H. Recovery of Attorney's Fees

• Library: SC Construction Law Desk Book (SCBar) (2013 Ed.)

H. Recovery of Attorney's Fees

1. Right of the Surety to Recover from Principal¹⁴³

Although there is no specific South Carolina case law on point, as a general rule, the surety is entitled to recover from the principal those attorney's fees incurred on the principal's behalf.¹⁴⁴ The indemnity agreement executed by the principal and indemnitors will often have a provision providing for the recovery of attorney's fees incurred by the surety. An example of such language from an exemplar agreement of indemnity provides as follows:

Indemnification:

The Undersigned shall indemnify and keep indemnified the Surety against any and all liability for losses and expenses of whatsoever kind or nature, including the fees and disbursements of counsel, and against any and all said losses and expenses, which the Surety may sustain or incur, (i) by reason of having executed or procured the execution of any Bond or Bonds (ii) by reason of the failure of the Undersigned to perform or comply with the covenants and conditions of this Agreement, or (iii) in enforcing any of the covenants and conditions of this Agreement.

Disputes arise when the solvent principal is paying for its own attorney and does not want the surety's attorney to incur significant legal fees because of the principal's indemnification obligations. The surety must then decide whether the principal's attorney is properly handling a dispute which could result in significant liability to the surety if the principal is defaulted on a project.

2. Recovery from Surety

South Carolina courts have allowed claimants to recover attorney's fees when a performance bond expressly includes a provision allowing for such recovery. This is true even where a question existed as to who was entitled to make the claim, but only where the language of the payment or performance bond itself makes a provision for attorney's fees.¹⁴⁵ In Roberts...