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Cooper v. Hartford Financial Services Group

June 15, 2005


The opinion of the court was delivered by: Henry H. Kennedy, Jr. United States District Judge


Plaintiffs, an estate and eight individuals, seek to hold defendant, The Hartford Financial Services Group, Inc. ("Hartford"), an investment and insurance company, liable for $200,000 on a bond Hartford issued to cover liability imposed on First Government Mortgage and Investors Corp. ("First Government"), a mortgage lender against which plaintiffs hold a judgment in excess of $4 million. Before the court are the parties' cross motions for summary judgment. Upon consideration of the motions, the oppositions thereto, and the record of this case, the court concludes that both motions must be granted in part and denied in part.


In 1996, First Government applied for a mortgage license. In order to satisfy licensing requirements and the District of Columbia Mortgage Lender and Broker Act of 1996, D.C. Code § 26-1101 et seq., ("MLBA"), First Government purchased a bond from Hartford in the amount of $50,000. Thereafter, in exchange for an annual payment of $500, Hartford re-issued the bond each year for the next four years until First Government ceased doing business in 2001.*fn1 Compl. ¶ 17.

In 2000, plaintiffs sued First Government alleging that it had violated various federal and District of Columbia consumer protection laws that govern mortgage lenders.*fn2 They succeeded in winning a jury verdict against First Government in the amount of $4.125 million in punitive damages, $543,734.25 in attorneys' fees, and compensatory and statutory damages in varying amounts for each plaintiff.*fn3 Plaintiffs now seek to recover $200,000 on Hartford's bond.


As plaintiffs point out, the resolution of this case turns on "whether Hartford is liable for $50,000 in each of the four years covered by [the bond it issued to First Mortgage] or whether its liability is limited to the amount in the bond for a single year . . . ." Pls.' Mot. at 1. The court's resolution of the issue, in turn, depends on whether the bond issued by Hartford, along with its subsequent renewals, is a "continuous bond" or a "cumulative bond." If the bond is continuous, Hartford's liability is only the face value of the original bond, $50,000, regardless of how many years the bond was in effect. If, on the other hand, the bond is cumulative, Hartford is liable for up to $50,000 for each year the bond was in effect and plaintiffs can demonstrate they suffered losses.*fn4

Plaintiffs' primary argument is that because the bond at issue is "statutory," one required by law for the protection of the public, it must be construed to be cumulative.*fn5 Hartford disagrees, contending that even though its bond is "statutory," the language of the bond itself and the text of the MLBA show that it is continuous. Plaintiffs' have the better argument.*fn6

A. Interpreting the Bond

A bond is a contract and is to be interpreted in accordance with established rules of contract construction. United States v. Insurance Company of North America, 131 F.3d 1037, 1041-42 (D.C. Cir. 1997).In instances where a bond is mandated by statute, the provisions of the statute are to be read into the bond. Speir v. United States, 31 App. D.C. 476, 483 (D.C. Cir. 1908) (holding that statutory conditions "must be considered as read into and made a part of the bond"). In addition, the bond must be construed in light of the purpose of the statute. United States v. American Surety Co., 200 U.S. 197, 205 (1906) (holding that the bond must be read in light of "the declared purpose of the statute"). Hence, whether a statutory bond is continuous or cumulative is determined by whether the statute and the bond, construed as a whole, indicate an intention that liability should be limited to the amount of the original bond or extended each time the bond is renewed.

1. The Language of the Hartford bond

Hartford contends that the language of its bond indicates that it is continuous.*fn7 For example, Hartford points to a provision that states, "[t]his obligation may be continued by an appropriate renewal certificate in support of licenses issued for subsequent years." Pls.' Ex. 4; Def.'s Ex. B. Hartford argues that "this" means that it is a single obligation intended to extend for multiple years and "continued" demonstrates the D.C. Council's intention for the bond to be continuous. Def.'s Opp'n at 7. Hartford's argument is unpersuasive for two reasons. First, as Hartford has conceded, statutory bonds must be read in light of the governing statute. When so read, "this obligation" refers simply to the general requirement in the MLBA for all licensees to have a bond, D.C. Code § 26-1103(i), and "continued" indicates only that the bond may be renewed, not that it is a continuous bond. Id.

Second, and more important, Hartford's bond states "[t]his obligation is issued under and is governed by District of Columbia Code 26-1003(i) and the obligations of the surety shall be those therein set forth."*fn8 Pls.' Ex. 4. In cases involving statutory bonds, courts have determined that "the obligation of a bonding company is determined by the statute, and not by the wording of the bond." Royal Indemnity, 393 P.2d at 262. This is particularly the case when, as here, the precise ...

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