Glossary
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Administrator Cum Testamento Annexo or with the will Annexed
A fiduciary appointed by a probate court to manage or distribute the assets of an estate of a person who died and left a valid will but failed to name an executor or the one named as executor fails to qualify.
Administrator De Bonis Non
A fiduciary appointed by a probate court to replace an executor who refuses to act, has died, resigned or been discharged before the administration of an estate has been completed.
Administrator Pendent Lite
A fiduciary appointed to preserve the assets of a decedent’s estate where the will is contested or other circumstances delay the appointment of an executor or the appointment of an executor or the appointment of an administrator if there is no will.
Administrator special
Same as Administrator Pendent Lite.
Admiralty courts
Special courts which deal with matters pertaining to the sea. These courts have their own procedures and rules.
Advanced Payment Bond
A bond that guarantees repayment or liquidation by the principal of funds advanced in connection with a construction, supply or other type of contract.
Aggregate Limit of liability – Financial Institution Bonds
A provision in financial institution Bonds which limits the insurance company’s total liability for losses covered under the bond to a predetermined amount (compare to single loss limit of liability).
Aggregate Limit of Liability – Surety Bonds
A clause which clarifies that the maximum liability of the surety under the bond is limited the penal sum of the bond.
Alcohol Bond
A general term describing a bond given in compliance with federal or state laws or regulations governing the sale, manufacture or warehousing of alcohol for beverage or non-beverage purposes which guarantees the payment of appropriate taxes. Where the alcohol is intended for beverage purposes, the bond frequently is referred to as a Liquor Bond or Intoxicating Liquor Bond.
Annual Bid or Supply Bond
A bid or supply bond written to cover bids submitted or contracts awarded during an annual period or for a period terminating within a fiscal year.
Annual Bond
A bond which expires by its own terms in one year. If bond coverage is needed for a longer period a new bond or a continuation certificate must be issued.
Appeal Bond
A bond filed with a court by a party against whom a judgment has been rendered, in order to stay execution of the judgment pending appeal to a higher court. The bond guarantees that the judgment will be satisfied if determined to be correct.
Attachment Bond- Plaintiffs (Prejudgment)
Prejudgment Attachment is the taking into custody of a defendant’s property by a summary court proceeding, in advance of the trial on the merits of the case, as security for the payment of any judgment that may be recovered by the plaintiff in the action. This attachment is allowed only where the plaintiff alleges a statutory ground for it (e.g. defendant is a non-resident, or is about to leave the jurisdiction, or remove or conceal property). The bond, which the plaintiff is required to furnish, provides for indemnity to the defendant against loss or damage in case it is decided that a statutory ground did not in fact exist or the plaintiff fails to recover a judgment against the defendant.
Attachment-Defendant’s Bond to Discharge or Release (Prejudgment)
When a prejudgment attachment has been issued, a defendant may discharge the attachment by giving bond conditioned for the payment of any judgment that may be rendered against the defendant in the underlying action, often with interest and cost.
Attorney-In-Fact
The holder of a Power of Attorney by an insurance company empowering the execution of a bond or policy on behalf of the company.
Bail Bond-Civil or Criminal
A person under arrest may be released upon giving a bond guaranteeing that he or she will not depart from a specified area fixed by the court and will appear when ordered to do so. In the event of a breach of the bond the entire penalty becomes due and payable as forfeiture.
Balance of the Contract Price
The total amount payable by the owner to the contractor under the construction contract after all proper adjustments have been made. Adjustments include allowance to the contractor of any amounts received or to be received by the owner in the settlements of insurance or other claims for damage to which the contractor is entitled, reduced by all valid and proper payments made to or on behalf of the bond guarantees that the principal will make restitution if the guaranteed signature is invalid.
Bankers Blanket Bond
See Financial Institution Bond.
Bid Bond
A bond given by a bidder for a supply or construction contract to guarantee that the bidder, if awarded the contract within the time stipulated, will enter into the contract and furnish the prescribed performance and/or payment bond. Default ordinarily will result in liability to the oblige for the difference between the amount of the principal’s bid and the bid of the next low bidder who can qualify for the contract. The liability of the surety is limited to the bid bond penalty.
Blanket Fidelity Bond
A bond covering loss of property caused by the dishonesty of any of the insured’s covered employees. All covered employees are bonded for the same amount. (See also Coverage Form- Form A- Employee Dishonesty (Blanket)
Bond
See specific type of bond such as Fidelity Bond or Surety Bond.
Bond Penalty
See Limit of Liability.
Cancellation Clause
A clause in a bond or policy which stipulates how the bond or policy may be terminated.
Cercla
The acronym for the comprehensive Environment Response, Compensation and Liability Act of 1980 (42 USCS $$ 9601 et seq.). This federal law applies to the cleanup of hazardous waste sites. The law commonly is referred to as Superfund.
Certiorari, Bond on petition for writ of
Certiorari is an appellate proceeding where a superior court issues a writ requesting the record of a proceeding in an inferior court for review by the superior court. The one who petitions for the writ usually is required to give bond or security for the payment of the cost incurred in connection with the petition.
Civil Arrest
Bond may be required of a civil party at whose insistence an arrest is made. It usually is conditioned for the payment of costs and any damages which the defendant may sustain if it finally is decided that the arrest was improper.
Claimant’s Bond
A claimant may be required to give bond conditioned for the return of property where property is released, prior to judgment on the merits, to one who is not a party to the litigation but claims to be the owner of the property.
Co-fiduciary
One who serves as a fiduciary jointly with another, such as co-administrator, co-executor, co-guardian, etc.
Coinsurance- Financial Institution Bonds
The portion of liability that an insured assumes on the loss covered under the bond.
Collateral
Anything of value pledged with the surety to protect against loss by reason of default of the principal.
Collusive Loss
A loss caused by two or more dishonest employees acting together.
Combination Safe Depository Policy for Financial Institutions
A policy available to those financial institutions with safe deposit box exposure. The policy contains two separate Insuring Agreements. The insured may purchase either one or both of the Insuring Agreements with the same or different limits of insurance. Insuring Agreement (A) protects the insured against loss, which the insured becomes legally obligated to pay due to loss of customers’ property contained in safe deposit boxes. Insuring Agreement (B) protects against loss of customers’ property contained in safe deposit boxes through burglary, robbery, damage or destruction, provided such loss is included in the insured’s proof of loss.
Commercial crime policy (see also coverage form)
A policy providing various crime coverage for mercantile and governmental entities. Designed in easy to read language, the policy is promulgated jointly by the security association of America and the insurance service office, inc. several optional crime coverage forms are available under the policy, each of which insures against specific exposures.
Commercial Package Policy
A policy containing coverage for various lines of insurance (e.g. fidelity, burglary, boiler and machinery, general liability, etc.). Each line of insurance is written as a coverage part to the commercial package policy. Employee dishonesty and forgery or alteration coverage forms, when written, are included in the commercial crime coverage part.
Committee
A fiduciary appointed by a court to manage the estate of a person who has been declared incompetent. Also known as a Conservator or a Curator.
Completion Bond
A bond that secures the performance of a contract regardless of whether the oblige pays in accordance with the contract terms.
Computer crime policy for financial institutions
A policy available to financial institutions to insure against certain perils associated with the computer environment, including:
- Loss of funds or property sustained by the insured or a client of the insured resulting from a fraudulent entry or change of electronic data in a computer program;
- Loss resulting from transferring funds from a customer’s account based upon a fraudulent instruction received by telephone or telefacsimile;
- Loss resulting from damage or destruction of electronic data or computer programs caused by a hacker or virus; and
- Loss resulting from long-distance telephone charges incurred by the insured due to the fraudulent use of an account code or password by an unauthorized person.
Continuous Bond
A bond which remains in force and in effect until cancelled.
Contract Balance
The original contract price, including adjustments for change orders, less the amount paid to the contractor in accordance with the contract terms.
Contract Bond
A bond given to secure the performance of a contract. Frequently two bonds are required- one to cover performance and the other to cover payment of certain labor and material bills. The former commonly is known as a performance bond, and the latter as a labor and material or payment bond.
Contract Price
The whole sum of money which passes from the owner to the contractor when final settlement is made between the parties to the contract. The contract price is used as the basis for the premium charge on most types of construction and supply contract bonds.
Corporate Surety
A corporation licensed under various state laws which under its charter has legal power to act as surety for others.
Costs Bond
A bond required of a litigant conditioned for the payment of the court cost of the litigation such as fees of the court clerk and sheriff, but not attorneys’ fees.
Co-Surety
An arrangement where two or more surety companies directly participates on a bond.
Cumulative Liability
The aggregate amount recoverable under two or more surety bonds on behalf of the same principal filed in succession, where the succeeding bond(s) do(es) not extinguish the liability under the prior bonds.
Customs bonds
Bonds, which guarantee the payment of, import duties and taxes and compliance with regulations governing the entry into the United States of merchandise from foreign countries.
Deposit Premium
The initial premium required by a surety company on those forms of bonds which are subject to premium adjustment.
Depository Bond
A bond, which guarantees repayment of money, deposited with a financial institution if the institution fails or becomes insolvent.
Depository Liability
Many states have statutes which provide for the designation of depositories for public funds and for the furnishing of collateral security by such depositories. Strict compliance with such laws usually exempts public officials and their sureties from liability for loss caused by the failure or insolvency of any of the designated and qualified depositories. Otherwise, a public official may be held liable for public official may be held liable for public funds which he or she deposits in a depository which fails and causes a loss to the public body.
Discovery Coverage
A term used to describe the coverage of fidelity bonds and policies which indemnify the insured for losses sustained at any time but discovered during the term of the bond or policy. (Compare to Loss Sustained Coverage)
Discovery Period
A period of time after the cancellation of certain fidelity bonds and policies to discover losses that would have been recoverable had the bond or policy remained in force. Covered losses discovered during this time are recoverable subject to the same terms and conditions as those discovered during the policy period.
Dishonest and Fraudulent Act
As used in the insuring Agreement of many fidelity bonds and policies, a dishonest or fraudulent act means an act committed by an employee with the manifest intent:
a. To cause the insured to sustain a loss: and
b. To obtain financial benefit for the employee or another person or entity.
Dual Obligee Bond
A bond which names as additional oblige a lender or other party, putting them in a position to invoke the performance features of the bond.
Earned Premium
The portion of the premium, which the surety earns for the time the bond, has been in effect.
Effective Date
The date upon which coverage begins.
Employee Retirement Income Security Act of 1974 (E.R.I.S.A.)- Bonding Requirement
This law, among other things, requires every fiduciary of an employee benefit plan and every person who handles funds or other property of a plan subject to E.R.I.S.A. to be bonded by a surety company on the U.S. Department of the Treasury List of Acceptable Sureties on Federal Bonds (See also treasury List). The bond protects the assets of the plan against loss caused by acts of fraud or dishonesty by those covered persons handling such assets.
Embezzlement
The wrongful taking of property or money entrusted to one’s care.
Employee Retirement Income Security Act of 1974 (E.R.I.S.A.)- Bonding Requirement
This law, among other things, requires every fiduciary of an employee benefit plan and every person who handles funds or other property of a plan subject to E.R.I.S.A. to be bonded by a surety company on the U.S. Department of the Treasury List of Acceptable Sureties on Federal Bonds (See also treasury List). The bond protects the assets of the plan against loss caused by acts of fraud or dishonesty by those covered persons handling such assets.
Endorsement
A printed or manuscript form attached to a policy to alter the policy’s provisions.
Excess Coverage
Additional coverage written over a primary bond or policy applying only to loss above a specified amount.
Excise Tax Bonds
These bonds are required of Manufacturers, Distillers, Processors, Brewers, Winemakers or Dealers compliance with all immigration laws and regulations.
Exclusion
A provision in a bond or policy describing perils or property not covered.
Executor
A fiduciary named in a will to distribute and settle the estate of the testator.
Expense Ratio
A ratio measuring the percentage of a written premium used to pay all costs of acquiring, writing and servicing a bond or policy, exclusive of loss adjustment expenses.
Experience
The loss history of an individual risk or class of insured.
Experience Rating Plan
Rating plans under which credits or debits are applied to the manual premium based on the actual past experience of a particular risk. (Compare to Schedule Rating Plan.)
Expiration Date
The date upon which a bond or policy will cease to provide coverage.
Facultative Reinsurance
Reinsurance of a single risk with a separate certificate or reinsurance agreement written for each cession. The ceding company is under no obligation to accept, participation on any single risk.
Faithful Performance Coverage
Coverage protecting the named insured against loss caused by the failure of covered persons to perform faithfully their duties as prescribed by law or regulation, or by the constitution and by-laws of the insured.
Financial Statement
The financial presentation including the balance sheet, statement of earnings and other disclosures which the surety requires of an applicant for a bond (particularly a contractor), setting forth its financial position as a given time or period.
Fidelity Bond
A bond, which indemnifies the insured for loss caused by the dishonest or fraudulent acts of its covered employees. It can be written on a blanket, individual or schedule basis. Also known as Employee Dishonesty Insurance. (See also Coverage Form.)
Fiduciary
A person who, or entity which, occupies a position of trust. Fiduciaries often are appointed by courts to manage the affairs of funds of another.
Financial Guarantee Bond (Traditional Surety)
A bond which guarantees payment of a sum of money, whether or not the exact amount is known or stated.
Fixed Penalty
A bond in which the maximum amount of the surety’s liability is a stated and definite sum of money. (Compare to Open Penalty Bond.)
Forfeiture Bond
A bond where the full penalty is payable upon breach of the condition regardless of the actual amount of loss or damage sustained by the obligee.
Forgery
The signing of the name of another person or organization with intent to deceive.
Forthcoming Bond
Any bond conditioned for the return or redelivery of property in compliance with a court order. In some states it may guarantee payment of a judgment.
Garnishment – Bond of discharge or release
When money or property (often wages or salary) belonging to a defendant has been attached while in hands of a third party, the proceeding is called a garnishment and the third party is called the garnishee. This bond allows for release of the garnished property.
Guardian AD Litem
A person appointed to protect the interests of a minor or incompetent during litigation, and to receive,preserve and account for any assets awarded prior to the appointment of a general guardian.
Guardian or general guardian
A fiduciary appointed by the court to administer the estate of a minor or incompetent.
Hold-over Public Officials
Those who are elected or appointed to succeed themselves in office or who continue beyond the limits of their terms until their successors are appointed or elected.
Immigrant’s Bond
A class of federal bonds aliens entering the United States. These bonds are given to secure compliance with all immigration laws and regulations.
Income Tax Bonds
Bonds which guarantee payment of federal or state income taxes due or claimed to be due.
Indemnity Agreement
An agreement whereby the principal and/or others agree to reimburse the surety for any loss the surety may incur under a bond issued on behalf of the indemnitor or another.
Indemnity Bonds
A general term describing any bond for the payment of money which protects the obligee in the event the principal fails to comply with a specific agreement.
Indemnity to Sheriff or Marshal
A sheriff or marshal, in the execution of the process of the courts, may incur liability for damages to a third party through a wrongful actor acts. Either official, when require a bond of the party marking the request to cover the potential liability of the sheriff or marshal for that action.
Individual Fidelity Bond
A bond covering a single individual for a specified amount which protects the insured against loss resulting from that person’s dishonesty. (See also Coverage Form- Form A- Employee Dishonesty (Schedule).)
Individual Surety
See Personal Surety.
Injunction- Plaintiff’s Bond To secure
An injunction is a judicial process the defendant is required to perform or retain from performing a particular act. An order granting an injunction may be conditioned upon the plaintiff furnishing a bond to indemnity the defendant against loss in case it finally is decided that the injunction should not have been granted.
Indemnity
An agreement whereby the principal and/or others agree to make reimbursement to the surety for any loss the surety may incur under the bond.
Indemnitor
One who enters into agreement with surety company to hold the surety harmless from any loss or expense it may sustain or incur on a bond issued on behalf of the indemnitor or another.
Injunction-Defendant’s Bond to dissolve
When an injunction has been issued, the court may order the injunction dissolved upon the giving of a bond. The bond is conditioned to pay damages the plaintiff may sustain as a result of the performance of the act or acts originally forbidden or ordered by the court if it is decided the injunction was proper. The defendant then may proceed as if the injunction never had been issued.
Internal Revenue Bonds
A class of federal bonds that guarantee the payment of taxes and compliance with applicable laws and/or regulations. (See also excise Tax Bonds and Income Tax Bonds.)
Intestate
When a person dies without a valid will.
Joint control agreement
A written agreement between a fiduciary and a surety, acknowledge by the bank in which funds or securities are held, providing that both parties control the funds and sureties. Usually all checks are required to be signed by the fiduciary and counter signed an authorized representative of the surety. Access by the fiduciary to the securities is possible only in the presence of an authorized representative of the surety.
Joint Venture
When two or more entities join their financial resources and skills to undertake a contract.
Judicial Bonds
A general term applied to bonds filed in court.
Labor and Material Bond
A bond given by a contractor to guarantee payment to certain subcontractors, laborers and suppliers for the labor and material used in the work performed under the contract. Also called Payment Bond.
Labor-Management Reporting and Disclosure Act of 1959
This law, among other things, requires every officer, agent, shop steward or other representative or employee who handles funds or other property of a labor organization (or trust in which a labor organization has an interest) to be bonded by a corporate surety company on the U.S. Department of the treasury List of Acceptable Sureties on Federal Bonds. (See also Treasury List)
Legal Liability
This is a board term denoting any legally enforceable obligation.
Libel- Bond to Discharge or Release (Admiralty Proceedings)
When a warrant for the seizure of a ship has been issued, the marshal is required to stay execution of the process, or discharge the ship if process has ship bond or stipulation condition to comply with the decree of court in the action.
License Bonds
Bonds required by state law, municipal ordinance or regulation, to be filed in order to obtain a license to engage in a particular business or obtain a permit to exercise a particular privilege. These bonds provide payment to the oblige or, in some instances to third parties, for loss or damage resulting from violations by the licensee of the duties and obligations imposed upon him or her. Used interchangeably with the term “permit bond”.
Lien
An encumbrance real or personal property for the satisfaction of a debt.
Limit of Liability
The maximum amount which an insurance or surety company will pay in case of loss sometimes called the bond penalty, penal sum or limit of insurance.
Loss ratio
The percentage developed by dividing incurred losses to earn premiums.
Loss Sustained Coverage
A term used to describe fidelity bonds and policies which indemnify the insured for losses sustained and discovered during the term of bond or policy.
Loss instrument Bond
A bond given by the owner of a valuable security alleged to have been lost stolen or destroyed. The bond protects the user of the security against loss which may result from the insurance of a duplicate security or, in some instances, payment of the cash value of the security.
Maintenance Bond
A maintenance bond normally guarantees against defective workmanship or materials. However, maintenance bond occasionally may incorporate an obligation guarantee “ efficient or successful operation” or other obligations of like intent and purpose.
Mandamus Bond
Mandamus is a common law writ issued from a superior court to an inferior court, corporation, or public officer, requiring the person so ordered to perform some particular act. The person requesting the mandamus may be required to give bond to indemnify the person so ordered against loss or damage in case it finally is decided that the mandamus should not have been issued.
Mccarran-Ferguson Act
A federal statute passed in 1945 declaring that continued regulation and taxation by states of business of insurance is in the public interest. The act exempts the business of insurance from federal antitrust laws to the extent that there is state regulation. The law does not provide an antitrust exemption for acts of boycott, coercion or intimidation (15 USCS $$ 1011-1015). (See also S.E.U.A. Decision.)
Mechanics’ Lien-Bond To discharge
A lien against private real estate may be filed for an amount claimed to be to be due for labor or materials furnished for the construction of a building or other improvement upon the property. The owner of the property may have the lien discharged by giving a bond conditioned for the payment of any amount that may be found due to the claimant.
Miller Act Bonds
The Miller Act, approved August 24, 1935, requires federal construction projects over a statutory threshold amount to be protected by a performance bond and a labor and material payment bond (40 USCS $$ 270a,et seq.)
Minimum Premium
The least amount a company will charge for a bond or policy.
Miscellaneous Bonds
A general term used to describe a category of surety bonds covering diverse obligations.
Miscellaneous Indemnity Bond
A bond which guarantees specific performance of an agreement. If the principal does not perform, the surety may pay a sum of money.
Name schedule Fidelity Bond
See Coverage Form – Form A – Employee Dishonesty (Schedule).
Obligee
The party to whom a bond is given and who is protected against loss. An obligee may be a person, firm, corporation, government or a government agency.
Obligor
The party primarily bound by the obligation. (See also Principal.)
Open Default Bond
When a Judgment has been entered by default, the defendant may, under certain circumstances, have the case reopened and tried on its merits,
Upon giving an Open Default Bond conditioned for the payment of any judgment that may be rendered in the action.
Open Penalty Bond
A surety bond written without a limit on the liability of the principal or surety. (Compare to Fixed Penalty Bond.)
Pay-If-Paid
A contract provision whereby payment by the construction project owner to the prime contractor is a condition precedent to the prime contractor’s obligation to pay the subcontractor.
Pay-when-Paid
A contract provision that calls for the prime contractor within a certain number of days after the prime contractor receives payment from the project owner. Generally, failure of the owner to pay the prime contractor does not relieve the prime contractor’s obligation to pay subcontractors for work satisfactorily performed.
Payment Bond
See Labor and Material Bond.
Penal Sum
The total amount of money that the surety is obligated to pay under the terms of its bond. When this amount has been paid, the obligation of the surety is extinguished. Also known as the bond penalty or limit of liability. See also Aggregate Limit of Liability – Surety Bonds.)
Performance Bond
A bond which guarantees performance of the terms of a written contract. Performance bonds can incorporate payment bond (Labor and Materials) and maintenance bond liability.
Permit Bonds
See License Bonds.
Personal Surety
An individual who acts as surety for another, who may not charge a fee for his or her guarantee. Personal sureties generally are not subject to licensing requirements like corporate sureties, but may be subject to some minimal regulation.
Petitioning Creditor’ Bond
When a petition is filled to have a person or entity adjudged bankrupt, and application is made to have a receiver or a marshal take charge of his, her or its property prior to the adjudication, the petitioners are required to give bond to indemnify the person or entity for costs, counsel fees, expenses, and damages which may be sustained due to the seizure, in case the petition is dismissed or withdrawn by the petitioners.
Plat Bond
See Subdivision Bond.
Position schedule Fidelity Bond
See Coverage Form – Form A – Employee Dishonesty (schedule)
Power of Attorney
The authority given to a person or corporation to act for an obligate another to the extent set forth in the instrument creating the power.
Premium
The amount of money paid to the surety or insurance company for a bond or policy.
Principal
The one who is bound primarily on a bound furnished by a surety company. For example, on a contract bond, the principal is a contractor; in the license bond, the principal is the one to whom the license is issued. Sometimes the principal is called the obligator.
Probate Bond
A bond, customarily filed in probate court, that guarantees an honest accounting and faithful performance of duties by administrators, trustees, guardians, and executors, and other fiduciaries.
Pro Rata Cancellation
Cancellation of a bond or policy before the end of its term, where the return premium is the full unearned premium.
Public Official Bond (Statutory)
A bond which guarantees the faithful performance of duty of a public official who is in a position of trust, and also provides for an honest accounting of all public funds handled by that person. This type of bond is given to comply with a statute and therefore, covers whatever liability the statute imposes.
Qualifying Power (Treasury Limitation)
The largest net amount of risk which be retained by a surety on a bond. (See also Treasury List.)
Recovery
Reimbursement received by an insurer from reinsurance, by subrogation or from salvage following a loss.
Redelivery Bond
See Forthcoming Bond
Refunding Bonds
A bond conditioned to future return, if ordered, of money which the principal was allowed to charge or retain pending final determination of the matter.
Two main types are bonds required of heirs, distributes and creditors in estate challenges. Bonds in rate litigation cases guarantee that an insurer or public service corporation will refund amounts charged which are deemed to be excessive. Bonds in estate challenges guarantee the principal will refund any advance distribution of estate funds if it is determined to distribution, in whole or part, is inappropriate.
Reinsurance
An agreement whereby the original insurer arranges to pass all or part of the risk to another insurer, known as the reinsurer, in consideration of a premium paid to the reinsurer. The original insurer may be referred to as the primary insurer, the reinsured, or the ceding company. The amount of liability retained by the original insurer commonly is called the retention or net line.
Removal Bond
A bond required when a case originally brought in a state court is removed to a federal court. The bond guarantees payment of federal court costs if the case ifs found to have been removed improperly. A similar bond may be required on removal of a case from one state court to another state court.
Replevin – Plaintiff’s Bond to Secure
Replevin is an action to recover possession of specific articles of personal property. The Replevin Bond, Which the plaintiff is required to furnish, is conditioned for the return of the property, if return is ordered, and for the payment of all costs and damages adjudged to the defendant.
Replevin – Defendant’s Bond to recover property Replevied
Where personal property has been replevied, the defendant may, by the furnishing of a bond, regain possession of the property pending final decision on the merits. The bond is conditioned for redelivery of the property to the plaintiff if ordered to do so, or otherwise to comply with a court order or judgment.
Retainage
That amount (usually 5% to 15%) of money withheld from each payment by the owner until the work has been completed and the time for filing liens or claims has expired.
Retention
The amount of liability the ceding company (primary insurer) retains for its own account. Retention may be expressed either as a percentage or as a dollar amount. (See also Reinsurance.)
Rider
A printed or manuscript form attached to a bond to alter the bond’s provisions. Change or Endorse the original issued Bond.
S.E.U.A. Decision
The decision of the Supreme Court of the United States which reversed former Supreme Court holdings and ruled that insurance transactions conducted across stateliness constitute interstate commerce within the meaning of the constitution and that federal regulation, including The Sherman Act, applied to insurance.
Salvage
Property or money recovered from the principal or an indemnitor to offset the loss and expense incurred by a surety or insurer in satisfying obligations under a bond or policy.
Savings Clause
A clause in a dual oblige bond which requires the additional named oblige to fulfill the contractual obligations of the contract in order to invoke the performance features of the bond.
Schedule Fidelity Bond
See Coverage Form – Form A – Employee dishonesty (Schedule.)
Schedule Rating Plan
A rating plan under which credits or debits based on various risk characteristics are applied to the manual premium. (Compare to experience Rating Plan.)
Sequestration Bond
A bond provided to protect property held in custody by a third party until a determination is made as to the proper disposition. (See also Attachment Bond-Plaintiff’s.)
Short Rate Cancellation
Cancellation of a bond or policy by the insured, before the end of the bond or policy term, where the return premium is the unearned premium less an expense charge. (Compare to Pro Rata Cancellation.)
Signature Guarantee Bonds (Securities Transfer)
Surety bonds allowed by the securities Exchange Commission Rule 17Ad-15. These bonds are issued on behalf of banks and other financial institutions (Principal) which guarantee the validity of signatures required to transfer stocks and bonds. The bond guarantees that the principal will make restitution if the guaranteed signature is invalid.
Small Business Administration – Office of Surety Bond Guarantees
The Federal Government agency that operates the Federal Surety Bond Guarantee Programs. These programs are designed to assist sureties in providing bonds for small and emerging contractors.
Statutory Bond
A bond generally used to describe a bond given in compliance with a statute.
Stay of Execution Bond
A bond to stay or suspends execution on a judgment. It guarantees the payment of the judgment upon termination of the stay.
Stipulation for value or Limitation of Liability
A seized Ship can be released by the owner giving a stipulation (bond) in an agreed amount, or if claims exceed the value of the ship, by giving bond in an amount fixed by court based on an appraisal of the ship, conditioned to pay any sum awarded final decree not exceeding the amount of the bond.
Subcontract Bond
A bond required by a general contractor of a Subcontractor, guaranteeing that the subcontractor will perform the subcontract in accordance with its terms and will pay certain labor and material incurred in the prosecution of the subcontracted work.
Subdivision Bond
A bond running to a city, county or state to guarantee the principal will finance and construct certain improvements such as streets, sidewalks, curbs, gutters, sewer and drainage systems.
Subrogation
The legal or equitable process by which a surety or insurer obtains the right of its principal or insured to cover from a third party, payments made by the surety or insurer on behalf of the principal to the oblige or a claimant under the bond or policy.
Superfund
The common name for the Comprehensive Environmental Response, Compensation and Liability Act of 1960 (42 USCS $$ 9601 et Seq.) . (See also CERCLA.)
Supersedes Bond
A bond to supersede or take the place of a judgment.(See also Appeal Bond.)
Superseded Surety ship Provision
A provision under which a succeeding surety or insurer assumes liability or losses which would have been covered under the prior bond or policy. (See also Loss Sustained Coverage)
Supply Bond
A bond, which guarantees performance of a contract to furnish supplies or materials. In the event of a default by the supplier, the surety indemnifies the purchaser of the supplies against the result loss.
The Surety Association of America
Voluntary, non-profit, unincorporated associations of companies which are engage in the business of writing Fidelity, Forgery and Surety bonds. The Association establishes classifications of risk, develops advisory loss costs, creates standard fidelity bond forms and riders, collects and analyzes statistical data, makes filings with regulatory authorities on behalf of those members which authorize it to do so, and represents its members with regard to regulatory and legislative matters.
Surety Bond
It is a three party agreement, it is written agreement whereby one party, called the surety, obligates itself to a second party, called the oblige, to answer for the default of a third party, called the principal or obligor.
Suretyship
Refers to obligations to pay the debts of, or answer for, the default or miscarriage of another. It is a legal relationship based upon a written contract in which one person or corporation (the surety) undertakes to answer to another (the obligee) for the debt, default or miscarriage of a third person (the principal) resulting from the third person’s failure to pay or perform as required by an underlying contract, permit, ordinance law, rule or regulation.
Surplus Reinsurance
See Proportional (Pro Rata) Reinsurance.
Term
The period of time for which a bond or policy is issued.
Testator
A person who makes or has made a will.
Third party bond
A type of license bond which gives parties other than the named oblige a right of action in their own name to recover loss or damage resulting from a breach by the licensee of its obligations under the law, ordinance or regulations under which the bond is required.
Treasury List (Circular570)
To be an acceptable surety on bonds in favor of the United States, the surety must qualify under regulations of the department of the treasury. The Department annually issues a list of companies so qualified, the underwriting limit of each, the states in which each is licensed and other data. The underwriting limit frequently is referred to as qualifying power, which is equal to 10% of the capital and surplus of the surety as determined by the department.
There is no limit on the number of bonds which a surety may write as long as each bond is within the qualifying power of the surety, or the excess is protected by coinsurance, reinsurance or other methods in accordance with Treasury Circular 297. *See also Qualifying Power.)
Trustee
A fiduciary named in a will or deed of trust or appointed to manage property for the benefit of other.
Underwriter
An officer or employee of an insurance company who has the responsibility for accepting or rejecting risks on behalf of the company.
Unearned Premium
That part of the premium which has not been earned by the insurer for the unexpired portion of the term of the bond or policy.
Writ of Error Bond
A writ may be issued by an appellate court to review alleged errors of laws by an inferior court which resulted in a final judgment will be satisfied if determined to be correct.
