Construction uses “indemnity” in two main places, and they work differently.
The general indemnity agreement (GIA). Before a surety issues bonds, it requires the contractor, and usually the owners personally and their spouses, to sign a GIA. If the surety pays a claim or spends money on investigation and legal fees, the indemnitors must reimburse it. GIAs typically let the surety demand collateral once a claim is made, take assignment of contract funds, and settle claims in its own judgment.
Contract indemnity clauses. Prime contracts and subcontracts include hold-harmless clauses where one party (usually the downstream one) agrees to defend and pay for claims arising from its work, such as third-party injuries or property damage. The scope varies: limited (only your own negligence), intermediate, or broad (even the other party’s negligence). Many states have anti-indemnity statutes that void the broadest forms, and the rules differ again for insurance-backed obligations.
Why it matters
A GIA puts the owners’ personal assets behind every bond. A contract indemnity clause can shift risk your insurance won’t cover. Both deserve legal review before signing.
Common mistakes
- Thinking a corporate entity shields owners from a surety loss after they signed the GIA personally.
- Agreeing to broad-form indemnity without checking whether state law or your policy covers it.
- Accepting a duty to defend without understanding it’s triggered by allegations, not proven fault.
- Not flowing the same indemnity down to subs.
How os.construction handles it
We’re building contract records that keep key clauses and insurance requirements attached to each subcontract and prime contract. Legal review stays with you and your counsel. It’s in development.