1. In the event of the mutilation or destruction of an annual license issued by the division, the lawful holder thereof may file with the motor carrier and railroad safety division an affidavit showing such fact and shall, on the surrender of that portion of the mutilated, damaged or worn license on which is imprinted the serial number, and the payment of a fee of one dollar, obtain a duplicate or replacement of such license under such rules and regulations as the division may prescribe.

2. Whenever a law enforcement officer observes an annual license issued by the motor carrier and railroad safety division to be in such condition as to hinder or make difficult identification of same, he shall notify the division and instruct the owner to apply for a duplicate or replacement. If the owner has not made application within fifteen days, the division may cancel such license and notify the owner and such cancellation shall remain in force until the application has been filed.