Is It Possible to Cancel a Bond?

This publish is a part of a collection sponsored by Outdated Republic Surety.

It’s a query you could encounter: Can I cancel this bond? Whereas canceling an insurance coverage coverage is usually a easy course of, cancelling a bond is extra sophisticated, notably since most bonds are required by regulation or by undertaking homeowners. Right here’s useful information for you and your bond shoppers.

Everyone knows bonds usually are not the identical as insurance coverage. Whereas bonds are thought of to be a sort of specialty insurance coverage, and the surety is normally an insurance coverage firm, bonds and insurance coverage are two distinctly completely different merchandise.

A bond is a contract between three events: the obligee (the occasion who requires the bond, or the beneficiary); the principal (the occasion who should get hold of the bond, akin to a contractor); and the surety (who writes the bond).

Not like an insurance coverage coverage, a bond can’t be cancelled via a misplaced coverage receipt. The obligee — which might be a court docket, state or municipality — requires the principal to hold a bond. Due to this fact, the surety should observe the obligee’s requirement, which is normally spelled out on the bond kind.

Cancellation provisions differ

Bond termination or cancellation provisions normally rely upon the kind of bond. Within the case of a license, allow and miscellaneous bond, the cancellation provision will normally be listed within the final paragraph of the bond wording.

Within the instance of a termination clause under, cancellation requires 30 days’ written discover despatched to the obligee by registered mail:

“The surety shall have the correct to terminate its legal responsibility hereunder by serving written discover of its election so to do, by United States registered mail, upon the obligee, and thereupon the surety shall be discharged from any legal responsibility hereunder for any default of the principal, after the expiration of thirty (30) days from and after service of such discover.”

Cancellation procedures may additionally specify 60 or 90 days, or there might be direct mailing directions for us to ship the discover of cancellation, and so on. The surety additionally typically will enable 10 days’ mailing time to be added to the time specified.

DOT bonds and court docket bond necessities

Different bonds, akin to a bond required by a state’s division of transportation (DOT), might not be cancelled till work is inspected and the DOT points a launch of the bond — even when your shopper says work is accomplished. The obligee should present the ultimate sign-off.

Court docket bonds can’t be cancelled by the principal or the surety. The court docket has required the bond, and solely the court docket is ready to cancel the bond by issuing a “launch” stating the bond is not wanted.

Be suggested: It may take a very long time to settle the property or court docket case and in the meantime premiums are due till such time as a launch is acquired.

Enterprise service and different voluntary bonds

Lastly, enterprise service bonds and constancy/crime bonds are voluntary and subsequently could also be cancelled on the principal’s request, both by an announcement requesting the cancellation or by submitting a misplaced coverage receipt requesting the cancellation.

Procedures for canceling a bond differ broadly relying on the kind of bond, or the state the place the enterprise or service is being performed. Your agent, surety or legal professional can present some steerage on the cancellation provisions concerned in the kind of bond you or your shopper are required to acquire.

Ought to you have got questions or want recommendation, contact an appointed agent or attain out to the Outdated Republic Surety department nearest you.