At Roth Law Group, we have experience defending contractors in indemnity actions brought against them by surety companies in connection with performance bonds issued on public building projects. The General Indemnity Agreement (GIA) is the document in which individuals personally obligate themselves to reimburse the surety company for any payments it makes on a bond claim. Additionally, the GIA usually requires that the indemnitors pay all costs of investigation along with attorneys’ fees incurred in connection with the performance bond claim.
It should come as no surprise that the documents associated with the issuance of a performance bond strongly favor the surety company. The language of the bonds are usually defined in the prime contract that exists between the owner and the general contractor. Contractors are at a serious disadvantage once a bond claim has been tendered, because the language of the bonds usually requires prompt payment to the owner (or general contractor) and most defenses are waived. It’s important to understand that the bond is issued for the benefit of the owner, not the contractor. Thus, surety companies may pay on a claim prior to performing any meaningful investigation after which they will seek reimbursement from the indemnitors.
Contractors should take all reasonable steps to avoid having an owner or general contractor make a claim on its performance bond, yet such claims are a part of doing business. With that said, there are certain defenses to indemnification claims and a surety cannot expect full indemnification in instances in which it failed to act timely or require that a general contractor or owner mitigate damages.
Contact the attorneys at Roth Law Group to discuss your surety indemnification action or to discuss performance bond claims in general at (919) 410-8107.