Common Surety Bond Terms Glossary

A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z

A

Administrator
a person who has the legal right to direct the affairs of the estate of a decedent; a person who directs and manages the affairs of a company.
Applications
a written form, filled out by an applicant, used to collect the information necessary to underwrite a contract
Attachment
the legal act of seizing a debtor's property

B

Balance Sheet
a financial statement of a business or institution that lists assets, debts, investments, and net worth
Bank Depository Bonds
bonds insuring the deposit of public funds
Bankruptcy Trustee Bonds
bonds which offer protection to the beneficiaries of a bankruptcy. It assures the beneficiaries that the appointed bankruptcy trustees will perform their duties according to court rulings.

Most common types of bankruptcy
  • Chapter 7 - requires the liquidation of a business and allows for the proceeds from the sale of its assets to be used to pay creditors
  • Chapter 11 - the business may remain and retain its assets but must file a plan of reorganization
Bid Bonds
a bond meant to guarantee that a bidder of a contract (i.e. construction contract) enters that bid in good faith and will properly execute the contract if the bid is successful.
Blanket Bonds
a bond which protects an employer from loss due to dishonest acts of all employees
Blanket Position Bonds
a bond which protects an employer from loss due to dishonest acts of employees, including embezzlement. The bond is issued for a fixed amount and each position (rather than individual) is covered for this amount.
Blanket Position Public Official Bonds
a bond which protects from loss due to dishonest acts of public employees. The bond is issued for a fixed amount and each position is covered for this amount.
Blanket Public Official Bonds
a bond which protects from loss due the dishonest acts of all public employees

C

Capacity
the maximum size of a bond allowable by a surety
Commercial Bonds
bonds required by businesses (other than contractors) to guarantee completion of service.
Commercial Blanket Bonds
a bond providing a single amount to cover the dishonest acts of employees
Conservator
a guardian, or entity, appointed by the court, to manage the affairs of and protect the interest of one who is incapable of doing it for himself (whether due to incompetence or age of minority)
Contract Bonds
a bond that provides financial security and construction assurance on building/construction jobs. It assures the project owner that the contractor will perform the contracted work and/or pay subcontractors, laborers, and suppliers.
Court and Probate Bonds
bonds that guarantee proper performance of fiduciary duties (i.e. the execution of a will) and compliance with court orders

D

Damages
the financial compensation sought by a claimant
Defendant
the person (or entity) being accused in a court case
Defendant Bonds
a bond that guarantees payment of damages if a law suit is decided in favor of the plaintiff. These bonds often require collateral.

E

Employee Retirement Income Security Act (ERISA)
Federal law established in 1974 to protect the retirement assets of Americans. The law established legal guidelines for the administration of private pension plans and investment practices. The law ensures that fiduciaries do not misuse funds.
Errors and Omissions Insurance (E&O)
an insurance policy covering damages from mistakes. These mistakes may be unintentional, due to negligence, or due to a failure to take appropriate action.
Executor
One (person or entity), appointed in a will and approved by the court, to settle the estate of a decedent

F

Fidelity Bonds
a bond issued to protect an employer from financial or property losses due to the dishonesty of employees. Often these bonds are issued when an employer hires 'high risk' employees
Fiduciary
a court appointed person or entity who is obligated to handle the affairs on another
Fiduciary Bonds
bonds that guarantee that a fiduciary will perform all duties in the best interest of the ward or estate
Funds control
a means to ensure proper disbursement of funds to sub-contractors and suppliers of a construction/building job.

I

Indemnification
an agreement to hold another harmless (not place blame, not take legal action) for a loss
Individual Bonds
a bond written in the name of a single public employee

L

Large Deductible Plans
an insurance bond where the insurer pays all losses, including those in the deductable. The insurer then obtains reimbursement from the policy holder on a quarterly (or monthly) basis. The bond protects the insurer should the policy holder fail to make payments
License and Permit Bonds
bonds required to obtain a license or permit from a city, county, state, or occasionally the federal government. The purpose is usually to safeguard the public.

M

Maintenance Bonds
bonds which protect against defective materials or poor workmanship for a specified period of time after a project is finished
Minor
a person who has not reached the legal age of majority. The age of majority varies from state to state but ranges from 18-21
Miscellaneous Bonds
a bond that does not fit the description of better known bond types. These bonds serve a unique purpose. Examples may be a Milk Dealer Bond or a Turnpike Toll Bond

N

Name Schedule Bonds
a Fidelity Bond which insures an employer for loss caused by the dishonest act of employees. Individual names are listed in a schedule attached to the bond. A specific amount of coverage is listed for each individual.
Name Schedule Public Official Bonds
A name schedule bond used specifically for public officials. This may be used for city council members, school board officials, or other groups of public officials.
Notary Public Bonds
bonds required to protect against losses from improper actions of a notary public

O

Obligee
the party a bond protects from loss; the beneficiary of the bond. For example the project owner on a construction site
Open Penalty
a type of bond that does not have a fixed sum of money stated as the amount of coverage. The liability of the surety is thus unlimited
Ordinance
a public regulation; i.e. a city ordinance

P

Payment Bonds
a bond given to guarantee payment, usually of a contractor to sub-contractors and suppliers. This is frequently the only protection offered those supplying work or materials to a public job
Penalty
the monetary obligation of a bond
Pension
financial compensation received on a regular basis (usually monthly) by an employee, from an employer, after retirement
Performance Bonds
bonds guaranteeing performance of the terms of a contract. These protect the owner of the contract from financial loss should the contractor refuse or be unable to fulfill the contract obligations.
Plaintiff
the person or business that files action/suit in a court of law.
Plaintiff Bonds
A bond that guarantees payment of damages if a law suit is decided in favor of a defendant.
Position Schedule Bonds
a Fidelity Bond which insures an employer for loss caused by the dishonest act of employees. Individual positions are listed in a schedule attached to the bond. A specific amount of coverage is listed for each position. This is valuable in cases where a company (or position) has a high turnover.
Premium
the amount of money paid for an insurance premium or bond
Principal
the person or business whose obligations are guaranteed by a bond
Public Officials
someone who holds a public office; i.e. mayor, school board official, president
Public Official bonds
bonds that protect against the dishonesty or lack of performance of duties by a public official.

R

Rates
the percentage of money (amount per thousand dollars) used to determine the bond premium.
Reclamation Bonds
a bond which insures that an entity will restore to its original condition, land that it has mined or altered.
Replevin
the legal action for the recovery of personal property wrongfully taken or detained.
Replevin bond
a bond given by a plaintiff in a replevin law suit. It will cover losses to the defendant (or court officer who seizes the property in the defendant's possession) in the event that the plaintiff loses the case
Retrospective Plan Bonds
an insurance program bond which has a final premium payment based on incurred losses and an administrative charge.

S

SBA
an acronym representing the Small Business Administration. The SBA has programs to help minority owned and small businesses obtain surety bonds They can be found on the web at www.sba.gov
Self-Insurers Retention Plan Bonds
bonds used for Workers' Compensation, general liability and other coverage where only limited or unaffordable coverage is available.
Supply Bonds
a bond which covers the contract of a supplier. It will cover losses should a supplier not deliver supplies and materials as contracted
Surety
a person (or entity), who is legally responsible for the contracts, debt, delinquency, or liability of another
Surety Bonds
a Bond that is a three party agreement between a contractor (Principal), the project owner (Obligee), and the surety company. The bond insures that the contracted work will be completed on time and on budget and will cover any losses incurred by poor contract performance
Surety Industry
contract and commercial surety businesses that provide bond coverage through agents and brokers

T

Treasury Listing
a list published by the federal government containing the maximum size bond a surety is permitted to write.
Trustee
a person or entity, appointed to manage the affairs of a company or institution including assets and debts.

W

Work-On-Hand Reports
report listing a contractors jobs in progress
Workers' Compensation Self-Insurers Bond
a bond guaranteeing that an employer will compensate an employee injured on the job, as mandated by law. An employer may choose to post a workers' compensation bond instead of purchasing workers' compensation insurance. This is a dangerous venture due to 'long-tail' exposure. 'Long-tail' liability is one where an on the job injury takes time to become known and claim to be filed, i.e. asbestos exposure.

In this regard there are two statutory bond forms:
  • Last surety on-bond form - The surety is responsible for ALL workers' compensation claims. The surety is released from liability if the bond is canceled or replaced
  • Traditional-Bond Form - The surety is liable for payment of any workers' compensation claims that occur during the time the bond is in force, even after the policy has been cancelled.