The three parties of a Cost Surety Bond include the obligee, the principal, and the surety company. The obligee is the court that is requiring the principal to be bonded. The principal must be bonded in order to proceed with court. The surety company is the party that underwrites and ensures the bond.
A Cost Surety Bond guarantees all court expenses will be paid back to the court by the individual. Plaintiffs that file an action in a state they do not live in usually need to file this bond. However, some states require residents to file a cost bond also. This bond is a promise to pay for litigation fees.
The surety bond is an agreement between the three parties that the principal will act accordingly with the bond requirements. If the principal acts fraudulently or fails to abide by the bond requirements, then the surety company will cover the claim filed against the bond.
As stated before, the court requires an individual to promise to pay for court expenses. If the bonded individual does not pay for promised expenses, the court can file a claim against the bond in order to recover fees.
The principal should be informed on all requirements before applying for a bond. If the principal acts against the bond and a claim is filed, then the surety company will pay for all paid claims which the principal must then pay back to the surety.
The cost for the bond is also referred to as the bond premium. The bond premium is the one cost that the surety company sets. All other fees that are related to the bond are set by the obligee. The bond premium is only a small percentage of the bond amount.
The bond amount is set by the obligee, not the surety company. Usually, the judge will set the bond amount based on the court case. The bond amount is the amount of coverage the surety company will pay out to the party harmed if a claim is filed against the bond.