Insurance, Administration

Rule R590-186

Bail Bond Surety Business

Notice of Proposed Rule

(Amendment)

DAR File No.: 34259
Filed: 11/29/2010 03:41:55 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The rule is being changed as a result of discussions in recent Bail Bond Advisory Board meetings. The changes are intended to provide clarification on the use of letters of credit by bail bond agencies and adds deceptive or intimidating practices as unprofessional conduct.

Summary of the rule or change:

Sections R590-186-4 and R590-186-5 add wording regarding the use of letters of credit and requires that they be drawn on a Utah depository institution. The change in Section R590-186-7, regarding unprofessional conduct, adds to Subsection R590-186-7(28), "outstanding judgments" to violations dealing with the failure to comply with Utah laws and rules. A new Subsection R590-186-7(29) has been added which makes deceptive or intimidating practices to gain bail bond business as unprofessional conduct.

State statutory or constitutional authorization for this rule:

• Section 31A-35-104
• Section 31A-35-301
• Section 31A-35-401
• Section 31A-35-406

Anticipated cost or savings to:

the state budget:

Additional violations that the department can take action against could increase the department's workload. At this time, there is no indication that this would result in the need for additional personnel. This could cause an increase in administrative actions and the number of forfeitures issued and paid into the general fund. What the fiscal impact would be is unknown at this time.

local governments:

The requirement to have bail bond agencies have a Utah financial institution provide their letters of credit will benefit a very few financial institutions. Most agencies already use local financial institutions to do their business. The changes should have no other impact on local governments.

small businesses:

All bail bond agencies in Utah are classified as small businesses. The addition of actions that are considered unprofessional conduct may result in an increase in the number of violations and the forfeitures paid by licensees. The amount of the forfeiture is determined during the administrative procedure and will vary depending on circumstances. If a bail bond agency has their account with an out-of-state financial institution, they will need to arrange for a local financial institution to issue their letters of credit to comply with the new requirements of this rule. This should have little if any fiscal impact on the bail bond agency.

persons other than small businesses, businesses, or local governmental entities:

Bail bond agencies that have their accounts with an out-of-state financial institution will need to arrange for a local financial institution to issue their letters of credit to comply with the new requirements of this rule. This should then have a positive fiscal impact on the financial institutions. Currently there are around 40 bail bond agencies licensed to do business in Utah. It is anticipated that only a few of these will need to change the financial institution that they are now doing business with.

Compliance costs for affected persons:

All bail bond agencies in Utah are classified as small businesses. The addition of actions that are considered unprofessional conduct may result in an increase in the number of violations and the forfeitures paid by licensees. The amount of the forfeiture is determined during the administrative procedure and will vary depending on circumstances. If a bail bond agency has their account with an out-of-state financial institution they will need to arrange for a local financial institution to issue their letters of credit to comply with the new requirements of this rule. This should have little if any fiscal impact on the bail bond agency.

Comments by the department head on the fiscal impact the rule may have on businesses:

The few bail bond agencies that do not have their letters of credit drawn from a Utah financial institution will need to change their account to a local institution. This may result in little if any cost to the agency but should have a favorable impact on the financial institution receiving the new business. The increase in listed violations may result in an increase in the number of violations and the forfeitures paid into the general fund.

Neal T. Gooch, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
450 N MAIN ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

01/14/2011

This rule may become effective on:

01/21/2011

Authorized by:

Jilene Whitby, Information Specialist

R590. Insurance, Administration.

R590-186. Bail Bond Surety Business.

R590-186-4. Initial Company License.

(1) Persons desiring to become licensed as bail bond surety companies shall file with the Bail Bond Surety Oversight Board (Board) a bail bond company application which can be obtained from the Insurance Department.

(2) The applicant shall pay the annual license fee set forth in R590-102, Insurance Department Fee Payment Deadlines, and provide at least one of the following:

(a) If the applicant relies on a letter of credit as the basis for issuing a bail bond, the applicant shall provide an irrevocable letter of credit with a minimum face value of $300,000 assigned to the State of Utah from an entity qualified by state or federal regulators to do business as a financial institution in the state of Utah.

(b) If the applicant relies on the ownership of real or personal property located in Utah as the basis for issuing bail bonds, the applicant shall provide a financial statement reviewed by a certified public accountant as of the end of the most current fiscal year. The financial statement must show a net worth of at least $300,000, including a minimum of $100,000 in liquid assets. The applicant shall also provide a copy of the applicant's federal income tax returns for the prior two years and, for each parcel of real property owned by the applicant and included in the applicant's net worth calculation, a preliminary title report dated not more than one month prior to the date of the application and an appraisal dated not more than two years prior to the date of the application.

(c) If the applicant relies on their status as the agent of a bail bond surety insurer as the basis for issuing bail bonds, the applicant shall provide a Qualifying Power of Attorney issued by the bail bond surety insurer.

(3) Applications approved by the Board will be forwarded to the insurance commissioner for the issuance of a license.

(4) Applications disapproved by the Board may be appealed to the insurance commissioner within 15 days of mailing the notice of disapproval.

(5) When a bail bond surety pledges the assets of a letter of credit under 31A-35-404(1), the letter of credit must:

(a) be drawn on a Utah depository institution;

(b) be assigned to the state and its political subdivisions to guarantee the payment of a bail bond forfeiture; and

(c) be drawn upon by the holder of the judgment of a bail bond forfeiture, which remains unpaid 60 days following the suspension of the bail bond surety licensed under 31A-35-504.

 

R590-186-5. Company License Renewal.

A licensed bail bond surety company shall renew its license on or before July 15 of each year by meeting the following requirements:

(1) file with the insurance commissioner a renewal application, pay the required renewal licensing fee set forth in R590-102, Insurance Department Fee Payment Deadlines, and provide the additional information described in this section.

(2) If the applicant relies on the ownership of real or personal property as the financial basis for issuing bail bonds the applicant must include the following with the renewal:

(a) a statement that no material changes have occurred negatively affecting the property's title, including any liens or encumbrances that have occurred since the last license renewal;

(b) a financial statement reviewed by a certified public accountant as of the end of the most current fiscal year showing a net worth of at least $300,000, at least $100,000 of which must consist of liquid assets and a copy of the applicant's federal income tax return for the prior year; and

(c) the following items are required as indicated:

(i) renewal in 2002, 2008, and 2014: a preliminary title report dated not more than one month prior to the date of the renewal application for each parcel of real property owned by the applicant and included in the applicant's net worth calculation; or

(ii) renewal in 2005, 2011, and 2017: a preliminary title report and a current appraisal dated not more than one month prior to the date of the renewal application for each parcel of real property owned by the applicant and included in the applicant's net worth calculation.

(3) Renewal applicants who were licensed as a bail bond surety company prior to December 31, 1999, may opt to apply under the lower limits in effect at that date.

(a) For renewal applicants relying on a letter of credit as the financial basis for issuing bail bonds, the amount is reduced to $250,000.

(b) For renewal applicants relying on real or personal property as the basis for issuing bail bonds, the amount is reduced to a net worth of at least $250,000, at least $50,000 of which must consist of liquid assets.

(c) Renewal applicants opting for lower limits are limited to the 5 to 1 ratio of outstanding bond obligations as shown in R590-186-9.

(4) When using a letter of credit at renewal the bail bond surety must follow R590-186-4(5).

 

R590-186-7. Unprofessional Conduct.

Persons in the bail bond surety business may not engage in unprofessional conduct. For purposes of this rule, unprofessional conduct means the violation of any applicable insurance law, rule, or valid order of the commissioner, or the commission of any of the following acts by bail bond sureties, by bail bond surety agents or by bail bond enforcement agents working for bail bond sureties:

(1) having a license as a surety revoked in this or any other state;

(2) being involved in any transaction which shows unfitness to act in a fiduciary capacity or a failure to maintain the standards of fairness and honesty required of a trustee or other fiduciary;

(3) willfully misstating or negligently reporting any material fact in the initial or renewal application or procuring a misstatement in the documents supporting the initial or renewal application;

(4) being the subject of any outstanding civil judgment which would reduce the surety's net worth below the minimum required for licensure;

(5) being convicted of any felony or of any misdemeanor that involves the misappropriation of money or property, dishonesty or perjury;

(6) failing to report any collateral taken as security on any bond to the principal, indemnitor, or depositor of such collateral;

(7) failing to preserve, or to retain separately, or both, any collateral taken as security on any bond;

(8) failing to return collateral taken as security on any bond to the depositor of such collateral, or the depositor's designee, within ten business days of having been notified of the exoneration of the bond and upon payment of all fees owed to the bail bond agent, whichever is later;

(9) failing to advise the insurance commissioner of any change that has reduced the surety's net worth below the minimum required for licensure;

(10) using a relationship with any person employed by a jail facility or incarcerated in a jail facility to obtain referrals;

(11) offering consideration or gratuities to jail personnel or peace officers or inmates under any circumstances which would permit the inference that said consideration was offered to induce bonding referrals or recommendations;

(12) failing to deliver to the incarcerated person, or the person arranging bail on behalf of the incarcerated person, prior to the time the incarcerated person is released from jail, a one page disclosure form which at a minimum includes:

(a) the amount of the bail;

(b) the amount of the surety's fee, including bail bond premium, preparation fees, and credit transaction fees;

(c) the additional collateral, if any, that will be held by the surety;

(d) the incarcerated person's obligations to the surety and the court;

(e) the conditions upon which the bond may be revoked;

(f) any additional charges or interest that may accrue;

(g) any co-signors or indemnitors that will be required; and

(h) the conditions under which the bond may be exonerated and the collateral returned.

(13) using an unlicensed bail bond agent or unlicensed bail bond enforcement agent;

(14) using a bail bond agent not contracted and appointed by the bail bond surety company;

(15) charging excessive or unauthorized premiums, excessive fees or other unauthorized charges;

(16) requiring unreasonable collateral security;

(17) failing to provide an itemized statement of all expenses deducted from collateral, if any;

(18) requiring as a condition of his executing a bail bond that the principal agree to engage the services of a specified attorney;

(19) preparing or issuing fraudulent or forged bonds or power of attorney;

(20) signing, executing, or issuing bonds by an unlicensed person;

(21) executing bond without countersignature by a licensed agent at time of issue;

(22) failing to account for and to pay any premiums held by the licensee in a fiduciary capacity to the bail bond surety company, bail bond surety insurer or other person who is entitled to receive them;

(23) knowingly violating, advising, encouraging, or assisting the violation of any statute, court order, or injunction in the course of a business regulated under this chapter;

(24) conviction of felony involving illegally using, carrying, or possessing a dangerous weapon;

(25) conviction of any act of personal violence or force against any person or conviction of threatening to commit any act of personal violence or force against any person, including but not limited to violent felonies as defined under Utah Code Annotated Section 76-3-203.5;

(26) soliciting sexual favors as a condition of obtaining, maintaining, or exonerating bail bond, regardless of the identity of the person who performs the favors;

(27) acting as an unlicensed bail bond enforcement agent;[ and]

(28) failing to comply with the provisions of the Utah statutes and rules regulating the bail bond surety business or order of the insurance commissioner[.], including outstanding judgments; and

(29) using deceptive or intimidating practices in which to gain bail bond business.

 

R590-186-8. Investigating Unprofessional Conduct.

The Board and the commissioner shall investigate allegations of unprofessional conduct on the part of any bail bond surety, or bail bond surety agent. Complaints alleging unprofessional conduct shall be submitted in writing to the Department of Insurance.

(1) Investigations shall be completed in the following manner:

(a) Upon receipt of a complaint of unprofessional conduct, the commissioner shall provide a copy of the complaint to the person against whom the complaint was made, and, if warranted, to the person's surety. The commissioner may edit the copy of the complaint mailed under this subsection as may be necessary to protect the identity or interests of the person making the complaint if the complainant so requests.

(b) The subject of the complaint shall provide to the commissioner a written response to the complaint within 15 days of the date the complaint was mailed to him.

(c) At the next meeting of the Board the commissioner shall present to the Board the complaint and the action undertaken by the Department to investigate the complaint.

(d) After the investigation is completed, the commissioner shall present the findings and recommended disposition to the Board. The Board may concur with the commissioner's recommended disposition, recommend a different disposition, request additional investigation, or conduct its own investigation.

(i) If the Board conducts its own investigation it may take and record witness statements under oath and may request any documents or other evidence from any person, including necessary financial records.

(ii) Witnesses may be compensated for their appearances as specified in 31A-2-301.

(iii) The Board may request a Subpoena from the commissioner to compel the production of documents or other evidence or to compel the testimony of a witness.

(iv) After the Board completes its investigation, it shall:

(A) close the investigation if the allegations have been shown to be unfounded or if the matter complained of is satisfactorily resolved; or

(B) if the investigation shows that unprofessional conduct did occur that requires the imposition of sanctions, it shall compile the evidence necessary to pursue the matter in an administrative proceeding by the Department of Insurance, and shall make a written report of its findings and of its recommendations for the penalties to be applied, and forward the report and evidence to the commissioner for further action within 15 days of the conclusion of the investigation.

(2) Except for matters referred to the commissioner for further proceedings, the Board shall retain in the Utah Insurance Department a file on each of the investigations it conducts concerning unprofessional conduct for a period of 5 years. Files regarding investigations conducted by the Board shall be classified as protected under Governmental Records Access and Management Act (GRAMA).

 

KEY: insurance

Date of Enactment or Last Substantive Amendment: [March 21, 2002]2011

Notice of Continuation: July 29, 2008

Authorizing, and Implemented or Interpreted Law: 31A-35-104; 31A-35-301; 31A-35-401; 31A-35-406