Appeal bonds are provided by surety or bond companies (i.e. insurance companies) through specialized surety brokers.
A surety broker’s role in obtaining an appeal bond is to advise the client on how appeal bonds work, explain the general underwriting requirements, and help the client obtain the appeal bond with the best terms based on their individual circumstances, preferences and time frame for needing to file the bond with the court.
No. Very few surety brokers specialize in appeal bonds in the United States. It is important to work with someone that writes appeal bonds on a weekly or daily basis and knows the ins and outs of the process.
When no collateral is required, appeal bonds can be approved and issued within as little as 24 hours. The process can vary significantly when collateral is being used to secure a bond. For example, cash collateral can be put in place within just a few days while real estate can take 30-60 days depending on the circumstances.
Every state has different requirements, but generally, the surety and broker need to be licensed in the particular state where the case is held. For federal cases, the surety needs to be approved and listed on the Department of Treasury’s List of Certified Surety Companies.
Yes, we are licensed to provide bonds in every state and federal district court.
The amount required for an appeal bond is set by state statute or by federal rule by each district court. Please refer to our State Bond Requirements page for your state’s bond requirement. Please note you should consult with your attorney to confirm the bond amount required for your particular case.
Each state differs by statute and particular circumstance of the state. Consult your attorney for specific details on your case.
They are one in the same and are simply different terminology used in various jurisdictions.
There are four forms of collateral surety companies will accept:
- Letters of credit from an approved bank
- Real estate
- Stock and bond portfolios held in non-retirement accounts.
Potentially. Any substitution will need to be approved by the surety and there can be additional costs or premium charges.
In very limited circumstances sureties can use these assets to secure an appeal bond.
No. Applicants that are very financially strong, particularly those with strong liquidity relative to the bond amount, can often qualify for appeal bonds based on their indemnity alone. This generally includes large private and public corporations, insurers, high net worth individuals and municipalities.
Since very few appeals are successful, there is a high probability that a surety company will receive a claim on the appeal bond. Surety premiums are very low relative to the exposure under the bond, so sureties will often require collateral to protect themselves.
Sureties will typically pay interest on cash collateral, and often it is equal to or greater than the annual premium charged. Courts, on the other hand, pay little to no interest. Some jurisdictions also allow for bond premiums to be taxed as costs if the appeal is won. Cash can also be used as a bridge to get a bond quickly with the intention of substituting it for another form of collateral later.
Letters of credit are provided by banks and are essentially a promise to pay on demand to the surety up to a certain dollar amount (usually equal to the bond amount). Letters of credit are viewed similar to cash by surety companies due to the liquid nature. The surety company must approve the bank issuing the letter of credit.
Sureties will consider residential, multifamily, commercial, and in some rare circumstances raw land if it is in a highly desirable area and free and clear of any debt. The location, amount of debt, condition, cash flow (if it generates income), and use of a property are all major considerations.
No, surety companies cannot accept retirement accounts.
Yes. It is important to note that the third party providing the collateral will also be required to indemnify for the bond.
Generally, when collateral is required by sureties, it needs to be for 100% of the bond amount. There are exceptions in limited circumstances.
Underwriting Appeal Bonds
Given the nature of what these bonds guarantee, they are conservatively underwritten by surety companies based on the financial wherewithal of the applicant relative to the bond required. Large, well-capitalized corporations and high net worth individuals can often qualify for these bonds without collateral by simply providing their guarantee if they have liquid assets well in excess of the bond amount, because surety companies can feel confident that they will pay the judgment on their own without involving them if there is an adverse decision on appeal. For those situations where the bond amount represents a large portion of the applicant’s liquid assets and net worth, surety companies will generally require collateral.
Only insurers that are licensed to transact surety business can write a bond for themselves. According to the Federal Department of Treasury Listing of Certified Companies, only roughly 200 insurers in the United States are approved to write surety bonds in federal court.
In those instances when a judgment is in excess of the insurance coverage provided by an insurer, the insurer will typically provide an appeal bond up to their policy limit. However, there are exceptions where an insurer determines they need to provide a bond for the entire judgment, and when doing so, the insurer needs to be aware they are obligating themselves financially to the entire judgment amount.
In those cases where the insurer only bonds the judgment up to their policy limit, the insured will have to provide a separate appeal bond for any excess judgment if they want to stay enforcement.
The cost will depend on the client, size of bond and whether collateral is required. All premiums are charged annually during the appeal, and the first year’s premium is fully earned meaning no refunds are given after the bond is issued. Premiums are prorated for any subsequent renewals after the first year if the bond is exonerated mid-term.
When it is not specifically addressed by statute, we have seen bond amounts set by the court by taking the monthly periodic payment and multiplying it by the anticipated length of the appeal.
The short answer is as soon as possible. It is best to contact a surety broker before the judgment has been entered to give you lead time to determine the options and time frame necessary for obtaining your appeal bond depending on the circumstances. There is no cost for the initial consultation.
Yes, surety companies can accept a third-party guaranty.
Notify the surety broker and surety before the settlement agreement is executed to ensure the proper steps are taken to exonerate the bond and discharge the surety’s liability in the process.
It depends on whether collateral is required by the surety. When collateral is used, the typical time frames are as follows:
- Cash – A few days
- Letter of Credit - 1 to 3 weeks
- Real Estate - 3 to 6 weeks
- Marketable Securities – 1 to 3 weeks