Bond Coverage

Surety bonds are a promise by a surety company to pay a first party if a second party fails to meet its obligations.  They protect the third party that is hiring a business from any potential losses that could arise from incomplete work, damage and other failures of the hired business.  If such losses do occur, the third party can file a claim and receive compensation for the loss from the surety company, which would then be repaid by the purchaser of the bond. 


Who is involved in a surety bond?

A surety bond represents an agreement between three parties.

The Principal is the purchaser of the bond and is the business that is providing its service to others. 

The Obligee is the entity that requires the bond before allowing the principal to do business.  Often, the obligee is a state, municipal or other government institution but commercial and professional parties can also use bonds. 

The Surety is the insurance company that issues the bond.

What does it mean to be bonded?

A bonded business is one that has purchased a surety bond.  Surety bonds provide a guarantee that your business will fulfill the terms of a contract.  Unlike other types of insurance, the bond carrier (the surety) will expect reimbursement when it pays a claim.  Surety bonds assist principals, usually small contractors, compete for contracts by assuring obliges that they will receive the service or product as outlined in the contract. 

How does a bond work?

The principal will pay a premium to the surety in order to obtain the surety bond. The bond itself requires the principal to sign an agreement that pledges the business assets to reimburse the surety if a claim occurs. If the business assets aren’t sufficient or are uncollectable, the surety will pay its own money towards the claim. 

Parts of a surety bond

Bonding capacity is the maximum bond amount a principal can obtain.  This figured is calculated by the surety using the principal’s working capital, cash flow, experience and other financial records.

Bond term is the length of the bond and is outline in the contract between the principal and the obligee.

Bond terms are typically between one to four years but can usually be renewed if needed. 

Working capital is a principal’s current assets less their current liabilities.  Sureties require principals to have a certain amount of working capital in order to offer them a bond. 

Bond premium is often a percentage of the bonded amount.  It is charged by the surety and paid by the principal.

What types of bonds are there?

There are many different types of bonds.  Some of the most common types of bonds are explained below.  

Contract surety bonds are often used to guarantee the performance of a contractor as it relates to a construction contract. 

  • Performance bonds protect the obligee if the contract fails to complete a project as required.
  • Payment bonds guarantee that the contractor will pay its subcontractors, laborers and suppliers as specified in the contract.
  • Bid bonds ensure that a contractor can meet the requirements of the bids they submit and that they won’t back out of a project if the bid is won.
  • Maintenance bonds are sometimes called warranty bonds and they protect a project owner from losses resulting from defective workmanship or faulty materials.

Janitorial surety bonds can reimburse clients for incomplete work or employee theft.  They are often required to be carried by professional cleaning companies. 

Fidelity surety bonds help business protect themselves from employee theft, fraud and dishonesty. They can also protect against unlawful digital access. 

  • Employee dishonesty bonds protect against losses resulting from an employee’s dishonest acts. This type of bond is often used by non-profit organizations.
  • Business services bonds defend against employee theft of or damage to client and customer assets, like money or belongings.
  • ERISA bonds protect pension and retirement plan participants from malpractice by the employees that manage the plans.

Commercial surety bonds are used by government entities to protect public interests. These types of bonds are used by licensed business as a way to ensure that they follow regulations and codes that relate to the well-being of the general public.  Liquor stores, notaries, auto dealers and licensed contractors are common principals for this kind of bond. 

  • License and permit bonds are required by government agencies when professionals, like a plumber or electrician, apply for a license.
  • Mortgage broker bonds ensure that mortgage brokers adhere to state regulations and protects borrowers from those that don’t.
  • Other bonds apply specifically to certain industries, like lottery-ticket sellers, fuel sellers and travel agents.

Court surety bonds protect individuals or business from losses during court cases.  They can be used by plaintiffs and defendants and even estate administrators. 

  • Cost bonds ensure payment of court costs during litigation
  • Administrator bonds guarantees that an estate administrator performs their court-appointed duties.
  • Guardianship bonds ensure that guardians will act in the best interest of the incapacitated or underage person.
  • Attachment bonds are required to be obtained by courts before they seize someone’s property. They guarantee that defendants will be reimbursed for any damages resulting from the seizure. 

The city of Anytown hires a contractor to re-pave Main Street.  Partway through the job, the paving contractor’s project manager quits and leaves the project unfinished.  Anytown could file a claim with the surety for the cost of hiring another contractor to complete the project.  The original paving contractor would then be obligated to reimburse the surety. 

What our clients are saying:

Post Independent logo

NEWS  |  November 8, 2011
Kelley Cox

GLENWOOD SPRINGS, Colorado – When investor and businessman Harry Logan founded Glenwood Insurance Agency in 1911, he probably wasn’t thinking about the company’s longevity. He sold it eight years later.

But from 1919 to the present, the company has passed through two Glenwood Springs families, and is still owned today by a partnership of families.

Now, 100 years after Logan opened the doors, the Glenwood Insurance Agency is celebrating a century in business.

“I’m proud to carry on the tradition,” said Scott Bolitho, a co-owner and third generation executive in the company. “My grandfather did business with a handshake. That personal touch has carried through to the present.

“We like to do business by establishing a relationship with people. You know in insurance, there’s nothing tangible you’re selling. Everything is built on trust and relationships,” Bolitho said.

“A lot of things have changed over the years, most notably the technology and the regulations on the industry,” said Asa Jones, another co-owner who took over from his brother Pete.

“The foundation for our success has always been our relationships with our customers. One of the benefits of living in and doing business in a town like Glenwood Springs is that we get to know and help so many great families,” Jones said.

“Through good years and bad, our priority has been to treat our customers and our employees like family,” said Nettie Avery, who, along with her husband Bryan, bought a share of the company in 1999.

“That’s one of the reasons we’ve weathered the storms. We’ve helped our customers through the difficult times by proactively meeting with them to find ways to cut their costs without sacrificing their coverage,” Avery said. “When our customers succeed, we succeed.”

Harry Logan was in the insurance and lending businesses when he launched Glenwood Insurance Agency in 1911. The town was just 26 years old, and didn’t stretch any farther south than 13th Street.

In 1919, Logan sold the business to Carleton Hubbard Sr., who ran it until the 1960s, said his son, Carleton Hubbard Jr. of Glenwood Springs, who also worked in the business in his younger years.

The senior Hubbard, who had spent the previous 10 years as county clerk and deputy county clerk, had purchased the Garfield County Abstract Co. a year earlier, and he was very busy running the two businesses.

Needing help, he hired Ada Hutchings, a former Strawberry Queen. Proximity paid off, and the two were married in 1928. They ran the two companies from an office in the Hotel Glenwood, a four-story wooden structure at the northeast corner of Eighth and Grand.

In 1944, they moved the office across the street into the brick First National Bank Building. The following year, the Hotel Glenwood burned to the ground.

In the 1960s, the Hubbards bought the abstract companies that were serving Eagle and Pitkin counties, just at the time when Vail and Snowmass Village were beginning to be developed. The title business was far more demanding than the insurance business, so the Hubbard family sold the 50-year-old insurance agency to Walter Thrall.

“My dad would feel very proud,” Hubbard said of the business continuing for another 50 years, “and it wouldn’t surprise him that it is still doing well. It was a nice little agency when he sold it. They [represented] good companies.”

In the same downtown block, Pat Bell owned a competing insurance agency in the Dever Building, on the northwest corner of Eighth and Grand.

“I remember going to my grandfather’s office on Saturday mornings with my brother to play with the rotary phones. We really grew up with the business,” said Scott Bolitho, son of Jere Bell (Pat Bell’s daughter) and her husband, Bill Bolitho.
In 1977, Pete Jones and Bill Bolitho bought the Glenwood Insurance Agency from Thrall and his partner, Ralph Sample. They merged the company with Bell’s agency, forming a company that was, for a few years, called the Glen Bell Agency.
A few years later, they also acquired the First Agency from Randy Wilson and Bob Howsam. In 1982, Pete’s brother Asa Jones came in as a partner. In 1983, they partners changed the name back to Glenwood Insurance Agency.

Today, Glenwood Insurance is owned by Scott Bolitho, Asa Jones, Bryan and Nettie Avery, along with investors Dennis Lawrence of Wyoming and Sarah Fleming of Grand Junction. Ian Exelbert, who previously served as market president for U.S Bank and controller for WestStar Bank in Glenwood Springs, joined the agency in September as an owner and chief operating officer.

Scott Bolitho also noted that Todd Thulson was a partner and key player in the agency from 1999 until his retirement in 2008.

Bolitho said as a kid, he never imagined following his father and grandfather into the insurance business.
“The last thing I was going to do was move back to Glenwood Springs. I wanted to work in sports marketing,” he said.
But he earned a college degree in insurance and finance, and spent seven years in Denver working for Travelers Insurance, one of the lines Glenwood Insurance has carried for decades. And then, just like his parents, he moved his young family back to Glenwood Springs and went into the business.

Now his son Ryan, 26, works there too.

“It was the same thing as me,” Scott Bolitho said. “He used to say to me, ‘Dad, how can you work in an office?’ And here he is.”

The insurance industry calls this multi-generational pattern “perpetuation.”

It results in stability and dependability that keeps customers and employees on board for years. Many of the agency’s customers are the second, third and, in some cases, fourth generations doing business with Glenwood Insurance, and some employees have been with the company for 20 to 30 years.

For Exelbert, it’s like stepping into a deep tradition.

“This is a great opportunity to carry on the legacy of a Glenwood Springs business that has stood the test of time, and proven its commitment to customers and employees again and again,” he said.

– Publicist Mandy Gauldin contributed to this report.