A federal appeals court has affirmed a bankruptcy court judgment in favor of an insurance company that drew more than $1.3 million on a letter of credit issued to a construction company it had bonded. The insurer had issued surety bonds to the company on the condition that it acquire the letter of credit, which the insurer said allowed the company to gain "new value" -- seven government contracts -- as a result. The company subsequently filed for bankruptcy, prompting the insurer to draw on the letter of credit to fulfill the obligations set forth by the surety bonds.

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