What is a Process Server Bond?
Process server bonds are a subset of the broader license bond category that must be filed with the government agency (city, county, or state) responsible for regulating legal documentation practices in the process server’s jurisdiction as a condition of appointment for most process servers. Process servers handle documents that summon citizens to appear in court. Many states handle process server appointment directly, while others allow local municipalities or courts to regulate and appoint process servers.
Process server 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 process server bond, will also be referred to as the “surety company” or the “bond company”. Process server bonds refer to the server as the Principal, the surety bond company as the Obligor and the government agency as the Obligee.
Why is a Process Server Bond required?
Process servers are required to purchase license 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 process server breaking state or local legal document serving regulations. The surety company provides the government a guarantee (the surety bond) that the citizens served by an appointed process server will receive payment for financial damages due to a violation of the statutes and regulations pertaining to the process server appointment 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, process servers 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.
Process server bond violations triggering a bond payout may include a server committing fraudulent or dishonest acts within the scope of their appointment or failing to deliver court documents.
How much does a Process Server Bond cost?
Process server bonds generally cost between .5% and 1% of the bond limit with a minimum premium of $100.
Example: $10,000 Process Server Bond Cost
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Is a Credit Check Required for Process Server Bonds?
Credit checks are typically not required for most process server bonds, however the surety insurance company ultimately determines how it will underwrite and price a surety bond.
How does the wording in the bond form impact the cost of a Process Server Bond?
The bond form is a tri-party agreement which defines the rights and obligations of the government agency (obligee), surety company (obligor) and process server (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 process server via higher bond premiums, stricter underwriting or collateral. The primary text to consider in a process server 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 $15,000 process server 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. Process server 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 process server 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 process server failing to pay premiums due or as a result of a claims payment. Process server 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”). Process server bonds with forfeiture clauses will be more expensive than a bond with similar coverage that does not contain the clause.