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

George E. Pataki
Governor

Howard Mills
Acting Superintendent

The Office of General Counsel issued the following opinion on March 22, 2005, representing the position of the New York State Insurance Department.

RE: Surety Bond

Question Presented:

May an insurer authorized in New York to write fidelity and surety insurance write a "Payment Bond for Liability" as specified in 30 Texas Administrative Code § 37.511 and as worded in 30 Texas Administrative Code § 37.611?

Conclusion:

Yes, an insurer authorized in New York to write fidelity and surety insurance may write a "Payment Bond for Liability" as specified in 30 Texas Administrative Code § 37.511 and as worded in 30 Texas Administrative Code § 37.611.

Facts:

An attorney in Texas states that his client would like to use a surety bond, to be written by an insurer authorized in New York to write fidelity and surety insurance, to satisfy certain financial assurance requirements that are contained in the administrative code of the Texas Commission on Environmental Quality. The writer of the surety bond agrees to pay third party claims against the client, under certain circumstances and conditions outlined in the bond. The attorney questions whether such bond is "a legally valid and enforceable obligation" in New York. The Department interprets the inquiry to be whether the bond constitutes a type of fidelity and surety insurance that may be written by an insurer authorized in New York to write fidelity and surety insurance.

Analysis:

N.Y. Ins. Law § 1113(a)(16) (McKinney Supp. 2005) states, in relevant part:

(a) The kinds of insurance which may be authorized in this state, subject to other provisions of this chapter, and their scope, are set forth in the following paragraphs. …

(16) "Fidelity and surety insurance," means:

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(C) Any contract bond; including a bid, payment or maintenance bond or a performance bond where the bond is guaranteeing the execution of any contract other than a contract of indebtedness or other monetary obligation;

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(F) Becoming surety on, or guaranteeing the performance of, bonds and undertakings required or permitted in all judicial proceedings or otherwise by law allowed, including surety bonds accepted by states and municipal authorities in lieu of deposits as security for the performance of insurance contracts;

Thus, the "Payment Bond for Liability," as specified in 30 Texas Administrative Code § 37.511 and as worded in 30 Texas Administrative Code § 37.611, constitutes a type of fidelity and surety insurance that may be written by an insurer authorized in New York to write fidelity and surety insurance.

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