Tag Archives: general indemnity agreement

Construction Bonds Come With Strings Attached. Make Sure You Know What They Are.

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When serious trouble befalls a bonded contractor, its surety might be called upon to shoulder significant risk both downstream (i.e., payment obligations to subs & suppliers) and upstream (i.e., performance obligations to the owner, if the bonded contractor is prime, or to the prime, if the bonded contractor is a sub).

Yet even when adversity strikes, sureties don’t expect to suffer a loss, as counter-intuitive as that might sound.  That’s a feature of suretyship distinguishing it from insurance (for a handy, 1-page chart summarizing other distinctions, see page 6 of this 18-page surety primer by CNA Surety).

How do bonding companies seek to avoid losses on troubled construction projects?  One of the most significant weapons in the surety’s loss-avoidance arsenal is the “general indemnity agreement” or GIA, an instrument that virtually every surety requires each bonded contractor, the contractor’s owners and the owners’ spouses to sign as a condition of surety credit extension.  The GIA vests in the surety numerous rights and remedies against the corporate and individual indemnitors, which are typically triggered once trouble starts brewing.

Here are some of the key rights enjoyed by sureties under a typical GIA:

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Filed under Indemnity Rights, Surety Law

N.C. Liens/Bonds, They Are A-Changin’ Part III: Double Payment Protection for GC’s

For North Carolina general contractors, the big prize in last year’s lien and bond law legislation was protection from double payment exposure on bonded public contracts.  Carolinas AGC lobbyist Dave Simpson has said on numerous occasions that he spent the better part of two decades pushing the N.C. General Assembly for double payment protection.   In a similar vein, Carolinas AGC member Susie Shaw of Beam Construction added that “this has been an issue I have heard about from my father since I was a young child.  It took a long time, but I am glad it is coming to pass in my lifetime.”

This post explains the “double payment” provisions of the new lien/bond laws in-depth, focusing on how prime contractors are exposed to double payment liability on public projects, how the new statute provides protection from that exposure, and the limits of the new legislation.  Continue reading

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Filed under Feature story, Payment Bonds, Payment for Goods and Services, State law, policy & news, Subcontractors