Author, Andy Roberts, Account Executive, Surety, Rancho Mesa Insurance Services, Inc.

Most questions that we receive from contractors new to the industry or new to bonded work usually center around what is a General Indemnity Agreement (GIA) and why do they (ownership) and spouse(s) have to sign personally.

A GIA is a contract between the surety and the contractor (principal), where the surety agrees to provide bonds for the contractor. This is a standard document in the construction and surety industries. Its basic purpose is to protect the surety company from any loss or expense that the surety sustains as a result of having issued bonds on behalf of the principal.

Through the protections in the GIA contract, the principal will be required to reimburse the surety for any losses that they incur as a result of the principal not fulfilling their obligations identified in the job contract. This is why the GIA is signed both for the company and personally.

When executing this document, the surety will almost always require that it be signed by all owners, both for the company and personally, and their spouses, which can alarm some people. In the surety’s case, they need seek a complete indemnity package, with all owners and spouses, in order to protect themselves against a situation where one spouse may transfer assets to another spouse to prevent the surety from having access to them in the event of a loss. 

This article was designed to be a basic overview of a GIA and its purpose within the relationship between the contractor and the Surety. If you have any questions about this article or General Indemnity Agreements, please contact Rancho Mesa Insurance Services at 619-937-0166.