Alabama Onsite Wastewater Performance Bond

What Is the Purpose of the Onsite Wastewater Bond?

The Alabama Onsite Wastewater Board requires a bond in the amount of $15,000 or $30,000 to indemnify an injured party from the principal’s failure to manufacture, install, or service the residential waste or sewage system. The Board is responsible for regulating licensee to protect residents in rural areas that are not connected to a public sewage system from being neglected in waste disposal or treatment.  

Who Needs the Onsite Wastewater Bond?

The Onsite Wastewater Performance Bond is a licensing requirement set by the Alabama Onsite Wastewater Board. Under the Code of Alabama Section 34-21A-16, this bond shall be held by the following licenses:

Licensees who have held their license before December 31st, 1999 are exempt from the current training, examination, and bonding requirements.

What Do Surety Underwriters Need to Know About the Onsite Wastewater Bond?

The risk for an Onsite Wastewater Performance Bond is based on just that - the licensee’s performance of the installation, service, and maintenance of sewage and waste systems on residential land. The main cause of a claim would be the property owner seeking restitution due to the licensee’s failure or inability to repair the sewage system they installed or failing to complete the installation. As long as the licensee completes any installation or repair work to sewage systems, no claims will be made on the bond. 

Based on discussions with industry leaders, this bond carries a low risk but will still require a personal credit check for underwriting for both limits. The bond has a $15,000 limit for basic installers, pumpers, manufacturers, and portable restroom licensees. The $30,000 limit must be held by advanced level installers (both I and II) and will be sufficient for the coverage needed to perform the work of a pumper, manufacturer, and portable toilet licensee. A licensee does not need to hold multiple bonds; one bond will be sufficient as long as it meets the highest bonding requirement. 

What Do Surety Claims Handlers Need to Know About the Onsite Wastewater Bond?

The Onsite Wastewater Performance Bond receives claims from property owners that have been injured due to the principal’s failure to comply with the rules and regulations of Section 34-21A of the Code of Alabama and the Alabama Administrative Code Chapter 628-X-1. Mainly, this comes from the licensee’s unwillingness or incapability to resolve an issue with the sewage system that he or she installed. The surety company is obligated to pay out the claimant up to the full limit of the bond. 

Can an Onsite Wastewater Licensee Avoid the Bond Requirement? 

No, the Onsite Wastewater Performance Bond cannot be avoided. To receive a license, the installer (whether basic or advanced), plumber, manufacturer, or portable toilet applicant must file this bond as a financial assurance to the Board. 

How Much Does the Onsite Wastewater Bond Cost?

The cost for an Onsite Wastewater Performance Bond ranges from 1% to 5% of the bond limit that is required. Cost is determined by the bond limit ($15,000 or $30,000) and the principal’s personal credit. 

How Is the Onsite Wastewater Bond Filed?

The Onsite Wastewater Performance Bond must be signed and sealed by the surety company. The principal must also sign the bond before submitting it to the Alabama Onsite Wastewater Board. 

The original bond and any other licensing paperwork that may be needed to submit can be mailed to: 

State of Alabama Onsite Wastewater Board
P.O. Box 303552
Montgomery, AL 36104

Can the Onsite Wastewater Bond Be Cancelled?

Yes, the surety company can cancel an Onsite Wastewater Performance Bond by giving the Board 45 days’ notice of cancellation. The Board will finalize the cancellation once that 45-day term has expired. Any prorated refunds can be given to the principal according to the surety company’s cancellation policy. 

Do Onsite Wastewater Bonds in Alabama Renew? 

Yes, the Onsite Wastewater Bond must be maintained in accordance with the license provided by the Alabama Onsite Wastewater Board. The license is valid for a calendar year and can be renewed by December 31st to continue licensure.