Court Bonds: A Comprehensive Guide

October 14, 2021

Court Bonds

Court bonds are an important surety bond class that insurance agents are bound to encounter throughout their careers. There are many different types of court bonds, each with its own unique purpose and underwriting criteria. To help agents better understand these bonds, we have put together this comprehensive guide explaining what court bonds are and how insurance agents can efficiently obtain them for their customers.

What is a Court Bond?

“Court bond” is a term used to classify surety bonds that are required by a court of law. Surety bonds act as a three-party contract between the principal (your customer), the surety company, and the obligee (entity requiring the bond). If the obligee on your customer’s bond is a court, then they must acquire a court bond. Court bonds are categorized as either probate or judicial.

How Can an Insurance Agent Obtain a Court Bond?

BondExchange makes obtaining a Court Bond easy. Simply log in to your account and use our keyword search to find the “court” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone at (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

What are the Different Types of Court Bonds?

As we mentioned earlier, there are many different types of court bonds that will fall under either the probate or judicial category. Below are the different types of court bonds:

Probate

Probate bonds are surety bonds that are required by a probate court and protect the beneficiaries of an estate from financial harm if the court-appointed fiduciary breaches their duties. Probate courts require individuals to purchase a probate bond prior to being appointed to a fiduciary role over an estate’s assets. There are two classes of probate bonds:

1. Bonds for the Estate of a Deceased Individual:

Administrator

If an individual passes away with leaving a will or appointing an executor to their estate, then the fiduciary responsible for handling their affairs must purchase an administrator bond. Administrator bonds are also required if an estate’s executor passes away or declines to perform their fiduciary duties.

Executor

Required for individuals who have been explicitly named as the estate’s executor in a deceased individual’s will.

While administrator and executor bonds are required in different scenarios, they both serve the same purpose of ensuring a deceased individual’s assets are handled lawfully and in the best interest of the estate beneficiaries.

2. Bonds over Legally Incompetent Individuals or Minors

Guardianship

Fiduciaries who administer the estate of a ward (minor entrusted to the care of a government entity) or an individual deemed legally incompetent must purchase a guardianship bond. Fiduciaries with a guardianship bond may also make health decisions for the individual.

Conservatorship

Like guardianship bonds, conservatorship bonds are also required for fiduciaries who administer the estate of a ward or legally incompetent person. However, fiduciaries who hold conservatorship bonds may only make financial decisions for the individual and are not authorized to make health decisions on the individual’s behalf.

To learn more about probate bonds, check out our prior article on these bonds here.

Judicial

Judicial bonds are court bonds required as a result of or in conjunction with legal action. Below are the different types of judicial bonds:

Injunction

Courts will oftentimes issue injunctions, or orders prohibiting a person from performing specific actions until active litigation is resolved. But what happens if the injunction is deemed to have been unnecessary and the defendant suffers financial harm as a result? Well, to protect against this courts will oftentimes require plaintiffs to purchase an injunction bond that ensures the defendant will receive compensation if a court deems the injunction should not have been issued. Injunction bonds also protect defendants against false accusations, as plaintiffs will want to make sure they have grounds to sue if they are financially liable to repay damages.

Replevin

Individuals who believe that their property was taken illegally may request that a court issue a replevin to determine who is the rightful property owner. If the plaintiff wants to seize property from a defendant prior to the start of a trial, they may purchase a replevin bond. Replevin bonds ensure that the plaintiff will forfeit the property if the defendant wins the trial. Additionally, defendants can purchase counter-replevin bonds to prevent the property from being seized.

Appeal

After a lawsuit has been tried and the court has issued a judgment, the losing party may wish to appeal the decision to a higher court. Plaintiffs and defendants are usually required to furnish an appeal bond before a higher court will hear the appeal. The principal on an appeal bond is the losing party in the lawsuit, either a plaintiff or a defendant. This bond guarantees that if the original judgment is upheld by the appellate court, the principal must satisfy it and pay interest and court costs.

Supersedeas

If a defendant is ordered to pay out a judgment but wishes to appeal the ruling, they may be required to purchase a supersedeas bond. Supersedeas bonds allow defendants to avoid paying out a judgment while their appeal is ongoing. Additionally, these bonds ensure that plaintiffs will receive the full judgment amount if a defendant’s appeal is denied and they no longer have the means to pay out the required judgment.

Release of Lien

If subcontractors or material suppliers are not paid for the work done or materials provided, they may file a lien against the property being worked on until they receive payment. Contractors and property owners cannot sell or alter properties with active liens against them. However, they may purchase a release of lien bond to have the lien removed while the subcontractors’ or material suppliers’ claims are reviewed. Release of lien bonds ensure that the individual(s) who filed the lien will receive compensation if the lien was unjustifiably released. Simply put, these bonds allow contractors and project owners to have liens against the property removed and provide protection to subcontractors and material suppliers if the lien should not have been released.

Cost Bond

Plaintiffs who file an appeal against a lower court’s decision may be ordered to purchase a cost bond. These bonds guarantee that the court will receive payment for all fees. Cost bonds are most often required for plaintiffs who are nonresidents of the state the court is located in.

Indemnity to Sheriff

Plaintiffs who require law enforcement officers to investigate/seize a defendant’s property as part of a court case must purchase an indemnity to Sheriff bond. These bonds protect law enforcement officers from financial harm if they are not reimbursed for expenses accrued during the seizure of the property or if they are sued by the defendant.

Attachment

If a court seizes a defendant’s property prior to a trial taking place, then the plaintiff may need to purchase an attachment bond. Attachment bonds protect the defendant from financial harm if the court determines the grounds for the attachment were not valid. These bonds dictate that the plaintiff must pay all fees, legal costs, and damages sustained by the defendant if their claim is not valid. An attachment is a type of court order that seizes a specific piece of property before a trial commences.

Stay of Execution

If a party loses a lawsuit but wishes to delay the court’s judgment from being executed, they may purchase a Stay of Execution bond. The bond ensures that the winning party will receive the full court judgment once the stay is lifted.

Stay of Proceedings

Courts will sometimes issue a stay of proceedings, which essentially suspends the court until one of the parties in a lawsuit carries out a particular action. If a stay of proceedings is issued, the party required to complete the action may need to purchase a Stay of Proceedings bond to ensure that they will pay out a judgment when the matter is resolved and the proceedings resume. The principal will not need to pay out a judgment if the court rules in their favor.

Condemnation

Railroad, telephone, and other public utility companies can sometimes seize land and convert it for public use against the property owner’s wishes. If the public utility company and the property owner cannot agree on a price for the land, a court will determine a fair price. Condemnation bonds allow public utility companies to immediately seize the land while the court proceedings play out. These bonds ensure that the property owner will receive full compensation for their land at the price determined by the court.

Petitioning Creditors in Bankruptcy

If a delinquent debtor refuses to voluntarily file bankruptcy, then creditors may file a petition to force them to do so. To do this, creditors must purchase a Petitioning Creditors in Bankruptcy bond that ensures the debtor will receive compensation for fees and damages if the petition to forcibly declare bankruptcy is dismissed or withdrawn.

How can Insurance Agents Market Themselves to Court Bond Customers?

Surety bonds are a great source of revenue for insurance agents. Additionally, these bonds tend to create “sticky” relationships with clients due to the intense underwriting requirements (principals don’t like switching surety agents). So how can agents market themselves to surety customers? Well, agents who have a strong digital presence and implement word-of-mouth referral incentives for their existing customers typically have a much easier time generating leads. We are wholesale only, so we will never compete with insurance agents for the same business. Additionally, we can create custom flyers for insurance agents helping them advertise their ability to obtain bonds. To request a custom flyer, click here.

2021-10-14T16:30:55+00:00

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