New York Court of Appeals ruled that bail bondsmen may not retain the premium paid on a criminal defendant’s behalf when bail is denied and the defendant is not released from custody.
In 2011, Arthur Bogoraz was indicted on state fraud charges with bail set at $2 million. His wife and family friends (collectively, “Plaintiffs”) contacted Ira Judelson, a licensed bail bond agent, to post a bail bond for Bogoraz’s release. Plaintiffs entered into an indemnity agreement with Judelson, whereby he agreed to underwrite a bail bond to secure Bogoraz’s release in exchange for a $120,560 premium.
After the Plaintiffs paid the premium, Judelson posted the bail bond with the court. The court subsequently ordered a bail-sufficiency hearing under CPL § 520.30 to approve or disapprove the bail. The court denied the bail bond, so Bogoraz was never released. The Plaintiffs requested the return of the premium paid to Judelson, but he refused.
The Plaintiffs sued Judelson in federal court, asserting diversity jurisdiction. The district court determined that the indemnity agreement allowed Judelson to keep the premium. On appeal, the U.S. Court of Appeals for the Second Circuit concluded that under New York law it is an open question as to when a bail bondsman actually earns the premium for posting a bail bond.
As such, the Second Circuit certified the following question to the New York Court of Appeals: “Whether an entity engaged in the ‘bail business’ … may retain its ‘premium or compensation’ … where a bond posted … is denied at a bail-sufficiency hearing … and the criminal defendant that is the subject of the bond is never admitted to bail.” The New York Court of Appeals answered the certified question in the negative.
The Court began its analysis by reviewing the applicable insurance and criminal statutes and determined that the answer to the certified question hinges upon the meaning of the term “give bail bond.” As used in the context of this case, the term is not defined in the statutes. In interpreting the relevant statutes, the Court reasoned that if a court refuses to accept the bond, the bond remains only proposed, not fully executed. So “executing” a bail bond is equated with having “given bail,” explained the Court. This means “that bail bond has not been given if the court refuses to accept the bond after the bail source hearing.”
The Court announced that “a bail bond surety may not retain a premium when the court refuses to accept the bond because no premium is earned under section 6804(a) until a bail bond is given, and the bond cannot be deemed given within the meaning of the Insurance Law if it is not accepted by the court.”
In addition to its statutory interpretation, the Court added that the insurance law principle of “premium follows risk further supports this result.” The risk associated in a bail bond situation is that the defendant will abscond, and the bail bond will be forfeited. But when the court disapproves of the bail bond and the defendant is never released, there is no risk of loss to the bail bondsman. It follows, then, that absent any risk of loss, the bail bondsman is not entitled to the premium.
See: Gevorkyan v. Judelson, 80 N.E.3d 999 (N.Y. 2017).
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Gevorkyan v. Judelson
|Cite||80 N.E.3d 999 (N.Y. 2017)|