A Baltimore contractor went bankrupt. Now its surety wants $3.2 million from the people who pledged to cover the losses.
In a complaint filed June 17, 2026, in Maryland federal court, Frankenmuth Insurance Company says five defendants broke the contract meant to shield the surety from a contractor's collapse.
The story starts with bonds. Frankenmuth issued payment and performance bonds for Modern Builders, LLC, a Baltimore contractor, on several projects. A surety bond is a backstop: if the contractor fails, the surety pays. According to the complaint, that is what happened.
Frankenmuth says Modern defaulted on multiple jobs. On the "Penn North Project," a townhome renovation built to "passive home" energy standards, the owner terminated Modern for default in October 2022 and filed a performance bond claim, the filing states. Frankenmuth says it resolved that claim for $2,580,000, and a separate payment bond claim on the same project for $81,605.25.
There was more. The filing describes a claim on the Yorkewood Apartments project that the surety says it settled for $120,000, plus claims on the "CMSC - North Tower Addition and Renovation" project, which the complaint calls the Johns Hopkins Project, resolved for $146,331 and $65,846.36. Frankenmuth also says it ran up $244,384.21 in attorneys' and consultants' fees. Modern filed for Chapter 7 bankruptcy on or about May 27, 2024, according to the complaint.
That is where the indemnitors come in. Before issuing the bonds, Frankenmuth had the defendants sign a General Agreement of Indemnity on or about May 2, 2019, the filing states. It required them to cover the surety's losses and post collateral on demand.
The wording is the part surety professionals will recognize. According to the complaint, the agreement says the indemnitors "shall exonerate, indemnify and save Company harmless and against all Loss," and that "an itemized, sworn statement by an employee of Company, or other evidence of payment, shall be prima facie evidence of the propriety, amount and existence of Indemnitors' liability." Translation: the surety's sworn accounting stands as proof of the debt unless the indemnitors can rebut it.
The agreement also let Frankenmuth decide, "in its sole discretion," whether to pay, settle or fight a claim, with that call "final, binding and conclusive upon the Indemnitors," the filing states. And it required the indemnitors to "deposit with Company, upon demand, funds, other collateral security acceptable to Company."
Frankenmuth says it leaned on those clauses. The complaint states the surety demanded $3,100,000 in collateral by March 31, 2024, then on July 23, 2025, demanded payment of losses it put at $3,236,938.36. The indemnitors "failed and refused" to do either, according to the filing.
The headline figure: Frankenmuth puts its total loss at $3,238,077.36, after a $89.46 recovery. It wants judgment against all five defendants "jointly, severally, and individually," plus interest, costs and fees.
For surety and claims professionals, this is a clean enforcement action - and a reminder of why indemnity agreements read the way they do. The "prima facie evidence" and "sole discretion" clauses are exactly the tools a surety reaches for when a principal fails and the indemnitors fall silent.
These are allegations. The defendants have not yet responded, and no court has ruled.
