How do surety bonds work in large civil judgments and why do courts sometimes require 120% collateral?

1. What a surety bond actually does: a stand-in for cash and a stay of execution

An appeal or supersedeas bond replaces immediate cash payment and secures an automatic or discretionary stay of enforcement so the appellant can litigate without execution of the judgment; the bond obligates the surety to pay the appellee up to the bond limit if the appeal is unsuccessful ^[1][2][6]. The bond’s purpose is both practical—avoiding costlier collection efforts like liens or garnishments—and doctrinal—deterring frivolous delay by requiring a financial stake to stay enforcement ^[7][1].

2. How sureties underwrite the risk and price the guarantee

Surety companies underwrite appeal bonds by assessing the appellant’s credit, assets, and indemnity agreement; they charge a premium (typically a small percentage of the bond annually) and may demand collateral or a guarantor if the applicant’s liquidity or net worth doesn’t convincingly cover the exposure ^[3][7][8]. Premiums commonly range from low single digits of the bond amount, but underwriting treats appeal bonds as high risk because appellants already lost and claims are likely, prompting stricter underwriting standards ^[7][5].

3. Why courts and sureties ask for 120% (or more) collateral: math and risk management

Courts or statutory formulas often set bond amounts to exceed the base judgment so interest, appellate costs, and potential fee awards are covered; jurisdictions routinely demand multipliers—120%–150% or 1.5x in California for non-admitted sureties—to ensure the appellee is made whole even if the judgment grows during appeal ^[3][4][9]. From the surety’s perspective, full or super-full collateral (often 100% cash or more) mitigates default risk: because appeals usually fail, the surety expects potential payout and will secure assets in advance to avoid insolvency exposure ^[5][10].

4. Forms of collateral and when courts or sureties waive them

Acceptable collateral includes cash, letters of credit, non-retirement securities, and sometimes real property; admitted or well-capitalized corporate principals may qualify for reduced multipliers or no collateral where the surety is comfortable with the principal’s balance sheet ^[7][4][8]. Conversely, smaller or higher-risk appellants typically must post full collateral—sometimes at least 100%—before the surety will issue the bond because underwriting treats these bonds as the highest hazard category ^[11][2].

5. Practical consequences and incentives: who bears the cost and why parties accept it

The appellant bears premium and collateral opportunity costs; if the appeal is lost, collateral is used to satisfy the judgment or the surety pays and pursues indemnity against the principal ^[6][3]. For appellees, the bond reduces collection friction and creates predictable exposure; for sureties, collateral and high multipliers protect solvency and pricing models—an implicit commercial agenda of surety firms that favors conservative collateral rules to limit defaults ^[10][12].

6. Legal variation and policy tensions

Statutes and court rules differ by state and by type of bond—California law, for example, prescribes specific multipliers and admitted surety rules that can lower the multiplier to 1.5x or require two personal sureties in some situations—so the exact collateral percentage is a mix of statute, judicial discretion, and surety underwriting ^[4][9]. Policy debates surface between access-to-appeal concerns (excessive collateral can block meritorious appeals) and creditor-protection aims (insufficient security risks leaving appellees uncompensated), and the published practice leans toward creditor protection via higher collateral requirements ^[2][13].