32-1152

32-1152. Bonds

A. Before granting an original contractor's license, the registrar shall require of
the applicant a surety bond in a form acceptable to the registrar or a cash deposit as
provided in this section. No contractor's license may be renewed unless the applicant's
surety bond or cash deposit is in full force and effect.

B. The bonds, or the cash deposit as provided in this section, shall be in the name
of the licensee in amounts fixed by the registrar with the following schedules after
giving due consideration to the volume of work and the classification contemplated by the
applicant:

1. General commercial building contractors and subclassifications of general
commercial contractors shall furnish a surety bond or cash deposit in an amount which
shall be determined as follows:

(a) If the estimated annual volume of construction work of the applicant is ten
million dollars or more, the applicant shall furnish a surety bond or cash deposit of not
less than fifty thousand dollars or more than one hundred thousand dollars.

(b) If the estimated annual volume of construction work of the applicant is more
than five million dollars and less than ten million dollars, the applicant shall furnish
a surety bond or cash deposit of not less than thirty-five thousand dollars or more than
seventy-five thousand dollars.

(c) If the estimated annual volume of construction work of the applicant is more
than one million dollars and less than five million dollars, the applicant shall furnish
a surety bond or cash deposit of not less than fifteen thousand dollars or more than
fifty thousand dollars.

(d) If the estimated annual volume of construction work of the applicant is more
than five hundred thousand dollars and less than one million dollars, the applicant shall
furnish a surety bond or cash deposit of not less than ten thousand dollars or more than
twenty-five thousand dollars.

(e) If the estimated annual volume of construction work of the applicant is more
than one hundred fifty thousand dollars and less than five hundred thousand dollars, the
applicant shall furnish a surety bond or cash deposit of not less than five thousand
dollars or more than fifteen thousand dollars.

(f) If the estimated annual volume of construction work of the applicant is less
than one hundred fifty thousand dollars, the applicant shall furnish a surety bond or
cash deposit of five thousand dollars.

2. Specialty commercial contractors shall furnish a surety bond or cash deposit in
an amount which shall be determined as follows:

(a) If the estimated annual volume of construction work of the applicant is ten
million dollars or more, the applicant shall furnish a surety bond or cash deposit of not
less than thirty-seven thousand five hundred dollars or more than fifty thousand dollars.

(b) If the estimated annual volume of construction work of the applicant is more
than five million dollars and less than ten million dollars, the applicant shall furnish
a surety bond or cash deposit of not less than seventeen thousand five hundred dollars or
more than thirty-seven thousand five hundred dollars.

(c) If the estimated annual volume of construction work of the applicant is more
than one million dollars and less than five million dollars, the applicant shall furnish
a surety bond or cash deposit of not less than seven thousand five hundred dollars or
more than twenty-five thousand dollars.

(d) If the estimated annual volume of construction work of the applicant is more
than five hundred thousand dollars and less than one million dollars, the applicant shall
furnish a surety bond or cash deposit of not less than five thousand dollars or more than
seventeen thousand five hundred dollars.

(e) If the estimated annual volume of construction work of the applicant is more
than one hundred fifty thousand dollars and less than five hundred thousand dollars, the
applicant shall furnish a surety bond or cash deposit of not less than two thousand five
hundred dollars or more than seven thousand five hundred dollars.

3. The total amount of the surety bond or cash deposit required of a licensee who
holds more than one license under paragraphs 1 and 2 of this subsection shall be the sum
of the surety bond or cash deposit required for each license based on the estimated
annual volume of construction work of the applicant allocated to and performed under each
license. The applicant at his option may post a single surety bond or cash deposit which
shall be the sum of the bonds or deposits determined under this subsection for all such
licenses.

4. General dual licensed contractors and subclassifications of general dual
licensed contractors shall furnish a single surety bond or cash deposit with amounts for
each classification of license that are determined based on the volume of commercial work
as determined under paragraph 1 of this subsection and the volume of residential work as
determined under paragraph 5 of this subsection. Liability under the bond or cash
deposit shall be limited to the amount established for each commercial or residential
license and is subject to the limitations and requirements set forth in subsection E of
this section.

5. General residential contractors and subclassifications of general residential
contractors shall furnish a surety bond or cash deposit in an amount of not more than
fifteen thousand dollars and not less than five thousand dollars.

6. Specialty dual licensed contractors shall furnish a single surety bond or cash
deposit with amounts for each classification of license that are determined based on the
volume of commercial work as determined under paragraph 2 of this subsection and the
volume of residential work as determined under paragraph 7 of this subsection. Liability
under the bond or cash deposit shall be limited to the amount established for each
commercial or residential license and is subject to the limitations and requirements set
forth in subsection E of this section.

7. Specialty residential contractors shall furnish a surety bond or cash deposit in
an amount of not more than seven thousand five hundred dollars and not less than one
thousand dollars.

8. Dual licensed swimming pool contractors and residential swimming pool general
contractors shall furnish a surety bond or cash deposit in the same amounts based on the
volume of work as determined under paragraph 1 of this subsection for a general
commercial contractor.

C. Dual licensed contractors and residential contractors shall also either:

1. Furnish an additional surety bond or cash deposit in the amount of two hundred
thousand dollars solely for actual damages suffered by persons injured as described in
section 32-1131. This bond shall be subject to the limitations on the amounts that may
be awarded to individual claimants as established in section 32-1132.

2. Participate in the residential contractors' recovery fund and pay the assessment
prescribed by section 32-1132.

D. The surety bonds shall be executed by the contractor as principal with a
corporation duly authorized to transact surety business in this state. Evidence of a
surety bond shall be submitted to the registrar in a form acceptable to the
registrar. The contractor may in the alternative establish a cash deposit in the amount
of the bond with the state treasurer in accordance with rules adopted by the registrar.
Such cash bond monies shall be deposited, pursuant to sections 35-146 and 35-147, in the
contractors' cash bond fund. The state treasurer shall invest and divest monies in the
fund as provided by section 35-313, and monies earned from investment shall be credited
to the state general fund. Such cash deposits may be withdrawn, if there are no
outstanding claims against them, two years after the termination of the license in
connection with which the cash is deposited. The cash deposit may be withdrawn two years
after the filing of a commercial surety bond as a replacement to the cash deposit.

E. The bonds or deposit required by subsection B of this section shall be for the
benefit of and shall be subject to claims by the registrar of contractors for failure to
pay any sum required pursuant to this chapter. The bond or deposit required by subsection
B, paragraphs 1, 2 and 3 of this section is for the benefit of and subject to claims by a
licensee under this chapter or a lessee, owner or co-owner of nonresidential real
property including, but not limited to, a tenant in common or joint tenant, or their
successors in interest, who has a direct contract with the licensee against whose bond or
deposit the claim is made and who is damaged by the failure of the licensee to build or
improve a structure or appurtenance on that real property at the time the work was
performed in a manner not in compliance with the requirements of any building or
construction code applicable to the construction work under the laws of this state or any
political subdivision, or if no such code was applicable, in accordance with the
standards of construction work approved by the registrar. The residential bond or
deposit required by subsection B, paragraphs 4 through 8 of this section is for the
benefit of and subject to claims by any person furnishing labor, materials or
construction equipment on a rental basis used in the direct performance of a construction
contract involving a residential structure or by persons injured as defined in section
32-1131. The bond or deposit required by subsection C, paragraph 1 of this section is
for the benefit of and is subject to claims only by persons injured as described in
section 32-1131. The person seeking recovery from the bond or cash deposit shall
maintain an action at law against the contractor if claiming against the cash deposit or
against the contractor and surety if claiming against the surety bond. If the person
seeking recovery is required to give the notice pursuant to section 33-992.01, he is
entitled to seek recovery only if he has given such notice and has made proof of
service. The surety bond or cash deposit shall be subject to claims until the full
amount thereof is exhausted. The court may award reasonable attorney's fees in a
judgment against a contractor's surety bond or cash deposit. No suit may be commenced on
the bond or for satisfaction from the cash deposit after the expiration of two years
following the commission of the act or delivery of goods or rendering of services on
which the suit is based, except that time for purposes of claims for fraud shall be
measured as provided in section 12-543. The surety bond or cash deposit shall be
continuous in form and shall be conditioned so that the total aggregate liability of the
surety or cash deposit for all claims, including reasonable attorney's fees, shall be
limited to the face amount of the surety bond or cash deposit irrespective of the number
of years the bond or cash deposit is in force. If the corporate surety desires to make
payment without awaiting court action, the amount of any bond filed in compliance with
this chapter shall be reduced to the extent of any payment or payments made by the
corporate surety in good faith thereunder. Any such payments shall be based on priority
of written claims received by the corporate surety prior to court action. If more than
one cash deposit exists, the judgment against the contractor shall state which cash
deposit shall be used to satisfy the judgment. A certified copy of the judgment shall
then be filed with the registrar, and such judgment shall specify that it may be
satisfied from the contractor's cash deposit. Priority for payment shall be based upon
the time of filing with the registrar. Upon receipt of a certified copy of the judgment,
the registrar may authorize payment from the cash deposit of the amount claimed or of
whatever lesser amount remains on file. In any action against a cash deposit, the
claimant, at the time of filing suit, may notify the registrar in writing of the action
against the cash deposit, but shall not name as a defendant in the action the registrar,
the treasurer, or the state. Failure to so notify the registrar at the time of filing
suit may result in the cash deposit being withdrawn by the licensee prior to judgment
pursuant to subsection D of this section.

F. When a corporate surety cancels a bond, the surety shall not less than thirty
days prior to the effective date of the cancellation give the principal and the registrar
a written notice of the cancellation. Notice to the principal shall be by certified mail
in a sealed envelope with postage fully prepaid. Proof of notice to the principal shall
be made available to the registrar on request. On reduction or depletion of the cash
deposit, the registrar shall immediately notify the licensee of said reduction or
depletion and that the licensee must replenish the cash deposit or furnish a surety bond
on or before thirty days from the date of said reduction or depletion or the contractor's
license shall be suspended on the thirtieth day without further notice or
hearing. Notice to the contractor shall be by certified mail in a sealed envelope with
postage fully prepaid thereon, addressed to the contractor's latest address of record in
the registrar's office. The contractor's license shall be suspended by operation of law
on the date the bond is canceled or thirty days from the date of reduction or depletion
of the cash deposit unless a replacement bond or cash deposit is on file with the
registrar.

G. The registrar and the state treasurer shall have no personal liability for the
performance of duties relating to the bonds, cash deposits, certificates of deposit,
investment certificates or share accounts required or permitted by this chapter as long
as such duties are performed in good faith.

H. In the following instances the registrar, after a hearing, may require, as a
condition precedent to issuance, renewal, continuation or removal of suspension of a
license, a surety bond or cash deposit in an amount and duration to be fixed by the
registrar based upon the seriousness of the violations, which shall be not more than ten
times the amount required by subsection B of this section:

1. When a license of either the applicant or the qualifying party has been
suspended or revoked or a surety bond or cash deposit requirement has been increased
under section 32-1154 previously as the result of disciplinary action for a violation of
this chapter.

2. When either the applicant or qualifying party was an officer, member, partner or
qualifying party for a licensee at any time during which cause for disciplinary action
occurred resulting in suspension or revocation of such licensee's license and such
applicant or qualifying party had knowledge of or participated in the act or omission
which was the cause of such disciplinary action for a violation of this chapter.

3. The bonds required by this subsection shall be in addition to any other bond or
cash deposit required by this chapter or any other bond required of a contractor by an
owner or any other contracting party on any contract undertaken by him pursuant to the
authority of such license.