West Linn-Wilsonville board declares Emmerich Construction in default; bond surety to assume completion duties

The West Linn-Wilsonville School District board declared Emmerich Construction in default on the Frog Pond Primary School construction contract and said the contract will be terminated seven days after the declaration.

"The district has declared a contractor default with the Emmerich Construction, and the contract will be terminated in 7 days," Pat McGuff told the board, citing unsolicited communications from subcontractors alleging nonpayment and a letter from Zurich instructing that bond funds be withheld. McGuff said the district has only one contractual relationship — with Emmerich — and does not have authority to pay subcontractors directly.

McGuff explained that by contract and under Oregon law the district can request written evidence from Emmerich that subcontractors have been paid; Emmerich did not provide such proof, and Zurich, the payment and performance bond surety, directed the district to withhold future payments and to direct funds to Zurich as the assignee. "Zurich will ensure protection and proper disbursement of the project funds to any subcontractors and or vendors that are owed money on the project," McGuff said.

Under the performance bond, Zurich has several legally permitted options to address the default — from arranging a contractor to complete the work to denying liability. McGuff summarized the options and said the district currently has confidence that Zurich will accept liability and pursue completion. He added that the district is obligated to pay the remaining contract balance to Zurich but is not responsible for additional costs Zurich may incur to finish the project.

The board held the special meeting to inform the public and to set the procedural steps needed while Zurich and its counsel address subcontractor claims and the process for completing construction.