As we continue our series on indemnification law, we now come to the favorite part of anyone seeking to be indemnified—recovery.
Going back to our running scenario, if you recall, a general contractor has been sued by an owner alleging that the air conditioning unit in the attic was not installed correctly, has leaked, and caused thousands of dollars in damage. The general contractor knows that he hired an HVAC subcontractor to install that unit and he believes the subcontractor should be held responsible for any damage. However, the owner has only sued the general contractor and not the subcontractor. At this point, the general contractor would need to consider indemnification and, specifically, equitable indemnification if there was no contract between the parties.
Now, let’s suppose that the general contractor has met the requirements of equitable indemnification (including being “without fault” and showing that a “special relationship” exists between the parties) and succeeded at trial. What can the general contractor recover from the subcontractor?
“The damages which can be claimed under equitable indemnity may include the amount the innocent party must pay to a third party because of the at-fault parties’ breach of contract or negligence as well as attorney fees and costs which proximately result from the at-fault party’s breach of contract or negligence.” Town of Winnsboro v. Wiedeman-Singleton, Inc., 307 S.C. 128, 130, 414 S.E.2d 118, 120 (1992). “Expenses” include any costs which are reasonably necessary to defend litigation or otherwise protect the innocent party’s interest. Vermeer Carolina’s, Inc. v. Wood / Chuck Chipper Corp., 336 S.C. 53 (Ct. App. 1999). Thus, the general contractor in our scenario would be able to recover whatever amount the jury decided he must pay to the owner as well as the general contractor’s attorney’s fees and costs.
What about if the general contractor settles with the owner instead of proceeding to trial? The South Carolina Court of Appeals has held that the cost of settling a case is recoverable (1) if the settlement is bona fide, with no fraud or collusion by the parties; (2) if, in the circumstances, the decision to settle is a reasonable means of protecting the innocent party’s interest; and (3) if the amount of the settlement is reasonable in light of the third party’s estimated damages and the risk and extent of defendant’s exposure if the case is tried. Griffin v. Van Norman, 302 S.C. 520 (Ct. App. 1990).
Thus, if the general contractor succeeds on the often difficult to prove equitable indemnification claim, the law allows him to be made whole (assuming, of course, the subcontractor is solvent or has some sort of coverage for the claim).