Alabama - Automotive Dismantler Bond

What Is the Purpose of the Alabama Automotive Dismantler Bond?

The Alabama Department of Revenue (AL DOR) requires automotive dismantlers and parts recyclers to obtain the $50,000 Automotive Dismantler Bond as a requisite of the Dismantler and Parts Recycler License. The surety bond ensures that the dismantler will follow the rules and regulations of their license, as well as the legislative code, and acts as a fiscal guarantee in cases of any person suffering a loss due to violations committed by the licensee. 

Who Needs the Alabama Automotive Dismantler License Bond?

According to the Alabama Department of Revenue's Motor Vehicle Division, any person, firm, or corporation that is looking to operate an automotive dismantler or parts recycler business must be licensed and bonded. This only applies to such businesses that shall possess 10 or more inoperable motor vehicles for more than 30 days. 

Licensed repair businesses and licensed junk dealers are exempt from this bond requirement. No alternatives to the Automotive Dismantler Bond requirement are accepted by the AL DOR. 

What Do Surety Underwriters Need to Know About the Alabama Automotive Dismantler Bond?

Suretypedia has confirmed with industry experts that the Automotive Dismantler Bond has a moderately low risk for underwriters to take on in Alabama. As of October 2020, the standard bond limit of $25,000 has been upped to $50,000 by the Alabama Department of Revenue (AL DOR). Considering the higher limit, a credit check and review of the applicant’s business financials are recommended when offering bond rates. 

In order to obtain a Dismantler License, the automotive dismantler or parts recycler must have already applied with the National Motor Vehicle Title Information System and received a registration number. Once this step has been completed, the application for the licensee’s status can be officially submitted. If approved, the licensee will be expected to follow all regulations and state legislation requirements pursuant to their Dismantler License. Failure to do so may result in fines from $25 to $1,000 per violation, suspension or termination of their license, misdemeanor charges, possible county jail time of 6 months if convicted, and/or a claim on their bond.

Due to the severity of the penalties, it is common for licensees to try and resolve violation issues with the AL DOR and/or the public before such drastic measures and an expensive bond claim ensues.

What Do Surety Claims Handlers Need to Know About the Alabama Automotive Dismantler Bond?

The Alabama Department of Revenue expects dismantlers and parts recyclers to follow Alabama Legislation Title 40, Chapter 12, Article 9 as it pertains to their license regulations. Although, the legislation does not specifically attest to what actions could lead to a bond claim, only stating that any person who suffered financial damages at the hands of the licensee could take civil action in the pursuance of such claim.

In reference to similar state dismantler and parts recycler bonds, a claim could occur if the licensee failed to properly acquire and report proof of title, registration card, and license plate to the AL DOR; thus failing to give a possible rightful owner of the vehicle a chance to take ownership of the vehicle before it is dismantled without their knowledge or permission. 

If this occurs, then the dismantler has just destroyed the owner’s property and must reimburse them for the vehicle. In cases where the licensee refuses to do so or is unwilling, the damaged party can take civil action that may end in a claim on their Automotive Dismantler Bond. 

If an Alabama judge rules in favor of the claimant, the court should give a clear timeline for the bond handling and claim payout deadline, but if they do not, it is recommended that the surety provider default to their company’s claim handling and payout timeline standards.

How Much Does the Alabama Automotive Dismantler License Bond Cost?

The Alabama Automotive Dismantler Bond is typically priced at 1 to 10% of the $50,000 bond limit. Surety provider rates can vary depending on the applicant’s credit score and the chosen underwriting process.

How Is the Alabama Automotive Dismantler Bond Filed?

The Alabama Department of Revenue requires the signed and sealed Automotive Dismantler Bond to be filed with their office. The bond must remain on file to maintain an active Dismantler License with the AL DOR. 

The signed and sealed bond form should be mailed to the following address:

Alabama Department of Revenue
Motor Vehicle Division
PO Box 327643
Montgomery, AL 36132-7643

The application for the Dismantler License is done online; registration and the application can be started on the AL DOR webpage. Further detail about the process can be found here.

Can the Alabama Automotive Dismantler Bond Be Cancelled?

The surety bond may be cancelled at any time by the surety provider or upon the Alabama Department of Revenues own accord. Written notice of the cancellation by the surety company must be mailed to the Department. The liability of the bond will be released within 60 days of receiving such notification.

Are Alabama Automotive Dismantler Bonds Renewable?

The Alabama Automotive Dismantler Bond is continuous, and therefore will need to be renewed upon the bond terms expiration date. Renewal is also required in order to maintain an active Dismantler License with the Alabama Department of Revenue.