A. Each association shall maintain an effective blanket indemnity bond with an adequate corporate surety authorized to do business in this state protecting the association from loss by or through any fraud, dishonesty, forgery or alteration, larceny, embezzlement, robbery, burglary, misappropriation or any other dishonest or criminal action or omission by any officer or employee of the association and any director of the association when performing the duty of an officer or employee. The coverage shall be maintained in minimum amounts, computed on a base consisting of the total assets of the association plus the unpaid balance of loans which it has contracted to service for others, as follows:
| Base | Coverage |
| Not over $300,000 | $15,000 plus $7,500 for each |
| $300,001 to $1,000,000 | $45,000 plus $15,000 for each |
| $1,000,001 to $10,000,000 | $150,000 plus $30,000 for each |
| $10,000,001 to $30,000,000 | $450,000 plus $60,000 for each |
| $30,000,001 to $60,000,000 | $705,000 plus $75,000 for each |
| $60,000,001 to $100,000,000 | $945,000 plus $90,000 for each |
| $100,000,001 and over | $1,230,000 plus $105,000 for each |
B. No association is required to maintain indemnity bond coverage in an amount greater than three million dollars ($3,000,000). The coverage may contain provision for a deductible amount from any loss which, except for the deductible provision, would be recoverable from the surety, but no deductible amount shall be in excess of five hundred dollars ($500) for all losses involving the same person in any case where the base for the coverage is ten million dollars ($10,000,000) or less, or in excess of one thousand dollars ($1,000) where the base is in excess of ten million dollars ($10,000,000). Associations which employ collection agents who, for any reason, are not covered by a bond required by this section, shall provide for the bonding of each unbonded agent in an amount equal to at least twice the average monthly collection of the agent. Such agents shall be required to make settlement with the association at least monthly. No bond coverage is required for any agent which is an association insured by the federal savings and loan insurance corporation.
C. The amounts and form of the bonds and sufficiency of the surety shall be approved by the board of directors and the supervisor. All bonds shall provide that a cancellation, either by the surety or the insured, shall not become effective until thirty days after notice in writing has been received by the supervisor unless the supervisor approves the cancellation earlier.
D. Every association shall pay on behalf of, or reimburse, an officer, director or employee for the expenses of defending an action brought on behalf of the association or the savings account holders, other creditors or borrowers thereof, founded upon any acts performed or omitted by the person acting as an officer, director or employee if:
(1) the person is adjudicated to be not liable, in which case all reasonable expenses of litigation shall be paid by the association; or
(2) the person is held to be liable on certain items and not liable on others, in which case the association shall pay the proportion of the total reasonable expenses of litigation which the items on which he is held to be not liable bear to all the items alleged.
If, in the opinion of the association, the person is not liable upon the substantive issues alleged, the association may compromise and settle the claim or litigation in its discretion and pay the entire expense, including the compromise settlement, if the expense is reasonable. Any action taken by the association under this subsection requires approval by vote of at least two-thirds of the directors of the association, any interested director taking no part in the vote, or by vote of the members.
History: 1953 Comp., § 48-15-67, enacted by Laws 1967, ch. 61, § 23.
ANNOTATIONSCross references. — For meaning of "supervisor", see 58-10-2J NMSA 1978.
Am. Jur. 2d, A.L.R. and C.J.S. references. — 10 Am. Jur. 2d Banks § 424.
Insurance of bank against larceny and false pretenses, 15 A.L.R.2d 1006.
9 C.J.S. Banks and Banking § 102; 12 C.J.S. Building and Loan Associations § 15.