Our 2020 Workers' Compensation Audit will be available online through February 22. +
By Sam Light, CIRSA General Counsel
A common question we get at CIRSA after the biennial April election is whether there is a bonding requirement for the treasurer in a statutory city or town. This post discusses the state law for statutory municipalities and how your CIRSA crime coverage can help address this need. As explained below, state law grants discretion to statutory municipalities to decide whether to require a treasurer’s bond. It also grants them discretion to decide the amount of any bond and whether to obtain crime coverage in lieu of a bond. Thus, it’s important to check your municipality’s own rules and consult with your entity’s own attorney on how to address this issue.
As background, the Colorado Revised Statutes (C.R.S.) were amended after the April 2018 election to remove the bonding language from the municipal statutes addressing the appointment of officers (C.R.S. 31-4-304) and the oath of office (C.R.S. 31-4-401(2)).1 As a consequence, the bonding provisions for the municipal treasurer are now contained only within C.R.S. 31-20-301(1). This statute states in pertinent part that the treasurer “shall give a bond to the city or town” to secure the faithful performance of duties. The bond shall be in such sum as the governing body requires; however, “[t]he governing body of the city or town may waive the requirement of a bond.” In short, the governing body has the power to require or waive a bond, and to determine its amount. Therefore, it’s important to check what your local rules require.
In addition to removing the bonding language from the statutes noted above, the 2018 legislation also confirmed that crime coverage could be purchased in lieu of a required bond. Specifically, House Bill 18-1140 enacted a new C.R.S. 24-14-102(2)(a) addressing crime coverage. It states that whenever a person is required to provide or purchase a personal surety bond as a condition of public service, “the public entity for which the person will serve may, in lieu of the required bond, purchase crime insurance to protect the public entity from any dishonesty, theft, or fraud by the person.” This statute goes on to state that if the public entity purchases crime insurance in lieu of a personal surety bond, the official and entity are relieved of all statutory requirements related to the personal surety bond.
Based on these updates to state law, statutory municipalities have authority and flexibility to decide how to put in place protections against risks of loss due to dishonesty, theft, or fraud by a public official. Options include obtaining either a bond or crime coverage, or both, and waiving the bond requirements.
CIRSA members who participate in the Property and Casualty Pool receive as part of their base crime policy $150,000 in coverage for losses arising from acts of “employee dishonesty,” subject to the member’s deductible and other terms and conditions of the policy. CIRSA also has an optional, excess crime coverage program under which members may purchase additional coverage limits of $500,000, $2,000,000, or $5,000,000. Your CIRSA underwriter can also assist your entity with placement of public officials’ bonds with one of the available markets. If your municipality both requires a bond and has CIRSA crime coverage, then in the event of a loss, your CIRSA crime coverage will apply excess of the amount of any bond.
In order to protect the municipality, its constituents, and public funds, it’s important your city or town have mechanisms in place to protect against losses arising from acts of dishonesty. I hope the above helps explain the law and options available with respect to treasurer’s bonds. If you have any questions regarding CIRSA coverage or would like assistance in addressing your entity’s needs in this area, please call or email your CIRSA Underwriting Representative.
Note: This article is intended for general information purposes only and readers should consult with their entity’s own counsel for legal advice on specific issues.
Join our email list