An insurance company (GAIC) that issued a performance bond sued a general contractor (Merritt-Meridian) over a dispute involving the bond. The court ruled that the indemnity agreement between the surety and contractor is binding and enforceable. The surety can settle bond claims on its own without the contractor's permission, unless the contractor puts up collateral as required by the settlement terms. This matters to subcontractors because it shows that sureties have significant power to manage bond claims independently.
Indemnity agreements between sureties and general contractors are legally binding—don't expect a GC to override a surety's settlement decision
A surety can settle bond claims without the GC's consent unless the GC has posted collateral under the settlement clause—know what collateral requirements exist in your bonds
If you're a subcontractor on a bonded project, understand that the GC's relationship with the surety is separate from your rights—focus on your direct contract with the GC