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These bonds are commonly required by statute and create a three-party relationship more common in the context of surety bonds. Also frequently discussed in the context of public officials are public employee dishonesty coverages and similar fidelity policies. These instruments typically include the traditional two-party relationship where the insurer issues a policy or bond agreeing with the insured to indemnify the insured for certain losses arising from the dishonesty or other enumerated conduct of its employees
A public officials bond refers to an instrument “by which a public officer and a secondary obligor undertake to pay up to a fixed sum of money if the officer does not faithfully discharge the duties of his or her office.” A statutory public officials bond is thus a public officials bond mandated by statute. Black’s Law Dictionary defines “official bond” as “a bond given by a public officer, conditioned on the faithful performance of the duties of office.” In the three-party surety structure, the public official is the principal, the bonding company is the surety (sometimes called the secondary obligor), and the government or, in many cases, the public being served by the official is the obligee
The Public Officials bond is commonly issued to protect against conduct or omissions by the named public official that constitutes a breach of the public official’s duties of office. As is discussed in more detail below, these bonds guarantee against more than the public official’s fraud or dishonesty and, in certain cases, can cover loss arising from neglect or omissions.
A Public Officials bond may be issued for the benefit of the governmental unit in which the principal holds office, but also it can provide coverage to the general public. The Bond is “in the nature of an Indemnity Bond rather than a Penal or Forfeiture Bond; it is, in effect, a contract between the officer and the government, binding the officer to discharge the duties of his or her office.” The Official Bond is not intended to protect the principal or the public official himself but rather is intended to protect the city or the entire citizenship served by the official.