Hartford Bond Glossary of Terms
Administrator to Alcohol Bond
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Titles with links will take you to the matching section of the Commercial Surety Underwriting Guide
Hazard Code link will open up Underwriting Requirement Grid. Not all bonds in this Glossary are within Hartford
Bond appetite and not all bonds are in the Underwriting Guide.
Administrator: A fiduciary appointed by the probate court in the absence of a will, to manage or
distribute the assets of an estate and pay all just claims and debts. Hazard Code 3
Administrator, Cum Testamento Annexo or With Will Annexed: One appointed by a probate
court to administer the estate where the deceased left a will but failed to name an executor or the one
named as executor fails to qualify.
Administrator, Cum Testamento Annexo, De Bonis Non: One appointed by a probate court to
succeed an executor who has died, resigned or been discharged before the administration is
complete.
Administrator De Bonis Non: One appointed by a probate court to succeed an administrator who
has died, resigned or been discharged before the administration is complete.
Administrator Pendente Lite: One appointed to preserve the assets of a decedent's estate where
there is a contest of the will or other circumstances which delay qualification of an executor if there
is a will, or the appointment of an administrator if there is no will.
Administrator, Special: Same as Administrator Pendente Lite.
Administrator, Temporary: Same as Administrator Pendente Lite.
Admiralty Court: Special courts which deal with matters pertaining to the sea. They have their own
procedures, rules, etc. which differ from those in ordinary courts.
Admiralty Company: An insurance or surety company licensed to do business in a given state.
Advance Payment Bond: Guarantees repayment or liquidation by the principal of monies advanced
in connection with a construction or supply bond or other type of contract.
Adverse Selection: This occurs when an obligee enforces a bond requirement for principals who do
not meet certain credit standards of the obligee. The standards could be a minimum net worth, a
clean credit history or "X" years in the business.
Agent of Record: an individual who has a contractual agreement with an insured/principal. The
agent of record has a legal right to commissions from the risk.
Aggregate Liability Clause: A clause in a third party license bond which limits the surety's
liability to the bond penalty regardless of the number of claims made against the bond.
Alcohol Bond: A general term describing a bond given in compliance with either Federal or State laws or
regulations governing the sale, manufacture, or warehousing of alcohol. The bond frequently is referred to
as a Liquor Bond
Hartford Bond Glossary of Terms
Annual Accounting to Attachment Defendant’s
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Annual Accounting: This term relates to Fiduciary Bonds. An annual accounting is a presentation
of an estates activity over a year term. Depending on the jurisdiction, a fiduciary may be required to
file such a document with the court. As a surety, we require copies of the court accepted document
to ensure that the fiduciary is complying with court requirements and that no obvious problems are
developing with the estate.
Annual Bond: One written to cover contracts or bids awarded or submitted during an annual period
or for a period terminating within a fiscal year.
Appeal Bond: One filed in court by a defendant, against whom a judgment has been rendered, in
order to stay execution of the judgment pending appeal to a higher court, in the hope of reversing the
judgment. Hazard Code 5
Appellant: One pleading review of a court decision.
Appleton Law: Regulation named after a former Superintendent of Insurance of New York State,
and instituted in the early 1900's. The law was amended in 1989 after the failure of several banks
which provided credit during the financing boom of the 1980's. The repayment of many of these
credit risks were guaranteed by surety bonds in the form of financial guarantees.
Consequently, the state of New York passed an amendment which restricts the writing of “financial
guarantee insurance” to those companies set up to write coverage only in New York State, ie.
monoline carriers. Since the definition of “financial guarantee insurance” is somewhat vague, many
insurance companies have elected not to write bonds that may be carry potential promissory note
guarantees. Some examples include retro premium payment, large deductible, and depository bonds.
Application: A questionnaire giving required information concerning one who requests a bond
written in his/her behalf. The questionnaire describes the nature of the bond and contains the
applicant's promise to pay and to indemnify the surety in case of default.
Assets: Assets include all funds, property, securities, etc. Also the property of an estate -- real or
personal.
Assign: To transfer an interest.
Assignment: The document transferring an interest.
Attachment Bond-Plaintiff's: Attachment is the taking into custody of a defendant's property by a
summary process from the court, in advance of the trial on the merits of the case, as security for the
payment of any judgment that may be recovered by the plaintiff in the action. Attachment is
allowed only where the plaintiff alleges a statutory ground for it (e.g. defendant is a non-resident or
is about to leave the jurisdiction or remove or conceal his property). The bond, which the plaintiff is required
to furnish, provides for indemnity to the defendant against loss or damage in case it is finally decided that a
statutory ground did not in fact exist or the plaintiff fails to recover a judgment against the defendant.
Hazard Code 2
Attachment-Defendant's Bond to Discharge or Release: When an attachment has been issued, a
defendant may discharge the attachment by giving bond conditioned for the payment of any
judgment that may be rendered against him in the action, with interest and coasts. Hazard Code 2
Hartford Bond Glossary of Terms
Attorney-in-Fact to Broker of Record
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Attorney-in-Fact: One who holds a Power of Attorney granted by a surety company empowering
the execution of a surety bond.
Audit: An examination and verification of financial books and records.
Audited Statement: The report of the public accountant after having examined and verified the
books and records to an extent sufficient to certify to their accuracy.
Bail Bond: One given by an accused or convicted of violation of a law or ordinance in order to
secure his release or liberty, guaranteeing that he will appear in court at the time set for trial. Hartford Bond
does not write these type of bonds.
Bank Confirmation Letter: An agreement whereby one financial institution guarantees (confirms)
a letter of credit of another financial institution. The Hartford usually requires that all letters of
credit issued by small or foreign banks be confirmed.
Bid Bond: Given by a bidder for a supply or construction contract to guarantee that the bidder, if
awarded into contract within the time stipulate, will enter into the contract and furnish the prescribed
performance bond. Default will ordinarily result in liability for the difference between the amount
of the principal’s bid and the bid of the next low bidder who can qualify for the contract. In any
event, however, the liability of the surety is limited to the bid bond penalty.
Blanket Fidelity Bond: is a bond which covers loss of money, securities or other property owned by the
insured, held by the insured, or for which the insured is legally liable, when such loss is due to the
dishonesty of the insured's employees. Unless specifically excluded, all employees are covered under the
bond for one blanket amount.
Blocked Accounts: This term relates to Fiduciary Bonds. It is an established account of estate
assets that a fiduciary does not have access to without a court order.
Blue Sky Bonds: In many states, there are laws regulating the sale of securities, known as Blue Sky
Laws, designed to prohibit the sale within the state of worthless securities. A bond is required of
securities dealers to indemnify purchases of securities from the dealer against loss in event of false
representations, as an inducement to purchase.
Bond: An instrument designed chiefly to guarantee the integrity and honesty of the principal;
his/her ability, financial responsibility, and compliance with the law or contract. It is a guarantee of
performance. Bonds are written by the surety on behalf of the principal to ensure satisfaction by the
obligee.
Bond Penalty: See Penal Sum
BOP/Business Owners Policy: Crime insurance for smaller businesses is often provided as part of a
business owners policy (BOP). Although most BOP's are independently filed by companies (and therefore
aren't all the same), they typically include nominal limits of employee dishonesty insurance and other basic
crime coverages.
Broker of Record: See Agent of Record.
Hartford Bond Glossary of Terms
Cancellation to Committee
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Cancellation: Termination of an insurance policy or a bond either by the insured or by the
insurance company.
Cancellation Clause: A clause in a bond that permits the surety to terminate its future liability
under the bond by serving written notice upon the obligee.
Capital Retention Agreement: An agreement between surety and indemnitor whereby the
indemnitor agrees to maintain a certain level of equity or other covenants in exchange for bond
credit. If the indemnitor defaults, the surety has the right to seek retribution as outlined in the
agreement.
Certiorari, Bond on Petition for Writ of: Certiorari is a writ issuing out of a superior court to call
upon the record of a proceeding in an inferior court before an administrative officer or body for
review by the superior court. The one who petitions for the writ usually is required to give bond or
security for the payment of the costs incurred in connection with the petition.
Claimant’s Bond: In cases where, pending final decision on the merits, property is released to one
not a party to the litigation, who claims to be the owner thereof, the claimant may be required to give
bond conditioned for the return or redelivery of the property if ordered to do so by the court.
Class of Business: distinguishes applicants based on their primary activity or business purpose and the
relative crime risk within that type of activity or business. Class of business is a primary rating factor in
crime policies with the more hazardous risks having higher premium modifiers.
Co-Fiduciary: One who serves as a fiduciary jointly with another, such as a co-administrator, co-executor,
co-guardian, etc.
Collateral: Anything of value pledged with the surety to secure it against loss through default of
the principal who supplies the collateral. An ILOC is our preferred form of collateral.
Combination Crime Policy: (also known as the Commercial Crime Policy) is a policy providing various
crime coverages for mercantile or government entities. The policy is written in easy-to-read language and
is under the joint jurisdiction of the SAA and the ISO. Several optional crime coverage forms are available
under the policy, each of which insures against specific exposures. The policy can be tailored to fit the
insurance needs of the insured by attaching only the coverage forms desired - a sort of "mix and match"
arrangement.
Commercial Package Policy: is a policy containing coverages from various lines of insurance (e.g. Boiler
& Machinery, General Liability, etc.). Each line of insurance is written as a coverage part of the Commercial
Package Policy. Employee dishonesty, for instance, is included in the "part" dealing with crime coverage
and generally written at nominal limits.
Commissioner of Insurance: The official charged with enforcement of the laws pertaining to
insurance in his state. In some jurisdictions this official is called the Superintendent or Director of
Insurance.
Committee: One appointed by a court to manage the estate of a person ho has been declared
incompetent. Also known as a conservator or a curator
Hartford Bond Glossary of Terms
Completion Bond to Counter Replevin
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Completion Bond: One covering performance of a construction project that names as an obligee a
lender or similar party in a position to invoke the performance features of the bond for his benefit
without an obligation to provide funds to complete.
Compliance Bond: These are the most commonly required and freely written license and permit
bond. Required by states, counties, and local cities or towns. These bonds guarantee that a person
or business will conduct a business or profession according to the privilege granted and in
conformity with the governing laws, ordinances, or regulations. (e.g. electricians, plumbers and
other construction tradespersons)
Condition: The technical name of one of the four parts of a bond. The condition is not a
qualification of coverage as in the case of an insurance policy but is the essence of the guarantee.
Confirmation Letter: See Bank Confirmation Letter
Conservator: A person, official or institution designated to take over and protect the interest of
an incompetent. Hazard Code 4
Consignee: One to whom merchandise is shipping on consignment.
Consolidation: Merger is the first General Condition clause. It deals with the acquisition, consolidation or
merger of the insured with another entity. It provides for short-term coverage, but requires underwriting
information for reassessment of risk and premium to be charged.
Continuation Certificate: A document evidencing continuation of a bond beyond the stipulated
termination data.
Continuity Clause: The clause in a bond, or rider attached to a bond, under which that bond, subject to its
terms, assumes liability for any loss due to acts which occurred while a prior bond was in force but which
were not discovered until after the expiration of the discovery period of the prior
bond.
Continuous Term: means the Policy Terms states a "from" date, but no specified expiration date. The
policy always remains in effect unless the insured provides a signed policy release or the insurer sends
written notice of cancellation. CrimeSHIELD is written on a continuous term basis.
Contract: An agreement between two or more parties to either do or not do a specific thing.
Corporate Surety: A surety which is a corporation, licensed under various insurance laws, and has
under its charter the legal power to act as surety for others.
Cost Bond: A bond filed by a litigant in a court action guaranteeing payment of the court costs.
Co-Surety: One of a group of Sureties directly participating in a bond, with the obligation under the
bond joint and several. Hazard Code 3
Co-Suretyship: A procedure whereby two or more surety companies jointly become sureties on a
bond.
Counter Replevin: See Replevin - Defendant's Bond to Recover Property Replevied.
Hartford Bond Glossary of Terms
Countersignature to Discovery Period
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Countersignature: A signature of a licensed domiciled agent or representative required by the laws
of some states to validate the bond.
Court Bonds: A general term applied to all bonds filed in court, whether Fiduciary or Judicial
Bonds (See "Fiduciary" and "Judicial" Bonds for amplification).
Cumulative Liability: When one bond is canceled and a second bond is issued to take its place, if
the first bond has a "discovery period," the surety company is exposed to the possibility of a loss
equal to the aggregate sum of the two bonds.
Custom Bond: The primary purpose of these bonds is to assure the payment of import duties and
taxes, and compliance with all regulations governing the entry into the United States of merchandise
from foreign sources. Hazard Code 5
Deductible: is an amount which is to be subtracted from any loss and which the insured agrees to bear.
Default: Violation of the terms of the bond or the bonded contract by the principal.
Defendants Bonds: Bonds given by defendants in litigation enabling them to retain or regain possession
of property, pending the outcome of a suit, or to suspend the execution of a judgment, order or decree of a
court while the defendant seeks reversal of an unfavorable judgment in a higher court.
Deferred Premium Payment Bond: See Retrospective Premium Payment Bond.
Definite Term: is a when a policy is written with both a stated "from" or starting date and "to", a expiration
date. See also "Continuous Term" above.
Depository Bond: This guarantees repayment of moneys deposited with a bank in the event of failure or
insolvency of the bank. Now a negligible line of surety business, it was once a large one. The Federal
Deposit Insurance Corporation (FDIC) now guarantees the payment of bank deposits up to $100,000 per
account title. Hazard Code 5
Depository Liability: A public official is liable for public funds, which he deposits in a bank and cannot pay
over because of insolvency or failure of the bank. In many states, statutes provide for the designation of
depositories for public funds and for the furnishing of collateral security by such depositories. Such laws, if
strictly complied with, usually exempt the public official and his surety from liability for loss through failure of
any of the designated and qualified depositories.
Discharge of Attachment Bond: A bond permitting a defendant to retain possession of property attached
by a plaintiff.
Discharge Mechanics Lien: See Mechanics Lien - Bond to Discharge.
Discovery Basis: refers to a policy wherein a loss may be sustained (occur) at any time, but is discovered
during the period of time that the policy is in force. See also Loss Sustained Basis.
Discovery Period: Provision is made in certain bonds and policies to give the insured a period of time
after the cancellation of the bond or policy in which to discover that he/she has sustained a loss. The loss
must be within the terms of the contract and must have been recoverable if the contract had remained inforce.
Hartford Bond Glossary of Terms
Dishonest or Fraudulent to Executor
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Dishonest or Fraudulent Acts: are those dishonest or fraudulent acts that are committed by an employee
with the manifest (evident) intent (1) to cause the insured to sustain a loss, and (2) to obtain financial
benefit for the employee or another person or entity. CrimeSHIELD does not use this language, but rather
refers to these acts as employee theft.
Dissolve Injunction: See Injunction - Defendant's Bond to Dissolve.
Dun & Bradstreet: This is an independent company that provides analysis reports on business
entities. There are two types of reports available from Dun & Bradstreet (D&B): (1) a reference
book that is divided by state and city and includes a financial rating for both publicly and nonpublicly traded companies; (2) a full summary report which includes a detailed listing of the history
of the company, its ownership, their operations and any significant current legal proceedings.
Sometimes financial and credit information is also available.
Earned Premium: The earned premium on a bond is at any time the amount which would
compensate the surety for the protection furnished for the expired portion of the term of the bond.
Effective Date: The date on which coverage becomes effective. The onset of the premium period.
Endorsement: A form attached to the bond to add to, alter or vary its provisions (See also Rider).
Embezzlement: is the wrongful taking of money or property entrusted to one's care. Employee is a person
in the service of the insured who receives compensation for his services and is under the direction and
control of the insured.
Employees: can be either the regular employees of an insured or employees of an employment contractor
temporarily working for the insured. The policy definition of an employee may be changed by endorsement,
many of which are built into the CrimeSHIELD policy form.
Endorsements: (called Riders on bonds) are documents that are attached to the original policy that modify
or change the original policy in some way. An endorsement my broaden coverage or may restrict coverage,
or may extend coverage to an insured not on the original policy. It may also serve as a clarification of the
policy's terms.
Estate: The assets entrusted to a Fiduciary.
Excess Bond: A bond or policy covering the insured against certain hazards, applying only to loss
or damage in excess of a stated amount, or primary insurance.
ERISA: (Employee Retirement Income Security Act of 1974) is a Congressional Act that replaced the
Welfare & Pension Plans Disclosure Act of 1962. ERISA requires that qualifying employee benefit plans be
bonded by acceptable surety companies (as listed by the U.S. Treasury Department) for the protection of
plan funds against loss by acts of fraud or dishonesty on the part of those persons handling the funds.
ERISA also requires the disclosure and reporting of financial and other information concerning the
operations of employee benefit plans. Hartford is a very active writer of ERISA bonds.
Exclusions: Provisions of a bond or policy referring to hazards or to property with respect to which
no insurance is afforded.
Executor: A fiduciary named in a will to manage or distribute the assets of an estate and pay all just
claims and debts. (see Administrator) Hazard Code 3
Hartford Bond Glossary of Terms
Expense Ratio to Forthcoming Bond
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Expense Ratio: The percentage of the premium used to pay all costs of acquiring, writing, and
servicing the bond.
Expiration: The date upon which a bond will cease to provide coverage unless previously canceled.
Facultative Reinsurance: Reinsurance of individual risks by offer and acceptance wherein the reinsurer
retains the faculty or privilege to accept or reject each risk offered.
Faithful Performance Bond: A bond guaranteeing that the principal will discharge his obligation
as required by law.
Federal Bonds: Immigrants Bonds, Internal Revenue Bonds, and Customs Bonds. Loosely grouped
under the miscellaneous classification.
Federal Deposit Insurance Corporation (FDIC): An agency formed as the result of bank failures in the
1930's to insure the deposits of customers of member banks. The FDIC is an agency of the Federal
Government and insures each account title up to $100,000.
Fiduciary: A person who occupies a position of special trust and confidence, particularly one who
handles the affairs or funds of another.
Fiduciary Bonds: Bonds issued for persons either named in a will or appointed by the court to manage the
affairs of others, such as wards, incompetents, etc., or to distribute a decedent's estate assets in
accordance with the provision of a will or order of the court.
Financial Institution Bonds: are bonds specifically written for financial institutions such as commercial
banks, savings banks, savings and loan associations, stockbrokers, mortgage bankers, insurance
companies, and others.
Financial Guarantee Bond: A bond which guarantees payment of a sum of money whether or not the
exact amount is known or stated. Common types are: court bonds (appeal, etc.), lease bonds which
guarantee payment of rent, etc.
Financial Responsibility Law: A statute requiring motorists to furnish, either before or after an accident,
evidence of ability to pay damages. Such evidence may be furnished by a surety bond.
Financial Statement: A compilation of financial disclosures (including the balance sheet, income
statement and other pertinent schedules) which the surety requires the bond applicant to furnish, setting
forth his financial position as of a given time or period.
Fixed Penalty Bond: A bond the amount of which is expressed in a certain sum of money.
Forfeiture Bond: A bond requiring payment of the entire penalty upon default of the principal,
regardless of the size of actual loss.
Forgery Coverage: indemnifies the insured for loss caused by forgery of a signature on, or alteration of
stated instruments, documents or securities. Insuring Agreement 2 in a Hartford CrimeSHIELD policy.
Forthcoming Bond: This term is applicable to any bond conditioned for the return of redelivery of property
in compliance with an order of a court. In some states, it may guarantee payment of a judgment.
Hartford Bond Glossary of Terms
Fronting to Indemnity to Sheriff
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Fronting: A procedure under which a ceding company (the fronting company) cedes a risk it has
underwritten to a reinsurer with the ceding company retaining none of the risk for its own account.
Garnishment-Bond to Discharge or Release: When money or property belonging to a defendant
has been attached while in the hands of a third party, the processing is called a garnishment and the
third party is called the garnishee. The bond is similar to a release of attachment bond.
Guarantee: A promise to answer for the debt or default of another.
Guardian: One appointed by the court to manage the estate of a minor or an incompetent. Hazard Code 4
Guardian Ad Litem: One appointed to preserve the assets of the estate of a minor during a
litigation which delays the appointment of a general guardian.
Guardian or General Guardian: A fiduciary appointed by the court to administer the estate of a minor.
Hazard: A term applied to certain conditions which may create or increase the probability of a loss
because of a given covered peril.
Heir: One who inherits or is entitled to inherit.
Hold-Over Public Officials: Those who are elected or appointed to succeed themselves in office or
who continue beyond the limits of their terms until their successors are appointed or elected.
Immigrants Bond: A class of federal bonds covering aliens who enter the United States legally.
Income Tax Bonds: These are given to guarantee payment of federal income taxes due or claimed
to be due. They are direct financial guarantees and collateral usually is required.
Indebtedness: The sum of one's obligation.
Indefinite Term: Having no fixed termination.
Indemnify: To compensate the victim of a loss for the actual loss sustained.
Indemnitor: One who enters into an agreement with a surety company to hold the surety harmless
from any loss or expense it may sustain or incur on a bond issued on behalf of another.
Indemnity: A promise to prevent or compensate for loss.
Indemnity Agreement: A contract by which one party agrees to protect another against loss.
Indemnity Bond: A general term describing any bond which protects the obligee against direct loss
which may arise as a result of failure on the part of a principal to perform.
Indemnity to Sheriff or Marshal: A sheriff or marshal, in the execution of the process of the courts, may
incur liability for damage to a third party through an act or acts which turn out to be wrongful. Either official
when requested to take some particular action, may require a bond of the party making the request. The
bond covers the liability of the sheriff or marshal in that connection. Hazard Code 1
Hartford Bond Glossary of Terms
Inherit to Last Surety on Form
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Inherit: To receive from one's ancestors or predecessors.
Inheritance: A legacy.
Injunction: A court order prohibiting or requiring a certain action. Hazard Code 3
Injunction-Plaintiff's Bond to Secure: An injunction is a judicial process whereby the defendant
is required to do or refrain from performing a particular act. An order granting an injunction may be
conditioned upon the furnishing by the plaintiff of a bond to indemnify the defendant against loss in
case it is finally decided that the injunction should not have been granted.
Injunction-Defendant's Bond to Dissolve: When an injunction has been issued, the court may
order the injunction dissolved upon the giving of a bond conditioned, in effect, to pay such damages
that the plaintiff may sustain as a result of the performance of the act or acts originally enjoined, it
being then the privilege of the defendant to proceed as if the injunction has never been issued.
Insolvency: The condition of being unable to pay one's maturing debts.
Internal Revenue Bonds: A class of Federal Bonds guaranteeing producers' of distilled spirits,
tobacco, etc., compliance with laws and regulations, as well as their payment of taxes.
Intestate: Not having made a valid will. One who dies without having made a valid will.
ISO: (Insurance Services Office) is an organization working with the insurance industry to maintain
statistical data, file loss costs and manage standardized forms on behalf of its member companies. The
ISO is to the insurance industry as the SAA is to the surety industry. See SAA.
Joint Control: This is an arrangement by written agreement and acknowledgement of a financial
institution holding estate funds whereby any access to said funds requires two signatures: the
fiduciary's and that of a third party, i.e. attorney, surety, agent.
Joint Venture: An association established to conduct a single transaction or series of related
transactions, as contrasted to an ongoing business that involves many transactions. It is a special
purpose partnership whose members can be sole proprietorships, partnerships or corporations.
Joint Insured: Endorsement adds subsidiaries or other entities such as welfare and pension plans over
which the insured exercises control. An employee of one insured is considered an "employee" of all the
insureds.
Judgment: The obligation created by a court decree or decision.
Judicial Bond: Bonds required of litigants who seek to avail themselves of privileges or remedies
which are allowed by law, upon condition that a bond be furnished for the protection of the opposing
litigant or other interested parties.
Last Surety On Form: Workers Compensation Bonds falling under this description obligate the surety for
all self-insured retention liability of the principal, dating back to the inception of the principal's self-insured
qualification. The surety may be absolved of all liability once their bond is superseded by acceptable
replacement security.
Hartford Bond Glossary of Terms
Legal Liability to Loss Ratio
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Legal Liability: Obligation imposed by law.
Legatee: One to whom property is given under the terms of a will.
Lessee: A tenant.
Lessor: One who grants a lease.
Letter of Understanding: This letter is required of a all principals who post collateral in support of
a Self-Insured Workers Compensation Bond. The letter explains the nature of the risk and outlines
The Hartford's procedures on returning the collateral to the principal.
Liability: This is a broad term denoting any legally enforceable obligation.
Libel – bond to discharge or release: When a warrant for the seizure of a ship has been issued, the
marshal is required to stay execution of the process, or discharge the ship if process has been levied,
on receiving from the owner of the ship a bond or stipulation conditioned to comply with the decree
of court in the action.
License and Permit Bonds: These are bonds required by law or ordinance as a condition precedent
to the granting of a license to engage in a particular business or a permit to exercise a specific
privilege.
Lien: A charge upon real or personal property for the satisfaction of a debt.
Limit of Insurance: is the maximum amount an insurer will pay in case of loss. Sometimes called limit of
liability, bond penalty or penal sum.
Limit of Liability: The maximum amount a surety is liable to pay in case of a loss as set forth in
the contract.
Limited Liability Company: An LLC is a hybrid business entity created by statute. It is an
unincorporated association of members which, if properly structured, receives pass-through federal
tax treatment and limited liability for its members.
Liquidate: To pay a debt. To settle the accounts and distribute the assets of an estate.
Liquor Bond: (See Alcohol Bond)
Litigant: A party to an action at law.
Long-Term Bond: (Fiduciary) A bond required of a fiduciary whose duties are normally expected
to extend over a considerable period of time. (See also: "Short-Term Bond")
Loss Ratio: The percentage which incurred losses bear to premiums.
Hartford Bond Glossary of Terms
Loss Sustained Basis to Mechanic’s Lien Bond to Discharge
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Loss Sustained Basis: refers to the form of bond wherein a loss must be sustained (or occur) as well as
be discovered during the period of time the coverage is in force. Most policies written on this basis include
an additional provision for a discovery period. This allows for a loss that is sustained (occurs) during the
bond/policy period, but discovered during the discovery period that follows the expiration or termination of
the policy - typically twelve months. See also Discovery Basis.
Lost Securities Bonds: Bonds given by owners of valuable instruments (i.e. stocks, bonds,
promissory notes, certified checks, etc.) which are alleged to have been lost or destroyed, in order to
protect the issuers against loss which may result from the issuance of duplicate instruments or, in
some instances, payment of cash value thereof.
Maintenance Bond: The normal coverage provided by a maintenance bond is a guarantee against
defective workmanship or materials. However, maintenance bonds sometimes incorporate an
obligation guaranteeing “efficient or successful operation” or other obligations of like intent and
purpose.
Mandamus: This is a common law writ issuing from a superior court to an inferior court,
corporation, or public officer, requiring the person so ordered to do some particular act therein
specified, which pertains to his office. If the writ is issued before there has been a final decision on
the merits, the person requesting the mandamus may be required to give bond to indemnify the
person so ordered against loss or damage in case it is finally decided that the mandamus should not
have been issued.
Manifest Intent: Employee dishonesty forms require that an employee act with manifest intent to (1) cause
a loss to the insured and (2) obtain financial benefit for the employee or for another person or entity that the
employee wants to receive the benefit. This “dual trigger” indicates that both elements for manifest intent
must be present in order for coverage to apply.
Manual: A book published by an insurance or bonding organization giving information as to rates,
classifications, codes and other data. (Specifically, for Fidelity, Forgery and Surety Bonds, the rate
manual of the Surety Association of America.)
Manual Rate: The cost of a unit of insurance or bond protection as published in the pertinent
manuals of various organizations in the insurance industry, and again seen in the rate manual, as to
bonds, of the Surety Association of America.
Martindale Hubbell Law Directory: This is a directory maintained in Home Office that provides
information on both individual attorneys and law firms. Information may include schooling, year
graduated, legal expertise, members/partners of a firm, and a rating (CV, BV, AV, with AV being
the best). Directory is either in hardback or on CD Rom.
Mechanic's Lien: A right to detain property exercised by one who has furnished labor or material.
Mechanics Lien – Bond to Discharge: A lien against real estate may be filed for an amount
claimed to be due for labor or materials furnished for the construction of a building or other
improvement upon the property. Pending final determination of the owner’s liability, the owner may
discharge the lien by giving bond conditioned for the payment of any amount that may be found due
to claimant with interest and costs.
Hartford Bond Glossary of Terms
Minimum Premium to Omnibus
Named Insured
Version II
2010
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Minimum Premium: The smallest amount of premium acceptable for a specified period.
Miscellaneous Indemnity Bonds: Bonds which do not fit any of the well-recognized divisions or
subdivisions, and therefore, are thus categorized. The bond manual will supply further data.
Monoline: policies provide only one type of insurance coverage (i.e. commercial crime).
Moody's: See Standard & Poor's.
Moral Hazard: The possibility of loss caused by, or accentuated, by the dishonesty or carelessness
of the insured or others.
Negotiable Instrument: Commercial paper which may be circulated with or without endorsement.
Net Rating Factor: This figure is net of all credits and/or debits applied to rates for an account's
bonds. For example, if the account receives a 50% net worth credit and a 15% indemnity credit, the
net rating factor would be .425 (.5 x .85).
Notary Public: An official who attests signatures on documents. Hazard Code 1
Note: A written promise to pay a certain sum of money.
Obligation: An enforceable duty assumed by or imposed upon a person, firm or corporation.
Obligee: The person or firm protected against loss by a bond. Similar to the insured under an
insurance policy.
Obligor: The entity for whose account the debt or default is made. Under a bond, strictly speaking,
both the principal and the surety are the obligors since the surety company must answer if the
principal defaults.
Occurrence: is a loss caused by, or involving one or more "employees", whether the result of a single act
or a series of acts. See the CrimeSHIELD policy for its specific definitions.
Occurrence Form: Workers Compensation Bonds meeting this description obligate the surety for
all self-insured retention liability of the principal which accrue during the term of the bond. Without
special precautions, the surety will remain forever obligated for liability accrued under the bond
after termination, cancellation or replacement by a succeeding surety.
Omnibus Language: This is a clause found in the Continuing Agreement of Indemnity Miscellaneous Form, which extends the signer's indemnity to bonds written for "the Applicant;
individually; jointly with others or on behalf of any of its subsidiaries, affiliates or divisions or their
subsidiaries, affiliates or divisions now in existence or hereafter formed or acquired; or on behalf of
individuals, partnerships or corporations. . . ."
Omnibus Named Insured: provides for extension of coverage (within certain parameters) to entities
acquired in the future where there is more than 50% ownership and controlled or operated by the insured
and for pension and benefit plans. Typically added by endorsement.
Hartford Bond Glossary of Terms
Open Penalty Bond to Premium
Version II
2010
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Open Penalty Bond: A surety bond written without maximum limit on the liability of the principal
or the surety.
Parent Company: A corporation owing or controlling one or more other corporations.
Partnership: A legal relationship created by the voluntary association of two or more persons to
carry on as co-owners of a business for profit.
Penal Amount or Penalty: The limit of liability under a bond.
Per Occurrence Limit: A bond limit that is applied to each loss/occurrence that is incurred during
the term of the bond. For example, if a surety receives 10 claims of $5,000 each on a bond with a
per occurrence limit of $10,000, the surety would pay out $50,000.
Performance Bond: A bond that guarantees faithful performance of the terms of a written
contractor for furnishing supplies or for construction of all kinds. Performance bonds frequently
incorporate payment bond (labor and materials) and maintenance bond liability.
Performance Bond (non-construction): A bond that guarantees performance of contractors/vendors who
provide services, manufacture/supply goods, or perform installation of equipment or software.
Permit: Permission given by a governmental authority to engage in some activity.
Personal Surety: An individual who acts as surety for another, who may or may not exact a price for his
services, and usually is not regulated by any governmental agency, such as is the corporate surety.
Petitioning Creditors' Bond: When a petition is filed to have a person adjusted a bankrupt and
application is made to have a receiver or a marshal take charge of the property of the alleged
bankrupt prior to the adjudication, the petitioners are required to give bond to indemnify the alleged
bankrupt for such costs as counsel fees, expenses, and damages that may be occasioned by such
seizure in case the petition is dismissed or withdrawn by the petitioners.
Place in Funds Letter: An agreement between surety and indemnitor whereby indemnitor agrees to
immediately provide the surety funds if surety shall be called upon to make payment under bond.
The document supplements our indemnity agreement and in no way affects our rights under such.
Plaintiff: One who initiates an action at law.
Plaintiff's Bond: Bonds given by plaintiffs in litigation enabling them to exercise certain privileges
with permission of the court, such as Attachment, Injunction, and Replevin.
Power of Attorney: Authority given one person or corporation to act for and obligate another to the
extent laid down in the instrument creating the power. In corporate suretyship, an instrument under
seal which appoints an attorney-in-fact to act on behalf of a surety company in signing bonds.
Premium: The consideration paid to the company for its bonds or policy of insurance. An
insurance premium includes a factor for the payment of losses.
Hartford Bond Glossary of Terms
Principal to Redelivery Bond
Version II
2010
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Principal: In suretyship, the party whose actions, honesty or responsibility is to be guaranteed.
Probate: The legal process of administering estates of decedents, minors and incompetents.
Probate Bond: One that guarantees an honest accounting and faithful performance of duties by
administrators, executors, trustees, guardians and other fiduciaries, so-called because such bonds are
usually filed in a Probate Court.
Prohibited Risk: A risk of a class which the company will not entertain in any circumstances.
Proof of Loss: A sworn statement by claimant setting forth details of his claim.
Pro Rate Cancellation: Computation of the return premium resulting from cancellation on a
proportionate basis.
Public Official Bonds: These are afforded in four categories: Individual, Name Schedule, Position
Schedule, and Public Employees Blanket bond and Public School System Employees Blanket Bond.
Qualifying Limit: The largest net amount that a surety company may retain. The Qualifying Limit
for bonds filed with the Federal Government is established annually by the U.S. Treasury Department.
Several states also establish Qualifying Limits applicable to bonds filed in their particular jurisdictions.
Qualifying Power: The largest net amount of risk which may be carried by a surety company on a
bond.
RMA Annual Statement Studies: (Robert Morris Associates) The Statement Studies contain composite
financial data on manufacturing, wholesaling, retailing, service, and contracting lines of business. Financial
statements on each industry are shown in common size form, and are accompanied by widely used ratios.
Rate: The cost of a unit of insurance.
Rate Manual: A compendium that lists, among other items, the rates established for individual risks, e.g.
The Rate Manual of Fidelity, Forgery & Surety Bonds of the Surety Association of America.
Rating Bureau: An organization which files rates with state supervisory authorities for those member
companies authorizing it to do so.
Receiver: One appointed by a court to take custody of property.
Recital: The portion of a surety bond usually commencing with the word “Whereas” which
describes the transaction for which the bond is given. In the case of a guarantee of a contract it
generally incorporates the contract by reference.
Recovery: Reimbursement received by a surety from a reinsurer, by subrogation, or from salvage
following a loss.
Redelivery Bond: Substantially the same as a Forthcoming Bond.
Hartford Bond Glossary of Terms
Refunding Bond Rate Litigation to SAA
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2010
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Refunding Bond-Rate Litigation: This term is applicable to any bond conditioned for future
return, if ordered, or money which the principal was allowed to charge and retain pending the final
determination or decision in a contested matter.
Reinsurance: A form of insurance that insurance/surety companies buy for their own protection - a
sharing of insurance. An insurer/surety (the reinsured) reduces its possible maximum loss on either
an individual risk (facultative) or on a large number of risks (treaty) by giving (ceding) a portion of
its liability to another insurance/surety company (reinsurer).
Reinsured: An insurance/surety company which originates an insurance policy/surety bond and
cedes a portion of the liability to another company (reinsurer).
Reinsurer: An insurance/surety company which assumes all or part of an insurance policy/ surety
bond written by a primary insurance/surety company (ceding company).
Release: To give up or abandon an enforceable right. The document evidencing such act.
Removal Bond: Where a case originally bought into a state court is removed to the federal court, and the
defendant is required to give bond for the payment of costs in federal court if the case is found to have
been improperly removed. A similar bond may be required on the removal of a case from one state court
to another. Hazard Code 1
Renewal: Continuance of a bond or policy for a subsequent premium term.
Replevin: A legal action to recover property taken or unlawfully detained.
Replevin-Plaintiff's Bond to Secure: Replevin is an action to recover possession of specific articles or
personal property. The replevin bond, which the plaintiff is required to furnish, is conditioned for the return
of the property, return is ordered, and for the payment of all costs and damages adjudged to the defendant.
Hazard Code 2
Replevin-Defendant's Bond to Recover Property Replevied: Where personal property has been
replevied the defendant may, by the furnishing of a bond, regain possession of the property, pending
final decision on the merits. The bond is conditioned for redelivery of property to the plaintiff, if
ordered to do so, or otherwise to comply with a court order or judgment. Hazard Code 2
Retention: The portion of a reinsured risk that the originating insurance/surety company does not
cede to the reinsurer.
Retroactive Restoration: A provision in a bond whereby, after payment of a loss, the original amount of
coverage is automatically restored to take care of undiscovered losses as well as future losses.
Rider: An attachment to a bond that modifies its conditions by expanding or restricting benefits or
excluding certain conditions from coverage.
Risk: Any chance of loss. The insured or the property to which the bond relates.
SAA: (Surety Association of America) is the surety industry counterpart to ISO. See ISO. Examples of
Surety Association data are included in this training section. Employee Dishonesty and Forgery coverages
are often considered to be "surety," rather than "insurance," with respect to state insurance law.
Hartford Bond Glossary of Terms
Salvage to Statutory Warranty Deed
Version II
2010
Page 17
Salvage: The value of property after it has been partially damaged by fire, malicious mischief or
other perils. In suretyship, salvage is that which is recovered from the principal or indemnitor to
offset the loss and expense paid by a surety in satisfying its obligations under a bond.
Schedule Fidelity Bond: is a bond or policy that covers only the dishonest acts of specifically named
persons (Name Schedule) or specifically listed positions within the company (Position Schedule.) See also
"Blanket Fidelity Bond." CrimeSHIELD is written on a blanket basis.
Securities: Certificates evidencing debts or shares of ownership.
Separation or Segregation of Duties: is a means of providing internal control by clearly defining the roles
and responsibilities of employees and requiring that more than one person is involved in the handling,
recording and reconciliation of all transactions. For example, the person who prepares or signs checks
should be different than the person reconciling the bank statement.
Sequestration Bond: Substantially the same as Attachment Bond-Plaintiff's.
Sheshunoff Bank, and Sheshunoff S&L: This reference guide provides summary financial
statistics on Commercial Banks and Savings and Loans respectively. The guide is organized by state
and city. A financial rating is made available based on an interpretation of the financial strength of
the bank or S&L. This guide is available in the Home Office and comes out quarterly.
Short Rate-Short Rate Cancellation: The charge required for bonds taken for less than a year, and
in some cases, the earned premium for bonds canceled by the insured before the end of the term of
the bond; i.e., the earned premium plus an expense charge.
Short-Term Bonds: Those covering fiduciaries whose duties are to collect the assets of the decedent,
pay the debts and distribute the remainder according to law. The terms of these fiduciaries
are usually brief. (See "Long Term bond.")
Stack/Cumulative Liability: This occurs when a bond has a definite expiration date and a new
bond must be filed for each successive term. Each bond carries a new bond penalty, thus "stacking"
the bond liability from year to year.
Standard & Poor's (S&P) and Moody's: Both S&P and Moody's are independent companies that
provide ratings on a company's ability to pay their outstanding debt (i.e. commercial bonds). The
ratings are based on an analysis of a given company's financial condition. The higher the rating the
higher the level of confidence that they will fund their debt obligations as agreed. The ratings are
provided from an investment perspective and are updated monthly. Most publicly traded companies
are rated. These publications are available from Home Office and most local libraries.
Statute: A law enacted by a legislature.
Statutory: Required by, or having to do with, a law or statute.
Statutory Bond: A term generally used describing a bond given in compliance with a statute. Such
a bond must carry whatever liability the statute imposes on the principal and the surety.
Statutory Warranty Deed: A warranty deed form prescribed by some state statutes.
Hartford Bond Glossary of Terms
Stay of Execution to Surety Association
of America
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2010
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Stay of Execution: A bond to stay or suspend execution on a judgment. It guarantees the payment
of the judgment upon termination of the stay.
Stipulation for Value or Limitation of Liability: The release of a libeled ship is something
effected by the owner giving a stipulation for value in an agreed amount or, if claims exceed the
value of the ship, by giving stipulation for limitation of liability in an amount fixed by the court
based on an appraisal of the ship, conditioned by paying any sum awarded by final decree not
exceeding the amount of the stipulation.
Subcontract Bond: One required by a general contractor of a subcontractor, guaranteeing that the
subcontractor will faithfully perform the subcontract in accordance with its terms and will pay for
labor and material incurred in the prosecution of the subcontracted work.
Subdivision Bond: One guaranteeing that a developer of a subdivision will, within a specified period,
construct improvements on the property, such as streets, sidewalks, curbs, gutters, sewers, etc. at his
own expense.
Submission: The presentation of underwriting data to one with the necessary authority to act.
Subrogation: The surrender of rights by an insured against a third party to an insurance company
that has paid a claim.
Supersede: To replace.
Supersedeas: A writ staying execution of a judgment pending appeal.
Superseded Suretyship: is a provision that allows an insured to change surety companies/insurers
without fear of severe penalties. It provides coverage for losses that were sustained (occurred) before the
policy period of the current policy (but only to the limit of the previous policy and only if there was no
interruption in coverage between the two policy periods). In other words, if the current policy became
effective on the date the former policy expired, the discovery period for the previous policy had expired,
and if the loss would be recovered under both the terms of the old and the new policies, then the new
policy reaches back and picks up the loss coverage - even if the companies changed. Superseded
suretyship is only applicable to loss sustained policy forms. As CrimeSHIELD is a discovery form policy, it
does not apply.
Supply Bond: An agreement providing for monetary compensation should there be a failure to
perform specified acts within stated period.
Surety: A person or corporation collaterally bound for the payment of money or the performance of
an act or duty by another.
Surety Association of America (SAA): An association composed of leading capital stock insurance
companies which engage in Fidelity, Surety and Forgery Bond Underwriting. It establishes the
classifications of risks. It also creates standard forms, provisions, riders and miscellaneous other forms.
It collects and analyses statistical data, makes filings with regulatory authorities in behalf of its members
and performs other functions for the benefit of its members and subscribers and for their insured.
Hartford Bond Glossary of Terms
Surety Bond to Will
Version II
2010
Page 19
Surety Bond: A three party agreement whereby one party (the surety) is bound with the person bonded
(the principal) to a third party (the obligee). The bond guarantees the surety's performance or monetary
compensation to the obligee should there be a failure by the principal to perform specified acts within a
stated time period.
Term: A period of time for which a bond or policy is issued.
Testamentary: Of or relating to a will.
Testator: One who dies leaving a valid will.
Third Party Coverage: extends protection to theft of client property by an employee of the insured.
Third Party Liability: A bond provision that provides third parties the right to make claim against
the surety bond. This increases the surety's exposure and may result in small nuisance claims.
Treasury Limits: These are qualifying limits imposed upon the surety by the United States Treasury
Department. To be an acceptable surety on bonds in favor of the U.S., the surety must qualify financially
under regulations of the Treasury Department. It compiles an annual list of the companies who are
qualified, the underwriting limit of each and other pertinent data.
Treaty Reinsurance: An agreement between parties in which one company agrees to automatically
cede a portion of all business outlined in the agreement to the other party (reinsurer), and the reinsurer
agrees to accept such business.
Trustee: One holding property belonging to and for the use of another.
Undertaking: This is similar to a bond except it is a two party agreement between the surety and the
obligee - The principal is not named on the form. Under such an agreement, the obligee can make demand
on the surety without first looking to the principal for action.
Underwriter: An individual or employee of an insurance company who determines which risk to accept and
the amount of such risks.
Uniform Commercial Code: A codification of the law merchant adopted by many states.
Unilateral: By one party only.
Value Line Investment Survey: Value Line is an independent company that maintains information on
larger, publicly traded companies, primarily those traded on the New York and American Stock Exchanges.
Reports are updated quarterly. The information provided includes a synopsis of the company's operations
and financial trends and is geared towards investors. Home Office maintains a subscription to Value Line,
and most libraries retain copies in their reference collections.
Ward: One under guardianship.
Will: A document disposing of property upon death.
Hartford Bond Glossary of Terms
Withoug Predudice to Writ
Version II
2010
Page 20
Without Prejudice: This clause is often seen on court judgments, motions or orders of decree. It
is meant as a declaration that no rights/privileges of the parties concerned are to be considered
waved or lost. If a case is dismissed "without prejudice," a new suit can be brought on the same
cause or action. A Document with this phrase is not sufficient evidence to cancel a court bond.
Writ: An order issued in the name of a court.