No. 43694 (Amendment): Rule R590-186. Bail Bond Surety Business

(Amendment)

DAR File No.: 43694
Filed: 05/01/2019 10:14:12 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

These changes streamline the process for bail bond agencies to obtain initial and renewal licenses, eliminate provisions that duplicated the content of statutes, and streamline the process for obtaining input from the Bail Bond Oversight Board on investigations of code violations conducted by the Insurance Department (Department).

Summary of the rule or change:

The changes are as follows: 1) initial and renewal licenses can be obtained by submitting to the Department an application, proof that statutory financial requirements are met, and an application fee; and 2) when the Department completes an investigation of a possible code violation, it will report its findings and recommended disposition to the Board which will then provide input, and after receiving this input, the Department makes the final decision on disposition.

Statutory or constitutional authorization for this rule:

• Subsection 31A-35-301(1)
• Section 31A-35-104
• Subsection 31A-35-406(1)(b)
• Subsection 31A-35-401(2)

Anticipated cost or savings to:

the state budget:

It is expected that the state will see some savings because the Department will spend less time reviewing initial and renewal applications, and will require fewer steps in the process for the Bail Bond Board review of Department investigations. However, the potential savings cannot be calculated with any reasonable certainty.

local governments:

There is no anticipated cost or savings to local governments because the rule solely applies to the interactions between the Department and its licensees.

small businesses:

Bail bond agencies should see some savings because they will spend less time preparing applications for an initial license and at renewal. The amount of savings cannot be determined with any reasonable certainty.

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

There is no anticipated cost or savings for any other persons.

Compliance costs for affected persons:

There are no compliance costs for any affected persons.

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

After conducting a thorough analysis, it was determined that these proposed rule changes will not result in a fiscal impact to businesses.

Todd E. Kiser, Commissioner

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

Insurance
Administration
Room 3110 STATE OFFICE BLDG
450 N MAIN ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Steve Gooch at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [e-mail]

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:

06/14/2019

This rule may become effective on:

06/21/2019

Authorized by:

Steve Gooch, Information Specialist

RULE TEXT

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs

FY 2019

FY 2020

FY 2021

State Government

$0

$0

$0

Local Government

$0

$0

$0

Small Businesses

$0

$0

$0

Non-Small Businesses

$0

$0

$0

Other Person

$0

$0

$0

Total Fiscal Costs:

$0

$0

$0

Fiscal Benefits

State Government

$0

$0

$0

Local Government

$0

$0

$0

Small Businesses

$0

$0

$0

Non-Small Businesses

$0

$0

$0

Other Persons

$0

$0

$0

Total Fiscal Benefits:

$0

$0

$0

Net Fiscal Benefits:

$0

$0

$0

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described in the narrative. Inestimable impacts for Non - Small Businesses are described in Appendix 2.

 

Appendix 2: Regulatory Impact to Non - Small Businesses

These rule changes are not expected to have any fiscal impacts on non-small businesses revenues or expenditures, because this rule pertains only to bail bond agencies active in the state of Utah. All bail bond licensees within the state are properly classified as small businesses having fewer than 50 employees.

 

The head of the Insurance Department, Todd E. Kiser, has reviewed and approved this fiscal analysis.

 

 

R590. Insurance, Administration.

R590-186. Bail Bond [Surety ]Business.

R590-186-1. Purpose.

This rule establishes [uniform ]criteria and procedures for [the initial and renewal ]licensing[, of] a bail bond agency[surety company,] and sets standards of conduct[ for those in the bail bond surety business in the State of Utah].

 

R590-186-2. Authority.

This rule is promulgated pursuant to:

(1) Section 31A-35-104 which requires the commissioner to adopt by rule specific licensure[,] and certification guidelines and standards of conduct for the bail bond business;

(2) Subsection 31A-35-301(1) which authorizes the commissioner to adopt rules necessary to administer [Chapter 35 of ]Title 31A, Chapter 35;

(3) [Subsection 31A-35-401(1)(c) which allows the commissioner to adopt rules governing the granting of licenses for bail bond surety companies;

(4) ]Subsection 31A-35-401(2) which allows the commissioner to require by rule additional information from bail bond agency license applicants[ applying for licensure]; and

([5]4) Subsection 31A-35-406(1)(b) which allows the commissioner to establish by rule the annual renewal date for the renewal of a license as a bail bond agency[surety company].

 

R590-186-3. Scope and Applicability.

This rule applies to any person engaged in the bail bond[surety] business.

 

R590-186-4. Initial and Renewal Agency [ Company ] License.

(1) Applications for an initial and a renewal bail bond agency license [Persons desiring to become licensed as bail bond surety companies ]shall be filed with the [Bail Bond Surety Oversight Board (Board) a bail bond company application which can be obtained from the Insurance Department]commissioner.

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

(a) the initial or renewal license fee in R590-102-16;

(b) proof that the applicant satisfies the minimum financial requirements for a bail bond agency license set forth in Section 31A-35-404[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) if the bail bond agency is in its second or subsequent year of licensure, the following items are required:

(i) a certified appraisal report;

(ii) a current tax notice and a title letter or report; or

(iii) a current abstract of title from the county recorder.

(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).

 

R590-186-6. Agent ] Bail Bond Producer License and Renewal.

(1) Bail bond agencies and surety [companies and ]insurers [are required to ]must issue bail bonds [only ]through licensed bail bond producers who [agents that ]have been designated by the bail bond agency or have been contracted with and appointed by the surety insurer[ or designated by the bail bond surety company for whom they are issuing bail bonds].

(2) All persons doing business as bail bond producers[agents] must be licensed in accordance with [Chapter 23 of ]Title 31A, Chapter 23a, 31A-35-406, and applicable [department ]rules regarding individual producer[agent] licensing. Bail bond producer[agent] licenses are individual limited line licenses. These licenses are issued for a two[ ]-year period and require no licensing examination or continuing education.[

(3)] Individual bail bond producer[agent] licenses must be renewed at the end of the two[ ]-year licensing period[in accordance with Chapter 23 of Title 31A and applicable department rules regarding individual agent licensing renewal].

 

R590-186-[7]6. Unprofessional Conduct.

Persons in the bail bond [surety ]business may not engage in unprofessional conduct. [For purposes of this rule, u]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 professional or occupational 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 bail bond agency[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 or[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 bail bond agency[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 bonding 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 bail bond agency[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 bail bond agency[surety];

(d) the incarcerated person's obligations to the bail bond agency[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 a[the] bail bond agency or surety insurer[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 bond purchaser[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 bonds without countersignature by a licensed bail bond producer[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 agency,[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 Title 31A, Chapter 35[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;

(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]7. Investigating Unprofessional Conduct.

The [Board or the ]commissioner shall investigate complaints[allegations] of unprofessional conduct submitted in writing to the commissioner. Once the investigation is complete, the commissioner shall report findings and a recommended disposition to the board. That report shall be confidential and may not be disclosed beyond the Insurance Department and the board. After obtaining the board's comments and recommendations concerning the report, the commissioner will determine the appropriate disposition[on the part of any bail bond surety, bail bond surety agent, or bail bond producer. 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 respondent.

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

(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, or request additional investigation.

(i) Disclosures made to the Board under Sections (c) and (d)shall be treated as confidential. Board members may not disclose or act upon any confidential information obtained pursuant to investigations conducted under this Section.

(ii) If the Board requests additional investigation, the commissioner shall reasonably conduct additional investigation in compliance with the policies and procedures of the Department.

(a) The commissioner shall present findings to the Board at the next scheduled board meeting, or at a meeting no sooner than 30 days after the Board's request, at the discretion of the Board.

(b) Upon hearing the results of any additional investigation by the commissioner, the Board shall provide to the commissioner its recommendation within 30 days].

 

R590-186-[9]8. Bonding Limits.

(1) A[n insurance bondsman] bail bond agency that maintains a qualified power of attorney from a surety insurer may not maintain outstanding bail bond obligations in excess of the amount allowed by the surety insurer[insurance company].

(2) A bail bond agency that pledges assets of a letter of credit[bondsman and/] or pledges personal or real property[a property bondsman] may not maintain outstanding bail bond obligations in excess of the amounts provided in the table below:

 

TABLE

 
 Financial Requirements           Ratio of Outstanding Bond 
                                 Obligations to Letter of 
                                 Credit or Net Worth and 
                                 Liquidity Amounts 
 
$250,000 line of credit          licensed 0 to 36 months: 5 to 1 
or net worth/$50,000             licensed over 36 months: 5 to 1 
liquidity) 
300,000 or more line of          licensed 0 to 36 months:  5 to 1 
credit limit or net worth/       licensed over 36 months: 10 to 1 
at least $100,000 liquidity

 

(3) The commissioner may reduce the bonding limit of a letter of credit or a property bail bond agency[company] who has qualified for the 10 to 1 ratio if that bail bond agency[company]'s line of credit limit or net worth or liquidity limit falls below the limits stated in Subsection(2) above.[

 

R590-186-10. Publication of Licensed Bail Bond Surety Companies.

On or before September 1 of each year, the Board shall publish a list of bail bond surety companies licensed to do business in the State of Utah.]

 

R590-186-[11]9. Definition.

[In reference to s]For the purpose of Subsection 31A-35-701(5) , "members of their immediate families" [shall be defined as: ]means spouse, children, stepchildren, children-in-law, mother, father, brother, sister, mother-in-law, father-in-law, sister-in-law, brother-in-law, step-mother, step-father, step-brother, step-sister, half-brother, or[and] half-sister.

 

R590-186-[12]10. Penalties.

Violations of this rule are punishable pursuant to Section 31A-2-308.

 

R590-186-11[13. Enforcement Date.

The commissioner will begin enforcing the revised provision of this rule 45 days from the rule's effective date. Non-revised provisions are enforceable as of the effective date.

 

R590-186-14]. Severability.

If any provision [or clause ]of this rule or its application to any person or situation is held to be invalid, that[such] invalidity shall[may] not affect any other provision or application of this rule which can be given effect without the invalid provision or application, and to this [a]end the provisions of this rule are declared to be severable.

 

KEY: insurance

Date of Enactment or Last Substantive Amendment: [ February 7, ]2019

Notice of Continuation: July 10, 2018

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

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