A New York surety is going after an electrical contractor and its principals - including their spouses as indemnitors - to recoup more than $1.8 million tied to a string of allegedly defaulted public works bonds.
United States Fire Insurance Company filed its case on April 23, 2026 in the Eastern District of New York, asking the court to enforce a General Indemnity Agreement against Palace Electrical Contractors, the Palazzo Dhaim Partnership, and four individuals - Gerard Palazzo, Catherine Palazzo, George Dhaim and Gail Dhaim. According to the filing, the surety stepped in after Palace was allegedly defaulted or terminated on a series of bonded projects across Long Island and New York City.
The backstory, as told in the filing, is familiar to anyone who has worked a surety claim. US Fire says it agreed to back Palace based on a General Indemnity Agreement signed on or about December 28, 2015, and later amended on March 1, 2019. On the strength of that deal, the surety says it executed around 20 performance and payment bonds for contracts with the Town of Hempstead, the Hicksville, Carle Place, Plainview and Port Washington water districts, the City of New York, Nassau County, the Village of Hempstead, and several school districts, including Longwood, Valley Stream, Miller Place and Bridgehampton. A separate benefits and wage bond - eventually raised to a $250,000 penal sum - was posted in favor of the Electrical Industry Board of Nassau and Suffolk Counties.
The first cracks show up in the filing on May 14, 2025, when the Town of Hempstead sent four letters saying it was starting or resuming default proceedings on the Levittown, Uniondale, Wells 5 & 11, and Wells 1 & 3 projects, and calling on US Fire to finish the work. The surety says it signed a Takeover Agreement on or about August 13, 2025, brought in Hinck Electrical Contractors to complete the jobs, and has so far paid Hinck at least $405,577.56. Further defaults or terminations are alleged on the Plainview, Port Washington and three Longwood school projects.
There is also a union wrinkle. The filing says Palace failed to remit required benefit contributions, prompting US Fire to pay $350,000 in initial payments to the Electrical Industry Board. When the Board sued on November 17, 2025 in Suffolk County Supreme Court seeking the full penal sum of the benefits bond, US Fire says it paid another $226,715 to close out the claim.
For insurers and claims professionals, the filing is a reminder of how much muscle a modern indemnity agreement carries. The quoted Paragraph 5 says the indemnitors must reimburse the surety for any loss paid in good faith, and treats a sworn statement of loss from a surety employee as prima facie evidence of the propriety, amount and existence of the indemnitors' liability. Paragraph 7 lets the surety demand collateral "in its sole and absolute discretion" once a claim is asserted, liability looks likely, funds appear diverted, or it "deems itself insecure."
US Fire is asking for at least $1,848,278.82 in losses, another $326,487.94 in fees and expenses, $391,161.27 in collateral, $15,000 in unpaid premiums, access to the indemnitors' financial records, and common-law indemnification from Palace.
The allegations have not been tested in court. The defendants have not yet filed a response, and no judge has ruled on any of the claims.
