---
kind: "section"
citation: "12 U.S.C. § 5005"
title: "12"
title_heading: "Banks and Banking"
number: "5005"
heading: "Indemnity"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/12/5005"
units:
  - "Chapter 50 — Check Truncation"
---

# §5005. Indemnity

- (a) **Indemnity—** A [reconverting bank](/usc/12/5002.md?p=15) and each [bank](/usc/12/5002.md?p=2) that subsequently transfers, presents, or returns a [substitute check](/usc/12/5002.md?p=16) in any electronic or paper form, and receives consideration for such transfer, presentment, or return shall indemnify the transferee, any subsequent collecting or [returning bank](/usc/12/5002.md?p=3-D-i), the [depositary bank](/usc/12/5002.md?p=3-B), the drawee, the drawer, the payee, the depositor, and any endorser, up to the amount described in subsections [(b)](#b) and [(c)](#c), as applicable, to the extent of any loss incurred by any recipient of a [substitute check](/usc/12/5002.md?p=16) if that loss occurred due to the receipt of a [substitute check](/usc/12/5002.md?p=16) instead of the original [check](/usc/12/5002.md?p=6).
- (b) **Indemnity amount—**
  - (1) **Amount in event of breach of warranty—** The amount of the indemnity under [subsection (a)](#a) shall be the amount of any loss (including costs and reasonable attorney’s fees and other expenses of representation) proximately caused by a breach of a warranty provided under [section 5004 of this title](/usc/12/5004.md).
  - (2) **Amount in absence of breach of warranty—** In the absence of a breach of a warranty provided under [section 5004 of this title](/usc/12/5004.md), the amount of the indemnity under [subsection (a)](#a) shall be the sum of—
    - (A) the amount of any loss, up to the amount of the [substitute check](/usc/12/5002.md?p=16); and
    - (B) interest and expenses (including costs and reasonable attorney’s fees and other expenses of representation).
- (c) **Comparative negligence—**
  - (1) **In general—** If a loss described in [subsection (a)](#a) results in whole or in part from the negligence or failure to act in good faith on the part of an indemnified party, then that party’s indemnification under this section shall be reduced in proportion to the amount of negligence or bad faith attributable to that party.
  - (2) **Rule of construction—** Nothing in this subsection reduces the rights of a [consumer](/usc/12/5002.md?p=7) or any other [person](/usc/12/5002.md?p=14) under the [Uniform Commercial Code](/usc/12/5002.md?p=19) or other applicable provision of Federal or [State](/usc/12/5002.md?p=17) law.
- (d) **Effect of producing original check or copy—**
  - (1) **In general—** If the [indemnifying bank](/usc/12/5002.md?p=11) produces the original [check](/usc/12/5002.md?p=6) or a copy of the original [check](/usc/12/5002.md?p=6) (including an image or a [substitute check](/usc/12/5002.md?p=16)) that accurately represents all of the information on the front and back of the original [check](/usc/12/5002.md?p=6) (as of the time the original [check](/usc/12/5002.md?p=6) was truncated) or is otherwise sufficient to determine whether or not a claim is valid, the [indemnifying bank](/usc/12/5002.md?p=11) shall—
    - (A) be liable under this section only for losses covered by the indemnity that are incurred up to the time that the original [check](/usc/12/5002.md?p=6) or copy is provided to the indemnified party; and
    - (B) have a right to the return of any funds it has paid under the indemnity in excess of those losses.
  - (2) **Coordination of indemnity with implied warranty—** The production of the original [check](/usc/12/5002.md?p=6), a [substitute check](/usc/12/5002.md?p=16), or a copy under [paragraph (1)](#d-1) by an [indemnifying bank](/usc/12/5002.md?p=11) shall not absolve the [bank](/usc/12/5002.md?p=2) from any liability on a warranty established under this chapter or any other provision of law.
- (e) **Subrogation of rights—**
  - (1) **In general—** Each [indemnifying bank](/usc/12/5002.md?p=11) shall be subrogated to the rights of any indemnified party to the extent of the indemnity.
  - (2) **Recovery under warranty—** A [bank](/usc/12/5002.md?p=2) that indemnifies a party under this section may attempt to recover from another party based on a warranty or other claim.
  - (3) **Duty of indemnified party—** Each indemnified party shall have a duty to comply with all reasonable requests for assistance from an [indemnifying bank](/usc/12/5002.md?p=11) in connection with any claim the [indemnifying bank](/usc/12/5002.md?p=11) brings against a warrantor or other party related to a [check](/usc/12/5002.md?p=6) that forms the basis for the indemnification.

## Source credit

(Pub. L. 108–100, § 6, Oct. 28, 2003, 117 Stat. 1181.)

## Notes

### Editorial Notes

### References in Text

This chapter, referred to in subsec. (d)(2), was in the original “this Act”, meaning Pub. L. 108–100, Oct. 28, 2003, 117 Stat. 1177, which is classified generally to this chapter. For complete classification of this Act to the Code, see Short Title note set out under section 5001 of this title and Tables.

### Statutory Notes and Related Subsidiaries

### Effective Date

Section effective at the end of the 12-month period beginning on Oct. 28, 2003, see section 20 of Pub. L. 108–100, set out as a note under section 5001 of this title.