Conn. Asks XL Insurance to Review Use of Defaulted Contractor

Connecticut Governor M. Jodi Rell has asked XL Specialty Insurance Co. of Stamford, the insurer of former road contractor L.G. DeFelice, to reconsider its decision to assign two unfinished state Department of Transportation construction projects in New Haven and New Milford worth $20 million to a new company recently formed by DeFelice’s former president.

It is the insurer’s responsibility to select a replacement contractor to complete the work upon default of a state contract, Rell said.

According to state officials, L. G. DeFelice voluntarily defaulted on these state contracts involving improvements to I-95 and Route 7 last month forcing XL Specialty to assume responsibility for finding a new contractor and completing the projects. XL Specialty selected Hallberg Contracting Corporation of West Haven, a new construction company owned and operated by former DeFelice President Stephen Hallberg and newly registered with the Secretary of the State’s Office in February 2006.

“Despite this record of incomplete and unsatisfactory contract compliance, your company has chosen to hire Hallberg to complete the projects in New Haven and New Milford,” wrote Rell in a letter to XL Specialty Insurance.

“DeFelice knowingly defaulted on a total of seven projects in the state of Connecticut, leaving the state and its taxpayers to bear the costs and inconveniences of its negligence. Given the common leadership of DeFelice and Hallberg, it is inconceivable that XL Specialty would permit a corporate shell game to overshadow the realities of the situation,” she wrote.

In addition to the New Haven and New Milford projects, DeFelice defaulted on the $65 million I-84 widening project in Waterbury. DOT last month fired DeFelice for performance issues from five separate multi-million dollar road contracts in Waterbury, Milford, Stamford, Greenwich and West Haven.

“XL Specialty has a contractual obligation to the state to ensure that DeFelice’s obligations are properly and completely discharged,” continued Rell. “Your company must retain a contractor with the equipment, resources and working capital to complete the work you have insured. XL Specialty must reconsider its decision to hire Hallberg.”

A spokesperson for XL Insurance told Insurance Journal the company had no comment at this time.

Rell also directed DOT Commissioner Stephen E. Korta II to conduct an exhaustive re-examination of Hallberg’s capabilities and past poor performance as L.G. DeFelice to determine independently if the new company has the working capital, equipment and resources to perform the required work.

DOT said it will provide to XL Specialty Insurance all relevant information to assist the insurer in its own reconsideration of the contract awards.

“DeFelice has left the State and its taxpayers to bear the cost of its negligence,” said Rell. “Given the common leadership of the DeFelice and Hallberg, it is important that the history of DeFelice be given due consideration in the event Hallberg seeks to bid on state business in the future.”