Surety recovers attorneys fees under indemnity agreement
The Third Circuit held last week a surety may recover indemnity from the owner of a subcontractor it bonded for attorneys fees the surety incurred in defeating a performance bond claim even though no surety relationship ever existed between the surety and the bond claimant.
To induce the surety to issue bonds, the owner of a painting subcontractor signed an Indemnity Agreement in favor of the surety. The surety issued bonds on behalf of a subcontractor that named a general contractor the bond beneficiary, but the general contractor never 'accepted" the bonds.
Later the general contractor terminated the subcontractor and sued the surety seeking damages under the performance bond, but the trial court held no "surety relationship" with the general contractor existed because the bonds had not been accepted.
The subcontractor's owner contended the absence of a surety relationship let him off the hook as well. But both the district court and the Third Circuit said nothing doing. The subcontractor had accepted the bonds even if the general contractor had not and that was enough to establish a surety relationship between the subcontractor and the surety under the Indemnity Agreement.
The case is styled First Indemnity of America Insurance Company v. Tiedeken.
Some businesses even use the surety bond as a marketing point to convey a certain image to the public. Advertising the fact that you are bonded will give the customer a sense of trust in you and your company.