ACCOUNTING
METHODS: For
construction or building contractors, the two methods of accounting,
both realistic and preferred by surety companies, are (a) the Completed
Contract method, and (b) the Percentage-of-Completion method.
ADMINISTRATOR:
A fiduciary appointed by a probate court to manage or distribute
the assets of an estate of a person who died without leaving a will.
ADMINISTRATOR CUM TESTAMENTO ANNEXO
OR WITH WILL ANNEXED: One appointed by a probate court to administer
the estate where the deceased left a will but failed to name an executor
or the one named as executor fails to qualify.
ADMINISTRATOR, CUM TESTAMENTO ANNEXO, DE BONIS NON:
One appointed by a probate court to succeed an executor who has died,
resigned, or been discharged before the administration is complete.
ADMINISTRATOR DE BONIS NON:
One appointed by a probate court to succeed an administrator who has
died, resigned or been discharged before the administration is complete.
ADMINISTRATOR PENDENTELITE:
One appointed to preserve the assets of a decedent's estate where the
will is contested or other circumstances occur which delay qualification
of an executor if there is a will, or the appointment of an
administrator if there is no will.
ADVANCE PAYMENT BOND:
Guarantees repayment or liquidation by the principal of moneys advanced
in connection with a construction or supply bond or other type of
contract.
AGGREGATE LIABILITY
CLAUSE: A clause in a
third party license bond which limits the surety's liability to the bond
penalty regardless of the number of claims made against 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.
Where the alcohol is intended for beverage purposes, the bond is
frequently referred to as a liquor bond or intoxicating liquor bond.
ANNUAL BOND:
One written to cover contractors or bids awarded or submitted during an
annual period or for a period terminating within a fiscal year.
APPEAL BOND:
One filed in 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, in hope of reversing the judgment.
The bond guarantees that the judgment will be paid if the appeal fails.
APPLICATION:
A questionnaire which must be completed, when required, by an applicant
for a bond. It gives the
company information about the applicant and contains his/her agreement
to indemnify the surety in the event of loss, as well as his/her promise
to pay the premium.
ASSETS:
The items on a balance sheet showing the book value of property owned.
For a surety this could include all funds, property, securities, etc.,
or the property of an estate, whether real or personal.
ATTACHMENT BOND - PLAINTIFF'S:
Attachment is taking a defendant's property into custody by a summary
process from the court in advance of the trial on the merits of the
case. It is taken as security for the payment of any judgment that
may be recovered by the plaintiff in the action.
Attachment is allowed only where the plaintiff alleges a statutory
ground for it (e.g. defendant is a nonresident or is about to leave the
jurisdiction or remove or conceal his/her property).
The bond, which the plaintiff is required to furnish, provides for
indemnity to the defendant against loss or damage in case it is finally
decided that a statutory ground did not exist or the plaintiff fails to
recover a judgment against the defendant.
ATTACHMENT - DEFENDANT'S BOND TO DISCHARGE OR RELEASE:
When an attachment has been issued, a defendant may discharge the
attachment by giving the bond conditioned for the payment of any
judgment that may be rendered against him/her in the action, with
interest and costs.
BID 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
bond. Default will
ordinarily result in liability 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. In any
event, however, the liability of the surety is limited to the bid bond
penalty.
BLANKET FIDELITY BOND:
A bond which covers loss of money, merchandise, or other property owned
by the insured or in which he/she has a pecuniary interest, when such
loss is due to dishonesty of his/her employees.
All employees are covered under the bond unless specifically excluded.
BLANKET POSITION BOND:
A blanket fidelity bond which covers all of the insured's employees for
a uniform amount on each so that if loss is caused by dishonest or
fraudulent acts of two or more employees in collusion, recovery up to
the amount of the bond may be made on each identifiable participating
employee.
BLUE SKY BONDS:
Many states control the sale of securities under regulations known as
Blue Sky Laws. These laws are designed to prohibit the sale of worthless
securities. The bonds
required of security dealers indemnify purchasers against loss caused by
false representations. The
term Blue Sky Law originated when a court complained that certain stock
was backed only by the blue sky.
BOND:
Generally speaking, it is an agreement whereby one party, called the
surety, obligates itself to a second party, called the obligee, to
answer for the default of a third party, called the principal.
CANCELLATION CLAUSE:
A clause in a bond which permits the surety to terminate its future
liability by serving written notice upon the obligee.
CLAIMANT'S BOND:
In cases where, pending final decision on the merits, property is
released to one not a party to the litigation, who claims to be the
owner thereof. The claimant may be required to give bond conditioned for the
return or redelivery of the property if ordered to do so by the court.
CO-FIDUCIARY:
One who serves as a fiduciary jointly with another, such as a
co-administrator, co-executor, co-guardian, etc.
COLLATERAL:
Anything of value pledged with the surety to secure it against loss by
reason of default of the principal.
COLLUSIVE LOSS:
A loss caused by two or more dishonest employees acting in consort.
COMMERCIAL BLANKET BOND:
A blanket fidelity bond issued in a stated amount on all regular
employees of commercial establishments covering against loss from
employees' dishonest acts.
COMMISSIONER OF INSURANCE:
The official charged with enforcement of the laws pertaining to
insurance in his/her state.
In some jurisdictions this official is called the superintendent or
director of insurance.
COMMITTEE:
One appointed by a court to manage the estate of a person who has been
declared incompetent. Also
known as conservator or a curator.
COMPLETION BOND:
One covering performance of a construction project that names as an
obligee a lender or similar party in a position to invoke the
performance features of the bond for its benefit without an obligation
to provide funds or to complete.
CONDITION:
The technical name of one of the four parts of a bond. The condition is not a qualification of coverage as with an
insurance policy, but is the essence of the guarantee.
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:
A guarantee of the faithful performance of a construction contract and
usually the payment of all labor and material bills related to it.
In those situations where two bonds are required - one to cover
performance and the other to cover payment of labor and materials - the
former is known as a performance bond, and the latter as a payment bond.
CONTRACT PRICE:
The whole sum of money which passes from the owner to contractor when
final settlement is made between the two under the contract, the basis
for the premium charge on most types of construction and supply contract
bonds.
CONVERSION:
The wrongful taking of property entrusted to one's care.
CORPORATE SURETY:
A corporation licensed under various insurance laws, which under its
charter, has legal power to act as surety for others.
COST BOND:
One required of a litigant conditioned for the payment of the costs of
the litigation, such as fees of the court clerk, sheriff, etc.
CO-SURETY:
One or two or more surety companies directly participating in a bond.
Their obligation to the owner is joint and several, but often a limit of
liability for each surety is stated as between themselves.
COUNTERSIGNATURE:
A signature of a licensed domiciled agent or representative required by
the laws of some states to validate the bond.
COURT BONDS:
A general term embracing all bonds and undertakings required of
participants in a lawsuit permitting them to pursue certain remedies in
the courts.
CUMULATIVE LIABILITY:
The aggregate amount of two or more bonds in behalf of the same
principal (or in the case of fidelity or blanket bonds, in favor of the
same obligee) 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.
CUSTOMS BONDS:
These bonds guarantee the payment of import duties and taxes, and
compliance with regulations governing the entry of merchandise from
foreign countries into the United States.
