The world of court bonds can be confusing and sometimes hard to navigate. So over the next several blog posts, we will take a look at some of the more common court bonds, why they are required, and some possible underwriting considerations.
We will begin our discussion with appeal bonds and supersedeas bonds as they are very common court bonds. While we see these two terms often used interchangeably, they are two distinct and different bonds.
When a court case is settled and a judgment rendered, the losing party may desire to appeal the decision to a higher court. The appeal bond will cover the opposing party’s court costs if the appeal is unsuccessful. The court determines the penal sum of the appeal bond. And, if a claim is submitted against the bond, it will require an analysis to determine the exact amount of the court costs or damages incurred to determine the dollar amount the surety will need to pay.
According to Black’s Law Dictionary a supersedeas bond is “a bond required of one who petitions to set aside a judgment or execution and from which the other party may be made whole if the action is unsuccessful.” When a party prevails in court and obtains a judgment, the opposing party may wish to appeal the lower court’s decision. In addition, they do not want to pay the judgment to the winning party until the appeal process is complete. In order to hold off payment of the judgment, the appellant is required to obtain a stay of enforcement from the court. When the court issues the stay of enforcement, they also determine the amount of the required supersedeas bond.
Because the appellant has already lost the case at trial and because the success of most appeals is low, these bonds are consider to be one of the highest risk class of bonds within the surety industry. Typically, a supersedeas bond guarantees that the if the appellant loses the appeal, the surety and the principal are “jointly and severally” liable to the oblige to satisfy the original judgment. For this reason, most appeal and supersedeas bonds will require 100% collateral (or in some cases more) in order for a surety to entertain.