Also known as: indemnity bonds · indemnity · surety bond
Written by attorneys · grounded in primary & secondary sources — see below
A bond under seal by which a surety undertakes to compensate the obligee for loss or damage if a specified event occurs or a third party fails to perform an obligation.
Imperial Motors and Ironclad Industries were both held liable in tort for the same injury to a third party. Imperial Motors paid the full judgment and then demanded reimbursement from Ironclad Industries. An indemnity bond posted by Ironclad Industries ensured that Imperial Motors recovered the amount paid, preventing unjust enrichment of Ironclad Industries.
Indigo Textiles, a foreign manufacturer, faced an indemnity suit in a state court after its component reached the forum through the stream of commerce. The company posted an indemnity bond to cover potential liability but successfully argued that the forum lacked minimum contacts and that jurisdiction would be unreasonable.
Select any source to read its text and confirm it supports the definition.
After a breach caused measurable loss, the court ordered payment under an indemnity bond to restore the injured party. The amount covered the harm sustained and served as compensation rather than punishment.
Innovate Pharmaceuticals paid a judgment on behalf of both itself and a co-tortfeasor. Because an indemnity bond gave Innovate Pharmaceuticals a right of indemnity against the co-tortfeasor, the co-tortfeasor could not pursue contribution from Innovate Pharmaceuticals.
A principal posted an indemnity bond covering its agent. When the agent was held liable only vicariously for the indemnitor's conduct, the bond allowed the principal to recover the full amount paid from the indemnitor.
Idris Ives obtained a preliminary injunction against a takeover bid. The court required an indemnity bond to secure payment of costs and damages if the injunction later proved wrongful. When the injunction was dissolved, the bond compensated the enjoined party for losses suffered.
An indemnity bond specifically secures compensation for loss or damage if a third party defaults or a specified event occurs. A performance bond instead guarantees completion of a contractual obligation.
Supporting sources
The right arises when one tortfeasor discharges the common liability and the other would be unjustly enriched by that payment. The paying party may then recover under principles stated in the Restatement.
Yes. When one tortfeasor holds a right of indemnity against another, neither may pursue contribution from the other.
The bond secures payment of costs and damages if the injunction is later found wrongful. It protects the enjoined party without requiring proof of abuse of process.
…the protection of the ordinary laws of the land who disregard them in an emergency, and should look to a grateful country for indemnity and pardon, than to allow, beforehand, the whole frame of jurisprudence to be overturned, and every thing placed at the mercy of the bayonet. "No tribunal or department in our system of…