Michael Pasinkoff
Michael Pasinkoff ()

John Smith, a hypothetical defendant, was arraigned before a New York State Supreme Court Justice on an indictment charging him with robbery in the first degree. After reviewing Smith’s lengthy criminal record, which included two prior violent felony convictions and a history of bench warrants, the court set bail in the amount of $50,000, which could be posted in the form of a bond, or $25,000, which could be posted in the form of cash.

The following day, Smith’s brother approached a bondsperson in order to facilitate Smith’s release through the posting of a $50,000 insurance company bail bond. The bondsperson required that Smith provide $5,000 cash as collateral for the bond. That money would be held by the bondsperson to ensure that Smith returned to court. If Smith returned to court, the bail bond would be exonerated at the conclusion of the case and the $5,000 would be returned to Smith. If Smith absconded and the bond was ordered forfeited, the bondsperson would keep the $5,000 and attempt to collect the remainder of the $45,000 from Smith or any other person who had agreed to be an obligor on the bond. The bondsperson would ultimately be responsible for paying the full $50,000. CPL §540.10(1). In either case, the bondsperson would keep an additional $3,260 which, in addition to the $5,000, would be paid by Smith.1

After collecting the $3,260 fee and securing the $5,000 collateral, the bondsperson prepared the statutorily required justifying affidavit which listed, among other details, the collateral received to secure the bond ($5,000), and the face value of the bond ($50,000). CPL §520.20(4). The bondsperson presented the justifying affidavit to a judge for approval. The judge found the $5,000 cash collateral to be inadequate, especially since it was well below the $25,000 cash alternative set by the bail court. In the judge’s view, $5,000 provided an insufficient financial incentive for the defendant to return to court. Given the seriousness of the charges against Smith and his history of bench warrants, the judge opined that more collateral was necessary to provide a stronger financial incentive for Smith to return.

Despite her concerns, the judge signed the bond, believing that she was bound by a terse Second Department opinion, People ex rel. Savage v. Horn, 56 A.D.3d 806, 807 (2d Dept. 2008), which holds that the court cannot question the business judgment of the issuing company with regard to the amount of collateral it requires to secure the bond. However, neither Savage nor the authority it relies on limits a court’s statutory authority to evaluate whether, in a particular case, the collateral is sufficient to ensure a defendant’s continued appearance at court proceedings. This article explores the authority of courts to reject insurance company bail bonds based upon a determination that the collateral which secures the bond provides an insufficient financial incentive to compel a defendant’s return to court.2

Criminal Procedure Law §510.10 mandates that a when a defendant “whose future court attendance at a criminal action or proceeding is or may be required, initially comes under the control of a court, such court must by a securing order, either release him on his own recognizance, fix bail or commit him to the custody of the sheriff.” The bail proceeding always occurs at arraignment, but may reoccur at later points in the criminal proceeding based upon various changed circumstances. A court may rely on a variety of factors in making a bail determination, including the strength of the People’s case, the defendant’s criminal record, and his or her history of failing to return to court. CPL §510.30(2). The bail proceeding may also include a request by the prosecution for a surety examination, that is, an offer of proof that provides “reasonable cause to believe that [any cash bail that might be posted] constitutes the fruits of criminal or unlawful conduct.” CPL §520.30(1).

After reviewing the applicable factors, a court must make a determination as to what, if any, financial incentive is necessary to ensure a defendant’s return to court. If a court determines that bail is appropriate, the statute authorizes a court to not only set bail in a certain monetary amount, but also to set the form in which the bail must be posted. A court must designate at least two forms by which bail may be posted. People ex rel. McManus v. Horn, 18 N.Y.3d 660, 666 (2012).

Bail can be posted in a variety of forms including “cash bail”—a sum of money which is deposited with the court. CPL §§500.10(10), 520.15(1).3 The person posting cash bail on behalf of a defendant must complete a form which includes an “acknowledgment that the cash bail will be forfeited if the [defendant] does not comply with any requirement or order of process to appear in court.” CPL §520.15(2)(g). If a defendant makes all necessary court appearances, the cash bail will be returned to the person who posted it. If, on the other hand, a defendant fails to appear in court as required, the cash bail will be forfeited. CPL §540.10 (1).

The court may also permit bail to be posted in one of seven different types of bail bonds, including an insurance company bail bond. CPL §520.10(b)-(i). Unlike the posting of cash bail, which only requires a judicial inquiry when a surety examination is ordered, a bail bond must always be reviewed and ultimately approved by a judge. Criminal Procedure Law Section 520.30(1) authorizes a court, “following the posting of a bail bond and the justifying affidavit or affidavits … [to] conduct an inquiry for the purpose of determining the reliability of the obligors or person posting cash bail, the value and sufficiency of any security offered, and whether any feature of the undertaking contravenes public policy.” Upon such inquiry, “the court may examine, under oath or otherwise, the obligors and any other persons who may possess material information.” At the conclusion of the inquiry, the court must issue an order either approving or disapproving the bail. CPL §520.30(3)

As a type of bail bond, an insurance company bail bond is subject to this type of inquiry.4 Needless to say, a critical “public policy” consideration, and the ultimate question a court must answer before approving a bond, is whether the bond is sufficient to ensure a defendant’s return to court. A defendant who has pledged significant collateral to secure an insurance company bail bond has a far greater financial incentive to return to court than one who has only offered minimal collateral. Whether the collateral pledged is sufficient to meet this objective is a question that should be answered by a judge. That a bondsperson found the collateral sufficient is no substitute for a judicial review of its sufficiency. After all, a bondsperson is “under no obligation to ensure that the bail arrangement is consistent with the public policy of the State.” People v. McIntyre, 168 Misc.2d 556, 563 (Sup. Ct., Kings Co. 1996). It is the obligation of the court, not a bondsperson, to ensure that the bail bond is consistent with public policy and that it serves the ultimate objective of ensuring the defendant’s return to court. If a court finds that the pledged collateral provides an insufficient incentive for a defendant to return to court, it may and should disapprove the bond.

This judicial determination is permissible notwithstanding the holding in Savage. An examination of the record in Savage reveals that the judge who disapproved the bond offered no public policy reason to explain why the perceived insufficiency of the collateral resulted in disapproval of the bond. There was no finding that the minimal collateral provided an insufficient incentive for the defendant to return to court or that its low value offended some other aspect of public policy. That there was no explanation for the disapproval of the bond makes the holding in Savage extremely limited. At most, Savage stands for the proposition that judges cannot summarily reject insurance company bail bonds without some public policy basis for such a decision.

At least one court has expressly held that, notwithstanding Savage, it has the authority to reject a bond based upon the insufficiency of collateral on public policy grounds. In People v. Torres, 51 Misc. 3d 1203(A), N.Y. Slip Op. 50354(U) (Cty. Ct, Sullivan Co. March 24, 2016), Justice Frank J. LaBuda disapproved a $100,000 insurance company bail bond which was secured by a trailer of limited value. Citing to Savage, the court made clear that it was not second guessing the bondsperson’s business judgment. Nevertheless, the court held that it retained the “inherent authority, granted it by the Legislature, pursuant to §520.30(1), to make a determination as to ‘whether any feature of the undertaking contravenes public policy.’” 51 Misc.3d 1203(A), at *2 (citing CPL §520.30(1) (emphasis in original)). In rejecting the bond, the court noted that the low value of the collateral pledged provided “no monetary incentive [for the defendant] to appear in connection with the bail package.” Id. at *3.

The legislative history of §520.30(1) underscores the need for judges to exercise the discretion that the statute has given them and to carefully review bail bonds. Indeed, the first statute addressing the use of insurance company bail bonds appeared in 1922 when §554-b was added to the Code of Criminal Procedure. The statute imposed the requirement that a person operating a bail bond business be licensed pursuant to the Insurance Law. Section 554-b also authorized the court to reject a bond only “if any portion of such security has been feloniously obtained by the defendant, or the bond violates a legal restriction, or the person was not licensed.”5

Senator Salvatore Cotillo, who introduced the bill, commented that the “purpose of these bills is to check the exploitation of defendants seeking bail by professional bondsmen who in return for exorbitant fees will go bail [sic] for habitual criminals … .” “Governor Signs Crime Wave Bill,” N.Y. Times, March 29, 1922. In signing the bill, the then governor noted that “this bill, if rightly enforced, should go a long way to stop the bail bond evil. The proper enforcement of the act now rests with the Superintendent of Insurance and the court Judges.” Id. All of these assertions make clear that this legislation was enacted to create some oversight of bondspersons.

Unlike §554-b, §520.30(1) allows a court to inquire whether “any feature of the undertaking contravenes public policy.” Had the Legislature intended to restrict a court’s authority, the statute would have said so. And the expanded authority is not surprising, especially in the case of insurance company bail bonds. The statute was designed to further regulate this industry, not to compel judges to defer to it.

A review of recently forfeited bail bonds also supports the need for judicial scrutiny of insurance company bail bonds. In 2016, there were approximately 49 bond forfeitures in New York County which were either paid or outstanding on felony cases that originated from 2014 to 2016. Forty-three of these forfeited bonds were secured by cash collateral. The average percentage of cash collateral which secured these bonds was approximately 11 percent. Notably, many of these defendants who failed to return to court had an extensive history of bench warrants as well as other factors that made them flight risks. One defendant had a history of contempt convictions, bench warrants and the use of false names. Yet the bondsperson was willing to write the bond after receiving only 10 percent collateral. Another bondsperson was willing to accept 12 percent collateral for a defendant who had over eight bench warrants as well as a history of violating parole and probation. That a bondsperson was willing to issue a bail bond for these individuals further establishes that a bondsperson’s business judgment takes into account different factors than a court’s public policy analysis.

In light of this data, it is imperative that judges consider the individual facts of each case and the particular circumstances of each defendant before approving a bail bond. Courts should use the same factors that can be considered when setting bail to determine the sufficiency of collateral pledged to secure a bail bond. In some cases, where there is a low risk of a defendant not returning to court, minimal collateral may be sufficient. In others, defendants who pose a significant risk of flight should be required to post more collateral to secure a bail bond. As explained above, Criminal Procedure Law §520.30(1) gives the courts broad authority to reject a bond if any of its features violates public policy. Because the primary purpose of bail is to ensure a defendant’s return to court, an insufficient financial incentive undermines that purpose and provides the most compelling basis for a court to disapprove a proposed insurance company bail bond.

Endnotes:

1. Insurance Law §6804(a) allows a bondsperson to charge a fee for preparing the bond. The statute limits the fee to a percentage of the face value of the bond. There is, however, no statutory provision regulating the amount of collateral a bondsperson is required to collect.

2. Much has been written recently about the fairness of our bail system and whether reforms should be pursued to avoid unnecessary pre-trial detention, especially for low-level offenses. This article does not address these policy issues.

3. The statute also authorizes cash bail to be deposited with the county treasurer or the sheriff in whose custody the defendant has been committed.

4. CPL §500.10 contains various interlocking definitions pertaining to different types of bail bonds. CPL 500.10(15) defines a surety bond as a type of bail bond in which the obligor consists of one or more sureties. An insurance company bail bond is defined as a “surety bond” specifically executed by “a corporation licensed by the superintendent of financial services to engage in the business of executing bail bonds.” CPL §500.10(16).

John Smith, a hypothetical defendant, was arraigned before a New York State Supreme Court Justice on an indictment charging him with robbery in the first degree. After reviewing Smith’s lengthy criminal record, which included two prior violent felony convictions and a history of bench warrants, the court set bail in the amount of $50,000, which could be posted in the form of a bond, or $25,000, which could be posted in the form of cash.

The following day, Smith’s brother approached a bondsperson in order to facilitate Smith’s release through the posting of a $50,000 insurance company bail bond. The bondsperson required that Smith provide $5,000 cash as collateral for the bond. That money would be held by the bondsperson to ensure that Smith returned to court. If Smith returned to court, the bail bond would be exonerated at the conclusion of the case and the $5,000 would be returned to Smith. If Smith absconded and the bond was ordered forfeited, the bondsperson would keep the $5,000 and attempt to collect the remainder of the $45,000 from Smith or any other person who had agreed to be an obligor on the bond. The bondsperson would ultimately be responsible for paying the full $50,000. CPL §540.10(1). In either case, the bondsperson would keep an additional $3,260 which, in addition to the $5,000, would be paid by Smith.1

After collecting the $3,260 fee and securing the $5,000 collateral, the bondsperson prepared the statutorily required justifying affidavit which listed, among other details, the collateral received to secure the bond ($5,000), and the face value of the bond ($50,000). CPL §520.20(4). The bondsperson presented the justifying affidavit to a judge for approval. The judge found the $5,000 cash collateral to be inadequate, especially since it was well below the $25,000 cash alternative set by the bail court. In the judge’s view, $5,000 provided an insufficient financial incentive for the defendant to return to court. Given the seriousness of the charges against Smith and his history of bench warrants, the judge opined that more collateral was necessary to provide a stronger financial incentive for Smith to return.

Despite her concerns, the judge signed the bond, believing that she was bound by a terse Second Department opinion, People ex rel. Savage v. Horn , 56 A.D.3d 806, 807 ( 2d Dept. 2008 ) , which holds that the court cannot question the business judgment of the issuing company with regard to the amount of collateral it requires to secure the bond. However, neither Savage nor the authority it relies on limits a court’s statutory authority to evaluate whether, in a particular case, the collateral is sufficient to ensure a defendant’s continued appearance at court proceedings. This article explores the authority of courts to reject insurance company bail bonds based upon a determination that the collateral which secures the bond provides an insufficient financial incentive to compel a defendant’s return to court.2

Criminal Procedure Law §510.10 mandates that a when a defendant “whose future court attendance at a criminal action or proceeding is or may be required, initially comes under the control of a court, such court must by a securing order, either release him on his own recognizance, fix bail or commit him to the custody of the sheriff.” The bail proceeding always occurs at arraignment, but may reoccur at later points in the criminal proceeding based upon various changed circumstances. A court may rely on a variety of factors in making a bail determination, including the strength of the People’s case, the defendant’s criminal record, and his or her history of failing to return to court. CPL §510.30(2). The bail proceeding may also include a request by the prosecution for a surety examination, that is, an offer of proof that provides “reasonable cause to believe that [any cash bail that might be posted] constitutes the fruits of criminal or unlawful conduct.” CPL §520.30(1).

After reviewing the applicable factors, a court must make a determination as to what, if any, financial incentive is necessary to ensure a defendant’s return to court. If a court determines that bail is appropriate, the statute authorizes a court to not only set bail in a certain monetary amount, but also to set the form in which the bail must be posted. A court must designate at least two forms by which bail may be posted. People ex rel. McManus v. Horn , 18 N.Y.3d 660, 666 ( 2012 ) .

Bail can be posted in a variety of forms including “cash bail”—a sum of money which is deposited with the court. CPL §§500.10(10), 520.15(1).3 The person posting cash bail on behalf of a defendant must complete a form which includes an “acknowledgment that the cash bail will be forfeited if the [defendant] does not comply with any requirement or order of process to appear in court.” CPL §520.15(2)(g). If a defendant makes all necessary court appearances, the cash bail will be returned to the person who posted it. If, on the other hand, a defendant fails to appear in court as required, the cash bail will be forfeited. CPL §540.10 (1).

The court may also permit bail to be posted in one of seven different types of bail bonds, including an insurance company bail bond. CPL §520.10(b)-(i). Unlike the posting of cash bail, which only requires a judicial inquiry when a surety examination is ordered, a bail bond must always be reviewed and ultimately approved by a judge. Criminal Procedure Law Section 520.30(1) authorizes a court, “following the posting of a bail bond and the justifying affidavit or affidavits … [to] conduct an inquiry for the purpose of determining the reliability of the obligors or person posting cash bail, the value and sufficiency of any security offered, and whether any feature of the undertaking contravenes public policy.” Upon such inquiry, “the court may examine, under oath or otherwise, the obligors and any other persons who may possess material information.” At the conclusion of the inquiry, the court must issue an order either approving or disapproving the bail. CPL §520.30(3)

As a type of bail bond, an insurance company bail bond is subject to this type of inquiry.4 Needless to say, a critical “public policy” consideration, and the ultimate question a court must answer before approving a bond, is whether the bond is sufficient to ensure a defendant’s return to court. A defendant who has pledged significant collateral to secure an insurance company bail bond has a far greater financial incentive to return to court than one who has only offered minimal collateral. Whether the collateral pledged is sufficient to meet this objective is a question that should be answered by a judge. That a bondsperson found the collateral sufficient is no substitute for a judicial review of its sufficiency. After all, a bondsperson is “under no obligation to ensure that the bail arrangement is consistent with the public policy of the State.” People v. McIntyre , 168 Misc.2d 556, 563 ( Sup. Ct., Kings Co. 1996 ) . It is the obligation of the court, not a bondsperson, to ensure that the bail bond is consistent with public policy and that it serves the ultimate objective of ensuring the defendant’s return to court. If a court finds that the pledged collateral provides an insufficient incentive for a defendant to return to court, it may and should disapprove the bond.

This judicial determination is permissible notwithstanding the holding in Savage. An examination of the record in Savage reveals that the judge who disapproved the bond offered no public policy reason to explain why the perceived insufficiency of the collateral resulted in disapproval of the bond. There was no finding that the minimal collateral provided an insufficient incentive for the defendant to return to court or that its low value offended some other aspect of public policy. That there was no explanation for the disapproval of the bond makes the holding in Savage extremely limited. At most, Savage stands for the proposition that judges cannot summarily reject insurance company bail bonds without some public policy basis for such a decision.

At least one court has expressly held that, notwithstanding Savage, it has the authority to reject a bond based upon the insufficiency of collateral on public policy grounds. In People v. Torres , 51 Misc. 3d 1203 (A), N.Y. Slip Op. 50354(U) (Cty. Ct, Sullivan Co. March 24, 2016), Justice Frank J. LaBuda disapproved a $100,000 insurance company bail bond which was secured by a trailer of limited value. Citing to Savage, the court made clear that it was not second guessing the bondsperson’s business judgment. Nevertheless, the court held that it retained the “inherent authority, granted it by the Legislature, pursuant to §520.30(1), to make a determination as to ‘whether any feature of the undertaking contravenes public policy.’” 51 Misc.3d 1203(A), at *2 (citing CPL §520.30(1) (emphasis in original)). In rejecting the bond, the court noted that the low value of the collateral pledged provided “no monetary incentive [for the defendant] to appear in connection with the bail package.” Id. at *3.

The legislative history of §520.30(1) underscores the need for judges to exercise the discretion that the statute has given them and to carefully review bail bonds. Indeed, the first statute addressing the use of insurance company bail bonds appeared in 1922 when §554-b was added to the Code of Criminal Procedure. The statute imposed the requirement that a person operating a bail bond business be licensed pursuant to the Insurance Law. Section 554-b also authorized the court to reject a bond only “if any portion of such security has been feloniously obtained by the defendant, or the bond violates a legal restriction, or the person was not licensed.”5

Senator Salvatore Cotillo, who introduced the bill, commented that the “purpose of these bills is to check the exploitation of defendants seeking bail by professional bondsmen who in return for exorbitant fees will go bail [sic] for habitual criminals … .” “Governor Signs Crime Wave Bill,” N.Y. Times, March 29, 1922. In signing the bill, the then governor noted that “this bill, if rightly enforced, should go a long way to stop the bail bond evil. The proper enforcement of the act now rests with the Superintendent of Insurance and the court Judges.” Id. All of these assertions make clear that this legislation was enacted to create some oversight of bondspersons.

Unlike §554-b, §520.30(1) allows a court to inquire whether “any feature of the undertaking contravenes public policy.” Had the Legislature intended to restrict a court’s authority, the statute would have said so. And the expanded authority is not surprising, especially in the case of insurance company bail bonds. The statute was designed to further regulate this industry, not to compel judges to defer to it.

A review of recently forfeited bail bonds also supports the need for judicial scrutiny of insurance company bail bonds. In 2016, there were approximately 49 bond forfeitures in New York County which were either paid or outstanding on felony cases that originated from 2014 to 2016. Forty-three of these forfeited bonds were secured by cash collateral. The average percentage of cash collateral which secured these bonds was approximately 11 percent. Notably, many of these defendants who failed to return to court had an extensive history of bench warrants as well as other factors that made them flight risks. One defendant had a history of contempt convictions, bench warrants and the use of false names. Yet the bondsperson was willing to write the bond after receiving only 10 percent collateral. Another bondsperson was willing to accept 12 percent collateral for a defendant who had over eight bench warrants as well as a history of violating parole and probation. That a bondsperson was willing to issue a bail bond for these individuals further establishes that a bondsperson’s business judgment takes into account different factors than a court’s public policy analysis.

In light of this data, it is imperative that judges consider the individual facts of each case and the particular circumstances of each defendant before approving a bail bond. Courts should use the same factors that can be considered when setting bail to determine the sufficiency of collateral pledged to secure a bail bond. In some cases, where there is a low risk of a defendant not returning to court, minimal collateral may be sufficient. In others, defendants who pose a significant risk of flight should be required to post more collateral to secure a bail bond. As explained above, Criminal Procedure Law §520.30(1) gives the courts broad authority to reject a bond if any of its features violates public policy. Because the primary purpose of bail is to ensure a defendant’s return to court, an insufficient financial incentive undermines that purpose and provides the most compelling basis for a court to disapprove a proposed insurance company bail bond.

Endnotes:

1. Insurance Law §6804(a) allows a bondsperson to charge a fee for preparing the bond. The statute limits the fee to a percentage of the face value of the bond. There is, however, no statutory provision regulating the amount of collateral a bondsperson is required to collect.

2. Much has been written recently about the fairness of our bail system and whether reforms should be pursued to avoid unnecessary pre-trial detention, especially for low-level offenses. This article does not address these policy issues.

3. The statute also authorizes cash bail to be deposited with the county treasurer or the sheriff in whose custody the defendant has been committed.

4. CPL §500.10 contains various interlocking definitions pertaining to different types of bail bonds. CPL 500.10(15) defines a surety bond as a type of bail bond in which the obligor consists of one or more sureties. An insurance company bail bond is defined as a “surety bond” specifically executed by “a corporation licensed by the superintendent of financial services to engage in the business of executing bail bonds.” CPL §500.10(16).