Surety Bond Quarterly - Summer 2015 - 26

4. Failure to properly run a business
owned by the estate.
5. Self-dealing or conflict of interest
when the principal acts in his or
her own interest instead of the
interest of the estate.
6. Attorneys' fees and costs
incurred in pursuing a claim
against the principal and surety.
7. Reliance on counsel (often when
a principal gets bad advice from
his or her attorney when administering the estate).
8. Failure to file or pay taxes (resulting in interest and penalties owed
by the estate).
9. Theft of assets from the estate.
10. Failure to maintain insurance
on assets owned by the estate
(resulting in a claim if there
is, for example, a fire and an
uninsured house owned by the
estate burns).
11. Failure to collect rent from tenants living in property owned by
the estate.
12. Inappr opria te
c hari t ab le
contributions.
13. Inappropriate settlement of a
claim (often when the settlement is not approved by the
court or not in the best interest
of the estate).
14. Excess bond premiums (often
when the fiduciary fails to

timely complete the administration of the estate, which keeps
it open longer than necessary,
causing the estate to incur
additional expenses).
A practical guide to handling
probate bond claims
In the unfortunate situation when
a formal claim is brought against a
probate bond, the claims handler
or attorney defending the claim will
conduct an initial review of all available materials in the file. It is critical
that the bond producers and underwriters obtain and provide as much
information as possible at the time
the bond is issued. Not only will the
claim handler review any correspondence or pleadings received to initiate
the claim, but the claim handler will
want to review the surety's internal
records, especially the underwriting
file. This file should have detailed
information regarding the assets of
the estate, as well as detailed information regarding the principal, including
an address, phone number, employer,
and social security number.
The claims handler will then review
the court docket and the probate
court file. This will provide a chronology of everything that took place
from the time the bond was issued
to the present. It is important to

Contract Surety
Commercial Surety
Fidelity Bonds
26

BOND QUARTERLY | SUMMER 2015

Conclusion
The information in this article should
help producers understand the
importance of obtaining pertinent
information about the principal and
assets of the estate prior to issuing
probate bonds because that is when
the principal is most willing to provide information due to the fact that
he or she needs the bond in order to
qualify as the estate's fiduciary. Any
information relating to the principal
is extremely useful in the unfortunate
event that a bond claim arises.
If a producer has any questions
regarding the issuance of the bond,
he or she is encouraged to make contact with the surety's underwriting
department to ensure all of the necessary pieces of information are in
place prior to issuing the bond.
●
Jeffrey M. Frank is a founding shareholder and the managing partner of
Alber Crafton, PSC, practicing primarily
in theTroy, Michigan office. He concentrates his practice primarily in the areas
of fidelity and surety law, specializing
in commercial surety, as well as commercial and probate litigation. He can
be reached at jfrank@albercrafton.com
and 248.822.6190.

www.selective.com
SURETY
694661_Selective.indd
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determine if the alleged wrongdoing
took place prior to or after the bond
was issued because, in some jurisdictions, sureties are not liable for
wrongdoings that occurred before
the bond was issued.
As a practical matter, the claim
handler or attorney will attempt
to resolve the matter before a formal Petition to Surcharge is filed. A
Petition to Surcharge is like a lawsuit
against the principal and surety, seeking to obtain a judgment or order to
pay against the surety based on the
wrongdoings of the principal.
In some situations, the surety might
insist that an Order Resolving the
Surcharge is entered once the parties have settled the claim. This is
often because the Order will include
language that will permit the bond
to be canceled and the surety to be
released from any further liability
once the surcharge is satisfied.

20/05/14 1:37 AM


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Table of Contents for the Digital Edition of Surety Bond Quarterly - Summer 2015

NASBP Upcoming Meetings & Events
2015-2016 NASBP Executive Committee
From the CEO - There is Poetry in Surety Claims, Surely
Practical Insights: What You Need to Know - Hiding in Plain Sight: Specifications as a Source of Risk
Profile: President Susan Hecker
Developing Your Leadership Vision
Liability Issues - Can Public Owners be Held Liable to Subcontractors and Suppliers for Failure to Require General Contractors to Obtain Required Payment Bond?
An Introduction to Probate Bonds
Class Act - Surety Team’s Cooperative Efforts Enable School to Open on Time
NASBP’s Attorney Advisory Council - Participants Opine on Current Risk Management Challenges and Business Opportunities
The AIA Describes Updated and Expanded Design-Build Documents Family
Contractor Practices That may Result in Construction Claims to Recover for Delays and increased Costs
NASBP Annual Meeting Speakers - Veterans can benefit private sector, but need help finding jobs
Index to Advertisers
Surety Bond Quarterly - Summer 2015 - cover1
Surety Bond Quarterly - Summer 2015 - cover2
Surety Bond Quarterly - Summer 2015 - 3
Surety Bond Quarterly - Summer 2015 - 4
Surety Bond Quarterly - Summer 2015 - 5
Surety Bond Quarterly - Summer 2015 - 6
Surety Bond Quarterly - Summer 2015 - 2015-2016 NASBP Executive Committee
Surety Bond Quarterly - Summer 2015 - From the CEO - There is Poetry in Surety Claims, Surely
Surety Bond Quarterly - Summer 2015 - 9
Surety Bond Quarterly - Summer 2015 - Practical Insights: What You Need to Know - Hiding in Plain Sight: Specifications as a Source of Risk
Surety Bond Quarterly - Summer 2015 - 11
Surety Bond Quarterly - Summer 2015 - Profile: President Susan Hecker
Surety Bond Quarterly - Summer 2015 - 13
Surety Bond Quarterly - Summer 2015 - Developing Your Leadership Vision
Surety Bond Quarterly - Summer 2015 - 15
Surety Bond Quarterly - Summer 2015 - Liability Issues - Can Public Owners be Held Liable to Subcontractors and Suppliers for Failure to Require General Contractors to Obtain Required Payment Bond?
Surety Bond Quarterly - Summer 2015 - 17
Surety Bond Quarterly - Summer 2015 - 18
Surety Bond Quarterly - Summer 2015 - 19
Surety Bond Quarterly - Summer 2015 - 20
Surety Bond Quarterly - Summer 2015 - 21
Surety Bond Quarterly - Summer 2015 - An Introduction to Probate Bonds
Surety Bond Quarterly - Summer 2015 - 23
Surety Bond Quarterly - Summer 2015 - 24
Surety Bond Quarterly - Summer 2015 - 25
Surety Bond Quarterly - Summer 2015 - 26
Surety Bond Quarterly - Summer 2015 - Class Act - Surety Team’s Cooperative Efforts Enable School to Open on Time
Surety Bond Quarterly - Summer 2015 - 28
Surety Bond Quarterly - Summer 2015 - 29
Surety Bond Quarterly - Summer 2015 - NASBP’s Attorney Advisory Council - Participants Opine on Current Risk Management Challenges and Business Opportunities
Surety Bond Quarterly - Summer 2015 - 31
Surety Bond Quarterly - Summer 2015 - The AIA Describes Updated and Expanded Design-Build Documents Family
Surety Bond Quarterly - Summer 2015 - 33
Surety Bond Quarterly - Summer 2015 - Contractor Practices That may Result in Construction Claims to Recover for Delays and increased Costs
Surety Bond Quarterly - Summer 2015 - 35
Surety Bond Quarterly - Summer 2015 - NASBP Annual Meeting Speakers - Veterans can benefit private sector, but need help finding jobs
Surety Bond Quarterly - Summer 2015 - 37
Surety Bond Quarterly - Summer 2015 - Index to Advertisers
Surety Bond Quarterly - Summer 2015 - cover3
Surety Bond Quarterly - Summer 2015 - cover4
Surety Bond Quarterly - Summer 2015 - outsert1
Surety Bond Quarterly - Summer 2015 - outsert2
Surety Bond Quarterly - Summer 2015 - 43
Surety Bond Quarterly - Summer 2015 - 44
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