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BOND FROM THE BUSINESS PERSPECTIVE
Bail is evidenced by a bond or recognizance, which as a rule becomes a record of the court. The bond actually represents the compensatory component of a contract between a court of law on one side and a defendant charged by that court and his sureties on the other. The arrangement formalized in the agreement confirms that the court of jurisdiction will release the defendant from custody if the sureties will guarantee, by the pledging of a bail bond in an amount determined by the court, that the defendant will appear at a specified time(s) and place to answer the charge(s) levied against him. If the defendant fails to appear, the sureties become the absolute debtor of the court for the full amount of the bond.
The defendant, or one or more co-signors, signs a bail agreement with the bail agent which provides for reimbursement of expenses to the bail agent if the defendant fails to appear in court. These expenses include the full amount of the bond forfeited, reasonable expenses incurred by the bail agent to locate and surrender the defendant, and related court costs incurred.
Under this agreement, the bondsman collects a bail bond premium which the agent earns upon the defendant's release from custody. The amount of the premium usually depends upon the nature and risk of the bond involved. As a general rule of thumb, the premium on "cash only" bonds is 20% of the face amount of the bond, while the premium on "cash or surety" bonds is 10% of the bond's face amount.
From this premium collected, the bail agent makes two payments to the surety company--one for bond costs and the second for the agency's reserve account, commonly known as a "Build up Fund" or BUF account. This fund is held in trust for the bonding agent by the surety company in a separate account in a local or regional financial institution. The purpose of this BUF account is to provide funds to cover any potential liabilities incurred as a result of any forfeiture of bonds written by that specific agent. The bail agent usually has no access to these funds, and the surety company can make withdrawals from the account without permission from the agent.
In addition to the bail bond premium, the bonding agent may also demand collateral from the defendant, based upon the bondsman's assessment of risk involved in the transaction. Stability and liquidity are characteristic traits of this collateral, which may come in the form of cash or stocks and bonds, or other, more tangible property, such as jewelry, automobile titles, or real estate deeds of trust.
When a bail agent contracts with a surety company, he or she is contracting to write bail bonds for the surety company as its agent. The surety company is ultimately liable for all bonds written by the bail agent on its behalf. The contract specifies premium rates, bond costs, and BUF payments, and contains an indemnity agreement. Other areas that are usually addressed include treatment of collateral, weekly reporting requirements, and terms for the return of the BUFaccount balance. The contract may also limit the amount of bail that the bail agent is permitted to write per bond. The indemnity agreement specifies that the bail agent is responsible for any expenses relating to bonds written by the bail agent. These include the apprehension, movement, or surrender of the defendant, as well as any expenses relating to bond forfeitures.
In this relationship, a surety company contracts to support a particular bondsman who, in turn, promises to indemnify this bond underwriter for forfeitures and related costs on bail bonds that default when the defendant fails to make scheduled, court-ordered appearances. In a worst-case example of this scenario, when all previous attempts to coerce a reluctant defendant into court have failed, a Notice of Forfeiture is filed against the bondsman. The severity of the Court's demand for action to cure an existing "breach of contract" within a prescribed deadline cannot be ignored. If the "defaulting" defendant is not surrendered to the court before the deadline expires, a Summary Judgment requiring immediate payment equal to the full face value of the bond will be levied against the bondsman. The bonding agency's failure to comply with the judgment order could result in revocation of the surety company's surety bonding license. .
general, any individual who transacts "criminal court appearance
bonds" for a fee must be licensed by that state's department
of insurance. Most state regulators currently enforce equally exacting
underwriting standards for all forms and variations of risk-based
insurance, and surety bonding is no exception. It is nearly impossible
for an individual operator to comply with the vast array of stringent
performance and solvency requirements most regulators demand from
their licensees and applicants alike. As a result, the majority of
bondsmen serving America's bail bond business today do so as licensed
representatives for the major regional or national surety companies
that ultimately "underwrite" the actual bail bonds and thereby
assume total liability on the full amount of the bond. This liability
position, and the deferral of much of the financial responsibility
back to the bondsman who originally initiated the surety instrument
in the first place, has been a driving force in the expansion of the
agent's focus upon the bail bond enforcement operations, glorified
in part by the 21st Century bounty hunter.
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