41-2179

41-2179. Bonds and cash deposits;
requirements; fund

A. Before granting an original license, the deputy director shall require of the
applicant, except an applicant for salesperson or broker of manufactured homes, mobile
homes or factory-built buildings designed for use as residential buildings, a surety bond
in a form acceptable to the deputy director or a cash deposit pursuant to this section. A
separate bond or cash deposit shall be required for each branch location of any licensed
manufacturer or installer. No license shall be renewed unless the applicant's surety bond
or cash deposit is in full force and effect. A change of location of a licensee's
principal place of business requires a rider or endorsement to the existing bond and
payment of the administrative function fee. The rider or endorsement shall indicate the
new location and acceptance of claims for the previous location.

B. The bonds or cash deposit shall be in amounts prescribed by the board.

C. The surety bonds shall be executed by the applicant as principal with a
corporation duly authorized to transact surety business in this state. Evidence of a
surety bond shall be submitted to the deputy director in a form prescribed by the deputy
director. The applicant may in the alternative establish a cash deposit in the amount of
the bond with the state treasurer pursuant to the rules adopted by the deputy director.
The bond funds shall be deposited, pursuant to sections 35-146 and 35-147, in a special
account to be known as the consumer recovery 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 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 Such cash deposits may be withdrawn, if there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 The cash deposit may be withdrawn two years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.

D. The bond or deposit required by this section shall be in favor of the state for
the benefit of any person covered by this subsection. The bond or deposit shall be
subject to claims by:

1. Any consumer of a unit regulated by this chapter who enters into an agreement
with any licensee, except a salesperson or broker of manufactured homes, mobile homes or
factory-built buildings designed for use as residential buildings, and is damaged by the
failure of the principal to perform a sales or installation agreement or to perform
repairs under a warranty.

2. The deputy director, if the principal fails to pay any of the fees or costs
which the principal owes the office.

E. Any person claiming against the bond or deposit, except the department, may
maintain an action against the principal and the surety. Such principal's bond or deposit
may be sued upon in successive actions until the full amount is exhausted. No suit may be
commenced on the bond or deposit after the expiration of two years after the date of sale
or installation of the unit, whichever is later, on which the suit is based, except that
the time for purposes of the claim for fraud shall be measured pursuant to section
12-543.

F. The surety bond or deposit shall be continuous in form and shall contain the
condition that the total aggregate liability of the surety or depository for all claims
shall be limited to the face amount of the bond or depository irrespective of the number
of years the bond or depository is in force. If the corporate surety desires to make
payment without awaiting court action, the amount of the bond filed shall be reduced to
the extent of any payment or payments made by the corporate surety in good faith. Any
such payments shall be based on priority of written claims received by the corporate
surety prior to court action. The surety bond or depository shall be continuous as long
as the corporate surety or the depositor maintains the face amount of the bond or
deposit. Failure to maintain the face amount of the bond or deposit constitutes a
suspension of such license until the face amount of the bond or deposit is restored.

G. The corporate surety shall notify the deputy director of the intent of the
principal to cancel the bond and of any monies paid from the bond. Upon receipt by the
deputy director of notice to cancel a bond by any corporate surety, the deputy director
shall immediately notify the licensee who is the principal on the bond of the effective
date of cancellation of the bond and that the licensee shall furnish a like bond or make
cash deposit on or before the effective date of cancellation or the license shall be
suspended. Notice to the licensee shall be by certified mail postage fully prepaid,
addressed to the licensee's last address of record with the office. The license shall be
suspended on the date the bond is canceled unless a replacement bond or cash deposit in
lieu of a bond is on file with the deputy director.

H. The director and deputy director shall have no personal liability for the
performance of duties relating to the bond and cash deposit requirements of this section
if such duties are performed in good faith.