How Bond Claims Work

Should you suspect a loss has been suffered by an estate at the hands of a trustee / liquidator/ executor (the incumbent named on the bond of security), you should proceed to investigate it. Once your investigation is complete, you need to notify the Master of your investigations and be able to substantiate the loss allegedly suffered.

If the Master is of the view that the bond of security may be called up, he will do so. He is obliged in terms of the bond clauses to inform the Surety (insurance Company) in writing of the alleged default and the amount of the alleged loss or damage suffered. In addition, the Master shall provide the Insurer with full details of the alleged default and loss or damage available to him at the time of making the demand.

If the Insurer so requires, the Master shall afford the Insurer an opportunity of investigating the alleged default and loss or damage. In order to do this the master may be asked to provide all information and documents in his possession or under his control relative thereto.

The Master must co-operate with the Insurer to complete its investigations to the extent that it is in his power to do so.

The Insurer can within a period of three months notify the Master of an objection to the claim amount or grounds on which it was based.

The insurer may request additional time for purposes of investigating the alleged default and the amount of the loss or damage so claimed. The master may allow this additional time.

If and after an objection, the master may reject the objection to the claim. In the event that the Master rejects the objection to the claim or the amount thereof, the Insurer shall be entitled to institute action within four months of such rejection.

The sum which the Master has demanded may be paid by the Insurer into the Guardian’s Fund pending the expiration of the period of four months to contemplate action or the final determination of any action instituted by the Insurer, whichever occurs last.

Some common misconceptions are:

  1. that the creditor has the right to call upon the Insurer to pay the claim. Only the Master has this power. All investigations to be lodged with the Master and the Master will be in touch with the Insurer.
  2. that the creditor can call up the bond for shortfall amounts. This is not considered default, but insufficient assets owned by the insolvent to pay estate administration expenses. This is not a basis for calling up the bond.
  3. that the claim against the Insurer never prescribes. Bond claims do in fact prescribe.
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