In United States Fire Insurance v. American Bonding Company, 2016 Ohio App. LEXIS 4849 (Ohio Ct. App. December 2, 2016) a surety sued its bail agent for breach of the agency agreement alleging that the bail agent failed to indemnify the surety in connection with two bond forfeitures and for legal expenses incurred by the surety related to litigation between the agent and another surety. The trial court entered judgment for the surety for the contractual indemnification and breach of contract claims. The trial court also entered judgment for the bail agent in connection with the agent’s counterclaim that the surety made “inappropriate withdrawals” from the build-up fund. Both parties appealed. The Court of Appeals rejected the agent’s argument that the agency agreement was an unenforceable contract of adhesion. It noted that both parties were sophisticated and none of the agreement’s terms were unconscionable. Further, the Court noted no evidence that the agent was under compulsion or duress to enter into the agreement. The Court also rejected the agent’s argument that the surety had a duty to mitigate the damages and failed to do so by not seeking a remission in the bail bond proceedings. The Court found that the agency agreement unambiguously required the agent to provide full and unconditional indemnification. The Court held that in light of the unconditional indemnification obligation, the surety had no general obligation under common law to mitigate damages. With respect to the withdrawals from the build-up fund (a withdrawal to pay for legal fees related to the agent’s litigation with another surety and a withdrawal as liquidated damages for failure to return the unused powers of attorney), the Court of Appeals found that the trial court erred in shifting the burden of provide to the surety to demonstrate that the unused powers were not returned. The Court found that the clear weight of the evidence showed that the agent did not return the unused powers. The Court also found that the scope of the agency agreement’s indemnification obligations extended to the legal fees incurred by the surety. It rejected the agent’s argument that the statute regarding build-up funds (R.C.3905.91) required the surety to use the funds only for forfeitures. It found that the statute did not address how build-up funds may be used. Rather the agency agreement addresses the use of funds. In light of the Court’s affirmance of the judgment for the surety and reversal of the judgment for the agent, the Court found that the surety was the prevailing party and enforced the attorneys’ fees provisions set forth in the agency agreement in the surety’s favor.
