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ACROSS SESSIONS
- Subject Index: Since 1995
- Bills & Resolutions: Since 1994
- Summaries: Since 1994
Developed and maintained by the Division of Legislative Automated Systems.
2010 SESSION
Be it enacted by the General Assembly of Virginia:
1. That §§ 38.2-1442 and 38.2-1700 through 38.2-1715 of the Code of Virginia are amended and reenacted as follows:
§ 38.2-1442. Guaranty association obligations.
A domestic insurer may invest in any obligation not in default
of the Virginia Life, Accident and Sickness Insurance Guaranty Association
issued pursuant to subdivision L 3 of subsection J of § 38.2-1704
or the Virginia Property and Casualty Insurance Guaranty Association issued
pursuant to subdivision 2 of subsection B of § 38.2-1606.
§ 38.2-1700. Purpose and applicability of chapter.
A. The purpose of this chapter is to protect, subject to certain
limitations, policyowners, insureds, beneficiaries, annuitants, payees, and
assignees of life insurance policies, accident and sickness insurance policies,
annuity contracts, and supplemental contracts the persons specified in
subsection B against failure to fulfill in the performance of
contractual obligations due to, under life and accident and sickness
insurance policies and annuity contracts specified in subsection C because of
the impairment or insolvency of the insurers issuing those member
insurer that issued the policies or contracts. This chapter shall be
construed to effect this purpose. To provide this protection, (i) an
association of insurers is created to enable the guaranty of payment of
pay benefits and of continuation of coverages to continue
coverage as limited by this chapter, (ii) and members of the
Association are subject to assessments to provide funds to carry out the
purpose of this chapter, and (iii) the Association is authorized to assist
the Commission, in the prescribed manner, in the detection and prevention of
insurer impairments or insolvencies.
B. This chapter shall provide coverage for the policies and contracts specified in subsection C as follows:
1. This chapter shall provide coverage, for the policies and contracts specified in subsection C, to persons who, regardless of where they reside, except for nonresident certificate holders under group policies or contracts, are the beneficiaries, assignees, or payees of the persons covered under subdivision B 2.
2. This chapter shall provide coverage, for the policies and contracts specified in subsection C, to persons who are owners of or certificate holders under the policies or contracts, other than unallocated annuity contracts and structured settlement annuities, and in each case who:
a. Are residents; or
b. Are not residents and (i) the insurer that issued the policies or contracts is domiciled in the Commonwealth, (ii) the states in which the persons reside have associations similar to the Association, and (iii) the persons are not eligible for coverage by an association in any other state due to the fact that the insurer was not licensed in the state at the time specified in the state's guaranty association law.
3. For unallocated annuity contracts specified in subsection C, subdivisions B 1 and B 2 shall not apply, and this chapter, except as provided in subdivisions B 5 and B 6, shall provide coverage to persons who are the owners of the unallocated annuity contracts if the contracts are issued to or in connection with a specific benefit plan whose plan sponsor has its principal place of business in this Commonwealth.
4. For structured settlement annuities specified in subsection C, subdivision B 1 and B 2 shall not apply and this chapter, except as provided in subdivisions B 5 and B 6, shall provide coverage to a person who is a payee under a structured settlement annuity, or beneficiary of a payee if the payee is deceased, if the payee:
a. Is a resident, regardless of where the contract owner resides; or
b. Is not a resident and both (i) the contract owner of the structured settlement annuity is (a) a resident or (b) not a resident but the insurer that issued the structured settlement annuity is domiciled in the Commonwealth and the state in which the contract owner resides has an association similar to the Association; and (ii) neither the payee or beneficiary, nor the contract owner is eligible for coverage by the association of the state in which the payee or contract owner resides.
5. This chapter shall not provide coverage to:
a. A person who is a payee, or beneficiary, of a contract owner resident of the Commonwealth if the payee, or beneficiary, is afforded any coverage by the association of another state; or
b. A person covered under subdivision B 3 if any coverage is provided by the association of another state to the person.
6. This chapter is intended to provide coverage to a person who is a resident of the Commonwealth and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person who would otherwise receive coverage under this chapter is provided coverage under the laws of any other state, the person shall not be provided coverage under this chapter. In determining the application of the provisions of this subdivision in situations where a person could be covered by the association of more than one state, whether as an owner, payee, beneficiary, or assignee, this chapter shall be construed in conjunction with other state laws to result in coverage by only one association.
C. This chapter shall apply to:
1. Provide coverage to the persons specified in subsection
B for direct, nongroup life insurance policies, accident and
sickness insurance policies, or annuity policies or contracts,
and contracts supplemental to life, accident and sickness insurance
policies and annuity contracts to any of these, for certificates under
direct group policies and contracts, and for unallocated annuity contracts
issued by member insurers licensed to transact insurance in this
Commonwealth at any time, in each case except as limited by this
chapter. Annuity contracts and certificates under group annuity contracts
include guaranteed investment contracts, deposit administration contracts,
unallocated funding agreements, allocated funding agreements, structured
settlement annuities, and any immediate or deferred annuity contracts. This
chapter shall apply also to dental benefit contracts entered into with a dental
plan organization as provided in Chapter 61 (§ 38.2-6100 et seq.) of this
title.
C 2. This chapter shall not apply to
Not provide coverage for:
1 a. That A portion or part of
a variable life insurance or variable annuity of a policy or
contract not guaranteed by an insurer;
2. That portion or part of any policy or contract or
under which the risk is borne by the policyholder policy or contract
owner;
3 b. Any A policy or contract,
or part of a policy or contract assumed by the impaired or insolvent insurer
under a contract of reinsurance, other than reinsurance for which
unless assumption certificates have been issued pursuant to the
reinsurance policy or contract;
4 c. Any A portion of a policy or
contract issued by cooperative nonprofit life benefit companies, mutual
assessment life, accident and sickness insurance companies, burial societies,
fraternal benefit societies, dental and optometric services plans and health
services plans not subject to § 38.2-4213 to the extent that the rate of
interest on which it is based, or the interest rate, crediting rate, or similar
factor determined by use of an index or other external reference stated in the
policy or contract employed in calculating returns or changes in value:
(1) Averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting two percentage points from Moody’s Corporate Bond Yield Average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier; and
(2) On and after the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody’s Corporate Bond Yield Average as most recently available;
d. A portion of a policy or contract issued to a plan or program of an employer, association, or other person to provide life, health, or annuity benefits to its employees, members, or others, to the extent that the plan or program is self-funded or uninsured, including but not limited to benefits payable by an employer, association, or other person under:
(1) A multiple employer welfare arrangement as defined in 29 U.S.C. § 1144;
(2) A minimum premium group insurance plan;
(3) A stop-loss agreement described in subsection B of § 38.2-109; or
(4) An administrative services only contract;
e. A portion of a policy or contract to the extent that it provides for:
(1) Dividends or experience rating credits;
(2) Voting rights; or
(3) Payment of any fees or allowances to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract;
f. A policy or contract issued in the Commonwealth by a member insurer at a time when its license to issue the policy or contract in the Commonwealth had been suspended, revoked, not renewed, or voluntarily withdrawn;
g. An unallocated annuity contract issued to or in connection with a benefit plan protected under the federal Pension Benefit Guaranty Corporation, regardless of whether the federal Pension Benefit Guaranty Corporation has yet become liable to make any payments with respect to the benefit plan;
h. A portion of an unallocated annuity contract that is not issued to or in connection with a specific employee, union, or association of natural persons benefit plan;
i. A portion of a policy or contract to the extent that the assessments required by § 38.2-1705 with respect to the policy or contract are preempted by federal or state law;
j. An obligation that does not arise under the express written terms of the policy or contract issued by the insurer to the contract owner or policy owner, including:
(1) Claims based on marketing materials;
(2) Claims based on side letters, riders, or other documents that were issued by the insurer without meeting applicable policy form filing or approval requirements;
(3) Misrepresentations of or regarding policy benefits;
(4) Extra-contractual claims; or
(5) A claim for penalties or consequential or incidental damages;
k. A contractual agreement that establishes the member insurer’s obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer;
l. A portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract, or as to which the policy or contract owner’s rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier. If a policy’s or contract’s interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this subdivision, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture;
m. A policy or contract providing any hospital, medical, prescription drug or other health care benefits pursuant to Part C or Part D of Subchapter XVIII, chapter 7 of Title 42 of the United States Code (known as Medicare Parts C and D) or any regulations issued pursuant thereto; or
5 n. Any contract or certificate which
is not issued to and owned by an individual, except to the extent of (i) any
annuity benefits guaranteed to an individual by an insurer under such contract
or certificate, (ii) any annuity benefits payable for the benefit of an
individual by an insurer under an annuity contract issued to fund a structured
settlement agreement on account of personal injury or sickness, or (iii) any
life insurance benefits and accident and sickness insurance benefits guaranteed
payable to any person by an insurer A charitable gift annuity as defined
in § 38.2-106.1.
D. This chapter shall provide coverage for the policies and
contracts specified in subsection B The benefits that the Association
may become obligated to cover shall in no event exceed the lesser of:
1. To persons who, regardless of where they reside (except
for nonresident certificate holders under group policies or contracts), are the
beneficiaries, assignees or payees of the persons covered under subdivision 2
The contractual obligations for which the insurer is liable or would have been
liable if it were not an impaired or insolvent insurer; or
2. To persons who are owners of or certificate holders
under such policies or contracts (other than structured settlement annuities),
and who
a. are residents, or
b. are not residents, but only under all of the following
conditions: (i) the insurers which issued such policies or contracts are
domiciled in this state; (ii) such insurers at the time of issuance of such
policies or contracts did not hold a license or certificate of authority in the
states in which such persons reside; and (iii) such persons are not eligible
for coverage by an association of another state where such association is
similar to the association created by this chapter; and
3. For structured settlement annuities described in clause
(ii) of subdivision C 5, subdivisions 1 and 2 of this subsection shall not
apply, and this chapter shall provide coverage to a person who is a payee (or
beneficiary of a payee if the payee is deceased) under such a structured
settlement annuity, if the payee (i) is a resident, regardless of where the
contract owner resides, or (ii) is not a resident, but only under both of the
following conditions: (a) (1) the contract owner of the structured settlement
annuity is a resident or (2) the contract owner of the structured settlement
annuity is not a resident, but the insurer that issued the structured
settlement annuity is domiciled in this Commonwealth, and the state in which
the contract owner resides has an association similar to the association
created by this chapter, and (b) neither the payee (or beneficiary) nor the
contract owner is eligible for coverage by the association of the state in
which the payee or contract owner resides. In determining the application of
the provisions of this subdivision in situations where a person could be
covered by the association of more than one state, whether as an owner, payee,
beneficiary or assignee, this subdivision shall be construed in conjunction
with other state laws to result in coverage by only one association With
respect to:
a. One life, regardless of the number of policies or contracts:
(1) $300,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance;
(2) In health insurance benefits, (i) $100,000 for coverage not defined as disability insurance, basic hospital, medical and surgical insurance, major medical insurance or long-term care insurance including any net cash surrender and net cash withdrawal values; (ii) $300,000 for accident and sickness insurance that constitutes disability insurance or long-term care insurance; and (iii) $500,000 for accident and sickness insurance that constitutes basic hospital medical and surgical insurance or major medical insurance; and
(3) $250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values;
b. Each individual participating in a benefit plan established under Section 401, 403(b) or 457 of the U.S. Internal Revenue Code who (i) selected an investment option that includes investment in unallocated annuity contracts and (ii) is covered by such an unallocated annuity contract, including the beneficiaries of each such individual if deceased, in the aggregate, $250,000 in present value of annuity benefits, including net cash surrender and net cash withdrawal values;
c. Each payee of a structured settlement annuity (or beneficiary or beneficiaries of the payee if deceased), $250,000 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any; and
d. One plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts part or all of any of which is not included in subdivision 2 b, $5 million in benefits, irrespective of the number of contracts with respect to the plan sponsor. However, in the case where one or more unallocated annuity contracts are covered contracts under this chapter and are owned by a trust or other entity for the benefit or two or more plan sponsors, coverage shall be afforded by the Association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in the Commonwealth and in no event shall the Association be obligated to cover more than $5 million in benefits with respect to all such unallocated contracts.
In no event shall the Association be obligated to cover (i) more than an aggregate of $350,000 in benefits with respect to any one life under subdivisions D 2 a, b, and c except with respect to benefits for basic hospital, medical and surgical insurance, and major medical insurance under subdivision D 2 a (2), in which case the aggregate liability of the Association shall not exceed $500,000 with respect to any one individual, or (ii) with respect to one owner of multiple nongroup policies of life insurance, whether the policy owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, more than $5 million in benefits, regardless of the number of policies and contracts held by the owner.
The limitations set forth in this subsection are limitations on the benefits for which the Association is obligated before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the Association’s obligations under this chapter may be met by the use of assets attributable to covered policies or reimbursed to the Association pursuant to its subrogation and assignment rights.
E. Any member insurer which has been declared insolvent and
is placed under a final order of liquidation, rehabilitation, or conservation
by a court of competent jurisdiction prior to July 1, 1991, shall be subject to
the provisions of Chapter 17 as this chapter existed prior to July 1, 1991.
E. In performing its obligations to provide coverage under § 38.2-1704, the Association shall not be required to guarantee, assume, reinsure or perform, or cause to be guaranteed, assumed, reinsured or performed, the contractual obligations of the insolvent or impaired insurer under a covered policy or contract that the Association has determined, with the concurrence of the Commission, do not materially affect the economic values or economic benefits of the covered policy or contract.
§ 38.2-1701. Definitions.
As used in this chapter:
"Account" means any one of the three two
accounts created under § 38.2-1702.
"Association" means the Virginia Life, Accident and Sickness Insurance Guaranty Association created under § 38.2-1702.
"Authorized assessment" or the term "authorized" when used in the context of assessments means that a resolution by the board of directors has been passed whereby an assessment will be called immediately or in the future from member insurers for a specified amount. An assessment is authorized when the resolution is passed.
"Benefit plan" means a specific employee, union, or association of natural persons benefit plan.
"Called assessment" or the term "called" when used in the context of assessments means that a notice has been issued by the Association to member insurers requiring that an authorized assessment be paid within the time frame set forth within the notice. An authorized assessment becomes a called assessment when notice is mailed by the Association to member insurers.
"Contractual obligation" means any an
obligation under covered policies a policy or contract or certificate
under a group policy or contract, or portion thereof for which coverage is
provided under § 38.2-1700.
"Covered policy" means any a policy or
contract within the scope of this chapter or portion of a policy or
contract for which coverage is provided under § 38.2-1700.
"Extra-contractual claims" shall include, for example, claims relating to bad faith in the payment of claims, punitive or exemplary damages, or attorney fees and costs.
"Impaired insurer" means a solvent member
insurer considered by the Commission to be potentially unable to fulfill its
contractual obligations.
"Insolvent insurer" means a member insurer that
becomes insolvent and is placed under a final an order of
liquidation, rehabilitation, or conservation by a court of competent
jurisdiction with a finding of insolvency.
"Member insurer" means any person an
insurer licensed to write transact in this Commonwealth any
class of insurance to which this chapter applies under § 38.2-1700,
including an insurer whose license to transact the business of insurance in the
Commonwealth has been suspended, revoked, not renewed or voluntarily withdrawn,
but does not include cooperative nonprofit life benefit companies, health
maintenance organizations, mutual assessment life, accident and sickness
insurance companies, burial societies, fraternal benefit societies, dental and
optometric services plans, and health services plans not subject to this
chapter pursuant to § 38.2-4213.
"Moody’s Corporate Bond Yield Average" means the Monthly Average Corporates as published by Moody’s Investors Service, Inc., or any successor thereto.
"Owner" of a policy or contract or "policy owner" and "contract owner" means the person who is identified as the legal owner under the terms of the policy or contract or who is otherwise vested with legal title to the policy or contract through a valid assignment completed in accordance with the terms of the policy or contract and properly recorded as the owner on the books of the insurer. The terms “owner,” “contract owner,” and “policy owner” do not include persons with a mere beneficial interest in a policy or contract.
“Plan sponsor” means: (i) the employer, in the case of a benefit plan established or maintained by a single employer; (ii) the employee organization in the case of a benefit plan established or maintained by an employee organization; or (iii) in the case of a benefit plan established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations, the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan.
"Premiums" means direct gross insurance premiums
and annuity amounts or considerations, by whatever name called,
received on covered policies or contracts, less any return of
returned premiums, and considerations, and deposits on
covered policies, and less dividends paid or credited to
policyholders on this business and experience credits. “Premiums”
does not include amounts or considerations received for policies or contracts
or for the portions of policies or contracts for which coverage is not provided
under subsection C of § 38.2-1700 except that assessable premium shall not be
reduced on account of subdivision C 2 of § 38.2-1700 relating to interest
limitations and subsection D 2 of § 38.2-1700 relating to limitations with
respect to one individual, one participant, and one contract owner. "Premiums"
do shall not include (i) premiums and considerations on
contracts between insurers and reinsurers for coverage in excess of $5
million on an unallocated annuity contract covered under subdivision D 2 d of §
38.2-1700 or (ii) with respect to multiple nongroup policies of life insurance
owned by one owner, whether the policy owner is an individual, firm,
corporation, or other person, and whether the persons insured are officers,
managers, employees or other persons, premiums for coverage in excess of $5
million with respect to these policies or contracts, regardless of the number
of policies or contracts held by the owner.
"Principal place of business" of a plan sponsor or a person other than a natural person means the single state in which the natural persons who establish policy for the direction, control, and coordination of the operations of the entity as a whole primarily exercise that function, determined by the Association in its reasonable judgment by considering the following factors: (i) the state in which the primary executive and administrative headquarters of the entity is located; (ii) the state in which the principal office of the chief executive officer of the entity is located; (iii) the state in which the board of directors (or similar governing person or persons) of the entity conducts the majority of its meetings; (iv) the state from which the management of the overall operations of the entity is directed; and in the case of a benefit plan sponsored by affiliated companies comprising a consolidated corporation, the state in which the holding company or controlling affiliate has its principal place of business as determined using these factors. However, in the case of a plan sponsor, if more than 50 percent of the participants in the benefit plan are employed in a single state, that state shall be deemed to be the principal place of business of the plan sponsor. The principal place of business of a plan sponsor described in clause (iii) of the definition of plan sponsor in this section shall be deemed to be the principal place of business of the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan that, in lieu of a specific or clear designation of a principal place of business, shall be deemed to be the principal place of business of the employer or employee organization that has the largest investment in the benefit plan in question.
“Receivership court” means the court in the insolvent or impaired insurer’s state having jurisdiction over the conservation, rehabilitation, or liquidation of the insurer.
"Resident" means any a person to
whom a contractual obligation is owed and who resides in this the
Commonwealth at the time on the date a member with contractual
obligations is determined to be insurer becomes an impaired or
insolvent insurer or a court order is entered that determines a member
insurer to be an insolvent insurer. A person may be a resident of only one
state, which in the case of a person other than a natural person shall be its
principal place of business. Citizens of the United States that are either (i)
residents of foreign countries, or (ii) residents of United States possessions,
territories, or protectorates that do not have an association similar to the
Association, shall be deemed residents of the state of domicile of the insurer
that issued the policies or contracts.
“Structured settlement annuity” means an annuity purchased in order to fund periodic payments for a plaintiff or other claimant in payment for or with respect to personal injury or sickness suffered by the plaintiff or other claimant.
“Supplemental contract” means a written agreement entered into for the distribution of proceeds under a life, health, or annuity policy or contract.
“Unallocated annuity contract” means an annuity contract or group annuity certificate that is not issued to and owned by an individual or a trust created by an individual for the benefit of one or more individuals, except to the extent of any annuity benefits guaranteed to an individual or such a trust by an insurer under the contract or certificate.
§ 38.2-1702. Association; creation; memberships; accounts; supervision.
A. The Association is a nonprofit legal entity to be
known as the Virginia Life, Accident and Sickness Insurance Guaranty
Association, created by former § 38.1-482.20, shall continue in existence.
All member insurers shall continue to be and remain members of
the Association as a condition of their license to transact the business of
insurance in this Commonwealth. The Association shall perform its functions
under the plan of operation established and approved under § 38.2-1706 and
shall exercise its powers through a board of directors established under §
38.2-1703. For purposes of administration and assessment, the Association shall
maintain three two accounts: (i) the accident and sickness
insurance account; and (ii) the life insurance and annuity account;
and (iii), which includes the following subaccounts: (a) the life
insurance account, (b) the annuity account, which shall include
unallocated annuity contracts covered under subdivision D 2 b of § 38.2-1700,
but shall otherwise exclude unallocated annuities, and (c) the unallocated
annuity account, which shall consist of contracts covered under subdivision D 2
d of § 38.2-1700, but shall otherwise exclude unallocated annuities.
B. The Association shall come under the immediate supervision
of the Commission and shall be subject to the applicable provisions of the
insurance laws of this the Commonwealth. Meetings or records
of the Association may be opened to the public upon majority vote of the board
of directors of the Association.
§ 38.2-1703. Board of directors of Association.
A. The board of directors of the Association shall consist of not less than five nor more than nine member insurers serving terms as established in the plan of operation. The members of the board shall be selected by member insurers subject to the approval of the Commission. Vacancies on the board shall be filled for the remainder of the term by a majority vote of the remaining board members, subject to the approval of the Commission.
B. In approving selections or in appointing members to the
board the Commission shall consider, among other things, whether all
domestic and foreign member insurers are fairly represented.
C. Members of the board may be reimbursed from the assets of the Association for expenses incurred by them as members of the board of directors but members of the board shall not be otherwise compensated by the Association for their services.
§ 38.2-1704. Powers and duties of Association.
In addition to the powers and duties enumerated in other sections of this chapter:
A. In the case of If the member insurer is an
impaired domestic insurer, the Association may, in its discretion
and subject to (i) any conditions imposed by the Association
other than those that do not impair the contractual obligations of
the impaired insurer, (ii) approval by the impaired insurer and (iii)
approval that are approved by the Commission, the Association may:
1. Guarantee, assume, or reinsure, or cause to be
guaranteed, assumed, or reinsured, any or all of the covered policies
or contracts of the impaired insurer; and
2. Provide moneys, pledges, loans, notes, guarantees or
other means required for compliance with as are proper to effectuate
subdivision 1 of this subsection and assure payment of the contractual
obligations of the impaired insurer pending action under that subdivision;
and
3. Loan money to the impaired insurer.
B. In If the case of member insurer is
an insolvent insurer, the Association shall, in its discretion and subject
to the approval of the Commission, either:
1. a. Guarantee, assume, or reinsure or cause to be
guaranteed, assumed, or reinsured the covered policies of the insolvent insurer;
2. Assure or assure payment of the contractual
obligations of the insolvent insurer; and
3 b. Provide moneys, pledges, notes, guarantees,
or other means reasonably necessary to discharge its duties; or
2. Provide benefits and coverages in accordance with the following provisions:
a. With respect to life and health insurance policies and annuities, assure payment of benefits for premiums identical to the premiums and benefits, except for terms of conversion and renewability, that would have been payable under the policies or contracts of the insolvent insurer, for claims incurred:
(1) With respect to group policies and contracts, not later than the earlier of the next renewal date under those policies or contracts or 45 days, but in no event less than 30 days, after the date on which the Association becomes obligated with respect to the policies and contracts;
(2) With respect to nongroup policies, contracts, and annuities, not later than the earlier of the next renewal date, if any, under the policies or contracts or one year, but in no event less than 30 days, from the date on which the Association becomes obligated with respect to the policies or contracts;
b. Make diligent efforts to provide all known insureds or annuitants (for nongroup policies and contracts), or group policy owners with respect to group policies and contracts, 30 days' notice of the termination, pursuant to subdivision 2 a, of the benefits provided;
c. With respect to nongroup life and health insurance policies and annuities covered by the Association, make available to each known insured or annuitant, or owner if other than the insured or annuitant, and with respect to an individual formerly insured or formerly an annuitant under a group policy who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of subdivision 2 d, if the insureds or annuitants had a right under law or the terminated policy or annuity to convert coverage to individual coverage or to continue an individual policy or annuity in force until a specified age or for a specified time, during which the insurer had no right unilaterally to make changes in any provision of the policy or annuity or had a right only to make changes in premium by class;
d. In providing the substitute coverage required under subdivision 2 c, the Association may offer either to reissue the terminated coverage or to issue an alternative policy. Alternative or reissued policies shall be offered without requiring evidence of insurability, and shall not provide for any waiting period or exclusion that would not have applied under the terminated policy. The Association may reinsure any alternative or reissued policy;
e. Alternative policies adopted by the Association shall be subject to the approval of the domiciliary insurance commissioner and the receivership court. The Association may adopt alternative policies of various types for future issuance without regard to any particular impairment or insolvency. Alternative policies shall contain at least the minimum statutory provisions required in this Commonwealth and provide benefits that shall not be unreasonable in relation to the premium charged. The Association shall set the premium in accordance with a table of rates that it shall adopt. The premium shall reflect the amount of insurance to be provided and the age and class of risk of each insured, but shall not reflect any changes in the health of the insured after the original policy was last underwritten. Any alternative policy issued by the Association shall provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the Association;
f. If the Association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy, the premium shall be set by the Association in accordance with the amount of insurance provided and the age and class of risk, subject to approval of the domiciliary insurance commissioner and the receivership court;
g. The Association’s obligations with respect to coverage under any policy of the impaired or insolvent insurer or under any reissued or alternative policy shall cease on the date the coverage or policy is replaced by another similar policy by the policy owner, the insured or the Association; and
h. When proceeding under subdivision B 2 with respect to a policy or contract carrying guaranteed minimum interest rates, the Association shall assure the payment or crediting of a rate of interest consistent with subdivision C 2 c of § 38.2-1700.
C. Nonpayment of premiums within 31 days after the date required under the terms of any guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage shall terminate the Association’s obligations under the policy or coverage under this chapter with respect to the policy or coverage, except with respect to any claims incurred or any net cash surrender value that may be due in accordance with the provisions of this chapter.
D. Premiums due for coverage after entry of an order of liquidation of an insolvent insurer shall belong to and be payable at the direction of the Association. If the liquidator of an insolvent insurer requests, the Association shall provide a report to the liquidator regarding such premium collected by the Association. The Association shall be liable for unearned premiums due to policy or contract owners arising after the entry of the order.
C. Subsection B E. The protection provided by
this chapter shall not apply in the case of a foreign or alien insurer
where the Commission has determined that the foreign or alien insurer's
domiciliary jurisdiction or state of entry provides substantially similar protection
by statute or regulation for residents of this Commonwealth.
D. 1 F. In carrying out its duties under
subsection B of this section, the Association may request that:
1. Subject to approval by the Commission, impose
permanent policy liens or contract liens be imposed in connection
with any a guarantee, assumption, or reinsurance agreement,
and those liens may be imposed if the court: if the Association finds
a. Finds that the amounts which that can
be assessed under this chapter are less than the amounts needed to assure full
and prompt performance of the insolvent insurer's contractual obligations
Association's duties under this chapter, or that economic or financial
conditions as they affect member insurers are sufficiently adverse so
that to render the imposition of such permanent policy or contract
liens are to be in the public interest; and
b. Approves the specific policy or contract liens to be
used.
2. Before being obligated under subsection B of this
section, the Association may request that Subject to approval by the
Commission, impose temporary moratoriums or liens be imposed on
payments of cash values and policy loans or any other right to withdraw
funds held in conjunction with policies or contracts, in addition to any
contractual provisions for deferral of cash or policy loan values, and the
temporary moratoriums and liens may be imposed if they are approved by the
court. In addition, in the event of a temporary moratorium or moratorium
charge imposed by the receivership court on payment of cash values or policy
loans, or on any other right to withdraw funds held in conjunction with
policies or contracts, out of the assets of the impaired or insolvent insurer,
the Association may defer the payment of cash values, policy loans, or other rights
by the Association for the period of the moratorium or moratorium charge
imposed by the receivership court, except for claims covered by the Association
to be paid in accordance with a hardship procedure established by the
liquidator or rehabilitator and approved by the receivership court.
G. A deposit in this Commonwealth, held pursuant to law or required by the Commission for the benefit of creditors, including policy owners, not turned over to the domiciliary liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of an insurer domiciled in this Commonwealth or in a reciprocal state, pursuant to Article 7 (§ 38.2-1045 et seq.) of Chapter 10 shall be promptly paid to the Association. The Association shall be entitled to retain a portion of any amount so paid to it equal to the percentage determined by dividing the aggregate amount of policy owners' claims related to that insolvency for which the Association has provided statutory benefits by the aggregate amount of all policy owners’ claims in this Commonwealth related to that insolvency and shall remit to the domiciliary receiver the amount so paid to the Association less the amount retained pursuant to this subsection. Any amount so paid to the Association and retained by it shall be treated as a distribution of estate assets pursuant to applicable state receivership law dealing with early access disbursements.
E H. If the Association fails to act as
provided in subsection B of this section within a reasonable period of time
with respect to an insolvent insurer, as provided in subsection B, the
Commission, on behalf of the Association, shall exercise have
the powers and duties of the Association under this chapter with respect to
the insolvent insurers insurer.
F I. Upon request, the The
Association may provide render assistance and advice to the
Commission, upon the Commission's request, concerning rehabilitation,
payment of claims, continuation of coverage, or the performance of other
contractual obligations of an impaired or insolvent insurer.
G J. The Association shall have standing
to appear or intervene before the Commission or any court or
agency in this the Commonwealth regarding with
jurisdiction over an impaired or insolvent insurer concerning which the
Association is or may become obligated under this chapter or with jurisdiction
over any person or property against which the Association may have rights
through subrogation or otherwise. Standing shall extend to all matters
germane to the powers and duties of the Association, including, but not
limited to, proposals for reinsuring, modifying, or guaranteeing the
covered policies or contracts of the impaired or insolvent
insurer and the determination of the covered policies or contracts and
contractual obligations. The Association shall also have the right to appear
or intervene before a court or agency in another state with jurisdiction over
an impaired or insolvent insurer for which the Association is or may become
obligated or with jurisdiction over any person or property against whom the
Association may have rights through subrogation or otherwise.
H K. 1. Any person receiving
benefits under this chapter shall be deemed to have assigned the rights under,
and any causes of action against any person for losses arising under, resulting
from, or otherwise relating to, the covered policy or contract to
the Association to the extent of the benefits received because of this chapter,
whether the benefits are payments of or on account of contractual
obligations or, continuation of coverage, or provision of
substitute or alternative coverages. The Association shall may
require an assignment to it of those such rights and causes of
action by any payee, policy or contract owner, beneficiary, insured,
or annuitant as a condition prior precedent to the receipt of any
rights right or benefits conferred by this chapter upon that
the person. The Association shall be subrogated to those rights against
the assets of any insolvent insurer.
2. The subrogation rights of the Association under this subsection shall have the same priority against the assets of the insolvent insurer as that possessed by the person entitled to receive benefits under this chapter.
3. In addition to the rights provided by subdivisions K 1 and K 2, the Association shall have all common law rights of subrogation and any other equitable or legal remedy that would have been available to the impaired or insolvent insurer or owner, beneficiary, or payee of a policy or contract with respect to the policy or contract, including, in the case of a structured settlement annuity, any rights of the owner, beneficiary, or payee of the annuity, to the extent of benefits received pursuant to this chapter, against a person originally or by succession responsible for the losses arising from the personal injury relating to the annuity or payment therefor, excepting any such person responsible solely by reason of serving as an assignee in respect of a qualified assignment under § 130 of the Internal Revenue Code.
4. If subdivision K 1 through K 3 are invalid or ineffective with respect to any person or claim for any reason, the amount payable by the Association with respect to the related covered obligations shall be reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies, or portion thereof, covered by the Association.
5. If the Association has provided benefits with respect to a covered obligation and a person recovers amounts to which the Association has rights as described in subdivisions K 1 through K 4, the person shall pay to the Association the portion of the recovery attributable to the policies, or portion thereof, covered by the Association.
I. The contractual obligations for which the Association may
become liable shall in no event exceed the lesser of:
1. The contractual obligations for which the insurer is
liable or would have been liable if it were not an impaired or insolvent
insurer; or
2. With respect to any one life, regardless of the number
of policies or contracts:
a. $300,000 in life insurance death benefits, but not more
than $100,000 in net cash surrender and net cash withdrawal values for life
insurance;
b. $300,000 in health insurance benefits, including any net
cash surrender and net cash withdrawal values;
c. $100,000 in the present value of annuity benefits,
including net cash surrender and net cash withdrawal values; and
d. $250,000 in the present value of annuity benefits where
the annuity is established and maintained as one of the following types of
accounts:
(1) Individual retirement accounts described in § 408(a) of
the Internal Revenue Code of 1986, 26 U.S.C. § 408(a);
(2) Eligible deferred compensation plan accounts described
in § 457 of the Internal Revenue Code of 1986, 26 U.S.C. § 457; and
(3) Individual account plans defined in § 3(34) of the
Employee Retirement Income Security Act, 29 U.S.C. § 1002, and any plan
described in § 401(d) of the Internal Revenue Code of 1986, 26 U.S.C. § 401(d),
to the extent that participants and beneficiaries under such plans have a right
to direct the investment of assets held in individual accounts maintained on
their behalf by the plans.
However, in no event shall the Association be liable to
expend more than $350,000 in the aggregate with respect to any one individual.
J L. The In addition to the
rights and powers granted to it elsewhere in this chapter, the Association
may:
1. Enter into such contracts as are necessary or
proper to fulfill carry out the provisions and purposes of this
chapter.;
2. Sue or be sued, including taking any legal actions
necessary or proper for recovery of to recover any unpaid
assessments under § 38.2-1705 and to settle any claims or potential claims
against it.;
3. Borrow money to effect the purposes of this chapter. Any
notes or other evidence of indebtedness of the Association not in default shall
be Category 1 investments, as defined in § 38.2-1401, for domestic insurers.;
4. Employ or retain such persons as are necessary
or appropriate to handle the financial transactions of the Association, and
to perform other functions required by as become necessary or proper
under this chapter.;
5. Negotiate and contract with any liquidator, rehabilitator,
conservator, or ancillary receiver to carry out the powers and duties of the
Association.;
6. Take such legal action required as may be
necessary or appropriate to avoid or recover payment of improper
claims.;
7. Exercise, for the purposes of this chapter and to the
extent approved by the Commission, the powers of a domestic life or accident
and sickness insurer, but in no case shall may the Association
issue insurance policies or annuity contracts other than those issued to
perform the contractual its obligations of the impaired or
insolvent insurer under this chapter.;
8. Organize itself as a corporation or in other legal form permitted by the laws of the Commonwealth;
9. Request information from a person seeking coverage from the Association in order to aid the Association in determining its obligations under this chapter with respect to the person, and the person shall promptly comply with the request; and
10. Take other necessary or appropriate action to discharge its duties and obligations under this chapter or to exercise its powers under this chapter.
M. The Association may join an organization of one or more other state associations of similar purposes, to further the purposes and administer the powers and duties of the Association.
N. 1. a. At any time within 180 days of the date of the order of liquidation, the Association may elect to succeed to the rights and obligations of the ceding member insurer that relate to policies or annuities covered, in whole or in part, by the Association, in each case under any one or more reinsurance contracts entered into by the insolvent insurer and its reinsurers and selected by the Association. Any such assumption shall be effective as of the date of the order of liquidation. The election shall be effected by the Association or any agent of the Association on the Association’s behalf sending written notice, return receipt requested, to the affected reinsurers.
b. To facilitate the earliest practicable decision about whether to assume any of the contracts of reinsurance, and in order to protect the financial position of the estate, the receiver and each reinsurer of the ceding member insurer shall make available upon request to the Association or to any agent of the Association on the Association’s behalf as soon as possible after commencement of formal delinquency proceedings (i) copies of in-force contracts of reinsurance and all related files and records relevant to the determination of whether such contracts should be assumed and (ii) notices of any defaults under the reinsurance contracts or any known event or condition which with the passage of time could become a default under the reinsurance contracts.
c. The following shall apply to reinsurance contracts so assumed by the Association:
(1) The Association shall be responsible for all unpaid premiums due under the reinsurance contracts for periods both before and after the date of the order of liquidation, and shall be responsible for the performance of all other obligations to be performed after the date of the order of liquidation, in each case which relate to policies or annuities covered, in whole or in part, by the Association. The Association may charge policies or annuities covered in part by the Association, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the Association and shall provide notice and an accounting of these charges to the liquidator;
(2) The Association shall be entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods after the date of the order of liquidation and that relate to policies or annuities covered, in whole or in part, by the Association, provided that, upon receipt of any such amounts, the Association shall be obliged to pay to the beneficiary, under the policy or annuity on account of which the amounts were paid, a portion of the amount equal to the lesser of (i) the amount received by the Association and (ii) the excess of the amount received by the Association over the amount equal to the benefits paid by the Association on account of the policy or annuity less the retention of the insurer applicable to the loss or event;
(3) Within 30 days following the Association’s election (the election date), the Association and each reinsurer under contracts assumed by the Association shall calculate the net balance due to or from the Association under each reinsurance contract as of the election date with respect to policies or annuities covered, in whole or in part, by the Association, which calculation shall give full credit to all items paid by either the insurer or its receiver or the reinsurer prior to the election date. The reinsurer shall pay the receiver any amounts due for losses or events prior to the date of the order of liquidation, subject to any set-off for premiums unpaid for periods prior to the date, and the Association or reinsurer shall pay any remaining balance due the other, in each case within five days of the completion of the aforementioned calculation. Any disputes over the amounts due to either the Association or the reinsurer shall be resolved by arbitration pursuant to the terms of the affected reinsurance contract or, if the contract contains no arbitration clause, as otherwise provided by law. If the receiver has received any amounts due the Association pursuant to subdivision N 1 c (2), the receiver shall remit the same to the Association as promptly as practicable; and
(4) If the Association or receiver, on the Association’s behalf, within 60 days of the election date, pays the unpaid premiums due for periods both before and after the election date that relate to policies or annuities covered, in whole or in part, by the Association, the reinsurer shall not be entitled to terminate the reinsurance contracts for failure to pay premium insofar as the reinsurance contracts related to policies or annuities covered, in whole or in part, by the Association, and shall not be entitled to set off any unpaid amounts due under other contracts, or unpaid amounts due from parties other than the Association, against amounts due the Association.
2. During the period from the date of the order of liquidation until the election date (or, if the election date does not occur, until 180 days after the date of the order of liquidation),
a. Neither the Association nor the reinsurer shall have any rights or obligations under reinsurance contracts that the Association has the right to assume under subdivision N 1, whether for periods prior to or after the date of the order of liquidation; and the reinsurer, the receiver, and the Association shall, to the extent practicable, provide each other data and records reasonably requested;
b. Provided that once the Association has elected to assume a reinsurance contract, the parties’ rights and obligations shall be governed by subdivision N 1.
3. If the Association does not elect to assume a reinsurance contract by the election date pursuant to subdivision N 1, the Association shall have no rights or obligations, in each case for periods both before and after the date of the order of liquidation, with respect to the reinsurance contract.
4. When policies or annuities, or covered obligations with respect thereto, are transferred to an assuming insurer, reinsurance on the policies or annuities may also be transferred by the Association, in the case of contracts assumed under subdivision N 1, subject to the following:
a. Unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract transferred shall not cover any new policies of insurance or annuities in addition to those transferred;
b. The obligations described in subdivision N 1 shall no longer apply with respect to matters arising after the effective date of the transfer; and
c. Notice shall be given in writing, return receipt requested, by the transferring party to the affected reinsurer not less than 30 days prior to the effective date of the transfer.
5. The provisions of this subsection shall supersede the provisions of any law or of any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, on account of losses or events that occur in periods after the date of the order of liquidation, to the receiver of the insolvent insurer or any other person. The receiver shall remain entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods prior to the date of the order of liquidation, subject to applicable setoff provisions.
6. Except as otherwise provided in this section, nothing in this subsection shall alter or modify the terms and conditions of any reinsurance contract. Nothing in this section shall abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance contract. Nothing in this section shall give a policy holder or beneficiary an independent cause of action against a reinsurer that is not otherwise set forth in the reinsurance contract. Nothing in this section shall limit or affect the Association’s rights as a creditor of the estate against the assets of the estate. Nothing in this section shall apply to reinsurance agreements covering property or casualty risks.
O. The board of directors of the Association shall have discretion and may exercise good faith business judgment to determine the means by which the Association is to provide the benefits of this chapter in an economical and efficient manner.
P. Where the Association has arranged or offered to provide the benefits of this chapter to a covered person under a plan or arrangement that fulfills the Association’s obligations under this chapter, the person shall not be entitled to benefits from the Association in addition to or other than those provided under the plan or arrangement.
Q. Venue in a suit against the Association arising under this chapter shall be in the circuit court of the city or county in which the Association has its principal place of business except that any suit to which the Commission is a party shall be brought before the Commission. The Association shall not be required to give an appeal bond in an appeal that relates to a cause of action arising under this chapter.
R. In carrying out its duties in connection with guaranteeing, assuming, or reinsuring policies or contracts under subsection A or B, the Association may, subject to approval of the receivership court, issue substitute coverage for a policy or contract that provides an interest rate, crediting rate or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value by issuing an alternative policy or contract in accordance with the following provisions:
1. In lieu of the index or other external reference provided for in the original policy or contract, the alternative policy or contract provides for (i) a fixed interest rate, (ii) payment of dividends with minimum guarantees, or (iii) a different method for calculating interest or changes in value;
2. There is no requirement for evidence of insurability, waiting period, or other exclusion that would not have applied under the replaced policy or contract; and
3. The alternative policy or contract is similar to the replaced policy or contract in all other material terms.
§ 38.2-1705. Assessments.
A. For the purpose of providing the funds necessary to carry
out the powers and duties of the Association, the board of directors shall
assess the member insurers, separately for each account, at any such
time and for any amounts as the board finds necessary. Assessments shall be due
not less than thirty 30 days after prior written notice
has been given to the member insurers. Interest Late payments
shall be accrue interest from the due date compounded quarterly
and be, based upon the average ninety 90 day treasury
bill rate for the most recently completed calendar quarter as published in the
Federal Reserve Bulletin. Interest will accrue on and after the due
date shall be subject to a minimum charge of $50.
B. There shall be two classes of assessments, as follows:
1. Class A assessments shall be made authorized and
called for the purpose of meeting administrative and legal costs and other
expenses, including the cost of examinations conducted under the authority
of § 38.2-1708 E. Class A assessments may be made authorized and
called whether or not related to a particular impaired or insolvent
insurer.
2. Class B assessments shall be made authorized and
called to the extent necessary to carry out the powers and duties of the
Association under § 38.2-1704 with regard to an impaired or an insolvent
insurer.
C. 1. The amount of any Class A assessment shall be determined
by the board and may be made authorized and called for current member
insurers on a pro-rata or nonpro-rata basis. If pro rata, the board may
provide that it be credited against future Class B assessments. A The
total of all nonpro-rata assessment assessments shall not
exceed $200 $500 per member insurer in any one calendar year.
With respect to any insurer that became impaired or insolvent after January 1,
1991, the The amount of any a Class B assessment shall
be allocated for assessment purposes among the accounts pursuant to an
allocation formula which may be based on the premiums or reserves of the
impaired or insolvent insurer or any other standard deemed by the board in its
sole discretion as being fair and reasonable under the circumstances.
2. Class B assessments against member insurers for each
account and subaccount shall be in the proportion that the premiums
received on business in this Commonwealth by each assessed member insurer on
policies or contracts covered by each account and subaccount for the
three most recent calendar years for which information is available preceding
the year in which the insurer became impaired or insolvent or, in the
case of an assessment with respect to an impaired insurer, the three most
recent calendar years for which information is available preceding the year in
which the insurer became impaired, bear to such premiums received on
business in this Commonwealth for such those calendar years by
all assessed member insurers.
3. Assessments for funds to meet the requirements of the
Association with respect to an impaired or insolvent insurer shall not be
made authorized or called until necessary to implement the purposes
of this chapter. Classification of assessments under subsection B of this
section and computation of assessments under this subsection shall be made
with a reasonable degree of accuracy, recognizing that exact determinations may
not always be possible. The Association shall notify each member insurer of
its anticipated pro-rata share of an authorized assessment not yet called
within 180 days after the assessment is authorized.
D. The Association may abate or defer, in whole or in part, the assessment of a member insurer if, in the opinion of the board, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations. In the event an assessment against a member insurer is abated or deferred in whole or in part, the amount by which the assessment is abated or deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section. Once the conditions that caused a deferral have been removed or rectified, the member insurer shall pay all assessments that were deferred pursuant to a repayment plan approved by the Association.
E. The 1. a. Subject to the provisions of
subdivision E 1 b, the total of all assessments upon a authorized
by the Association with respect to a member insurer for each subaccount
of the life insurance and annuity account and for the accident and sickness
insurance account shall not in any one calendar year exceed two percent of
the that member insurer's average annual premiums received in
the Commonwealth on the policies and contracts covered by the subaccount
or account in this Commonwealth during the three calendar
year years preceding the assessment year in which the
insurer became an impaired or insolvent insurer.
b. If two or more assessments are authorized in one calendar year with respect to insurers that become impaired or insolvent in different calendar years, the average annual premiums for purposes of the aggregate assessment percentage limitation referenced in subdivision E 1 a shall be equal and limited to the higher of the three-year average annual premiums for the applicable subaccount or account as calculated pursuant to this section.
c. If the maximum assessment, together with the other
assets of the Association in any an account, does not provide in
any one year in any that account an amount sufficient to
carry out the responsibilities of the Association, the necessary additional
funds shall be assessed as soon thereafter as permitted by this chapter.
2. The board may provide in the plan of operation a method of allocating funds among claims, whether relating to one or more impaired or insolvent insurers, when the maximum assessment will be insufficient to cover anticipated claims.
3. If the maximum assessment for a subaccount of the life and annuity account in one year does not provide an amount sufficient to carry out the responsibilities of the Association, then pursuant to subdivision C 2, the board shall access the other subaccounts of the life and annuity account for the necessary additional amount, subject to the maximum stated in subdivision E 1.
F. The board, by an equitable method as established in the
plan of operation, may refund to member insurers, in proportion to the
contribution of each insurer to that account, the amount by which the
assets of the account exceed the amount the board finds is necessary to
fulfill carry out during the coming year the Association's
obligations during the coming year of the Association with regard to
that account, including assets accruing from assignment, subrogation, net
realized gains and income from investments. In determining the refunds,
assets accruing from net realized gains and income from investments shall be
included. A reasonable amount may be retained in any account to provide
funds for the continuing expenses of the Association and for future losses
if refunds are impractical and claims.
G. It shall be proper for any member insurer, in
determining its premium rates and policy owner dividends as to any kind of
insurance within the scope of this chapter, to consider the amount
reasonably necessary to meet its Class A assessment obligations in
determining its premium rates and policyowner dividends for any class of
insurance covered by under this chapter.
H. The Association shall issue to each insurer paying an
assessment under this chapter, other than a Class A assessment, a certificate
of contribution, in a form prescribed by the Commission, for the amount
of the assessment so paid, excluding interest penalties. All outstanding
certificates shall be of equal dignity and priority without reference to
amounts or dates of issue. A certificate of contribution may be shown by the
insurer on in its financial statement as an asset. This shall
be shown in a such form, in an and for such
amount, if any, and for a period of time approved by as
the Commission may approve.
I. 1. A member insurer that wishes to protest all or part of an assessment shall pay when due the full amount of the assessment as set forth in the notice provided by the Association. The payment shall be available to meet Association obligations during the pendency of the protest or any subsequent appeal. Payment shall be accompanied by a statement in writing that the payment is made under protest and setting forth a brief statement of the grounds for the protest.
2. Within 60 days following the payment of an assessment under protest by a member insurer, the Association shall notify the member insurer in writing of its determination with respect to the protest unless the Association notifies the member insurer that additional time is required to resolve the issues raised by the protest.
3. Within 30 days after a final decision has been made, the Association shall notify the protesting member insurer in writing of that final decision. Within 60 days of receipt of notice of the final decision, the protesting member insurer may appeal that final action to the Commission.
4. In the alternative to rendering a final decision with respect to a protest based on a question regarding the assessment base, the Association may refer the protest to the Commission for a final decision, with or without a recommendation from the Association.
5. If the protest or appeal on the assessment is upheld, the amount paid in error or excess shall be returned to the member company. Interest on a refund due a protesting member shall be paid at the rate actually earned by the Association.
J. The Association may request information of member insurers in order to aid in the exercise of its power under this section and member insurers shall promptly comply with a request.
§ 38.2-1706. Plan of operation.
A. 1. Neither the plan of operation nor any amendment to it
shall become effective until submitted to and approved by the Commission. The
Commission shall approve the plan or any amendment to it if it assures the
fair, reasonable, and equitable administration of the Association.
2. The Association's plan of operation approved
under former § 38.1-482.24 shall remain in effect until modified in accordance
with subdivision 3 of this subsection. The Association shall from
time to time submit to the Commission any amendments to the plan of operation
necessary or suitable to assure the fair, reasonable, and equitable
administration of the Association. Any amendments to the plan of operation
shall become effective upon the Commission's written approval or unless they
have not been disapproved within 60 days.
3 2. If at any time the
Association fails to submit suitable amendments to the plan, the Commission shall,
after notice and hearing, adopt and promulgate such reasonable rules
that as are necessary or advisable to effect effectuate
the provisions of this chapter. These The rules shall
continue in force until modified by the Commission or superseded by a
an amended plan or amendment submitted by the Association and
approved by the Commission.
B. All member insurers shall comply with the plan of operation.
C. The plan of operation shall, in addition to requirements enumerated elsewhere in this chapter:
1. Establish procedures for handling assets of the Association.;
2. Establish the amount and method of reimbursing members of
the board of directors under § 38.2-1703.;
3. Establish regular places and times for meetings,
including telephone conference calls, of the board of directors.;
4. Establish procedures to keep for records to
be kept of all financial transactions of the Association, its agents, and
the board of directors.;
5. Establish the procedures for submitting to the
Commission whereby selections for the board of directors.
will be made and submitted to the Commission;
6. Establish any additional procedures for assessments under §
38.2-1705.;
7. Establish a plan for equitable distribution of refunds to
members.;
8. Contain additional provisions necessary or proper for the
execution of the powers and duties of the Association.;
9. Establish procedures whereby a director may be removed for cause, including in the case where a member insurer director becomes an impaired or insolvent insurer; and
10. Require the board of directors to establish a policy and procedures for addressing conflicts of interests.
D. Except as provided by subdivision 3 of subsection A of §
38.2-1704 and § 38.2-1705, the The plan of operation may provide
that any or all powers and duties of the Association may be, except
those under subdivision L 3 of § 38.2-1704 and § 38.2-1705 are delegated to
the a corporation, association, or other organization which
that performs or will perform functions similar to those of this Association,
or its equivalent, in two or more states. The Such a corporation,
association, or organization shall be reimbursed for any payments made on
behalf of the Association and shall be paid for its performance of any function
of the Association. A delegation under this subsection shall take effect only
with the approval of both the board of directors and the Commission, and may be
made only to a corporation, association, or organization that extends
protection not substantially less favorable and effective than that provided by
this chapter.
§ 38.2-1707. Duties and powers of the Commission.
A. In addition to the duties and powers enumerated elsewhere in this chapter, the Commission shall:
1. Upon request of the board of directors, provide the
Association with a statement of the premiums in the appropriate states for each
member insurer.;
2. When an impairment is declared and the amount of the
impairment is determined, serve a demand upon the impaired insurer to make good
the impairment within a reasonable time. Notice to the impaired insurer shall
constitute notice to its shareholders, if any. The failure of the insurer to
promptly comply with this demand shall not excuse the Association from the
performance of its powers and duties under this chapter.; and
3. Be appointed as the liquidator or rehabilitator in any liquidation or rehabilitation proceeding involving a domestic insurer. If a foreign or alien member insurer is subject to a liquidation proceeding in its domiciliary jurisdiction or state of entry, the Commission shall be appointed conservator.
B. The Commission may suspend or revoke, after notice and hearing, the license to transact the business of insurance in this Commonwealth of any member insurer that fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative the Commission may levy a forfeiture on any member insurer that fails to pay an assessment when due. The forfeiture shall not exceed five percent of the unpaid assessment per month, but no forfeiture shall be less than $100 per month.
C. Any action of the board of directors or the Association may
be appealed to the Commission by any member insurer if the appeal is taken
within thirty 30 days of the action being appealed. Any final
action or order of the Commission shall be subject to judicial review in
accordance with the provisions of §§ 12.1-39 through 12.1-41.
D. The liquidator, rehabilitator, or conservator of any impaired or insolvent insurer may notify all interested persons of the effect of this chapter.
§ 38.2-1708. Detection and prevention of insolvencies.
A. To aid in the detection and prevention of insurer insolvencies, the Commission shall have the duty to:
1. Notify the insurance departments of all of the other states
within thirty 30 days of taking following the action
taken or the date the action occurs, when the Commission takes any of the
following actions against a member insurer:
a. Revocation of license;
b. Suspension of license; or
c. Making any Enters a formal order that
requires the insurer to (i) the company restrict its premium
writing, (ii) obtain additional contributions to surplus, (iii)
withdraw from the Commonwealth, (iv) reinsure all or any part of its
business, or (v) increase its capital, surplus, or any other
account for the security of policyholders policy owners or
creditors.;
2. Report to the board of directors when (i) the
Commission has taken any of the actions set forth in subdivision 1
of this subsection have been taken or (ii) has received a
report has been received from any other insurance department indicating
that an any such action has been taken in another state. The
report to the board of directors shall contain (i) all significant
details of the action taken or (ii) the report received from
the other another insurance department.;
3. Report to the board of directors when it the
Commission has reasonable cause to believe from an examination, whether
completed or in process, of any member insurer that an the
insurer may be an impaired or insolvent or in a financial condition
hazardous to the policyholders or the public. The report may be based on a
member insurer's financial examination, whether completed or in progress.
insurer; and
4. Furnish to the board of directors the National Association of Insurance Commissioners (NAIC) Insurance Regulatory Information System (IRIS) ratios and listings of companies not included in the ratios developed by the NAIC, and the board may use the information contained therein in carrying out its duties and responsibilities under this section. The report and the information contained therein shall be kept confidential by the board of directors until such time as made public by the Commission or other lawful authority.
B. The Commission may seek the advice and recommendations of
the board of directors concerning any matter affecting its duties and
responsibilities regarding the financial condition of member insurers and
insurers seeking admission to transact the business of insurance in this
the Commonwealth.
C. The board of directors may, upon majority vote, make reports and recommendations to the Commission upon any matter germane to the solvency, liquidation, rehabilitation or conservation of any member insurer or germane to the solvency of any insurer seeking to transact the business of insurance in this Commonwealth. These reports and recommendations shall not be considered public documents.
D. The board of directors shall have the duty, upon
majority vote, to may notify the Commission of any information
indicating that a member insurer may be an impaired or insolvent
or in a financial condition hazardous to the policyholders or the public
insurer.
E. The board of directors, upon majority vote, may request
that the Commission order an examination of any member insurer that the board,
in good faith, believes may be in a financial condition hazardous to the
policyholders or the public. Within thirty days of the receipt of the request,
the Commission shall begin the examination. The examination may be conducted as
the National Association of Insurance Commissioners examination or may be
conducted by persons the Commission designates. The cost of the examination
shall be paid by the Association, and the examination report shall be treated
like other examination reports. In no event shall the examination report be
released to the board of directors prior to its release to the public, but this
shall not preclude the Commission from complying with subsection A of this
section. The Commission shall notify the board of directors when the
examination is completed. The request for an examination shall be kept on file
by the Commission but it shall not be open to public inspection prior to the
release of the examination report to the public make recommendations to
the Commission for the detection and prevention of insurer insolvencies.
F. The board of directors may, upon majority vote, make
recommendations to the Commission for the detection and prevention of insurer
insolvencies.
G. The board of directors shall, at the conclusion of any
insurer insolvency in which the Association was obligated to pay covered
claims, prepare a report to the Commission containing all information it has in
its possession relating to the history and causes of the insolvency.
H. The board shall cooperate with the board of directors of
guaranty associations in other states in preparing a report on the history and
causes for a member's insolvency, and may adopt by reference any report
prepared by other associations.
§ 38.2-1709. Tax write-offs of certificates of contributions.
A. A member insurer shall have at its option the right to show
a certificate of contribution as an asset in the form approved by the
Commission pursuant to subsection H of § 38.2-1705 at the original face amount
for the calendar year of issuance. Such amount may shall be
amortized as follows:
1. Certificates of contribution issued prior to January 1,
1998, shall be amortized in each succeeding calendar year through December 31,
1997, at an amount not to exceed 0.05 of one percent of the member's direct
gross premium income for the classes of insurance in the account for which the
member insurer is assessed. As used herein, the definition of direct gross
premium income shall be the same as that specified in § 58.1-2500. If the amount
of the certificate has not been fully amortized by the contributing insurer by
December 31, 1997, the unamortized balance of the certificate amount shall be
amortized, at the option of the contributing insurer, either (i) in the same
manner as the certificate was amortized prior to January 1, 1998; however, if
not amortized in full prior to calendar year 2010, the unamortized balance of
the certificate shall be amortized in full during calendar year 2010, or (ii)
over the ten successive calendar years commencing January 1, 1998, in amounts
each equal to ten percent of such unamortized balance. A contributing insurer
whose certificate has not been fully amortized by December 31, 1997, shall
notify the Commission in writing of the amortization schedule option it has
selected on or before March 1, 1998; however, if a contributing insurer fails
to notify the Commission by such date, the insurer shall be deemed to have
selected the option described in clause (i) of the preceding sentence.
2. Certificates of contribution issued on or after January
1, 1998, shall be amortized over the ten 10 calendar years
following the year the contribution was paid in amounts each equal to ten
10 percent of the amount of the contribution.
B. The insurer may offset the amount of the certificate
amortized in a calendar year as provided in subsection A. This amount shall be
deducted from the premium tax liability incurred on business transacted in this
Commonwealth for that year. However, the Association shall diligently pursue all
rights available to it to recover its expenditures made in the fulfillment of
its responsibilities under this chapter. In the event If the
Commission determines after a hearing that the Association is not diligently
pursuing available measures of recovery, participating contributing
insurers will not be able to offset amounts amortized during the period that
the Commission determines that the Association has not been diligently pursuing
available measures of recovery.
C. Any sums for which a certificate of contribution has been issued that have been (i) amortized by contributing insurers and offset against premium taxes as provided in subsection B and (ii) subsequently refunded pursuant to subsection F of § 38.2-1705 shall be paid to the Commission and deposited with the State Treasurer for credit to the general fund of this Commonwealth.
D. The amount of any credit against premium taxes provided for in this section for an insurer shall be reduced by the amount of reduction in federal income taxes for any deduction claimed by the insurer for an assessment paid pursuant to this chapter.
§ 38.2-1710. Miscellaneous provisions.
A. Nothing in this chapter shall be construed to reduce the liability for unpaid assessments of the insureds on an impaired or insolvent insurer operating under a plan with assessment liability.
B. Records shall be kept of all negotiations and
meetings in which of the board of directors to discuss the activities
of the Association or its representatives are involved in carrying
out its powers and duties under § 38.2-1704. Records The records
of these negotiations or meetings the Association with respect to an
impaired or insolvent insurer shall not be made public only upon
(i) disclosed prior to the termination of a liquidation, rehabilitation,
or conservation proceeding involving the impaired or insolvent insurer, (ii)
except (i) upon the termination of the impairment or insolvency of the
insurer, or (iii ii) upon the order of a court of
competent jurisdiction. Nothing in this subsection shall limit the duty of the
Association to render a report of its activities under § 38.2-1711.
C. For the purpose of carrying out its obligations under this
chapter, the Association shall be deemed to be a creditor of the impaired or
insolvent insurer to the extent of assets attributable to covered policies and
contracts reduced by any amounts to which the Association is entitled as
subrogee pursuant to subsection H K of § 38.2-1704. All assets
Assets of the impaired or insolvent insurer attributable to covered
policies and contracts shall be used to continue all covered policies
and contracts and pay all contractual obligations of the impaired or
insolvent insurer as required by this chapter. For the purpose of this
subsection, assets "Assets attributable to covered policies
is and contracts" means that proportion of the assets which the
reserves, that should have been established for these policies,
and contracts bear to the reserves that should have been established for
all insurance policies and contracts written by the impaired or
insolvent insurer.
D. As a creditor of the impaired or insolvent insurer as established in subsection C and consistent with subsection B of § 38.2-1509, the Association and other similar associations shall be entitled to receive a disbursement of assets out of the marshaled assets, from time to time as the assets become available to reimburse it, as a credit against contractual obligations under this chapter. If the liquidator has not, within 120 days of a final determination of insolvency of an insurer by the receivership court, made an application to the court for the approval of a proposal to disburse assets out of marshaled assets to guaranty associations having obligations because of the insolvency, then the Association shall be entitled to make application to the receivership court for approval of its own proposal to disburse these assets.
E. 1. Prior to the termination of any liquidation,
rehabilitation, or conservation proceeding, the court, in making an equitable
distribution of the ownership rights of the insolvent insurer, may take into
consideration the contributions of the respective parties, including the
Association, the shareholders, and policyowners policy and
contract owners of the insolvent insurer, and any other party with a
legitimate interest. In this determination, consideration shall be given to the
welfare of the policyholders policy and contract owners of the
continuing or successor insurer.
2. No distribution to any stockholders, if any, of an
impaired or insolvent insurer shall be made until and unless the total
amount of valid claims have been fully recovered by of the
Association with interest thereon for funds expended in carrying out its
powers and duties under § 38.2-1704 with respect to the insurer have been
fully recovered by the Association.
E F. 1. If an order for liquidation or
rehabilitation of an insurer domiciled in this Commonwealth has been
entered, the receiver appointed under that order shall have a right to recover on
behalf of the insurer, from any controlling affiliate on behalf
of the insurer that controlled it, the amount of distributions,
other than stock dividends paid by the insurer on its capital stock,
made at any time during the five years preceding the petition for liquidation
or rehabilitation. This shall be, subject to the limitations of
subdivisions 2 through 4 of this subsection.
2. No dividend such distribution shall be
recoverable if the insurer shows that when paid the distribution was
lawful and reasonable at the time of payment, and that the insurer did
not know and could not reasonably have known that the distribution might
adversely affect the ability of the insurer to fulfill its contractual
obligations.
3. Any person who was an affiliate that controlled the insurer
at the time the distributions were paid shall be liable up to the amount of
distributions he received. Any person who was an affiliate that
controlled the insurer at the time the distributions were declared shall be
liable up to the amount of distributions he that would have been
received if they had been paid immediately. If two or more persons
are liable with respect to the same distributions, they shall be jointly and
severally liable.
4. The maximum amount recoverable under this subsection shall be the amount in excess of all other available assets of the insolvent insurer needed to pay (i) the contractual obligations of the insolvent insurer and (ii) the reasonable expenses of the Association incurred in connection with the performance of its duties for the insolvent insurer.
5. If any person liable under subdivision 3 of this
subsection is insolvent, all its affiliates that controlled it at the time
the dividend distribution was paid shall be jointly and severally
liable for any resulting deficiency in the amount recovered from the insolvent
affiliate.
§ 38.2-1711. Examination of the Association; annual report.
The Association shall be subject to examination and regulation by the Commission. The board of directors shall submit to the Commission, not later than each May 1, a financial report for the preceding calendar year in a form approved by the Commission and a report of its activities during the preceding calendar year. Upon the request of a member insurer, the Association shall provide the member insurer with a copy of the report.
§ 38.2-1712. Tax exemptions.
The Association shall be exempt from the payment of all fees
and all taxes levied by this the Commonwealth or any of its
subdivisions, except taxes levied on real and personal property.
§ 38.2-1713. Immunity.
There shall be no liability on the part of, and no cause of action of any nature shall arise against, any member insurer or its agents or employees, the Association or its agents or employees, members of the board of directors, or the Commission or its representatives, for any action taken by them in the performance of their powers and duties under this chapter. This immunity shall extend to the participation in any organization of one or more other state associations of similar purposes and to any such organization and its agents or employees.
§ 38.2-1714. Stay of proceedings; reopening default judgments.
All proceedings in which the insolvent insurer is a party in
any court in this Commonwealth shall be stayed sixty 180 days from
the date an order of liquidation, rehabilitation, or conservation is final.
This will allow time for to permit proper legal action by the
Association on all matters germane to its powers and duties. The Association
may apply to have the judgment under any decision, order, verdict, or finding
based on default set aside by the same court that made the judgment and shall
be permitted to defend against the suit on the merits.
§ 38.2-1715. Prohibited advertisement of Association coverage in insurance sales; notice to policy owners.
A. No person, including an insurer, agent, or affiliate
of an insurer shall make, publish, disseminate, circulate, or place before the
public, or cause, directly or indirectly, to be made, published, disseminated,
circulated or placed before the public, in any newspaper, magazine or other
publication, or in the form of a notice, circular, pamphlet, letter or poster,
or over any radio station or television station, or in any other way, any
advertisement, announcement or statement which, written or oral, that
uses the existence of the Association of this Commonwealth for the purpose of
sales, solicitation, or inducement to purchase any form of insurance covered by
this chapter. This subsection shall not apply to the Association or any
other entity that does not sell or solicit insurance.
B. By January 1, 2011, the Association shall prepare a summary document describing the general purposes and current limitations of this chapter and that complies with subsection C. This document shall be submitted to the Commission for approval. At the expiration of the sixtieth day after the date on which the Commission approves the document, an insurer may not deliver a policy or contract to a policy or contract owner unless the summary document is delivered to the policy or contract owner at the time of delivery of the policy or contract. The document shall also be available upon request by a policy or contract owner. The distribution, delivery, or contents or interpretation of this document does not guarantee that either the policy or the contract or the owner of the policy or contract is covered in the event of the impairment or insolvency of a member insurer. The summary document shall be revised by the Association as amendments to the chapter may require. Failure to receive this document does not give the policy owner, contract owner, certificate owner, certificate holder, or insured any greater rights than those stated in this chapter.
C. The document prepared under subsection B shall contain a clear and conspicuous disclaimer on its face. The Commission shall establish the form and content of the disclaimer. The disclaimer shall:
1. State the name and address of the Association and the Bureau of Insurance;
2. Prominently warn the policy or contract owner that the Association may not cover the policy or contract or, if coverage is available, it will be subject to substantial limitations and exclusions and conditioned on continued residence in the Commonwealth;
3. State the types of policies for which guaranty funds will provide coverage;
4. State that the insurer and its agents are prohibited by law from using the existence of the Association for the purpose of sales, solicitation, or inducement to purchase any form of insurance;
5. State that the policy or contract owner should not rely on coverage under the Association when selecting an insurer;
6. Explain rights available and procedures for filing a complaint to allege a violation of any provisions of this chapter; and
7. Provide other information as directed by the Commission including but not limited to, sources for information about the financial condition of insurers provided that the information is not proprietary and is subject to disclosure under the Freedom of Information Act (§ 2.2-3700 et seq.).
D. A member insurer shall retain evidence of compliance with subsection B for so long as the policy or contract for which the notice is given remains in effect.
2. That any member insurer, as defined in § 38.2-1701 of the Code of Virginia, that has been placed by a court of competent jurisdiction under an order of liquidation, rehabilitation, or conservation pursuant to Chapter 15 (§ 38.2-1500 et seq.) of Title 38.2 of the Code of Virginia or equivalent statutes of the state in which the member insurer is domesticated, prior to July 1, 2010, shall be subject to the provisions of Chapter 17 (§ 38.2-1700 et seq.) of Title 38.2 of the Code of Virginia as that chapter existed prior to July 1, 2010.