Lost Title Bond Claims Guide

In most states (36 to be exact), individuals who have purchased a used motor vehicle (or sometimes trailers, boats, outboard motors, and recreational vehicles) without a clean title may obtain a bonded title from their home state’s governing entity. This alternative title is referred to most commonly as a Lost Title Bond or Certificate of Title Bond.

Jet Insurance Company provides Lost Title Bonds as an alternate way for you to prove your ownership of the used motor vehicle (the governing DMV will typically issue you a title once the required time period of the bond has ended). The surety bond also ensures that the governing DMV will not be held liable for any unknowingly lost or stolen vehicles, and should the rightful owner of the vehicle come forward, the bond may be used as a means of restitution for the loss of their property.

Let’s go over the best ways to avoid the above claim scenario and what to do should a previous owner of the vehicle come forward seeking their lost or stolen property.

How to Avoid a Lost Title Bond Claim

More than likely, the reason you are seeking a bonded title is that you either lost the title or never received the title for your vehicle?maybe due to the previous owner not having the title or you purchased an unclaimed/abandoned vehicle. 

The process of you avoiding a claim should begin before you even purchase a Lost Title Bond. When applying for a bonded title through your local governing regulator, the DMV will typically conduct an investigation into the history of the motor vehicle. This is done to ensure that the vehicle was not recently reported as lost or stolen. If the vehicle is found to be clean then you should be approved for a bonded title. 

Jet highly recommends that you also take care of a few tasks before obtaining a bonded title for your vehicle. Here are a few things you can do to prove rightful ownership of your vehicle.

• Acquire a bill of sale or proof of payment from the previous owner or the salvage yard that you purchased the motor vehicle from 
• Ensure that the vehicle’s registration is under your name and keep a copy of the documents
• If insured, keep copies of your vehicle insurance paperwork
• Conduct your own research of the title and possible liens on the vehicle

If you can, you should also contact previous owners of the motor vehicle. They should be able to let you know if the vehicle has a clean title and/or maybe an idea of what happened to the original proof of title. 

Claims Process Details

Who Can File a Claim on a Lost Title Bond?

Only the rightful owner of the motor vehicle may pursue civil action against you which can result in an official claim on the Lost Title Bond. 

Are There Limits to Claim Filings?

Yes, a claim on a Lost Title Bond is limited when it comes to the amount that can be paid out to the claimant, as well as when exactly a claim may be filed. Claim payouts will never exceed the surety’s bond’s liability which is represented by the dollar amount of the bond limit. 

Lost Title Bond limits are always custom and are typically based on the estimated value of the motor vehicle according to a current Kelly Blue Book Valuation Guide and/or the governing entity’s own evaluation (e.g. Florida requires bond limits to be equal to twice the value of the car).

Lost Title Bonds must remain active for a certain amount of time before the bond obligation is released by the governing entity and a new title is issued to the owner. This required liability period is typically three years following the bond’s effective date. As for when a claim may be filed, the rightful owner of the vehicle can file a claim against you at any time during the bond’s active duration. However, once the bond has been released by the entity governing your bond, no claims may be filed. 

It is important to note that Lost Title Bonds may not be cancelled. Once you purchase the bond from a surety provider (Jet), the bond will remain active for the required timeline and will only be terminated by the governing entity once it reaches its official expiration date. 

What Would a Lost Title Bond Claim Look Like?

Suppose that Jeremy has recently purchased a 2015 Volkswagen GTI from “Tammy” on Craigslist. Tammy explained that she had lost the title so she technically couldn’t transfer it over to Jeremy, but the price was such a good deal that Jeremy ignored this minor inconvenience. Later on, Jeremy applies for a bonded title with his local Alabama Department of Motor Vehicles (DMV) and is approved for a Lost Title Bond. However, after being in possession of the car for a year, Jeremy is notified that his car was reported as stolen in another state three years ago and the rightful owner (Kim) wants their property back. 

Complaint

Kim finds out that Jeremy is now in possession of her car as he got a parking ticket, but because he failed to register the vehicle in his name, the ticket was sent to Kim’s home address in Florida. Kim contacts the Alabama DMV to notify them that said vehicle had been stolen three years previously and files a complaint against Jeremy.

Investigation

Once notified, the Alabama DMV begins an investigation into the matter and contacts Jeremy to let him know what is going on. Now Jeremy is willing to work with Kim and gives the DMV all available information regarding his purchase of the vehicle. Unfortunately, once the investigation concludes, Jeremy is ordered to return the vehicle to Kim.

However, Kim decides she would rather receive payment for the car and pursues civil action against Jeremy instead.

Civil Action

The court conducts an investigation regarding the Volkswagen GTI. It is important to point out that Jeremy did not ensure he had documented proof of ownership for this car. He paid in cash, received no bill of sale from the Craigslist seller (Tammy), and failed to even register the vehicle in his name so there’s really no way for him to win this case. Like we foresaw, the court rules in favor of the claimant (Kim) and Jeremy is ordered to pay up.

Restitution

Unfortunately, Jeremy doesn’t have any extra cash on hand so Kim is forced to file a claim on his Lost Title Bond. An official notice is sent to Jeremy’s surety provider (Jet), and once again, an investigation of the case begins.

The Jet team finds that the claim is justified and a payout will proceed (the claim payout will not exceed the bond’s limit). Funds from the Lost Title Bond will cover the value of the vehicle, as well as the cost of Kim’s attorney fees (not all states require court costs to be covered by a surety bond).

Indemnification

The odds are a bit against Jeremy at this time as he will now be expected to pay Jet Insurance Company back for the claim payment that was made on his behalf (all surety providers require reimbursement of bond funds). The Lost Title Bond acted as a line of credit for Jeremy with the hopes that he wouldn’t have to use these funds, but once he did, the expectation is that he will fill that credit line back up to its original amount. Failure to do so may result in the cancellation of his surety bond which means he will not receive a clean title for his car and will have to start the whole process again.