Legal document assistant bonds are a subset of the broader license bond category that must be filed with the state government agency responsible for regulating legal documentation activity in the document preparer’s jurisdiction as a condition of licensure for most legal document assistants. Legal document assistants differ from legal assistants and paralegals as document preparers are barred from providing legal advice to clients. California and Nevada are the only states with such a requirement and each state handles legal document assistant or preparer licensing directly.
Legal document assistant bonds must be issued by insurance carriers admitted in the state where the government agency requiring the bond resides. The insurance carrier issuing any surety bond, such as a legal document assistant bond, will also be referred to as the “surety company” or the “bond company”. Legal document assistant bonds refer to the document assistant or preparer as the Principal, the surety bond company as the Obligor and the government agency as the Obligee.
Legal document assistants are required to purchase license bonds by state statutes to protect a government agency by transferring to a surety bond company the cost of ensuring the public is compensated for damages resulting from a legal document assistant breaking regulations pertaining to their license. The surety company provides the government a guarantee (the surety bond) that the clients of a licensed legal document assistant will receive payment for financial damages due to a violation of the statutes and regulations pertaining to the legal document assistant license up to a limit specified in the bond (“penal sum” or “bond amount”). The bond company also directly receives claims from the public and determines the validity of claims. Ultimately, legal document assistants and preparers are responsible for their actions and required by law to reimburse the surety company for any payments made under the bond or face indefinite license suspension.
Legal document assistant bond violations triggering a bond payout may include a legal document assistant committing acts of fraud, dishonesty, or incompetence as well as performing legal services not permitted by their license.
Legal Document Assistant bonds generally cost between 1% and 5% of the bond amount depending on the credit of the applicant. The $25,000 CA Legal Document Assistant bond costs $150 for 2 years.
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Credit checks typically not required for legal document assistant bonds with bond amounts of $25,000 or below. For bonds larger than $25,000, credit checks are required. Ultimately, the surety insurance company determines how it will underwrite and price a surety bond.
The bond form is a tri-party agreement which defines the rights and obligations of the government agency (obligee), surety company (obligor) and legal document preparer (principal). While many bond forms use similar language, each bond form can be customized by the government agency requiring the specific bond and may contain provisions that increase potential costs for the surety company, which will ultimately be passed on to the legal document preparer via higher bond premiums, stricter underwriting or collateral. The primary text to consider in a legal document preparer bond surrounds (1) aggregate limits, (2) cancellation provisions and (3) forfeiture clauses.
Bond forms always specify the penal sum defined as the maximum amount of financial damages any single party can recover from the bond related to a single claim occurrence. Most bond forms also contain a clause which limits the amount of financial damages from all parties and all claims to a specific amount (“aggregate limit”), usually the same amount as the penal sum. For example, a $25,000 legal document assistant bond with an aggregate limit of $25,000 will pay out no more than $25,000, regardless of the number of damaged parties or claim occurrences. Legal document assistant bonds without an aggregate limit will be more expensive than a bond with similar coverage containing an aggregate limit.
Most bonds contain a provision allowing for the surety company to cancel the bond (“Cancellation Provision”) by providing a notice to the legal document assistant and government agency requiring the bond with the cancellation taking effect within a set period of time, usually 30 days (“Cancellation Period”). Cancellation provisions allow the surety company to cancel the bond for any reason, but most often due to the document assistant failing to pay premiums due, claim payouts, or material changes in the document preparer’s credit score. Legal document assistants’ bonds with no cancellation provision or cancellation periods greater than 30 days will be more expensive than a bond with similar coverage containing a standard cancellation provision.
Surety bond claims are paid by surety companies to damaged parties to reimburse that party for the financial loss incurred up to the bond penalty amount. Certain bonds contain a clause which requires the surety company to pay the full bond penalty to the damaged party, regardless of the actual damages incurred (“Forfeiture Clause”). Legal document assistant bonds with forfeiture clauses will be more expensive than a bond with similar coverage that does not contain the clause.
To find information on specific legal document assistant bonds, select the state to find any requirement across the country.