The Office of General Counsel issued the following informal opinion on January 11, 2002, representing the position of the New York State Insurance Department.
Re: Licensing of Bail Bond Supervisor.
Do the exceptions from licensing as an insurance agent for employees of insurers, which are contained in N.Y. Ins. Law § 2101 (McKinney 2000), apply in regard to bail bond agents?
No, the definition of insurance agent, and the exceptions from licensing as an agent that are contained in N.Y. Ins. Law § 2101, do not apply to bail bond agents, which are governed by N.Y. Ins. Law Article 68 (McKinney 2000.
By letter dated June 19, 2001, this office responded to an earlier inquiry from the inquirer on a similar state of facts. In that letter, we opined that a bail bond supervisor located in another state, who was employed by a holding company of the insurer, and whose functions included the review and approval of certain bail bonds solicited and sold in New York by licensed bail bond agents of the insurer, was required to be licensed in this state pursuant to N.Y. Ins. Law § 6802 (McKinney 2000).
In this inquiry, the inquirer asked whether it would make a difference if the supervisor was an employee of the insurer itself, instead of the holding company because of the exceptions from licensing as an insurance agent contained in N.Y. Ins. Law § 2101(a)(1) and (2) (McKinney 2000). For the purposes of this letter, we assume that the employee would satisfy the conditions of either paragraphs (1) or (2).
We further assume that the employee would be engaging in the same activities as discussed in the inquirers previous letter. Since we already opined that those activities would require licensing, the only issue is whether the employee exception applies to bail bond agents and would negate the licensing requirement where the insurer is the employer instead of the holding company.
Article 68 of the Insurance Law governs bail bonds. N.Y. Ins. Law § 6802(a) provides, in relevant part:
(a) No person, firm or corporation or any officer or employee thereof shall act in this state as an agent or solicitor of an insurer doing a bail bond business in soliciting, negotiating or effectuating any such deposit or bail bond by such insurer unless licensed by the superintendent as an agent pursuant to the provisions of this section. Any person, firm or corporation so acting without being duly licensed shall be guilty of a misdemeanor.
(b) Every corporation engaging as an insurer in the business of giving bail shall procure a license pursuant to the provisions of this section for each of its employees, officers and agents acting for it in soliciting, negotiating or effectuating any such deposit or bail bond.
(c) The superintendent may, in his discretion, issue to any person, firm or corporation a license to act as an agent of an authorized insurer, in soliciting, negotiating or effectuating any such deposit or bail bond by such insurer.
Subsection (b) requires that any employee, officer, or agent of an insurer that acts for the insurer in soliciting, negotiating or effectuating any bail bond must be licensed as a bail bond agent. However, the inquirer argued that this provision is subject to the definition of "insurance agent", including its exceptions, that is contained in Article 21 of the Insurance Law. N.Y. Ins. Law § 2101(a) provides, in relevant part:
(a) In this article, "insurance agent" means any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to article forty-four of the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or procurement or making of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker, except that such term shall not include:
(1) any regular salaried officer or employee of a licensed insurer, fraternal benefit society or health maintenance organization or of a licensed insurance agent, who does not solicit or accept from the public, outside of an office of such insurer, health maintenance organization or agent, applications or orders for any such contract, if such officer or employee does not receive a commission or other compensation for his services which commission or other compensation is directly dependent upon the amount of business done;
(2) any regular salaried officer or employee of any insurer or health maintenance organization, who devotes substantially all of his services to activities other than the solicitation of insurance business and health maintenance organization contracts from the insuring public, and who receives for the solicitation of such insurance and health maintenance organization contracts no commission or other compensation directly dependent upon the amount of business obtained
In the inquirers letter, the inquirer cited to People v. Smith 196 Misc. 304; 91 N.Y.S.2d 490 (N.Y. Cl. Ct. 1949), modified by 277 A.D. 794, 97 N.Y.S.2d 896 (N.Y. App. Div. 1950), aff'd. 301 N.Y. 763 (1950), for the proposition that the insurance agent licensing exceptions of then Insurance Law § 110 (for our purposes, the relevant exceptions are now Insurance Law § 2101(a)(1) and (2)) apply to bail bond agents. Accordingly, the inquirer believed that an employee of an insurer that came within one of the above exemptions would not have to be licensed as a bail bond agent.
The Smith case, stated that then § 110 "is a general provision applicable to all agents of all classes of insurers." Smith, 196 Misc. at 310, 91 N.Y.S. 2d at 496. Therefore, then § 331 (now Article 68 of the Insurance Law) had to be construed in conjunction with Section 110. However, the Smith court was construing the Insurance Law provisions as they existed in 1949. Chapter 545 of the Laws of 1962 substantially amended the bail bond laws. The amendments go beyond the scope of this letter, but the Memorandum that was written by the Insurance Department for the bill, which was a Department proposal, notes, in relevant part:
The bill recodifies existing provisions relating to licensing and regulating bail bond agents and the posting of bail bonds. It simplifies the statutory scheme and removes duplications, ambiguities and inconsistencies
The existing statutes require that a person soliciting, negotiating or effectuating a deposit of bail be licensed as a fidelity and surety agent under Section 115 of the Insurance law. If he operates in a city with a population of 175,000 or more, Section 554-b of the Criminal Code appears to require an additional license.
In 1939 Section 331 of the Insurance Law was enacted, providing for the licensing of professional bondsmen and those soliciting, negotiating or effectuating bail in their behalf. Thus, there now exist three different statues relating to the licensing of bail bond agents, each with its own standards and provisions.
Prior to the enactment of Section 331 of the Insurance Law, bail bond agents had always been licensed under Section 115 of the Insurance Law, or its predecessor, and /or Section 554-b of the Code of Criminal Procedure, depending upon whether the agents were to do business in a city with a population of 175,000 or more. When Section 331 was enacted the applicable provisions of Sections 115 and 554-b were not amended. Consequently, the practice of licensing bail bond agents under either of the two latter sections continued and no agent has ever been licensed by the Insurance Department under Section 331. Nor has anyone been licensed as a "professional bondsman" under Section 331.
Among the amendments made by Chapter 545 were the repeal of former Section 331(3), which stated that any agent of a surety company duly licensed to act as agent with respect to fidelity and surety insurance, would be deemed to be licensed within the meaning of Section 331(2), and replaced it with what is now § 6802(a), (quoted above), which requires licensing pursuant to Article 68.
Based upon the legislative history, it is clear that the definition of insurance agent, and the exceptions thereto, which are contained in § 2101(a), are not applicable to bail bonds agents. One of the purposes of the bill was specifically to eliminate overlapping or multiple statutory requirements and to consolidate all of the provisions relative to bail bonds in Section 331, now Article 68. The express language of § 6802(a) requires a license for any employee or officer of an insurer that engages in soliciting, negotiating or effectuating any bail bond. Accordingly, under the inquirers scenario, the employee of the insurer would be required to be licensed as a bail bond agent.
The above opinion is informal and not binding on any court. For further information, you may contact Principal Attorney Paul A. Zuckerman at the New York City office.