Nixon & Lindstrom Insurance

Why a court bond is Needed and the Parties Involved
WHY LITIGANT STARTS A LAWSUIT, OR APPEALS A CASE ALREADY TRIED AND LOST, OR ATTEMPTS SOME LEGAL MANEUVER, AND	PARTIES PRINCIPALS
WE AGREE TO BOND HIM	SURETY
TO GUARANTEE PAYMENT OF THE ACTUAL OR POTENTIAL FINANCIAL OBLIGATIONS HE HAS, OR MAY INCUR, AS A RESULT OF THE LITIGATION SHOULD THEY BE ASSESSED AGAINST OUR LITIGANT BY	OBLIGATION
THE COURT THAT REQUIRED THE BOND	OBLIGEE

A civil action often involves a dispute over property, or valuable rights of some kind. Since actions cannot be filed one day and tried the next, the delay may cause some possible loss of value or loss of use to the other litigant's property or rights. Thus, the bond is to protect one of the litigants who might suffer financial loss because of the litigation, or the bond may cover court costs or judgments levied against the loser, while he appeals.

The Court type of Judicial bond is only a financial guarantee to the other litigant, honesty is not a factor. Rather, the bond is just a financial guarantee to the opposing litigant. Being a financial guarantee they are underwritten about as carefully as a bank makes a loan. Under no circumstances is a Court bond written if there is any chance of default on the part of the principal. These bonds are frequently referred to as "litigant" bonds.

Since action in civil court involve a defendant and a ;plaintiff, it follows that these bonds are segregated into these two categories.

It is a statistical fact that plaintiffs (in civil action) win a much higher percentage of cases than do defendants. Thus, plaintiff bonds are more desirable than defendant bonds. Nevertheless, plaintiff bonds can be a problem too, so while they are written more freely, they are also written with care.

Probably the most suitable litigant bonds involve a financially sound business organization. They are able to pay costs, judgments, etc., when and if they are required to do so by the court, thus causing their surety company no trouble.

This "collectibility" is very important in writing "litigant" bonds. In fact, some litigant bonds require full collateral or very high grade "guarantors" standing back of the principal.

Speaking of collateral, the posting of collateral, even if 100% of the penalty, does not automatically make a hazardous bond desirable. "Full collateral" only guarantees the penalty of the bonds. Over and above this we, the surety, are subject to litigation costs from the opposing party (or 3rd party in some kinds of bonds) we could suffer substantial litigation costs, in addition to the penalty of the bonds. You can't make a hazardous bonds good simply by requiring full collateral or guarantors.

Court bonds are noncancellable an liability continues until the obligation of the principal is discharged or the applicable statute of limitations has expired.

The agent must keep in mind that proper termination evidence is necessary to close a Court bond file. Nonpayment of premium has no bearing on ending the obligation of the principal and the surety company. The surety company is exposed to a potential loss whether or not they can collect their premium.

As indicated, it is the "litigant(s)" who needs the bond. It is to protect his opponent. The statute governing the civil action involved determines whether or not a Litigant bond is needed. As with other Judicial bonds, they channel through the attorneys representing the litigants.

Generally speaking, there are similar bonds for each adversary. Or, putting it another way, there is usually a "like" bond for each litigant for any maneuver the other attempts. For example, you might wish to repossess a car from a person behind in his payments. The court might require a "Replevin bond" form you before ordering the sheriff to pick up the car from the defendant. However, the defendant might choose to file a "Counter Replevin bond" and keep the car, pending the court action. If he does, you would be as fully protected by the bonds. as if you had gained possession of the car.

Sometimes either a Defendant bond or a Plaintiff bond is said to have a "fixed penalty". Or, it is said to have and "open penalty". This simply means that the amount of the bond (the penalty) was set (fixed) by the court. Or, that the amount (penalty) was not set (left open) by the court. Incase of a loss on a "fixed penalty" bond, the actual loss up to the full penalty would be covered. However, on the "open penalty" bond, the loss would require a forfeit for the actual loss without a limit plus any costs involved.

There are so many kinds of litigant bonds and they are so varied and difficult to under write, that that no attempt is made to go into such details here. These are the more common types of Plaintiff bonds.

1) A COST BOND guarantees that the plaintiff will take care of the costs in the action he has filed.

2)A REPLEVIN BOND guarantees that the defendant will suffer no improper loss by the taking of personal property form him, before the case is tried in court.

3) AN INDEMNITY TO SHERIFF BOND protects the sheriff should he incur liability for loss or damage to third parties.

4) A plaintiff's APPEAL BOND guarantees he will pay the costs of the appeal if the court decides against him.

As previously noted, the need arises from actions to be filed (or already filed) in courts. An attorney contacts his bond agent and says "I represent so and so in a lawsuit against so and so, and we need (or will need) a (the attorney will name it) bond.

It may be for a "fixed" or "open" penalty. In addition, the attorney will either have the bond form to be used or will have the bonds forms typed up. The agent must determine from the conversation whether the attorney's client is the plaintiff or defendant. That's very important because of the desirability angle. The only thing likely to confuse the bond agent is the Latin spelling a pronunciation of the legal maneuver involved and which the attorney uses in describing the kind of bond he wants. But, its exact name must be had.

Long form applications, properly completed, are an absolute necessity with Court bonds, because of our need to have a signed indemnity agreement from the principal.