HAR §16-106-40. Plan manager’s bond

(a) A plan manager shall at all times maintain a bond, naming the time share owners association and all time share owners as obligees, covering all of its directors, officers, employees, agents, and volunteers having control of or access to moneys of the plan manager or moneys which are collected, held, managed, or disbursed by the plan manager in the performance of its duties as plan manager for a time share plan. The bond shall cover any loss of money or other property the plan manager, time share owners association and time share owners may sustain as a result of any fraud, dishonesty, forgery or alteration, larceny, theft, embezzlement, unlawful obstruction, misapplication, misplacement, destruction or misappropriation, or any other dishonest or criminal act or omission, or infidelity to duty of or by any director, officer, employee, agent, or volunteer of the plan manager, and may contain at least the following provisions: (1) That the surety shall provide, not less frequently than annually, written assurances to the director and to the time share owners association that the bond is in full force and effect; (2) That the surety may not cancel the bond without giving at least thirty days prior written notice to the director and to the time share owners association of the cancellation of the bond; 106-41 (3) That the prosecution or conviction or both of a director, officer, employee, agent, or volunteer of the plan manager shall not be a condition precedent to recovery on the bond; (4) That knowledge of defalcations shall not be imputed to the plan manager where a director, officer, employee, agent, or volunteer other than the offending party has knowledge of the defalcations; (5) That the identification of a specific offending party shall not be a condition precedent to recovery on the bond; provided that it is conclusively shown that loss has occurred as a result of the actions of a director, officer, employee, agent, or volunteer of the plan manager; (6) That the surety expressly acknowledges the plan manager’s status (if such be the case) as an independent contractor or agent of the time share owners association, and that coverage under the bond shall not be affected thereby; (7) That the bond may not be changed or amended without the prior written consent of the director; and (8) That the surety waives any defense based upon the exclusion of volunteers or other persons who serve without pay from coverage under the bond. (b) The amount and form of the above-described bond and the identity of the surety thereon shall be approved by the director; provided that the amount of the bond shall be not less than the following: (1) If payments are collected or received by the plan manager or due from the time share owners at intervals of forty-five days or less, an amount equal to three times the total amount due at each such interval from the owners of all time share units in the time share plan; or (2) If payments are collected or received by the plan manager or due from the time share owners at intervals longer than forty-five days, an amount equal to two times the total amount due at each such interval from the owners of all time share units in the time share plan. (3) Notwithstanding subsections (1) and (2), the amount of the bond shall not be less than $10,000 nor more than $200,000, unless said amount is increased or decreased by the director pursuant to subsection (d). (c) In lieu of the above-described bond, a plan manager may file a cash bond or irrevocable letter of credit with the director in the applicable amount specified in subsection (b)(1) or subsection (b)(2) above. 106-42 (d) The director shall have the discretion to accept a bond or other equivalent, the form and amount of which are not in conformance with this section if, in the judgment of the director, that bond or equivalent would give time share owners the benefits and protections designed to be afforded by this section. In the exercise of that discretion, the director may take into consideration the following factors: (1) The background and experience of the plan manager; (2) The length of operation of the time share program; (3) The financial history and strength of the plan manager; (4) The history of complaints or non-complaints against the plan manager; (5) The plan manager is a real estate broker, licensed pursuant to chapter 467, HRS; (6) The existence of other types of insurance covering the plan manager; (7) The method of collection and procedures in place to protect time share owners; and (8) Such other factors upon which the benefits and protections to be afforded the time share owners by this section can best be met without undue burden to the plan manager. (e) A plan manager shall annually provide evidence that a bond which satisfies the requirements of this section has been secured for each time share plan under the management of the plan on a form prescribed by the director. [Eff and comp 9/1/85; am and comp 11/29/85; am and comp 6/5/87; am and comp 3/7/88; comp 9/15/90] (Auth: HRS §§514E-10, 514E-13) (Imp: HRS §514E-10)