KRS 355.4-302: Payor bank's responsibility for late return of item.

(1) If an item is presented to and received by a payor bank the bank, is accountable for

the amount of:

(a) a demand item, other than a documentary draft, whether properly payable or

not, if the bank, in any case in which it is not also the depositary bank, re tains

the item beyond midnight of the banking day of receipt without settling for it

or, whether or not it is also the depositary bank, does not pay or return the

item or send notice of dishonor until after its midnight deadline; or

(b) any other properly payable item unless, within the time allowed for acceptance

or payment of that item, the bank either accepts or pays the item or returns it

and accompanying documents.

(2) The liability of a payor bank to pay an item pursuant to subsection (1) of this section

is subject to defenses based on breach of a presentment warranty (KRS 355.4 -208)

or proof that the person seeking enforcement of the liability presented or transferred

the item for the purpose of defrauding the payor bank.