The term “court bond” encompasses all of the surety bonds that might be needed in the course of taking legal action in a civil matter. Judicial bonds are a subcategory of court bonds and are further divided into defendant bonds and plaintiff bonds. Learn more about how these bonds work, discover the various types available, and apply today.
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The general purpose of all court bonds is to reduce risk. This may include things like: the risk that one party will dispose of contested property before the court has rendered a final decision on the case, the risk that court costs will not be paid, or the risk that a court-appointed individual will not carry out his or her duties properly.
Plaintiffs and defendants involved in civil cases may be required by the court to obtain specific types of court bonds. An individual serving as a personal representative, executor of an estate, guardian, or anyone else with fiduciary responsibility, for instance, may be required to obtain a bond before they can begin to act in that capacity.
How Do They Work?
As with all surety bonds, there is an obligee (the party requiring the bond), a principal (the party that must obtain the bond), and a surety (the company issuing the bond):
- The obligee is the court with jurisdiction over the legal case in question.
- The principal may be a plaintiff, a defendant, or an individual who has been granted authority over another person’s assets under the terms of a will, trust, or similar agreement.
- The surety is typically an insurance company or a company that specializes in underwriting and issuing surety bonds.
In the event that the obligee makes a valid claim against the bond, the surety will make payment and then attempt to recover that amount from the principal.
How Much Do They Cost?
As with all surety bonds, the obligee establishes the total bond amount required. This is the amount the court deems necessary to cover possible court costs, damage awards, legal fees, fines, restitution, etc. The cost of a court or judicial bond is then calculated as a percentage of this bond amount.
The exact percentage is determined through an underwriting process that considers the nature of the case and the risks involved, such as the length of the bond term, the possibility of unanticipated claims, and risks associated with the particular applicant.
While determining the cost of a court bond, underwriters evaluate the principal under the following terms:
- Ability to live up to the specific obligations associated with the legal matter, such as having the skills and knowledge to manage another person’s assets
- Financial situation and personal credit
- Character (and the character of the principal’s attorney, if applicable)
These last two factors are essential in assessing the likeliness of repayment from the principal of any amount paid out on a claim. The greater the underwriting risk, the higher the premium rate and the cost of the bond. In some cases, the surety may require the principal to put up collateral in addition to paying the bond premium.
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Types of Court Bonds
The following are among the most common types of court and judicial bonds. Please note that some of these are known by more than one name. Find what you need, and apply today. If you don’t see what you’re looking for, contact us, as we likely do offer it in our large book of coverage.
PERSONAL REPRESENTATIVE BONDS (PROBATE BONDS, EXECUTOR BONDS)
These are all names for the type of bond that an individual designated to manage the estate of a deceased individual may be required to obtain. A personal representative or executor is responsible for:
- Managing the estate’s assets for the benefit of heirs
- Settling the deceased’s debts
- Closing out the deceased’s various accounts
- Paying funeral costs on behalf of the estate
- Inventorying the estate’s assets
- Distributing assets to heirs
- Notifying Social Security of the death
- Paying any taxes due
The probate court (the obligee) may require a personal representative, executor, administrator or trustee (the principal) to obtain a bond whether or not there is a will. The bond guarantees that the principal will carry out all of the duties associated with their appointment. The court can file a claim against the bond in the event that the principal acts in a negligent or fraudulent manner while managing the estate.
FIDUCIARY BONDS
Fiduciary bonds are nearly identical to personal representative, probate, or executor bonds—except that the principal may be managing the assets of an individual who is living but unable to manage his or her own finances. Being granted fiduciary power establishes a relationship of trust that typically is codified in a legal document, but sometimes is an ethical obligation rather than a legal one. A fiduciary bond provides protection against any malfeasance by the principal and makes the principal responsible for any resulting financial loss.
GUARDIANSHIP BONDS (CUSTODIAN BONDS)
Guardianship bonds, also called custodian bonds, are a form of fiduciary bond. They provide protection for the person (typically a minor or incapacitated individual) who a guardian or custodian is caring for. It’s common for the court to require a guardian or custodian to purchase a bond after being appointed. The surety will do a credit check and perhaps a criminal background check before issuing a guardianship or custodian bond.
If a guardian or custodian (the principal) neglects or abuses the person under his or her care, a claim can be made against the bond on behalf of the minor or incapacitated person. The same is true if the guardian or custodian mishandles the assets of the person under his or her care or otherwise behaves in a dishonest or unethical manner. The surety will pursue the guardian or custodian for repayment of any amount paid out on a valid claim.
APPEAL BONDS (SUPERSEDEAS BONDS)
Appeal bonds, also known as supersedeas bonds, are one type of defendant bond. Someone who has lost a civil case and has been ordered to pay a certain judgement amount to the plaintiff has the right to appeal the judgement to a higher court. Payment of that judgement is deferred until the appellate court has made a decision on the appeal.
The court that imposed the judgement (the obligee) may require the appellant (the principal) to obtain a bond in the amount of the original judgement, or possibly more. The bond guarantees that the original judgement amount plus interest, attorney’s fees, and court costs will be paid if the principal’s appeal is unsuccessful.
ATTACHMENT BONDS
A court may issue an order to transfer certain property owned by a debtor to a creditor or to sell the property and remit the proceeds to the creditor. This process is known as attachment. It begins with a request from the creditor, or plaintiff, so an attachment bond is considered to be a plaintiff bond.
The court (the obligee) requires the creditor (the principal) to purchase an attachment bond to ensure that the creditor pays the legal costs, court fees, and any damages awarded to the debtor (the defendant) if the court denies the plaintiff’s request for attachment of the debtor’s property. If the debtor’s property has already been seized, the attachment bond ensures its return. Thus, a defendant who wins in court is protected by the attachment bond, and if the plaintiff wins, the bond becomes null and void.
REPLEVIN BONDS
Someone who believes that his or her property is being held illegally by another party may bring a replevin action in court, filing as the plaintiff (the principal). The court (the obligee) may require the plaintiff to obtain a replevin bond if the defendant is ordered to return the property to the plaintiff before a decision has been rendered in the case. This guarantees that if the court later finds in favor of the defendant, the plaintiff will return the property to the defendant.
INJUNCTION BONDS (PLAINTIFF INJUNCTION BOND)
An injunction bond is a specific type of plaintiff bond. It comes into play when a plaintiff files for an injunction against another party, the defendant, to prevent the defendant from carrying out a specific action or to compel the defendant to take an action. Injunction bonds are also referred to as temporary restraining order bonds.
The court (the obligee) may require the plaintiff (the principal) to obtain an injunction bond to ensure the payment of court costs and any damages awarded to the defendant if the court rules against the plaintiff and denies the injunction. If the plaintiff loses in court, the defendant may file a claim against the bond for any damages. The surety will pay the claim if the plaintiff doesn’t and will then seek reimbursement from the plaintiff.
There are also defendant injunction bonds that protect the plaintiff, with the defendant in the role of principal.
BANKRUPTCY BONDS
Bankruptcy courts in every state require bankruptcy trustees to obtain a bond. A bankruptcy trustee is responsible for managing and liquidating the assets of the party petitioning for bankruptcy. The court requires a bankruptcy bond to ensure that creditors and other beneficiaries receive any funds or assets due to them and that the trustee complies with the rules of the court in performing his or her duties.
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