No. 31501 (Amendment): R590-186. Bail Bond Surety Business

DAR File No.: 31501
Filed: 05/30/2008, 01:35
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The main purpose of the rule change is to amend the instructions for agency renewal and add three additional descriptions of unprofessional conduct. These changes relate to the implementation of a minimum premium for bail bonds. This minimum premium is set in Rule R590-196 "Bail Bond Surety Fee Standards, Collateral Standards, and Disclosure Form". (DAR NOTE: The proposed amendment to Rule R590-196 is under DAR No. 31502 in this issue, June 15, 2008, of the Bulletin.)

Summary of the rule or change:

Sections R590-186-1 and R590-186-3 are being combined into a new Section R590-186-2. The rule changes in Sections R590-186-3 and R590-186-5 allow bail bond agencies to discount 12 bonds a year for less than the minimum premium. Section R590-186-7 adds three additional descriptions of unprofessional conduct relating to minimum premiums.

State statutory or constitutional authorization for this rule:

Sections 31A-35-104, 31A-35-301, 31A-35-401, and 31A-35-406

Anticipated cost or savings to:

the state budget:

The proposed changes will have no fiscal impact on the department or the state budget. These changes will not create an increase or decrease in fees received by the department. It could increase the workload of department's market conduct examiners, depending on the number of complaints received regarding discounted bonds. It is very unlikely that this would necessitate the need for an additional department employee.

local governments:

The changes to this rule will have no impact on local governments since the rule deals solely with the relationship between the department and its licensees, bail bond agencies.

small businesses and persons other than businesses:

This rule regulates Utah bail bond agencies, the great majority of which are composed of fewer than 50 employees. The rule also affects what can be charged to those seeking a bail bond. The rule will require bail bond agencies to print new bail bond disclosure forms at a minimal cost.

Compliance costs for affected persons:

This rule regulates Utah bail bond agencies. The rule also affects what can be charged to those seeking a bail bond. The rule will require bail bond agencies to print new bail bond disclosure forms at a minimal cost.

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

The changes to this rule will have minimal fiscal impact on bail bond agencies. D. Kent Michie, Commissioner

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

Jilene Whitby 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:

07/23/2008

Interested persons may attend a public hearing regarding this rule:

7/16/2008 at 10:00 AM, Capitol Board Room, East end of second floor of the Capitol, 400 N State Street, Salt Lake City, UT

This rule may become effective on:

07/30/2008

Authorized by:

Jilene Whitby, Information Specialist

RULE TEXT

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 surety company, and sets standards of conduct for those in the bail bond surety business in the State of Utah.

 

]R590-186-[2]1. 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;

(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 applicants applying for licensure;

(5) 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 surety company.

 

R590-186-[3]2. Purpose and Scope[ and Applicability].

(1) The purpose of this rule is:

(a) to establish uniform criteria and procedures for the initial and renewal licensing of a bail bond surety company; and

(b) to set standards of conduct for persons doing the business of bail bond surety insurance in Utah.

(2) This rule applies to any person [engaged in the]doing bail bond surety insurance business in Utah.

 

R590-186-3. Definitions.

(1) The definitions in Sections 31A-1-301 and 31A-35-102 apply to this rule.

(2) "Discounted minimum premium" means a total bail amount posted per defendant that is less than 10% of the total bail amount posted per defendant.

(3) In reference to subsection 31A-35-701(5) "Members of their immediate families" means a spouse, a child, a stepchild, a child-in-law, a mother, a father, a brother, a sister, a mother-in-law, a father-in-law, a sister-in-law, a brother-in-law, a step-mother, a step-father, a step-brother, a step-sister, a half-brother, or a half-sister.

 

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) file a list of all discounted minimum premiums charged during the annual licensing period. The list must include the following:

(a) the date the total bail amount per defendant was posted;

(b) the total bail amount posted per defendant;

(c) the total premium charged;

(d) the total discounted minimum premium;

(e) the actual amount collected; and

(f) the date of the last payment made.

[(2)](3) 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)](4) 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.

 

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[.];

(29) issuing more than a total of 12 discounted minimum premiums in any annual licensing period;

(30) failing to initiate a legal form of collection for an unpaid bond premium after the premium has been unpaid for 180 days including:

(a) filing litigation to recover the unpaid premium debt or assigning the unpaid premium to a collection agency; and

(b) initiation of the collection action must be within 15 days of the expiration of the 180 day period; and

(31) failing to keep accurate and complete business records of the total bail amount posted per defendant including:

(a) the date the bail amount per defendant was posted;

(b) the total bail amount posted per defendant;

(c) the total premium charged;

(d) the total discounted minimum premium, if provided;

(e) the actual amount collected; and

(f) the date of the last payment made.

 

[R590-186-11. Definition.

In reference to subsection 31A-35-701(5) "members of their immediate families" shall be defined as: 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, and half-sister.

 

]R590-186-[12]11. Penalties.

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

 

R590-186-[13]12. 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]13. Severability.

If any provision or clause of this rule or its application to any person or situation is held invalid, such invalidity 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 and the provisions of this rule are declared to be severable.

 

KEY: insurance

Date of Enactment or Last Substantive Amendment: [March 21, 2002]2008

Notice of Continuation: August 29, 2003

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