Indemnification Between Contractor and Surety

Does Florida’s limitation on Indemnification in Construction Contracts apply to the general agreement of indemnity between a surety and principal on a bond?

No, Florida’s limitation on Indemnification in Construction Contracts (section 725.06, Florida Statutes) does not apply to the general agreement of indemnity between a surety and a principal on a bond.

This question was recently answered in the case of Great Am. Ins. Co. v. Brewer, No. 6:16-CV-63-ORL-37KRS, 2016 WL 3640395, at 2 (M.D. Fla. July 8, 2016).  The court held that section 725.06 does not apply to this relationship because a surety is not an owner of real property, or an architect, engineer, general contractor, subcontractor or material supplier.  Accordingly Florida statue §725.06 does not apply to indemnity agreements between a surety and a principal on a bond.

The Court in Brewer analyzed this question as follows:  Florida statue §725.06 renders contracts void and unenforceable under the following circumstances: (1) the contract concerns or guarantees “any construction, alteration, repair, or demolition of a building, structure, appurtenance, or appliance, including moving and excavating associated therewith” (“Construction Contract”); (2) the parties to the Construction Contract include “an owner of real property and an architect, engineer, general contractor, subcontractor, sub-subcontractor, or materialman or any combination thereof” (“Contracting Party Requirement”); (3) one of the parties to the Construction Contract promises “to indemnify or hold harmless” the other party “for damages to persons or property caused in whole or in part by any act, omission, or default of the indemnitee arising from” the Construction Contract or performance of the Construction Contract; and (4) the Construction Contract does not contain “a monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract and is part of the project specifications or bid documents, if any.”

In Great Am. Ins. Co. v. Brewer, Brewer argued that, because Brewer Paving & Development, Inc. (principal) is a contractor, Florida statue §725.06 applies to the agreement, making it void. Great American Insurance Company (surety) argued that BPD being a contractor is irrelevant, and Florida statue §725.06 does not apply to the agreement.

The United States District Court agreed with the surety, ruling that, as long as the surety is not an owner of real property, or an architect, engineer, general contractor, subcontractor or materialman, then Florida statue §725.06 does not apply to indemnity agreements between a surety and a principal on a bond.