Vehicle Registration Bond Claims Guide

In every state, there is a government entity that handles driver licensing and car registrations, typically called the Department of Motor Vehicles (DMV), or Motor Vehicle Division, Bureau of Motor Vehicles, etc. Some state departments utilize third parties to aid with certain services, like title issuances or transfers, vehicle or license plate registrations, dealer licensing, or other paperwork. 

When the DMV authorizes another person or business to take care of such services, a surety bond—generally called a Vehicle Registration Bond—must be filed to protect against financial damages caused by a vehicle registration agent failing to carry out their permitted duties. And, as the issuer of the bond, Jet Insurance Company is there to compensate the DMV or any clients for violations that are covered by the terms of the bond.

Other Vehicle Registration Bond Names

• Branch Auto Tag Bond / Motor Vehicle Branch Office Bond
• Electronic Temporary Registration Third Party Provider Bond / Electronic Title and/or Registration Processing Bond
• Electronic Vehicle Registration Permit Bond
• License Plates and License Registration Receipts Bond
• Motor Vehicle Registration Agent Bond / Third-Party Motor Vehicle Registration Bond / Motor Vehicle Registration Issuance Bond
• Partial Service License Branch Bond
• Public License Tag Agent Bond
• Substation Contract Bond
• Tag Service Company Bond
• Vehicle Registration Program Dealer Bond / Vehicle Registration Service Bond / Vehicle Registration Program Emission Station Bond

How to Avoid Motor Vehicle Registration Bond Claims

Third-party registration agents will receive authorization from their governing entity to perform certain actions, which will vary between states. For example, the Florida Department of Highway Safety and Motor Vehicles allows licensed dealers to issue temporary license plate tags, and even in Miami-Dade County, private businesses are permitted to distribute auto tags. Texas license plate registration agents assist the County Tax Assessor-Collectors in registration renewals and collection of taxes or license and title fees. It is recommended that you are familiar with the obligations of your contract with the State or County - refer to the chart at the bottom of the page.

Registration agents may have specific obligations under each state’s Vehicle Registration Bond, but typically, agents are bound to fulfill the registration services that they receive payment for and forward those funds to the entity that granted them authority. The surety bond will generally provide coverage for the following actions:  

• Failure to submit registration taxes or fees to the regulator
• Unfulfilled registration services for clients
• Failure to provide a refund for unfulfilled services (like in the case of insolvency)
• Misappropriation of funds
• Failure to complete contractual obligations
• Other violations of State/County legislation

When Can a Claim Be Filed?

An injured party can only file a claim for an action that occurred while the surety bond was in effect. Some bonds will explicitly give additional time for claims to come in, like in California, vehicle registration services can receive a claim up to three (3) years from the bond’s end, given that the offensive action took place during the bond’s active period.

How Much Coverage Is Provided?

Surety bond claims are capped out at the amount of the bond, so whatever the bond limit is, claims cannot be higher than that. The limit is determined by the state (or county) requiring the Vehicle Registration Bond for third parties. The limit can be a set amount—like $50,000 for the Private Tag Agent Bond in Georgia—or can vary based on the average amount of revenue the agent collects for vehicle registration services.

Now that we’re familiar with some of the details regarding claims for Vehicle Registration Bonds, how would a claim filing play out?

The Complaint

After a registration agent breaks their obligation, the injured party will file a complaint as a first step.

Let’s say we have a customer (we’ll call her Betty) and a private registration agent (we’ll call him Jake). Betty paid Jake for her vehicle registration renewal but hasn’t received the renewed registration. Betty will reach out to Jake to sort out the issue. Jake can fix his error right then and there and everyone is able to move on. But, Jake keeps dodging Betty’s calls, and she knows this behavior all too well—Betty contacts the DMV with a formal complaint against Jake. 

The Investigation

The regulator will investigate the complaint, even to the point of a court hearing. Any pertinent evidence should be presented by the registration agent for their defense. 

The DMV will review evidence to determine if Jake has violated the contract that authorized him to provide registration services. Betty can provide evidence of payment and a lack of communication on Jake’s part. As for Jake’s defense, he indicated that he ended his business and did not receive those messages. Still, Betty paid for her registration but never received it so she is owed compensation.

The Judgment

If the regulator finds that the registration agent has violated the obligations stated by their contract, the agent will be required to atone for their actions. This can be in the form of administrative penalties or a payout from the surety bond if the violation was within the bond’s coverage. The payout can be for the benefit of the regulating agency for mishandling of funds or for a customer that is owed a refund.

The DMV finds Jake at fault and demands that reparations be made. Aside from penalties, Jake is hit with a bond claim based on his failure to provide a refund to Betty when he went out of business and didn’t complete her paperwork.

The Recovery

Jet will need to uphold the obligation of the Vehicle Registration Bond and pay the injured party, whether that’s a customer or the regulator. And, as is the standard in the surety industry, the registration agent will need to pay Jet back in the amount of the claim. 

As the surety company, Jet will pay Betty from the surety bond in the amount she was due for her refund. This completes Jet’s purpose as a surety bond provider: to make reparations when a principal (in this case, Jake) doesn’t.

But, a surety bond isn’t like insurance—Jake is still responsible for his actions and, like with any other surety company, Jake will need to pay Jet Insurance Company back.