Lexington Nat'l. Ins. Co. v. Delaware County ( 2022 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Lexington National Insurance : CASES CONSOLIDATED
Company, :
Appellant :
:
v. : No. 1078 C.D. 2020
:
Delaware County :
In Re: International Fidelity Insurance :
Company :
: No. 1079 C.D. 2020
Appeal of: International Fidelity :
Insurance Company : Argued: March 9, 2022
BEFORE: HONORABLE RENÉE COHN JUBELIRER, President Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE ELLEN CEISLER, Judge
HONORABLE LORI A. DUMAS, Judge
HONORABLE STACY WALLACE, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE CEISLER FILED: May 10, 2022
Lexington National Insurance Company (Lexington) and International
Fidelity Insurance Company (International Fidelity) (together, Insurers) appeal from
two September 25, 2020 Orders of the Court of Common Pleas of Delaware County
(Trial Court) denying their Petitions to Refund Bail Deposits (Petitions). The issue
before this Court is whether Delaware County Local Criminal Rule 531(e)(3)(d)
(Local Rule 531(e)(3)(d)), which requires corporate sureties to post financial
security with Delaware County (County) as a condition of conducting bail bond
business in the County, is preempted by the Act of July 2, 2015, P.L. 110, No. 16,
42 Pa. C.S. §§ 5741-50 (commonly known as Act 16), or The Insurance Department
Act of 1921 (Insurance Act), Act of May 17, 1921, P.L. 789, as amended, 40 P.S.
§§ 1-326.7.
For the reasons that follow, we conclude that: (1) Local Rule 531(e)(3)(d) is
not preempted by either Act 16 or the Insurance Act; and (2) the County has express
authority to require corporate sureties conducting bail bond business in the County
to post financial security pursuant to Pennsylvania Rule of Criminal Procedure
531(A)(3) (Rule 531(A)(3)). Accordingly, we affirm the Trial Court’s Orders.
Background
In July 2015, the General Assembly enacted Act 16 to eliminate the varying
rules governing bail bonds in Pennsylvania and to establish a statewide, uniform
system of regulation of the bail bond industry. As a result of Act 16, bail bondsmen
now must be licensed by the Pennsylvania Insurance Department (Insurance
Department) and may conduct bail bond business only if they are affiliated with an
insurance company and their bonds are underwritten by an insurance company
pursuant to a qualified power of attorney.1 Act 16 became effective on October 30,
2015.
1
Section 2 of Act 16 states: “No person shall engage in, or continue to engage in, the
business of a bail bondsman unless the person has been licensed by the [Insurance D]epartment
as an insurance producer under Article VI-A of [the Insurance Act, added by the Act of December
6, 2002, P.L. 1183,] and possesses a casualty line of authority.” 42 Pa. C.S. § 5742 (emphasis
added). Section 4 of Act 16 states:
A bail bondsman shall only be authorized to conduct business in a county when the
bail bondsman provides all of the following documents to the office of the clerk:
(1) A copy of the license issued to the bail bondsman by the
[Insurance D]epartment.
(Footnote continued on next page…)
2
In March 2016, the County adopted Local Rule 531(e)(3)(d),2 which states:
3. Requirements for Approval. To become qualified to act as a
corporate surety, or agent thereof, with respect to the posting of bail
bonds in the [County], a corporate surety and its agents must:
d) Post with the [County’s] Office of Judicial Support as
security the minimum sum of $50,000 in United States
currency or unencumbered securities of the United States
Government, which will entitle the corporate surety to post
bond in the aggregate sum of $500,000 or post $75,000 in
US currency or unencumbered securities of the US
Government, which will entitle the corporate surety to post
bond in the amount of $1,000,000, and by further posting
the sum required for each individual bond or undertaking
with the bail authority.
Del. Cnty. Local Crim. R. 531(e)(3)(d) (emphasis added). In compliance with Local
Rule 531(e)(3)(d), Lexington deposited a total of $325,000 and International Fidelity
deposited a total of $100,000 with the County’s Office of Judicial Support.
(2) A statement identifying an office address for service of legal
process.
(3) A qualifying power of attorney issued by an insurer authorizing
the bail bondsman as a producer on behalf of the insurer. The
qualifying power of attorney must set forth, in clear and
unambiguous terms, the maximum monetary authority of the bail
bondsman per bond.
Id. § 5743.1 (emphasis added).
2
Local Rule 531(e)(3)(d) “applies to any corporate surety and its agents seeking to post a
bond in satisfaction of the full amount of the monetary condition of a defendant’s release on bail.”
Del. Cnty. Local Crim. R. 531(e)(1) (emphasis added). The rule defines “corporate surety” as
“any corporation or partnership which engages in the business of providing bail, providing or
soliciting bail undertakings, or providing or soliciting indemnity or court indemnity to others on
bail undertakings.” Id. 531(e)(2).
3
On July 15, 2021, Insurers filed their Petitions in the Trial Court, seeking
refunds of their bail deposits and asserting that Local Rule 531(e)(3)(d) is preempted
by state law. In particular, Insurers asserted that Act 16 eliminated the need for bail
bondsmen to post collateral, because they are now licensed and regulated by the
Insurance Department; the Insurance Department has the exclusive right to regulate
the financial and security requirements of surety companies; and the Insurance Act
preempts local rules requiring security deposits for licensed bail bond insurers.
Thus, Insurers argued that Local Rule 531(e)(3)(d) is preempted by Act 16 and the
Insurance Act.
The County filed Answers to the Petitions, asserting that Act 16 does not
preempt Local Rule 531(e)(3)(d) and that Rule 531(A)(3) expressly authorizes the
County to impose additional requirements on corporate sureties. Rule 531(A)(3)
provides in relevant part: “Subject to any additional requirements prescribed by
local rule of court, the following shall be qualified to act as sureties: . . . surety
companies approved by the court and authorized to do business in the
Commonwealth of Pennsylvania.” Pa.R.Crim.P. 531(A)(3) (emphasis added).
On September 25, 2020, after a hearing, the Trial Court denied Insurers’
Petitions, concluding that Act 16, by its plain language, applies only to bail
bondsmen, not to corporate sureties. The Trial Court also concluded that Rule
531(A)(3) expressly authorizes the County to impose additional requirements on
sureties such as Insurers. In its subsequent Pa.R.A.P. 1925(a) Opinion, the Trial
Court explained its reasoning as follows:
Act 16 . . . specifically states that the requirements included within
apply to bail bondsmen. Should the legislature have intended to impose
the same uniform statewide regulations on both bail bondsmen and
sureties, it is most logical that both terms would have been included in
the relevant section upon which [Insurers] center[] [their] argument[s].
4
In contrast, only the term “bail bondsmen” appears in the section [of
Act 16] at issue.
[Rule] 531([A])[(3)], Qualifications of a Surety, states that
additional requirements may be imposed upon corporate securities by
way of local rules of court. . . .
As the licensing requirements for bail bondsmen in Act 16 . . .
have no effect upon corporate sureties, [Rule] 531([A])[(3)] expressly
permits the County to impose additional requirements upon corporate
sureties in bail matters. Pursuant to that ability, the County, by way of
Local Rule 531(e)(3)(d), lawfully imposed the requirement of a
corporate surety to post a deposit with the [County] in order to issue
bail bonds within its jurisdiction.
Trial Ct. Op., 6/28/21, at 5-6 (emphasis added).3 Insurers now appeal to this Court.4
Analysis
On appeal, Insurers assert that the Trial Court erred in denying their Petitions
because Local Rule 531(e)(3)(d), which requires corporate sureties to post financial
security with the County in order to conduct bail bond business in the County, is
preempted by Act 16 and the Insurance Act.
Act 16 requires that all bail bondsmen in the Commonwealth be licensed
insurance agents with a casualty line of authority. 42 Pa. C.S. § 5743.1. Under Act
16, bail bondsmen can issue bonds only as an appointed representative of a licensed
insurance company. Id. The Insurance Department issues a license to the bondsman,
who acts pursuant to a power of attorney issued by a licensed surety. Id. According
to Insurers, that is all that is required for a bondsman or surety to conduct bail bond
business in the Commonwealth; the County cannot require additional security.
3
The Trial Court issued identical Orders and Opinions in both consolidated cases.
4
Because the issue on appeal is purely a question of law, our standard of review is de novo,
and our scope of review is plenary. Dooner v. DiDonato, 971 A.2d 1187, 1193 (Pa. 2009); Pa.
Physical Therapy Ass’n v. Oleksiak, 265 A.3d 849, 856 n.7 (Pa. Cmwlth. 2021).
5
Act 16, however, clearly distinguishes between bail bondsmen and sureties.
Act 16 appears in Subchapter B of Chapter 57 of the Judicial Code, which is titled
“Bail Bondsmen.” Section 1 of Act 16 defines “bail bondsman” as “a person who
engages in the business of giving bail as a surety for compensation.” 42 Pa. C.S. §
5741. Section 2 of Act 16 defines “surety” as “a person who pledges security,
whether or not for compensation, in exchange for the release from custody of a
person charged with a crime prior to adjudication.” Id. § 5742. Section 4 of Act 16
then sets forth the requirements for bail bondsmen to conduct business in a county
of the Commonwealth as follows:
A bail bondsman shall only be authorized to conduct business in a
county when the bail bondsman provides all of the following documents
to the office of the clerk:
(1) A copy of the license issued to the bail bondsman by
the [Insurance D]epartment.
(2) A statement identifying an office address for service of
legal process.
(3) A qualifying power of attorney issued by an insurer
authorizing the bail bondsman as a producer on behalf of
the insurer. The qualifying power of attorney must set
forth, in clear and unambiguous terms, the maximum
monetary authority of the bail bondsman per bond.
Id. § 5743.1 (emphasis added).
Based on the statute’s plain language, it is evident that Act 16 applies only to
bail bondsmen, not to corporate sureties. The licensing requirements for bail
bondsmen created by Act 16 do not preclude the County from imposing additional
security requirements on corporate sureties. Importantly, Act 16 contains no
language prohibiting a county from requiring corporate sureties to post additional
6
security. Therefore, we conclude that Act 16 does not preempt Local Rule
531(e)(3)(d).
Next, Insurers assert that the Insurance Act preempts Local Rule 531(e)(3)(d)
because the General Assembly intended to fully occupy the field of insurance law.
Insurers point out that the Pennsylvania Supreme Court has recognized field
preemption in the state-regulated areas of alcohol, banking, medical marijuana, and
anthracite mining. Thus, Insurers contend that “[i]nsurance regulation is so
comparable to banking regulation that the logic of finding field preemption there
applies equally to insurance.” Insurers’ Br. at 23.
Our Supreme Court has explained the concept of field preemption as follows:
The state is not presumed to have preempted a field merely by
legislating in it. The General Assembly must clearly show its intent to
preempt a field in which it has legislated. The test for preemption in
this Commonwealth is well established. Either the statute must state
on its face that local legislation is forbidden, or “indicate[] an intention
on the part of the legislature that it should not be supplemented by
municipal bodies.” If the General Assembly has preempted a field, the
state has retained all regulatory and legislative power for itself and no
local legislation is permitted.
Nutter v. Dougherty, 921 A.2d 44, 56 (Pa. 2007) (emphasis added) (citations
omitted; brackets in original). Furthermore, “the mere fact that the General
Assembly has enacted legislation in a field does not lead to the presumption that the
state has precluded all local enactments in that field; rather, the General Assembly
must clearly evidence its intent to preempt.” Hoffman Mining Co., Inc. v. Zoning
Hearing Bd. of Adams Twp., 32 A.3d 587, 609 (Pa. 2011) (emphasis added).
Here, Insurers assert that Section 201 of the Insurance Act, 40 P.S. § 41, which
“charges” the Insurance Department “with the execution of the laws of this
Commonwealth in relation to insurance,” is effectively a statement of field
7
preemption. However, Insurers cite no legal authority to support this proposition,
nor have we found any case interpreting Section 201 in this manner. Indeed, in the
100 years since the Insurance Act’s enactment, our appellate courts have not
recognized field preemption in the area of insurance, which Insurers plainly admit.
See Insurers’ Br. at 23; see also Hydropress Env’t Servs., Inc. v. Twp. of Upper Mt.
Bethel, 836 A.2d 912, 918 (Pa. 2003) (“Recognizing the clarity with which an intent
to preempt must be expressed by the [l]egislature and the significance of such a
determination, ‘[w]e have found an intent to totally preempt local regulation in only
three areas: alcoholic beverages, banking and anthracite strip mining.’”) (citation
omitted). Absent a clear indication by the legislature that it intended to preclude all
local regulation in the field of insurance, we decline to find field preemption in this
case. See Council of Middletown Twp. v. Benham, 523 A.2d 311, 315 (Pa. 1987)
(recognizing that “[t]otal preemption is the exception and not the rule”).
In the alternative, Insurers contend that the doctrine of conflict preemption
applies here, asserting that Local Rule 531(e)(3)(d) conflicts with the provisions of
the Insurance Act governing surety agencies. Specifically, the Insurance Act states
that if an insurance company meets the Act’s solvency and financial qualifications,
the Insurance Commissioner “shall issue to such company[] . . . his certificate that it
is authorized to become and be accepted as sole surety on all bonds, undertakings,
and obligations . . . which certificate shall be conclusive proof of the solvency and
credit of such company for all purposes and of its right to be so accepted as such
sole surety and its sufficiency as such.” 40 P.S. § 833 (emphasis added). The
Insurance Act also states that public officials, including judges of the courts of
common pleas, “shall approve the [bond] whenever the conditions of such bond or
undertaking are guaranteed” by a licensed surety company and that the Insurance
8
Commissioner’s certificate “shall be conclusive proof of the solvency and credit of
such company for all purposes, and of its qualifications to be so accepted as such
sole surety, and its sufficiency as such.” 40 P.S. § 831 (emphasis added).
Insurers argue that these provisions require the courts of common pleas to
accept the bond of any properly certified surety company, including a bail bond, as
the “sole surety.” Because Local Rule 531(e)(3)(d) requires corporate sureties to
post additional financial security in order to conduct bail bond business in the
County, Insurers claim that it is in conflict with, and therefore preempted by, the
Insurance Act. We disagree.
Our Supreme Court has explained that conflict preemption occurs when “a
municipal ordinance cannot be sustained to the extent that it is contradictory to, or
inconsistent with, a state statute.” Hoffman, 32 A.3d at 594. In other words, conflict
preemption is applicable when the conflict between a local regulation and a state
statute is irreconcilable – i.e., when it would be impossible to comply with both the
local regulation and the state law. Id. A court will not invalidate a local regulation
“unless there is such actual, material conflict between the state and local powers that
only by striking down the local power can the power of the wider constituency be
protected.” Id. at 594-95 (emphasis added); see Mars Emergency Med. Servs., Inc.
v. Twp. of Adams, 740 A.2d 193, 196 (Pa. 1999) (“[A]bsent a clear statement of
legislative intent to preempt, state legislation will not generally preempt local
legislation on the same issue.”). Further, municipalities may impose restrictions that
are in addition to, and not in conflict with, state regulations. Hoffman, 32 A.3d at
612.
We conclude that Local Rule 531(e)(3)(d) neither interferes with nor alters
the licensing and certification requirements set forth in the Insurance Act. As
9
explained above, the General Assembly has not evidenced its intent to preempt this
type of local regulation relating to bail bonds. Although the Insurance Act addresses
other areas of regulation for corporate sureties, it does not contain any specific
requirements for sureties that post bail bonds in the courts of common pleas.
Therefore, we conclude that the cash security requirements of Local Rule
531(e)(3)(d) are merely in addition to, and not in conflict with, the Insurance Act.
Moreover, Rule 531(A)(3) expressly permits the courts of common pleas to
impose additional requirements on corporate sureties that conduct bail bond
business. Rule 531(A)(3) provides: “Subject to any additional requirements
prescribed by local rule of court, the following shall be qualified to act as sureties:
. . . surety companies approved by the court and authorized to do business in the
Commonwealth of Pennsylvania.” Pa.R.Crim.P. 531(A)(3) (emphasis added).
Insurers attempt to disregard the significance of Rule 531(A)(3) by pointing
to Section 5702 of the Judicial Code, which states: “Except as otherwise provided
by this title and the laws relating to the regulation of surety companies, all matters
relating to the fixing, posting, forfeiting, exoneration and distribution of bail and
recognizances shall be governed by general rules.” 42 Pa. C.S. § 5702 (emphasis
added).5 Insurers argue that this language means that “general rules” of procedure,
such as Rule 531(A)(3), are superseded by state laws regulating surety companies.
In other words, Insurers contend that although the counties can impose additional
procedural requirements on sureties, they may not supplant the substantive
requirements established by Act 16 and the Insurance Act. We reject this
interpretation.
5
Section 102 of the Judicial Code defines “general rule” as “[a] rule or order promulgated
by the governing authority.” 42 Pa. C.S. § 102.
10
Insurers effectively argue that Section 5702 of the Judicial Code excepts
surety companies from compliance with all “general rules” of procedure governing
bail. However, the plain language of Rule 531(A)(3), which is a criminal rule of
procedure, unambiguously applies to “sureties” that are licensed and approved by
the Insurance Department and expressly allows “local rule[s] of court” to place
“additional requirements” on their qualifications to do business in the courts of
common pleas. This rule does not run afoul of Section 5702 of the Judicial Code,
because, as explained above, the Insurance Act does not contain requirements for
sureties that post bail bonds in criminal courts. See 42 Pa. C.S. § 5702 (stating that
general rules shall apply “[e]xcept as otherwise provided by . . . the laws relating to
the regulation of surety companies”).
Insurers also rely on Commonwealth v. Liberty Bail Bonds, 8 A.3d 1031 (Pa.
Cmwlth. 2010), to support their preemption argument. We conclude, however, that
Insurers’ reliance on Liberty is misplaced.
In Liberty, a surety agency and its agent filed an application to act as a surety
in Montgomery County. Montgomery County denied the application because the
agency did not have an office in the county as required by both a Montgomery
County local rule and the Judicial Code. This Court determined, however, that the
local office rule applied only to bondsmen and not to surety agencies.
It is undisputed that [the agent] did not have a local office in
Montgomery County. However, it is also undisputed that [he] is a
surety agent, not a bondsman, and therefore exempt from the [local
rule]. The exemption resides in the initial clauses of [Section 5741 of
the Judicial Code], 42 Pa. C.S. § 5741, [which provides] the statutory
definition of a professional bondsman.
The [l]egislature defined a professional bondsman and the class of
persons that must maintain a local office. The [l]egislature explicitly
11
excluded surety companies and their agents from the definition of
professional bondsmen and thus, the local office requirements. The
conditions that a surety company/agent must comply with prior to
engaging in a surety business in Pennsylvania are set forth in 40 P.S. §
832 . . . . A surety must be licensed by the [Insurance] Department,
carry a statewide license, must pass certain testing, must be backed by
an insurance company and must abide by the specific financing and
solvency conditions set forth in 40 P.S. § 832. . . .
....
The [l]ocal [r]ules provide different sections and rules for sureties and
professional bail bondsmen. Neither the corporate surety[] nor the
surety agent is required to have a local office operating within
Montgomery County. Only the professional bail bondsman is required
to have such [an] office.
Id. at 1033-35 (emphasis added) (footnote omitted). Therefore, we concluded that
because the surety agent was not a professional bondsman, he was not required to
maintain an office in Montgomery County.
Although the Liberty Court referenced the Insurance Act’s requirements for a
surety to conduct business in the Commonwealth, those provisions were not germane
to our decision in that case. Rather, we premised our holding on the statutory
definition of “professional bondsman” and the legislature’s clear intent to distinguish
between bondsmen and surety agencies with regard to their office requirements.
This Court did not conclude, as Insurers suggest, that the Insurance Act preempted
Montgomery County’s local rule. Therefore, Insurers’ reliance on Liberty is
inapposite.6
6
Since Liberty was decided, the General Assembly amended Section 5741 of the Judicial
Code. Former Section 5741 defined “professional bondsman,” in pertinent part, as “[a]ny person,
other than a fidelity or surety company or any of its officers, agents, attorneys, or employees,
authorized to execute bail bonds or to solicit business on its behalf . . . .” Formerly 42 Pa. C.S. §
5741 (emphasis added), amended by the Act of July 2, 2015, P.L. 110. “Professional bondsman”
(Footnote continued on next page…)
12
Conclusion
In sum, we conclude that Rule 531(A)(3) explicitly permits a local county to
impose additional security requirements on corporate sureties that conduct bail bond
business in that county. Neither the Insurance Act nor Act 16 addresses the financial
security requirements for corporate sureties that post bail bonds in the courts of
common pleas. Rule 531(A)(3) leaves that decision to the local counties. Therefore,
the Trial Court properly concluded that: (1) Local Rule 531(e)(3)(d) is not
preempted by state law; and (2) the County was expressly authorized to impose
additional security requirements on Insurers pursuant to Rule 531(A)(3).
Accordingly, we affirm the Trial Court’s Orders.
________________________________
ELLEN CEISLER, Judge
has now been replaced with “bail bondsman,” which is defined as “[a] person who engages in the
business of giving bail as a surety for compensation.” 42 Pa. C.S. § 5741.
13
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Lexington National Insurance : CASES CONSOLIDATED
Company, :
Appellant :
:
v. :
:
Delaware County : No. 1078 C.D. 2020
In Re: International Fidelity Insurance :
Company :
:
Appeal of: International Fidelity :
Insurance Company : No. 1079 C.D. 2020
ORDER
AND NOW, this 10th day of May, 2022, the Orders of the Court of Common
Pleas of Delaware County, entered on September 25, 2020, are hereby AFFIRMED.
__________________________________
ELLEN CEISLER, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Lexington National Insurance : CASES CONSOLIDATED
Company, :
Appellant :
:
v. :
:
Delaware County : No. 1078 C.D. 2020
In Re: International Fidelity Insurance :
Company :
:
Appeal of: International Fidelity : No. 1079 C.D. 2020
Insurance Company : Argued: March 9, 2022
BEFORE: HONORABLE RENÉE COHN JUBELIRER, President Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE ELLEN CEISLER, Judge
HONORABLE LORI A. DUMAS, Judge
HONORABLE STACY WALLACE, Judge
OPINION NOT REPORTED
DISSENTING OPINION
BY JUDGE COVEY FILED: May 10, 2022
Respectfully, I disagree with the Majority’s affirmance of the Delaware
County (County) Common Pleas Court’s (trial court) September 25, 2020 orders.
Because the Pennsylvania Insurance Department (Insurance Department) has the
exclusive right to determine Lexington National Insurance Company’s (Lexington) and
International Fidelity Insurance Company’s (Fidelity) (collectively, Insurance
Companies) qualifications to conduct business in the Commonwealth of Pennsylvania
(Commonwealth), I would reverse the trial court’s orders.
The Pennsylvania Supreme Court has explained:
The General Assembly, in recognition of the specialized
complexities involved in insurance generally, and in the
regulation of this industry in particular, assigned the task of
overseeing the management of that industry, in this
Commonwealth, to the Insurance Department, the agency
having expertise in that field. [See Section 201 of The
Insurance Department Act of 1921 (The Insurance
Department Act),1] 40 P.S. § 41[.]
Aetna Cas. Surety Co. v. Ins. Dep’t, 638 A.2d 194, 200 (Pa. 1994) (quoting Foster v.
Mutual Fire, Marine & Inland Ins. Co., 614 A.2d 1086, 1091 (Pa. 1992)); see also
Ciamaichelo v. Indep. Blue Cross, 909 A.2d 1211, 1216 (Pa. 2006) (“Under [Section
201 of The Insurance Department Act], the [Insurance] Department is charged with
executing the insurance laws of the Commonwealth.”).
Section 661 of the The Insurance Company Law of 1921 (The Insurance
Company Law)2 specifically sets forth the necessary qualifications for a surety
company to execute bonds:
Conditions for doing business
Every surety company, to be qualified to so act as surety
or guarantor, must be authorized, under the laws of the
[s]tate or country where incorporated and its charter, to
guarantee the fidelity of persons holding places of public
or private trust, and to guarantee the performance of
contracts other than insurance policies, and to execute
bonds and undertakings required or permitted in action
or proceedings or by law allowed, must: (a) [c]omply with
the requirements of the laws of this [s]tate applicable to such
company in doing business therein; (b) must have at least one
hundred thousand dollars ($100,000[.00]) invested in
securities created by the laws of the United States, or by or
under the laws of the [s]tate or country wherein it is
incorporated, or in other safe, marketable, and interest-
bearing stocks and securities, the value of which shall be at
1
Act of May 17, 1921, P.L. 789, as amended, 40 P.S. §§ 1-326.7.
2
Act of May 17, 1921, P.L. 682, as amended, 40 P.S. § 832.
AEC - 2
or above par and deposited with or held by the Insurance
Commissioner or other corresponding officer of the [s]tate or
country in which it is authorized to transact business, in trust
for the benefit of the holders of the obligations of such
company; (c) its liabilities must not exceed its available
assets, which said liabilities, however, shall be taken to be--
(I) its capital stock, (II) its outstanding debts, and (III) a
premium reserved equal to fifty per centum of the annual
premium on all outstanding risks in force; and (d) such
company shall also, before transacting business in this [s]tate
under this act, file with the Insurance Commissioner a
certified copy of its charter or act of incorporation, (e) a
written application to be authorized to do business under this
act, and (f) a statement, signed and sworn to by its president
or one of its vice presidents and its secretary, or one of its
assistant secretaries, stating--(I) the amount of its paid up
cash capital, (II) particularly each item of investment, (III)
the amount of premium on existing bonds upon which it is
surety, (IV) the amount of liability for unearned portion
thereof, estimated at fifty per centum of the annual premium
on all outstanding premiums for one year or less, and pro rata
for terms of more than one year, and (V) the amount of its
outstanding debts of all kinds.
Any surety company which is authorized to do business
in this Commonwealth shall not expose itself to any loss
or hazard on any one fidelity or surety risk in an amount
exceeding ten per centum of its capital and surplus unless
it shall be protected in excess of that amount . . . .
....
No such corporation shall, anything to the contrary in this
section notwithstanding, execute suretyship obligations
guaranteeing the deposits of any single financial institution
in an aggregate amount in excess of ten per centum of the
capital and surplus of such corporate surety, unless it shall be
protected in excess of that amount by credits in accordance
with subdivisions (a), (b), (c), or (d) of this section.
Upon satisfactory evidence of the violation of this section
by any insurance company, association, or exchange, its
members, officers, directors, or attorney-in-fact, the
Insurance Commissioner shall, in his discretion, take,
against the offending party, any one or more of the
AEC - 3
following courses of action: (1) [r]evoke the certificate of
authority of such offending company, association, or
exchange; (2) refuse, for a period of not to exceed one year
thereafter, to issue a new license to such offending
company, association, or exchange; (3) impose a fine of not
more than one thousand dollars for each act of violation
of said section. Any insurance company, or the officers,
directors, members, or attorney-in-fact of any insurance
company, association, or exchange, or any other person,
violating any of the provisions of this section, shall be guilty
of a misdemeanor, and, upon conviction thereof, shall be
sentenced to pay a fine of not more than five hundred dollars
($500.00) for each and every violation, or to imprisonment
in the jail of the county in which the offense is committed for
a period of not more than six (6) months or both.
40 P.S. § 832 (text bold and underline emphasis added).
In 2015, the General Assembly passed Act 16,3 effective October 30,
2015, to modernize and regulate the bail industry. Act 16’s purpose as described by
the senate co-sponsors thereof is to
provide a uniform collection of rules to regulate this serious
profession.
This legislation will provide accountability, professionalism
and transparency for the practice of providing bail for those
awaiting trial. . . .
This legislation will promote a clean industry where all of
the rules are the same for every corner of the
Commonwealth.
Senate Co-Sponsorship Memoranda, Senate of Pennsylvania, Session 2015-2016
Regular Session (emphasis added).4
3
Act of July 2, 2015, P.L. 110, No. 16, 42 Pa.C.S. §§ 5741-50 (commonly known as Act 16).
4
https://www.legis. state.pa.us//cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=S&SPi
ck=20150&cosponld=15846 (last visited May 9, 2022).
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Importantly, Section 2 of Act 16 mandates: “No person shall engage in,
or continue to engage in, the business of a bail bondsman unless the person has
been licensed by the [Insurance D]epartment as an insurance producer under . . .
The Insurance Department Act . . . , and possesses a casualty line of authority.” 42
Pa.C.S. § 5742 (emphasis added). Section 2 of Act 16 defines a “[b]ail bondsman[]”
as “[a] person who engages in the business of giving bail as a surety for compensation.”
42 Pa.C.S. § 5741. Section 4 of Act 16 sets forth the following requirements for a bail
bondsman to conduct business within each of the Commonwealth’s 67 counties:
A bail bondsman shall only be authorized to conduct
business in a county when the bail bondsman provides all of
the following documents to the office of the clerk:[5]
(1) A copy of the license issued to the bail bondsman by
the [Insurance D]epartment.
(2) A statement identifying an office address for service of
legal process.
(3) A qualifying power of attorney issued by an insurer
authorizing the bail bondsman as a producer on behalf of
the insurer. The qualifying power of attorney must set
forth, in clear and unambiguous terms, the maximum
monetary authority of the bail bondsman per bond.
42 Pa.C.S. § 5743.1 (emphasis added).
In March 2016, the County passed amended Local Criminal Rule (Local
Rule) 531(e)(3)(d), which mandates corporate sureties to post security with the County
as a requirement to act as a corporate surety. Specifically, Local Rule 531(e) provides,
in relevant part:
New Rule 531(e). Corporate Surety. Pennsylvania Rule
of Criminal Procedure [(Rule)] 528(D)(5) recognizes the
5
Section 2 of Act 16 defines “office of the clerk” as “[t]he office of the clerk of the court of
common pleas of each judicial district in which a person engages in the business of a bail bondsman.”
42 Pa.C.S. § 5741.
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surety bond of a surety company authorized to do business in
the Commonwealth . . . as an acceptable form of security to
satisfy the full amount of the monetary condition of a
defendant’s release on bail. Rule 531 of the Pennsylvania
Rules of Criminal Procedure permits, by local rule of [c]ourt,
additional requirement to be imposed on surety companies
approved by the [c]ourt. This Regulation sets forth the
additional requirement imposed by this Judicial District on
corporate sureties and their agents.
l. Applicability. This Regulation applies to any corporate
surety and its agents seeking to post a bond in satisfaction of
the full amount of the monetary condition of a defendant’s
release on bail.
....
3. Requirements for Approval. To become qualified to act as
a corporate surety, or agent thereof, with respect to the posting
of bail bonds in the Thirty Second Judicial District of
Pennsylvania, a corporate surety and its agents must:
....
d) Post with the Office of Judicial Support as security the
minimum sum of $50,000[.00] in United States currency
or unencumbered securities of the United States
Government, which will entitle the corporate surety to
post bond in the aggregate sum of $500,000[.00] or post
$75,000[.00] in [United States] currency or
unencumbered securities of the [United States]
Government, which will entitle the corporate surety to
post bond in the amount of $1,000,000[.00], and by
further posting the sum required for each individual bond
or undertaking with the bail authority. Provided,
however, that the corporate surety must post additional
security with the Office of Judicial Support in the event
the corporate surety intends to post bond in excess of
$1,000,000[.00]. The additional security to be posted
with the Office of Judicial Support must be in units of
$50,000[.00] which will entitle the corporate surety to
post bond in the additional sum of $1,000,000[.00] per
unit. No interest will be paid on any deposits[.]
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Del.Co.R.Crim.P. 531(e).6
On August 5, 2016, Lexington and Fidelity deposited $325,000.00 and
$100,000.00 with the County, respectively, in accordance with Local Rule
531(e)(3)(d). On July 5, 2020, Insurance Companies filed Petitions to Refund Bail
Deposits Held by the County as Collateral/Security for Bail Bonds (Bail Refund
Petitions) asserting that Local Rule 531(e) is preempted by Act 16 and The Insurance
Department Act. The trial court heard oral argument on September 16, 2020. On
September 25, 2020, the trial court denied the Bail Refund Petitions reasoning that
because Act 16 separately defined bail bondsmen and sureties, and Insurance
Companies are sureties under Act 16, and “[Rule] 531(a) . . . states that additional
requirements may be imposed upon corporate sureties by way of local rules of court[,]”
the County was permitted to enact Local Rule 531(e). Trial Ct. Op. at 6.
Rule 531(A) provides, in relevant part:
Qualifications of Surety
Subject to any additional requirements prescribed by
local rule of court, the following shall be qualified to act as
sureties:
(1) owners of cash or securities as provided in Rule 528;
(2) owners of realty located in the Commonwealth as
provided in Rule 528(D)(3), or owners of realty located
outside the Commonwealth but within the United States as
provided in Rule 528(D)(4), provided that satisfactory
evidence of ownership or special approval of the court is
obtained;
(3) surety companies approved by the court and authorized
to do business in the Commonwealth [];
(4) professional bondsmen licensed under the Judicial
Code, 42 Pa.C.S. §§ 5741- 5750[.]
Pa.R.Crim.P. 531(A) (text emphasis added).
6
See delcopa.gov/courts/localrules/CriminalRules.pdf (last visited May 9, 2022).
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The Majority similarly concludes that, because Act 16 separately defines
bail bondsmen and sureties, and Section 4 of Act 16 applies only to bail bondsmen, not
sureties, those requirements “do not preclude the County from imposing additional
security requirements on corporate sureties. . . . Act 16 contains no language
prohibiting a county from requiring corporate sureties to post additional security.”
Lexington Nat’l Ins. Co. v. Del. Cnty. (Pa. Cmwlth. Nos. 1078, 1079 C.D. 2020, filed
May 10, 2022), slip op. at 6-7. The Dissent disagrees.
Initially,
[the Pennsylvania Supreme Court] . . . observe[s] that, in all
matters of statutory interpretation, [the Court] appl[ies] the
Statutory Construction Act [of 19727], which directs [the
Court] to ascertain and effectuate the intent of the General
Assembly. 1 Pa.C.S. § 1921(a). Generally, a statute’s plain
language provides the best indication of legislative intent.
Pa. Fin. Resp[.] Assigned Claims Plan v. English, . . . 664
A.2d 84, 87 ([Pa.] 1995) (“Where the words of a statute are
clear and free from ambiguity the legislative intent is to be
gleaned from those very words.”). Only when the words of
a statute are ambiguous will we resort to other considerations
to discern legislative intent. 1 Pa.C.S. § 1921(c).
Johnson v. Phelan Hallinan & Schmieg, LLP, 235 A.3d 1092, 1097 (Pa. 2020).
“In determining legislative intent, we must read all sections of a statute
‘together and in conjunction with each other,’ construing them ‘with reference to the
entire statute’ and giving effect to all the statutory provisions.” Ins. Fed’n of Pa., Inc.
v. Ins. Dep’t, 970 A.2d 1108, 1114 (Pa. 2009) (quoting Hous. Auth. of the Cnty. of
Chester v. Pa. State Civ. Serv. Comm’n, 730 A.2d 935, 945 (Pa. 1999)). “Where
ambiguity or inexplicitness exists, the Court may afford weight to other considerations,
including the object to be attained by the statute under consideration, the consequences
7
1 Pa.C.S. §§ 1501-1991.
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of a particular interpretation, and contextual considerations.” Gas v. 52nd Jud. Dist.,
Lebanon Cnty., 232 A.3d 706, 712 (Pa. 2020).
Here, Section 2 of Act 16 defines a “[s]urety” as “[a] person who pledges
security, whether or not for compensation, in exchange for the release from custody of
a person charged with a crime prior to adjudication.” Id. However, Section 2 of Act
16 also defines an insurer “as defined in [S]ection 601-A of [The Insurance Department
Act,]” 42 Pa.C.S. § 5741, which definition includes “an insurance company.” 40 P.S.
§ 310.1.8 Because Insurance Companies are both sureties and insurers, deciding the
issue on the basis of the definition of bail bondsman versus surety ignores Act 16’s
mandate that no person shall engage in the business of a bail bondsman unless the
person has been licensed by the Insurance Department. See 42 Pa.C.S. § 5742.
Clearly, Insurance Companies, as insurers, are licensed by the Insurance Department.
Local Rule 531(e)(2) defines a “corporate surety” as “any corporation,
limited liability corporation or partnership which engages in the business of providing
bail, providing or soliciting bail undertakings, or providing or soliciting indemnity or
court indemnity to others on bail undertakings.” Del.Co.R.Crim.P. 531(e)(2). The fact
that Insurance Companies may be corporate sureties under Local Rule 531(e) does not
change the fact that they are insurers under Act 16.
Because under Section 2 of Act 16 all bail bondsmen in the
Commonwealth are licensed insurance producers for certificated insurance companies,
and the Insurance Department determines the insurance companies’ qualifications to
conduct business in the Commonwealth, there is no dispute that Act 16 prohibits a
county from requiring bail bondsmen to post additional security.
In Commonwealth v. Liberty Bail Bonds, 8 A.3d 1031 (Pa. Cmwlth. 2010),
this Court addressed whether a surety agent was required to have an office in a county
8
Added by Section 2 of the Act of Dec. 6, 2002, P.L. 1183.
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where the county’s local rule and the Judicial Code so required. The Liberty Court
concluded that the local office rule applied only to bail bondsmen and not to surety
agencies. The Liberty Court explained:
The conditions that a surety company/agent must comply
with prior to engaging in a surety business in
Pennsylvania are set forth in [Section 661 of The
Insurance Company Law] . . . . A surety must be licensed
by the [Insurance] Department, carry a statewide license,
must pass certain testing, must be backed by an insurance
company and must abide by the specific financing and
solvency conditions set forth in [Section 661 of The
Insurance Company Law]. A professional bail bondsm[a]n
is not subject to these conditions. Moreover, a professional
bail bondsm[a]n is solely in the business of posting bail for
incarcerated individuals.
Liberty, 8 A.3d at 1033-34 (emphasis added).
The Majority maintains that because the Liberty Court “premised [its]
holding on the statutory definition of “professional bondsman”[9] and the legislature’s
clear intent to distinguish between bondsmen and surety agencies with regard to their
office requirements[,]” The Insurance Company Law’s “provisions were not germane
to the case.” Lexington Nat’l Ins. Co., slip op. at 12. However, that fact does not
9
Liberty was decided before Act 16’s enactment. At that time, Section 5741 of the Judicial
Code defined a “[p]rofessional bondsman” as
Any person, other than a fidelity or surety company or any of its
officers, agents, attorneys, or employees, authorized to execute bail
bonds or to solicit business on its behalf, who:
(1) engages in the business of giving bail, giving or soliciting
undertakings, or giving or soliciting indemnity or counter-indemnity to
sureties on undertakings; or
(2) within a period of 30 days has become a surety, or has indemnified
a surety, for the release on bail of a person, with or without a fee or
compensation, or promise thereof, in three or more matters not arising
out of the same transaction.
Liberty, 8 A.3d at 1033 (emphasis omitted) (quoting former 42 Pa.C.S. § 5741).
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discount the Liberty Court’s recognition that surety companies are regulated by the
Insurance Department, not the county or the courts.
Section 5702 of the Judicial Code expressly provides: “Except as
otherwise provided by this title and the laws relating to the regulation of surety
companies, all matters relating to the fixing, posting, forfeiting, exoneration and
distribution of bail and recognizances shall be governed by general rules.” 42 Pa.C.S.
§ 5702 (emphasis added). Thus, the General Assembly explicitly provided that the
general rules (including Rule 531) are superseded by the laws relating to the regulation
of surety companies. “The conditions that a surety company . . . must comply with
prior to engaging in a surety business in Pennsylvania are set forth in [Section 661 of
The Insurance Company Law.]” Liberty, 8 A.3d at 1033-34. Accordingly, the general
rules, which are the rules of criminal procedure promulgated by the Pennsylvania
Supreme Court,10 do not control.
Moreover, The Insurance Company Law includes Section 1 of the Act of
1923,11 which expressly instructs:
Whenever any person individually, or in any public or private
trust, who is now or hereafter may be required or permitted
by law to make or execute or give a bond, or undertaking
with security, conditioned for the faithful performance of any
duty, or for the doing or not doing of anything in said bond
or undertaking specified, any head of a department, judge
of the Supreme Court or prothonotary thereof, judge of
the court of common pleas or prothonotary thereof, judge
of the orphans’ court, register of wills, sheriff, magistrate,
or any other officer who is now or shall be hereafter
required to approve the sufficiency of any such bond or
undertaking, shall approve the same whenever the
conditions of such bond or undertaking are guaranteed
by a company duly authorized by the Insurance
Department of this [s]tate to do business in this [s]tate
10
Section 102 of the Judicial Code defines “[g]eneral rule” as “[a] rule or order promulgated
by the governing authority.” 42 Pa.C.S. § 102.
11
Act of June 29, 1923, P.L. 943, as amended, 40 P.S. §§ 831-838.
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and authorized to guarantee the fidelity of persons
holding positions of public or private trust, and whenever
such company has filed, in the office of the prothonotary
of the county in which the said bond is to be approved, a
certificate issued by the Insurance Commissioner of the
[s]tate authorizing it to become surety on all bonds,
obligations, and undertakings, and until such certificate has
been revoked by the Insurance Commissioner.
Such certificate shall be conclusive proof of the solvency and
credit of such company for all purposes, and of its
qualifications to be so accepted as such sole surety, and its
sufficiency as such.
40 P.S. § 831 (emphasis added).
The Insurance Department’s issuance of a license authorizes a surety
company to issue bonds up to the maximum amount without further requirements, and
for its bond to be universally accepted as sole surety. The insurer’s general assets and
the state-mandated deposit ensure the risk; there is no requirement of dedicated assets
for a particular risk. Any other construction makes the statutory maximum bond
amount meaningless. The Majority improperly attempts to distinguish bail bond surety
companies, such as Insurance Companies, from any other licensed insurance company,
and erroneously concludes that the local common pleas courts have authority to
regulate certificated insurers and producers and establish county-by-county financial
qualifications. The Majority’s conclusions are plainly contrary to the General
Assembly’s unambiguous and comprehensive legislative scheme. Accordingly,
because Section 5702 of the Judicial Code specifically excepts sureties’ regulation
from the courts’ general rulemaking authority, I believe that Local Rule 531(e)(3)(d)
does not control herein.
Because Insurance Companies are insurers under Act 16, and corporate
sureties under The Insurance Company Law, I would conclude that the Insurance
Department has the exclusive right to determine their qualifications to conduct business
in the Commonwealth, and neither the courts nor the counties may override the
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Insurance Department’s regulations and authorizations. Accordingly, I would reverse
the trial court’s orders.
_______________________________
ANNE E. COVEY, Judge
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