Nevada Encroachment Permit Bonds: NDOT Occupancy Permits and County Rules

Two documents set the bond. NAC 408.437 lets the district engineer require a performance or cash bond equal to 110 percent of the district engineer's estimate of the cost of the improvements authorized by the permit, to ensure their successful and timely completion. In deciding whether to require one, the district engineer considers the department's experience with the permit holder, the potential disruption to highway maintenance or operation and the potential hazard to highway users if the work is late or does not follow the permit.

NDOT's Terms and Conditions booklet, 2021 edition revised August 2022, turns that discretion into a rule for two categories. Section III, item 27 requires a performance bond for Permit Category IV, highway or driveway access for commercial traffic, and Category V, subdivision or commercial development, in a sum equal to 110 percent of the engineer's estimate for the work within the state right of way. The bond must be on the form in Appendix C and written by a surety approved by the Insurance Commissioner of the State of Nevada, and evidence of the bond is submitted with the permit. The district engineer may require a performance or cash bond for other permit types and may accept a performance bond already provided to another public agency instead.

The Appendix C form is broader than a completion guarantee. It secures compliance with the statute and every term of the permit, requires the permittee to hold the State harmless from damage to the highway, to property or to any person arising from the permitted work, to safeguard the work and the highway and to bear the entire cost of completing the work. The surety also agrees that no change, extension or addition to the permit affects its obligation, and certificates of authority for attorneys in fact must be on file with NDOT and the Insurance Commissioner.

Telecommunications installations have their own bond schedule. Under NAC 408.4404 and Section X of the Terms and Conditions, NDOT may require a provider of telecommunications or a cable television company to obtain a $100,000 surety bond when it approves an occupancy permit, and a bond of more than $100,000 but less than $2 million for a facility of significant length. The department weighs its experience with the provider, the risk of disrupting highway maintenance and operation, potential damage to the highway system and the hazard if the facility is installed late or out of compliance. An annual occupancy permit can carry a $200,000 surety bond for each permit issued.

Underground work is tightly specified. The Terms and Conditions call for pipes to cross the roadway by jacking, boring or otherwise forcing them under the pavement without disturbing the roadway section, bar hydraulic or wet boring and allow directional bentonite slurry boring only with the district engineer's approval. Pavement may not be cut unless the permit specifically allows it, and one of the listed grounds for trenching a crossing is a failed boring attempt, with the subsurface conditions certified under the seal of a Nevada licensed engineer. These rules decide how an HDD or utility contractor prices the crossing and what the bond is really securing.

Plans for most permit categories must be reviewed and stamped by an engineer licensed in Nevada, and NDOT's District 1 process note says the technical review period is when an applicant should arrange its client's bond and indemnification agreement. After approval, the District 1 note says the permittee has one year to complete the work.

The permit's indemnity is wider than many contractors expect. Item 2 of Section III requires the permittee to indemnify, defend and save harmless the State, its agencies, officers, employees, agents and contractors from claims for death, injury, disease or property damage arising out of the permitted activities, including negligent operations, defective materials, negligent safeguarding and negligent design. It applies even if the loss is caused in whole or in part by the State's own negligence, unless the permittee establishes in court that the proximate cause was the State's willful misconduct or gross negligence. Separate clauses add indemnity for failing to obtain the underlying fee owner's consent and for delay damages tied to contamination discovered in the right of way.

Whether a contractor's liability policy responds to that promise is a coverage question, not a given. It depends on how the policy defines an insured contract, any contractual liability limitations and the additional insured endorsements in place. The Terms and Conditions booklet we reviewed does not set out an insurance schedule, so ask the district permit office what certificates and endorsements it will require and have them reviewed against the indemnity before the permit is signed.

Unincorporated Clark County splits right-of-way work in two. Under Title 30 section 30.06.11G, an off-site permit covers major new improvements and issues only after plans are approved and bonds and agreements are executed, which is where the developer's 100 percent off-site improvement bond comes in. An encroachment permit covers minor reconstruction, maintenance of existing improvements, new utility facilities and other minor encroachments, and requires a completed application, approved plans with a construction traffic control plan, a utility company or an applicant licensed by the State Contractors Board and an applicant not in default on an existing permit.

Security on an encroachment permit is targeted. An applicant that had a permit in default within the previous two years must make a deposit in the amount the Director of Public Works sets to restore the streets; the county may use it if the permittee fails to restore the right of way, and it is released on final approval of the work. Clark County also restricts cuts in streets that have been built, reconstructed or resurfaced: under section 30.06.11K, an owner that was notified and did not make its improvements may not excavate in that street for five years after the county accepts it. Section 30.06.11L requires alternatives such as jacking, boring or tunneling to be considered first, and any allowed cut must meet the county's restoration standards, which can include resurfacing beyond the trench. Public Works posts a current No Cut street list.

Washoe County's encroachment and excavation permit for county right of way, issued under Washoe County Code sections 85.058 through 85.115, requires a $5,000 performance bond on a form approved by the District Attorney, plus liability insurance with $1 million combined single limit and $2 million aggregate. The certificate must name Washoe County as an additional insured, and all endorsements must be received before the permit issues. Only a utility company or a contractor licensed, bonded and insured to work in Nevada may hold the permit.

The county's bond form is a continuing obligation. It covers every street cut permit issued to the principal while the bond is in force, including all guarantee periods tied to those permits, until the surety gives 90 days' written notice of cancellation. The permit conditions are short-fused: the permit expires if excavation does not start within 15 calendar days and is valid for no more than 30, temporary hot-mix patches at least 3 inches thick go in within 24 hours after backfill and the permittee maintains them for up to 90 days. Projects longer than 500 lineal feet need a subsurface utility improvement submittal, and grind, overlay or slurry seal can be imposed as a special condition.

Because the bond is small and continuing, the larger exposure is often outside it. The permit's indemnity covers injury or property damage resulting from the permitted work, and the county may make good any loss the permittee neglects and charge back its costs, including engineering and legal fees. That is why paving and utility contractors should look at their liability program, not just the bond, before working in county roads.