Appeal Bond

[Pacman]

Why does a Appeal Bond require 100% collateral?

[ClaimsGuy]

Pacman:

The principal should not be offended by the request. Even Fortune 500 companies are requested to provide collateral.

First, the surety recognizes that the principal has already lost the case once and, more likely than not, will lose again.

More inportantly though, as soon as the judgment against the principal becomes final, a demand is made on the bond and payment is expected immediately, within hours or days. Failure to pay within that time may result in the court entering judgment against the surety, again within days. Typically the principal is unable to pay within that short period of time so as to avoid a jugment being entered against the surety.

I have handled cases in which the surety had full collateral in the form of a letter of credit and the bond obligee was able to get a judgment entered against the surety before the bank would pay on the letter of credit.

ClaimsGuy.