Student Notes

Indemnification is the same thing as a surety contract.1

As an example of indemnification, we will assume the state of Florida is requiring a

license and permit bond of an auto dealer in order to become licensed to operate within
the state. The Florida Department of Motor Vehicles (DMV) is the obligee and the auto
dealer is the principal. The auto dealer must obtain the surety bond from an acceptable
bonding company, the obligor. In this case, the bonding company is making a written
guarantee to the state that the auto dealer will operate per the terms of the license. Should
the auto dealer breach the states regulations, the Florida DMV can place a claim against
the surety bond. There are three parties in indemnification: the principal (auto dealer), the
obligor/surety (bonding company), and the obligee (DMV).

In the event a claim is paid out by the surety, the obligor/surety (bonding company) will
pursue the principal for repayment of all costs associated with the claim, including...legal
fees! This may come as a surprise, but remember, bonds are not insurance. Suretyship
is more a form of credit than insurance. Prior to issuing the bond, the obligor/surety
will require the principal to sign an agreement for corporate, personal, and spousal
indemnification. This indemnity agreement states that the surety shall be held harmless
and the principal is fully responsible in the event of a claim.2

An example of contribution occurs in maritime law, where the property of one of several
parties with interests in a vessel and cargo has been voluntarily sacrificed for the common
safety of the vessel – as by casting goods overboard to lighten the vessel – such loss must
be made up by the contribution of others, which is labeled “general average”.3

Contribution also occurs among joint tortfeasors (wrong doers). This involves two or
more individuals with liability in a tort action for the same injury to the same person or
property. If the plaintiff is awarded damages, each joint tortfeasor is responsible for
paying a portion of the damages, based on the percentage of the injury caused by his or
her negligent act. The defendant who pays more than his or her share of the damages, or
who pays more than he or she is at fault for, may bring an action to recover from the
other culpable defendants under the principle of contribution.4

1
http://www.massbar.org/publications/section-review/1999/summer/fundamentals-of-contribution-and-
indemnity
2
http://www.jwsuretybonds.com/info/surety-bonds-101.htm
3
http://legal-dictionary.thefreedictionary.com/contribution
4
http://legal-dictionary.thefreedictionary.com/Joint+Tortfeasor