Securing Uncommon Court Bonds

Liz Hahn| Surety Advisor

Court bonds in civil matters serve to verify the financial capability of the bond principal to pay a judgment, deliver property, or indemnify an injured party according to the court’s final decision. They are usually required when the court is asked to confer a benefit, such as possession of disputed property, in advance of final judgment. Most agents can process an “off the shelf” court bond, such as a TRO or Injunction bond, but not every bond requirement is clear-cut. Some bonds are only needed very rarely or don’t fit the standard submission guidelines due to specific circumstances. It takes creativity, communication, and a clear understanding of the underlying legal requirements to successfully place and issue a nonstandard court bond.

A colleague brought me a bond request from a personal friend of the family. The bond had already been declined by several carriers on submission from a previous broker.

The requesting client, we’ll call him Robert, was the defendant in a lawsuit with a final judgment against him. The sheriff had executed on a writ, and seized personal property from Robert’s home to satisfy the judgment. The sheriff had also seized property belonging to a family member who we’ll call Ben, which had been stored in the house. In order to claim his property, Ben needed to post a bond to the sheriff guaranteeing that he would appear in court to prove his rightful ownership.

The bond requirement for these proceedings is stated in the RCW, but no language or form of bond is specified.

Robert was willing to provide additional indemnity to support the bond for Ben because he felt responsible for the loss of the property, and initially, this seemed like a good option: Ben was a younger individual with unknown work history or personal credit, whereas Robert was well established in business with significant real estate holdings. However, Robert had had some public financial difficulties in the recent past in addition to the present lawsuit – financial deals gone south that turned up in a Google search. It became clear that this information had been partially responsible for the carrier’s unfavorable response to the request.

Parker, Smith & Feek worked with the attorney representing the principal to establish the nature of the bond. It had nothing to do with the judgment against the requesting client and so underwriting should not be affected by the adverse judgment or the requesting client’s history. We recommended this to our market as a Sheriff’s Indemnity Bond, a low-risk class of surety; it protected the sheriff against wrongful release of the property, and provided the underwriter with Ben’s underwriting information rather than involve Robert.

Opposing counsel in the judgment against Robert was also involved in negotiating the bond requirement. The counsel and sheriff’s office objected to the form of bond, requesting instead an appeal bond.

We explained that an appeal (e.g. cost or supersedeas) bond was not appropriate to the situation. It would protect the plaintiff in the judgment, not the sheriff, creating a financial liability for Ben that had no basis in the judgment or in the code. Since surety bonds by their nature guarantee an underlying legal requirement or agreement, it would have been nearly impossible, as well as unfair, to place this bond on Ben’s behalf.

After working directly with the sheriff’s office and providing written opinions for review of counsel, we were able to manuscript a bond form based on a sheriff’s indemnity bond, which maintained the low risk profile of the bond to the principal’s benefit, and incorporated the specific section of the RCW to satisfy all stakeholders.

We were able to successfully place and issue this bond by working aggressively to understand and meet the needs of all parties. Not all bonds are clear-cut, and you should be on the lookout for requirements that are deliberately onerous, especially when negotiating with opposing counsel. The sooner you can involve your broker and get the conversation started, the better position your client will be in to meet any unusual bond requirements.

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