Surety Bonds serve to protect the obliged party against losses that result from the failure of the principal to meet their obligation. A surety bond is an agreement amount three parties, who are identified by the following terms:
Principal: a party that has a responsibility to perform some obligation
Obligee: a party that will benefit from the principal performing the obligation
Surety: the party that promises to pay the obligee if the principal fails to perform the obligation
A common type of a Surety Bond would be a License and Permit Bond. License and Permit Bonds are a type of surety bond, sometimes referred to as “license bonds”. License and permit bonds are required by government agencies as a pre-licensing requirement for a number of different businesses.
A License and Permit bond guarantees that a business will operate in accordance with federal, state, or local laws and regulations. Each license bond is specific to one industry, and protects customers and/or the state from damages. Most commonly, license bonds protect governments and consumers from fraudulent practices committed by the business that is bonded. In any industry that requires bonding, each business must be licensed and bonded before they are allowed to legally operate.
Underground Storage Tank Surety Bonds (UST Bonds)
Many states have implemented programs to comply with the US Environment Protection Agency (EPA0 regulations and financial responsibility requirements to ensure that underground storage tanks (USTs) are in safe working order to protect both drinking water and human health. Gas stations, convenience stores, and local governments having underground tanks that store petroleum must comply with financial responsibility requirements set forth in state and federal regulations. The purpose of the financial responsibility requirement is to ensure that owners/operators have the financial means to clean up spills and overfills, repair or replace leaking corrosive tanks and lines, and provide compensation for third parties if any bodily injury or property damage occurs.