We at Jurisco are asked all the time: How do you properly discharge (or exonerate) a surety bond once it is no longer necessary, or after all the claims are settled. More specifically, what does the court require and what does the surety company require to be satisfied that there won’t be any future claims coming against the bond? This can be a big headache for surety, the court and your clients if not handled properly. For one, if not properly notified, the surety company will assume that the bond is still active and will continue to operate as such; i.e. keep the risk on their books and bill the client for annual premiums. This can lead to an accounting hassle for the client as they had been operating as their obligation to the surety (and all claimants was satisfied).
What the surety and the courts are looking for is: A statement from the court stipulating that “The Surety is released from all future liability and claim against the bond” Sometimes this will be found in the settlement agreement. In a non-settled case this language is generally found in the satisfaction of judgement. Surety companies also look for an ‘order of discharge’ from the court stating that the Surety is released from all liability and claims against the bond. The ‘Order of discharge’ is most often used in probate and elder care cases where bond is required to be kept current throughout the duration of care in a guardianship/conservatorship or for the duration of fiduciary responsibilities is a personal representative is managing an estate through the probate process.
If you have any question about any part of the surety bond process, please contact the experts at Jurisco and one of their staff will be happy to answer any of your queries.