Cancelled Bond and the Power of Attorney
On Thursday, a family pays Len a $5,000 premium (10% of a $50,000 bond) for a Friday morning posting. Thursday night Len signs the bail bond and gives the family a copy, but the court clerk's office is closed, so nothing is filed. Friday at 8 a.m. the judge raises bond to $75,000. The family cannot pay the additional $2,500 premium and cancels. Len says the premium is fully earned because 'the bond was written,' keeps all $5,000, and does not ask for the bond copy back. The insurer's filed rate schedule states premium is earned when the bond is executed and accepted by the court.
1. Was the premium earned? Explain using the risk-attachment principle and the filed rate schedule.
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No-the premium was not earned. Premium is consideration for the surety's assumption of risk. Risk attaches when the bond is executed and accepted by the court, not when a form is signed in the office.
Here, the clerk's office was closed, nothing was filed, and the court never accepted the bond. The obligation never came into force. The family cancelled before posting. Under the insurer's filed schedule, the condition for earning premium was not met.
Len may retain only documented, disclosed out-of-pocket expenses that the signed contract expressly authorizes-for example, a stated application or filing fee. He may not keep the full $5,000 as 'earned' when no risk attached. Keeping it would also create an incentive to write bonds that are never filed.
2. What must Len do about the signed bond copy and the power of attorney?
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Retrieve and void them. A signed bond and a live power of attorney in the family's hands create a real risk that someone files or presents the bond later, without underwriting, without premium, and beyond Len's control.
Steps:
- Ask for the bond copy back and document the request.
- Notify the insurer in writing that the bond was cancelled before filing and ask that the power of attorney be voided in the insurer's records.
- Send the family a written cancellation confirming that no bond is in force and that they should not present the copy to any court.
- Keep copies of the cancellation notice and the returned documents in the file.
If the family cannot return the copy, Len should notify the clerk and the insurer so the bond cannot be mistakenly accepted.
3. The family demands a full refund and threatens a complaint. What is the correct response and recordkeeping?
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Len should refund the unearned premium promptly-$5,000 unless a specific, disclosed expense is documented and authorized-and provide a written refund statement. Arguing 'the bond was written' will not survive review when the court never accepted it.
Record:
- the date and time of the original payment;
- the clerk's closure and the unfiled status;
- the bond increase to $75,000;
- the cancellation request and date;
- the refund amount and method;
- the request to void the power of attorney.
He should also notify the insurer of the cancellation. A prompt, documented refund is both the contractual answer and the ethical one; a complaint is far less damaging than a pattern of retaining unearned premium.