You may be ordered by the court to purchase an injunction bond if you file suit against another party and request an injunction pending the court’s decision. The court will let you know whether you need to purchase an injunction bond and in what amount. The bond must remain in force until the court has issued a ruling on the case.
Injunction Bonds for Court Orders
Plaintiffs requesting injunctive relief need an injunction bond when the court requires security for potential damages. Surety Bonds Agent serves all 50 states with expert help and direct support. Apply today for an injunction bond quote.
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What Are Injunction Bonds?
To understand what injunction bonds are and how they work, you must first know what an injunction is. Very simply, an injunction is a court order requiring someone to do something specific or not to do it. An injunction may be ordered when a lawsuit is being litigated, usually because the plaintiff wants the defendant to cease and desist a certain activity until the case has been settled or ruled upon.
Here’s an example. You’ve probably seen environmentalists protesting a pipeline project or cutting down trees to clear land for development. The environmental group could file suit against the developer and, as the plaintiff in the case, ask the judge to issue an injunction forcing the developer, the defendant, to stop their work until the court rules on the matter.
If the judge decides to grant the injunction, the plaintiff will be ordered to obtain an injunction surety bond, a type of court bond. In the event that the plaintiff loses the case, the injunction will be canceled, or “lifted.” The injunction bond is the plaintiff’s pledge to pay any damages the defendant suffered as a result of the injunction, such as wages paid to laborers while the injunction prevented them from working. The plaintiff may also be required to pay the defendant’s court costs and legal fees.
Who Needs Them?
How Do They Work?
An injunction bond brings three parties together in a legally binding contract:
- The obligee (the court)
- The principal (the plaintiff purchasing the bond)
- The surety (the company issuing the bond)
The obligee establishes the required amount of the injunction bond, the surety determines how much the bond will cost, and the principal bears sole legal responsibility for paying a valid claim against the bond.
If the court rules against the plaintiff and lifts the injunction, the defendant files a claim against the injunction bond for compensation of any financial loss resulting from the injunction while it was in force. If the surety cannot negotiate a favorable settlement and the principal does not pay the claim promptly, the surety will pay the claim and then collect reimbursement from the principal.
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What Do They Cost?
Injunction bonds are sold for a premium that’s a small percentage of the required bond amount established by the court. The surety’s main concern is being reimbursed if it becomes necessary to pay a claim on the principal’s behalf. The best indicator of the risk the surety will be taking on is the principal’s personal credit score, though the underwriters will also look at the principal’s personal financial circumstances and merits of the case.
A well-qualified principal will most likely pay a premium that’s in the vicinity of one to two percent of the required amount of the injunction bond. Someone less creditworthy will pay a higher premium rate.
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