Before Pennsylvania determined that First Sealord Surety, the small surety shut down by the state on Feb. 8, was a financial wreck, the company fought costly legal battles in different states where it had provided bonds.

The state Dept. of Insurance examines licensed companies in the state once every five years and First Sealord got a generally healthy report card from an examination in 2005. It isn't clear if that is the last time the Villanova, Pa.-based surety firm was examined.

A.M. Best did not downgrade First Sealord Surety’s credit rating, from excellent to weak, until late January.

Bondholders now have 30 days after the date of the liquidation order in which to replace First Sealord’s bonds. The first claims on the firm's assets are from the state for administrative costs in operating it, says an insurance department spokeswoman. Policyholders and claimants on First Sealord’s guarantees are next in line, she says.

According to the Justia database of lawsuits, 26 separate legal proceedings named First Sealord as a defendant or a plaintiff in 2010 and 2011.

The company’s net written premium in the last 12 months, according to A.M. Best, was $15 million to $18 million, and the average amount of the bond was $429,000.

In one court action involving a bankrupt California contractor, First Sealord stated that its total losses from the contractor's default amounted to $2 million.

The California case involved one of the owners of the contracting company and his wife, whom First Sealord said had provided an indemnification. An attorney for First Sealord claimed filed a pleading in Riverside, Calif. bankruptcy court Dec. 22.

In the pleading, First Sealord's attorney said that the surety had executed several different performance and payment bonds with UST Development Inc., beginning in 2009, that total $1.74 million.

The attorney argued that in addtion, since UST’s default, First Sealord was owed another $300,000 that UST employees had won from the surety and more than $452,000 in legal fees for UST-related litigation.