Personal Sureties Issue

The Tennessee Notary Statute allows personal sureties or corporate sureties to bond notaries. So why do most Notaries use a corporate bonding company instead of personal sureties to post their $10,000 notary bond?

There are several reasons personal sureties are not used frequently. First, there is considerable risk to the personal surety. If a notary’s bond is called, the personal or corporate surety must respond immediately. A court may ask that the surety place the full bond amount ($10,000 cash) in the care of the court. If a judgment is rendered against the Notary and the Notary can not respond, the court will ask the surety to respond in place of the Notary. Bye, Bye $10,000!

If the Notary and the personal sureties can not respond with cash, the court will probably place a lien on the sureties’ property or force the sale of the surety’s property. The surety does have the right to recover the cost and expense from the Notary but this may be several years later. It may involve substantial legal and court expenses. Notice that the court could go after the assets of the sureties and leave it up to the sureties to recover from the Notary.

Secondly, some county commissioners feel they put the State at financial risk when they accept personal sureties. Hence, they may ask to review a personal surety’s financial statement or property assessment before accepting the personal surety. The personal surety is an unknown financial factor. The corporate surety on the other hand is monitored by the Insurance Commissioner of Tennessee and in many cases, the federal government. This monitoring is done to make sure that the corporate surety or bonding company is financially sound and can fulfill the duties under the bonds posted to the State.

Finally, most insurance companies will not write Errors and Omission insurance on a Notary they have not bonded. The Errors and Omission insurance policy is protection for the Notary and most Notaries are reluctant to give up this important protection for themselves to save a few bucks by using personal sureties. You see the maximum the surety has at risk is $10,000, the amount of the risk. The Notary on the other hand can be held liable for damages that exceed that amount.

Although it is certainly legal to use personal sureties in Tennessee, it appears most Notaries do not believe it makes good business sense