By Jerry Kopel
Nov. 9, 2008
Will the legislature reinstate an outrageous
Here's background on surety bonding for Colorado notaries public which
was repealed in 1992. It may be pushed back into law by the bonding
industry when the 2009 legislature considers the Dept, of Regulatory
Agencies (DORA) Sunset review of the notary public law.
In 1981, the legislature increased the four year surety bond required
for a notary public commission from $1,000 to $5,000. The $1,000 amount
had been the law from 1908 (if not earlier) through 1980.
From 1981 through 1990, the notary surety industry took in $5,734,021 as
Colorado premiums, according to their figures. They paid out $106,644
for damage claims, which is a two percent loss ratio.
How much did the surety bond cost a Colorado notary public? From the
National Notary Association position paper in 1991: "A $5,000 bond ...
costs a Colorado notary $50 or less, with some bonding agents charging
premiums as low as $25".
But the state department's notary licensing director in 1991 disagreed,
stating the average cost was $50, with prices ranging from $35 to $80.
The (in my opinion) "scam" was uncovered by DORA research staff which
prepared the Notary Public 1991 Sunset review for the legislature to
consider in 1992. At that time the reasonable loss ratio (claims paid
out) suggested by insurance commissioners was 40 percent.
Actually, Colorado's payment to victims was greater than the rest of the
country. In 1990, the surety industry's released figures were
$17,825,344 direct premiums earned, with $288,071 in claims paid for a
loss ratio of 1.6 percent. Talk about windfall profits!
DORA's 1991 Sunset report recommended the $5,000 surety bond be repealed
based on the small numbers of claims and repaid losses. Since the bond
requirement was repealed in 1992, why this column?
In 2008, the state auditor out-sourced a performance review of the
notary public law to Clifton Gunderson LLP, Certified Public Accountants
from Greenwood Village.
While the report mentioned the 1992 surety bond repeal, it provided the
reader with NO INFORMATION as to why the bond had been removed from the
law. No one presently serving in the legislature (thanks to term limits)
has any reason to know the background.
The Gunderson staffer recommended the legislature consider the Model
Notary Act of 2002 which, among other suggestions, requires a $25,000
DORA's review found 110,000 new and reappointed notaries public
presently active with an average of 27,000 to 28,000 commissioned in
each yearly cycle. DORA did not recommend reinstating a surety bond
requirement finding "a manual sifting of complaints filed ... did not
provide justification for recommendation ..."
The Gunderson staffer also recognized the vagueness of record keeping by
the secretary of state of 149 complaints from fiscal years 2006 and
2007, resulting in four notary commissions revoked, two suspensions and
Neither Gunderson nor DORA mentioned that bonding companies, by law, can
recover from a notary public who caused a monetary loss, the full amount
of the loss, further reducing the percent of claims paid out compared to
the profit figures. Small claims courts have jurisdiction up to $7,5000
in damages with no attorneys needed for representation.
DORA and Gunderson did agree on other recommendations:
- Keep commissioning notaries public since
they are usually required by all states to be involved in real
- better record keeping on complaints;
- accurate journals for each notary act
performed and not just in real estate transactions.
For many notaries, DORA reminds us "a commission
is simply an adjunct to their other job duties" but "there are certain
occupations in which holding a notary commission is an essential
However, that is no reason for the state by statute to pick their
(Jerry Kopel served 22 years in the Colorado House.)