Does The Maximum Aggregate Liability Stated In A Guaranty Include Interest, Costs, And Attorney Fees?

Under Kentucky’s guaranty statute, KRS 371.065, if a guaranty is not written on the instrument it guarantees or if it does not expressly refer to that instrument, it must contain a termination date and a “maximum aggregate liability” of the guarantor. Generally, the maximum aggregate liability is the cap on the guarantor’s liability under the guaranty. Thus, if the underlying principal obligation is $1 million but the stated maximum aggregate liability is only $500,000, the guarantor is only liable for $500,000 of the total $1 million obligation. However, in addition to the stated cap, guaranties often provide that the guarantor is also liable for interest on the debt, attorney fees, and other collection costs.

This raises the question of whether the stated maximum aggregate liability is also a cap on the guarantor’s liability for interest and attorney fees. The statute addresses this in subsection (2):

Notwithstanding any other provision of this section, a guaranty may, in addition to the maximum aggregate liability of the guarantor specified therein, guarantee payment of interest accruing on the guaranteed indebtedness, and fees, charges and costs of collecting the guaranteed indebtedness, including reasonable attorneys’ fees, without specifying the amount of the interest, fees, charges and costs.

KRS 371.065(2). The statute therefore makes clear that the stated liability cap does not include any interest, attorney fees, or other charges the guarantor is liable for under the guaranty. Thus, while a guaranty may state a specific dollar amount for the maximum aggregate liability of the guarantor, the guarantor could ultimately be liable for an amount in excess of that stated amount for interest, attorney fees, and other costs—so long as the guaranty agreement provides for it.  See, e.g., Buridi v. Leasing Group Pool II, LLC, Case No. 2011-CA-001808-MR, 2014 Ky. App. LEXIS 51, at *17-*18 n.18 (Ky. Ct. App. Mar. 21, 2014).

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One thought on “Does The Maximum Aggregate Liability Stated In A Guaranty Include Interest, Costs, And Attorney Fees?

  1. Pingback: What Is The Effect Of Including A Termination Date In A Guaranty (Per KRS 371.065)? | Kentucky Guaranty Statute

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