Each car wash bond is a legal contract binding three parties together.
- The principal is the car wash or prospective car wash who purchases the bond
- The obligee is the state government agency who requires the bond
- The surety is the insurance company who issues the bond.
If a car wash conducts fraudulent activities (i.e., lying to customers, not paying their employees), the obligee can seek reimbursement by filing a claim against the car wash owners' bond. If a claim is prove to be valid, the surety will pay for the claim up to the bond amount. Then, the surety will require reimbursement from the car wash owner