Glossary

Glossary

Administrator

A person or organization appointed as fiduciary in the settlement of an estate of an individual who died without a will, had a will but not an executor, or in cases when the executor has died, been removed from the case or has declined to serve.

Administrator Cum Testamento Annexo or with Will Annexed

An administrator appointed by a probate court to administer the estate where there is a will, but it failed to name an executor or the one names failed to qualify.

Administrator De Bonis Non

An administrator appointed by a probate court to succeed an administrator who has died, resigned or been discharged prior to the administration being complete.

Administrator Pendente Lite

An administrator appointed to preserve the assets of a decedent’s estate where the will is contested or other circumstances prevent the immediate qualification of an executor if there is a will, or the appointment of an administrator there is no will or qualifying executor.

Administrator, Cum Testamento Annexo, De Bonis Non

An administrator appointed by a probate court to succeed an executor who has died, resigned or been discharged prior to the administration being complete.

Airline Reporting Corporation (ARC Bond)

A bond that guarantees payment to the airlines from agents for the sale of airline tickets. It is required by the Airline Reporting Corporation (ARC) that all agents doing business with the ARC maintain a minimum bond of $20,000 up to a maximum bond of $70,000 as determined by the ARC.

Appeal Bond

May be required whenever a judgment, order or decree has been rendered and the plaintiff or defendant desires to appeal to a higher court and usually to stay execution of judgment, order or decree. The bond guarantees that the principal will prosecute the appeal and perform the judgment, order or decree appealed from if it should be affirmed by the appellate court.

Application

A form providing the surety company with certain information necessary to underwrite a given risk.

Associate in Fidelity and Surety Bonding (AFSB)

Professional designation awarded by the Insurance Institute of America upon successful completion of five national exams.

Attachment

The legal act of seizing a debtor’s property/assets when they are in dispute, ahead of trial. Attachment is only allowed when the plaintiff alleges statutory ground for it, such as the defendant is a non-resident, or about to leave the jurisdiction, or remove or conceal the property.

Attachment Bond – Plaintiff

This bond provides indemnity to the defendant against loss or damage in case it’s decided that the statutory ground for attachment did not exist or the plaintiff fails to recover a judgment against the defendant.

Attachment Bond – Defendant

When an attachment has been issued, the defendant may discharge the attachment by giving bond conditioned for the payment of any judgment that may be rendered in the action including interest and cost.

Auctioneer Bankruptcy Bond (US Bankruptcy Appointed)

Guarantees that the Auctioneer will faithfully perform the duties of an Auctioneer. The Auctioneer will account for all monies received and in all things comply with the requirements of the United States Trustee and/or the United States Bankruptcy court.

Bond Penalty

Limit of liability under a surety bond.

Cancellable

A bond that the surety company may revoke with the proper notice.

Collateral

The principle’s pledge of specific assets to the Surety to secure it against loss by reason of default of the principle.

Common Law Rights

Rights granted to the surety independent of any written indemnity agreement, resting upon the principle of natural justice. The right of subrogation is an example (see also Subrogation).

Concessionaires Bond

Guarantee for payment of rent or a percentage of profits. The bonds required by the principal for operating a business enterprise on public owned or on private property. This bond is mainly used by the business enterprises for their business purpose. Most commonly associated with cafeterias, cantinas and vending machines.

Condition

One of four parts of a bond. It is the essence of the guarantee.

Conference Companies

Members of the Surety Association of America.

Conservator

A person, official or institution designated to take over and protect the interests of an incompetent.

Continuity Clause

The clause in a bond, or rider attached to a bond, under which that bond, subject to its terms, assumes liability for any loss due to acts which occurred while a prior bond was in force, but which were not discovered until after the expiration of the discovery period of the prior bond.

Contract Bond

The most common type is a guarantee of faithful performance of contracted work and usually the payment of all labor and materials bills related to the contract. Often, two bonds are required call a Performance Bond and a Payment Bond.

Contractual Rights

Rights granted to the surety in a written agreement. These typically extend the principle of subrogation in the form of an Indemnity Agreement (see also Indemnity Agreement).

Court Bond

A general term encompassing all bonds and undertakings required of participants in a lawsuit. These bonds are typically required by statute or court order for the benefit of another person, company, public, state or federal entity, otherwise known as the obligee. They are filed in connection with litigation by a principal as specified by the court. The principal can be the Appellant, Defendant, or anyone who seeks court intervention. These bond protect the obligee from loss as a result of ensuing litigation.

Conversion

The wrongful taking of property entrusted to one’s care.

Cumulative Liability

The aggregate amount of two or more bonds in behalf of the same principal filed in succession, where the succeeding bond(s) does not extinguish the liability under the prior bond(s) or the liability of the surety is the penalty of the bond times the number of years in force.

Custom Bond

A type of federal bond guaranteeing the payment of duties by an importer or exporter on commodities subject to foreign trade and released from the custody of the U.S. Customs Service prior to final determination of duties. None of these bonds contain cancellation privileges, but the government may permit the surety to cancel some bonds on 60-days’ notice (see also Federal Bond).

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Depository Liability

A public official is liable for public funds which he/she deposits in a bank and cannot pay over because of insolvency or failure of the bank. In many states, statues provide for the designation of depositories for public funds and for the furnishing of collateral security by such depositories.

Effective Date

The date from which bond coverage is provided.

Endorsement

A form attached to the bond to add, alter, or vary its provisions. Also called a rider.

Excise Bond

A type of federal bond guaranteeing the adequacy of the premises; compliance with regulations that are subject to supervisory control over the manufacture, handling, storage, and transportation of the given product; as well as the payment of taxes. These bonds are required under the Internal Revenue laws and generally do not contain cancellation provisions but the regulations governing them may permit the right. (see also Federal Bond).

Executor

One named in a will to distribute and settle the estate of the testator. Same duties as an administrator.

Expiration Date

The date upon which a bond ceases to provide coverage unless previously cancelled.

Federal Bond

Bonds required by the federal government providing some sort of financial guarantee. (see also, Customs Bond, Excise Bond, Immigrants Bond).

Fiduciary

An individual or corporation occupying a position of trust, particularly one who manages the funds and/or affairs of others.

Fiduciary Bond

These bonds guarantee that the principal, a court appointed fiduciary, will administer property held in trust in such capacities as administrator, executor, guardian, trustee or receiver, in accordance with the law. These bonds guarantee honesty as well as specific performance of duties under the law. These bonds, generally, are non-cancellable.

Fixed Penalty Bond

Bond for which the liability is clearly expressed in terms of a stated and definite sum of money.

Forfeiture Bond

Bond where the full penalty is payable upon breach of condition regardless of the actual amount of loss or damage.

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Garnishment – Bond to Discharge or Release

When assets belonging to a defendant have been attached while in the hands of a third party, the proceeding is called a garnishment and the third party is called the garnishee. This bond is similar to the release of an attachment bond.

Guardian

A fiduciary appointed by the court to administer the estate of a minor or incompetent.

Guardian – Incompetent

A person who has the legal authority and corresponding duty to care for the personal and property interests of another person, called the ward. Usually, a person has the status of guardian because the ward is incapable of caring for his or her own interest due to incapacity or disability.

Guardian – Minor Child

A person who has the legal authority and corresponding duty to care for the personal and property interests of a minor child. Usually, parent/parents/relatives die leaving money and property to a named minor child. The court appoints a guardian to insure safe keeping until the minor child reaches the age of majority.

Guardian Ad Litem

One appointed to preserve the assets of the estate of a minor during litigation which delays the appointment of a general guardian.

Hold-Over Public Officials

Those elected or appointed to succeed themselves in office or who continue beyond the limits of their terms until their successor is appointed or elected.

Immigrant Bond

A type of federal bond required of aliens entering the United States temporarily for specified purposes. The bond is conditional upon the departure of the alien at the end of the authorized period of stay, subject to forfeiture of the bond penalty. These bonds are non-cancellable.

Income Tax Bonds

Given to guarantee payment of federal income taxes due or claimed to be due. These are direct financial guarantees requiring collateral.

Incompetent

A ward that is incapable of caring for his/her own interests due to incapacity or disability.

Indemnity

Restoration to the victim of a loss up to the amount of the loss.

Indemnity Agreement

Signed contract where the principle agrees to indemnify the surety company in case of loss.

Indemnity to Sheriff or Marshal Bond

This bond protects the Sheriff or Marshal from a suit being brought on by the party whose property is being seized by an order of possession or writ of execution.

Injunction

A judicial process whereby the defendant is required to do or refrain from performing a particular act.

Injunction – Defendant’s Bond to Dissolve

The court may order an injunction to be dissolved conditional upon the giving of a bond. The bond guarantees payment to the plaintiff for damages that may be sustained as a result of the performance of the act or acts originally enjoined. It is the privilege of the defendant to proceed as if the injunction had never been issued.

Injunction – Plaintiff’s Bond to Secure

An injunction may be granted on the condition that the plaintiff furnishes a bond to indemnify the defendant against loss in case it is decided that the injunction should not have been granted.

Intestate

One whom dies without a legal will.

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Joint Control

An arrangement by written agreement between fiduciary and a surety, acknowledged by the bank in which funds are deposited or securities lodged so that the funds or securities are controlled by both parties.

Judicial Bond

These bonds are financial guarantees given in litigated cases in state or federal courts. There are two types, plaintiff’s bonds and defendant’s bonds. All judicial bonds are non-cancellable and may run a considerable number of years.

License and Permit Bond

Vast number of bonds required by local ordinances, state laws, and, in some instances, by the federal government or its agencies. These bonds are designed to primarily guarantee that the principle, wishing to engage in a specific activity, will comply with the regulations regarding that activity. They may extend protection to third parties, or, they may be strictly financial guarantees to remit taxes, such as sales tax. These bonds are usually cancellable.

Lien

A charge upon real or personal property for the satisfaction of a debt.

Limit of Liability

The maximum amount which a surety company will pay in case of a loss. Also referred to as the bond penalty.

Lost Securities Bond

Bond required by the issuing company of the stock bank through its transfer agent. This bond is to protect the corporations and the agent in case the lost certificate is somehow redeemed by the principal or another party at a later date. Several categories exist, including Lost Life Insurance Policies, Lost Stocks, Lost Securities, Lost Cashier’s Checks, Lost Money Orders, and Lost Certified Checks. Also known as a Lost Instrument Bond.

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Mechanics Lien – Bond to Discharge

A lien against real estate may be filed for the amount claimed to be due for labor or materials furnished for the construction of a building or improvement upon the property. Pending final determination of the owner’s liability, the owner may discharge the lien by giving a bond that guarantees payment of any amount that may be found due to the claimant with interest and cost.

Miscellaneous Bonds

Typically these bonds are non-contract commercial surety bonds that provide some sort of financial guarantee.

Non-cancellable

A bond that cannot be cancelled by the surety once it has been issued.

Obligee

The person, firm, corporation, government or agencies of the government that establishes and determines the obligation of the bond and its underlying agreement. The party in whose favor the bond runs. The party protected from loss by the bond.

Obligor

Also known as the principal, is the party bound on a bond furnished by the surety company. This party is obligated in some manner to the obligee.

Open Default Bond

Where a judgment has been entered by default, the defendant may under certain circumstances, have the case reopened and tried on its merits, upon giving a bond conditioned for the payment of any judgment that may be rendered.

Open Penalty Bond

A bond written without a limit on the liability to a principle or surety. Under state and federal regulations surety companies are not permitted to obligate themselves on any one bond for an amount greater than a specified percentage of their capital and surplus.

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Penal Sum

Represents the maximum amount a surety company will pay under a bond. The amount of the penal sum is typically expressed as a percentage of the underlying contract price.

Penalty

Limit of liability under a surety bond.

Power of Attorney

Authority given to a person or corporation to act for and obligate another, to the extent set forth in the instrument creating the power.

Principal

Also known as the obligor, is the party bound on a bond furnished by the surety company. The principal is obligated in some manner to the obligee.

Pro Rate Cancellation

Cancellation of a bond when the portion of returned premium is the full proportional amount due.

Probate Bond

A specific type of court bond that guarantees the duties of the administrators, trustees, guardians, executors and other fiduciaries of an estate. These bonds are non-cancellable.

Public Officials Bond

A bond that guarantees honesty and faithful performance of duties. Most public positions, elected or appointed, that involve handling funds will be required to be bonded. These bonds are generally for the protection of the taxpayers and the penalty amount should be adequate to protect this interest.

Qualifying Power

The largest net amount of risk a surety company can carry on a bond. Also known as the Underwriting Limitation.

Recital

Portion of a surety bond usually commencing with the word “Whereas” which describes the transaction for which the bond is given. In the case of a guarantee of a contract it generally incorporates the contract by reference.

Refunding Bond – Rate Litigation

Applicable to any bond conditioned for future return, if ordered, of money which the principal was allowed to charge and retain pending final determination or decision in a contested matter.

Removal Bond

Where a case is originally brought in state court is removed to federal court, the defendant is required to give a bond for the payment of costs in federal court if the case is found to have been improperly removed. Similar bonds may be required to move a case form one state to another.

Replevin

An action to recover possession of specific articles of personal property.

Replevin – Defendant’s Bond to Recover Property Replevied

Where personal property has been replevied, the defendant may, by furnishing of a bond, regain possession of the property, pending final decision of the merits. The bond is conditioned for redelivery of property to the plaintiff, if ordered to do so, or otherwise comply with a court order or judgment.

Replevin – Plaintiff’s Bond to Secure

A bond conditioned for the return of the property taken through replevin, if return is ordered, and for the payment of all costs and damages adjudged to the defendant.

Retroactive Restoration

A provision in a bond whereby, after payment of a loss, the original amount of coverage is automatically restored to take care of undiscovered losses as well as future losses.

Rider

A printed form of special provision passed to a bond. Also called an endorsement.

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Short Rate or Short Rate Cancellation

The charge required for bonds taken for less than one year, and in some cases, the earned premium for bonds cancelled by the insured before the end of the term of the bond.

Short Term Bonds

Bonds covering fiduciaries whose duties are to collect the assets of the decedent, pay the debts, and distribute the remainder according to law. The bonds are typically less than two years in duration.

Statutory Bond

Term used to describe a bond given in compliance with a statue. Such a bond must carry the liability the statue imposes on the principle and the surety.

Stay of Execution

A bond to stay or suspend execution on a judgment. It guarantees the payment of the judgment upon termination of the stay.

Subrogation

The assignment to a surety company, after payment of a loss, the rights to recover the amount of the loss from the one legally liable for the loss.

Supercedeas Bond

A bond to supersede or take the place of a judgment, and coverage is substantially the same as a defendant’s appeal bond.

Supercedeas Suretyship

When a surety writes a bond to take the place of another bond which is cancelled on the effective date of the new bond. The bond either contains a supercedeas suretyship provision or a rider is attached agreeing to pay losses that would have been recoverable under the first bond except for the expiration of the discovery period.

Surety

A party that guarantees the performance of another. The contract through which the guarantee is executed is called a surety bond.

Surety & Fidelity Association of America

Trade association consisting of companies that collectively write the majority of surety and fidelity bonds in the United States. Commonly known as the SFAA, it is a great resource for surety information.

Surety Bond

A contract under which one party (the surety) guarantees the performance of certain obligations for a second party (the principal) to a third party (the obligee).

Surety Company

A party that guarantees the performance of another. The contract through which the guarantee is executed is called a surety bond.

Suretyship

The obligation to pay the debts of, or answer for, the default of another.

Term

Period of time for which a bond is issued.

Testator

One who makes a will.

Treasury Limits

Qualifying limits imposed upon surety companies by the United States Treasury.

Trustee

In most states, the Trustee Under Will is the same as an executor. Most commonly the Trustee is an executor of a trust.

Testamentary Trust or Trust Under Will

A trust whose creation is spelled out in a will.

Special Needs Trust

Trust established to provide the care and special needs required by a ward. The trustee of a special needs trust is similar to a guardian.

Veterans Disbursement Fiduciary

This VA Custodian Bond is required by the Veteran’s Administration where the ward is a veteran receiving benefits from the VA. The principal on the bond is the caregiver of the ward. The bond guarantees that the principal is not misusing funds. This bond is similar to a guardian bond.

Underwriting Limitation

The largest net amount of risk a surety company can carry on a bond. Also known as the Qualifying Power.

Union Wage & Welfare Bond

Guarantees an employer’s contribution to welfare funds; including payment of wages. Some unions require a bond to cover wages only, others may require a bond for fringe benefits only, but most combined both obligations and may add more to include paying into the retirement plans that may exist.

Utility Deposit Bond

Guarantees that the principal will pay utility bills to the Utility Company in a timely manner. The bond amount varies from obligee to obligee as some calculate the bond by the percentage of power that will be consumed per month.

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Ward

A person whose personal and property interests are cared for by a guardian.