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the amount of the loss. In the agreement, petitioner agrees to
bring a defendant to court as required by the bond, or, if he
fails, to indemnify the surety for any expenses incurred,
including a forfeiture. If petitioner brings the defendant to
court within the required time, the bond is exonerated and there
is no loss. A loss occurs only when petitioner is unable to
bring the defendant to court. Petitioner's liability for
expenses associated with a bond forfeiture does not arise prior
to his obligation to indemnify Associated.2
As security for petitioner's promise to indemnify
Associated, the agreement requires petitioner to contribute to a
BUF account, and amounts paid into the BUF accounts are derived
from bond premiums collected. Associated established and
maintained BUF accounts for petitioner with the Bank of America
and functioned as trustee for petitioner with respect to the BUF
accounts. The BUF accounts are required as a necessary condition
of petitioner's doing business as a bail bondsman. In accordance
with the agreement, the funds in the BUF accounts were
accumulated in proportion to the volume of outstanding bonds
executed by petitioner on behalf of Associated. Accrued
2 Because of his potential liability to Associated in the
event of a loss, petitioner's normal practice is to attempt to
obtain collateral from his customers as security for such
liability. When he is able to obtain collateral, petitioner's
normal custom is to accept only cash or a deed of trust on real
property. If the collateral is inadequate to pay a loss,
petitioner is required to pay the difference from either personal
resources or the BUF accounts.
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Last modified: May 25, 2011