Recovery of Attorney’s Fees Under Indemnity Provisions: The Devil is in the Details
Category | Announcements
By Lucas T. Clayton
Luke is a shareholder of the firm’s Construction Law Department. He can be reached at 612.359.7628 or LClayton@fwhtlaw.com
One of the most important and consequential provisions of any construction contract are the defense and indemnity terms. Most contracts make clear that if a third party makes a claim against the person being indemnified (the Indemnitee), then the person making the indemnification promise (the Indemnitor) has to pay for the defense of the Indemnitee. In Minnesota, however, the language allowing this recovery of attorney’s fees must be explicitly and clear from the plain language of the contract. What often isn’t clear in contracts, however, is whether the Indemnitee can recover its attorney’s fees incurred to enforce the defense and indemnity provisions against the Indemnitor. It is particularly important for the Indemnitor to understand the scope of its obligations in this respect, because in the event that the Indemnitor is required to indemnify the Indemnitee for its attorney’s fees in enforcing the indemnity provision, the Indemnitor’s potential liability is significantly increased. This Briefing Paper will discuss the language contracting parties should look for in their indemnity provisions to ensure they understand the rights and obligations to which they have agreed.
General Rules for Recovery of Attorney’s Fees Under Indemnity Provisions
In the United States, each party to a litigation typically bears its own attorney’s fees, known as the “American Rule.” In order to overcome the American Rule, the parties can agree in their contract that one party will pay the attorney’s fees of another. One common way this occurs in construction contracts is through the parties’ defense and indemnity provisions in which the Indemnitor promises to defend (i.e. pay for the defense costs) of the Indemnitee if the Indemnitee is sued by a third party. In short, the parties agree to ignore the American Rule and pay for the other parties’ attorney’s fees and costs to defend against an indemnified claim.
However, in Minnesota, a provision that agrees to pay the other side’s attorney’s fees “must be sufficiently clear to overcome [the] presumption that each litigating party pays its own way.” Aadland v. Ranweiler, No. A17-1234, 2018 WL 1902457 at *7 (Minn. Ct. App. Apr. 23, 2018). This is especially true when one party seeks to have the other party pay for the attorney’s fees it incurred to enforce an indemnity provision in the contract. If a party seeks attorney’s fees and costs “for prosecuting [a] right to indemnification,” the contract must “explicitly state[] so.” Seifert v. Regents of Univ. of Minnesota, 505 N.W.2d 83, 86 (Minn. Ct. App. 1993). Language in the contract that simply states that one party agrees to indemnify the other for attorney’s fees “arising out of or resulting from” an indemnified claim is not sufficient to entitle that party to the fees and cost incurred attempting to enforce its indemnification rights against the contracting party. Id. at 85.
Although somewhat confusing, Minnesota’s approach to this issue makes perfect sense when one considers the purpose of an action to enforce an indemnity provision. When one party fails to indemnify the other party as required under the terms of the contract, a lawsuit to enforce the indemnity provision is essentially a breach of contract claim, not an indemnity claim itself asking for defense and protection from a third-party claim. See Id. at 86. Thus, to show that the parties’ intent was for one party to bear the cost of the other party’s attorney’s fees even in a breach of contract claim, that intent must be explicitly stated in the contract. Otherwise, Minnesota courts will refuse to infer that the parties intended to contravene the American Rule. If parties want to include the obligation to pay attorney’s fees related to enforcing an indemnity agreement, the contract must include explicit language that provides for legal fees “incurred to enforce the provisions of the [indemnification] paragraph.” See, e.g., Van Vickle v. C. W. Scheurer & Sons, Inc., 556 N.W.2d 238, 242 (Minn. Ct. App. 1996).
Engineering & Construction Innovations, Inc. v Bradshaw Construction Corporation,
No. 20-CV-808 (ECT/SGE), 2025 WL 1790679 (D. Minn. June 30, 2025)
This issue recently arose in a matter handled by our firm, Eng’g & Constr. Innovations, Inc. v. Bradshaw Constr. Corp., No. 20-CV-808 (ECT/SGE), 2025 WL 1790679 (D. Minn. June 30, 2025). In that matter, our firm represented a subcontractor whose subcontract with the general contractor contained an indemnification provision wherein both parties agreed that if the general contractor was assessed liquidated damages by the owner due to the subcontractor’s failure to perform according to the contractual schedule, the subcontractor would indemnify the general contractor for those liquidated damages. Specifically, the parties’ subcontract provided that:
Subcontractor will defend, indemnify and save harmless Contractor and Owner, and their respective officers, directors and agents, to the fullest extent of the law, from any and all claims, damages, and expenses, in whole or in part, including costs, expert fees, and reasonable attorney’s fees, bodily injury or property damage, arising or in any way resulting from. . . [a]ny other liability to Owner or Contractor that Subcontractor caused including Liquidated Damages
The general contractor brought a claim against the subcontractor alleging that it failed to indemnify the general for liquidated damages assessed against the general contractor by the owner. After a trial, the court found in favor of the general contractor and ruled that the subcontractor had failed to indemnify the general contractor for the liquidated damages in question. Subsequently, the general contractor made a motion to recover nearly $3.3 million in attorney’s fees and costs related to the indemnity claim, arguing that its attorney’s fees and costs associated with proving its failure to indemnify claim arose or resulted from the assessed liquidated damages.
In response, our firm argued that the parties’ subcontract did not include any language explicitly providing that the subcontractor was required to pay the general contractor’s legal fees for simply enforcing the indemnity provision, and accordingly the general should not be entitled to recover any of its attorney’s fees or costs. The court agreed with this analysis and found that the general contractor was not entitled to recover the attorney’s fees and costs it incurred enforcing the indemnity provision against the subcontractor. Eng’g & Constr. Innovations, Inc., 2025 WL 1790679 at * 2– 3 (applying the rule from Seifert v. Regents of Univ. of Minnesota, 505 N.W.2d 83 (Minn. Ct. App. 1993)). Consequently, we were able to successfully defend our client from a nearly $3.3 million judgment, which allowed the parties to resolve the case through a settlement. But for the fact that the indemnity provision at issue did not contain explicit language allowing for the recovery of attorney’s fees for enforcing the provision, such a favorable result would not have been possible. This matter highlights how important it is for a contractor to understand the scope of its indemnity provisions and whether or not it is agreeing to pay the indemnified party’s attorney’s fees associated with simply enforcing the indemnity provision, and evidences the consequential impacts such language, or lack thereof, can have if the parties run into issues on a project that later must be litigated.
Conclusion
Ultimately, the takeaway is that is imperative for contractors to read their indemnification provisions closely to determine what kind of risk they are accepting regarding attorney’s fees. A failure to do so may end up exposing the contractor to far more liability for than it originally anticipated in the event it is found liable for an indemnified claim.
Announcements
Congratulations to the eight attorneys from Fabyanske, Westra, Hart & Thomson, P.A. who have been named 2025 “Minnesota Super Lawyers”. The polling, researching, and selecting of “Super Lawyers” is designed to identify Minnesota lawyers who have attained a high degree of peer recognition and professional achievement. Only five percent of Minnesota attorneys receive this honor. FWHT’s 2025 “Minnesota Super Lawyers” include Mark Becker, Matt Collins, Hugh Brown, Julia Douglass, Rory Duggan, Kyle Hart, Jesse Orman, and Dean Thomson. Dean Thomson was also selected as a Top 100 “Super Lawyer”. For more information click here.
Congratulations to the Fabyanske, Westra, Hart & Thomson, P.A. attorneys who have been named Super Lawyer’s 2025 Minnesota “Rising Stars”. They are Colin Bruns, Elise Radaj, Erinn Valine and Leon Wells. “Rising Stars” are nominated by their peers and must be 40 years old or under, or have been practicing for 10 years or less. No more than 2.5 percent of the lawyers in the state are named to the list. For more information click here.
Dean Thomson was one of eight attorneys in Minnesota selected to be on the Forbes inaugural list of America’s Best-In-State Lawyers. This list recognizes top attorneys across all 50 states and U.S. jurisdictions. For more information click here.