Why would an agency revoke a surety bond?
Agency revocations can come about in different ways. The surety bond may need to be revoked if the agency moves its operations into a new location, or changes the requirements of the bond. An agency may also request that a surety company revoke a bond based on inaccurate information given to them by an applicant for insurance.
An agency will often issue an order to show cause before revocation proceedings are initiated. This document explains why they are considering revoking your bond, and gives you an opportunity to respond with any reasons why it should not be revoked. You have typically 15 days from receipt of this notice to file your response, after which point hearings will take place, decisions will be made and revocation can follow.
If a surety bond is revoked the insurance company must alert the agency and deliver notice to its insureds. If an appeal is filed by the insured, the status of the bond will likely have stayed until a decision is made on whether or not it should continue as part of the court record. If no appeal is filed, service shall be provided within 15 days of an order revoking a surety bond unless otherwise ordered by a court.
Can a surety bond be revoked?
Yes, a surety bond can be revoked. There are two ways in which an agency may request the revocation of a surety bond:
(1) It has been proposed that the insurance company remove its endorsement from the bond; or
(2) The premium rates have increased above those originally set forth by an agency.
The determination to revoke a surety bond will only be made after a hearing is held and a final decision is reached. It’s important that you file any paperwork needed to appeal this order so you have time to respond properly.
What can cause your surety bond to be revoked?
There are a number of reasons that an agency may request for a surety bond to be revoked:
– If the insurance company reduces its coverage and your bond only covers the reduced amount;
– If the insurer is bought out by another company and your bond is registered with the original insurer; or,
– If there has been a change in how many locations an insured operates.
If you have filed for bankruptcy, your insurer may ask your agency to revoke your surety bond until such time as you get things settled. This can happen whether you file Chapter 7 or 13 bankruptcy. However, if you have just received a foreclosure notice on one location where you operate under this policy the insurance company isn’t going to drop it right away.
What does it mean when a surety bond is exonerated?
If your surety bond is revoked, the agency will typically send you an order to show cause so you have time to file any letters in opposition. Following this, hearings will take place and a decision made by an administrative judge.
If an appeal is filed by the insured, the status of the bond will likely stay until a decision is made on whether or not it should continue as part of the court record. If no appeal is filed, service shall be provided within 15 days of an order revoking a surety bond unless otherwise ordered by a court.
How do you avoid having your surety bond revoked?
You can easily avoid having your surety bond revoked by regularly updating them on the status of your business, providing any requested information within a timely fashion, and ensuring that all rates are appropriate.
How do you revoke a surety bond?
The same way you revoke a surety bond is the same way that your business can have its bond revoked. If you decide to give notice of dissolution, change of company address, remove an endorsement or cancel coverage, the insurance company must notify each agency for which it has insured bonds and inform them as well.
What does it mean if a surety bond is “canceled” but not “revoked?”
If a surety bond is canceled but not revoked this means that one or more insurers have decided to end their agreement with a particular agent, however, the policy itself will remain in force until such time as all remaining coverages expire or are terminated by an insured location.
In some cases, canceling a policy may be done by an insurer without any forewarning. Usually, this is due to the insurance company not paying its premiums on time, which causes the bond of the agent to be voided. If you wish to avoid cancellation or revocation of bonds for your business, make sure all payments are made on time and that your agency provides written notice if its agents fail to comply with these terms.
Whether or not an agency’s bond can be revoked depends on whether or not there has been a failure in providing the requested information (such as financial statements), inappropriate premium rates (i.e. above the legal limit), or failure to follow proper dissolution procedures.