Could Connecticut’s insurance board pay for a surety bond the treasurer bought directly?

Plain-English summary

In March 1995, Connecticut’s AG considered a surety bond arranged for the Treasurer’s Office in connection with a Canadian real estate investment. A private law firm acting for the Treasurer had obtained the bond through an insurance agent and then asked the State Insurance Purchasing Board to pay its premium. The AG concluded the board had no authority to pay that bill.

The governing insurance statute placed the selection of surety companies and agents of record with the board and gave it power to negotiate their compensation. The Treasurer’s broader power to enter contracts did not override those specific procurement duties. Because the board had not selected this bond, the AG said the agent who had purchased it for the Treasurer had to present a claim for the premium to the Claims Commissioner instead.

Board and treasury staff at the time

The board’s statutory role in selecting surety companies could not be bypassed by having another office purchase the bond and later send the premium bill to the board.

Insurance agents at the time

The opinion identified the Claims Commissioner process as the avenue for the agent’s payment claim. It did not decide the merits or amount of any such claim.

Currency note

This opinion was issued in 1995. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Could the insurance board pay a premium for a bond selected by the treasurer?
A: No. The AG said the board lacked authority to pay for the bond purchased outside its statutory selection process.

Q: Did the treasurer’s general contract power control the bond purchase?
A: No. The opinion treated the board’s specific power over surety selection as controlling over the Treasurer’s general contracting authority.

Q: Where could the bond agent seek payment?
A: The AG directed the agent to file a premium claim with the Claims Commissioner under the statute cited in the opinion.

Background and statutory framework

Conn. Gen. Stat. § 4a-20 assigned the board the selection of surety companies and agents and authority over agent compensation. The AG compared that specific command with the Treasurer’s general contractual authority under § 3-11a and pointed to § 4-147 for the agent’s claim.

Citations and references

Statutes: Conn. Gen. Stat. § 4a-20; Conn. Gen. Stat. § 3-11a; Conn. Gen. Stat. § 4-147.

Source

• Landing page: https://portal.ct.gov/AG/Opinions
• Opinion page: https://portal.ct.gov/ag/opinions/1995-formal-opinions/mr-peter-bulkeley-chairman-state-insurance-purchasing-board-1995010-formal-opinion-attorney-general

Original opinion text

Mr. Peter Bulkeley, Chairman, State Insurance Purchasing Board, 1995-010 Formal Opinion, Attorney General of Connecticut

Attorney General's Opinion

Attorney General, Richard Blumenthal

March 6, 1995

Mr. Peter Bulkeley

Chairman, State Insurance Purchasing Board

55 Elm Street, Room 118

Hartford, CT 06106

Dear Mr. Bulkeley:

You have requested our opinion as to whether the State Insurance Purchasing Board (the "Board") has authority under Conn. Gen. Stat. § 4a-20 to make payment on a premium for a surety bond purchased directly by the Treasurer.

The facts, as presented to this Office, indicate that the Treasurer's Office purchased a $38,407,480.11 bearer bond (Canadian dollars) in a Canadian real estate venture, "Cadillac Fairview." In order to liquidate its investment in the real estate venture Cadillac Fairview required the Treasurer's Office to post a surety bond in an amount twice the face value of the debenture or $76,814,960.22 (Canadian dollars), and that the bond be issued by a Canadian surety company. A private law firm which had been retained by the Treasurer's Office to negotiate with Cadillac Fairview obtained the surety bond directly from an insurance agent on the Treasurer's behalf. The premium on the surety bond is $345,667.00 of which approximately 30% is the agent's commission. Thereafter, the Treasurer's Office informed the Board of the above stated transaction and requested the Board to make payment of the $345,667.00 premium. You have asked us for our opinion whether the Board has the statutory authority to pay this bill. For the following reasons, it is our opinion that the Board lacks such authority.

The Insurance Purchasing Board's duties are set out in Conn. Gen. Stat. § 4a-20 which provides

Said board shall determine the method by which the state shall insure itself against losses by the purchase of insurance governed by the provisions of title 38a to obtain the broadest coverage at the most reasonable cost. It shall direct the negotiations for purchase of such insurance and determine whether deductible provisions should be included in the insurance contract. Wherever appropriate it shall determine that the state shall act as a self-insurer and may request funds from the contingency fund to establish reserves and carry out such practices as are necessary to safeguard the self-insurance activity. It shall designate the agent or agents of record and shall select the companies from whom insurance coverage and surety bonds shall be purchased. Notwithstanding any other provision of the Connecticut General Statutes, including without limitation sections 38a-707 and 38a-825, it shall have full authority to negotiate either a commission or fee structure to compensate the agent or agents of record for services performed. It shall also have full authority to retain consulting firms and to negotiate their fee compensation for services performed. Any refund, dividend or other payment from any insurance company in connection with insurance for the state shall be returned to the comptroller for deposit in the general fund. The board shall establish specifications for each contract of insurance and shall request bids for each such contract through the agent of record. Each such contract shall be for a specified period of time.

Conn. Gen. Stat. § 4a-20 (emphasis added).

Although the Treasurer is authorized broadly to enter into "contractual agreements" under Conn. Gen. Stat. § 3-11a,1 Conn. Gen. Stat. § 4a-20 specifically provides that the Board "shall designate the agent or agents of record"2 ... "shall select the companies from whom insurance coverage and surety bonds shall be purchased," and "shall have full authority to negotiate either a commission or fee structure to compensate the agent or agents of record." This specific statutory mandate leaves no doubt but that the Board and not the Treasurer has the statutory authority to select and purchase surety bonds. "It is a well-settled principle of construction that specific terms covering the given subject matter will prevail over general language of the same or another statute which might otherwise prove controlling." Charlton Press, Inc. v. Sullivan, 153 Conn. 103, 110 (1965), Budkofsky v. Commissioner of Motor Vehicles, 177 Conn. 588, 592 (1977). In the present case, therefore, we must conclude that Conn. Gen. Stat. § 4a-20 is the controlling provision relating to the purchase of surety bonds.

Since it is the Board and not the Treasurer who has the authority to "select the companies for whom ... bonds shall be purchased," the bill for the surety bond premium purchased by the Treasurer may not be presented to the Board for payment. Instead, the agent who purchased the bond for the Treasurer must file a claim for the premium with the Claims Commissioner pursuant to Conn. Gen. Stat. § 4-147.

Very truly yours,

Richard Blumenthal

Attorney General

Anne O'Leary

Assistant Attorney General

RB/AO/db

1 Conn. Gen. Stat § 3-11a provides "In accordance with established procedures, the treasurer may enter into such contractual agreements as may be necessary and proper for the discharge of his duties."

2 According to information you have supplied us, Francis M. Jackson Associates has been designated as the agent of record under a non-exclusive agreement with the Board.