Waste Hauling Bond
What is a Waste Hauling Bond?
Waste hauling bonds are a subset of the broader license and permit bond category that must be filed with the government agency (city, county, or state) responsible for regulating waste management activity in the hauler’s jurisdiction as a condition of licensure or permit issuance for most waste haulers. Many states handle waste hauler licensing and permit issuance directly, while others allow local municipalities to regulate, license, and issue permits to waste haulers. Waste haulers are responsible for collecting, transporting, and disposing of garbage, refuse, solid waste, and/or recyclables.
Waste hauler 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 waste hauler bond, will also be referred to as the “surety company” or the “bond company”.
Why is a Waste Hauling Bond Required?
Waste haulers are required to purchase license or permit bonds by state and local 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 hauler breaking waste management and disposal regulations. The surety company provides the government a guarantee (the surety bond) that the customers, vendors, suppliers and employees of a licensed waste hauler will receive payment for financial damages due to a violation of the statutes and regulations pertaining to the waste hauler license or permit 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, waste haulers 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. Waste hauler bonds refer to the hauler as the Principal, the surety bond company as the Obligor and the government agency as the Obligee.
Waste hauler bond violations triggering a bond payout may include a hauler transporting waste that exceeds weight specifications of the state, dumping waste in unauthorized locations, and operating without the required license or permit .
How much does a Waste Hauling Bond Cost?
Waste hauling bonds generally cost between 2% and 8% of the bond limit.
Example: $10,000 Waste Hauling Bond Cost
| Credit Score | Premium Rate | Bond Cost |
|---|---|---|
| 680 or above | 2.0% | $200 |
| 650-679 | 2.5% | $250 |
| 600-649 | 4.0% | $400 |
| 550-599 | 7.5% | $750 |
| 500-549 | 8.0% | $800 |
The actual cost of a specific waste hauler bond can vary widely depending on the risk associated with legal precedent in the jurisdiction, the language in the bond form and the hauler’s license history, experience and creditworthiness. Waste hauler bonds required by a local government (city or county) tend to have the lowest cost, while state requirements have potentially higher costs and/or more strict underwriting requirements.
Is a Credit Check Required for Waste Hauling Bonds?
Credit checks are required for waste tire hauler license bonds. Ultimately, the surety insurance company determines how it will underwrite and price a surety bond.
How Does the Wording in the Bond Form Impact the Cost of a Waste Hauling Bond?
The bond form is a tri-party agreement which defines the rights and obligations of the government agency (obligee), surety company (obligor) and waste hauler (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 hauler via higher bond premiums, stricter underwriting or collateral. The primary text to consider in a waste hauler bond surrounds (1) aggregate limits, (2) cancellation provisions and (3) forfeiture clauses.
Aggregate Limits
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 $15,000 waste hauler bond with an aggregate limit of $15,000 will pay out no more than $15,000, regardless of the number of damaged parties or claim occurrences. Waste hauler bonds without an aggregate limit will be more expensive than a bond with similar coverage containing an aggregate limit.
Cancellation Provisions
Most bonds contain a provision allowing for the surety company to cancel the bond (“Cancellation Provision”) by providing a notice to the waste hauler 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 waste hauler failing to pay premiums due, claim payouts, or material changes in the hauler’s credit score. Waste hauler 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.
Forfeiture Clause
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”). Waste hauler bonds with forfeiture clauses will be more expensive than a bond with similar coverage that does not contain the clause.
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