5 Things You Don’t Know About Court Bonds

Courts may require surety bonds for practical reasons.

Basically, like all surety bonds, court bonds serve these purposes:

• They guarantee payments of related court costs.
• They safeguard involved parties in the litigation (usually the obligee, which is opposite the bond applicant).

Here are five things you may not know about court surety bonds.

Court bonds are split into two categories: Judicial and Fiduciary bonds

A court bond is a general term that covers the different types of court bonds being written today.

Courts require judicial bonds in every jurisdiction throughout the US and protect either the defendant or plaintiff – usually not the court. Therefore, the obligee and principal are both parties involved in the litigation. Judicial bonds promise financial guarantee, unlike fiduciary bonds that ensure ethical completion of fiduciary obligations.

Fiduciary bonds, as opposed to judicial bonds, assures the ethical practice and completion of responsibilities by a court-appointed fiduciary. Typically, these bonds do not have a direct financial guarantee; but if a fiduciary does not perform their duties or if the fiduciary acts unethically and these actions create financial damages to those whom the fiduciary was responsible, then the bond would cover any losses awarded by the court.

Surety companies do not underwrite the case on court bonds

While surety companies do not perform the typical underwriting process for court bonds; this means they do not make decisions on whether they believe either the defendant or plaintiff will succeed. They do, however, read court documents and bond forms to understand both parties (even the attorneys) involved and the claims being made.

Some court bonds require collateral

Usually, this is reserved for bail bonds. However, for the most part, this is up to the surety bond provider is collateral is required for the bond. While this is not always the case, some sureties need 150% of the bond as collateral. The collateral covers the surety if the defendant fails to appear in court and needs to be returned to court or jail.

The factors that most surety companies will look at when considering collateral requirements include the bail amount, the need for a payment plan, and the amount of time the defendant and plaintiff have lived in the area. Surety underwriters determine the risk – the higher the risk, the more a collateral is needed.

Sureties ensure that a proper legal representation represents the principal

It is crucial to have a fit attorney representation in underwriting court bonds since most clients (the principal) do not understand the complexity of dealing with the courts and the legal processes that they need to go and follow through.

Because sureties depend on the expertise of the attorneys in establishing underwriting decisions, they are excellent sources of court bond business.

Court bonds are transactional in nature

Each court bond is written for a different client. Surety companies establish a mutual exchange, agreement, and communication with parties that affect all those involved. Some surety bond companies have programs that can be set up for clients with more frequent needs – with a fixed rate for that client.

Some court bonds can renew for one, two, or up to 10 years depending on the duties and obligations set in place.

Surety Bond Authority Inc. provides court bonds and guidelines for clients on their obligations as a principal. We will be glad to speak with you about any aspect of the court bonding process. Call us now at 800-333-7800.