I hope this message finds you well, present circumstance excluded. I am a licensed attorney with over a decade of experience handling matters such as this one. It is a pleasure to assist you today.
This is an interesting area of the law because local ordinances frequently outpace the scope and breadth of state law. In the present case, state law requires that the Health Department must notify the owner if the animal that bit someone or another animal has been impounded and is believed to be a carrier of disease, like rabies. Colorado Statute 25-4-604.
However, C. R. S. A. § 30-15-104 runs a little contrary to the aforementioned statute. This Colorado statute immunizes the board of county commissioners or other local governing entity from liability associated with the impoundment of pet animals. Specifically, it states the board or anyone authorized to enforce a local ordinance shall not be held responsible for any accident or subsequent disease that may occur to the animal in connection with the administration of the resolution or ordinance.
The reason for the later statute is that because local ordinances can run contrary to state law, the state is trying to protect local officials.
What does this all mean for you guys? It means that if the dog was impounded under local ordinance, then it is likely that the agency is correct in that they do not have to find the actual owner of the dog as they have claimed. Moreover, if the dog is being checked for rabies, state law protects them in keeping the dog too.
I wish I had better news for you, but this looks like a situation in which they are relying on local ordinance to defend themselves. I suggest that you ask them for the specific ordinance for which they are relying to defend their position. If they cannot produce it and there is no infectious disease hold on the animal through the Department of Health, you can likely get an injunction from a local court which demands the release of the animal.
Let me know if you have any other questions or comments.
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Best wishes going forward!