2004-354, GULF INSURANCE CO. v. AMSCO, INC.

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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Rockingham
No. 2004-354
GULF INSURANCE COMPANY
v.
AMSCO, INC. & a.
Argued: September 15, 2005
Opinion Issued: December 28, 2005
Duncan J. MacCallum, of Portsmouth, on the brief, and Louis Movitz, of
Boston, Massachusetts, orally, for the plaintiff.
Hinckley, Allen & Snyder, LLP, of Concord (Christopher H.M. Carter on
the brief and orally), for defendant AMSCO, Inc.
BRODERICK, C.J. The plaintiff, Gulf Insurance Company (Gulf), appeals
the decision of the Superior Court (Coffey, J.): (1) permitting defense expert
Peter Hermes to testify; (2) ruling that attorney’s fees and other expenses
incurred by Gulf on certain bond claims were not recoverable under the parties’
indemnity agreement; and (3) rejecting Gulf’s request for attorney’s fees under
the indemnity agreement with its principal for its pursuit of the present case.
The defendants are AMSCO, Inc., English Wood Associates, Inc., Sara L. Clark,
William D. Clark, Fernande Clark, Anthony C. Clark, Mark S. Clark and Laura
D. Clark (collectively referred to as “AMSCO”). AMSCO cross-appeals, arguing
that the trial court erred by: (1) ruling that it had agreed to pay Gulf over
$14,000 in attorney’s fees and expenses Gulf incurred on two bond claims; and

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(2) refusing to allow it to amend its pleadings to pursue counterclaims for
Gulf’s alleged breach of contract and violation of the Consumer Protection Act,
RSA chapter 358-A. We affirm.
The following facts either were found by the trial court or are otherwise
not disputed by the parties. In January 1997, Gulf, as surety, and AMSCO, as
principal, entered into a general agreement of indemnity (GAI) in connection
with a series of performance bonds issued by Gulf guaranteeing AMSCO’s
performance on various construction projects. At different times, claims were
made against three bonds involving disputes between AMSCO and three
companies: Beacon Properties, Panciocco Builders, Inc., and Brita
Corporation. These disputes have since been resolved, and the present matter
involves a lawsuit Gulf brought against AMSCO seeking recovery under the GAI
for costs and expenses it incurred related to the three bond claims.
In the fall of 1999, Beacon Properties made a claim against a
performance bond issued by Gulf for AMSCO’s alleged failure to complete a
construction project. Gulf assented to AMSCO handling the Beacon defense,
and AMSCO retained legal counsel to represent them both. The dispute was
ultimately settled without Beacon filing suit and without Gulf making any
payments under the bond. Gulf then sought indemnification from AMSCO for
$1,443.23 it allegedly incurred in loss adjustment expenses generated by
Contract Operations Planning, Inc. (COP), a company hired by Gulf to
investigate and adjust bond claims.
Panciocco Builders also made a claim against a bond Gulf had issued to
AMSCO for the contract between AMSCO and Panciocco, and in 1999,
Panciocco brought suit against Gulf and AMSCO. Again, Gulf permitted
AMSCO to handle the defense, and AMSCO promptly retained legal counsel to
represent them both. Ultimately, AMSCO and Panciocco settled the suit
without Gulf making any payments under the bond. Subsequently, Gulf
demanded indemnification from AMSCO for legal fees and adjustment expenses
in excess of $20,000 it allegedly incurred. The amount sought included fees
charged by three different law firms, an independent engineering consultant,
and COP.
Finally, in June 2000, Brita Corporation made a claim against a Gulf
performance bond for damages allegedly associated with AMSCO’s substandard
performance on a construction project. Gulf denied the claim, and Brita filed
suit against Gulf and AMSCO. AMSCO retained legal counsel who initially
appeared for both Gulf and AMSCO. Thereafter, Gulf hired its own attorney,
who appeared on its behalf, and demanded that AMSCO pay Gulf $84,131.06
before it would allow AMSCO to assume Gulf’s defense in the Brita action. The
amount sought by Gulf included over $21,000 in expenses Gulf allegedly
incurred in the Beacon and Panciocco matters, over $3,000 in expenses in the

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Brita case, and $60,000 for collateral, representing Brita’s settlement demand.
Gulf’s subsequent correspondence conditioned its willingness to allow AMSCO
to assume Gulf’s defense upon AMSCO’s payment of the fees and adjustment
expenses allegedly associated with the Beacon and Panciocco matters, without
mention of the demand for collateral. AMSCO did not make payment to Gulf,
and the parties continued their defense to the underlying action with separate
counsel.
In January 2001, Gulf filed suit against AMSCO to recover attorney’s fees
and adjustment expenses allegedly incurred in the Beacon, Panciocco and
Brita matters, as well as to recover attorney’s fees under the GAI for pursuing
its right to indemnity. The expenses, which totaled $143,714.43, included
$1,443.23 in the Beacon matter, $20,502.83 in the Panciocco matter, and
$121,768.37 in the Brita matter and the indemnity action. In September 2003,
AMSCO and Brita settled Brita’s claim for $50,000; the dispute continued,
however, between AMSCO and Gulf for indemnity payments under the GAI.
The trial court conducted a multi-day trial on the indemnity action. Gulf
appeals, challenging the trial court’s admission of defense expert testimony, its
rejection of certain claimed attorney’s fees and loss adjustment expenses in the
Panciocco and Brita matters, and its failure to award it attorney’s fees under
the GAI. AMSCO cross appeals, arguing that the trial court erred by ruling it
had entered into a contract to pay Gulf in excess of $14,000 for legal fees and
loss adjustment expenses in the Beacon and Panciocco matters, and by
refusing to permit it to pursue certain counterclaims.
I
Gulf first argues that the trial court erred in permitting AMSCO’s expert
witness, Peter Hermes, to testify because he was disclosed only one week before
trial. Gulf contends that AMSCO’s pretrial statement, which was filed about
eighteen months prior to trial, did not list any expert witness or otherwise
disclose an intent to rely upon expert testimony. According to Gulf, AMSCO
never offered any good cause to excuse its late disclosure, and the trial court’s
finding that AMSCO’s expert disclosure did not come as “any surprise” to Gulf
is not supported by the record.
“In superior court, a party is entitled to disclosure of the opposing party’s
experts, the substance of the facts and opinions about which they are expected
to testify and the basis of [their] opinions.” Porter v. City of Manchester, 151
N.H. 30, 54 (2004); see Super. Ct. R. 35(b)(3), (f), 62. While Gulf makes no
claim that it specifically requested expert disclosure under Superior Court Rule
35, AMSCO filed a pretrial statement in which it was required to list all
witnesses expected to testify at trial pursuant to Superior Court Rule 62.
Under that rule, “only witnesses listed in the Pre-trial Statement [are] allowed

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to testify” absent good cause. Further, under the Preface to the Superior Court
Rules, the trial court may waive the application of any rule “[a]s good cause
appears and as justice may require.” The policy of disclosure of expert
witnesses rests upon the premise that “justice is best served by a system that
reduces surprise at trial by giving both parties the maximum amount of
information.” Wong v. Ekberg, 148 N.H. 369, 372 (2002) (quotation omitted).
Because the trial court retains discretion to admit expert testimony, In the
Matter of Letendre & Letendre, 149 N.H. 31, 37 (2002), we review its decision in
order to determine whether it unsustainably exercised its discretion, see State
v. Lambert, 147 N.H. 295, 296 (2001) (explaining unsustainable exercise of
discretion standard). Under the unsustainable exercise of discretion standard,
Gulf must show that the trial court’s ruling was “clearly untenable or
unreasonable to the prejudice of [its] case.” Id.
The trial court ruled that AMSCO’s late disclosure of its intent to present
expert testimony through Peter Hermes came as no surprise to Gulf. At trial,
the parties engaged in a colloquy with the court concerning the merits of Gulf’s
motion to preclude Hermes’ testimony. While AMSCO’s pretrial statement does
not list Hermes as a witness, the court recalled that during a pretrial
conference it had discussed with the parties AMSCO’s intended reliance upon
expert testimony as well as the subject area of the expected testimony. While
Gulf acknowledged the discussion, it denied that they had discussed the
specific facts related to its claim about which AMSCO’s expert would testify. It
contended that, due to the late disclosure of the specific nature of the expected
testimony, it was unable to depose Hermes or obtain a rebuttal expert. In
reply, however, AMSCO contended that it had provided Gulf with Hermes’
curriculum vitae in September 2002, a year prior to trial. Given this record
and the deference we accord to the trial court in the exercise of its discretion,
we cannot conclude that it was error to permit AMSCO’s defense expert to
testify at trial. See id.
II
Gulf next argues that the trial court erred by failing to apply the express
terms of the GAI when it denied Gulf’s request for indemnity. Gulf contends
that AMSCO may only avoid its obligation to indemnify Gulf for its loss
adjustment expenses and associated attorney’s fees by establishing that Gulf
acted in “bad faith” in incurring them. According to Gulf, even under some
lesser standard such as subjective or objective reasonableness, the evidence
compelled recovery of its claimed fees and expenses under the GAI. We hold
that the trial court’s decision is legally sound and supported by the evidence.
The trial court ruled that the plain language of the GAI required AMSCO
to indemnify Gulf only for “reasonable” expenses, and that the GAI contained a
burden-shifting provision requiring AMSCO to prove that Gulf’s claimed

5
expenses were unreasonable. It delineated two areas of inquiry: “whether it
was reasonable for [Gulf] to retain separate counsel in the Panciocco and Brita
matters and whether the amounts of the fees [were] reasonable.” Because the
trial court already had ruled that AMSCO had agreed under a separate contract
to pay more than $14,000 of the Beacon and Panciocco expenses, it reviewed
the reasonableness of approximately $7,500 in fees and expenses in the
Panciocco matter, and over $121,700 in fees and expenses in the Brita matter
and GAI claim. These costs represented expenses for COP and attorney’s fees
for counsel retained by Gulf. The trial court ruled that it was unreasonable to
require AMSCO to pay for fees charged by COP because such costs constituted
normal and expected administrative and housekeeping expenses associated
with Gulf’s ordinary cost of doing business and were not otherwise recoverable
under the GAI. The court further ruled that Gulf’s retention of its own legal
counsel on both the Panciocco and Brita matters was unreasonable for any
purpose other than to monitor the litigation. Accordingly, the court awarded
Gulf “$852 in pre-lawsuit and monitoring fees in the Panciocco case and
$10,774.73 in monitoring fees in the Brita case,” plus interest.
We first examine whether the trial court properly interpreted the GAI as
requiring AMSCO to prove Gulf’s claimed expenses were unreasonable, rather
than incurred in bad faith, to avoid indemnification under the GAI. We
interpret an indemnity contract in the same manner as we do contracts
generally, seeking to discern the parties’ intent at the time the contract was
made. Commercial Union Assurance Co. v. Brown Co., 120 N.H. 620, 623
(1980). When there is an express contract for indemnity, the rights of the
surety are not to be determined by general indemnity principles, but by the
letter of the contract for indemnification. Fidelity and Deposit Co. of Maryland
v. Bristol Steel & Iron Works, Inc., 722 F.2d 1160, 1163 (4th Cir. 1983). We
limit our search for the parties’ intent to the express words of the contract,
Commercial Union Assurance, 120 N.H at 623, and assign the words and
phrases used by the parties the common meaning that would be given to them
by a reasonable person, N.H. Water Res. Council v. Steels Pond Hydro, 151
N.H. 214, 215 (2004). The interpretation of a contract is a question of law, and
thus we review the trial court’s decision de novo. Sherman v. Graciano, 152
N.H. 119, 121 (2005).
Several paragraphs of the GAI must be read together to discern the
nature of Gulf’s indemnity rights. Paragraph 2(A) provides that AMSCO must
indemnify Gulf “for losses and expenses of whatsoever kind or nature,
including the fees and disbursements of counsel,” and for other enumerated
expenses. This comprehensive provision is modified by paragraph 3(A), which
states that Gulf may recover for any payment or compromise of “any claim,
demand, suit, judgment or expense arising out of any [bond]” so long as “the
same was made by [Gulf] in the reasonable belief that it was liable for the
amount disbursed, or that such payment or compromise was reasonable under

6
all the circumstances.” Therefore, Gulf’s claimed loss adjustment expenses
must be “reasonable under all the circumstances” for Gulf to secure
indemnification from AMSCO. Even assuming the “reasonable belief” clause in
paragraph 3(A) applies to this case and incorporates some subjective element
as Gulf contends, the term “reasonable” contains an objective component. In
other words, Gulf must not only have subjectively believed that the expenses
incurred were reasonable, but the belief must have been objectively reasonable
as well. Cf. Progressive N. Ins. Co. v. Concord Gen. Mut. Ins. Co., 151 N.H.
649, 653 (2005) (“reasonable belief” in insurance contract requires both a
subjective belief and that such belief be objectively sound). Nowhere in the GAI
does the phrase “good faith,” “bad faith” or similar language appear.
Furthermore, paragraph 3(B) provides that Gulf’s presentment of “an
itemized statement” of any payment or compromise of any claim, along with
certain verification requirements, constitutes “prima facie evidence of the fact
and amount of the liability of [AMSCO] under this Agreement.” This provision
merely transfers the burden to AMSCO to prove that Gulf’s claimed costs were
unreasonable. See Fallon Electric Co., Inc. v. Cincinnati Ins. Co., 121 F.3d
125, 129 (3d Cir. 1997) (“prima facie” evidence provision establishes who bears
burden of proof, not the standard by which the standard is proved).
Accordingly, reading the contractual provisions together, we conclude that
Gulf’s proper presentment of losses and expenses it incurred on the bond
matters created a rebuttable presumption of its entitlement to indemnification,
and AMSCO bore the burden of proving that such costs were unreasonable to
avoid payment under the GAI.
In Fallon Electric, the Third Circuit reviewed an indemnity contract with
nearly the precise language at issue in this matter. It held that the indemnitor
bore
the burden of proving both that: [the surety] did not actually
believe that it was liable for the attorney’s fees disbursed, or that
its belief in that respect was unreasonable; and [the surety] did
not actually believe that the payment of such fee (as opposed to
the incurrence of the fees) was reasonable under all the
circumstances, or that its belief in that respect was unreasonable.
Id. We agree with this plain reading of the contract language.
Gulf argues that in order to rebut the presumption for indemnification,
the GAI expressly required AMSCO to prove subjective “bad faith” through
dishonest purpose, conscious wrongdoing, or breach of duty motivated by self-
interest or ill will. To support its position, Gulf contends that application of the
subjective good faith standard is supported by “the law in virtually every
American jurisdiction.” The cases cited by Gulf, however, do not support its

7
position because they do not address indemnity contract provisions that
contain “reasonable” language like that in the GAI before us. See Fidelity &
Deposit Co. of Maryland, 722 F.2d at 1163 (contract required indemnity for
monies paid in “good faith”); Com’l Ins. Co. of Newark v. Pacific-Peru Const.,
558 F.2d 948, 953 n.4 (9th Cir. 1977) (contract required indemnity for all
liability of “whatever kind or nature”); Safeco Ins. Co. of America v. Criterion
Inv. Corp., 732 F. Supp. 834, 836 (E.D. Tenn. 1989) (same regarding “good
faith”); Elmore v. Morrison Assur. Co. Inc., 502 So. 2d 378, 379-80 (Ala. 1987)
(no reference to specific contract language); U.S. Fidelity & Guar. Co. v. Napier
Elec., 571 S.W.2d 644, 646 (Ky. Ct. App. 1978) (same regarding “good faith”);
Hartford Acc. and Indem. Co. v. Millis Roofing, 418 N.E.2d 645, 646 (Mass.
App. Ct. 1981) (same regarding “good faith”); American Employers’ Ins. Co. v.
Horton, 622 N.E.2d 283, 284 (Mass. App. Ct. 1993) (same regarding “good
faith”); Continental Casualty Co. v. Marman Develop. Corp., 198 N.Y.S.2d 375,
376 (Sup. Ct. 1960) (same regarding “good faith”); Fairfax County v. Culbertson
Constr. Co., 1987 WL 488767 *1 n.1 (Va. Cir. Ct. Nov. 17, 1987) (contract
required indemnity for all liability of “whatever kind or nature” and for monies
paid “in good faith”). Accordingly, we conclude that the trial court applied the
appropriate standard when it required AMSCO to prove that Gulf’s claimed loss
adjustment expenses were unreasonable in order to avoid its obligation to
provide indemnification under the GAI.
We next examine the trial court’s conclusion that AMSCO satisfied its
burden. The trial court ruled that Gulf’s claimed attorney’s fees and expenses
in the Panciocco and Brita matters, other than legal expenses for case
monitoring, were unreasonable. The trial court identified two principal reasons
to support its decision. First, it concluded that Gulf’s recovery of the COP
expenses was unreasonable because they constituted administrative and
housekeeping expenses, which were an ordinary cost of doing business and not
recoverable under the GAI. Second, it determined that legal fees not associated
with monitoring the litigation were not recoverable because it was
unreasonable for Gulf to hire counsel where AMSCO had provided it with
counsel. Gulf challenges both rulings, and we address each in turn.
With respect to the COP expenses, Gulf argues that COP is a distinct
entity from Gulf and challenges the trial court’s reliance on Wagner v.
Fireman’s Fund Insurance Co., 352 F.2d 410 (10th Cir. 1965), to disallow COP
expenses. Distinct entity or not, ample evidence supports the trial court’s
conclusion that such expenses were administrative and housekeeping in
nature. See Crown Paper Co. v. City of Berlin, 142 N.H. 563, 566 (1997)
(finding of fact upheld unless unsupported by the evidence). Furthermore, with
respect to the recoverability of such expenses under the GAI, we recognize that
the GAI extends comprehensive indemnity coverage for losses and expenses
incurred “by reason of the failure of [AMSCO] to perform or comply with the
covenants and conditions of this Agreement” or “in enforcing any of the

8
covenants and conditions of this Agreement against [AMSCO].” We, however,
agree with courts that hold that indemnity contracts, even broadly stated, do
not extend a “blank check” for a surety to recover all fees and expenses
incurred or paid by it in its sole discretion. See, e.g., Jackson v. Hollowell, 685
F.2d 961, 966 (5th Cir. 1982). We therefore conclude that corporate overhead
expenses, such as administrative services, are so remotely connected to losses
suffered on a bond as to fall outside of the intended bounds of generally stated
contractual recovery provisions, such as the ones before us. See Sentry Ins.
Co. v. Davison Fuel & Dock Co., 396 N.E.2d 1071, 1074 (Ohio Ct. App. 1978)
(disallowing indemnity recovery for proportional part of corporate overhead
costs); Wagner, 352 F.2d at 413-15 (affirming trial court’s decision denying
recovery of certain expenses as ordinary housekeeping and administrative
expenses of surety company).
Turning to Gulf’s legal expenses, Gulf challenges the trial court’s ruling
that its retention of legal counsel was unreasonable. To determine whether a
surety’s retention of separate legal counsel is “reasonable,” courts review
various factors, including:
“the amount of risk to which the surety was exposed; whether the
principal was solvent; whether the surety has called on the
principal to deposit with it funds to cover the potential liability;
whether the principal on demand by the surety to deposit with it
the amount of the claim has refused to do so; whether the
principal was notified of the action and given opportunity to
defend for itself and the surety; whether the principal hired the
attorney for both himself and the surety; whether the principal
notified the surety of the hiring of the attorney; the competency of
the attorney hired by the principal; the diligence displayed by the
principal and his attorney in the defense; whether there is a
conflict of interest between the parties; the attitude and
cooperativeness of the surety; and the amount charged and
diligence of the attorney hired by the surety.”
Perkins v. Thompson, 551 So. 2d 204, 210 (Miss. 1989) (quoting Central
Towers Apartments, Inc. v. Martin, 453 S.W.2d 789, 800 (Tenn. App. 1970));
see Jackson, 685 F.2d at 966 n.15 (same).
Concerning the Panciocco matter, Gulf contends that as a result of
incurring more than $20,000 in loss adjustment expenses, including COP,
legal fees and a construction expert, it helped resolve Panciocco’s $84,000
claim. The trial court concluded that “it was unreasonable for [Gulf] to hire its
own attorney after tendering defense of the Panciocco suit to [AMSCO] for any
reason but to monitor the case.” Gulf points to no evidence suggesting it was
necessary for it to retain professionals, independent of Gulf’s legal counsel, to

9
resolve the Panciocco claim and pass on these costs to AMSCO when AMSCO,
with Gulf’s approval, had retained and paid for legal counsel who represented
them both in the defense against Panciocco. It does not challenge the
competency and diligence of AMSCO’s legal counsel, factors pertinent to the
reasonableness of a surety’s decision to retain separate legal counsel, see
Perkins, 551 So. 2d at 210. Accordingly, the trial court’s ruling stands.
Regarding the attorney’s fees it incurred in the Brita matter, Gulf
contends that it was entitled to refuse to tender its defense to AMSCO and to
hire its own counsel because: (1) AMSCO failed to post collateral as demanded;
(2) Gulf had unique defenses in the underlying claim that AMSCO “would not
have had much incentive” to pursue; and (3) a conflict of interest existed
between the parties caused by AMSCO’s refusal to pay the loss adjustment
costs on the Beacon and Panciocco matters.
Concerning AMSCO’s obligation to post collateral, the GAI provides
under paragraph 3(C):
If [AMSCO] desire[s] that a claim or demand against [Gulf] be
resisted and litigated, [AMSCO] shall
(i) give notice thereof to [Gulf];
(ii) deposit simultaneously with [Gulf] cash or collateral in a form
satisfactory to [Gulf] in an amount reasonably deemed by [Gulf] to
be sufficient to cover the claim or demand and interest thereon to
the probable date of disposition; and
(iii) deposit simultaneously with [Gulf] cash or collateral
satisfactory to [Gulf] in an amount sufficient to cover the expenses
and fees of defense, or take over the resistance and litigation of the
claim.
While the language in paragraph 3(C)(ii) establishes Gulf’s contractual
right to collateral “in an amount reasonably deemed by [it] to be sufficient to
cover the claim or demand and interest,” the trial court was unpersuaded by
Gulf’s claim at trial that it refused to tender defense to AMSCO because
AMSCO failed to post any collateral to cover the Brita claim. It concluded that
while Gulf initially requested collateral, “subsequent letters [made] no reference
to demand for collateral,” but focused on securing “the loss adjustment
expenses it had incurred in the Beacon and Panciocco matters.” Because
sufficient evidence exists to support the trial court’s factual finding that
AMSCO’s failure to post collateral did not serve as the basis for Gulf’s retention
of its own separate legal counsel, see Crown Paper Co., 142 N.H. at 566, we do

10
not review Gulf’s arguments concerning AMSCO’s contractual obligation to post
collateral.
We reject Gulf’s contention that it refused to tender its defense to
AMSCO because it had unique defenses to Brita’s claim that AMSCO would not
have pursued on its behalf. Because none of the correspondence from Gulf to
AMSCO stated it had unique defenses that required it to retain separate
counsel, the trial court found that Gulf’s refusal to tender its defense was not
based upon any unique defenses it may have had. Gulf does not challenge this
finding. Further, the trial court observed that Gulf did not argue or present
evidence to suggest that its unique defenses actually conflicted with any
position AMSCO took in the Brita action, and that absent a conflict, AMSCO
could have pursued these unique defenses on Gulf’s behalf. On appeal, Gulf
references only an inherent conflict of interest common between sureties and
contractors, and generally suggests that AMSCO “would not have [had] much
incentive to press legal issues that would only benefit Gulf.” It fails to
challenge the trial court’s finding by identifying an actual conflict of interest
between the parties that would have thwarted AMSCO’s pursuit of any defense
unique to Gulf. See Perkins, 551 So. 2d at 210 (factors to determine
reasonableness of surety’s retention of separate legal counsel include whether
conflict of interest exists between parties). Therefore, we uphold the trial
court’s ruling that Gulf’s claim of unique defenses provided no viable basis for
it to retain its own legal counsel.
Finally, we address Gulf’s argument that AMSCO’s failure to indemnify it
for the loss adjustment expenses Gulf allegedly incurred in the Beacon and
Panciocco matters justified its refusal to tender the defense in the Brita action
and hire its own legal counsel. The trial court ruled that “[n]othing in the GAI
allows [Gulf] to condition [AMSCO’s] assumption of the defense of the Brita suit
upon payment of [the] disputed expenses” in the prior matters. Gulf contends
that AMSCO’s failure to indemnify it in any amount constituted a default of the
GAI, and that under paragraph 7(B)(iv) of the GAI, it had the right to litigate
any claim in AMSCO’s name and choose an attorney to defend AMSCO. Gulf,
however, fails to sufficiently develop its argument for appellate review. See In
re Thayer, 146 N.H. 342, 347 (2001).
Gulf’s rights under paragraph 7 are intrinsically connected to paragraph
6. In particular, paragraph 7 outlines Gulf’s rights should an “event of default”
occur, and paragraph 6 specifically identifies occurrences that constitute an
“event of default.” Gulf identifies paragraph 7(B)(iv) as the linchpin for its right
to seek indemnity for retaining separate counsel:
Upon the happening of an Event of Default . . . [w]ithout limiting
the rights that [Gulf] might otherwise have under this Agreement
or at law, [AMSCO] authorizes and empowers [Gulf] to . . . assert

11
and prosecute any right or claim hereby assigned, transferred or
conveyed in the name of the Principal and to compromise and
settle any such right or claim on such terms as [Gulf] considers
reasonable under the circumstances.
It would appear that the right or claim Gulf is permitted to pursue is limited to
those identified in paragraph 6. Certainly, whether an “event of default” has
occurred to trigger Gulf’s rights under paragraph 7 is dictated by the terms of
paragraph 6. Both paragraphs are detailed and somewhat lengthy. Gulf
makes no effort, however, to identify relevant portions of paragraph 6 or
explain how the two paragraphs are intertwined. We elect not to make Gulf’s
argument for it, and thus we uphold the trial court’s ruling that “[n]othing in
the GAI allows [Gulf] to condition [AMSCO’s] assumption of the defense of the
Brita suit upon payment of [the] disputed expenses” in the prior matters.
Gulf also attempts to characterize AMSCO’s nonpayment of the fees in
the prior matters as creating some conflict of interest between it and AMSCO in
the Brita action. The record, however, does not demonstrate that Gulf pursued
this contention before the trial court. See Broughton v. Proulx, 152 N.H. __, __,
880 A.2d 388, 394 (2005) (argument not raised in trial court not preserved for
appellate review). Gulf relies upon two isolated portions of testimony to
demonstrate a conflict of interest as a basis for retaining separate counsel. In
one, a defense expert generally acknowledged that the relationship between
surety and a contractor inherently contains an adversarial component. In the
other, the Gulf expert testified that he never witnessed an occasion in which a
principal insisted upon retaining counsel to represent both parties while
simultaneously resisting indemnity obligations. These isolated portions of
testimony, without more, do not sufficiently establish that Gulf sought the trial
court’s consideration of a conflict of interest between the parties created by
AMSCO’s failure to make any indemnification payments in the Beacon and
Panciocco matters as a separate legal basis for Gulf having retained
independent legal counsel in the Brita action. Accordingly, we will not consider
Gulf’s claim in this regard.
Finally, because we uphold the trial court’s decision that it was
unreasonable for Gulf to seek indemnification from AMSCO for its separate
legal counsel in the Brita action, we do not address Gulf’s arguments
pertaining to the reasonableness of the amount of the attorney’s fees its
counsel generated. Ideal Electronic Sec. Co. v. Intern. Fidelity Ins., 129 F.3d
143, 150 (D.C. Cir. 1997) (reasonableness of amount of legal fees separate from
propriety of hiring individual legal counsel).

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In closing, we note our agreement with the Fifth Circuit in that
an indemnity agreement is not a blank check; it does not entitle
the surety company to reimbursement for legal expenses which are
unreasonable or unnecessary. To hold otherwise would allow [a
surety] to retain counsel and to charge attorney’s fees against the
indemnitor even when the surety company does not require a
separate legal defense to protect its interests.
Jackson, 685 F.2d at 966.
III
Gulf next challenges the trial court’s decision that Gulf was not
contractually entitled to attorney’s fees incurred in the present action because
AMSCO did not breach the GAI. It argues that the evidence at trial compelled
the conclusion that AMSCO admitted liability for over $14,000 in loss
adjustment fees due in the Beacon and Panciocco matters. Therefore,
according to Gulf, AMSCO’s failure to pay that undisputed sum constituted a
breach of the GAI which, under the contract, entitled it to attorney’s fees
incurred for pursuing its indemnity rights in the present action. Gulf further
argues that the trial court erred in precluding it from questioning AMSCO’s
former counsel, Ralph Suozzo, about certain communications between
opposing counsel which would have established AMSCO’s admission of liability
for more than $14,000. We do not address the merits of Gulf’s arguments,
however, because it attempts to assert a new argument regarding the nature of
the parties’ 2002 communications not properly presented to the trial court on
the record before us. See Holyoke Mut. Ins. Co. v. Carr, 130 N.H. 698, 699
(1988) (arguments not adequately raised below not addressed on appeal).
Prior to trial, Gulf filed a motion to enforce partial agreement. The
motion itself is not part of the appellate record. According to the trial court’s
order, Gulf alleged that “the parties [had] entered into two separate agreements
regarding partial payment of [its] loss adjustment expenses under the Beacon
and Panciocco bonds.” The trial court reviewed separate time frames during
which the parties discussed resolving Gulf’s claims for fees in those matters.
Regarding the 2001 discussions, the trial court ruled that the parties had
engaged in settlement negotiations that ultimately failed. For the 2002 time
frame, the trial court ruled that the parties had entered into an agreement for
AMSCO to pay Gulf $14,393.56 of the expenses incurred in the Beacon and
Panciocco matters. When addressing whether Gulf was entitled to attorney’s
fees under the GAI for its pursuit of the present indemnity action, however, the
trial court ruled that AMSCO did not breach the GAI, and thus Gulf was not
entitled to attorney’s fees for pursuing the indemnity action.

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We do not address Gulf’s argument that, rather than entering into a
separate contract, AMSCO conceded liability under the GAI for the more than
$14,000 in loss adjustment fees, and thus breached the GAI when it failed to
pay the fees. The record before us fails to show that Gulf pursued this position
in its motion before the trial court. The trial court characterized the motion as
seeking a ruling that the parties had entered into two separate agreements
regarding partial payment of Gulf’s loss adjustment expenses under the Beacon
and Panciocco bonds. Because the record does not contain the underlying
motion, we cannot review the validity of the trial court’s characterization of
Gulf’s argument. Further, the court expressly reviewed the legal elements of
contract formation and ruled that the contract was supported by sufficient
consideration. Thus, while the trial court decided Gulf’s motion on the premise
that the parties had entered into a contract independent of the GAI, the record
lacks any motion for reconsideration contending that the trial court erred in its
understanding of the legal basis for Gulf’s claim for $14,393.56. See Penrich,
Inc. v. Sullivan, 140 N.H. 583, 590 (1995) (issues should be raised at earliest
possible time to give trial court opportunity to come to sound conclusions and
correct any errors in first instance). Accordingly, we do not address Gulf’s
arguments that AMSCO conceded partial liability under the GAI on the Beacon
and Panciocco matters.
IV
On cross-appeal, AMSCO advances three arguments challenging the trial
court’s ruling that it entered into a contract to pay the $14,393.56. First, it
contends that no enforceable agreement could have existed because Gulf
refused to issue a release, and a release was its sole motivation in resolving the
Beacon and Panciocco matters for payment of a compromised sum in order to
assume Gulf’s defense in the Brita case. We, however, do not stand in the
shoes of the trial court on factual matters, such as the existence and terms of a
contract. Chisholm v. Ultima Nashua Indus. Corp., 150 N.H. 141, 145 (2003);
see Appeal of Land Acquisition, 145 N.H. 492, 494 (2000) (whether binding
settlement agreement exists is question of fact). Although evidence exists
supporting AMSCO’s view of the negotiations, the trial court’s ruling
concerning the scope of the parties’ intended agreement is supported by the
record. Estate of Younge v. Huysmans, 127 N.H. 461, 465 (1985).
Accordingly, we uphold the trial court’s decision.
Second, AMSCO argues that any promise it made to pay Gulf was not
supported by sufficient consideration. The trial court ruled that Gulf’s promise
to refrain from conducting two depositions and pursuing an additional claim
against AMSCO constituted valuable consideration for AMSCO’s promise to
make partial payment. AMSCO contends, however, that after it failed to make
payment, Gulf could have chosen to pursue the depositions and additional
claim, yet it failed to do so for the eighteen-month time frame prior to trial.

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According to AMSCO, Gulf could not have detrimentally relied upon its promise
to pay and thus no consideration supported the existence of a separate
contract. We disagree. Gulf’s decision to uphold its portion of the bargain
negates neither AMSCO’s breach of its promise to pay nor the exchange of
meaningful consideration for the contract. At the time AMSCO promised to
pay, Gulf exchanged meaningful consideration by refraining from pursuing
litigation avenues that it had the right to pursue. See Chisholm, 150 N.H. at
145 (consideration present when benefit to promisor or detriment to promisee).
Accordingly, the trial court’s conclusion that the contract was supported by
adequate consideration is supported by both the record and the law.
Third, AMSCO contends that any agreement compelling it to pay
excessive and unreasonable attorney’s fees and expenses would be
unenforceable as a violation of Rule 1.5 of the New Hampshire Rules of
Professional Conduct. Rule 1.5 states: “A lawyer shall not enter into an
agreement for, charge, or collect an illegal or clearly excessive fee.” The trial
court found that the parties considered the alleged excessive nature of the fees
when negotiating a sum. It ruled that while the fees in the Panciocco matter
may have been “unreasonable” under the contractual standard in the GAI,
“they do not rise to the level of being ‘illegal or clearly excessive’” under Rule
1.5. Because the factual findings are supported by the record, we will not
disturb the trial court’s decision. See Younge, 127 N.H. at 465.
V
Finally, we turn to AMSCO’s argument on cross-appeal that the trial
court erred in rejecting its request to amend its pleadings and assert
counterclaims against Gulf for breach of contract and for violation of the
Consumer Protection Act, RSA chapter 358-A. The trial court retains the
discretion to decide whether to allow a counterclaim, City of Concord v. 5,700
Square Feet of Land, 121 N.H. 170, 172 (1981), and we review its decision for
an unsustainable exercise of discretion, see Bezanson v. Hampshire Meadows
Dev. Corp., 144 N.H. 298, 303 (1999); cf. Lambert, 147 N.H. at 296 (explaining
unsustainable exercise of discretion standard).
Two days prior to trial, AMSCO moved to amend its pleadings to file
counterclaims based upon certain billing records. It argued that the trial court
should permit its amendment because it had received a substantial portion of
the billing records from Gulf for the first time just one week before trial, and
the counterclaims shared the same core facts with Gulf’s claims. The trial
court denied AMSCO’s motion to amend as “untimely.”
While counterclaims are generally permitted where appropriate to “avoid
circuity of action, multiplicity of suits, inconvenience, expense, unwarranted
consumption of the court’s time, and injustice by resolving all controversies

15
and granting full relief in one proceeding,” Concord, 121 N.H. at 172, we
cannot conclude that the trial court’s decision constituted an unsustainable
exercise of discretion. AMSCO did not dispute Gulf’s proffer to the trial court
that AMSCO failed to conduct any formal discovery to seek out its billing
records in a timely manner. Based upon this record and the lateness of
AMSCO’s request to amend, we will not disturb the trial court’s decision. See
Sup. Ct. R. 33 (party cannot file counterclaim after thirty days from the return
date except by leave of court).
Affirmed.
NADEAU, DALIANIS, DUGGAN and GALWAY, JJ., concurred.