Marine Sanitation Device Inspector Bond

What Is the Purpose of the Sanitation Device Inspector Bond?

The Alabama Department of Public Safety, Marine Patrol Division (DPS) requires all marine sanitation device inspectors to obtain a $10,000 Special Agent Indemnity Bond in order to receive their credentials. The surety bond guarantees the DPS has financial recourse should the DPS experience financial damage from the Special Agent due to non-compliance of rules, regulations, and their contractual obligations and not receive restitution from the Special Agent then the surety company will provide funds. 

The main concern of the DPS is that they receive their $10 fee for each inspection performed and that the Special Agent never charges more than $50 total for each inspection. The inspector must record each inspection and provide appropriate remittance to the DPS. 

What Do Surety Underwriters Need to Know About the Special Agent Indemnity Bond?

Underwriters for the Alabama inspector bond need to be concerned with the criminal activity of the inspector. Collecting fees and not recording them, is perhaps the greatest risk to the surety company as multiple infractions can pile up before an investigation is launched by the Marine Patrol Division. 

The other significant risk may exist from an inspector fabricating passed inspections which conversely leads to lawsuits from unlawful dumping sewage from vessels. The State of Alabama could be charged in conjunction with the boater. The bond form and state legislative language make this a potential surety bond claim as it would be a breach of contract by the special agent inspector and that is covered by the surety bond.

The bond has a fairly low limit and thus the surety industry will most often utilize a credit-only-based application for the bond. The credit may be a good indication if the temptation risk exists for an inspector to start pocketing money to take care of debts.

What Do Surety Claims Handlers Need to Know About the Special Agent Bond?

A claim will come to the surety company from the Alabama Department of Public Safety, Marine Patrol Division. The Alabama Administrative Code Chapter 220-6 details the laws surrounding marine sanitation device inspectors. Any breach of contract that results in fiscal damage to the Alabama Department of Public Safety or the public may result in a claim against the bond.

There is a good chance due to the small fee amount collected in each individual case that a claim on the bond would be a result of multiple infractions. It is unlikely a surety bond would come into play for one missing $10 fee to the DPS. Surety companies should be prepared to handle a payout to multiple claimants and should push to make one combined payment to the DPS. Thus avoiding a significant cost of loss-adjusted expenses.

Can an Inspector Avoid the Bond Requirement?

No, there are no alternatives to the surety bond offered by the DPS.

How Much Does the $10,000 Special Agent Indemnity Bond Cost?

Rates for the Special Agent Bond range from $100 to $1,000 and are based on the personal credit of the marine sanitation device inspector.

How Is the Special Agent Indemnity Bond Filed?

The bond form needs to be signed by both the principal (special agent inspector) and a surety company attorney-in-fact. Two witnesses must sign off on the bond form and an agent number provided. If you are a new applicant, please check with the DPS to see if they have an agent number prepared to put on the bond form.

The surety company must seal the bond form and they or the inspector must deliver the bond to the following address:

Alabama Department of Public Safety
Marine Patrol Division
301 South Ripley
Montgomery, AL 36130

Can the Special Agent Bond Be Cancelled?

The surety company sends a notice of cancellation to the DPS. Upon receipt of the notice the DPS does maintain a 30-day cancellation period wherein the bond remains active before it cancels and the surety company is relieved of any liability from that point forward. 

Returns for bonds should be made on a pro-rata basis. A minimum earned premium of $100 is typically applied and factored into the return amount available.

Do Marine Sanitation Device Inspector Bonds in Alabama Need to Be Renewed?

The bond must be active so long as the Special Agent keeps performing the annual inspections of vessels. Unlike other surety bonds, surety companies must provide an active notice of bond renewal to the DPS. The DPS requires this notice to be received by them 30 days prior to the expiration date of the bond. 

This creates a special issue where a surety company will have to cancel the bond at the 30-day mark prior to the expiration date. A reinstatement will need to be requested should renewal payment come in “late”. It is in the best interest of all parties involved to make sure the surety is paid and notices are made in a timely manner.