Writing Bonds After Appointment Termination
Dana R. is a New Hampshire-licensed bail bond agent appointed by Granite Mutual Surety. On January 15, Granite Mutual terminates Dana's appointment and sends the required notice to the Insurance Department. Dana does not tell the agency's office manager. On February 3 and February 10, Dana executes two $20,000 surety bonds for defendants in Strafford County using a power-of-attorney form Granite Mutual had issued before termination. Dana collects $2,000 in premium each time and deposits it in the agency operating account. Dana also pays a $300 referral fee to a jail trustee who steered the defendants to Dana. On March 1, a Department investigator asks for the appointment file, bond register, and bank records. Dana says the bonds are valid because the defendants appeared and the premium was earned.
1. Identify the licensing and prohibited-practice issues raised by Dana's conduct after January 15.
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Issue: Can a bail bond agent continue to execute surety bonds after the insurer terminates the appointment?
Analysis: The appointment is the source of Dana's authority to act for Granite Mutual. Once the appointment was terminated and notice was sent, Dana could not lawfully continue to write bonds for that surety. Using an old power-of-attorney form does not restore authority. The two February bonds were therefore written without a current appointment. The $300 payment to a jail trustee for steering defendants is also a serious solicitation/referral problem: it creates a jail-based referral arrangement, hides the source of business from the court and insurer, and is the kind of prohibited practice that undermines consumer protection.
Conclusion: Dana has exposure for unauthorized bond writing after termination, failure to stop using the surety's power of attorney, and improper referral payments. The fact that the defendants appeared does not cure the licensing defect; it only affects whether the surety ultimately suffers a loss.
2. Analyze whether Granite Mutual is bound on the two bonds and what Dana must do with the premiums.
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Issue: If the agent lacked a current appointment, is the surety still liable on the bonds?
Analysis: A court will look at apparent authority and the expectations of the defendants and the jail. Dana used the surety's old power-of-attorney form, collected premium, and filed the bonds. The defendants likely relied on the appearance of authority. That can bind the surety to the bond obligations even though Dana violated the appointment rules. The surety may then have a claim against Dana for acting outside authority.
Premium handling: Premium is not Dana's money. It belongs to the surety or must be accounted for under the agency agreement and commission schedule. Depositing it into the operating account and treating it as earned without remitting and reconciling it is a fiduciary problem. Dana must reconstruct the two transactions, remit the premium or set it aside as directed, and provide an accounting.
Conclusion: Do not assume the bonds are void because the appointment ended. Treat them as live obligations of the surety unless a court says otherwise, and immediately separate and account for all premium and fees.
3. Draft the corrective action Dana should take before responding to the Department.
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Dana should take these steps in order:
- Stop writing for Granite Mutual and stop using any old power-of-attorney forms.
- Notify the surety and the agency in writing of the two February bonds and the referral payments.
- Reconcile the bond register so each bond shows the defendant, amount, premium, date, agent, and surety.
- Segregate funds: move premium and any agency fees into the proper account and prepare a remittance/accounting.
- Preserve evidence: appointment termination notice, power-of-attorney form, bond files, bank records, and referral payment records.
- Self-report and cooperate with the Department; do not destroy or alter records.
- Review supervision so appointment changes trigger an immediate stop on writing and a file update.
The key judgment is that cooperation and prompt correction reduce regulatory risk, but they do not erase the unauthorized writing or the improper referral arrangement.