Supersedeas translates, “Ye Shall Desist” in Latin. In the United States court system, it is used to mean that the execution of a judgment will be delayed, or “stayed” until an appeal can be heard. For practical matters, it means that an officer of the law or court will not move to enforce or collect monies won in a lawsuit until the court can hear the appeal.
A Supersedeas Bond is a type of Appeal Bond. The bond supersedes or stands in the place of the judged amount. A Supersedeas Bond protects the plaintiff and court system. It provides a financial guarantee that if the Defendant loses their appeal, they will pay the judgment plus interest, expenses and court costs.
The principal on a Supersedeas Bond is the defendant that has lost the original lawsuit (the appellant) and has had a judgment filed against them. This party is appealing the lower court’s decision. To make the appeal, the principal must provide a Supersedeas Bond to the Appeals Court. The Appeals Court is the obligee that benefits from the bond’s protection along with the Appellee or the party that won the original case.
The surety bond company is a third-party providing a financial guarantee that if the principal loses again, they will pay the judgment, and often court costs and interest. In return for the bond, the surety gets a payment of premium and the indemnity of the principal. Win or lose, the surety will keep the premium. If they lose, they will pay the court and seek reimbursement from the principal under the indemnity agreement.
Supersedeas Bonds offer protection to the Appeals Court and the non-appealing plaintiff (the appellee or respondent). Should the principal lose the appeal, it may be much easier to collect from the surety bond company than the principal.
The amount of a Supersedeas Bond depends on the state and jurisdiction. The bond must generally cover the judgment amount, court costs, and interest until the judgment is paid. Some courts require the bond to be in the amount of one and one-half times (1.5x) or two times (2x) the judgment amount.
The cost of a Supersedeas Bond depends on the financial strength of the principal and the strength of the case. A strong corporation or individual may pay as little as 0.3% of the bond amount per year until the case is resolved. However, a company or individual could pay as much as 10% if the case is considered extremely risky. All appeal bonds are considered high risk as the party has already lost in court once. The odds of losing again are high. Learn more about surety bond costs and how they are determined here.
Appellants needing a Supersedeas Bond will need to provide the following:
There are several important underwriting factors that go into writing Supersedeas Bonds. Some are specific to the principal, and some depend on the jurisdiction.
One of the most important considerations for underwriting Supersedeas Bonds is the financial strength of the principal. Companies and individuals with significant resources may have an easier time paying the judgment if they lose their appeal. This presents less risk to the surety bond company. Alternatively, principals that have less resources may not be able to pay and are considered high risk. These parties may have to put up collateral to protect the surety bond company in the event of a loss.
The principal’s case is also an important underwriting factor. While there is significant risk that the defendant will lose the case again, other factors also become important. A case that is expected to be heard and settled within a short period of time presents less risk than an appeal with a long timeframe. Bond underwriters will need to examine the case and determine the principal’s chance to win the appeal.
Some court jurisdictions have a fixed dollar amount for Supersedeas Bonds. For example, some courts require the bond to cover the dollar amount of the judgment plus a fixed amount for court costs and interest. These venues are preferable for surety companies because they know their maximum penalty.
Some court jurisdictions have open dollar amounts for Supersedeas Bonds. For example, they may require the payment of the judgment, plus uncapped amounts for interest and court costs. These open penalties make it difficult for bond companies to know their maximum liability, and the risk is increased. However, surety bond underwriters commonly estimate these bond amounts to be 120% – 130% of the judgment amount.
The venue is an important underwriting consideration for Supersedeas Bonds. Some states are more friendly to businesses than others. In court cases, certain states are more likely to rule in the favor of businesses and some are more likely to rule in favor of individuals. Bond underwriters will take these factors into consideration on Supersedeas Bonds.
Because Supersedeas Bonds are high risk, putting up collateral is common in order to secure the bond. Common types of collateral can be cash, investments, real estate and irrevocable letters of credit. Learn more about using collateral with surety bonds here.
Some courts will allow the appellant to use alternatives to bonding. These alternatives may include holding funds in escrow or putting up an irrevocable letter of credit with the court. Those wishing to pursue alternatives will need to check with the court.
Supersedeas Bonds are an important tool for those wishing to appeal their case. Axcess Surety can help you get the best supersedeas bond for your case. We work with bond companies across the country to help find the best terms in all situations. Contact our people today. Appellants and attorneys may also need other judicial bonds and can learn more about those by visiting our Court Bonds page.
Axcess Surety is the premier provider of surety bonds nationally. We work individuals and businesses across the country to provide the best surety bond programs at the best price.
