Indemnities are a common basis for commercial insurance contracts and surety bonds, which is why anyone who is seeking either form of protection should familiarize themselves with the term and what it means in regards to the contract they are signing.
What is indemnity?
In contracts, indemnity is a form of protection against a loss or most other types of financial burdens that a party may incur. Generally, indemnity contractually obligates one party, known as the indemnitor, to compensate the other party, known as the indemnitee, should they suffer a loss due to actions taken by the indemnitor.
How Does Indemnity Relate to Surety Bonds?
Many surety bonds will have an indemnity clause or contract. Indemnity can be as simple as a paragraph or as complex as a multiple-page document that outlines very specific circumstances. Keep in mind that these agreements can include additional costs.
Keep in mind that most surety bonds will require an indemnity agreement, and the surety may require one if they believe the risk of a claim being filed is very high. Indemnity agreements shift some of the risk away from the surety and onto the principal. When obtaining a surety bond, it’s important to understand the ways in which the bond might pay out and if the risk is high. It’s more than likely that some form of indemnity will be required by most bond companies.
Should Indemnity Be Written Into My Surety Bond?
Indemnity clauses can be complex, so make sure you understand why one is placed in the bond and how it changes your responsibility. If you are uncertain about anything, speak with your attorney about indemnity clauses and how they can impact your case.
Is indemnity as complicated as it sounds? Does it have to be this complicated? Not if you work with the right surety bond agency. If you have questions about indemnity in relation to surety bonds, contact the bond experts at The Patrick J. Thomas Agency today.
Disclaimer: this is for informational purposes only and is not intended to be legal advice. If you need legal counsel, please contact an attorney directly.