§5005 Indemnity

Summary

A bank that makes a substitute check, or any bank that later transfers, presents, or returns that substitute check and gets paid, must pay for losses caused by giving the substitute instead of the original check. That payment can cover the bank or person who received the substitute, later banks, the deposit-taking bank, the bank asked to pay, the person who wrote the check, the intended payee, the depositor, and any endorser — up to the limits described next. If a warranty in section 5004 was broken, the bank must pay losses caused by that broken promise, including costs and reasonable lawyer fees. If no warranty was broken, the bank must pay losses up to the amount of the substitute check, plus interest and expenses (including reasonable lawyer fees). If the harmed party was partly at fault, their recovery is reduced in proportion to their fault. If the bank later gives the original check or a correct copy, its liability stops at the time the copy is given and it can get back any extra money it paid. The bank that pays can step into the victim’s rights to try to recover money and the victim must help with reasonable requests.