge of the a llegations in th e compla int. In response, the sureties filed a motion to stay the proceedings pending the outcome of litigation that Clark had instituted against MED CO. The sureties also filed a cross-motion for summary judgment, raising two grounds for relief: (1) pursuant to Article 4.j. of the subcontra ct, the money Clark ow ed to Wa dsworth w as not yet payable because MEDCO had not paid Clark; and (2) the sureties payment obligation under the terms of the payment bond arose only when Clark failed to pay amounts due at the time the claim was submitted. Appended to the sureties motion was the affidavit of Michael Mansager, employed by Clark as the Project Executive responsible for the management and oversight of Clark s contract with MED CO, who averred that Clark had paid Wadsw orth all sums currently due and owing . 2 Wadsw orth later voluntar ily reduced this a mount to $720,963.45. At the subsequent motions hearing, Wadsworth did not request, and the court did not award, pre-judgment interest. 5 On April 28, 2003, a hearing on the motions was held at whic h time Judg e Marv in Smith, sitting by special assignment, granted the motion on alternative grounds, the first being that Wadsworth was entitled to the money under the terms of the bond, and the second being public polic y. A written order emb odying the co urt s judgm ent was su bsequen tly entered on the d ocket o n Ma y 5, 2003 . On May 28, 2003, the sureties filed a notice of appeal to the Court of Special Appeals. The Court of Special Appeals affirmed Judge Smith s conclusion that the bond language operated to preclude the sureties from disputing the claims submitted by Wadsw orth due to their failure to comply with Paragraph 6 of the payment bond because Paragraph 6 provid es the surety 45 days to dispute a subcontractor s claim for payment and, if the surety does not answer within that time period , the surety cann ot thereafter d ispute the claim. National Union Fire Insurance Co. of Pittsburgh v. Wadsworth Golf Construction Company of the Midwest, 160 Md. App. 257, 274, 863 A.2d 347, 357 (2005). Moreover, the opinion noted that its construction of Paragraph 6 was consistent with the purpose of such bonds, which is to insure that claimants who perform work are paid for their work in the event th at the pri ncipal d oes no t pay. Id. The court concluded that to interpret Paragraph 6 otherwise would render the provision nugatory. Because the sureties did not appeal from the alternative ground for Judge Smith s determination, public policy, the Court of Special Appe als did n ot addr ess that g round . Bramble F acts 6 On May 16, 20 00, Clark s ubcontrac ted with David A. Bramble, Inc. ( Bramb le ) to provide water and sewer piping systems a t the reso rt. The subcontract p rovided that Clark would pay Bramble a base price of $2,055,00.00, which was increased by $400,000.00 during the construction process. Bramble completed the required site work in March of 2002, at which tim e Bramb le unsucce ssfully attempte d to collect the m onies that it believed were o utstand ing fro m Clar k. On June 14, 2002, Bramble notified the sureties by letter of its claim for payment under the bond, in the amount of $455,511.53. Nearly one month later, Federal responded to Bramble s claim by sending a letter that was identical in content to that sent to Wadsworth, stating that it forwarded the claim to th e lead surety, AIG. At som e point thereafter, AIG requested that Bram ble docume nt its claim under the payment bond by submitting a completed Proof of Claim form along with materials supporting its assertion. On April 22, 2003, B ramble submi tted the f orm to A IG. On April 25, 2003, AIG informed Bra mble by letter tha t the amou nt of the claim should be reduced to $336,334.63. Bramble received no additional correspondence from the sureties regarding its claim until after suit was filed. At the end of April, Bramble filed a single count co mplaint i n the Circ uit C ourt for D orch ester County against the sureties alleging breach of contract and seeking $500,000.003 in damages, plus pre-judgment and post-judgment interest. Bramble then filed a motion for summary judgment, which the 3 The re quest f or $50 0,00.00 was th ereafte r reduc ed to $3 27,035 .13. 7 sureties opposed. I n a hearing on June 12, 2003, Judge Smith granted summary judgment in favor of Bram ble relying on h is holding in Wadsw orth. The sureties filed a timely appeal with the Court of Special Appeals presenting questions identical to those in the Wadsw orth case. In an unreported opinion, the Court of Special Appea ls, relying entirely upon its reasoning in Wadsw orth, affirm ed the e ntry of su mmar y judgm ent. The sureties filed a petition for a writ of certiorari on January 14, 2005 in both cases and presented the following question, which we have reformulated for clarity purposes: Whether the Circuit Court improperly granted Wadsworth and Bramble s Motions for Summary Judgment based on the terms of Paragraph 6 of the payment bond, which requires the sureties to answer a submitted claim within 45 days of receipt and detail the amou nts which are disputed and wh ich are not. On Marc h 11, 20 05, we granted the petitio ns and issued th e writs. National Union v. Wadsw orth, 385 Md. 511, 869 A.2 d 864 (20 05); National U nion v. Bra mble, 385 Md. 511, 869 A.2d 864 (2005). Because we determ ine that the language of Paragraph 6 of the payment bond requires that the sureties answer a subcontractor s claim and delineate the portions of the claim that they intend to disput e within 45 days after the claim is submitted and that the sureties failed to do so, we f ind that Wadsw orth and Bramble are entitled to judgment under the bond and affirm the judgments of the Court of Special Ap peals. Our determin ation, like that of the Circuit Court, is based solely on an interpretation and application of the language of the payment bond. Discussion 8 Prim arily, the sureties contend that their failure to answer W adsworth and B ramble s claims within the 45-day period set forth in Paragraph 6 indicates that the entirety of the claims were bein g disputed . They argue that if they are no t able to dispu te the claim of the subcontra ctor, then they co uld be forced to make payment for claims not properly covered by the bond. M oreover, the sureties assert th at to determine otherwise could result in the subcontractors receiving a windfall a t the expen se of other legitimate claim ants entitled to recover under the terms of the bond. The sureties suggest that it would be more a ppropriate to award th e subcon tractors cons equential d amages a rising from the breach of contrac t. Fina lly, the sureties contend that the result of the Circuit Court s grant of summary judgment is punitive and inconsistent with the long standing principle in Maryland law prohibiting the courts f rom ex pandin g the sc ope of a bond or insur ance p olicy. Con vers ely, Wadsworth and Bramble assert that Judge Smith s determination that the plaintiffs wer e ent itled to recover w as su pported by the facts adduced in s upport of their motions for summary judgment. Wadsworth and Bramble argue that because the sureties breached the provision of the contract governing the procedures for investigating claims, the sureties were precluded from raising any defense on the merits relating to coverage or otherwise. Therefore, Wadsworth and Bramble assert that Judge S mith prope rly granted their motions. The H istory an d Fund amenta l Principles of Surety ship At the outset, we shall examine our understanding of the fundamental principles 9 governing surety bonds. A surety bond is a tripartite agreem ent among a princ ipal obligor, his obligee, and a surety. General Motors Accepta nce Cor p. v. Danie ls, 303 Md. 254, 259, 492 A.2d 13 06, 1309 (1985); Atlantic Contr acting & Mate rial Co ., Inc. v. U lico Casualty Co., 380 Md. 285, 299, 844 A.2d 460, 468 (2004). It is a three party arrangement intended to provide personal security for the payment of a debt or perfor manc e of an obligati on. William H. Woo ds, Historical Development of Suretyship from Prehistoric Custom to a Century s Experien ce with the Com pensated Corpor ate Surety , in T HE L AW OF S URETYS HIP 3 (Edward G. Gallagher ed., 2000). Baldwin s Century Edition of Bouvier s Law Dictionary (1948) defines surety as: A person who binds himself for the payment of a sum of mon ey, or for the performance of something else, for another. Uncompensated personal suretyship was the dominant form of security in early Rome . . . [and Roman law] prov ided the sur ety with certain u nique rights and defe nses in orde r to encourage individuals to voluntarily undertake the risks inh erent in t his form of secu rity. Woods, supra, at 6. A pe rson al surety w as not compensated and was m otivated by du ty rather than pr ofit. Id. Traditional uncompensated personal suretyship was also preeminent in England and w as go vern ed by three distinct lega l trad ition s: the Com mon Law , Equ ity, and the Law Merchant, the commercial common law.4 Id. at 8. In the American colonies, the law of suretyship was plagued with often conflicting and unsettled rules emanating from 4 The Law Merchant denotes the English unwritten body of law that developed from the unrecorded customs and practices of the merchants. Woods, supra, at 8. 10 these diverse bodies of En glish law . Id. at 20. Because the colonies were not important centers of international trade with established mercantile customs, the principles governing suretyship adopted in England were not widely used . Id. at 21. It was not until the nineteenth century that a significant need for suretyships developed in the United States. Compensated corporate suretyship by contract, which is the form of suretyship present in the case at bar, originated in England prior to th e Am erican R evolutio n. Id. at 26. In 1837, William L. Haskins, an American, published a pamphlet entitled, Considerations on the Project and Institution of a Guarantee Company, on a New Plan, with some general views on Credit, Confidence and Currency in which the organization of a company named, The New York Guarantee Co. was proposed. Id. at 27, qu oting W illis D. M organ, The History and Econom ics of Suretys hip, 12 Cornell L. Q . 153, 164-65 (1926). Haskins stated the purpose of his company as to guarantee the payment of notes and other written obligations or contracts, whether of individuals, corporations, or private associations. Id. Thus, Haskins has been credited with having first conceive d of the [c ompens ated] corpo rate surety. Id. American Surety Co., the first company in the United S tates devote d exclusive ly to surety underwriting, was incorporated in New York on April 14, 1884, and in 1887, was the first U nited S tates cor poratio n to wr ite a con tract sure ty bond. Id. With the emergence of the compensated corporate surety as a business e ntity, it was necessary to create rules of interpretation for surety bonds. Shortly after the turn of the twentieth century, this Court indicated that a surety w hose oblig ation is deliberately entered 11 into, as a commerc ial transaction, an d with the e xclusive vie w to the pe cuniary profit resulting from it, Smith v. Turner, 101 Md. 584, 587-88, 61 A. 334, 336 (1905), might expect to receive treatment different from that which had been afforded an uncompensated personal surety, which w as favored by the law. Su bsequen tly, the principle w as explicitly stated in Southern Md. Nat l Bank v. Nat l Surety Co., 126 Md. 290 , 94 A. 916 (191 5): The doctrine that a sure ty is a favorite of th e law, and that a claim against him is strictissimi juris [5] does not apply where the bond or undertaking is executed upon consid erati on by a corporation organized to make such bonds or undertakings for profit. Id. at 293, 94 A. at 916 (footnote added). Furthermore, in A/C Electric Co., Inc. v. Aetna Insurance Co., 251 Md. 410, 416, 247 A.2d 708, 711-12 (1968), quoting Maryland Cas. Co. v. Fowler, 31 F.2d 881, 884 (4th Cir. 1929), we stated: The rule is well settled . . . that a com pensated s urety is in effect an insurer, that its contract will be construed as an insurance contract m ost strongly in favor of the party or parties protected thereby, that forfeiture on technical grounds will not be favored, a nd that the strictissimi juris rule of the law of suretyship will no t be app lied for its protec tion. In Berry v. United States Fidelity & Guaranty Co., 249 Md. 150, 157, 238 A.2d 907, 910 (1968), this C ourt noted th at: A paid surety which is a surety or bonding compa ny is usually considered to be in the same class as an insurance compan y, its contract being held to be in the nature of insurance and to be 5 Strictissimi juris is a term of art meaning to be interpreted in the strictest m anner. B LACK S L AW D ICTIONARY, strictissimi juris (8th ed. 2004). 12 construed according to the rules applicable to insurance contracts. Id. Interpretation of Paragraph 6 In Dutta v. Sta te Farm Insurance Co., 363 Md. 54 0, 556, 769 A.2d 948, 957 (2001 ), we addressed the principles applicable to the interpretation of surety bonds. In the interpretation of the meaning of an insurance contract, we accord a word its usual, ordinary and accepted meaning unless there is evidence that the parties intended to employ it in a special or technical sense. Id. at 556, 769 A.2d at 957, quoting Cheney v. Bell Natio nal Life Insurance Co., 315 Md. 761, 766, 556 A.2d 1135, 1138 (1989). Consistent with that observation, insurance contrac ts are co nstrued as ordin ary contra cts. Id., citing Litz v. State Farm, 346 Md. 217, 224, 695 A.2 d 566, 56 9 (1997); North River Insurance Co. v. Mayor & City Council of Baltimore, 343 Md. 34, 39 , 680 A.2d 480 , 483 (1996). Ordina ry principles of contrac t interpre tation ap ply. Kenda ll v. Nationwide Insurance Co., 348 Md. 157, 165, 702 A.2d 767, 770-71 (1997). Accordingly, if no ambiguity in the terms of the insurance contrac t exists, a c ourt w ill enfor ce thos e terms . Id. at 171, 702 A.2d at 773. Therefore, [a] court construing an agreement under this test must first determine from the language of the a greemen t itself what a reasonab le person in th e position of the parties would have meant at the time it was effectuated. In addition, when the language of the contract is plain and unambiguous there is no room for construction, and a co urt must presume that the parties meant what they expressed. In these circumstances, the true test of what is meant is not what the parties to the contract intended it to mean, but wh at a reasonable person in the position of the 13 parties would have thought it meant. Consequently, the clear and unambiguous language of an agreement will not give []way to what the parties thought that the agreement meant or intended it to mean. Wells v. Chevy Chase Bank, F.S.B., 377 Md. 197, 224-25 n.12, 832 A.2d 812, 828 n.12 (2003). Moreover, this Court has adhered to the principle that w e will not un necessarily read contractual provisions as meaningless: A recognized rule of construction in ascertaining the true meaning of a contract is that the contract must be co nstrued in its entirety and, if reasonably possible, effect must be given to each clause so that a court will not find an interpretation which casts out or disregards a meaningful part of the language of the writing unless no o ther course can be sen sibly and reasona bly followed. DirectTV, Inc. v. Ma ttingly, 376 Md. 302, 320, 829 A.2d 626, 637 (2003), quoting Sagner v. Glenangus Farms, Inc., 234 M d. 156, 167, 1 98 A.2 d 277, 2 83 (19 64). See also Bausch & Lomb, Inc. v. Utica Mut. Ins. Co., 330 Md. 758, 782, 625 A.2d 1021, 1033 (19 93); Dahl v. Brunswick Corp., 277 M d. 471, 4 78-79 , 356 A .2d 221 , 226 (1 976). In the present case, Paragraph 6 of the payment bond states: When the Claimant has satisfied the conditions of Paragraph 4 [furnished written notice to the Contractor and sent a copy, or notice, to the Owner within 90 days after work was completed and when not paid within 30 days, sen t a notice to the Surety and Owner stating that a claim is being filed under the bond], the Surety shall promptly and at the Surety s expense take the following actions: 6.1 Send an answer to the Claima nt, with a copy to the Own er, within 45 days after receipt of the claim, stating the amounts that are undisputed and the basis for challenging any amounts that 14 are disputed. 6.2 Pay or arrange for payment of any undisputed amounts. The sureties do not contest the fact that they breached the requirements of Paragraph 6. Instead, they argue that when they failed to answer within the 45-day period of Paragraph 6, the entirety of the claim was disputed. We disagree. The language of Paragraph 6.1 requires the sureties to do three things: answer the Claimant s claim, defin e what am ounts are undisputed, and list the bases for challenging the payment of any amounts that are disputed. This language necessarily required the sureties to communicate with Wadsworth and Bramble, with a copy of the correspondence to the owner, concerning what portions of the submitted claim a re subject to dispute. Although the lead surety, AIG, responded to Wadsworth and Bram ble s claims, a cknow ledging rec eipt, the sureties failed to explicate which parts of the claims were disputed and undisputed as mand ated by th e langu age of the bon d withi n the tim e allotted . To satisfy Paragra ph 6.1, the su reties were re quired to, in th eir answer, state the amounts that were undisputed and the basis for challenging the claims that were disputed. Although the sureties correspon ded with W adsworth and Bramble during the 45-day period set forth in Paragraph 6.1, the record contains no evidence that the sureties attempted to comply with the language of the bond. The sureties argue that becaus e they failed to explicate both the amounts that are undisputed and those subject to challenge, the function of the paragraph is to render the entirety of the claim in dis pute. Parag raph 6 do es not, 15 however, simply require that the sureties state which portions of the claim are disputed and which are not; they must also specifically delineate the grounds u nderlying the d ispute. This places a greater bu rden on th e sureties w ith respect to tho se amou nts they wish to challenge as compared to those parts of the claim that are undisputed, the latter of which the sureties must only list. Therefo re, it would not be consistent with the plain meaning of the provisions of Paragraph 6 to interpret it to permit the sureties to dispute a c laim in its entirety through inaction. If we were to adopt the sureties interpretation of Paragraph 6, we would be rendering the 45-day time requirement essentially nugatory. This runs afoul of our long-standing tenet of contractual interpretation that provisions of a contract are to be interpreted, if possible, so as to give e ffect to all. DirectTV, Inc. v. Mattingly, 376 Md. 302, 320, 829 A.2d 626, 637 (2003), quoting Sagner v. Glenangus Farms, Inc., 234 Md. 156, 167, 198 A.2d 277, 283 (1964). See also Bausch & Lomb, Inc. v. Utica Mut. Ins. Co., 330 Md. 758, 782, 625 A.2d 1021, 1033 (19 93); Dahl v. Brunswick Corp., 277 Md. 471, 478-79, 356 A.2d 221, 226 (1976). The primary purpose of Paragraph 6 is to better facilitate the timely payment of claims under the bond, as we recently delineated: The reasonab le behavio r required o f a surety acting in good faith is not mean t to foster reluctance on a surety s part to satisfy bond claims. We agree with the court in General Accident Insurance Co. of America v. Merritt-Meridian Construction Corp., 975 F. Supp. 511, 516 (S.D.N.Y. 1997), which explained: Sureties enjoy such discretion to settle claims because of the imp ortant func tion they serve in 16 the construction industry, and because the econom ic incentives motivating them are a sufficient safeguard against p ayment of in valid claims. The many parties to a typical construction contract owners, general contractors, subcontractors, and sub-s ubcontrac tors look to sureties to provide assurance that defaults by any of the myriad other parties involved will not resu lt in a loss to them. Courts have recognized that as a practical matter the suppliers and small contractors on large construction projects need reasonably prompt payment for their work and materials in order for them to remain solvent and stay in business. (Citations omitted) Atlantic Contracting, 380 Md. at 314, 844 A.2d at 476-77. In Moore Bros. Co. v. Brown & Root, Inc., 207 F.3d 717, 723 (4th Cir. 2000), the United States Court of Appeals for the Fourth Circuit similarly stated the purpose of such bonds: [T]he very purpose of securing a surety bond co ntract is to insure that claimants who p erform work are paid for their work in the event that the principal does not pay. To suggest that non-payment by the Owners absolves th e surety of its obligation is nonsensical, for it defeats the very purpose of a payment bond. (Emp hasis in o riginal). The 45-day time period and the specificity of the procedures to dispute a claim as mandated in Paragraph 6 of the payment bond directly embody that purpose. To decide that the sureties, by inaction through time and effort, could dispute the entirety of a claim ad infinitum, would greatly undermine the bond s purpose of safeguarding those entities that supply goods and labor to the general contractor. The requirements of Paragraph 6 function 17 to insure that subcontractors and sub-subcontractors are not forced to absorb the risk of nonpayment over a protracted p eriod by the co ntractor and the own er, through n o fault of their own. A paid surety is classified as an insurance company, and as such, courts tend to construe contracts involving compensated sureties in favor of the party who benefits under the bond. A/C Electric Co., 251 Md. at 418, 247 A.2d at 712. In the present case, the sureties are comp ensated co rporate sure ties. Therefo re, to construe the language of Paragraph 6 in a man ner favora ble to the party whose in terests are pro tected by the bo nd is proper under M aryland la w. Ou r determ ination i s consis tent with that tene t. The sureties argue that such an interpretation results in a potential expansion of the coverage of th e bond becau se they would be forced to pay for claims that are beyond the scope of the bond s coverage. Although we recognize that we may not take action to expand the covera ge of a bond th rough judicial a ction, see Mayor & City Council of Baltimore v. Fidelity and Deposit Co. of Maryland, 282 Md. 431, 441, 386 A.2d 749, 754 (1978), there is nothing in the record to indicate that the sureties asserted that any portion of Wadsw orth and Bramble s claims was beyond the scope of the bond s coverage within the 45-day period delineated in Paragraph 6. By the plain language of the bond, the sureties are precluded from arguing otherwise. Therefore, the Circuit Court correctly granted summa ry judgment in favor o f Wad sworth and B ramble . Conclusion 18 Under the terms of Parag raph 6, the su reties were re quired to de lineate which portions of Wadswo rth and Bramble s claim were disputed and failed to do so. Therefore, the effect of the provisio ns in Paragrap h 6 is that the e ntirety of the claim is undisputed and the sureties are requ ired to promp tly pay t he claims submitted by Wadsworth and Bramble. Thus, we affirm the judg ments o f the C ourt of Specia l Appe als. JUDGMENTS OF THE COURT OF SPECIAL APPEALS AFFIRMED. COSTS IN BOTH COURTS T O BE PAID BY PETITIONERS. 19