Collateral, Indemnity, and Fiduciary Responsibilities
Two money streams, two sets of duties
The premium belongs to the surety or agency as earned compensation. Collateral belongs to the indemnitor and is held to secure the indemnity agreement. An agent who mixes the two, spends collateral, or refuses to account for it has breached a fiduciary duty and risks criminal liability under Chapter 648 for misuse of collateral.
Core obligations:
- Written indemnity agreement identifying who is bound and for what - typically the full bond amount plus costs of apprehension.
- Written receipt for every item or sum taken as collateral, describing it precisely.
- Segregation of collateral and client funds from operating funds.
- Return of collateral, with any required accounting, once the bond is exonerated or the indemnity obligation is satisfied.
- No personal use of collateral and no retention of it as a penalty for unpaid premium.
An agent may apply collateral to a forfeiture judgment but must account for any surplus. Accepting collateral the agent cannot lawfully liquidate, or failing to warn an indemnitor that a home may be protected homestead, is also a problem.
Traps
Calling the receipt optional; treating a co-signer's promise as limited to the premium; keeping a defendant's jewelry 'until he pays the balance'; failing to explain that the indemnitor may owe the entire bond plus costs; assuming collateral may be sold without notice or accounting.
Rule of thumb
On a $100,000 bond at a 10% rate, the premium is $10,000 while the indemnitor's exposure is the full $100,000 plus costs. Never let a client believe the $10,000 is the ceiling. Give a receipt, keep the collateral separate, and return it with a written accounting.