Code of Colorado Regulations
400 - Department of Natural Resources
402 - Division of Water Resources
2 CCR 402-14 - RULES AND REGULATIONS FOR ADMINISTRATION OF LICENSING, FINANCIAL RESPONSIBILITY, CONTINUING EDUCATION AND REMEDIAL ACTION FOR WELL CONSTRUCTION AND PUMP INSTALLATION CONTRACTORS
STATEMENT OF BASIS AND PURPOSE
7 - Financial Responsibility
Current through Register Vol. 47, No. 17, September 10, 2024
The statutory authority for this Rule is found under sections 11-35-101 and 101.5 and 37-91-107, C.R.S. (2017).
Rule 7 clarifies how a contractor may fulfill the financial responsibility requirement and how to file a claim against a bond or alternative funds. Section 37-91-107, C.R.S. (2017) requires a licensee to provide evidence of financial responsibility in the form of an approved compliance bond with a corporate surety authorized to do business in the state of Colorado, or in the form of alternative funds such as a savings account, deposit, certificate of deposit, or irrevocable letter of credit. A contractor's failure to maintain the statutorily required amount of financial responsibility will result in the lapse of that contractor's license.
Rule 7.2 describes the required coverage of a corporate surety bond and the information that must be listed on the bond. The bond must be a compliance bond that covers the licensee's compliance with all applicable laws and regulations that apply to the activity authorized by the license, including the Water Well Construction Rules and these Rules. Rule 7.2.3 addresses filing a claim against a bond, and Rule 7.2.4 charges the contractor with responsibility for notifying the Board of any change in or cancellation of a bond. Rule 7.2.1 was modified to raise in-state bonds to $20,000 in order to account for inflation and the rising costs of materials and labor. The Board is authorized under section 37-91-107 (3.7), C.R.S. (2017), to increase the required bond amounts higher than the statutory minimums if such an increase becomes necessary to further the purposes of Article 91 of Title 37.
Rules 7.3 and 7.3.1 explain how a contractor may fulfill the requirement of financial responsibility through alternative funds. Rule 7.3.2 imposes responsibility on the contractor for costs incurred by the Board in maintaining and administering such funds, including the costs of negotiation or litigation of claims. Rule 7.3.3 addresses filing a claim against alternative funds and sets forth the conditions under which the Board will make payments from the alternative funds. The Board will not release any alternative funds without a written and notarized agreement of the parties that the Board may do so in a specified amount, or a court order directing the Board to pay a party a specified amount from the alternative funds.
Rule 7.4 establishes periods of liability of both bonds and alternative funds. The two-year periods are based upon the time limitations for initiating a hearing on a complaint as set forth in Section 37-91-108, C.R.S. (2017). Because a complaint may have been filed before the date the liability period ends, but not yet resolved by that date, this Rule authorizes the Board to retain the alternative funds until the complaint is resolved.
