§ 172A.4 — Proof of financial responsibility required

Iowa § 172A.4

• Jurisdiction: Iowa
• Title V: AGRICULTURE
• Ch. 172A: BONDING OF SLAUGHTERHOUSE OPERATORS

Text

1. A license shall not be issued by the secretary to a dealer or broker until the applicant
has furnished proof of financial responsibility as provided in this section. The proof may be
in the following forms:
a. (1) A bond of a surety company authorized to do business in the state of Iowa in the
form prescribed by and to the satisfaction of the secretary, conditioned for the payment of a
judgment against the applicant furnishing the bond because of nonpayment of obligations in
connection with the purchase of animals.
(a) The amount of bond for an established dealer or broker who does not maintain a
business location in this state shall be not less than the nearest multiple of five thousand
dollars above twice the average daily value of purchases of livestock originating in this state,
handled by such applicant during the preceding twelve months or such parts thereof as the
applicant was purchasing livestock. The bond of a person who does not maintain a business
location in this state shall be conditioned for the payment only of those claims which arise
from purchases of livestock originating in this state.
(b) The amount of bond for an established dealer or broker who maintains one or more
business locations in this state shall be not less than the nearest multiple of five thousand
dollars above twice the average daily value of purchases of livestock originating in this
state handled by the applicant during the preceding twelve months or such parts thereof as
the applicant was purchasing livestock. The bond of a person who maintains one or more
business locations in this state shall be conditioned for the payment only of those claims
which arise from purchases of livestock originating in this state.
(c) If a new dealer or broker not previously covered by this chapter applies for a license,
the amount of bond shall be based on twice the estimated average daily value of purchases
of livestock originating in this state.
(d) For the purpose of computing average daily value, two hundred sixty is deemed the
number of business days in a year.
(e) Whenever a dealer or broker’s weekly purchases exceed one hundred fifty percent of
thedealer’sorbroker’saverageweeklyvolume, thedepartmentshallrequireadditionalbond
in an amount determined by the department.
(2) The licensee and surety of the bond shall be held and firmly bound unto the secretary
as trustee for all persons who may be damaged because of nonpayment of obligations in
connection with the purchase of animals originating in this state. Any person damaged
because of such nonpayment may maintain suit in the person’s own behalf to recover on the
bond, even though not named as a party to the bond.
(3) For purposes of this paragraph “a”, “purchases of livestock originating in this state”
shall not include purchases by dealers or brokers from their subsidiaries.
b. A bond equivalent may be filed in lieu of a bond. The bond equivalent shall be in the
form of a trust agreement and the fund of the trust shall be in the form of fully negotiable
obligations of the United States or certificates of deposit insured by the federal deposit
insurance corporation or the federal savings and loan insurance corporation.
(1) The trust agreement shall be in the form prescribed by the secretary and executed to
the satisfaction of the secretary. The trustee of the trust agreement shall be an institution
located in this state in which the funds are invested or deposited.
(2) The trust agreement shall provide as beneficiary, the secretary for the benefit of those
persons damaged because of nonpayment of obligations in connection with the purchase of
animals originating in this state. The fund in trust shall be an amount calculated in the exact
manner as provided in paragraph “a”. The fund in trust shall not be subject to attachment for
any other claim, or to levy of execution upon a judgment based on any other claim.
c. A person who is not a resident of this state and who either maintains no business
location in this state or maintains one or more business locations in this state, and a person
who is a resident of this state and who maintains more than one business location in this
3 BONDING OF SLAUGHTERHOUSE OPERATORS, §172A.5
state, may submit a consolidated proof of financial responsibility. The consolidated proof
of financial responsibility shall consist of a bond or a trust agreement meeting all of the
requirements of this section, except that the calculation of the amount of the bond or the
amount of the trust fund shall be based on the average daily value of all purchases of
livestock originating in this state. A person who submits consolidated proof of financial
responsibility shall maintain separate records for each business location, and shall maintain
such other records respecting purchases of livestock as the secretary by rule shall prescribe.
2. a. Any person damaged by nonpayment of obligations or by any misrepresentation or
fraud on the part of a broker or dealer may maintain an action against the broker or dealer,
and the sureties on the bonds or the trustee of a trust fund. The aggregate liability of the
sureties or the trust for all such damage shall not exceed the amount of the bond or trust. In
the event that the aggregate claims exceed the total amount of the bond or trust, the amount
payable on account of any claim shall be in the same proportion to the amount of the bond
or trust as the individual claim bears to the aggregate claims.
b. Unless the person damaged files claim with the dealer or broker, and with the sureties
or trustee, and with the department within ninety days after the date of the transaction on
whichtheclaimisbased, theclaimantshallbebarredfrommaintaininganactiononthebond
or trust and from receiving any proceeds from the bond or trust.
3. Whenever the secretary determines that the business volume of the applicant or
licensee is such as to render the bond or trust inadequate, the amount of the bond or trust
shall be, upon notice, adjusted.
4. All bonds and trust agreements shall contain a provision requiring that at least thirty
days’ prior notice in writing be given to the secretary by the party terminating the bond or
trust agreement as a condition precedent to termination.
5. a. Whenever a bond or a trust agreement is to be terminated by a cancellation by
the surety or trustee, the secretary shall cause to be published notices of the proposed
cancellation not less than ten days prior to the date the cancellation is effective. The notices
shall be published as follows:
(1) In the Iowa administrative code.
(2) In a newspaper of general circulation in the county in which the licensee maintains a
business location, or if the licensee maintains no business location in this state, then in the
county where the licensee transacts a substantial part of the licensee’s business.
(3) By general news release to all news media. Failure by the secretary to cause the
publication of notice as required by this subparagraph shall not be deemed to prevent or
delay the cancellation.
b. The termination of a bond or a trust agreement shall not release the parties from any
liability arising out of the facts or transactions occurring prior to the termination date.
c. Trustfundsshallnotbewithdrawnfromtrustbyalicenseeuntiltheexpirationofninety
days after the date of termination of the trust, and then only if no claims secured by the
agreement have been filed with the secretary. If any claims have been filed with the secretary,
the withdrawal of funds by the licensee shall not be permitted until the claims have been
satisfied or released and evidence of the satisfaction or release filed with the secretary.

Legislative History

[C73, 75, 77, 79, 81, §172A.4]