My name’s Neil Pedersen, and I’m an expert in appellate bonding. Many clients and others have been calling me asking questions about the appeal bond for Donald Trump related to the Leticia James litigation. 

  • Why was the bond challenged?
  • What about the insurance company?
  • What to look for?

And many other questions. They wanted me to explain what was happening.

The bond, approved the other day, was issued by a company that is an insurance carrier but not licensed to do surety bonds in New York State. This was one of the issues for challenging the appeal bond. Another issue was the company had capital and a surplus of over $130 million in New York State. Under NY Insurance Law Section 4118, a surety company may issue a single bond up to 10% of its capital and surplus.

The capital and surplus calculation is a standard calculation but is not relevant to this discussion. The selected company was allowed to issue a single bond for up to $13 million, and instead, they issued a bond for $175 million. That, in addition to their lack of license, were the two reasons for the challenge. Taking a step back, many insurance companies have a surety department and a surety license, but where most surety companies are also insurance companies, not all insurance companies are surety companies.

There’s a reason to bring that up because people assume these companies whose names include the words insurance company are all sureties. That’s not true and is something to be aware of. 

Separately, the single bond limitation is another thing of which to be aware because if an insurance carrier in New York State wants to go above their single bond limitation, they would have to make a motion to the court to have the bond accepted and would have to disclose the collateral behind the bond. Only certain types of collateral are accepted.

In this case, Judge Engoron approved the bond based on monthly updates of the collateral provided by Leticia James and that the funds are in the form of cash. With the monthly update and the funds remaining in cash, the judge approved the company issuing a bond well over their single capacity of a little over $13 million.

If you have a client in this situation where they have to use a company with a single bond limitation up to the bond amount, must disclose this to the court, and keep the money in cash, there are some issues. One is that cash sitting in an account, especially with today’s interest rate environment, will not accrue interest. Some money market accounts are currently paying over 5%, so if you must keep your funds in cash, you’re losing out on that 5%.

Using a qualified attorney who could maybe tie up a brokerage account would allow that client to earn interest on those funds. Without that, the total cost of the bond is a lot higher if you’re not receiving any interest on your cash collateral.

Call me to speak about your bonding situation today!

Neil Pedersen
15 Maiden Lane Suite #800
New York, NY, 10038

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