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

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on February 3, 2003, representing the position of the New York State Insurance Department.

RE: Bail Bond Business

Question Presented:

Is ABC, Inc. ("ABC") conducting a bail bond business, and doing an insurance business, pursuant to N.Y. Ins. Law § 6801 (McKinney 2000) for which it must be licensed, pursuant to N.Y. Ins. Law § 1102 (McKinney 2000)?

Conclusion:

No, ABC is not conducting a bail bond business, or doing an insurance business under N.Y. Ins. Law § 6801 (McKinney 2000). Therefore, ABC does not need to be licensed pursuant to N.Y. Ins. Law § 1102 (McKinney 2000) in order to conduct its business.

Facts:

ABC advertises its services in a correctional facility holding center. The ABC placards posted at this facility state: "You may now pay cash bail by credit card. Call toll-free 888-604-7888. Available 24 hours. A convenience fee for service will be added to the amount of fees due."

ABC states that it does not advertise or solicit its services directly to detainees, but that ABC contracts with government agencies and court officials to make detainees aware that they can make cash bail by accessing the services of ABC. Thus, the signs posted at the holding center announcing the services provided by ABC were posted by the agency itself.

ABC’s servicing procedure involves the detainee charging the bail amount and ABC’s service fee to his or her own credit card, with ABC named as the vendor. In a letter dated December 23, 2002, ABC provided the Department with additional information stating that the transaction involves the detainee authorizing ABC to request a transfer of funds from the credit card company, which provides an authorization of payment that commences an immediate wire transfer process. The funds are simultaneously transferred into ABC’s account and to the detention center to pay the bail. ABC states in its letter: "We have been assured by the Bank and its representatives that these transactions occur simultaneously through the federal reserve system."

ABC states that it serves only as a cash facilitator and that its service does not constitute a transfer of risk. ABC also states that it has no liability to the sheriff or detainee for the transferred funds. Hence, ABC asserts that it is not conducting a bail bond business, and is not engaging in the business of insurance.

Analysis:

Due to the additional information provided by ABC to us regarding the manner in which funds are transferred from the credit card issuer to ABC, and from ABC to the correctional facilities to whom bail is paid, we are reversing our August 6, 2002 opinion on this matter.

It is now clear that there is no potential for ABC to be liable for the funds it disburses for the payment of a detainee’s bail since the funds are forwarded to the correctional facilities from ABC’s account simultaneously with the placement of funds into ABC’s account by the credit card issuer. ABC is not doing an insurance business under N.Y. Ins. Law § 6801(a)(1) (McKinney 2000) because the simultaneous transfer of funds means that ABC does not "for another deposit money as bail." Instead, the bail is paid by the detainee, with ABC acting as a delivery service for the detainee. Hence, ABC does not need to be licensed pursuant to N.Y. Ins. Law § 1102 (McKinney 2000) in order to conduct its business.

This opinion only addresses the issue as to whether ABC is required to be licensed pursuant to the New York Insurance Law. We offer no opinion as to whether other statutes or caselaw permit or prohibit the services offered by ABC in New York.

For further information you may contact Associate Attorney Sally Geisel at the New York City Office.