What is a General Indemnity Agreement?

What is a General Indemnity Agreement or General Agreement of Indemnity?

A general indemnity agreement (GIA) is a document which outlines the surety/client relationship.  GIA’s typically indicate promises and agreements by which the indemnitors, by signing the GIA, and the surety company, by issuing the bond, agree to abide.  In most cases, the surety company will require you to sign their GIA prior to issuing your surety bond.

Do different insurance companies have different General Indemnity Agreements?

Yes, each insurance company will have a GIA which is specific to them.  In fact, some insurance companies have multiple GIA forms which can be used to obtain the indemnity of you or your company.  The most popular GIA is what’s called a short-form indemnity agreement.  These are used for relatively low risk bonds in terms of both the amount of the bond and the type of risk.  They are typically less than one page long and encompass the basic terms the surety company seeks to ensure.  The second form of GIA is what’s called a long-form indemnity agreement.  These agreements are used for larger bond amounts and often with clients who are in need of multiple surety bonds.  The long-form GIA is usually made up of several pages of information which govern the relationship between the surety company and client.

What types of things does General Indemnity Agreement typically include?

Almost all general indemnity agreements include a basic representation of facts.  The representations of fact usually state that you have requested the surety company to provide a bond and the indemnitors have a beneficial interest in receiving the bond.  The GIA typically then goes on to address the promises and agreements made in consideration of bond issuance.  These promises and agreements will vary between each surety company and their respective GIA’s.  Generally speaking, they include but are not limited to payment of premiums, payment of losses incurred by the surety as a result of issuing the bond or enforcing its provisions, reserve deposits, asset and record examination, other items which are important to the surety/client relationship.  This explanation should only be used as an example of the items a GIA may contain and each client should read and consult with their attorney regarding the language included in their specific GIA.

Who has to sign the General Indemnity Agreement?

In most cases, the surety company will require the general indemnity agreement to be signed by all owners, spouses, and the entity needing the surety bond.  In some cases, generally involving companies with large net worth, the surety company may waive the personal indemnity of all or some owners as they feel the company’s assets support the obligation.  It’s important to understand that this is the exception to the rule and reserved for only the best-in-class risks.

Why does my spouse have to sign the general indemnity agreement?

This is a very common question and the justification is usually that he/she has nothing to do with the business needing the surety bond.  The best answer to this question is that the surety company seeks a complete indemnity package when it comes to personal indemnity of owners and spouses.  This protects a surety company when one spouse transfers all assets from his/her name into their spouse’s name.  The process is very similar to obtaining a bank loan which the bank would seek to claim the same position.