I am not aware of any requirement to time a hold which is defined by leg distance. It's either timed or has a defined leg distance as far as I know. In the case of LNAV equipment failure, an equipment failure report should be given and an amended clearance requested. An RNAV hold with 4 mile legs would be executed by flying the outbound leg until the indicated along track distance (ATD) reaches 4, then the inbound turn is executed. If you're lucky enough to be using one of the FMSs that have the capability to steer the airplane around the entire hold with LNAV engaged, you might even have enough time to complete some of those ubiquitous and ill-timed abnormal checklists! At my first training on the Honeywell, the most commonly heard question in the sim was: Aww, wherezit goin' now?
Hope that helps,
Westhawk