Section 16-106-56 - Requirements for trustees(a) The requirements of this section shall be met if time share units are conveyed to a trustee under a lien payment trust established pursuant to section 514E-19, HRS.(b) The trustee shall be a bank, savings and loan association, or trust company authorized to do business in the State; provided that if the trustee is an out-of-state bank, savings and loan association, or trust company, the trustee shall be subject to approval of the director.(c) The trustee shall at all times maintain a fidelity bond or fidelity bonds covering all of its directors, officers, employees, agents, and volunteers having control of or access to moneys or securities of the trustee, or moneys or securities which are collected, held, managed, or disbursed by the trustee. The fidelity bond or fidelity bonds shall cover any loss of money or other property the trustee, the time share owners association, time share owners, and time share purchasers 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 trustee. The bond may be in the form of individual bonds, a schedule fidelity bond, or a blanket bond covering all of the persons mentioned above, 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 notice in writing to the director and to the time share owners association of the cancellation of the bond;(3) That the prosecution or conviction or both of a director, officer, employee, agent, or volunteer of the trustee shall not be a condition precedent to recovery on the bond;(4) That knowledge of defalcations shall not be imputed to the trustee 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 trustee;(6) That the bond may not be changed or amended without the prior written consent of the director; and(7) That the surety waives any defense based upon the exclusion of volunteers or other persons who serve without pay from coverage under the bond. The amount and form of the fidelity bond or fidelity bonds covering directors, officers, employees, agents, and volunteers of the trustee, and the sufficiency of the surety thereon, shall be approved by the director; provided that the amount of any bond shall be at least $50,000 or equivalent to the sum of all blanket liens on the time share units which are registered for sale in the time share plan.
(d) The trustee shall at all times maintain a policy of errors and omissions insurance covering any loss which the trustee shall become legally obligated to pay as a result of any claims made against the trustee by reason of liability arising out of any "wrongful act" on the part of the trustee in its capacity as trustee of a time share plan under section 514E-19, HRS. The term "wrongful act" shall mean any actual or alleged error or misstatement or misleading statement or act or omission or neglect or breach of duty by the trustee. The policy of insurance may contain at least the following provisions: (1) That the insurer shall provide, not less frequently than annually, written assurances to the director and to the time share owners association that the policy is in full force and effect;(2) That the insurer may not cancel the policy without giving at least thirty days notice in writing to the director and to the time share owners association of the cancellation of the policy; and(3) That the policy may not be changed or amended without the prior written consent of the director. The amount and form of the policy and the sufficiency of the insurer thereon shall be approved by the director; provided that the amount of any policy shall be at least $5,000,000.
[Eff and comp 3/28/85; comp 8/30/85; am and comp 11/29/85; comp 6/5/87; comp 3/7/88; comp 9/15/90] (Auth: HRS §§ 514E-13, 514E-23) (Imp: HRS § 514E-23)