Exploring how to get an appeal bond entails more than discussing the steps involved. You want to have your client understand what an appeal bond is, what it does, and to be prepared for the costs associated with it rather than only knowing that one needs to be posted with the court. With that in mind, before we detail how to get an appeal bond, we want to quickly begin with what an appeal bond is.
What is an Appeal Bond?
An appeal bond, also known as a supersedeas bond, is used when a judgment or court ruling is being appealed in the course of a lawsuit. It essentially guarantees that when the appeal court’s decision is handed down, the appellant or judgment debtor will satisfy the judgment should the judgment be affirmed.
The appeal bond is generally filed with the trial court by judgment debtor, and acts as a kind of insurance for the judgment creditor or appellee. It may seem as if the appeal bond only benefits the appellee, but with the bond in place, that also halts all collections activity while waiting for the appellate decision to be handed down. This can buy the appellant time and better prepare them financially to pay the judgment if the appeals court doesn’t overturn the decision of the lower court.
What is Needed for a Supersedeas Bond?
To successfully obtain an appeal bond the surety would need to review specific items such as:
- An Application
- Court complaint
- Judgment/Order
- Notice of appeal
Your client should be prepared to produce these documents when seeking an appeal bond as each is important for different reasons. The court documents are to ascertain the judgment amount and help determine the amount of the bond needed as well as legal information.
Due to the high risk and probability of a claim, collateral in the full amount of the bond is typically required. There are several exceptions to this general rule, and to consider providing a bond without collateral, surety insurers review the company or individual’s financial statements to determine if the financial strength is significantly greater than the bond required. When collateral is required, there are four types of collateral that sureties will accept: cash, letters of credit from banks, real estate, and marketable securities (stocks and bonds) held in non-retirement accounts.
How Much Does an Appeal Bond Cost?
The cost of an appeal bond depends on the size of the judgment, the applicant, and if collateral is required, the type of collateral that is used. The premium rate is a percentage of that total bond amount, which can range anywhere from .30% to 4%. For example, if the appellant needs to post a $3,500,000 appeal bond, and the premium rate is set at .75% then their premium for the bond would be $26,250. The bond premium is in addition to the collateral that the appellant may have to post.
To learn more about what is involved in the cost of an appeal bond, we invite you to read an article on that subject here:
How Much Does an Appeal Bond Cost?
Types of Collateral
Regarding the collateral itself, there are four types a surety will accept, though they can be used in combination with one another:
Cash
Using cash as collateral for an appeal bond carries a couple of advantages, such as some sureties paying interest on cash deposits. Another advantage of using cash as collateral is that it can shorten the time it takes to acquire the appeal bond versus posting another type of collateral.
Letters of Credit from a Bank
A letter of credit is essentially a promise by a bank to pay a beneficiary (in this case the surety company) a specified amount upon demand (typically equal to the bond amount). Given the liquid nature of a letter of credit, this form of collateral is seen as very similar to cash collateral by sureties. If using this type of collateral, the surety would first approve the bank as the surety’s risk is with the bank’s solvency. So the surety needs to ensure the bank isn’t at risk of failing. It’s important to note that sureties have their own letter of credit format that is generally provided once the bank has been approved
Real Estate
Real estate is also an option, but there are only two sureties that currently consider taking real estate as collateral for appeal bonds. The sureties will primarily consider residential real estate (single and multi-family) and commercial properties (office, industrial, and retail). In some instances, they will accept the raw land in very well-developed and high-demand areas.Sureties typically require a property appraisal, title insurance, and will discount the value of the property to account for market fluctuations. Using real estate as collateral can be a lengthy process, usually 30 to 60 days, depending on the size of the bond and type of property.
Marketable Securities
This type of collateral includes stocks and bonds held in non-retirement accounts, as well as mutual funds, exchange-traded funds, and money market funds. If the appellant wants to use marketable securities for collateral, they must first provide the surety company with their most recent account statement and the value of the account usually needs to exceed the amount of the bond. If the surety deems the assets acceptable, they will enter into an account control or pledge agreement with the brokerage firm and the client.
What Bond Amount Does my Client Need to Post?
The appeal bond amount an appellant must post generally needs to cover the amount of the original judgment and interest during the appeal process.
The way the bond amount is calculated and the specific appeal bond requirements vary from state to state. As one of the leading national providers of court surety bonds, we have collected the various state appeal bond requirements into a chart for easier reference. Explore the link below and click on the state where the judgment was entered, a page will appear listing the requirements for that specific state:
STATE APPEAL BOND REQUIREMENTS – CSBA
Who to Work With to Get an Appeal Bond?
To navigate the process of obtaining an appeal bond, and avoid a long-drawn-out process, it is essential for the appellant and their attorney to work with an experienced surety broker that has underwriters that specialize in appeal bonds. The specialty knowledge an appellant has access to when working with such a bond agency is paramount to obtaining a supersedeas bond with little opportunity for mishaps or delays.
Due to our expertise and experience with appeal bonds, we at CSBA have access to surety insurers that other brokers do not, and we have the ability to use a wider variety of forms of collateral.
Here at CSBA, we have been assisting attorneys and their clients with appeal bonds for a variety of civil litigation matters since 1984. With our 110 years of combined experience, in addition to issuing appeal bonds we have consulted on preparing pre-trial reports, served as expert witnesses, and provided declarations and affidavits to courts. Due to our extensive work with almost every major law firm in the industry, we have a deep understanding of the appellate process at both the state courts and federal courts, as well as at the local levels. This is the expertise appellants need at their disposal when the stakes are high.
If you’re looking to guide your client on how to get an appeal bond, you have come to the correct place. We encourage you or your client to reach out to us and begin the process of obtaining an appeal bond.
