Bonding in Hawaii

A surety bond is a 3-party promise. The contractor (the principal) pays a surety company for a bond that a customer, a government entity, or an injured member of the public (the obligee or claimant) can draw against if the contractor breaks the rules the bond covers. The surety pays valid claims up to the bond face value. The contractor then owes the surety for what the surety paid out. Hawaii handles contractor financial responsibility differently from most states, and the difference matters to every trade. 1. No statewide contractor license bond requirement (Recovery Fund in place). The Hawaii Contractors License Board does not require every licensed contractor to post a statewide surety bond on top of the license. Instead, the Board operates the Contractors Recovery Fund under HRS Section 444-26, funded by a recovery-fund fee collected at licensure (currently $148.00 full / $74.00 half per the 2025 contractor application). The Recovery Fund pays valid consumer claims against licensed contractors up to the statutory limit, subject to court-ordered findings. An individual entity or sole owner may be required to post a bond by the Board in specific circumstances (for example, as a condition of a probation or reinstatement order), and a bond form CT-09 is available on the Board's application and publications page for those cases. A C-53 Miscellaneous Retail Products contractor is the one category the statute names that requires a $50,000 surety bond as a condition of licensure. For most trade classifications (C-13 Electrical, C-37 Plumbing, C-52 HVAC), the standing requirement is the Recovery Fund fee plus continuous liability and workers' compensation insurance, not a license bond. 2. Mandatory insurance coverages (liability plus workers' comp). Every licensed Hawaii contractor must submit a certificate of liability insurance showing Bodily Injury Liability of at least $100,000 per person and $300,000 per occurrence, and Property Damage Liability of at least $50,000 per occurrence. The contractor must also submit a workers' compensation certificate (or the Board's prescribed substitute form where a single-member LLC with no employees or a corporation with the RME owning at least 50% and no other employees qualifies). Failure to maintain continuous liability and workers' compensation coverage causes automatic forfeiture of the license; if coverage is not reinstated within 60 days, the entity and RME must apply as new applicants. 3. Public works bonds: HRS Chapter 103D and the Little Miller Act for Hawaii. Contracts with Hawaii governmental entities require statutory bonds before work begins under Hawaii Revised Statutes Chapter 103D (Hawaii Public Procurement Code) and HRS Section 103-32.1. - Performance bond. Typically required at 100% of the contract price for contracts above the procurement threshold set in the rules and the solicitation. Bond runs to the governmental entity. - Payment bond. Typically required at 100% of the contract price. Bond runs to the benefit of subcontractors and suppliers. Claim procedures follow HRS Section 103-32.1 and the rules adopted by the State Procurement Office. Subcontractors on a bonded public job do not file mechanic's liens against public property. They perfect claims against the payment bond using the statutory notice procedure. Verify current thresholds and bond amounts on the current solicitation and the State Procurement Office website before bidding. 4. GE tax and county bonding. Hawaii's General Excise (GE) tax applies to gross receipts from construction activity. Registration is through the Department of Taxation and is separate from the contractor's license. Some Hawaii counties may require local bonding or registration for specific types of work (for example, work in right-of-way or excavation permits). Check the county permit office before you pull a permit. 5. Premium math. Where a bond is required (public works job, C-53 category, or a Board-imposed bond), a surety typically charges an annual premium of 1% to 3% of the bond face value for a contractor with strong credit and no prior claims. Weaker credit, tax liens, prior surety losses, or a new business can push the rate to 5% to 10% or more. Public works performance and payment bonds are priced per job, usually 0.5% to 3% of the contract price depending on contract size, job type, and the contractor's financial statements. Bond, insurance, workers' compensation, and the Recovery Fund fee are separate obligations. A Hawaii contractor carries the Recovery Fund fee at licensure, continuous liability and workers' compensation insurance at the state-set minimum levels or higher, any bond a public solicitation or Board order requires, and any county bond or registration a local permit requires. Confirm each requirement against the current rule and contract before you assume you are compliant.