PLEASE NOTE: The Terms & Definitions provided herein are for informational purposes ONLY and is not intended to serve as legal advice and is no substitute for consulting legal counsel.

AIRLINE REPORTING CORPORATION OR ARC BOND
ARC requires travel agents to post continuous, non cumulative surety bonds guaranteeing the agent will report and remit all ARC airline and train tickets sold on a weekly basis as required in the agent's reporting agreement. The bond has a 30-day cancellation clause and a six-month discovery period after cancellation. The bond is a good faith and credit guarantee.

ALCOHOL BOND
These bonds are required where alcohol is used for purposes instead of alcoholic beverages for personal consumption. The bonds basically guarantee compliance with governing regulations and the filing of all necessary reports including proof of use in accordance with the permit. The bonds also cover any special tax levies and substantial penalties if the alcohol is diverted for beverage purposes.

ALCOHOLIC BEVERAGES, BEER & LIQUOR BOND
(Permit Bonds) There is great variation from one jurisdiction to the next in the laws applicable to those dealing in alcoholic or intoxicating beverages. In all states, except where beer or liquor is sold by state stores, dealers are licensed. Bonds may be required to simply guarantee compliance with the law and can be written for reputable dealers. In other jurisdictions, the bonds may also guarantee the payment of taxes on beverages sold which makes the bond a good faith and credit guarantee. In still other jurisdictions, the bond guarantees fines or contains forfeiture provisions making the entire penal sum payable if the dealer is convicted of any violations of the law.

AUCTIONEER BOND
This bond guarantees that persons conducting auctions will not make any misrepresentations and will faithfully account for the goods and proceeds from the sale. The bonds can be an ongoing or annual license bonds covering any and all auctions during the license term or single permit bonds given in connection with a specific auction. In either case, the risk is a good faith and credit guarantee that can be written for reputable, experienced and well-established dealers.

BID BOND
The coverage provided by a bid or proposal bond is that the bidder, if awarded a contract, will enter into the contract and furnish the prescribed Performance & Payment Bond.

BLANKET COVERAGE FOR TRANSFER AGENTS
A blanket bond is issued to transfer agents and it protects them against loss resulting from the re-issuance of individuals shareholders’ securities that have been lost, stolen or destroyed. Traditionally, when a shareholder is unable to produce an original stock certificate, the transfer agent requires the shareholder to obtain a lost instrument bond before the transfer agent will replace the lost certificate. Blanket bond coverage effectively simplifies the securing of a replacement certificate.

BLANKET LOST OFFICIAL CHECK COVERAGE (The BLOC Program)
This product protects financial institutions against loss associated with the re-issuance of lost, stolen or destroyed certified or official checks. The customer must provide the bank with a lost instrument bond in most instances when a customer loses a check or has it stolen or destroyed. This coverage simplifies the process of securing a replacement check while protecting the financial institution that reissues it.

CIGARETTE OR CIGAR TAX BOND
These bonds guarantee the payment of taxes collected by the seller of cigarettes and cigars. This is a good faith and credit guarantee. The taxes are collected on behalf of the taxing authority by the seller at the point of sale to the customer. As a general rule, tax money is not segregated by the principal, but commingled with other cash belonging to or in the hands of the principal. In addition, these bonds often involve cumulative liability and audit/collection procedures vary from state to state which increases the risk to sureties providing bond coverage for several license periods or terms.

COLLECTION AGENT BOND
These bonds fall within the category of both good faith as well as credit and financial guarantees. Collection agents handle money on behalf of others, and the bonds usually guarantee faithful accounting for it. However, in many jurisdictions the bonds also protect the public from undue harassment and threats.

EMPLOYMENT AGENCY BOND
These bonds generally guarantee compliance with rules governing the conduct of this type of business, adherence to proper commission schedules and refund of fees as required by law. This is another good faith and credit guarantee where honesty, integrity, experience, and modest worth relative to the amount of bond coverage are the key underwriting criteria.

ESCROW ACCOUNT
Funds that a lender collects to pay monthly premiums in mortgage and homeowners insurance, and sometimes to pay property taxes.

ESCROW AGENT BOND
These bonds are often associated with the sale of real property or timeshares. They generally provide protection to the general public for damages resulting from fraud or misrepresentation, and guarantee refund of any money held for safekeeping by the escrow agent should the depositor be entitled to same. Escrow agent bonds are good faith and credit guarantees and the principal must be reputable, experienced and financially responsible.

EXCISE OR INTERNAL REVENUE BOND
Excise or internal revenue bonds guarantee that manufacturers and handlers of these commodities will pay the taxes and comply with all federal regulations related to their operation, including full, adequate and timely reporting of statistical data to the appropriate government agencies.

FINANCIAL GUARANTY COVERAGE
This is a versatile surety product. It is most often used in guaranteeing a performance of a specific agreement or in default thereof to pay a sum of money. This product may be written to guarantee obligations when traditional surety products fail to meet the needs of the interested parties.

GAMES OF CHANCE BOND
Currently, two states; (Florida and New York) have laws requiring operators of game promotions offered in connection with the sale of consumer products or services to either establish a trust account or post a surety bond guaranteeing that the prizes will, in fact, be awarded to the winners. In Florida there is an element of adverse selection because the security provisions can be waived for operators who have run successful promotions for five years without any civil, administrative or criminal actions. In as much as the bonds guarantee that the promoter will abide by its promises and award the prizes being offered in the promotion, the bonds must be treated as financial guarantees.

IMMIGRATION BOND
We write several types of immigration bonds. Bonds conditioned upon delivery of an alien are written when an alien is held under deportation proceedings. It is a bond guaranteeing the principal will be delivered for deportation to the Immigration and Naturalization Service when called. Bonds that state an alien shall not become a public charge are written to guarantee an alien will not accept any form of public assistance while residing in the United States. Bonds conditioned upon the voluntary departure of an alien guarantee the alien will be produced or will produce himself/herself to an immigration officer when called by the Immigration and Naturalization Service.

INDEMNITOR
As commonly used in suretyship, an individual, firm, or corporation who agrees to hold the surety free of loss and expense if it will execute a bond or bonds for a principal who is not qualified on his own for the bond or bonds. The agreement is usually, but not necessarily, a continuing one- effective until cancellation.

INDEMNITY
" a collateral contract or assurance, by which one person engages to secure another person against an anticipated loss or to prevent a loss by the legal consequences of an act or forbearance on the part of one of the parties..."

INDEMNITY BOND
This type of obligation guarantees that the principal will pay any damages or losses suffered by the governing body or public while engaging in a potentially hazardous activity that requires a specific license or permit. Differs from compliance type bonds in that the particular activity requires a special permit or license. Examples include various street obstruction and house moving bonds. These bonds can be written for well-established and reputable applicants who have adequate public liability and property damage insurance.

LAUNDROMAT/LAUNDRY JOBBER BOND
See License & Permit Bond

LICENCE & PERMIT BOND
A bond required by a public body as a condition of issuing a business license or a permit for some activity. It is a guaranty that laws, ordinances, regulations, etc., will be complied with and that the public body or members of the public will be compensated, within the bond's limits, for damage resulting from violations.

LOST INSTRUMENT BOND
Lost instrument bonds are required by the issuers of securities or their agents to protect them against any loss they might sustain by reason of issuing duplicate securities. Whenever someone loses, through theft, destruction or misplacement, a valuable instrument such as check, draft, certificate of deposit, stock certificate, municipal or government bond, bill, note, warehouse receipt, life insurance policy, deed, mortgage note or other similar instrument of ownership, the issuer or originator of the instrument will normally require a bond to protect it against loss, costs, damages, or expenses if the missing original is presented for payment at a future date by a third party claiming ownership thereto. The original may be paid through error or a bona fide holder may present it who acquired it legitimately and whose ownership must be recognized. The most common types of lost instrument bonds cover corporate stock certificates and the obligee can be the issuing corporation itself and/or its transfer agent, redemption agent or registrar. There are two Categories within this classification, fixed penalty bonds and open penalty bonds. Fixed penalty bonds are needed when items are lost such as certified checks, certificates of deposit, co-op certificates and any items with a fixed value. Open penalty bonds are needed when items are lost such as stock certificates or any item whose market value can fluctuate.

MAIL COVERAGE
This coverage protects the insured against the loss of both negotiable and non-negotiable securities in transit by: First Class Mail, Certified Mail, Registered Mail, Post Office Express Mail and Approved Courier. Security shipments made by the insured are automatically covered if they are reported to the surety on a regular basis.

MORTGAGE BROKER BOND
These bonds are good faith and credit guarantees protecting the public against fraud, misrepresentation and the wrongful withholding of earnest money deposits. The bonds guarantee compliance with the state and local laws governing the conduct of mortgage brokers and also the payment of any judgment that may be rendered against the broker for violating the law. The broker must be reputable, experienced, and possess adequate income and financial worth so as to alleviate any concerns about fraud, theft, embezzlement or incompetence.

MOTOR VEHICLE DEALER BOND
These bonds are required of dealers in motor vehicles and basically protect the buying public from fraud and misrepresentation on the part of the dealers/sales persons; guarantee the refund of deposit money if obligated to do so; and, also delivery of good title to the buyer. In some jurisdictions, the bond also guarantees the dealer will pay the seller from whom it purchases vehicles, and in still others, the bond may also guarantee some of the warranties given in connection with the sale of the vehicle. There can be different forms or guarantees in the same jurisdiction for new car dealers and used or new and used care dealers. The bonds can range from pure good faith and credit obligations to a combination good faith and credit and financial guarantee.

OBLIGEE
The one to whom the debt or other obligation of the principal is owed and who is the beneficiary of the surety bond. In a payment or labor and material bond the named obligee may be the owner or the general (prime) contractor, but the actual beneficiaries are the unnamed suppliers of labor and material. An obligee may be a person, firm, corporation, government, or an agency of a government.

OBLIGOR
Sometimes called the principal, or one bound by the obligation. Under a surety bond, both principal and surety are in a sense, obligors, since the surety must answer if the principal defaults.

PAYMENT OR LABOR & MATERIAL BOND
The coverage provided by a payment bond or labor and material bond is that the contractor will pay for labor and material used in the prosecution of the work that he is obligated to perform under contract.

PERFORMANCE BOND
The coverage provided by a performance bond is that principal will faithfully perform the terms and conditions of a written contract. In many cases performance bonds incorporate payment bond and maintenance bond liability.

PRINCIPAL
This entity is primarily liable for the underlying obligation. Is sometimes also called the obligor or debtor. The person whose debt or other obligation is secured or guaranteed by the bond and who has the primary duty to pay the debt or discharge the obligation. The individual or individuals whose fiduciary performance is guaranteed by the surety.

PRIVATE INVESTIGATOR/DETECTIVE AGENCY BOND
These bonds usually protect the public from personal injury and property damage caused by the detective or private investigator during the course of business. In addition, libel, slander and malicious prosecution are among the charges that could result in fines or penalties covered by the bond. Only exceptionally good applicants meeting the financial guarantee criteria are considered for bonding.

PROFESSIONAL LIABILITY
Covers professionals for negligence and errors or omissions that injure their clients.

PROFESSIONAL FUND RAISER BOND
See License & Permit Bond.

PUBLIC ADJUSTER/INDEPENDENT ADJUSTER BOND
See Public Official Bond.

PUBLIC OFFICIAL BOND
A bond that guarantees faithful performance of duty of a public official in a position of trust; also provides for an honest accounting of all public funds handled by him/her. Such bond is given to comply with a statute and, therefore, carries whatever liability the statute imposes.

SALES AND USE TAX BOND
These bonds are required of retailers in certain states and guarantee the payment of taxes due to the state for the sale of goods. Much like the cigarette and fuel tax bonds, the tax money is usually not segregated into a special account but commingled with other cash belonging to or in the hands of the principal and it is often used for general business purposes. In addition, these bonds can involve cumulative liability and audit/collection procedures vary from state to state.

SECOND HAND DEALER BOND
See License & Permit Bond.

STREET OBSTRUCTION BOND
See License & Permit Bond.

SURPLUS LINES PRODUCER BOND
Surplus lines insurance pertains to business that is placed by an agent or broker with a non-admitted insurer. A non-admitted insurer, known as an excess and surplus lines insurer is not licensed to transact business in a given state but may be permitted to write certain business in accordance with the surplus lines provisions of the state's insurance laws which often permits greater freedom from rate, form and operational regulation. See Broker Bond.

UNION WAGE & WELFARE BOND
Union wage and welfare bonds are required of employers. The bond guarantees the payment of wages and fringe benefits to employees, or in some case, fringe benefits only. The bonds are usually relatively small, but they are financial guarantees and the principal should be well established, historically profitable and in good financial condition.

WHOLESALE DISTRIBUTORS, FUEL TAX BOND
This bond is similar to the fuel tax bond for retailers. Basically, it allows the wholesaler to defer payment of tax on the acquisition of gasoline, aviation and/or diesel fuel to the supplier of said fuels until the date the supplier must remit taxes to the state taxing authority. This bond is more in the nature of a financial guarantee because the wholesaler is liable from its own assets for the payment of the taxes. Applicant should be reputable, well established, possess a good credit rating, historically profitable, have good cash flow, working capital of three to five times and net worth five to ten times the amount of coverage depending upon other risk factors and characteristics.

PLEASE NOTE: The Terms & Definitions provided herein are for informational purposes ONLY and is not intended to serve as legal advice and is no substitute for consulting legal counsel.