Berkley Surety Seeks $10 Million from San Antonio Contractor

A school district had made a claim under Davila Construction's performance bond

The San Benito School District has secured funds to finish projects that had been stalled, such as this aquatic center, since the district defaulted contractor Davila Construction.

Photo: Courtesy of the San Benito School District

Berkley Surety is seeking $10 million from the owners of Davila Construction Inc., a longtime San Antonio general contractor and construction manager that was terminated by a Texas school district for which it was constructing two buildings under contracts worth $30 million.

The surety filed a lawsuit in May in federal court in San Antonio against the contractor, its owners and others who guaranteed the bond obligation. Berkley says it has had to spend money for several of the 10 Davila Construction projects for which it had provided bonds. The work includes three contracts worth $9 million for the city of San Antonio, another worth $2.7 million for San Juan, Texas, a $5.6-million apartment building project and a $9-million renovation project for the U.S. Army Corps of Engineers.

The biggest contracts were for an aquatic center for the San Benito, Texas, school district, which terminated Davila and made a claim under its performance bond.

Both Davila Construction and a related partnership that indemnified the surety, ATC-Davila, "defaulted on several of the projects," Berkley claims in its lawsuit.

Davila Construction's listed phone number in San Antonio was not in service, and an attorney for the company and one of its owners, Antonio Davila, did not reply to messages seeking comment. A call and an email to the city of San Antonio regarding the status of Davila's contracts also went unanswered.

In an initial response to Berkley's lawsuit in June, Davila Construction asserts that the surety fails to state a claim or comply with preconditions for recovering funds. The indemnity agreement caps Antonio Davila's liability and individual exposure, Davila's reply states. The indemnity agreement states that the cap is $1 million.

While Davila Construction's current status remains unclear, its troubles on the San Benito School District project could have been costly. The school district had issued $40 million in bonds to finance construction of the aquatic center, performing arts center and other related work. In late 2019 it hired Davila as construction manager at risk to build the aquatic and performing arts center. A third structure, a football stadium, was completed by another contractor.

According to the San Benito News, an architect employed by the district discovered that misaligned "geopier rock columns" for one or both of the Davilla projects were "misaligned," and the school district halted the work in March 2023 and subsequently issued a default notice to Davila.

Berkley last month reached a settlement of the district's claim under its performance bond, agreeing to pay $13.3 million so that the aquatic center and performing arts center could be completed. In a Facebook post, the district said that it now has $29.3 million remaining to complete planned school construction projects.

Asked about the status of the school construction projects where Davila had been terminated, the school district said that its trustees and superintendent "are currently working out the next steps to move forward with the bond construction projects."

Deputy Editor Richard Korman helps run ENR's business and legal news and investigations, selects ENR's commentary and oversees editorial content on ENR.com. In 2023 the American Society of Business Publication Editors awarded Richard the Stephen Barr Award, the highest honor for a single feature story or investigation, for his story on the aftermath of a terrible auto crash in Kentucky in 2019, and in 2015 the American Business Media awarded him the Timothy White Award for investigations of surety fraud and workplace bullying. A member of Investigative Reporters and Editors, Richard has been a fellow on drone safety with the McGraw Center for Business Journalism at the Craig Newmark Graduate School of Journalism at CUNY. Richard's freelance writing has appeared in the Seattle Times, the New York Times, Business Week and the websites of The Atlantic and Salon.com. He admires construction projects that finish on time and budget, compensate all team members fairly and record zero fatalities or serious injuries.

Post a comment to this article

Enhancing Collaboration and Surpassing Traditional Design-Build Methods with Progressive Design-Build

Earn: 1 PDH; 1 AIA LU/Elective; 0.1 IACET CEU

Progressive Design-Build is reshaping large infrastructure projects by addressing key issues with the traditional Design-Build approach. We'll explore how PDB fosters collaboration between owners, design-builders, and design teams to develop a well-defined scope and budget, plus minimizes cost overruns and reduces liability claims.