32-3023. Letters of credit, bonds or cash deposits; fund
A. Before granting a private vocational program license or license to grant degrees the board shall require of the applicant a letter of credit, a surety bond in a form acceptable to the board or a cash deposit pursuant to this section if the program or institution is not accredited. Before renewing a private vocational program license or license to grant degrees the board may require of the applicant a letter of credit, a surety bond in a form acceptable to the board or a cash deposit pursuant to this section if the program or institution is not accredited.
B. Before granting or renewing a private vocational program license or license to grant degrees the board may require of the applicant a letter of credit, a surety bond in a form acceptable to the board or a cash deposit pursuant to this section if the program or institution is accredited.
C. The letter of credit, surety bond or deposit required by this section shall not be less than fifteen thousand dollars. The board may require a letter of credit, a bond or a deposit required by this section in an amount of more than fifteen thousand dollars and may consider the following:
1. The applicant's gross tuition revenue.
2. The length of time the applicant has been in operation and the applicant's financial position.
D. Surety bonds shall be executed by the applicant as principal with a corporation authorized to transact surety business in this state. Evidence of a surety bond shall be submitted to the board in a form prescribed by the board. Surety bonds issued by a surety company must be rated " A" or better by Moody's investor service or Standard and Poor's rating service or their successors.
E. As an alternative to a surety bond, the applicant may submit a confirmed, irrevocable letter of credit acceptable and payable to the board.
F. As an alternative to a surety bond, an applicant may establish a cash deposit in the amount of the bond with the state treasurer pursuant to rules adopted by the board. The treasurer shall deposit the monies in a special account to be known as the private postsecondary education cash bond fund. The monies shall be invested by the treasurer pursuant to laws governing such deposits. The accrued interest from investments shall be held by the treasurer for the payment of current claims. Cash deposits plus accrued interest may be withdrawn, if there are no outstanding claims against them, one year after the termination of the license in connection with which the monies are deposited. The deposit may be withdrawn one year after the filing of a surety bond as a replacement to the cash deposit.
G. The letters of credit, bonds or cash deposits required by this section shall be in favor of this state for the benefit of any person covered by this section. The letter of credit, bond or deposit is subject to claims by the board for failure to pay any amount required pursuant to this chapter or by any person who is damaged by the failure of the principal to provide educational services pursuant to its published catalogs, brochures or other publications.
H. A person claiming against the letter of credit, bond or cash deposit may maintain an action against the principal and the surety or depository. The principal's letter of credit, surety bond or deposit may be sued upon in successive actions until the full amount is exhausted. A suit shall not be commenced on the letter of credit, bond or cash deposit after the expiration of one year following the commission or omission of the act on which the suit is based, except that time for purposes of claims for fraud shall be measured pursuant to section 12-543.
I. The letter of credit, bond or deposit shall be continuous in form and shall be conditioned that the total aggregate liability of the letter of credit, surety or depository for all claims shall be limited to the face amount of the letter of credit, bond or deposit irrespective of the number of years the letter of credit, bond or deposit is in force. If a corporate surety desires to make payment without waiting for court action, the amount of any bond filed pursuant to this chapter shall be reduced to the extent of any good faith payments made by the corporate surety. These payments shall be based on priority of written claims received by the corporate surety before court action.
J. On receipt by the board of notice of intent to cancel a bond by a corporate surety, the board shall immediately notify the principal on the bond of the effective date of cancellation and that the principal must furnish a like bond or a letter of credit or make a cash deposit before the cancellation date or within thirty days after mailing of the notice by the board or its license shall be suspended. Notice to the principal shall be by certified mail in a sealed envelope with postage prepaid addressed to the principal's latest address of record in the board's office. A license is automatically suspended on the date the bond is cancelled unless a replacement bond or a letter of credit or cash deposit in lieu of a bond is on file with the board. Operation while the license is suspended is a violation of this chapter. The license shall not be reinstated until a replacement bond, letter of credit or cash deposit is on file with the board.