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Developed and maintained by the Division of Legislative Automated Systems.
2005 SESSION
Be it enacted by the General Assembly of Virginia:
1. That § 38.2-231 of the Code of Virginia is amended and reenacted as follows:
§ 38.2-231. Notice of cancellation, refusal to renew, reduction in coverage or increase in premium of certain liability insurance policies.
A. 1. No cancellation or refusal to renew by an insurer of a
policy of insurance as defined in § 38.2-117 or § 38.2-118 insuring a
business entity, or a policy of insurance that includes as a part thereof
insurance as defined in § 38.2-117 or § 38.2-118 insuring a business
entity, or a policy of motor vehicle insurance against legal liability of the
insured as defined in § 38.2-124 insuring a business entity, shall be effective
unless the insurer delivers or mails to the named insured at the address shown
on the policy a written notice of cancellation or refusal to renew. Such notice
shall:
a. Be in a type size authorized under § 38.2-311;
b. State the date, which shall not be less than 45 days after the delivery or mailing of the notice of cancellation or refusal to renew, on which such cancellation or refusal to renew shall become effective, except that such effective date may not be less than 15 days from the date of mailing or delivery when the policy is being cancelled or not renewed for failure of the insured to discharge when due any of its obligations in connection with the payment of premium for the policy;
c. State the specific reason or reasons of the insurer for cancellation or refusal to renew;
d. Advise the insured of its right to request in writing, within 15 days of the receipt of the notice, that the Commissioner of Insurance review the action of the insurer; and
e. In the case of a policy of motor vehicle insurance, inform the insured of the possible availability of other insurance which may be obtained through its agent, through another insurer, or through the Virginia Automobile Insurance Plan.
2. Nothing in this subsection shall apply to any policy of insurance if the named insured or his duly constituted attorney-in-fact has notified orally, or in writing, if the insurer requires such notification to be in writing, the insurer or its agent that he wishes the policy to be canceled or that he does not wish the policy to be renewed, or if, prior to the date of expiration, he fails to accept the offer of the insurer to renew the policy.
B. No insurer shall cancel or refuse to renew a policy of motor vehicle insurance against legal liability of the insured as defined in § 38.2-124 insuring a business entity solely because of lack of supporting business or lack of the potential for acquiring such business.
C. No reduction in coverage for personal injury or property
damage liability initiated by an insurer and no increase in the filed rate
for such coverage premium greater than 25 percent initiated by an
insurer of a policy of insurance defined in § 38.2-117 or § 38.2-118
insuring a business entity, or of a policy of insurance that includes as a part
thereof insurance defined in § 38.2-117 or § 38.2-118 insuring a
business entity, or a policy of motor vehicle insurance against legal liability
of the insured as defined in § 38.2-124 insuring a business entity, and which
in the case of a reduction in coverage is subject to § 38.2-1912, shall be
effective unless the insurer delivers or mails to the named insured at the
address shown on the policy a written notice of such reduction in coverage or rate
premium increase not later than 45 days prior to the effective date of
same. The increase in premium shall be the difference between the renewal
premium and the premium charged by the insurer at the effective date of the
expiring policy. Such notice shall:
1. Be in a type size authorized under § 38.2-311;
2. State the date, which shall not be less than 45 days after
the delivery or mailing of the notice of reduction in coverage or increase in
rate premium, on which such reduction in coverage or increase in
rate premium shall become effective;
3. State the manner in which coverage under an existing
policy will be reduced or the amount of such rate increase Advise the
named insured that the specific reason for the increase and the amount of the
increase, or, if in the case of a reduction in coverage, the specific reason
for the reduction and the manner in which coverage will be reduced, may be
obtained from the agent or the insurer;
4. State the specific reason or reasons for the reduction
in coverage or increase in rate;
5. Advise the insured of its right to request in
writing, within 15 days of receipt of the notice, that the Commissioner of
Insurance review the action of the insurer.
D. If an insurer does not provide notice in the manner
required in subsection C, coverage shall remain in effect until 45 days after
written notice of reduction in coverage or increase in rate premium
is mailed or delivered to the insured at the address shown on the policy,
unless the insured obtains replacement coverage or elects to cancel sooner in
either of which cases coverage under the prior policy shall cease on the
effective date of the replacement coverage or the elected date of cancellation
as the case may be. If the insured fails to accept or rejects the changed
policy, coverage for any period that extends beyond the expiration date will be
under the prior policy's terms and conditions. If the insured accepts the
changed policy, the reduction in coverage or increase in rate premium
shall take effect upon the expiration of the prior policy.
E. Notice of reduction in coverage or increase in rate
premium shall not be required if the insurer, after written demand, has not
received, within 45 days after such demand has been mailed or delivered to the
insured at the address shown on the policy, sufficient information from the
insured to provide the required notice, or if such notice is waived in writing
by the insured.
F. No written notice of cancellation, refusal to renew,
reduction in coverage or increase in rate premium that is mailed
by an insurer to an insured in accordance with this section shall be effective
unless:
1. a. It is sent by registered or certified mail,
b. At the time of mailing the insurer obtains a written receipt from the United States Postal Service showing the name and address of the insured stated in the policy, or
c. At the time of mailing the insurer (i) obtains a written receipt from the United States Postal Service showing the date of mailing and the number of items mailed and (ii) retains a mailing list showing the name and address of the insured stated in the policy, or the last known address, to whom the notices were mailed, together with a signed statement by the insurer that the written receipt from the United States Postal Service corresponds to the mailing list retained by the insurer; and
2. The insurer retains a copy of the notice of cancellation,
refusal to renew, reduction in coverage or increase in rate premium.
3. a. If the terms of a policy of motor vehicle insurance
insuring a business entity require the notice of cancellation, refusal to
renew, reduction in coverage or increase in rate premium to be
given to any lienholder, then the insurer shall mail such notice and retain a
copy of the notice in the manner required by this subsection. If the notices
sent to the insured and the lienholder are part of the same form, the insurer
may retain a single copy of the notice. The registered, certified or regular
mail postal receipt and the copy of the notices required by this subsection
shall be retained by the insurer for at least one year from the date of
termination.
b. Notwithstanding the provisions of subdivision 3 a, if the
terms of the policy require the notice of cancellation, refusal to renew,
reduction in coverage or increase in rate premium to be given to
any lienholder, the insurer and lienholder may agree by separate agreement that
such notices may be transmitted electronically provided that the insurer and
lienholder agree upon the specifics for transmittal and acknowledgement of
notification. Evidence of transmittal or receipt of the notification required
by this subsection shall be retained by the insurer for at least one year from
the date of termination.
4. Copy, as used in this subsection, shall include photographs, microphotographs, photostats, microfilm, microcard, printouts or other reproductions of electronically stored data, or copies from optical disks, electronically transmitted facsimiles, or any other reproduction of an original from a process which forms a durable medium for its recording, storing, and reproducing.
G. Nothing in this section shall prohibit any insurer or agent
from including in a notice of cancellation, refusal to renew, reduction in
coverage or rate premium increase any additional disclosure
statements required by state or federal laws.
H. For the purpose of this section the terms (i)
"business entity" shall mean an entity as defined by subsection A of
§§ 13.1-543, § 13.1-603 or § 13.1-803 and shall include an
individual, a partnership, an unincorporated association, the Commonwealth, a
county, city, town, or an authority, board, commission, sanitation, soil and
water, planning or other district, public service corporation owned, operated
or controlled by the Commonwealth, a locality or other local governmental
authority,; (ii) "policy of motor vehicle insurance"
shall mean a policy or contract for bodily injury or property damage liability
insuring a business entity issued or delivered in this Commonwealth covering
liability arising from the ownership, maintenance, or use of any motor vehicle,
but does not include (a) any policy issued through the Virginia Automobile
Insurance Plan, (b) any policy providing insurance only on an excess basis, or
(c) any other contract providing insurance to the named insured even though the
contract may incidentally provide insurance on motor vehicles,;
and (iii) "reduction in coverage" shall mean, but not be limited to,
any diminution in scope of coverage, decrease in limits of liability, addition
of exclusions, increase in deductibles, or reduction in the policy term or
duration except a reduction in coverage filed with and approved by the
Commission and applicable to an entire line, classification or
subclassification of insurance.
I. Within 15 days of receipt of the notice of cancellation,
refusal to renew, reduction in coverage or increase in rate premium,
the insured shall be entitled to request in writing to the Commissioner that he
review the action of the insurer. Upon receipt of the request, the Commissioner
shall promptly begin a review to determine whether the insurer's notice of
cancellation, refusal to renew, reduction in coverage or rate premium
increase complies with the requirements of this section. Where the
Commissioner finds from the review that the notice of cancellation, refusal to
renew, reduction in coverage or rate premium increase does not
comply with the requirements of this section, he shall immediately notify the
insurer, the insured and any other person to whom such notice was required to
be given by the terms of the policy that such notice is not effective. Nothing
in this section authorizes the Commissioner to substitute his judgment as to
underwriting for that of the insurer. Pending review by the Commission, this
section shall not operate to relieve an insured from the obligation to pay any
premium when due; however, if the Commission finds that the notice required by
this section was not proper, the Commission may order the insurer to pay to the
insured any overpayment of premium made by the insured.
J. Every insurer shall maintain for at least one year records
of cancellation, refusals to renew, reductions in coverage and rate
premium increases to which this section applies and copies of every notice
or statement required by subsections A, C and, F and L of
this section that it sends to any of its insureds.
K. There shall be no liability on the part of and no cause of
action of any nature shall arise against (i) the Commissioner of Insurance or
his subordinates,; (ii) any insurer, its authorized
representative, its agents, or its employees,; or (iii) any firm,
person or corporation furnishing to the insurer information as to reasons for
cancellation, refusal to renew, reduction in coverage or rate premium
increase, for any statement made by any of them in complying with this section
or for providing information pertaining thereto.
L. Notwithstanding anything in this section to the contrary, if an insurer cancels or refuses to renew a policy of medical malpractice insurance as defined in § 38.2-2800, or if the premium increases for a medical malpractice insurance policy by more than 25 percent of the previous policy's premium, the insurer shall provide no fewer than 90 days notice prior to the renewal effective date, or, if such policy is being cancelled or non-renewed for failure of the insured to discharge when due any of its obligations in connection with the payment of premium for the policy, the effective date of cancellation or refusal to renew shall not be less than 15 days from the date of mailing or delivery of the notice. The increase in the premium shall be the difference between the renewal premium and the premium charged by the insurer at the effective date of the expiring policy.