Did a sole escrow agent or partnership with no employees or officers need a commercial blanket bond under Washington’s 1965 law?

Plain-English summary

In 1965, the Washington Attorney General said an individual or partnership applying to register as an escrow agent did not need the act’s primary commercial blanket bond if it had no officers or employees. The bond was designed to cover losses caused by those personnel, so it served no role for an applicant with none. (Official opinion)

The AG added that an applicant in this position still had to meet the other requirements of chapter 153 before the director issued a registration certificate.

Currency note

This opinion was issued in 1965. 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

Did a sole operator with no staff need the blanket bond?
No. The AG said the bond requirement did not apply where there were no employees or officers to cover.

Did that eliminate the need to register?
No. The opinion addressed only the bond requirement and expressly kept the act’s other registration conditions.

What losses was the bond meant to cover?
The AG described losses from dishonest acts of an applicant’s employees or officers.

Background and statutory framework

The motor-vehicles director asked whether section 5’s bond rule applied to individuals or partnerships without officers or employees. The AG compared the original surety-bond bill with the enacted employee-and-officer fidelity-bond language.

Citations and references

• The official opinion states: “if an individual or partnership does not have any employees or officers, the bond requirement is not applicable.”
• The official opinion states: “if an individual or partnership not having any employees or officers fulfills the other requirements of chapter 153”

Subject

OFFICES AND OFFICERS ‑- STATE ‑- DIRECTOR OF MOTOR VEHICLES ‑- ESCROW AGENT REGISTRATION ACT ‑- PRIMARY COMMERCIAL BLANKET BOND ‑- COVERAGE FOR OFFICERS AND EMPLOYEES

Source

• Landing page: https://www.atg.wa.gov/ago-opinions/offices-and-officers-state-director-motor-vehicles-escrow-agent-registration-act

Original opinion text

Attorney General John J. O'Connell

OFFICES AND OFFICERS ‑- STATE ‑- DIRECTOR OF MOTOR VEHICLES ‑- ESCROW AGENT REGISTRATION ACT ‑- PRIMARY COMMERCIAL BLANKET BOND ‑- COVERAGE FOR OFFICERS AND EMPLOYEES.

Applicants for registration under the escrow agent registration act, chapter 153, Laws of 1965, who are individuals or partnerships not having any officers or employees are not required to obtain a "primary commercial blanket bond" since coverage under such bond only protects the employers from the acts of his employees and officers.

December 14, 1965

Honorable Douglas Toms
Director, Department of Motor Vehicles
Highway-Licenses Building
Olympia, Washington

Cite as: AGO 65-66 No. 58

Dear Sir:

By letter previously acknowledged you have requested an opinion of this office on a question which we have paraphrased as follows:

Does the bond requirement in § 5, chapter 153, Laws of 1965, (the escrow agent registration act) apply to applicants for registration who are individuals or partnerships not having any officers or employees?

We answer your question in the negative.

ANALYSIS

The legislature recently enacted chapter 153, Laws of 1965, which provides for the registration and regulation of escrow companies and agents. Basically the law provides that after December 31, 1965, it will be unlawful for any person to engage in the escrow business unless he has registered with the state director of motor vehicles or falls within one of the several exceptions set forth in § 2 of the act.

The act provides in § 9:

"Upon the filing of the application for registration as an escrow agent, the affidavits of character, the certificate of [[Orig. Op. Page 2]] assumed name, if appropriate,the acceptance of the bond or other indemnity insurance, and the payment of the filing fee, the director shall issue and deliver to the applicant a certificate of registration to engage in the business of an escrow agent at the location or locations set forth in the certificate or certificates." (Emphasis supplied.)

The underlined portion of the statute obviously refers to the bond requirement in § 5. When House Bill No. 117, which was subsequently enacted as chapter 153, Laws of 1965,supra, was introduced, § 5 provided:

"At the time of filing an application as an escrow agent, or any renewal or reinstatement thereof, the applicant shall deposit with the director a copy of a bond currently in force under which the applicant is principal. Said copy shall be certified by the surety. Said bond shall provide for a minimum coverage of fifty thousand dollars and shall guarantee the faithful accounting and application of all funds entrusted to the applicant, that he will faithfully and honestly perform all obligations and undertakings and shall be conditioned that it is for use and benefit as are fidelity bonds. This bond may be canceled by the surety upon delivering thirty days' written notice to the director and the principal."

The above‑quoted section obviously meant that any and all applicants for registration would have to deposit a fifty thousand dollar surety bond in order to comply with the registration requirements of the act.

The legislature however amended § 5 to read as follows:

"At the time of filing an application as an escrow agent, or any renewal or reinstatement thereof, the applicant shall satisfy the director thatit has obtained a fidelity bond providing fidelity coverage on each officer and employee of the applicant. Such applicant shall keep said bond in effect at all times [[Orig. Op. Page 3]] while his certificate of registration is in effect. Such bond shall be aprimary commercial blanket bond written by an insurer authorized to transact surety insurance business in the state of Washington. Such bond shall provide fidelity coverage in the amount of two hundred thousand dollars and may be canceled by the surety upon delivering thirty days written notice to the director and the principal." (Emphasis supplied.)

Section 5, as originally proposed, required the applicant to obtain a fifty thousand dollar surety bond. However, § 5, as amended (quoted above) requires that the applicant obtain a bond providing fidelity coverage of $200,000 for its officers and employees. It is further provided that the bond must be a "primary commercial blanket bond."

The term is not defined in the statute; therefore, in accordance with the well-established standard of statutory construction, these words must be given their generally accepted meaning. Crown Zellerbach Corporation v. State, 53 Wn.2d 813, 328 P.2d 884 (1958);Miller v. Pasco, 50 Wn.2d 229, 310 P.2d 863 (1957); andState v. Hemrich, 93 Wash. 439, 161 Pac. 79 (1916). These cases are cited not only because they support this rule of statutory construction but also because the court therein referred to definitions found in Webster's Dictionary to ascertain the generally accepted meaning. Webster's Third New International Dictionary (1963), defines "primary commercial blanket bond" as follows:

"a blanket bond covering any loss up to a stated amount caused by the dishonest act of an employee or group of employees"

The office of the insurance commissioner has supplied us with a copy of a commercial blanket bond from its files, which recites:

"The Underwriter . . . agrees to indemnify the Insured against any loss of money or other property which the Insured shall sustain through any fraudulent or dishonest act or acts committed by any of the Employees, acting alone or in collusion with others . . ."

[[Orig. Op. Page 4]]

Thus it appears clear from the language of the statute and the nature of the specific bond required by the statute that the applicant is required to obtain a bond to protect the applicant from losses accruing from the misconduct of its employees and/or officers, the theory apparently being that if the applicant is protected from loss, the persons utilizing the applicant's escrow services will thereby also be protected.

Since the bond required is to cover the employees and officers rather than the applicant itself, it must be concluded that if an individual or partnership does not have any employees or officers, the bond requirement is not applicable. Therefore, if an individual or partnership not having any employees or officers fulfills the other requirements of chapter 153, Laws of 1965, supra, the director should issue and deliver to the applicant his certification of registration to engage in the business of an escrow agent.

We trust the foregoing will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

EDWARD B. MACKIE
Assistant Attorney General