§ 34.1-4-406 — Customer's duty to discover and report unauthorized signature or alteration

(a) A bank that sends or makes available to a customer a
statement of account showing payment of items for the account
shall either return or make available to the customer the items
paid or provide information in the statement of account
sufficient to allow the customer reasonably to identify the
items paid. The statement of account provides sufficient
information if the item is described by item number, amount, and
date of payment.
(b) If the items are not returned to the customer, the
person retaining the items shall either retain the items or, if
the items are destroyed, maintain the capacity to furnish
legible copies of the items until the expiration of seven (7)
years after receipt of the items. A customer may request an
item from the bank that paid the item, and the bank must provide
in a reasonable time either the item or, if the item has been
destroyed or is not otherwise obtainable, a legible copy of the
item.
(c) If a bank sends or makes available a statement of
account or items pursuant to subsection (a), the customer must
exercise reasonable promptness in examining the statement or the
items to determine whether any payment was not authorized
because of an alteration of an item or because a purported
signature by or on behalf of the customer was not authorized.
If, based on the statement or items provided, the customer
should reasonably have discovered the unauthorized payment, the
customer must promptly notify the bank of the relevant facts.
(d) If the bank proves that the customer failed, with
respect to an item, to comply with the duties imposed on the
customer by subsection (c), the customer is precluded from
asserting against the bank:
(i) The customer's unauthorized signature or any
alteration on the item, if the bank also proves that it suffered
a loss by reason of the failure; and
(ii) The customer's unauthorized signature or
alteration by the same wrongdoer on any other item paid in good
faith by the bank if the payment was made before the bank
received notice from the customer of the unauthorized signature
or alteration and after the customer had been afforded a
reasonable period of time, not exceeding thirty (30) days, in
which to examine the item or statement of account and notify the
bank.
(e) If subsection (d) applies and the customer proves that
the bank failed to exercise ordinary care in paying the item and
that the failure substantially contributed to loss, the loss is
allocated between the customer precluded and the bank asserting
the preclusion according to the extent to which the failure of
the customer to comply with subsection (c) and the failure of
the bank to exercise ordinary care contributed to the loss. If
the customer proves that the bank did not pay the item in good
faith, the preclusion under subsection (d) does not apply.
(f) Without regard to care or lack of care of either the
customer or the bank, a customer who does not within one (1)
year after the statement or items are made available to the
customer (subsection (a)) discover and report the customer's
unauthorized signature on or any alteration on the item is
precluded from asserting against the bank the unauthorized
signature or alteration. If there is a preclusion under this
subsection, the payor bank may not recover for breach of
warranty under section 34.1-4-208 with respect to the
unauthorized signature or alteration to which the preclusion
applies.