A continuing bond, also called continuous bond, is a financial guarantee or a suretyship that renews automatically until it is canceled. Continuing bonds do not expire as long as the client makes the required payment for each renewal. In other words, it has an indefinite term.
A continuing bond does not expire, but is canceled by the obligee by formal notice of cancellation. In the absence of such formal notice of cancellation, the surety bond is deemed canceled if the Principal is able to satisfactorily show that the undertaking of the surety bond has been fully performed by it and the same is acknowledged in writing by the obligee. In Reparations Commission v. Universal Deep-Sea Fishing Corp., a continuing bond is one whose period of insurance is indefinite or with no fixed expiration date. The bond shall be in force unless canceled by the obligee, or by the Insurance Commissioner, or by a court of competent jurisdiction, as the case may be. As a consequence, the premium for furnishing the bond and the obligation to pay the same subsists for as long as the liability of the surety exists.
In Country Bankers Insurance Corp. v. Lagman, the Warehouse Bond was deemed a continuing bond and remains in force until canceled by the Administrator of the National Food Authority (obligee) and cannot be unilaterally canceled by the general agent who obligated himself in the Indemnity Agreement.
With respect to the premiums due, they are collected upon the issuance of the renewal certificates annually. However, the principal is still liable for the unpaid premiums notwithstanding the nonissuance of the renewal certificates. The obligation of the principal shall cease only when the obligee consents to it. The obligation to pay the premium subsists for as long as the liability of the surety exists. The principal is obliged to pay the annual premiums as it falls due until the contract of suretyship is canceled by the obligee or by the Commissioner or by a court of competent jurisdiction, as the case may be. Under Section 179 of the Amended Insurance Code: “In the case of a continuing bond, the obligor shall pay the subsequent annual premium as it falls due until the contract of suretyship is cancelled by the oblige or by the Commissioner or by a court of competent jurisdiction, as the case may be.”
Two examples of continuing bonds would be (a) bonds required by courts in criminal and civil actions or special proceedings, also known as judicial bonds; and (b) bonds required by the National Labor Relations Commission (NLRC) in labor cases.
For bonds in criminal and civil actions or special proceedings, Supreme Court A.M. 04-7-02 (Guidelines on Corporate Surety Bonds) provides that: “Unless and until the Supreme Court directs otherwise, the lifetime or duration of the effectivity of any bond issued in criminal and civil actions/special proceedings, or in any proceeding or incident therein shall be from its approval by the court, until the action or proceeding is finally decided, resolved or terminated.” Examples of judicial bonds are the injunction bond, attachment bond, replevin bond, and appeal bond.
For judicial bonds, the court may order the cancellation of the bond. In case the court does not include in its order or judgment the cancellation of the surety bond filed, but nonetheless terminates with finality the case, the bond may be considered as already canceled. However, it is better to file a motion with the court for the cancellation thereof. In addition, per Supreme Court Resolution under Administrative Matter 03-03-19-SC, “the lifetime or duration of the effectivity of any bond issued in civil actions or proceedings or in any accident therein shall be from its approval by the court until the action or proceedings is finally decided, resolved, or terminated.” Under Section 179 of the Amended Insurance Code, the Insurance Commissioner is authorized to cancel a contract of suretyship. Moreover, both Supreme Court and NLRC guidelines provide that “Nonrenewal or cancellation of the Certificate of Authority by the Insurance Commissioner” shall be a ground for the cancellation of the Certificate of Accreditation and Authority of surety companies. In January 2019, following the order to liquidate Far Eastern Surety & Insurance Co., the Insurance Commission ordered the cancellation of all continuing bonds issued by the said company and directed the liquidator to notify the respective courts, obligees, and advise the obligors to secure replacement bonds.
For bonds required by the NLRC, the NLRC in its En Banc Resolution 03-2013 (Guidelines for the Accreditation of Surety Companies) provided: “In accordance with Section 6, Rule VI of the 2011 NLRC Rules of Procedure, as amended, the surety bond shall be valid and effective from the date of deposit or posting, until the case is finally decided, resolved or terminated, or the award satisfied.”
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Dennis B. Funa is the current insurance commissioner. Funa was appointed by President Duterte as the new insurance commissioner in December 2016. E-mail: dennisfuna@yahoo.com.
