Learn more about litigation bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
Litigation bonds are a subset of court bonds that come into play when there is a dispute over property of some sort or perhaps a disputed action. The most common type of litigation bond is an appeal bond, also known as a supersedeas bond, or plaintiff bond, or defendant bond. Its purpose is to prevent a money judgment by the court from taking place while there is an ongoing appeal.
The appeal bond maintains the status quo regarding the disputed property until the court renders a final decision in the matter. It guarantees that the person who is ultimately awarded the property does not suffer any financial loss as a consequence of not having had physical possession of the property for the duration of the trial and/or appeal.
Another common litigation bond is an injunction bond. These bonds are used in disputes that have not yet been decided and have therefore not moved into the appellate state. Injunction bonds are required in the context of obtaining preliminary injunctions, temporary restraining or protection orders, or with the court appointment of a receiver. There are also a number of writs used for various legal purposes, such as writs of attachment, possession, claim, delivery, sequestration, and replevin.
Civil disputes are not always over money, but there is the potential for financial harm to the losing party. The court will advise any litigant in a given case if a litigation bond will be required.
These bonds, for the most part, “freeze” the current situation regarding assets or actions under dispute. Let’s say that two former business associates are disputing ownership of some of the assets of a company they’re closing. The judge could impose various bond arrangements to keep either party from liquidating or disposing of any of the disputed assets to the detriment of the other party until after the court has rendered a decision in the matter.
The court is the obligee in a litigation bond agreement. The litigant required to obtain the bond is the principal, and the underwriter that issues the bond is the surety. When the court has completed its deliberationTitle Page Separator Site title s and announced a verdict, the disputed property is distributed according to the court’s decision.
If it turns out that something has happened to adversely affect the value of the property while the bond was in force, the party who was awarded the property has a valid claim against the bond, and the surety will pay up to the full penal amount of the claim. The bond, however, includes an indemnity agreement. By signing it, the principal accepts legal responsibility for reimbursing the surety.
The court establishes the required bond amount based on the value of the disputed assets. The surety assesses the applicant’s credit and the major facts of the case and sets an appropriate premium rate. This is a percentage of the total bond amount that the applicant will pay. Collateral may be required in some cases. Applicants with good credit typically pay 1-3% of the bond amount as the premium.
If you have assets tied up in a court case and need some type of litigation bond, give us a call, or simply ask for an online quote.