A surety asserting an indemnity claim in federal court in Georgia sought recovery against indemnitors involved with a joint venture put together to bid on construction projects requiring surety bonds. The surety had issued bonds under a general indemnity agreement signed by the joint venture partners and individual indemnitors. When one of the joint venture partners defaulted on the projects, the surety faced claims on the bonds and sought indemnification from all the indemnitors.
In defense against the indemnity claims, certain individual indemnitors and one of the JV partners stated that they did not intend to indemnify the surety for bonds issued to only one of the joint venture partners and not to the joint venture. Rather, those indemnitors urged that their intention when signing the indemnity agreement was to only be liable for bonds issued directly to them or to the joint venture, not for bonds issued solely to the other JV partner. Purporting to rely upon an email communication from the agent which sold the bonds, the recalcitrant indemnitors declared that they believed that each party would bear responsibility only for the bonds tied to their respective operations.
However, the court found those indemnitors’ interpretation insufficient to override the clear language of the general indemnity agreement, which did not limit liability in the manner proposed. According to the court, “mutual assent” is determined by “‘overt acts and words [not] by the hidden, subjective or secret intention of the parties.’”
The indemnitors also contended that the indemnity agreement lacked consideration and was based on an illusory promise, as they believed that any obligation of the surety to issue bonds was purely at the surety’s option. The court refused this argument as well, noting that under Georgia law, indemnity agreements related to surety bonds are routinely upheld as valid. The court further held that the issuance of bonds to the single JV partner constituted sufficient consideration, and the surety’s actual performance under the agreement negated any assertion of an “illusory promise.”
Finally, the defendants argued that the indemnity agreement was unenforceable on public policy grounds, claiming that the surety issued its bonds without due diligence, including an alleged failure to restrict the bonded contractor’s capacity to obtain bonds, as well as relying “‘[too] heavily on the financial strength of” one of the individual indemnitors. The court was not swayed, holding that in the absence of a duty of due diligence explicitly stated in the indemnity agreement, no public policy implications were present.
Ultimately, the court granted summary judgment to the surety and against the indemnitors for over $7.5 million in damages and also required the indemnitors to deposit collateral security in excess of $9.5 million as required in the indemnity agreement.
United Fire & Cas. Co. v. Budget Servs. & Supplies, LLC, 2025 U.S. Dist. LEXIS 125177 (M.D. Ga. July 1, 2025)
