Notaries are empowered by a state to perform certain legal functions, primarily administering oaths and affirming signatures. Though these are fairly routine practices, mistakes can be significant and costly. To protect those who use notaries, most states have a bonding requirement as part of the notary public registration process. The notary surety bond, underwritten by a private company, does not transfer liability away from the notary, but ensures that her clients will receive swift compensation for damages.
The Parties to a Surety Bond
A surety bond is a legal instrument that reflects an agreement between three parties. In the case of a notary bond, those parties are the state, the surety company who underwrites the bond, and the notary public herself. Most states require that notaries obtain a surety bond to protect their clients from damages caused by the notary.
Purpose of the Bond
The notary bond works like any professional surety bond. Its purpose is to give consumers peace of mind that the professional service provider, in this case a notary, is licensed to perform the services and able to provide reimbursement in the case of faulty work. Errors by a notary could potentially invalidate an important legal document or create other expensive consequences for the consumer.
Cost of Surety Bonds
The required value of a notary surety bond varies by state. They typically range from $5,000 to $15,000, depending on the period of time they're intended to cover. The cost of obtaining the bond is a tiny fraction of the bond amount, as little as $35 to $50 depending on the surety company.
How Bonds Pay Out
Notaries must be licensed by the state they work in, and if someone has a claim against a notary, he must file against the state. If a claim is made, the surety pays out to the state, as obligee, in the amount of the claim, up to the maximum limit of the bond. The payment is used to settle the claim for damages by the notary’s client. The principal, which is the notary, is then liable to the surety company, who can collect the full amount of the payment directly from her.
A notary surety bond does not protect a notary; it protects her clients. Even with a surety bond, a notary can find herself on the hook for thousands of dollars in damages if she makes mistakes in her work. For this reason, active notaries often take out something called errors and omissions insurance. If a claim against the notary surety bond is paid, and the surety attempts to collect from the notary, the errors and omissions policy will cover the personal liability of the notary.