RLI Insurance Co. v. Nexus Services, Inc., No. 20-2253 (4th Cir. 2022)
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An immigration bond allows the release of a detained individual based on a surety’s contractual undertaking to the United States to either deliver the individual as demanded or forfeit the sum specified in the bond. Nexus runs a bonds program: It screens immigrants and maintains contact with them throughout their release. Nexus lacks the Department of Treasury’s commercial-surety certification and needs another surety to take on the liability to the government. RLI performs that function for a fee. Nexus agreed to indemnify RLI for all losses. The parties’ Commercial Surety General Indemnity Agreement involves nearly 2,500 bonds and contains several clauses designed to keep RLI whole. One obligates Nexus to provide collateral sufficient to cover all of RLI’s exposure,
Nexus argued that RLI’s exposure should be measured on each bond individually, that RLI is not actually “exposed” to any risk, and Nexus does not need to deposit collateral until there is reason to believe that RLI will have to pay on a particular bond because an immigrant fails to appear in court.
The Fourth Circuit affirmed in favor of RLI. Although it is not known which immigrants will breach, some will. The Agreement must secure against aggregate risk—the likelihood Nexus will be able to (timely) indemnify RLI for all future breached bonds. Nexus’s financial condition, its historical willingness to indemnify RLI, and the historical rate of bonds breached bear on that likelihood and should inform the collateral calculus.
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