New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following opinion on June 19, 2001 representing the position of the New York State Insurance Department.

RE: Bail Bond Business and N.Y. Ins. Law § 6802 (McKinney 2000).

Question Presented:

Does a bail bond supervisor in New Jersey, employed by a holding company, and whose functions include the review and approval of certain bail bonds solicited and sold in New York by licensed bail bond agents of a foreign authorized insurer need to be licensed pursuant to N.Y. Ins. Law § 6802 (McKinney 2000)?

Conclusion:

Yes. The described duties of the bail bond supervisor show substantial engagement in negotiating and/or effectuating bail bonds on behalf of an insurer doing a bail bond business.

Facts:

ABC Insurance Group, Inc. ("ABC"), a New Jersey corporation, is not an insurer and is the holding company controlling a foreign authorized insurer, its subsidiary.

ABC employs a person not located in New York to act as a "bail bond supervisor" over the New York licensed bail bond agents ("agents") for said subsidiary insurer.

This supervisor would perform the following functions:

to control and provide to the agents bail bond and general powers of attorney which are used by an insurer to grant authorization to act on its behalf and to bind the insurer on a specific bail bond;

to regularly audit the agents’ accounts;

to review and approve or reject the issuance of proposed bail bonds in an amount which exceeds the agent’s pre-established monetary limit;

to monitor underwriting compliance for all bail bonds written by the agents; and

to oversee collection activity on forfeited New York bail bonds by arranging for an attorney or New York collection agency to liquidate secured assets pledged as collateral on the bail bond by the obligor.

The supervisor would not have direct contact with the New York purchasers of bail bonds.

Analysis:

Under the facts provided, the supervisor at ABC would make the ultimate determination in binding the controlled insurer in the issuance or in refusing to issue certain proposed bail bonds. For such bonds, it is the supervisor who would cause the bonds to be written and to go into effect by authorizing the agents to process the paperwork. Therefore, it is fair to say that in relevant transactions, the supervisor has negotiated and/or effectuated the issuance of the bail bonds on behalf of the insurer, acting de facto as the insurer’s agent.

Furthermore, the supervisor, on behalf of the insurer, authorizes the agents to solicit business by maintaining control over the powers of attorney.

An integral part of the bail bond business is going after and collecting monies from the collateral received as a pledge from insureds who ultimately do not appear in court as required, causing the bonds to default. ABC, through its employee, the supervisor, is in charge of this necessary activity.

The fact that the supervisor is not physically stationed in New York and does not solicit or otherwise deal directly with the insureds is not dispositive. Without the approval of the supervisor, certain bail bonds would not be written, issued, or effectuated. His or her approval does effectuate the bail bond within the meaning of N.Y. Ins. Law § 6802 (a) (McKinney 2000).

For further information, you may contact Associate Attorney Jeffrey A. Stonehill at the New York City office.