Insurance as a Substitute for Bonds

Counties are authorized to purchase insurance policies in place of bonds for both officials and employees.  Purchase of such insurance policies is purely optional and at the discretion of the county legislative body.  The county legislative body can opt to cover all or some of the county's officials and employees using insurance rather than bonds. 

Under the amended law, codified at T.C.A. § 8-19-101, should a county choose to purchase insurance, the insurance policy must provide minimum coverage of $400,000 per occurrence and provide government crime coverage, employee dishonesty insurance coverage, or equivalent coverage that insures the lawful performance by officials and their employees of their fiduciary duties and responsibilities. Each covered official or office must be listed in the policy. A policy of insurance is deemed to be a blanket official bond for each office and official identified in the policy. A certificate of insurance, a policy or an endorsement must be recorded in the register's office and then filed with the county clerk.

In the event that the policy of insurance maintained by the county ceases to provide coverage to the officeholder for any reason, the officeholder has thirty (30) days from the date of termination of coverage to file a bond or other proof of insurance coverage.

Other entities are authorized to obtain insurance policies in lieu  of bonds under various statutes.  For example, development districts may opt to obtain insurance under T.C.A. § 13-14-114(a).

Choosing the insurance option does not affect the liability limits provided in the Tennessee Governmental Tort Liability Act.