You asked us to compare current law for professional bail bondsmen with proposals for surety bail bond agents under sHB 6354 (2009), An Act Regulating Surety Bail Bond Agents.

SUMMARY

By law, a professional bail bondsman is someone who furnishes bail in five or more criminal cases in any one year, whether or not for compensation. He or she puts up personal assets as bond security, and has complete personal liability for forfeited bonds. Professional bail bondsmen must be licensed by the Department of Public Safety (DPS).

Surety bail bond agents execute or countersign bail bonds in criminal cases. They are independent agents who work under contract with insurance companies and have limited personal liability for forfeited bonds. By law, agents must be licensed by the Connecticut Insurance Department (CID) and appointed by an insurer to act on its behalf.

In the 2009 regular legislative session, the Insurance and Real Estate Committee favorably reported sHB 6354, An Act Regulating Surety Bail Bond Agents. The bill, which died on the House calendar, would have:

1. expanded the surety bail bond licensing and appointment requirements;

2. established bail bond solicitation, record retention, and reporting standards;

3. established premium financing, build up funds, and collateral security requirements and restrictions;

4. required agents to certify under oath to the insurance commissioner that they charged the bond premium rate the commissioner approved (i.e., did not discount or increase the approved rate); and

5. authorized the insurance commissioner to suspend or revoke an agent's license, impose a $5,000 penalty, or both, if an agent violated the bill.

The chart below compares major features of the professional bail bondsmen laws, existing surety bail bond agent laws, and proposed changes to the surety bail bond agent laws.

For a complete description of current professional bail bondsmen and surety bail bond agent laws, see OLR Backgrounder 2009-R-0454.

COMPARISON CHART

Table 1 compares major features of existing laws for professional bail bondsmen and surety bail bond agents and proposals for surety bail bond agents.

Table 1: Comparison of Existing Professional Bail Bondsmen and Surety Bail Bond Agent Laws and 2009 Proposals for Surety Bail Bond Agents

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^[1] Source: Connecticut Insurance Department website at http://www.ct.gov/cid/lib/cid/licfeerenfee2009oct1.pdf.

^[2] Source: Connecticut Insurance Department Bulletin IC-24 (June 29, 2009).

AN ACT REGULATING SURETY BAIL BOND AGENTS

The following is a summary of sHB 6354 (2009), An Act Regulating Surety Bail Bond Agents. Where appropriate, it distinguishes from current law as described above.

§ 1 — Licensing, Appointments, and Examination of Books

As under current law, the bill prohibits people from acting as surety bail bond agents unless the insurance commissioner licenses, and an insurer appoints, them. To obtain a license, a person must file a completed application, pay an application fee, pass a written examination, and submit to a background investigation, including state and national criminal history records checks. Anyone acting as an agent without a license is guilty of a class D felony.

Disqualifying Offense. The bill expands the list of convictions that disqualify a person from being licensed as an agent to include convictions for any misdemeanor involving dishonesty or misappropriation of money or property. The law already disqualifies applicants convicted of a felony or any of the misdemeanors specified in Table 1.

Appointments. By law, an agent must have an insurer's notice of appointment on file with the commissioner to act on the insurer's behalf.

The bill specifies that, by appointing an agent, an insurer is (1) certifying to the commissioner that, to the best of its knowledge and belief, the person is competent, financially responsible, and suitable to represent the insurer and (2) bound by the person's acts within the scope of his or her actual or apparent authority as the agent. It prohibits agents from representing that they are authorized to act on an insurer's behalf until the insurer has appointed them.

The bill prohibits agents from acting, or attempting to act, on an insurer's behalf after their appointment is terminated. However, it permits an insurer that terminates an agent's appointment to authorize the agent to continue efforts to take into custody a defendant for whom a bail bond was written before the termination and to try to have forfeitures and judgments discharged.

The bill requires an insurer, managing general agent, or agent to notify the commissioner in writing within five days of learning that an agent was arrested for, pleaded guilty or no contest to, or was found guilty of a disqualifying offense in Connecticut or similar offense in another state, whether a court entered or withheld judgment.

The bill defines “managing general agent” as a person an insurer appoints or employs to supervise the bail bond business that the insurer's appointed surety bail bond agents write in Connecticut.

Examination of Books and Records. The bill permits the commissioner to examine an agent's books and records as often he deems necessary to enforce the bill. He already has this power with respect to license eligibility. The bill requires the agent to pay the cost of such examinations.

Change in Address or Telephone Number. The bill requires an agent to give written notice of a change in his or her principal business address or telephone number within 30 days of the change to the commissioner, appointing insurer, and managing general agent.

License Fees. The law specifies that an applicant for an initial surety bail bond agent license must pay a nonrefundable filing fee the commissioner determines. The bill authorizes the commissioner to renew or continue an agent's license at his discretion as long as the agent pays the “appropriate fee.”

§§ 2 & 15 — Notice to Courts and Police Departments

By law, the commissioner must give all courts and police departments in Connecticut a list of licensed agents and notify them of any change in the agent's status. The bill also requires him to notify them of a change in the agent's principal business address or telephone number.

§ 3 — Premium Requirements

The bill prohibits agents from executing bail bonds unless they charge the premium rate the insurer filed and commissioner approved. It requires agents, by the 10th of each month, to certify under oath to the commissioner, on a form he prescribes, that the premium for each surety bail bond they executed (presumably during the prior month) did not differ from the filed and approved premium rate.

If an agent files a false certification, the commissioner may suspend or revoke his or her license, impose a penalty of up to $5,000, or both.

The bill requires insurers transacting surety bail bond business in Connecticut to audit their appointed agents twice yearly to ensure they are charging the filed and approved premium rates. The audits must cover (1) January 1 to June 30 and (2) July 1 to December 31.

Within 45 days after each audit period ends (June 30 and December 31), an insurer must notify the commissioner of agents who failed to charge the filed and approved premium rates. The notice must include:

1. agent's name;

2. case docket number, if assigned;

3. total bond amount;

4. date the bond was posted;

5. insurer's National Association of Insurance Commissioners identification code; and

6. date the premium was due.

§ 4 — Premium Financing Arrangements

The bill specifies that it does not prohibit or limit a premium financing arrangement extended under certain circumstances.

If an agent extends credit for a premium financing arrangement, he or she must require the defendant and any indemnitor to execute a promissory note for the remaining premium due, at the filed and approved rate. The promissory note must require payment in full within 15 months of its execution.

If the balance owed is not paid in full by its due date, the bill requires the agent to (1) file a verified complaint seeking appropriate relief with the court within 60 days of when the balance was due and (2) make a diligent effort to obtain judgment within 120 days of filing the complaint, unless good cause is shown for failing to obtain judgment (e.g., the defendant or indemnitor files for bankruptcy or service of process failed despite good faith efforts).

§ 5 — Record Keeping and Accounting for Funds

The bill deems premiums, return premiums, or other funds an agent receives that belong to insurers or others to be trust funds received in a fiduciary capacity. The agent must account for and pay the funds to the insurer, insured, or other person entitled to them. (The bill does not define “return premiums.”)

The bill requires an agent to keep, and make available to the commissioner, books, accounts, and records as necessary to enable the commissioner to determine whether the agent is complying with applicable law. An agent must keep books, accounts, and records relating to premium payments for at least three years after payments are made. The bill permits computer records and photographic reproductions of records.

Agents who unlawfully divert or appropriate trust funds for their own use are guilty of larceny.

§ 6 — Record Maintenance and Examination

The bill requires agents to maintain all records of bonds they executed or countersigned for at least three years after the insurer's liability ends. The records must be open at all times for examination, inspection, and copying by the Insurance Department, insurer, or managing general agent. The commissioner may require agents to provide the department with information about their bail bond business at any time and in a way he specifies.

§ 7 — Build-Up Funds

The bill requires an insurer or managing general agent to maintain in an individual trust account “build-up funds” a surety bail bond or managing general agent posts. (The bill does not define “build-up funds,” but it appears to be money an insurer or managing general agent requires an agent to post and use to pay forfeited bonds, if any.)

The insurer or managing general agent must establish the account in a federally insured bank or savings and loan association located in Connecticut. It must be in (1) the name of the agent and the insurer or managing general agent or (2) trust for the agent. The account must be open to the Insurance Department's inspection and examination at all times. The insurer or managing general agent must maintain an accounting of all build-up funds that designates the amounts collected on each bond written.

Build-up funds cannot exceed 40% of the surety bail bond premium the insurer contractually authorizes the agent to write (presumably per bond). Funds must be immediately deposited to the trust account, and interest earned on the accounts must accrue to the bail bond agent.

The bill specifies that build-up funds become due to the bail bond agent when the (1) agent's bail bond contract ends and (2) liabilities on the bonds for which the funds were posted are discharged. It requires an insurer or managing general agent to pay the funds to the bail bond agent within six months after they are due.

§§ 8 & 9 — Collateral Security or Indemnity

Requirements and Restrictions. The bill sets forth requirements and restrictions with respect to collateral security or other indemnity an agent accepts. The collateral or indemnity must (1) be reasonable in relation to the bond amount, (2) not be used for the agent's personal benefit or gain, and (3) be returned in the same condition as received.

Acceptable forms of collateral or indemnity include:

1. cash or its equivalent,

2. a promissory note,

3. an indemnity agreement,

4. a real property mortgage in the insurer's name, or

5. any Uniform Commercial Code filing.

If the agent accepts collateral exceeding $50,000 in cash, he or she must make the cash amount payable to the insurer using a cashier's check, U.S. postal money order, certificate of deposit, or wire transfer. But the bill also specifies that when an agent receives bond collateral exceeding $50,000 in cash or its equivalent, he or she must promptly forward the entire amount to the insurer or managing general agent.

The agent must provide the person putting up the collateral or indemnity a written, numbered receipt that includes a detailed description of the collateral or indemnity received, along with copies of any documents rendered. The agent must receive and hold the collateral or indemnity in the insurer's name and in a fiduciary capacity. Before any bail forfeiture, the agent must keep the collateral or indemnity separate and apart from any other funds or assets.

The bill allows collateral to be placed in an interest-bearing account in a federally insured bank or savings and loan association located in Connecticut. The interest accrues to the benefit of the person putting up the collateral. The bill prohibits the agent, insurer, or managing general agent from receiving any pecuniary gain on the deposited collateral.

The bill makes the insurer liable for all collateral or indemnity an agent accepts. If, upon final termination of liability on a bond, the surety bail bond or managing general agent fails to return the collateral to the person that put it up, the bill requires the insurer to (1) return the actual collateral to that person or, (2) in the event that it cannot locate the collateral, pay the person in accordance with the bill. The insurer's liability survives the termination of a surety bail bond agent's appointment with respect to bonds the agent wrote before the termination.

In the event of forfeiture, the agent or insurer must give the principal and the person who put up collateral 10 days' written notice that the collateral will be converted into cash to satisfy the forfeiture. The notice must be sent via certified mail, return receipt requested, to their last-known addresses. If the court orders a stay of execution upon the forfeiture in accordance with law, the agent or insurer must send the written notice by certified mail, return receipt requested, to their last-known addresses at least 10 days before the stay expires.

The bill requires the agent or insurer to convert the collateral deposit into cash within a reasonable period of time and return any amount that exceeds the bond's face value, minus the actual and reasonable conversion expenses, which must not exceed 10% of the bond's face value. If an agent spends more than 10% to convert the collateral into cash, he or she may file an application with the court, which may allow recovery of the full amount of actual and reasonable expenses upon motion and proof that expenses exceeded 10%. If there is a remission of forfeiture that required the insurer to pay the bond, the insurer must pay the person that put up the collateral the value of any collateral received for the bond minus the recoverable actual and reasonable expenses.

Under the bill, an agent or insurer cannot (1) solicit or accept a waiver of its collateral requirements or (2) enter into any agreement as to the collateral's value.

Additional Appointment Requirement. Before an insurer appoints an agent who is currently or was previously appointed by another insurer, the agent must file a sworn and notarized affidavit with the commissioner, on a form he prescribes. The affidavit must state that (1) the agent has not lost, misappropriated, converted, or stolen any collateral he or she holds in trust for an appointing insurer; (2) all collateral the agent holds in trust and all records for any appointing insurer are available for the commissioner's, insurer's, or managing general agent's immediate audit and inspection; and (3) the agent will, upon the commissioner's or insurer's demand, transmit the collateral to the insurer for whom it is being held in trust.

Returning Collateral or Indemnity. Under the bill, if an agent accepted collateral or indemnity on a bond, the surety bail bond or managing general agent or insurer must return it, except a promissory note or an indemnity agreement, within 21 days after (1) receiving a court's written report that a bond was terminated or (2) becoming aware that a bond was terminated even if, despite an agent's or insurer's diligent inquiry, the court does not issue a written report. The collateral or indemnity must be returned to the person that gave it, unless the right to receive it was legally assigned to another person.

The bill prohibits an insurer or agent from deducting a fee or other charge, other than one the law authorizes, from the collateral due. Allowable expenses incurred in apprehending a defendant because of a forfeiture of bond or judgment, if accounted for, may be deducted.

The following penalties apply for not returning collateral or indemnity as required by the bill. If the collateral's value is:

1. less than $500, it is a class A misdemeanor;

2. at least $500 but less than $5,000, it is a class D felony;

3. at least $5,000 but less then $10,000, it is a class C felony; and

4. $10,000 or more, it is a class B felony.

§ 10 — Cannot Give Bond Supplies to Unlicensed Person

The bill prohibits an insurer, managing general agent, or surety bail bond agent from giving any blank form, application, stationery, business card, or other supplies used in soliciting, negotiating, or effecting bail bonds to anyone not licensed or appointed as a surety bail bond agent. It specifies that this does not prohibit unlicensed employees under the direct supervision and control of a licensed and appointed agent, while acting within their scope of employment, from possessing or executing in the surety bond office a form, other than a power of attorney, bond form, or collateral receipt.

The bill makes an insurer that (1) gives supplies to an agent or other person the insurer has not appointed and (2) accepts bail bond business from or writes bail bond business for that person, liable on the bond to the same extent and in the same manner as if the insurer had appointed him or her to act on its behalf.

§ 11 — Prohibited Practices

The bill prohibits an agent or insurer from:

1. suggesting, advising, or giving the name of, a particular attorney to represent its principal (i.e., bail bond client) in exchange for a fee or other consideration;

2. directly or indirectly “soliciting” business (see below) in, or on the grounds of, a jail, prison, or other place where prisoners are confined;

3. wearing or displaying any identification, other than an Insurance Department-issued or insurance commissioner-approved license or identification, in, or on the grounds of, a jail, prison, other place where prisoners are confined, or court;

4. acting as an attorney at a principal's trial or hearing;

5. executing a bond in Connecticut (a) on the agent's or insurer's own behalf or (b) if a bond the agent executed is forfeited and the forfeiture has remained unpaid for at least 60 days after payment was due, unless the full amount of the forfeited bond is paid to the chief state's attorney's office; or

6. accepting anything of value from a principal for providing a bail bond, other than the premium rate, as filed with and approved by the commissioner, and an expense fee, except that the agent may accept collateral or indemnity with documentary stamp taxes, if applicable.

The bill permits an agent, upon written agreement with a third party, to receive a fee or other compensation for returning to custody a person who fled the court's jurisdiction or caused a bond forfeiture.

The bill specifies that, for purposes of item 2 above, “solicit” includes distributing business cards, print advertising, or any other written information directed to prisoners or potential indemnitors, unless a prisoner or indemnitor initiates contact. The bill limits permissible print advertising in, or on the grounds of, a jail, prison, other place where prisoners are confined, or court, to a (1) telephone directory listing and (2) posting of the surety bail bond agent's name, address, and telephone number in a prominent, designated location.

The bill also prohibits an agent or insurer from paying a fee or rebate or giving or promising anything of value to:

1. a public official or employee or jailer, law enforcement officer, committing magistrate, or other person who has power to arrest or to hold a person in custody to secure a bail bond settlement, compromise, remission, or reduction or bail estreatment;

2. an attorney in a bail bond matter, except in defense of a bond action; or

3. the principal or anyone on his or her behalf.

§ 12 — Reporting Requirements

The bill requires insurers and agents writing bail bonds in Connecticut to maintain and report information the bill specifies to the Insurance Department upon request. Agents must (1) report the information separately for each company they represent and (2) give a copy to each insurer they represent.

Insurers and agents must report the number and total dollar amount of:

1. bonds executed;

2. bonds forfeited;

3. forfeitures discharged, remitted, or otherwise recovered before payment for any reason, including the agent's apprehension of the defendant;

4. forfeited bonds not reinstated under law;

5. forfeitures paid and subsequently recovered by the chief state's attorney's office by discharge, remission, or otherwise; and

6. bonds for which collateral was accepted.

They must also report:

1. a list of every outstanding or unpaid forfeiture, estreature, and judgment, including the case number and court's name for each, and the name of each agency or firm employing the bail bond agent;

2. the actual realized value of collateral converted, excluding the cost of converting it;

3. the cost of converting collateral; and

4. additional information the Insurance Department may require to evaluate the (a) reasonableness of rates or ensure that rates are not excessive, inadequate, or unfairly discriminatory; (b) financial condition or trade practices of agents and insurers executing bail bonds; and (c) performance of the commercial bail bond industry in accordance with appropriate criminal justice system goals and standards.

Additionally, an insurer must report (1) commissions paid, (2) underwriting gain or loss, and (3) net investment gain or loss allocated to funds associated with Connecticut business.

Annual Meeting. The bill requires the commissioner to meet at least annually with a group of agents and insurers, and any other representatives he deems necessary, to discuss these reporting requirements.

§ 13 — Penalty and Appeals

By law, the commissioner may suspend or revoke an agent's license, impose a penalty of up to $5,000, or both, for violating current law. The bill extends this authority when a person violates its provisions.

When an agent's license is surrendered, suspended, or revoked, the bill requires the appointing insurer or managing general agent to immediately designate a licensed and appointed agent to administer the bail bonds the former agent wrote.

By law, a person whose license the commissioner suspended or revoked, or whom the commissioner fined, may appeal. The bill makes the New Britain judicial district the appeal venue, instead of Hartford.

§ 14 — REGULATIONS

The bill authorizes the commissioner to adopt implementing regulations in accordance with law.

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