§ 38.2-100. Definitions.

As used in this title:

“Alien company” means a company incorporated or organized under the laws of any country other than the United States.

“Bureau” or “Bureau of Insurance” means the division of the Commission established to administer the insurance laws of the Commonwealth.

“Commission” means the State Corporation Commission.

“Commissioner” or “Commissioner of Insurance” means the administrative or executive officer of the Bureau.

“Company” means any association, aggregate of individuals, business, corporation, individual, joint-stock company, Lloyds type of organization, organization, partnership, receiver, reciprocal or interinsurance exchange, trustee or society.

“Domestic company” means a company incorporated or organized under the laws of the Commonwealth.

“Foreign company” means a company incorporated or organized under the laws of the United States, or of any state other than the Commonwealth.

“Health services plan” means any arrangement for offering or administering health services or similar or related services by a corporation licensed under Chapter 42 (§ 38.2-4200 et seq.).

“Insurance” means the business of transferring risk by contract wherein a person, for a consideration, undertakes (i) to indemnify another person, (ii) to pay or provide a specified or ascertainable amount of money, or (iii) to provide a benefit or service upon the occurrence of a determinable risk contingency. Without limiting the foregoing, “insurance” shall include (i) each of the classifications of insurance set forth in Article 2 (§ 38.2-101 et seq.) of this chapter and (ii) the issuance of group and individual contracts, certificates, or evidences of coverage by any health services plan as provided for in Chapter 42 (§ 38.2-4200 et seq.), health maintenance organization as provided for in Chapter 43 (§ 38.2-4300 et seq.), legal services organization or legal services plan as provided for in Chapter 44 (§ 38.2-4400 et seq.), dental or optometric services plan as provided for in Chapter 45 (§ 38.2-4500 et seq.), and dental plan organization as provided for in Chapter 61 (§ 38.2-6100 et seq.). “Insurance” shall not include any activity involving a home service contract that is subject to regulation pursuant to Chapter 33.1 (§ 59.1-434.1 et seq.) of Title 59.1; an extended service contract that is subject to regulation pursuant to Chapter 34 (§ 59.1-435 et seq.) of Title 59.1; a warranty made by a manufacturer, seller, lessor, or builder of a product or service; or a service agreement offered by an automobile club as defined in subsection E of § 38.2-514.1 .

“Insurance company” means any company engaged in the business of making contracts of insurance.

“Insurance transaction,” “insurance business,” and “business of insurance” include solicitation, negotiations preliminary to execution, execution of an insurance contract, and the transaction of matters subsequent to execution of the contract and arising out of it.

“Insurer” means an insurance company.

“Medicare” means the “Health Insurance for the Aged Act,” Title XVIII of the Social Security Amendment of 1965, as amended.

“Person” means any association, aggregate of individuals, business, company, corporation, individual, joint-stock company, Lloyds type of organization, organization, partnership, receiver, reciprocal or interinsurance exchange, trustee or society.

“Rate” or “rates” means any rate of premium, policy fee, membership fee or any other charge made by an insurer for or in connection with a contract or policy of insurance. The terms “rate” or “rates” shall not include a membership fee paid to become a member of an organization or association, one of the benefits of which is the purchasing of insurance coverage.

“Rate service organization” means any organization or person, other than a joint underwriting association under § 38.2-1915 or any employee of an insurer including those insurers under common control or management, who assists insurers in ratemaking or filing by:

1. Collecting, compiling, and furnishing loss or expense statistics;
2. Recommending, making or filing rates or supplementary rate information; or
3. Advising about rate questions, except as an attorney giving legal advice.

   “State” means any commonwealth, state, territory, district or insular possession of the United States.

   “Surplus to policyholders” means the excess of total admitted assets over the liabilities of an insurer, and shall be the sum of all capital and surplus accounts, including any voluntary reserves, minus any impairment of all capital and surplus accounts.

   Without otherwise limiting the meaning of or defining the following terms, “insurance contracts” or “insurance policies” shall include contracts of fidelity, indemnity, guaranty and suretyship.

History. Code 1950, §§ 38-1 , 38-1 94, 38-253.20, 38-253.67; 1952, c. 317, §§ 38.1-1 , 38.1-219; 1973, c. 504, § 38.1-279.30; 1980, c. 204, § 38.1-362.12; 1986, c. 562; 2001, c. 707; 2004, c. 668; 2017, cc. 653, 727; 2020, c. 264.

Cross references.

As to conduct prohibited by the General Assembly Conflicts of Interest Act, see § 30-103.

For requirement that applications for issuance and renewal of occupational licenses and registrations include the applicant’s social security number or a control number issued pursuant to § 46.2-342 , and provision for suspension of such license or registration for delinquency in support obligations, see § 63.2-1937 .

Editor’s note.

House Joint Resolution No. 1 of the 1984 Acts of Assembly directed the Virginia Code Commission to make a study of Title 38.1 and report to the Governor and the General Assembly its findings in the form of a revision of that title. In January, 1986, its report, containing a proposed revision of Title 38.1, was sent to the Governor and the General Assembly. The report was published as House Document No. 17 of the 1986 Session and served as the basis for this title, which was enacted by Acts 1986, c. 562, effective July 1, 1986.

In addition to its revision by Acts 1986, c. 562, Title 38.1 was amended by certain other acts during the 1986 Session. These amendments have been incorporated, as appropriate, into comparable provisions of this title, pursuant to § 30-152.

Many of the cases cited in the notes under sections of this title were decided under corresponding provisions of former Title 38.1 and earlier statutes.

The 2001 amendments.

The 2001 amendment by c. 707 added the paragraph defining “Insurance,” and deleted “ ‘insurance’ shall include fidelity and suretyship, and” following “the following terms” in the last paragraph of the section.

The 2004 amendments.

The 2004 amendment by c. 668, in the definition of “Insurance,” inserted “dental plan organization as provided for in Chapter 61 (§ 38.2-6100 et seq.) of this title” and made a related change.

The 2017 amendments.

The 2017 amendment by c. 653 added “or a service agreement offered by an automobile club as defined in subsection E of § 38.2-514.1 ” in the definition for “Insurance.”

The 2017 amendment by c. 727, effective January 1, 2018, in the definitions of “Health services plan” and “Insurance,” deleted “of this title” following the Chapter references; in the definition of “Insurance,” inserted “a home service contract that is subject to regulation pursuant to Chapter 33.1 (§ 59.1-434.1 et seq.) of Title 59.1.”

The 2020 amendments.

The 2020 amendment by c. 264 added the definition for “Bureau” or “Bureau of Insurance”; in the definition for “Commissioner” or “Commissioner of Insurance,” substituted “Bureau” for “division or bureau of the Commission established to administer the insurance laws of this Commonwealth”; in the definition for “Domestic company,” substituted “the Commonwealth” for “this Commonwealth”; and in the definition for “Foreign company,” substituted “the Commonwealth” for “this Commonwealth.”

Law Review.

For article, “The 1952 Revision of the Virginia Life Insurance Laws,” see 39 Va. L. Rev. 547 (1953).

For note on waiver, election and estoppel in Virginia insurance litigation, see 48 Va. L. Rev. 416 (1962).

For a note, “Self-Insurance as Insurance in Liability Policy — ‘Other Insurance’ Provisions,” see 56 Wash. & Lee L. Rev. 1245 (1999).

For an article, “The Impact of Convergence and the Gramm-Leach-Bliley Act on the Insurance Industry,” see 8 Geo. Mason L. Rev. 623 (2000).

Research References.

Business Insurance Law and Practice Guide (Matthew Bender).

Insurance Coverage for Environmental Claims (Matthew Bender). Lathrop.

Insurance and Risk Management for State and Local Governments (Matthew Bender). Rynard.

Law of Life and Health Insurance (Matthew Bender). Harnett and Lesnick.

New Appleman on Insurance: Current Critical Issues in Insurance Law (Matthew Bender).

Responsibilities of Insurance Agents and Brokers (Matthew Bender). Harnett.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, §§ 3, 4.

§ 38.2-100.1. Certified mail; subsequent mail or notices may be sent by regular mail.

Whenever in this title the Commissioner or the Commission is required to send any mail or notice by certified mail and such mail or notice is sent certified mail, return receipt requested, then any subsequent, identical mail or notice that is sent by the Commissioner or the Commission may be sent by regular mail.

History. 2011, c. 566.

§ 38.2-101. Classification of insurance.

Insurance is classified and defined as set out in subsequent sections of this article.

History. 1952, c. 317, § 38.1-2; 1986, c. 562.

Law Review.

For survey of Virginia law on insurance for the year 1973-1974, see 60 Va. L. Rev. 1553 (1974).

§ 38.2-102. Life.

1. “Life insurance” means insurance upon the lives of human beings. “Life insurance” includes policies that also provide (i) endowment benefits; (ii) additional benefits incidental to a loss in the event of death, dismemberment, or loss by accident or accidental means; (iii) additional benefits to safeguard the contract from lapse or to provide a special surrender value, a special benefit or an annuity, in the event of total and permanent disability of the insured; and (iv) optional modes of settlement of proceeds. As used in this title, unless the context requires otherwise, “life insurance” shall be deemed to include “credit life insurance,” “industrial life insurance,” “variable life insurance” and “modified guaranteed life insurance.”
2. “Life insurance” also includes additional benefits to provide for educational loans, subject to the provisions of § 38.2-3113.3 .
3. “Life insurance” also includes additional benefits providing specified disease coverage or limited benefit health coverage, subject to compliance with the minimum standards established by the Commission for such benefits pursuant to § 38.2-3519 . Such additional benefits may be combined in an individual policy, or added as a rider to the policy, provided that the insurer offering such additional benefits is licensed to transact the business of accident and sickness insurance and complies with the rate and form filing requirements of the Commission’s rules governing the filing of rates for individual and certain group accident and sickness insurance policy forms (14 VAC 5-130-10 et seq.), as amended.

History. 1952, c. 317, § 38.1-3; 1976, c. 562; 1986, c. 562; 1992, c. 210; 2000, c. 173; 2011, c. 186; 2012, c. 673.

The 2000 amendments.

The 2000 amendment by c. 173 designated the former single paragraph as subsection A, and added subsection B.

The 2011 amendments.

The 2011 amendment by c. 186 added subsection C.

The 2012 amendments.

The 2012 amendment by c. 673 substituted “benefits incidental to a loss in the event of death, dismemberment, or loss by accident” for “benefits in the event of death, dismemberment, or loss of sight by accident” in clause (ii) of subsection A.

§ 38.2-103. Credit life.

“Credit life insurance” means insurance on the life of a debtor pursuant to or in connection with a specific loan or other credit transaction.

History. 1960, c. 67, § 38.1-482.2; 1982, c. 223; 1986, c. 562.

§ 38.2-104. Industrial life.

“Industrial life insurance” means life insurance provided by an individual insurance contract (i) under which premiums are payable at least monthly and (ii) that has the words “industrial policy” printed upon the policy as a part of the descriptive matter.

History. Code 1950, § 38-433; 1952, c. 317, § 38.1-409; 1986, c. 562.

§ 38.2-105. Variable life.

“Variable life insurance” means any policy or contract of life insurance in which the amount or duration of benefits may vary according to the investment experience of any separate account maintained by the insurer for the policy or contract, as provided for in § 38.2-3113 .

History. 1986, c. 562.

§ 38.2-105.1. Modified guaranteed life insurance.

“Modified guaranteed life insurance” means any policy or contract of life insurance in which the benefits are guaranteed if held for specified periods and nonforfeiture values are based upon a market-value adjustment formula if held for shorter periods. The formula may or may not reflect the investment experience of any separate account which may be maintained by the insurer for the policy or contract as provided for in § 38.2-3113.1 .

History. 1992, c. 210.

§ 38.2-106. Annuities.

“Annuities” means all agreements to make periodic payments in specified or calculable sums pursuant to the terms of a contract for a stated period of time or for the life of the person or persons specified in the contract. “Annuities” does not include contracts defined in § 38.2-102 and qualified charitable gift annuities as defined in § 38.2-106.1 .

As used in this title, unless the context requires otherwise, “annuity” shall be deemed to include “variable annuity” and “modified guaranteed annuity,” and shall be deemed to include a contract under which a lump sum cash settlement is an alternative to the option of periodic payments.

History. 1952, c. 317, § 38.1-4; 1966, c. 289; 1970, c. 532; 1985, c. 312; 1986, c. 562; 1992, c. 210; 1993, c. 764; 1996, c. 425; 2001, c. 64.

Editor’s note.

Acts 1996, c. 425, cl. 2, provides: “[t]hat the provisions of this act amending § 38.2-106 , the definition of ‘charitable gift annuity’ as added by this act in § 38.2-106 .1, and subsections A and C in § 38.2-3113.2 as added by this act are declarative of existing law.”

The 2001 amendments.

The 2001 amendment by c. 64 substituted “specified or calculable sums” for “fixed dollar amounts.”

§ 38.2-106.1. Charitable gift annuities.

For purposes of this title:

“Charitable gift annuity” means an agreement by a charitable organization to make periodic payments in fixed dollar amounts payable over one or two lives, under which the actuarial value of the annuity, as determined for federal tax purposes, is less than the value of the cash or other property transferred by the donor in return therefor and the difference in value constitutes a charitable contribution for federal tax purposes.

“Charitable organization” means an entity described in:

1. § 501 (c) (3) of the Internal Revenue Code of 1986 (26 U.S.C. § 501 (c) (3)); or
2. § 170 (c) of the Internal Revenue Code of 1986 (26 U.S.C. § 170 (c)).“Qualified charitable gift annuity” means a charitable gift annuity that conforms to the requirements of § 501 (m) (5) of the Internal Revenue Code of 1986 (26 U.S.C. § 501 (m) (5)) and § 514 (c) (5) of the Internal Revenue Code of 1986 (26 U.S.C. § 514 (c) (5)) and that is issued by a charitable organization that on the date of the annuity agreement:

1. Has a minimum of $100,000 in unrestricted cash, cash equivalents, or publicly traded securities, exclusive of the assets contributed by the donor in return for the annuity agreement; and

2. Has been in continuous operation as a charitable organization for at least three years or is a successor or affiliate of a charitable organization that has been in continuous operation as such for at least three years.

History. 1996, c. 425.

Editor’s note.

Acts 1996, c. 425, cl. 2, provides: “[t]hat the provisions of this act amending § 38.2-106 , the definition of ‘charitable gift annuity’ as added by this act in § 38.2-106 .1, and subsections A and C in § 38.2-3113.2 as added by this act are declarative of existing law.”

§ 38.2-107. Variable annuity.

“Variable annuity” means any agreement or contract for an annuity in which the amount or duration of benefits or optional lump sum cash settlement may vary according to the investment experience of any separate account maintained by the insurer for the policy or contract as provided for in § 38.2-3113 . Pursuant to the terms of the contract, payments may be made for a stated period of time or for the life of the person or persons specified in the contract.

History. 1986, c. 562; 1993, c. 764.

§ 38.2-107.1. Modified guaranteed annuity.

“Modified guaranteed annuity” means any agreement or contract for an annuity in which the benefits are guaranteed if held for specified periods and nonforfeiture values are based upon a market-value adjustment formula if held for shorter periods. The formula may or may not reflect the investment experience of any separate account which may be maintained by the insurer for the agreement or contract as provided for in § 38.2-3113.1 .

History. 1992, c. 210.

§ 38.2-108. Credit accident and sickness.

“Credit accident and sickness insurance” means insurance on a debtor to provide for payments on a specific loan or other credit transaction while the debtor is disabled as defined in the policy.

History. 1960, c. 67, § 38.1-482.2; 1982, c. 223; 1986, c. 562.

§ 38.2-109. Accident and sickness.

1. “Accident and sickness insurance” means insurance against loss resulting from sickness, or from bodily injury or death by accident or accidental means, or from a combination of any or all of these perils. As used in this title, unless the context requires otherwise, the term “accident and sickness insurance” shall be deemed to include “credit accident and sickness insurance.”
2. The term “accident and sickness insurance” shall also include agreements insuring against losses resulting from health care claims or expenses of health care in excess of a specific or aggregate dollar amount, when such agreements are used to provide coverage to (i) an employee welfare benefit plan or any other plan providing accident and sickness benefits, (ii) a health maintenance organization, or (iii) a provider associated with a managed care network, provided:
   1. The agreement clearly discloses the extent and duration of the liability assumed by the insurer once the policyholder’s liability has been exceeded; and
   2. The insurer maintains reserves in accordance with § 38.2-1314 for the liability it assumes under the agreement.Such agreements shall not be subject to the requirements of Chapters 34 (§ 38.2-3400 et seq.) and 35 (§ 38.2-3500 et seq.) of this title.

History. 1952, c. 317, § 38.1-5; 1986, c. 562; 1997, c. 28.

§ 38.2-110. Fire.

“Fire insurance” means insurance against loss of or damage to any property resulting from fire, including loss or damage incident (i) to extinguishing a fire, or (ii) to the salvaging of property in connection with a fire.

History. 1952, c. 317, § 38.1-6; 1986, c. 562.

§ 38.2-111. Miscellaneous property and casualty.

1. “Miscellaneous property insurance” means insurance against loss of or damage to property resulting from:
   1. Lightning, smoke or smudge, windstorm, tornado, cyclone, earthquake, volcanic eruption, rain, hail, frost and freeze, weather or climatic conditions, excess or deficiency of moisture, flood, the rising of the waters of the ocean or its tributaries; or
   2. Insects, blights, or disease of such property other than animals; or
   3. Electrical disturbance causing or concomitant with a fire or an explosion; or
   4. The ownership, maintenance or use of elevators, except loss or damage by fire. This class of insurance includes the incidental power to make inspections of and to issue certificates of inspection upon any such elevator; or
   5. Bombardment, invasion, insurrection, riot, civil war or commotion, military or usurped power, any order of a civil authority made to prevent the spread of a conflagration, epidemic or catastrophe, vandalism or malicious mischief, strike or lockout, collapse from any cause, or explosion; but not including any kind of insurance specified in § 38.2-115 , except insurance against loss or damage to property resulting from:
      1. Explosion of pressure vessels, except steam boilers of more than fifteen pounds pressure, in buildings designed and used solely for residential purposes by not more than four families;
      2. Explosion of any kind originating outside of the insured building or outside of the building containing the insured property;
      3. Explosion of pressure vessels not containing steam; or
      4. Electrical disturbance causing or concomitant with an explosion; or
   6. Any other cause or hazard which may result in a loss or damage to property, if the insurance is not contrary to law or public policy.
2. “Miscellaneous casualty insurance” means insurance against liability, and against loss, damage, or expense arising out of injury to the economic interests of any person, but not including any class of insurance otherwise specified in this title, provided that such insurance is not contrary to law or public policy, except that any policy of miscellaneous casualty insurance may include appropriate provisions obligating the insurer to pay medical, hospital, surgical, and funeral expenses arising out of the death, dismemberment, sickness, or injury of any person, and death and dismemberment benefits in the event of death or dismemberment, if the death, dismemberment, sickness, or injury is caused by or is incidental to a cause of loss insured under the policy.

History. 1952, c. 317, §§ 38.1-7, 38.1-12; 1986, c. 562; 2004, c. 182; 2007, c. 762.

The 2004 amendments.

The 2004 amendment by c. 182 inserted the A designation at the beginning of the first paragraph and added subsection B.

The 2007 amendments.

The 2007 amendment by c. 762 added the exception to the end of subsection B.

§ 38.2-112. Water damage.

“Water damage insurance” means insurance against loss or damage to any property by water or other fluid or substance resulting from (i) the breakage or leakage of sprinklers, pumps or other apparatus erected for extinguishing fires or of water pipes or other conduits or containers, or (ii) casual water entering through leaks or openings in buildings or by seepage through building walls, but not including loss or damage resulting from flood or the rising of the waters of the ocean or its tributaries. This class of insurance includes insurance against accidental injury of such sprinklers, pumps, fire apparatus, conduits or containers.

History. 1952, c. 317, § 38.1-8; 1986, c. 562.

§ 38.2-113. Burglary and theft.

“Burglary and theft insurance” means insurance against:

1. Loss of or damage to any property resulting from actual or attempted burglary, theft, larceny, robbery, forgery, fraud, vandalism, malicious mischief, wrongful confiscation or wrongful conversion, disposal or concealment by any person or persons;
2. Loss of or damage to moneys, coins, bullion, securities, notes, drafts, acceptances or any other valuable papers or documents, resulting from any cause, except while in the custody or possession of and being transported by any carrier for hire or in the mail; or
3. The loss of property actually surrendered due to extortion, threat, or demand, involving the actual, alleged or threatened kidnapping of any individual or the threat to do bodily injury to or damage to property of or to wrongfully abduct or detain any individual.Any policy of burglary and theft insurance may include appropriate provisions obligating the insurer to pay medical, hospital, surgical, and funeral expenses arising out of the death, dismemberment, sickness, or injury of any person, and death and dismemberment benefits in the event of death or dismemberment, if the death, dismemberment, sickness, or injury is caused by or is incidental to a cause of loss insured under the policy.

History. 1952, c. 317, § 38.1-9; 1986, c. 562; 2007, c. 762.

The 2007 amendments.

The 2007 amendment by c. 762 added the last paragraph.

§ 38.2-114. Glass insurance.

“Glass insurance” means insurance against loss of or damage to glass and its appurtenances resulting from any cause.

History. 1952, c. 317, § 38.1-10; 1986, c. 562.

§ 38.2-115. Boiler and machinery.

“Boiler and machinery insurance” means insurance against any liability of the insured and against loss of or damage to any property of the insured resulting from the explosion of or injury to (i) any boiler, heater or other fired pressure vessel; (ii) any unfired pressure vessel; (iii) any pipes or containers connected with any of the boilers or vessels; (iv) any engine, turbine, compressor, pump or wheel; (v) any apparatus generating, transmitting or using electricity; or (vi) any other machinery or apparatus connected with or operated by any of the previously named boilers, vessels or machines. Boiler and machinery insurance includes the incidental power to inspect and to issue certificates of inspection upon any such boilers, pressure vessels, apparatus, and machinery.

History. 1952, c. 317, § 38.1-11; 1986, c. 562.

Michie’s Jurisprudence.

For related discussion, see 8A M.J. Explosions and Explosives, § 9.

§ 38.2-116. Animal.

“Animal insurance” means insurance against loss of or damage to any animal resulting from any cause.

History. 1952, c. 317, § 38.1-13; 1986, c. 562.

§ 38.2-117. Personal injury liability.

“Personal injury liability insurance” means insurance against legal liability of the insured, and against loss, damage or expense incident to a claim of such liability, arising out of the death or injury of any person, or arising out of injury to the economic interests of any person as the result of negligence in rendering expert, fiduciary or professional service, but not including any class of insurance specified in § 38.2-119 .

Any policy of personal injury liability insurance may include appropriate provisions obligating the insurer to pay medical, hospital, surgical, and funeral expenses arising out of the death or injury of any person, regardless of any legal liability of the insured.

History. Code 1950, § 38-239; 1952, c. 317, § 38.1-15; 1986, c. 562.

§ 38.2-118. Property damage liability.

“Property damage liability insurance” means insurance against legal liability of the insured, and against loss, damage or expense incident to a claim of such liability, arising out of the loss or destruction of, or damage to, the property of any other person, but not including any class of insurance specified in § 38.2-117 or § 38.2-119 .

History. 1952, c. 317, § 38.1-16; 1986, c. 562.

§ 38.2-119. Workers’ compensation and employers’ liability.

“Workers’ compensation and employers’ liability insurance” means insurance against the legal liability of any employer for the death or disablement of, or injury to, his or its employee whether imposed by common law or by statute, or assumed by contract.

Employers’ liability insurance may include appropriate provisions obligating the insurer to pay medical, chiropractic, hospital, surgical, and funeral expenses arising out of the death or injury of an employee, regardless of any legal liability of the insured.

History. 1952, c. 317, § 38.1-17; 1986, c. 562.

§ 38.2-120. Fidelity.

“Fidelity insurance” means:

1. Indemnifying any person against loss through counterfeit, forgery or alteration of, on, or in any security obligation or other written instrument; or
2. Indemnifying banks, bankers, brokers, financial or moneyed corporations or associations against loss resulting from any cause, of personal property, including fixtures, equipment, safes and vaults on the insured’s premises.

History. 1952, c. 317, § 38.1-18; 1986, c. 562.

§ 38.2-121. Surety.

“Surety insurance” means:

1. Becoming surety or guarantor for any person, in any public or private position or place of trust, whether the guarantee is in an individual, schedule or blanket form; or
2. Becoming surety on or guaranteeing the performance of any lawful obligation, undertaking, agreement, or contract, including reinsurance contracts connected therewith, except policies of insurance; or
3. Becoming surety on or guaranteeing the performance of bonds and undertakings required or permitted in all judicial proceedings or otherwise allowed by law, including surety bonds accepted by state and municipal authorities in lieu of deposits as security for the performance of insurance contracts.

History. 1952, c. 317, § 38.1-18; 1986, c. 562.

OPINIONS OF THE ATTORNEY GENERAL

Surety bail bondsman. —

A surety bail bondsman who executes a secured bail bond as a disclosed agent-in-fact for the stated corporate surety is not personally liable to the Commonwealth when the criminal defendant absconds, and the bond is forfeited. See opinion of Attorney General to The Honorable James S. Mathews, Judge, Norfolk General District Court, 09-025, (6/1/09).

A surety bail bondsman serves only as an agent-in-fact for the surety company and binds the surety company to bail bonds executed on behalf of the surety company, thus a surety bail bondsman operating within the bounds of his authority cannot be held personally liable to the Commonwealth for forfeited bonds when a defendant fails to comply with a condition of the bond. See opinion of Attorney General to The Honorable James S. Mathews, Judge, Norfolk General District Court, 09-025, (6/1/09).

§ 38.2-122. Credit.

“Credit insurance” means indemnifying merchants or other persons extending credit against loss or damage resulting from the nonpayment of debts owed to them. “Credit insurance” includes the incidental power to acquire and dispose of debts so insured and to collect any debts owed to the insurer or to any persons so insured by the insurer. “Credit insurance” does not include any insurance defined in §§ 38.2-103 , 38.2-108 , 38.2-122.1 , 38.2-122.2 or § 38.2-128 .

History. 1952, c. 317, § 38.1-19; 1986, c. 562; 2000, c. 526.

The 2000 amendments.

The 2000 amendment by c. 526 inserted “38.2-122.1, 38.2-122.2 .”

§ 38.2-122.1. Credit involuntary unemployment insurance.

“Credit involuntary unemployment insurance” means insurance on a debtor in connection with a specified loan or other credit transaction to provide payment to a creditor for the installment payments or other periodic payments becoming due (i) while the debtor is involuntarily unemployed, or (ii) while the debtor is on an unpaid leave of absence during which employment does not terminate. Such term shall not mean any insurance defined in §§ 38.2-108 , 38.2-109 or § 38.2-122 .

History. 1993, c. 774; 2000, c. 526.

The 2000 amendments.

The 2000 amendment by c. 526, in the first sentence, inserted the clause (i) designation, inserted “or,” and added clause (ii), and inserted “§§ 38.2-108 , 38.2-109 or” in the last sentence.

§ 38.2-122.2. Credit property insurance.

“Credit property insurance” means insurance against direct physical damage to personal household property used as security for a loan or other credit transaction. Such insurance may insure the creditor as sole beneficiary or may insure both the creditor and the debtor with the creditor as primary beneficiary and the debtor as beneficiary of proceeds not paid to the creditor. For purposes of this definition, “personal household property” does not include motor vehicles, mobile homes, or watercraft. The term “credit property insurance” shall not mean any insurance defined in § 38.2-122 .

History. 2000, c. 526.

§ 38.2-123. Title.

“Title insurance” means insurance against loss by reason of liens and encumbrances upon property, defects in the title to property, and other matters affecting the title to property or the right to the use and enjoyment of property. “Title insurance” includes insurance of the condition of the title to property and the status of any lien on property.

History. Code 1950, § 38-233; 1952, c. 317, § 38.1-20; 1986, c. 562.

§ 38.2-124. Motor vehicle.

1. “Motor vehicle insurance” means insurance against:
   1. Loss of or damage to motor vehicles, including trailers, semitrailers or other attachments designed for use in connection with motor vehicles, resulting from any cause, and against legal liability of the insured for loss or damage to the property of another resulting from the ownership, maintenance or use of motor vehicles and against loss, damage or expense incident to a claim of such liability; or
   2. Legal liability of the insured, and liability arising under subsection A of § 38.2-2206 and against loss, damage, or expense incident to a claim of such liability, arising out of the death or injury of any person resulting from the ownership, maintenance or use of motor vehicles. Motor vehicle insurance does not include any class of insurance specified in § 38.2-119 .
2. Any policy of “motor vehicle insurance” covering legal liability of the insured under subdivision 2 of subsection A and covering liability arising under subsection A of § 38.2-2206 may include appropriate provisions obligating the insurer to pay to the covered injured person medical expense and loss of income benefits arising out of the death or injury of any person, as set forth in subsection A of § 38.2-2201 . Any such policy of motor vehicle insurance may include appropriate provisions obligating the insurer to pay weekly indemnity or other specific benefits to persons who are injured and specific death benefits to dependents, beneficiaries or personal representatives of persons who are killed, if the injury or death is caused by accident and sustained while in or upon, entering or alighting from, or through being struck by a motor vehicle while not occupying a motor vehicle. These provisions shall obligate the insurer to make payment regardless of any legal liability of the insured or any other person.

History. 1952, c. 317, § 38.1-21; 1956, c. 678; 1962, c. 253; 1983, c. 448; 1984, c. 311; 1986, c. 562; 1991, c. 4; 1996, c. 276.

Cross references.

As to insurance coverage for exempted motor vehicles, see § 46.2-684.1 . As to offers to pay insurance deductible when installing or repairing motor vehicle glass, see § 59.1-207.5:1.

Law Review.

For article, “An Overview of Automobile Liability Insurance in Virginia,” see 28 U. Rich. L. Rev. 863 (1994).

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 4.

§ 38.2-125. Aircraft.

“Aircraft insurance” means insurance against:

1. Loss of or damage to aircraft and its equipment, resulting from any cause, and against legal liability of the insured for loss of or damage to the property of another resulting from the ownership, maintenance or use of aircraft and against loss, damage or expense incident to a claim of liability; or
2. Legal liability of the insured, and against loss, damage, or expense incident to a claim of liability, arising out of the death or injury of any person resulting from the ownership, maintenance or use of aircraft.

   Any policy of “aircraft insurance” covering legal liability of the insured under subdivision 2 of this section may include appropriate provisions obligating the insurer to pay medical, chiropractic, hospital, surgical, and funeral expenses arising out of the death or injury of any person.

History. 1952, c. 317, § 38.1-21; 1956, c. 678; 1962, c. 253; 1983, c. 448; 1984, c. 311; 1986, c. 562.

Law Review.

For article on the law governing airplane accidents, see 39 Wash. & Lee L. Rev. 1303 (1982).

Michie’s Jurisprudence.

For related discussion, see 2C M.J. Aviation, § 1.

§ 38.2-126. Marine.

1. “Marine insurance” means insurance against any kind of loss or damage to:
   1. Vessels, craft, aircraft, vehicles of every kind, excluding vehicles operating under their own power or while in storage not incidental to transportation, as well as all goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, bullion, precious stones, securities, choses in action, evidences of debt, valuable papers, bottomry and respondentia interests and all other kinds of property and interests therein in respect to any risks or perils of navigation, transit or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting shipment, or during any delays, storage, transshipment, or reshipment incident to shipment, including marine builders’ risks and all personal property floater risks;
   2. Persons or property in connection with or appertaining to marine, inland marine, transit or transportation insurance, including liability for loss of or damage to either arising out of or in connection with the construction, repair, operation, maintenance, or use of the subject matter of the insurance. This class of insurance shall not include life insurance, surety bonds or insurance against loss by reason of bodily injury to the person arising out of the ownership, maintenance or use of automobiles;
   3. Precious stones, jewels, jewelry, gold, silver and other precious metals used in business, trade, or otherwise and whether or not in transit. This class of insurance shall include jewelers’ block insurance;
   4. 1. Bridges, tunnels, and other instrumentalities of transportation and communication, excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage, unless fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot, and civil commotion are the only hazards to be covered; (ii) to piers, wharves, docks, and slips, excluding the risks of fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and civil commotion; and (iii) to other aids to navigation and transportation, including dry docks and marine railways, against all risks. 4. (i) Bridges, tunnels, and other instrumentalities of transportation and communication, excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage, unless fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot, and civil commotion are the only hazards to be covered; (ii) to piers, wharves, docks, and slips, excluding the risks of fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and civil commotion; and (iii) to other aids to navigation and transportation, including dry docks and marine railways, against all risks.
2. Marine insurance shall also include “marine protection and indemnity insurance,” meaning insurance against loss, damage, or expense or against legal liability of the insured for loss, damage, or expense arising out of or incident to ownership, operation, chartering, maintenance, use, repair or construction of any vessel, craft or instrumentality in use in ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person.
3. Any policy of “marine insurance” as defined in this section providing protection against bodily injury, sickness or death of another person may include appropriate provisions obligating the insurer to pay medical, hospital, surgical, and funeral expenses arising out of the death or injury of any person, regardless of any legal liability of the insured.
4. Marine insurance shall also include “travel insurance” as defined in § 38.2-1887 .

History. 1952, c. 317, § 38.1-22; 1986, c. 562; 2019, cc. 266, 346.

Editor’s note.

Acts 2019, cc. 266 and 346, cl. 2 provides: “That the provisions of this act shall apply to policies of travel insurance purchased on or after July 1, 2019.”

The 2019 amendments.

The 2019 amendments by cc. 266 and 346 are identical, and added subsection D. For applicability clause, see Editor’s note.

§ 38.2-127. Legal services insurance.

“Legal services insurance” means the assumption of a contractual obligation to reimburse the insured against, or pay on behalf of the insured, all or a portion of his fees, costs, and expenses related to services performed by or under the supervision of an attorney licensed to practice in the jurisdiction where the services are performed.

History. 1976, c. 636, § 38.1-22.1; 1978, c. 658; 1986, c. 562.

Cross references.

As to contracts and plans for future legal services, see § 38.2-4400 et seq.

Law Review.

For discussion of legislative developments with regard to prepaid legal services in the 1978 Session of the General Assembly, see 12 U. Rich. L. Rev. 759 (1978).

§ 38.2-128. Mortgage guaranty insurance.

“Mortgage guaranty insurance” means indemnifying lenders against financial loss arising from nonpayment of principal, interest, or other sums due under the terms of any evidence of indebtedness secured by a mortgage, deed of trust, or other instrument constituting a lien or charge on real property.

History. 1986, c. 562.

§ 38.2-129. Home protection insurance.

“Home protection insurance” means any contract or agreement whereby a person undertakes for a specified period of time and for a predetermined fee to furnish, arrange for, or indemnify for service, repair, or replacement of any or all of the structural components, parts, appliances, or systems of any covered residential dwelling caused by wear and tear, deterioration, inherent defect, or by the failure of any inspection to detect the likelihood of failure.

History. 1986, c. 562.

§ 38.2-130. Homeowners insurance.

“Homeowners insurance” is a combination multi-peril policy written under the provisions of § 38.2-1921 containing fire, miscellaneous property, and liability coverages, insuring primarily (i) owner-occupied residential real property pursuant to § 38.2-2108 , (ii) personal property located in residential units, or (iii) any combination thereof.

History. 1986, c. 562.

§ 38.2-131. Farmowners insurance.

“Farmowners insurance” is a combination multi-peril policy written under the provisions of § 38.2-1921 containing fire, miscellaneous property, and liability coverages, insuring primarily (i) farm and related residential property and improvements to real property owned, leased, or operated as a farm, (ii) personal property located in residential units, (iii) other real or personal property usual or incidental to the operation of a farm, or (iv) any combination thereof.

History. 1986, c. 562.

§ 38.2-132. Commercial multi-peril insurance.

“Commercial multi-peril insurance” is a combination multi-peril policy written under the provisions of § 38.2-1921 insuring risks incident to a commercial enterprise containing any combination of the classes of insurance set forth in subsection A of § 38.2-1902 , except insurance on or with respect to operating properties of railroads.

History. 1986, c. 562.

§ 38.2-133. Contingent and consequential losses.

The definition of any class of insurance against loss of or damage to property enumerated in this article may include insurance against contingent, consequential and indirect losses resulting from any of the causes set out in this article. Coverage for these losses shall be included in the specific grouping of the class of insurance where the cause is specified. Insurance against loss of or damage to property may include insurance against loss or damage to all lawful interests in the property, and against loss of use and occupancy, rents, and profits resulting from the loss or damage.

History. 1952, c. 317, § 38.1-23; 1986, c. 562.

§ 38.2-134. Definitions to include other insurance of same general kind.

The definition of any class of insurance enumerated in this article shall include insurance against other loss, damage or liability of the same general nature or character, or of a similar kind, if the insurance may reasonably and properly be included in the definition and is not specifically included in the definition of some other class of insurance.

History. 1952, c. 317, § 38.1-24; 1986, c. 562.

§ 38.2-135. Classes of insurance companies may be licensed to write.

Except as otherwise provided in this title and subject to any conditions and restrictions imposed therein, any insurer licensed to transact the business of insurance in this Commonwealth, other than life insurers and title insurers, may be licensed to write one or more of the classes of insurance enumerated in Article 2 (§ 38.2-101 et seq.) of this chapter that it is authorized under its charter to write, except life insurance, industrial life insurance, credit life insurance, variable life insurance, modified guaranteed life insurance, annuities, variable annuities, modified guaranteed annuities, and title insurance. An insurer licensed to write life insurance shall not be licensed to write any additional class of insurance except modified guaranteed life insurance, variable life insurance, annuities, modified guaranteed annuities, variable annuities, credit life insurance, credit accident and sickness insurance, accident and sickness insurance, and industrial life insurance. An insurer licensed to write title insurance shall not be licensed to write any additional class of insurance. However, any life insurer that has been licensed to write and has been actively engaged in writing life insurance and any additional class of insurance set out in Article 2 (§ 38.2-101 et seq.) of this chapter continuously during a period of twenty years immediately preceding July 1, 1952, may continue to be licensed to write those classes of insurance. No company shall write any class of insurance unless it has a current annual license from the Commission to do so.

History. Code 1950, §§ 38-159, 38-504; 1952, c. 317, § 38.1-25; 1978, c. 20; 1986, c. 562; 1994, c. 316; 1995, c. 789.

§ 38.2-136. Reinsurance.

1. Except as otherwise provided in this title, any insurer licensed to transact the business of insurance in this Commonwealth may, by policy, treaty or other agreement, cede to or accept from any insurer reinsurance upon the whole or any part of any risk, with or without contingent liability or participation, and, if a mutual insurer, with or without membership therein.
2. No insurer licensed in this Commonwealth shall cede or assume policy obligations on risks located in this Commonwealth whereby the assuming insurer assumes the policy obligations of the ceding insurer as direct obligations of the assuming insurer to the payees under the policies and in substitution for the obligations of the ceding insurer to the payees, unless: (i) the policyholder has consented to the assumption and (ii) the assuming insurer is licensed in this Commonwealth to write the class or classes of insurance applicable to the policy obligations assumed.
3. Notwithstanding the provisions of subsection B, the transfer of risk under any reinsurance agreement may be effected by entry of an order by the Commission approving the transaction whenever (i) the Commission finds a licensed insurer to be impaired or in hazardous financial condition, (ii) a delinquency proceeding has been instituted against the licensed insurer for the purpose of conserving, rehabilitating, or liquidating the insurer, or (iii) the Commission finds, after giving the insurer notice and an opportunity to be heard, that the transfer of the contracts is in the best interests of the policyholders.  In granting any such approval, the Commission shall ensure that policyholders do not lose any rights or claims afforded under their original policies pursuant to Chapter 16 (§ 38.2-1600 et seq.) or 17 (§ 38.2-1700 et seq.) of this title.  Prior to granting an approval under clause (iii), the Commission shall consider whether there is a reasonable expectation that the ceding insurer may not be able to meet its obligations to all policyholders; whether the ceding insurer’s continued operation in this Commonwealth may become hazardous to policyholders, creditors and the public in this Commonwealth; or whether the ceding insurer may otherwise be unable to comply with the provisions of this title.

History. Code 1950, §§ 38-160, 38-519; 1952, c. 317, § 38.1-26; 1986, c. 562; 1993, c. 158.

§ 38.2-137. Flood insurance.

“Flood insurance” means insurance against loss or damage to any property caused by flooding or the rising of the waters of the ocean or its tributaries.

History. 1990, c. 916.

Editor’s note.

Repeal of this section by Acts 1997, c. 590 was contingent on funding in the general appropriation act. The funding was not provided, and therefore, the repeal never took effect.

§ 38.2-200. General powers of the Commission relative to insurance.

1. The Commission is charged with the execution of all laws relating to insurance and insurers. All companies, domestic, foreign, and alien, transacting or licensed to transact the business of insurance in this Commonwealth are subject to inspection, supervision and regulation by the Commission.
2. All licenses granting the authority to transact the business of insurance in this Commonwealth shall be granted and issued by the Commission under its seal. The licenses shall be in addition to the certificates of authority required of foreign corporations under §§ 13.1-757 and 13.1-919 .
3. During an emergency, public health or otherwise, which the Commission, in its discretion, determines may inhibit the Commission’s ability to issue or renew licenses and registrations under this title, or which may hinder licensees’ ability to meet licensure requirements, the Commission may temporarily suspend, authorize extensions of time for, or waive requirements for issuance or renewal of a license or registration under this title. The Commission may (i) issue temporary licenses and registrations, (ii) suspend examination requirements, or (iii) take other necessary measures to ensure that licensees and registrants under this title can continue to transact the business of insurance in the Commonwealth during the emergency.When temporarily suspending, authorizing extensions of time for, or waiving requirements for issuance or renewal of a license or registration pursuant to this subsection, the Commission shall issue an order specifying:
   1. The nature and basis of the emergency;
   2. Each line of insurance business to which the order applies, if applicable;
   3. The requirements for temporary licensure or registration and other relief, if applicable;
   4. The requirements for issuance or renewal of licenses or registrations that the Commission is suspending, authorizing extensions of time for, or waiving; and
   5. The duration of the order, not to exceed 120 days unless renewed by the Commission.

History. Code 1950, § 38-2; 1952, c. 317, § 38.1-29; 1986, c. 562; 2021, Sp. Sess. I, c. 297.

Cross references.

As to procedures for preventing disclosure of confidential proprietary information submitted to the Commission pursuant to this section, see § 38.2-221.1 .

For other provisions as to licenses and certificates of authority, see § 38.2-1024 et seq. See also Va. Const., Art. IX.

The 2021 Sp. Sess. I amendments.

The 2021 amendment by Sp. Sess. I, c. 297, effective July 1, 2021, added subsection C.

Law Review.

For article analyzing ratemaking issues under the SCC, see 14 Wm. & Mary L. Rev. 601 (1973).

§ 38.2-201. Recommendations by Commission to General Assembly.

The Commission shall make any recommendations to the General Assembly necessary for legislation governing and regulating the classes of companies placed under its supervision by this title.

History. Code 1950, § 38-128; 1952, c. 317, § 38.1-30; 1986, c. 562.

§ 38.2-202. Regulation of solicitation of proxies, consents and authorizations.

The Commission may adopt any rules and regulations regarding the voting equity securities of any domestic stock insurer. These rules and regulations shall cover (i) the solicitation of proxies, (ii) consents, (iii) authorizations, and (iv) any related financial reports. However, these rules and regulations shall not apply to any domestic stock insurer whose equity securities are registered, or required to be registered, pursuant to § 12 of the Securities Exchange Act of 1934, as amended.

History. 1966, c. 262, § 38.1-30.1; 1986, c. 562.

Editor’s note.

Section 12 of the Securities Exchange Act of 1934, referred to above, is codified as 15 U.S.C.S. § 78l.

§ 38.2-203. Management and exclusive agency contracts subject to approval by Commission.

1. For the purpose of this section, an insurer shall mean a stock or mutual insurer, cooperative nonprofit life benefit company, mutual assessment life, accident and sickness insurer, burial society, fraternal benefit society, mutual assessment property and casualty insurer, home protection company, health maintenance organization, premium finance company or a person licensed under Chapter 42 (§ 38.2-4200 et seq.), 44 (§ 38.2-4400 et seq.) or 45 (§ 38.2-4500 et seq.) of this title, incorporated or organized under the laws of this Commonwealth.
2. No insurer shall make or enter into any contract that provides for the control and management of the insurer, or the controlling or preemptive right to produce substantially all insurance business for the insurer, unless the contract has been filed with and approved by the Commission and approval has not been withdrawn by the Commission. Any approval, disapproval, or withdrawal of approval shall be delivered to the insurer in writing. The notice of disapproval or withdrawal of approval shall state the grounds of such action and shall be delivered to the insurer at least fifteen days before the effective date.
3. The Commission may disapprove or withdraw approval of any contract referred to in this section that:
   1. Subjects the insurer to excessive charges for expenses or commissions;
   2. Does not contain fair and adequate standards of performance;
   3. Extends for an unreasonable length of time; or
   4. Contains other inequitable provisions or provisions that may jeopardize the security of policyholders.
4. The provisions of this section shall not affect contracts made before June 30, 1954, but shall apply to all renewals of those contracts made after that date.
5. Any insurer aggrieved by a disapproval or withdrawal of approval under this section may proceed under the provisions of § 38.2-222 .

History. 1954, c. 363, § 38.1-29.1; 1986, c. 562; 1998, c. 42.

The 1998 amendment, in subsection A, substituted “casualty insurer” for “casualty insurers,” deleted “legal services plan or” preceding “home protection company” and inserted “health maintenance organization, premium finance company or a person licensed under Chapter 42 (§ 38.2-4200 et seq.), 44 (§ 38.2-4400 et seq.) or 45 (§ 38.2-4500 et seq.) of this title” following “home protection company.”

§§ 38.2-204, 38.2-205. Repealed by Acts 1991, c. 620.

§ 38.2-205.1. Temporary contracts of insurance permitted.

A lender engaged in making or servicing real estate mortgage or deed of trust loans on one to four family residences shall accept as evidence of insurance a temporary written contract of insurance meeting the requirements of § 38.2-2112 and issued by any duly licensed agent, broker, or insurance company. Nothing herein prohibits the lender from disapproving such insurer provided such disapproval is reasonable. Such lender need not accept a binder unless such binder (i) includes the name and address of the insured, name and address of the mortgagee, a description of the insured collateral, and a provision that it may not be cancelled within the term of the binder except upon ten days’ written notice to the mortgagee; (ii) is accompanied by a paid receipt for one year’s premium, except in the case of the renewal of a policy subsequent to the closing of a loan; and (iii) includes an undertaking of agent to use his best efforts to have the company issue a policy within forty-five days, unless the binder is cancelled. The Bureau of Insurance may by administrative letter require binders to contain such additional information as may be necessary to permit such binders to comply with the reasonable requirements of the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation for purchase of mortgage loans.

History. 1987, c. 10.

§ 38.2-206. Corporations as members of mutual insurers.

Any public or private corporation in this Commonwealth or elsewhere may apply and enter into agreements for, hold policies in, and be a member of any mutual insurer.

History. Code 1950, § 38-506; 1952, c. 317, § 38.1-31.1; 1986, c. 562.

§ 38.2-207. Enforcement of right of subrogation in name of insured.

Except for contracts or plans subject to § 38.2-3405 or § 38.2-2209 , when any insurer pays an insured under a contract of insurance which provides that the insurer becomes subrogated to the rights of the insured against any other party the insurer may enforce the legal liability of the other party. This action may be brought in its own name or in the name of the insured or the insured’s personal representative.

History. 1952, c. 476, § 38.1-31.2; 1973, c. 28; 1986, c. 562.

Research References.

Bryson on Virginia Civil Procedure (Matthew Bender). Chapter 5 Parties. § 5.02 Competency. Bryson.

Virginia Forms (Matthew Bender). No. 13-104 Subrogation Agreement.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 58.

§ 38.2-208. Limitation of risks generally.

1. Except as otherwise provided in this title, no insurer transacting business in this Commonwealth shall expose itself to any loss on any one risk or hazard in an amount exceeding ten percent of its surplus to policyholders. Any risk or portion of any risk reinsured by an insurer meeting standards of solvency equal to those set forth in Article 3.1 (§ 38.2-1316.1 et seq.) of Chapter 13 shall be deducted in determining the limitation of risk prescribed in this section.
2. For the purpose of this section, the surplus to policyholders shall be determined from (i) the insurer’s last sworn statement filed with the Commission or (ii) the Commission’s last report of examination, whichever is more recent at the time the risk is assumed.
3. For the purpose of this section, any one risk or hazard (i) in the case of municipal bond insurance shall mean average annual debt service of insured obligations backed by a single revenue source, provided that the insurance policy does not require any accelerated payment of principal by the insurer upon the event of default and (ii) in the case of all other kinds of financial guaranty insurance shall mean the insured unpaid principal with respect to obligations for any one entity, except that any risk or hazard shall be defined by revenue source, if the insured risk or hazard is payable from a specified revenue source or adequately secured by loan obligations or other assets.
4. As used in subsection C above:“Municipal bond insurance” means a kind of financial guaranty insurance providing insurance against loss by reason of nonpayment of principal, interest or other payment obligations pursuant to the terms of municipal bonds.“Municipal bond” means any security, or other instrument under which a payment obligation is created, issued by or on behalf of, or payable or guaranteed by, the United States, Canada, a state, a province of Canada, a municipality or political subdivision of any of the foregoing, or any public agency or instrumentality thereof, or by any other entity provided that such security is eligible for issuance by one of the foregoing.“Average annual debt service” means the amount of insured unpaid principal and interest on an obligation multiplied by the number of such insured obligations, assuming that each obligation represents a $1,000 par value, divided by the amount equal to the aggregate life of all such obligations.“Financial guaranty insurance” means insurance against loss by reason of the failure of any obligor on any debt instrument or other monetary obligation, including common or preferred stock or capital leases, to pay when due principal, interest, premium, dividend, or purchase price of or on such instrument or obligation, or a fee in connection therewith, when such failure is the result of a financial default or insolvency, regardless of whether such obligation is incurred directly or as a guarantor by or on behalf of another obligor that has also defaulted.For the purposes of subsection C of this section, the amount of insured unpaid principal shall be reduced by the amount of deposit of (i) cash, or (ii) the market value of obligations rated in the four highest major rating categories by a securities rating agency recognized by the Commission, or (iii) the stated amount of an unconditional, irrevocable letter of credit issued or confirmed by a bank or trust company that (a) is a member of the federal reserve system or chartered by any state or (b) is organized and existing under the laws of a foreign country, has been licensed as a branch or agency by any state or the federal government and is rated in the two highest major rating categories by a securities ratings agency recognized by the Commission or (c) is otherwise acceptable to the Commission or (iv) a conveyance or mortgage of real property, or (v) the scheduled cash flow from obligations rated in the four highest major rating categories by a securities rating agency recognized by the Commission if scheduled to be received on or prior to the date of scheduled debt service on the insured obligations. Such deposit shall be held by the insurer or held in trust for the benefit of the insurer or held in trust for the benefit of holders of the insured obligation whether in the form of debt service, sinking funds or other reserves pursuant to the bond indenture by a trustee acceptable to the Commission.For the purpose of subsection C of this section, an insurer’s surplus to policyholders shall include the amount of any contingency or similar reserve established and maintained by the insurer pursuant to applicable law for the protection of insureds covered by financial guaranty insurance policies against the effect of excessive losses usually occurring during adverse economic cycles.
5. The limitation of risk prescribed in this section for any alien insurer shall apply only to the exposure to risk and the trusteed surplus of the alien insurer’s policyholders.
6. This section shall not apply to (i) life insurance, (ii) annuities, (iii) accident and sickness insurance, (iv) insurance of marine risks or marine protection and indemnity risks, (v) workers’ compensation or employers’ liability risks, or (vi) risks covered by title insurance.

History. Code 1950, §§ 38-167, 38-168; 1952, c. 317, § 38.1-32; 1986, c. 562; 1987, c. 353; 1988, c. 554.

Cross references.

As to compliance with this section by reciprocal insurers, see § 38.2-1203 .

§ 38.2-209. Award of insured’s attorney fees in certain cases.

1. Notwithstanding any provision of law to the contrary, in any civil case in which an insured individual sues his insurer to determine what coverage, if any, exists under his present policy or fidelity bond or the extent to which his insurer is liable for compensating a covered loss, the individual insured shall be entitled to recover from the insurer costs and such reasonable attorney fees as the court may award. However, these costs and attorney’s fees shall not be awarded unless the court determines that the insurer, not acting in good faith, has either denied coverage or failed or refused to make payment to the insured under the policy. “Individual,” as used in this section, shall mean and include any person, group, business, company, organization, receiver, trustee, security, corporation, partnership, association, or governmental body, and this definition is declaratory of existing policy.
2. Nothing in this section shall be deemed to grant a right to bring an action against an insurer by an insured who would otherwise lack standing to bring an action.
3. As used in this section, “insurer” shall include “self-insurer.”

History. 1982, c. 576, § 38.1-32.1; 1986, c. 562; 2006, c. 279.

The 2006 amendments.

The 2006 amendment by c. 279 substituted “fidelity bond” for “bond” in the first sentence in subsection A.

Law Review.

For an article relating to recent case decisions and statutory changes in the field of insurance law, see 32 U. Rich. L. Rev. 1303 (1998).

For article, “Insurance Law,” see 35 U. Rich. L. Rev. 697 (2001).

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, §§ 4, 68.

§ 38.2-210. Loans to officers, directors, etc., prohibited.

1. Except as provided in § 38.2-212 , no insurer, legal services plan, health services plan, dental or optometric services plan, health maintenance organization, or home protection company, transacting business in this Commonwealth shall make a loan, either directly or indirectly, to any of its officers or directors. No such company shall make a loan to any other corporation or business unit in which any of its officers or directors has a substantial interest. No such officer or director shall accept or receive any such loan directly or indirectly.
2. For the purposes of this section and of § 38.2-211 , “a substantial interest” in any corporation or business unit means an interest equivalent to ownership or control of at least ten percent of its stock or its equivalent by an officer or director, or the aggregate ownership or control by all officers and directors of the same company.

History. Code 1950, § 38-4.1; 1952, c. 317, § 38.1-33; 1978, c. 701; 1986, c. 562.

§ 38.2-211. Other interests and payments to officers, directors, etc., prohibited.

Except as provided in § 38.2-212 , no officer or director of any company listed in § 38.2-210 and transacting business in this Commonwealth shall receive, directly, indirectly or through any substantial interest in any other corporation, any compensation for negotiating, procuring, recommending, or aiding in the purchase or sale of property by such company, or in obtaining any loan from the company. No such officer or director shall be pecuniarily interested, either as principal, agent, or beneficiary, in any such purchase, sale or loan. No financial obligation of any such officer or director shall be guaranteed by the company.

History. Code 1950, § 38-4.2; 1952, c. 317, § 38.1-34; 1978, c. 701; 1986, c. 562.

§ 38.2-212. Certain compensation not prohibited.

1. Nothing contained in §§ 38.2-210 and 38.2-211 shall prohibit any officer or director of any company listed in § 38.2-210 from receiving usual compensation for services rendered in the ordinary course of his duties as an officer or director, if the compensation is authorized by vote of the board of directors or other governing body of the company. Nor shall the provisions of §§ 38.2-210 and 38.2-211 prohibit the payment to an officer or director of any such company who is a licensed attorney-at-law of a fee in connection with loans made by the company if and when those fees are paid by the borrower and do not constitute a charge against the company.
2. Nothing contained in this chapter shall prohibit a life insurer from making a loan upon a policy of insurance issued by it and held by the borrower. This loan shall not exceed the net cash value of the policy.  Nothing contained in this chapter shall prohibit any company from (i) making a loan on real property owned by the officer and improved with a dwelling that is to serve as his residence if the loan qualifies under subdivision 1 of § 38.2-1434 and under § 38.2-1437 or (ii) acquiring the residence of the officer in conformance with subsection D of § 38.2-1441 if the transaction is in connection with the relocation of the place of employment of an officer who is neither a director nor a trustee of the company.
3. Nothing contained in § 38.2-211 shall prohibit a director of any such company from receiving compensation that is usual and customary in the director’s business with respect to transactions in the ordinary course of business of the company and of the director. Prior to payment of the compensation, written request for the Commission’s approval shall be made. This written request shall set forth under oath complete details concerning the transactions that the company intends to conduct with a director. Any approval given by the Commission shall be in writing. No approval granted under this subsection shall imply that the Commission approves any investment of any company.

History. Code 1950, § 38-4.3; 1952, c. 317, § 38.1-35; 1977, c. 261; 1978, c. 701; 1981, c. 272; 1983, c. 457; 1986, c. 562; 1992, c. 588.

§ 38.2-213. Violation of § 38.2-210 or § 38.2-211.

Any company, officer or director violating any provision of § 38.2-210 or § 38.2-211 shall be guilty upon conviction of a Class 1 misdemeanor. Any funds of any company invested or used in violation of either of § 38.2-210 or § 38.2-211 may not be reported as an admitted asset in accordance with guidance set forth in the National Association of Insurance Commissioners accounting practices and procedures manuals.

History. Code 1950, § 38-4.4; 1952, c. 317, § 38.1-36; 1986, c. 562; 2000, c. 46.

Cross references.

As to punishment for Class 1 misdemeanors, see § 18.2-11 .

The 2000 amendments.

The 2000 amendment by c. 46, effective January 1, 2001, substituted “may not be reported as an admitted asset in accordance with guidance set forth in the National Association of Insurance Commissioners accounting practices and procedures manuals” for “may not be allowed as admitted assets of the company” at the end of the second sentence.

§ 38.2-214. Restrictions upon purchase and sale of equity securities of domestic stock insurers.

1. Each person who is directly or indirectly the beneficial owner of more than ten percent of a class of any equity security of a domestic insurer, or who is a director or an officer of a domestic stock insurer, shall file a statement with the Commission within ten days after becoming a beneficial owner, director or officer. This statement shall be in a form prescribed by the Commission and shall show the amount of all the domestic insurer’s equity securities of which he is the beneficial owner. Within ten days after the close of each calendar month, if there has been a change in his ownership during such month, the person shall file with the Commission a statement prescribed by the Commission indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.
2. To prevent the unfair use of information obtained by any beneficial owner, director or officer, any profit realized by such person within six months from the purchase and sale, or any sale and purchase, of any of the insurer’s equity securities shall inure to and be recoverable by the insurer. This provision shall apply regardless of any intention of the beneficial owner, director or officer to hold the equity security purchased or not to repurchase any sold equity security for a period exceeding six months. However, this provision shall not apply if the security was acquired in good faith in connection with a debt previously contracted. The insurer may sue at law or in equity to recover the profit in any court of competent jurisdiction. The owner of any equity security of the insurer may sue in the name and in behalf of the insurer if the insurer fails or refuses to bring suit within sixty days after request or if the insurer fails to diligently prosecute after bringing suit. No suit under this subsection shall be brought more than two years after the date the profit was realized. This subsection shall not be construed to cover any transaction where the person was not the beneficial owner at the time of either the purchase or sale of the equity security involved. The Commission may by rules and regulations exempt from the provisions of this subsection any transaction that is not comprehended within the purpose of this subsection.
3. No beneficial owner, director or officer shall directly or indirectly sell any equity security of the insurer if the person selling the security or his principal (i) does not own the security sold, or (ii) owns the equity security but does not deliver it within twenty days after the sale or does not mail it within five days after the sale. No person shall be deemed to have violated this subsection if he proves that, notwithstanding the exercise of good faith, he was unable to deliver or mail the security within the required time, or that to do so would cause undue inconvenience or expense. Any person violating this subsection shall be guilty upon conviction of a Class 1 misdemeanor.
4. Subsections B and C of this section shall not apply to the transactions of a dealer in an investment account that are conducted in the ordinary course of a dealer’s business and incident to the establishment or maintenance of an equity security’s primary or secondary market, other than on an exchange defined in the Securities Exchange Act of 1934. The Commission may, by rules and regulations, define and prescribe terms and conditions with respect to equity securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market.
5. Subsections A, B, and C of this section shall not apply to foreign or domestic arbitrage transactions unless made in contravention of rules and regulations adopted by the Commission to carry out the purposes of this section.
6. The term “equity security” when used in this section means (i) any stock or similar security, (ii) any security that is convertible, with or without consideration, into another security, (iii) any security that carries any warrant or right to subscribe to or purchase a security, or (iv) any warrant, right or other security that the Commission, by rules and regulations, deems to be similar in nature to an equity security and considers the classification necessary or appropriate for protecting the public or an investor’s interest.
7. Subsections A, B, and C of this section shall not apply to equity securities of a domestic stock insurer if (i) those equity securities are registered or are required to be registered pursuant to § 12 of the Securities Exchange Act of 1934, as amended; or (ii) the domestic stock insurer does not have any class of its equity securities held of record by 100 or more persons on the last business day of the year immediately preceding the year in which equity securities of the insurer would be subject to subsections A, B, and C of this section.
8. The Commission may adopt rules and regulations pursuant to § 38.2-223 for the execution of the functions vested in it by subsections A through G of this section. The Commission may classify for that purpose any domestic stock insurers, equity securities, and other persons or matters within its jurisdiction. The Commission may exempt from the provisions of this section any officer, director or beneficial owner of equity securities of any domestic stock insurer under the terms and conditions, and for the period of time the Commission considers necessary or appropriate if the Commission finds that the action is consistent with the public interest or the protection of investors. Any such exemption may be accomplished by (i) rules and regulations issued pursuant to § 38.2-223 or (ii) by order, upon application of any interested person, after due notice and an opportunity for hearing has been given. No provision of subsections A, B, and C of this section imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule or regulation of the Commission. Notwithstanding the provisions of this subsection, such rule or regulation may be amended, rescinded or determined by judicial or other authority to be invalid for any reason after the act or omission has occurred.

History. 1966, c. 265, § 38.1-36.1; 1986, c. 562.

Cross references.

As to punishment for Class 1 misdemeanors, see § 18.2-11 .

Editor’s note.

The Securities Exchange Act of 1934, referred to above, is codified as 15 U.S.C.S. § 78a et seq.

§ 38.2-215. Liability of president, chief executive officer or directors if insurance issued when insurer insolvent.

If any insurer is insolvent, and the president, chief executive officer or directors with knowledge of insolvency make or agree to further insurance, they shall be personally liable for any loss under that insurance.

History. Code 1950, § 38-176; 1952, c. 317, § 38.1-37; 1986, c. 562.

§ 38.2-216. Restrictions on removal or transfer of property and on reinsurance; penalty.

1. No domestic insurer shall remove from this Commonwealth either all or substantially all of its property or business without the written approval of the Commission.
2. No domestic insurer shall transfer or attempt to transfer substantially its entire property, or enter into any transaction the effect of which is to merge substantially its entire property or business into the property or business of any other company, without prior written approval of the Commission.
3. No domestic insurer shall reinsure with any other insurer all or substantially all of its risks without prior written approval of the Commission of the reinsurance and of the contract under which reinsurance is effected.
4. No domestic insurer shall enter into or modify a reinsurance treaty or risk-sharing arrangement without prior written approval of the Commission if for any twelve-month period the reinsurance premium or anticipated change in the ceding insurer’s liabilities equals or exceeds fifty percent of the insurer’s surplus to policyholders as of the immediately preceding December 31.
5. Any director or officer of the insurer consenting to and participating in any violation of this section shall be guilty of a Class 1 misdemeanor.

History. Code 1950, § 38-6; 1952, c. 317, § 38.1-38; 1986, c. 562; 2000, c. 51.

Cross references.

As to punishment for Class 1 misdemeanors, see § 18.2-11 .

The 2000 amendments.

The 2000 amendment by c. 51 added present subsection D, and redesignated former subsection D as present subsection E.

§ 38.2-217. When assets may not be distributed among stockholders.

No domestic insurer shall distribute its assets among its stockholders until all risks have expired or have been cancelled, or have been replaced by the policies of another solvent insurer licensed to transact the business of insurance in this Commonwealth, and until all claims against the insurer have been settled. No insurer shall contract to reinsure its risks for the purpose of distributing its assets without first obtaining the written approval of the Commission. However, nothing in this section shall be construed to prohibit the lawful payment of dividends.

History. Code 1950, §§ 38-170, 38-171; 1952, c. 317, § 38.1-39; 1986, c. 562.

§ 38.2-218. Penalties and restitution payments.

1. Any person who knowingly or willfully violates any provision of this title or any regulation issued pursuant to this title shall be punished for each violation by a penalty of not more than $5,000.
2. Any person who violates without knowledge or intent any provision of this title or any rule, regulation, or order issued pursuant to this title may be punished for each violation by a penalty of not more than $1,000. For the purpose of this subsection, a series of similar violations resulting from the same act shall be limited to a penalty in the aggregate of not more than $10,000.
3. Any violation resulting solely from a malfunction of mechanical or electronic equipment shall not be subject to a penalty.
4. 1. The Commission may require a person to make restitution in the amount of the direct actual financial loss: D. 1. The Commission may require a person to make restitution in the amount of the direct actual financial loss:
      1. For charging a rate in excess of that provided by statute or by the rates filed with the Commission by the insurer;
      2. For charging a premium that is determined by the Commission to be unfairly discriminatory, such restitution being limited to a period of one year from the date of determination;
      3. For failing to pay amounts explicitly required by the terms of the insurance contract where no aspect of the claim is disputed by the insurer; and
      4. For improperly withholding, misappropriating, or converting any money or property received in the course of doing business.
   2. The Commission shall have no jurisdiction to adjudicate controversies growing out of this subsection regarding restitution among insurers, insureds, agents, claimants and beneficiaries.
5. The provisions provided under this section may be imposed in addition to or without imposing any other penalties or actions provided by law.

History. Code 1950, § 38-24; 1952, c. 317, § 38.1-40; 1986, c. 562; 2010, c. 226.

Cross references.

As to suspension, revocation, or termination of license of limited lines travel insurance agent or travel retailer, see § 38.2-1888.1 .

As to penalties related to registration of continuing care providers, see § 38.2-4932 .

The 2010 amendments.

The 2010 amendments by c. 226 added subdivision D 1 d and made minor stylistic changes.

§ 38.2-219. Violations; procedure; cease and desist orders.

1. Whenever the Commission has reason to believe that any person has committed a violation of this title or of any rule, regulation, or order issued by the Commission under this title, it shall issue and serve an order upon that person by certified or registered mail or in any other manner permitted by law. The order shall include a statement of the charges and a notice of a hearing on the charges to be held at a fixed time and place which shall be at least ten days after the date of service of the notice. The order shall require that person to show cause why an order should not be made by the Commission directing the alleged offender to cease and desist from the violation or to show cause why the Commission should not issue any other appropriate order as the nature of the case and the interests of the policyholders, creditors, shareholders, or the public may require. At the hearing, that person shall have an opportunity to be heard in accordance with the Commission’s order. In all matters in connection with the charges or hearing, the Commission shall have the jurisdiction, power and authority granted or conferred upon it by Title 12.1 and, except as otherwise provided in this title, the procedure shall conform to and the right of appeal shall be the same as that provided in Title 12.1.
2. If the Commission finds in the hearing that there is about to be or has been a violation of this title, it may issue and serve upon any person committing the violation by certified or registered mail or in any other manner permitted by law (i) an order reciting its findings and directing the person to cease and desist from the violation or (ii) such other appropriate order as the nature of the case and the interests of the policyholders, creditors, shareholders, or the public requires.
3. Any person who violates any order issued under subsection B of this section may upon conviction be subject to one or both of the following:
   1. Punishment as provided in § 38.2-218 ; or
   2. The suspension or revocation of any license issued by the Commission.

History. 1952, c. 317, §§ 38.1-54, 38.1-55, 38.1-60 through 38.1-62; 1971, Ex. Sess., c. 1; 1973, c. 505, § 38.1-178.7; 1977, c. 414, § 38.1-178.17; 1977, c. 529; 1980, c. 404; 1982, c. 223, § 38.1-482.14:1; 1986, c. 562.

Michie’s Jurisprudence.

For related discussion, see 13A M.J. Monopolies and Restraints of Trade, § 8.

§ 38.2-220. Injunctions.

The Commission shall have the jurisdiction and powers of a court of equity to issue temporary and permanent injunctions restraining acts which violate or attempt to violate provisions of this title and to enforce the injunctions by civil penalty or imprisonment.

History. Code 1950, § 32-195.17; 1956, c. 268, § 38.1-830; 1978, c. 658, § 38.1-806; 1979, c. 721; 1980, c. 682, § 38.1-911; c. 720, § 38.1-884; 1981, c. 530, § 38.1-946; 1986, c. 562.

§ 38.2-221. Enforcement of penalties.

The Commission may impose, enter judgment for, and enforce any civil penalty or other penalty pronounced against any person for violating any of the provisions of this title, subject to the hearing provisions of § 12.1-28 . The power and authority conferred upon the Commission by this section shall be in addition to and not in substitution for the power and authority conferred upon the courts by general law to impose civil penalties for violations of the laws of this Commonwealth.

History. Code 1950, § 38-26; 1952, c. 317, § 38.1-41; 1986, c. 562.

§ 38.2-221.1. Confidentiality of information.

Whenever, during the course of a market conduct examination pursuant to Article 4 (§ 38.2-1317 et seq.) of Chapter 13 or inspection request or inquiry pursuant to § 38.2-200 , the Commission requests an insurer to furnish information which the insurer considers confidential proprietary information, such confidential proprietary information shall be submitted to the Commission but shall be excluded from, and the Commission shall not be subject to, subpoena or public inspection with respect to such information if the insurer (i) invokes such exclusion, in writing, upon submission of the data or other materials for which protection from disclosure is sought; (ii) identifies the data or other materials for which protection is sought; and (iii) states the reason why protection is necessary. Nothing contained herein shall prohibit the Commission from (i) using such confidential proprietary information in furtherance of any regulatory or legal action; (ii) publishing any decisions, orders, findings, opinions, or judgments; or (iii) publishing any final market conduct report or any other report containing aggregated findings, provided that such report, decisions, orders, findings, opinions, or judgments shall not disclose such confidential proprietary information unless the Commission has found, after the insurer has been provided notice and opportunity to be heard, that such information is not confidential proprietary information. No waiver of an existing privilege or claim of confidentiality shall occur as a result of disclosure to the Commission under this section.

History. 2000, c. 527.

§ 38.2-221.2. Treatment of confidential information pursuant to federal law.

1. Any information denominated in writing as confidential by a federal regulator and received by the Commission pursuant to the Gramm-Leach-Bliley Act of 1999 (Public Law §§ 106-102) (hereafter, the federal act) shall be excluded from, and the Commission shall not be subject to, subpoena or public inspection with respect to such information.
2. Pursuant to the federal act, and notwithstanding any other provision of law, the Commission may provide to a federal regulator any examination or other report, record or information to which the Commission has access with respect to any person who is engaged in the business of insurance in this Commonwealth and is an affiliate or agent of a depository institution or financial holding company, as those terms are defined in the federal act, provided that the federal regulator has the legal authority, and shall agree in writing, as a condition precedent to its receipt of such information, to maintain such information in confidence as provided in the federal act and to take all reasonable steps to oppose any effort to secure disclosure of such information.
3. The provision by the Commission pursuant to this section, or the provision by a federal regulator pursuant to the federal act, of such information shall not constitute, operate as a waiver of, or otherwise affect any existing privilege or any claim of confidentiality to which the information is otherwise subject.
4. Nothing contained herein shall prohibit the Commission from (i) using such confidential information in furtherance of any regulatory or legal action; (ii) publishing any decisions, orders, findings, opinions or judgments; or (iii) publishing any final report or any other report containing aggregated findings, provided that such reports, decisions, orders, findings, opinions or judgments shall not disclose any such confidential information.
5. For purposes of this section, “federal regulator” means the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, or the Federal Deposit Insurance Corporation.

History. 2001, c. 519.

§ 38.2-221.3. Confidentiality of applications and investigations.

1. For purposes of this section, “business entity” means a partnership, limited partnership, limited liability company, corporation, or other legal entity that is entitled to hold property in its own name and that is not a sole proprietorship.
2. This section applies to the Commission’s authority to license, register, or authorize business entities pursuant to this title. This section shall not apply to any license issued under Chapter 18 (§ 38.2-1800 et seq.).
3. All applications, documents, materials, or other information produced by, obtained by, or disclosed to the Commission or any other person in the course of an investigation, or a review of an application, shall be given confidential treatment, is not subject to subpoena, and may not be made public by the Commission or any other person. The Commission may grant access to (i) a regulatory official of any state or country; (ii) the National Association of Insurance Commissioners, its affiliate, or its subsidiary; or (iii) a law-enforcement authority of any state or country, provided that those officials are required under their law to maintain its confidentiality. Any such disclosure by the Commission shall not constitute a waiver of confidentiality of such applications, documents, materials, or other information, or copies thereof. Any parties receiving such information shall agree in writing prior to receiving the information to provide to it the same confidential treatment as required by this section, unless the prior written consent of the business entity to which it pertains has been obtained.
4. Nothing in this section shall prohibit the Commission from (i) using such confidential information in furtherance of any regulatory or legal action; (ii) publishing any decisions, orders, findings, opinions, or judgments; or (iii) publishing any final report or any other report containing aggregated findings, provided that such reports, decisions, orders, findings, opinions, or judgments shall not disclose any such confidential information.

History. 2009, c. 352; 2016, c. 250.

The 2016 amendments.

The 2016 amendment by c. 250 deleted “(i)” preceding “license, register,” and deleted “and (ii) license automobile clubs pursuant to Chapter 3.1 (§ 13.1-400.1 et seq.) of Title 13.1” at the end of the first sentence in subsection B.

§ 38.2-222. Appeals generally.

Except as otherwise specifically provided in this title, § 12.1-39 shall apply to the appeal of any final (i) finding, (ii) decision settling the substantive law, (iii) order, or (iv) judgment of the Commission issued pursuant to this title.

History. 1986, c. 562.

§ 38.2-223. Rules and regulations; orders.

The Commission, after notice and opportunity for all interested parties to be heard, may issue any rules and regulations necessary or appropriate for the administration and enforcement of this title.

History. 1986, c. 562.

Cross references.

As to promulgation of rules and regulations for step therapy protocols, see § 38.2-3407.9:05 .

As to promulgation of rules and regulations for limiting cost-sharing payments for prescription insulin drugs, see § 38.2-3407.15:5 .

§ 38.2-224. Procedures.

Except as otherwise specifically provided in this title, Chapter 5 (§ 12.1-25 et seq.) of Title 12.1 shall apply to proceedings under this title.

History. 1986, c. 562.

§ 38.2-225. Disposition of fines and penalties.

1. All fines recovered for criminal violations of this title or for criminal violations of rules, regulations, or orders issued pursuant to this title shall be paid into the state treasury to the credit of the Literary Fund.
2. All penalties and compromise settlements recovered for civil violations of this title or civil violations of rules, regulations, or orders issued pursuant to this title shall be paid into the state treasury. Pursuant to §§ 38.2-1620 and 38.2-1718 these funds shall be credited to the Literary Fund or if the Commission determines a need, to either (i) the Virginia Property and Casualty Insurance Guaranty Association established pursuant to Chapter 16 of this title or (ii) the Virginia Life, Accident and Sickness Insurance Guaranty Association established pursuant to Chapter 17 of this title.

History. Code 1950, § 38-25; 1952, c. 317, § 38.1-42; 1986, c. 562.

§ 38.2-226. Provisions of title not to apply to certain mutual aid associations.

This title shall not apply to beneficial, relief, or mutual aid societies, or partnerships, plans, associations, or corporations, established prior to 1935 and formed by churches for the purpose of aiding members who sustain property losses by fire, lightning, hail, storm, flood, explosion, power failure, theft, burglary, vandalism, civil commotion, airplane and vehicular damage, and in which the privileges and memberships in these societies, partnerships, plans, associations, or corporations are confined to members of the churches.

History. 1981, c. 171, § 38.1-42.1; 1985, c. 361; 1986, c. 562.

§ 38.2-226.1. Expired.

Editor’s note.

Acts 1996, c. 628, which enacted this section, provided for its expiration on July 1, 1997, pursuant to clause 2 of the 1996 legislation. Acts 1997, cc. 414 and 475, amended the text of the section, but did not amend the expiration clause. Therefore, at the direction of the Code Commission, this section is now set out as expired.

§ 38.2-226.2. Provisions of title not applicable to certain long-term care health plans.

1. This title shall not apply to pre-PACE long-term care health plans (i) authorized by the United States Health Care Financing Administration pursuant to § 1903 (m) (2) (B) of Title XIX of the United States Social Security Act (42 U.S.C. § 1396b et seq.) and the state plan for medical assistance services as established pursuant to Chapter 10 (§ 32.1-323 et seq.) of Title 32.1 and (ii) which have signed agreements with the Department of Medical Assistance Services as long-term care health plans.
2. This title shall not apply to PACE long-term care health plans (i) authorized as programs of all-inclusive care for the elderly by Subtitle I (§ 4801 et seq.) of Chapter 6 of Title IV of the Balanced Budget Act of 1997, Pub. L. No. 105-33, 111 Stat. 528 et seq., §§ 4801-4804, 1997, pursuant to Title XVIII and Title XIX of the United States Social Security Act (42 U.S.C. § 1395eee et seq.) and the state plan for medical assistance services as established pursuant to Chapter 10 (§ 32.1-323 et seq.) of Title 32.1 and (ii) which have signed agreements with the Department of Medical Assistance Services as long-term care health plans.
3. Enrollment in a pre-PACE or PACE plan shall be restricted to those individuals who participate in programs authorized pursuant to Title XIX or Title XVIII of the United States Social Security Act, respectively.

History. 1998, c. 318.

§ 38.2-226.3. Expired.

Editor’s note.

Acts 2000, c. 669, cl. 2, provided that the provisions of this section, which provided that the provisions of Title 38.2 were not applicable to certain health plans, would expire on July 1, 2001.

§ 38.2-227. Public policy regarding punitive damages.

It is not against the public policy of the Commonwealth for any person to purchase insurance providing coverage for punitive damages arising out of the death or injury of any person as the result of negligence, including willful and wanton negligence, but excluding intentional acts. This section declares existing policy.

History. 1983, c. 353, § 38.1-42.2; 1986, c. 562.

Research References.

Friend’s Virginia Pleading and Practice (Matthew Bender). Chapter 23 Damages. § 23.05 Punitive Damages. Friend.

Michie’s Jurisprudence.

For related discussion, see 5C M.J. Damages, § 64.

§ 38.2-228. Proof of future financial responsibility.

At the request of a named insured, a licensed property and casualty insurer shall provide without unreasonable delay to the Commissioner of the Department of Motor Vehicles proof of future financial responsibility as required by the provisions of Title 46.2.

History. 1986, c. 562.

§ 38.2-229. Immunity from liability.

1. There shall be no liability on the part of and no cause of action against any person for furnishing in good faith to the Commission information relating to the investigation of any insurance or reinsurance transaction when such information is furnished under the requirements of law or at the request or direction of the Commission.
2. There shall be no liability on the part of and no cause of action against the Commission, the Commissioner of Insurance, or any of the Commission’s employees or agents, acting in good faith, for investigating any insurance or reinsurance transaction or for the dissemination of any official report related to an official investigation of any insurance or reinsurance transaction.

History. 1986, c. 562.

§ 38.2-230. Distributions by nonstock corporation.

No dividend or distribution of income, as used in § 13.1-814 , shall be made to a member corporation of a corporation licensed under the provisions of this title unless the corporation has received approval by the Commission prior to the distribution. In approving the distribution, the Commission shall give consideration to the subscribers’ or policyholders’ best interest.

History. 1985, c. 380, § 38.1-39.1; 1986, c. 562.

§ 38.2-231. Notice of cancellation, refusal to renew, reduction in coverage or increase in premium of certain liability insurance policies.

1. 1. No cancellation or refusal to renew by an insurer of (i) a policy of insurance as defined in § 38.2-117 or 38.2-118 insuring a business entity; (ii) a policy of insurance that includes as a part thereof insurance as defined in § 38.2-117 or 38.2-118 insuring a business entity; (iii) a policy of motor vehicle insurance against legal liability of the insured as defined in § 38.2-124 insuring a business entity; or (iv) a policy of miscellaneous casualty insurance as defined in subsection B of § 38.2-111 insuring a business entity shall be effective unless the insurer delivers or mails to the first named insured at the address shown on the policy a written notice of cancellation or refusal to renew, or delivers such notice electronically to the address provided by the first named insured. Such notice shall: A. 1. No cancellation or refusal to renew by an insurer of (i) a policy of insurance as defined in § 38.2-117 or 38.2-118 insuring a business entity; (ii) a policy of insurance that includes as a part thereof insurance as defined in § 38.2-117 or 38.2-118 insuring a business entity; (iii) a policy of motor vehicle insurance against legal liability of the insured as defined in § 38.2-124 insuring a business entity; or (iv) a policy of miscellaneous casualty insurance as defined in subsection B of § 38.2-111 insuring a business entity shall be effective unless the insurer delivers or mails to the first named insured at the address shown on the policy a written notice of cancellation or refusal to renew, or delivers such notice electronically to the address provided by the first named insured. Such notice shall:
      1. Be in a type size authorized under § 38.2-311 ;
      2. State the date, which shall not be less than 45 days after the delivery or mailing of the notice of cancellation or refusal to renew, on which such cancellation or refusal to renew shall become effective, except that such effective date may not be less than 15 days from the date of mailing or delivery when the policy is being cancelled or not renewed for failure of the insured to discharge when due any of its obligations in connection with the payment of premium for the policy;
      3. State the specific reason or reasons of the insurer for cancellation or refusal to renew;
      4. Advise the first named insured of its right to request in writing, within 15 days of the receipt of the notice, that the Commissioner of Insurance review the action of the insurer; and
      5. In the case of a policy of motor vehicle insurance, inform the first named insured of the possible availability of other insurance which may be obtained through its agent, through another insurer, or through the Virginia Automobile Insurance Plan.
   2. Nothing in this subsection shall apply to any policy of insurance if the named insured or his duly constituted attorney-in-fact has notified orally, or in writing, if the insurer requires such notification to be in writing, the insurer or its agent that he wishes the policy to be canceled or that he does not wish the policy to be renewed, or if, prior to the date of expiration, he fails to accept the offer of the insurer to renew the policy.
   3. Nothing in this subsection shall apply if an affiliated insurer has manifested its willingness to provide coverage at a lower premium than would have been charged for the same exposures on the expiring policy. The affiliated insurer shall manifest its willingness to provide coverage by issuing a policy with the types and limits of coverage at least equal to those contained in the expiring policy unless the named insured has requested a change in coverage or limits. When such offer is made by an affiliated insurer, an offer of renewal shall not be required of the insurer of the expiring policy, and the policy issued by the affiliated insurer shall be deemed to be a renewal policy.
2. No insurer shall cancel or refuse to renew a policy of motor vehicle insurance against legal liability of the insured as defined in § 38.2-124 insuring a business entity solely because of lack of supporting business or lack of the potential for acquiring such business.
3. No reduction in coverage for personal injury or property damage liability initiated by an insurer and no insurer-initiated increase in the premium greater than 25 percent of (i) a policy of insurance defined in § 38.2-117 or 38.2-118 insuring a business entity; (ii) a policy of insurance that includes as a part thereof insurance defined in § 38.2-117 or 38.2-118 insuring a business entity; (iii) a policy of motor vehicle insurance against legal liability of the insured as defined in § 38.2-124 insuring a business entity; or (iv) a policy of miscellaneous casualty insurance as defined in subsection B of § 38.2-111 insuring a business entity, and which in the case of a reduction in coverage is subject to § 38.2-1912 , shall be effective unless the insurer delivers or mails to the first named insured at the address shown on the policy, or delivers electronically to the address provided by the first named insured, a written notice of such reduction in coverage or premium increase not later than 45 days prior to the effective date of same. The increase in premium shall be the difference between the renewal premium and the premium charged by the insurer at the effective date of the expiring policy. Such notice shall:
   1. Be in a type size authorized under § 38.2-311 ;
   2. State the date, which shall not be less than 45 days after the delivery or mailing of the notice of reduction in coverage or increase in premium, on which such reduction in coverage or increase in premium shall become effective;
   3. Advise the first named insured of the specific reason for the increase and the amount of the increase, or, if in the case of a reduction in coverage, the specific reason for the reduction and the manner in which coverage will be reduced, or that such information may be obtained from the agent or the insurer;
   4. Advise the first named insured of its right to request in writing, within 15 days of receipt of the notice, that the Commissioner of Insurance review the action of the insurer.
4. If an insurer does not provide notice in the manner required in subsection C, coverage shall remain in effect until 45 days after written notice of reduction in coverage or increase in premium is mailed or delivered to the first named insured at the address shown on the policy, or delivered electronically to the address provided by the first named insured, unless the named insured obtains replacement coverage or elects to cancel sooner in either of which cases coverage under the prior policy shall cease on the effective date of the replacement coverage or the elected date of cancellation as the case may be. If the named insured fails to accept or rejects the changed policy, coverage for any period that extends beyond the expiration date will be under the prior policy’s rates, terms and conditions as applied against the renewal policy’s limits, rating exposures, and additional coverages. If the named insured accepts the changed policy, the reduction in coverage or increase in premium shall take effect upon the expiration of the prior policy.
5. Notice of reduction in coverage or increase in premium shall not be required if:
   1. The insurer, after written demand, has not received, within 45 days after such demand has been mailed or delivered to the first named insured at the address shown on the policy, or delivered electronically to the address provided by the first named insured, sufficient information from the named insured to provide the required notice;
   2. Such notice is waived in writing by the named insured;
   3. The insurer delivers or mails to the first named insured a renewal policy or a renewal offer not less than 45 days prior to the effective date of the policy or, in the case of a medical malpractice insurance policy, not less than 90 days prior to the effective date of the policy;
   4. The policy is issued to a large commercial risk as defined in subsection C of § 38.2-1903.1 but excluding policies of medical malpractice insurance; or
   5. The policy is retrospectively rated, where the premium is adjusted at the end of the policy period to reflect the risk’s actual loss experience.
6. No written notice of cancellation, refusal to renew, reduction in coverage, or increase in premium that is mailed or delivered electronically by an insurer to a first named insured in accordance with this section shall be effective unless the insurer complies with the applicable provisions of subdivisions 1 through 4:
   1. If the notice is mailed, proof of mailing a notice of cancellation, refusal to renew, reduction in coverage, or increase in premium shall be obtained using one of the following methods that demonstrates the date that the notice was sent to the first named insured at the address stated in the policy or to such insured’s last known address:
      1. The notice is sent by:
         1. Registered mail;
         2. Certified mail; or
         3. Any other similar first-class mail tracking method used or approved by the United States Postal Service, including Intelligent Mail barcode Tracing (IMb Tracing); or
      2. The notice is sent by another method of mailing for which a certificate of mailing is obtained from the United States Postal Service at the time the notice is accepted for mailing. A certificate of mailing from the United States Postal Service does not include a certificate of bulk mailing.
   2. If the notice is delivered electronically, the insurer retains evidence of electronic transmittal or receipt of the notification for at least one year from the date of the transmittal.
   3. If the notice is mailed, the insurer retains a copy of the notice of cancellation, refusal to renew, reduction in coverage, or increase in premium for at least one year from the date such action was effective. If the notice is mailed, proof of mailing from the United States Postal Service consistent with the mailing method utilized by the insurer shall be maintained for one year from the date the cancellation, refusal to renew, reduction in coverage, or increase in premium is effective.
   4. 1. If the terms of a policy of motor vehicle insurance insuring a business entity require the notice of cancellation, refusal to renew, reduction in coverage, or increase in premium to be given to any lienholder, then the insurer shall mail such notice and retain a copy of the notice in the manner required by this subsection. If the notices sent to the first named insured and the lienholder are part of the same form, the insurer may retain a single copy of the notice. Proof of mailing from the United States Postal Service consistent with the mailing method utilized by the insurer shall be maintained for one year from the date the cancellation, refusal to renew, reduction in coverage, or increase in premium is effective.
      2. Notwithstanding the provisions of subdivision 4 a, if the terms of the policy require the notice of cancellation, refusal to renew, reduction in coverage, or increase in premium to be given to any lienholder, the insurer and lienholder may agree by separate agreement that such notices may be transmitted electronically, provided that the insurer and lienholder agree upon the specifics for transmittal and acknowledgment of notification. Evidence of transmittal or receipt of the notification required by this subsection shall be retained by the insurer for at least one year from the date of termination.“Copy,” as used in this subsection, includes photographs, microphotographs, photostats, microfilm, microcard, printouts, or other reproductions of electronically stored data or copies from optical disks, electronically transmitted facsimiles, or any other reproduction of an original from a process that forms a durable medium for its recording, storing, and reproducing.
7. Nothing in this section shall prohibit any insurer or agent from including in a notice of cancellation, refusal to renew, reduction in coverage, or premium increase any additional disclosure statements required by state or federal laws.
8. For the purpose of this section, the terms (i) “business entity” shall mean an entity as defined by subsection A of § 13.1-543 , § 13.1-603 or 13.1-803 and shall include an individual, a partnership, an unincorporated association, the Commonwealth, a county, city, town, or an authority, board, commission, sanitation, soil and water, planning or other district, public service corporation owned, operated or controlled by the Commonwealth, a locality or other local governmental authority; (ii) “policy of motor vehicle insurance” shall mean a policy or contract for bodily injury or property damage liability insuring a business entity issued or delivered in this Commonwealth covering liability arising from the ownership, maintenance, or use of any motor vehicle, but does not include (a) any policy issued through the Virginia Automobile Insurance Plan, (b) any policy providing insurance only on an excess basis, or (c) any other contract providing insurance to the named insured even though the contract may incidentally provide insurance on motor vehicles; and (iii) “reduction in coverage” shall mean, but not be limited to, any diminution in scope of coverage, decrease in limits of liability, addition of exclusions, increase in deductibles, or reduction in the policy term or duration except a reduction in coverage filed with and approved by the Commission and applicable to an entire line, classification or subclassification of insurance.
9. Within 15 days of receipt of the notice of cancellation, refusal to renew, reduction in coverage, or increase in premium, the named insured shall be entitled to request in writing to the Commissioner that he review the action of the insurer. Upon receipt of the request, the Commissioner shall promptly begin a review to determine whether the insurer’s notice of cancellation, refusal to renew, reduction in coverage, or premium increase complies with the requirements of this section. Where the Commissioner finds from the review that the notice of cancellation, refusal to renew, reduction in coverage, or premium increase does not comply with the requirements of this section, he shall immediately notify the insurer, the named insured and any other person to whom such notice was required to be given by the terms of the policy that such notice is not effective. Nothing in this section authorizes the Commissioner to substitute his judgment as to underwriting for that of the insurer. Pending review by the Commission, this section shall not operate to relieve an insured from the obligation to pay any premium when due; however, if the Commission finds that the notice required by this section was not proper, the Commission may order the insurer to pay to the insured any overpayment of premium made by the insured.
10. Every insurer shall maintain for at least one year records of cancellation, refusals to renew, reductions in coverage, and premium increases to which this section applies and copies of every notice or statement required by subsections A, C, F, and L that it sends to any of its insureds.
11. There shall be no liability on the part of and no cause of action of any nature shall arise against (i) the Commissioner of Insurance or his subordinates; (ii) any insurer, its authorized representative, its agents, or its employees; or (iii) any firm, person, or corporation furnishing to the insurer information as to reasons for cancellation, refusal to renew, reduction in coverage, or premium increase, for any statement made by any of them in complying with this section or for providing information pertaining thereto.
12. Notwithstanding anything in this section to the contrary, if an insurer cancels or refuses to renew a policy of medical malpractice insurance as defined in § 38.2-2800 , or if, as a result of an insurer-initiated increase in premium, the premium increases for a medical malpractice insurance policy by more than 25 percent of the previous policy’s premium, the insurer shall provide no fewer than 90 days’ notice prior to the renewal effective date, or, if such policy is being cancelled or non-renewed for failure of the insured to discharge when due any of its obligations in connection with the payment of premium for the policy, the effective date of cancellation or refusal to renew shall not be less than 15 days from the date of mailing or delivery of the notice. The increase in the premium shall be the difference between the renewal premium and the premium charged by the insurer at the effective date of the expiring policy.
13. As used in this section, an “insurer-initiated increase in premium” means an increase in premium other than one resulting from changes in (i) coverage requested by the insured, (ii) policy limits requested by the insured, (iii) the insured’s operation or location that result in a change in the classification of the risk, or (iv) the rating exposures including, but not limited to, increases in payroll, receipts, square footage, number of automobiles insured, or number of employees.

History. 1986, c. 376, § 38.1-43.01; 1987, c. 697; 1988, c. 189; 1989, c. 728; 1992, c. 160; 1996, c. 237; 1998, c. 142; 2000, c. 529; 2003, cc. 387, 678; 2005, cc. 290, 635; 2006, c. 554; 2008, cc. 58, 221; 2009, c. 215; 2013, cc. 13, 257; 2015, cc. 9, 443; 2016, cc. 4, 71.

Editor’s note.

This section was enacted as § 38.1-43.01 by Acts 1986, c. 376. Pursuant to § 30-152, this section has been incorporated into Title 38.2 as § 38.2-231 .

The 1998 amendment, in subdivision A 2, inserted “orally, or,” and “if the insurer requires such notification to be in writing.”

The 2000 amendments.

The 2000 amendment by c. 529 designated the first paragraph of subdivision 3 of subsection F as a, and added subdivision 3 b.

The 2003 amendments.

The 2003 amendment by c. 387, throughout the section, substituted “15” for “fifteen” and “45” for “forty-five”; substituted “25” for “twenty-five” in subsection C; added subdivision F c and made minor stylistic changes.

The 2003 amendment by c. 678, effective March 19, 2003, throughout the section, substituted “45” for “forty-five” and “15” for “fifteen”; substituted “25 percent” for “twenty-five percent” in subsection C; and substituted “subsection A of § 13.1-543 ” for “subsection B of § 13.1-543 ” in subsection H.

The 2005 amendments.

The 2005 amendment by c. 290, in the first sentence of the introductory paragraph in subdivision A 1 and in subsection C, inserted the clause (i) through (iii) designators and clause (iv); and made related and minor stylistic changes.

The 2005 amendment by c. 635 substituted “premium” for “rate” throughout subsections C through K; in subsection C, substituted “premium” for “filed rate for such coverage,” deleted “initiated by an insurer” preceding “of a policy of insurance,” and added the last sentence; rewrote subdivision C 3; deleted subdivision C 4, which formerly read: “State the specific reason or reasons for the reduction in coverage or increase in rate;” redesignated former subdivision C 5 as present subdivision C 4; substituted “subsections A, C, F and L” for “subsections A, C and F” in subsection J; added subsection L; and made related and minor stylistic changes.

The 2006 amendments.

The 2006 amendment by c. 554 inserted “insurer-initiated” in subsection C; in subdivision C 3, substituted “insured of” for “insured that” and inserted “or that such information” preceding “may be obtained”; inserted “as applied against the renewal policy’s limits, rating exposures, and additional coverages” at the end of the third sentence in subsection D; in subsection E, deleted “the” at the end of the introductory language, inserted the subdivision 1 and 2 designations, deleted “or if such” at the end of subdivision E 1, inserted “Such” at the beginning of subdivision E 2, and added subdivisions E 3 through E 5; inserted “as a result of an insurer-initiated increase in premium” in the first sentence of subsection L; and added subsection M.

The 2008 amendments.

The 2008 amendments by cc. 58 and 221 are nearly identical, and added subdivision A 3.

The 2009 amendments.

The 2009 amendment by c. 215 added the language beginning “however, if the written notice” at the end of the first sentence in the introductory language of subsection A; inserted “or delivers electronically to the address provided by the named insured” in the first sentence of the introductory language in subsection C; inserted “or delivered electronically to the address provided by the named insured” in the first sentence of subsection D and in subdivision E 1; in subsection F, inserted “or delivered when authorized for a notice other than a notice of cancellation” in the introductory language, substituted “or” for “and” at the end of paragraph F 1 c, added paragraph F 1 d and made related changes.

The 2013 amendments.

The 2013 amendment by c. 13 inserted “first” preceding “named insured” and “first named” preceding “insured” throughout the section.

The 2013 amendment by c. 257 substituted “or delivers such notice” for “however, if the written notice is a notice of refusal to renew, it may be delivered” near the end of the introductory paragraph of A 1; deleted “when authorized for a notice other than a notice of cancellation” following “delivered electronically” in subsection F; and made punctuation changes.

The 2015 amendments.

The 2015 amendments by cc. 9 and 443 are identical, and at the end of subdivision F 1 a inserted “or any other similar first-class mail tracking method that is used or approved by the United States Postal Service; or”; deleted former subdivisions F 1 b and F 1 c, which read “b. At the time of mailing the insurer obtains a written receipt from the United States Postal Service showing the name and address of the first named insured stated in the policy; c. At the time of mailing the insurer (i) obtains a written receipt from the United States Postal Service showing the date of mailing and the number of items mailed and (ii) retains a mailing list showing the name and address of the first named insured stated in the policy, or the last known address, to whom the notices were mailed, together with a signed statement by the insurer that the written receipt from the United States Postal Service corresponds to the mailing list retained by the insurer”; and redesignated former subdivision F 1 d as subdivision F 1 b.

The 2016 amendments.

The 2016 amendments by c. 4, effective February 23, 2016, and c. 71, effective March 1, 2016, are identical and in subsection F, added “the insurer complies with the applicable provisions of subdivisions 1 through 4” at the end of the introductory paragraph; rewrote subdivisions F 1 through 4; and made minor stylistic changes.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 27.

CIRCUIT COURT OPINIONS

Notice of lapse of property insurance. —

Named insured lien holder was not entitled to notice of a lapse of property insurance coverage based on the insured’s failure to pay the premium due under the policy; the insurance company was not required to issue a cancellation notice because there was no contract to cancel as of the date the policy lapsed for non-payment. Nat'l Bank of Fredericksburg v. Va. Farm Bureau Fire & Cas. Ins. Co., 63 Va. Cir. 102, 2003 Va. Cir. LEXIS 193 (Fredericksburg Aug. 28, 2003), aff'd, 269 Va. 148 , 606 S.E.2d 832, 2005 Va. LEXIS 12 (2005).

Cancellation ineffective. —

Insurer’s notice of cancellation failed to comply with subdivision F 1 of § 38.2-231 , because the insured’s address was incomplete on the postal receipt and the accompanying signed statement was not signed at the time of mailing. Performance Grading & Hauling, Inc. v. Progressive Classic Ins. Co., 82 Va. Cir. 322, 2011 Va. Cir. LEXIS 177 (Norfolk Mar. 3, 2011).

§ 38.2-232. Notice of lapse or pending lapse of certain life and accident and sickness insurance policies.

1. Every insurer, health services plan, or health care plan that issues a policy, contract, or plan of insurance or annuity as defined in §§ 38.2-102 through 38.2-109 shall provide the policy owner, contract owner, or plan owner with a written notice prior to the date that the policy, contract, or plan will lapse for failure to pay premiums due.
2. The provisions of subsection A shall not apply (i) to group policies, contracts, or plans of insurance or (ii) to individual policies, contracts, or plans of insurance if the insurer, health services plan, or health care plan (a) as a general business practice provides its policy owners, contract owners, or plan owners with written notices of premiums due or (b) has furnished its policy owner, contract owner, or plan owner with written notice separate from that contained in the policy that the failure to pay premiums in a timely manner will result in a lapse of such policy, contract, or plan.

History. 1991, c. 369; 2013, c. 93.

Editor’s note.

Acts 2013, c. 93, cl. 2 provides: “That the provisions of this act are declarative of existing law.”

The 2013 amendments.

The 2013 amendment by c. 93 added the subsection designators, and in subsection B, added “The provisions of subsection A” at the beginning, inserted “group” preceding “policies” and deleted “group” preceding “insurance” in clause (i), substituted “to individual policies, contracts, or plans of insurance if” for “where” at the beginning of clause (ii), inserted the (a) and (b) designators, deleted “(iii) where the insurer, health services plan, or health care plan” preceding (b), and made punctuation changes.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 27.

§ 38.2-233. Credit involuntary unemployment insurance; credit property insurance; disclosure and readability.

1. If a creditor makes available to the debtors more than one plan of credit involuntary unemployment insurance as defined in § 38.2-122.1 , or more than one plan of credit property insurance as defined in § 38.2-122.2 , all debtors must be informed of all such plans for which they are eligible.
2. When elective credit property insurance or elective credit involuntary unemployment insurance is offered, the borrower shall be given written disclosure that purchase of such insurance is not required and is not a factor in granting credit. The disclosure shall also include notice that the borrower has the right to use alternative coverage or to buy insurance elsewhere.
3. If the debtor is given a contract which includes a single premium payment to be charged for elective credit property insurance or elective credit involuntary unemployment insurance, the debtor shall be given:
   1. A contract which does not include the elective insurance premiums; or
   2. A disclosure form which shall clearly disclose the difference in premiums charged for a contract with the elective insurance and one without the elective insurance. This disclosure shall include the difference between the amount financed, the monthly payment and the charge for insurance. The form shall be signed and dated by the debtor and the agent, if any, soliciting the application or the creditor’s representative, if any, soliciting the enrollment request. A copy of this disclosure shall be given to the debtor and a copy shall be made a part of the creditor’s loan file.Nothing contained in this subsection shall be construed to prohibit the creditor from combining such disclosure, in order to avoid redundancy, with other forms of disclosure required under state or federal law.
4. If a creditor offers credit property insurance and requires evidence of insurance coverage on personal household property used as security for an indebtedness or credit involuntary unemployment insurance is required as security for any indebtedness, the debtor shall have the option of (i) furnishing the required amount of insurance through existing policies of insurance owned or controlled by him or (ii) procuring and furnishing the required coverage through any insurer authorized to transact insurance in this Commonwealth. The creditor shall inform the debtor of this option in writing and shall obtain the debtor’s signature acknowledging that he understands this option. Nothing contained in this subsection shall be construed to prohibit the creditor from combining such disclosure, in order to avoid redundancy, with other forms of disclosure required under state or federal law.
5. No contract of insurance upon a debtor paid by a single premium shall be made or effectuated unless, at the time of the contract, the debtor is provided with a notice prominently disclosing the right to a refund of premium in the event the insurance is terminated prior to its scheduled maturity date or the insured indebtedness is terminated or paid off early, and of the obligation of the debtor to provide notification to the insurer under subsection G. This notice shall be signed and dated by the debtor and the agent, if any, soliciting the application or the creditor’s representative, if any, soliciting the enrollment request. A copy of the signed notice shall be given to the debtor and a copy shall be made part of the insurer’s file.
6. The disclosure requirements set forth in subsections A, B, C, D, and E shall be disclosed separately from the loan or credit transaction papers in a form or forms approved by the Commission. When credit property insurance or credit involuntary unemployment insurance is offered with credit life insurance or credit accident and sickness insurance, the disclosure requirements set forth in subsections A, B, C, D, and E of § 38.2-233 and the disclosure requirements set forth in subsections A, B, C, D, and E of § 38.2-3735 may be disclosed together in a form which shall be approved by the Commission.
7. The Commission shall not approve any form providing credit property insurance or credit involuntary unemployment insurance unless the policy or certificate is written in nontechnical, readily understandable language, using words of common everyday usage. A form shall be deemed acceptable under this section if the insurer certifies that the form achieves a Flesch Readability Score of forty or more, using the Flesch Readability Formula as set forth in Rudolf Flesch, The Art of Readable Writing (1949, as revised 1974), and certifies compliance with the guidelines set forth in this section.The Commission shall not approve any form providing credit property or credit involuntary unemployment insurance paid by single premium unless the form includes a provision, separately and prominently captioned, stating in substance the following:“REFUND OF PREMIUM IN THE EVENT OF EARLY TERMINATION”“In the event this insurance policy or certificate is terminated prior to its originally scheduled maturity date, or the insured indebtedness is terminated or paid off earlier than scheduled, the insurer shall, within 30 days of receipt of notification from the debtor of such termination or early payoff, refund or credit any amount paid by the debtor for the insurance beyond the actual date of termination or payoff. Early termination of debt includes termination by renewal or refinancing. The debtor’s notification to the insurer shall include proof of termination or early payoff of the insured indebtedness.”The Commission shall not approve any form providing credit property or credit involuntary unemployment insurance unless the insurance policy or certificate states that the unearned premium refund will be calculated on a pro rata basis. No refund of five dollars or less need be made.The Commission shall not approve any form providing credit property or credit involuntary unemployment insurance unless the form has printed on it a notice stating in substance that if, during a period of at least ten days from the date the policy or certificate is delivered to the policy owner or certificate holder the policy or certificate is surrendered to the insurer or its agent with a written request for cancellation, the policy or certificate shall be void from the beginning and the insurer shall refund any premium paid for the policy or certificate.
8. Premium calculations for credit property insurance involving closed end credit transactions shall not be based on amounts paid for finance charges, service fees, delivery charges, taxes, interest, or any other item not covered under the credit property insurance form. If the premium calculations for credit property insurance involving open end monthly outstanding balance credit transactions are based on amounts paid for finance charges, service fees, delivery charges, taxes, interest, meals, entertainment, or any other item not covered under the credit property insurance form, then at least twice per year the premium notice for such insurance shall be accompanied by a disclosure in no smaller than eight-point boldface type substantially similar to the following:Your credit property insurance premium is based on the entire outstanding balance of this account. However, your insurance coverage applies only to certain tangible personal property. Finance charges, service fees, delivery charges, taxes, interest, meals, and entertainment are not covered under your policy. Therefore, you may be paying premiums on items not covered under your policy.The disclosure described in this subsection, with the same type-size requirements, shall also be included in any written materials provided at the time of invitation to contract and in policies or certificates provided to insureds.
9. A credit property insurance or credit involuntary unemployment insurance policy or certificate which provides truncated or critical period coverage, or any other type of similar coverage that does not provide benefits or coverage for the entire term or amount of the indebtedness, shall be subject to the following requirements:
   1. The policy or certificate shall include a statement printed on the face of the policy or first page of the certificate which clearly describes the limited nature of the insurance. The statement shall be printed in capital letters and in bold twelve-point or larger type; and
   2. The policy or certificate shall not include any benefits or coverage other than truncated or critical period coverage or any other type of similar coverage that does not provide benefits or coverage for the entire term or amount of the indebtedness.
10. A portion of the premium charged for credit property insurance or credit involuntary unemployment insurance may be allowed by the insurer to the creditor for providing and furnishing such insurance, and no such allowance shall be deemed a rebate of premium or as interest charges or consideration or an amount in excess of permitted charges in connection with the loan or other credit transaction.
11. All of the acts necessary to provide and service credit property insurance and credit involuntary unemployment insurance may be performed within the same place of business in which is transacted the business giving rise to the loan or other credit transaction.
12. Subsections A, B, C, D, F, and M shall not apply to credit property insurance or credit involuntary unemployment insurance that will insure open end monthly outstanding balance credit transactions if the following criteria are met:
    1. The insurance is offered to the debtor after the loan or credit transaction it will insure has been approved by the creditor and has been effective at least seven days;
    2. The solicitation for the insurance is by mail or telephone. The person making the solicitation shall not condition the future use or continuation of the open end credit upon the purchase of credit property insurance or credit involuntary unemployment insurance;
    3. The creditor makes available only one plan of credit property insurance and only one plan of credit involuntary unemployment insurance to the debtor;
    4. The debtor is provided written confirmation of the insurance coverage within thirty days of the effective date of such coverage. The effective date of such coverage shall begin on the date the solicitation is accepted; and
    5. The individual policy or certificate has printed on it a notice stating that if, during a period of at least thirty days from the date the policy or certificate is delivered to the policy owner or certificate holder, the policy or certificate is surrendered to the insurer or its agent with a written request for cancellation, the policy or certificate shall be void from the beginning and the insurer shall refund any premium paid for the policy or certificate. This statement shall be prominently located on the face page of the policy or certificate, and shall be printed in capital letters and in bold face twelve-point or larger type.
13. Subsections A, B, C, D, F, and L shall not apply to open end credit transactions by mail, telephone, or brochure solicitations that are not excluded from the requirements of subsections A, B, C, D, and F by subsection L where the insurer is offering only one plan of credit property insurance and only one plan of credit involuntary unemployment insurance and the following criteria are met:
    1. The following disclosures shall be included in solicitations, whether as part of the application or enrollment request or separately:
       1. The name and address of the insurer(s) and creditor; and
       2. A description of the coverage offered, including the amount of coverage, the premium rate for the insurance coverage offered, and a description of any exceptions, limitations or restrictions applicable to such coverage.
    2. The application or enrollment requests shall comply as follows:
       1. Notwithstanding requirements set forth elsewhere, the application and enrollment request shall be printed in a type size of not less than eight-point type, one-point leaded;
       2. The application or enrollment request shall contain a prominent statement that the insurance offered is optional, voluntary or not required;
       3. The application or enrollment request shall contain no questions relating to insurability other than the debtor’s age or date of birth and, if applicable, active employment status; and
       4. If the disclosures required by subdivision 1 of this subsection are not included in the application or enrollment request, the application and enrollment request shall make reference to such disclosures with sufficient information to assist the reader in locating such disclosures within separate solicitation material.
    3. Each insurer proposing to utilize an application or enrollment request in such transactions shall file such form for approval by the Commission. If the insurer anticipates utilizing such application or enrollment form in more than one solicitation, the insurer shall submit, as part of its filing of such form, a certification signed by an officer of the insurer, stating that any such subsequent use of the application or enrollment form will utilize the same form number and will not vary in substance from the wording and format in which the form is submitted for approval. Upon approval of such application or enrollment form by the Commission, the insurer shall be permitted to utilize such form in various solicitation materials provided that the application or enrollment form, when incorporated into such solicitation materials, has the same form number and wording substantially identical to that contained on the approved application or enrollment form. When credit property insurance or credit involuntary unemployment insurance is offered with credit life insurance or credit accident and sickness insurance, insurers may file one common form which shall be subject to prior approval by the Commission and shall incorporate the requirements of subsection M of this section and subsection F of § 38.2-3737 , according to the requirements stated in this paragraph and in subdivision F 3 of § 38.2-3737 .

History. 1993, c. 774; 1994, c. 306; 1995, c. 167; 1999, c. 586; 2000, c. 526; 2009, c. 643.

The 1999 amendment, in subsection C, inserted “if any” in two places in the third sentence of subdivision 2, and added the concluding paragraph, added the last sentence in subsection D, in subsection F, added the last sentence, deleted former subdivision 1, which read: “Each insurer is required to test the readability of its policies or certificates by use of the Flesch Readability Formula, as set forth in Rudolf Flesch, The Art of Readable Writing (1949, as revised 1974),” deleted former subdivision 2, which read: “A total readability score of forty or more on the Flesch score is required; and,” and deleted former subdivision 3, which read: “All policies or certificates within the scope of this section shall be filed with the Commission, accompanied by a certificate setting forth the Flesch score and certifying compliance with the guidelines set forth in this section,” and substituted “the insurance coverage” for “each plan of insurance” in subdivision K 1 b.

The 2000 amendments.

The 2000 amendment by c. 526 inserted “or more than one plan of credit property insurance as defined in § 38.2-122.2 ” in subsection A; in subsection B, inserted “credit property insurance or elective” and substituted “such” for “credit involuntary unemployment”; inserted “credit property insurance or elective” in subsection C; substituted “insurance premiums” for “credit involuntary unemployment insurance premium” in subdivision C 1; substituted “the elective” for “credit involuntary unemployment” in subdivision C 2, in two places; inserted “a creditor offers credit property insurance and requires evidence of insurance coverage on personal household property used as security for an indebtedness or” near the beginning of subsection D; in subsection E, substituted “disclosed separately from the loan or credit transaction papers in a” for “separately disclosed in another” and substituted “When credit property insurance or” for “Notwithstanding the provisions of § 38.2-1921 , when”; in subsection F, inserted “credit property insurance or” and added the last two paragraphs; added subsection G and redesignated former subsections G through K as present subsections H through L; inserted “credit property insurance or” in present subsection H; deleted “credit involuntary unemployment insurance” preceding “policy or” in subdivisions H 1 and H 2; inserted “credit property insurance or” in present subsections I and K and in subdivision K 2; inserted “credit property insurance and” in present subsection J; substituted “E and L” for “E and K” in present subsection K; substituted “The insurance” for “Credit involuntary unemployment insurance that will insure the open end monthly outstanding balance credit transaction” in subdivision K 1; inserted “only one plan of credit property insurance and” in subdivision K 3; in present subsection L, substituted “K” for “J” in two places, and inserted “only one plan of credit property insurance and”; inserted “if applicable” in subdivision L 2 c; and in subdivision L 3, substituted “When credit property insurance or” for “Notwithstanding the provisions of § 38.2-1921 ,” substituted “subject to prior approval” for “approved,” and substituted “subsection L” for “subsection K.”

The 2009 amendments.

The 2009 amendment by c. 643 added subsection E and redesignated former subsections E through L as subsections F through M; substituted “subsections A, B, C, D, and E” for “subsections A, B, C and D” three times in subsection F; in subsection G, substituted “paid by single premium unless the form includes a provision, separately and prominently captioned, stating in substance the following” for “unless the form provides that, in the event of termination of the insurance prior to the scheduled maturity date of the indebtedness, any refund of an amount paid by the debtor for insurance shall be paid or credited promptly to the debtor. Any unearned premium refund shall be calculated on a pro rata basis” in the second paragraph and added the present third through fifth paragraphs; substituted “Subsections A, B, C, D, F, and M” for “Subsections A, B, C, D, E and L” at the beginning of subsection L; and in subsection M, in the introductory paragraph, substituted “Subsections A, B, C, D, F, and L” for “Subsections A, B, C, D, E and K” and “subsections A, B, C, D, and F by subsection L” for “subsections A, B, C, D, and E by subsection K” and substituted “subsection M of this section” for “subsection L of § 38.2-233 ” in the last sentence of subdivision M 3.

§ 38.2-234. Release of information.

Notwithstanding the provisions of subdivision 5 of § 2.2-3802 , the Commission may share information with databases developed by the National Association of Insurance Commissioners (NAIC) for use by regulators.

History. 1996, c. 32.

§ 38.2-235. Liability insurance; carbon monoxide exclusions.

No policy of insurance furnishing personal injury liability or property damage liability coverage as defined in §§ 38.2-117 and 38.2-118 , including any endorsements thereto, shall be deemed to exclude coverage for the discharge, dispersal, seepage, migration, release, emission, leakage or escape of carbon monoxide from a residential or commercial heating system unless excluded in such policy by explicit reference thereto.

History. 1997, c. 157.

Michie’s Jurisprudence.

For related discussion, see 10B M.J. Insurance, § 128.

§ 38.2-236. Notice of settlement payment.

1. Upon payment by any insurer of at least $5,000 in a single check to an attorney licensed in the Commonwealth, or other representative, in settlement or satisfaction by an insured or a third party of any claim arising out of an insurance policy issued or delivered in the Commonwealth, the insurer shall send to the claimant or judgment creditor on the underlying insurance or liability claim a notice of such payment as required by subsection B within five business days after the date payment is made or sent to the attorney or other representative of the claimant or judgment creditor. A copy of the notice shall be sent simultaneously to the attorney or representative of the claimant or judgment creditor.
2. The notice required pursuant to subsection A shall be sent to the physical address, or email or other electronic address, furnished by the claimant or judgment creditor to the insurance company, unless the claimant or judgment creditor has notified the insurance company in writing that he waives notice of payment. In the absence of any address or waiver furnished by the claimant or judgment creditor, the notice shall be sent to the last known physical address, or email or other electronic address, of the claimant or judgment creditor.The notice shall be sent by the insurance company only after a settlement has been agreed to by the attorney or other representative of the claimant or judgment creditor, and shall contain only the following language:“Pursuant to § 38.2-236 of the Code of Virginia, you are hereby notified that a payment was sent on (insert date on which payment was sent) by (insert name of insurer) to your attorney or other representative (insert name, address, and telephone number of attorney or other representative known to insurer), in satisfaction of your claim or judgment against (insert name of insurer, or insured, whichever is appropriate).If you have any questions, please contact your attorney or other representative.”
3. Nothing in subsection A or B shall (i) create any cause of action for monetary damages for any person against an insurer based upon a failure to provide notice as required by this section or the provision of a defective notice, (ii) establish a defense for any person to any cause of action based on a failure to provide notice as required by this section or the provision of a defective notice, or (iii) invalidate or in any way affect the settlement or satisfaction for which the payment was made by the insurer.
4. Except as provided and authorized by this section, no insurer shall otherwise communicate with a claimant or judgment creditor known to be represented by an attorney licensed in the Commonwealth, or other representative, regarding settlement of a claim or satisfaction of a judgment without the written consent of such attorney or other representative.

History. 2013, c. 146.

Research References.

Virginia Forms (Matthew Bender). No. 1-401 Petition for Approval of Compromise of Infant’s Personal Injury Claim, et seq.; No. 2-1503 Order Dismissing Suit Pursuant to Compromise Without Prejudice, et seq.

§ 38.2-300. Scope of chapter.

This chapter shall apply to all classes of insurance except:

1. Ocean marine insurance other than private pleasure vessels;
2. Life insurance policies and accident and sickness insurance policies not delivered or issued for delivery in this Commonwealth;
3. Contracts of reinsurance; or
4. Annuities, except as provided for in §§ 38.2-305 , 38.2-316 and 38.2-321 .

History. 1952, c. 317, § 38.1-328; 1986, c. 562; 1988, cc. 333, 523.

Law Review.

For note on insurance contracts and methods of interpretation, see 18 Wash. & Lee L. Rev. 104 (1961).

For note on fraud as a defense to insurance contracts, see 18 Wash. & Lee L. Rev. 172 (1961).

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 17.

§ 38.2-301. Insurable interest required; life, accident and sickness insurance.

1. Any individual of lawful age may take out an insurance contract upon himself for the benefit of any person. No person shall knowingly procure or cause to be procured any insurance contract upon another individual unless the benefits under the contract are payable to (i) the insured or his personal representative or (ii) a person having an insurable interest in the insured at the time when the contract was made.
2. As used in this section and § 38.2-302 , “insurable interest” means:
   1. In the case of individuals related closely by blood or by law, a substantial interest engendered by love and affection;
   2. In the case of other persons, a lawful and substantial economic interest in the life, health, and bodily safety of the insured. “Insurable interest” shall not include an interest which arises only or is enhanced by the death, disability or injury of the insured;
   3. In the case of employees of corporations, with respect to whom the corporate employer, a trust established by the corporate employer, or an employee benefit trust is the beneficiary under an insurance contract, the lawful and substantial economic interest required in subdivision 2 of this subsection shall be deemed to exist in (i) key employees and (ii) other employees who have been employed by the corporation for 12 consecutive months, provided that the amount of insurance coverage on such other employees shall be limited to an amount which is commensurate with employer-provided benefits to non-key employees as a group;
   4. In the case of a party to a contract or option for the purchase or sale, including a redemption, of an interest in a business proprietorship, partnership or firm or of shares of stock of a corporation or of an interest in such shares, the lawful and substantial economic interest required in subdivision 2 shall be deemed to exist in each individual party to such contract or option and for the purpose of such contract or option only, in addition to any insurable interest that may otherwise exist as to the life of such individual;
   5. In the case of a trustee, other than the trustee of a domestic business trust or foreign business trust, as defined in § 13.1-1201 , the lawful and substantial economic interest required in subdivision 2 shall be deemed to exist, whether the life insurance policy is owned by a trustee before, on or after July 1, 2005, in (i) the individual insured who established the trust, (ii) each individual in whose life the owner of the trust for federal income tax purposes has an insurable interest, and (iii) each individual in whose life a beneficiary of the trust has an insurable interest; and
   6. In the case of an organization described in § 501 (c) of the Internal Revenue Code, the lawful and substantial economic interest required in subdivision 2 of this subsection shall be deemed to exist where (i) the insured or proposed insured has either assigned all or part of his ownership rights in a policy or contract to such an organization or has executed a written consent to the issuance of a policy or contract to such organization and (ii) such organization is named in the policy or contract as owner or as beneficiary.

History. 1952, c. 317, § 38.1-329; 1986, c. 562; 1988, c. 831; 1992, cc. 8, 50; 1993, c. 105; 2005, cc. 656, 698; 2007, c. 186.

Editor’s note.

Acts 1992, cc. 8 and 50, which amended this section, in cl. 2 provide that the provisions of the 1992 act are declaratory of existing law.

Acts 2005, cc. 656 and 698, cl. 2, as amended by Acts 2007, c. 186, cl. 2, provide: “That the provisions of this act shall not apply to policies or contracts of life insurance currently or subsequently issued where: (i) a charitable organization headquartered in Virginia executed a nondisclosure and exclusivity agreement prior to December 31, 2004, (ii) such charitable organization was the holder of a charity certificate issued by a business trust prior to December 31, 2004, and (iii) the policies or contracts of life insurance are written pursuant to such agreement on the lives of individuals who, prior to December 31, 2004, were donors to such charitable organization, or an organization under common control with such organization. The intent of the General Assembly is to permit any charitable organization that satisfies the criteria set forth in clauses (i), (ii), and (iii) to continue to acquire charity certificates following the enactment of this act.”

The 2005 amendments.

The 2005 amendments by cc. 656 and 698 are identical, and substituted “representative or (ii)” for “representative, (ii) a beneficiary designated by the insured, or (iii)” in subsection A; in subdivision B 3, inserted “a trust established by the corporate employer” and substituted “non-key employees as a group” for “such employees,” inserted present subdivisions B 4 and B 5 and redesignated former subdivision B 4 as subdivision B 6; and made minor stylistic changes.

The 2007 amendments.

The 2007 amendment by c. 186 inserted “whether the life insurance policy is owned by a trustee before, on or after July 1, 2005” in subdivision B 5.

§ 38.2-302. Life, accident, and sickness insurance; application required.

1. No contract of insurance upon a person shall be made or effectuated unless at the time of the making of the contract the individual insured, being of lawful age and competent to contract for the insurance contract, (i) applies for insurance or (ii) consents in writing to the insurance contract. However:
   1. Either spouse may effect an insurance contract upon each other;
   2. Any person having an insurable interest in the life of a minor, or any person upon whom a minor is dependent for support and maintenance, may effect an insurance contract upon the life of or pertaining to the minor; or
   3. A corporate employer or an employee benefit trust having the insurable interest described in subdivision B 3 of § 38.2-301 may effect an insurance contract upon the lives of such employees, provided that the employer or trust provides the employee with notice in writing that such insurance has been purchased, the amount of such coverage, and to whom benefits are payable in the event of the employee’s death.
2. Nothing in this section shall prohibit a minor from obtaining insurance on his own life as authorized in § 38.2-3105 .

History. 1952, c. 317, § 38.1-330; 1986, c. 562; 1988, c. 831; 1993, c. 105; 2020, c. 900.

The 2020 amendments.

The 2020 amendment by c. 900, in subdivision A 1, substituted “Either spouse” for “A wife or husband” and in subdivision A 3, substituted “subdivision B 3” for “subdivision 3 of subsection B.”

Law Review.

For 2000 survey of Virginia insurance law, see 34 U. Rich. L. Rev. 883 (2000).

§ 38.2-303. Insurable interest required; property insurance.

1. No insurance contract on property or on any interest therein or arising therefrom shall be enforceable except for the benefit of persons having an insurable interest in the property insured.
2. As used in this section, “insurable interest” means any lawful and substantial economic interest in the safety or preservation of the subject of insurance free from loss, destruction or pecuniary damage.

History. 1952, c. 317, § 38.1-331; 1986, c. 562.

Law Review.

For note, “Insurable Interest in Property in Virginia,” see 44 Va. L. Rev. 278 (1958).

Michie’s Jurisprudence.

For related discussion, see 10B M.J. Insurance, § 172.

§ 38.2-304. Contracts of temporary insurance; duration; what deemed to include.

1. Oral or written binders or other temporary insurance contracts may be made and used for a period not exceeding sixty days pending the issuance of the policy.  Unless otherwise provided, oral or written binders or other temporary insurance contracts shall be deemed to include the usual provisions, stipulations and agreements which are commonly used in this Commonwealth in effecting the class of insurance being written.
2. This section shall not apply to:
   1. Binders or other contracts referred to in §§ 38.2-2112 and 38.2-4605 ;
   2. Conditional receipts issued by life insurers; or
   3. Group insurance policies.

History. Code 1950, § 38-181; 1952, c. 317, § 38.2-332; 1986, c. 562.

Law Review.

For survey of Virginia law on insurance for the year 1972-1973, see 59 Va. L. Rev. 1535 (1973).

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 20.

§ 38.2-305. Contents of policies.

1. Each insurance policy or contract shall specify:
   1. The names of the parties to the contract;
   2. The subject of the insurance;
   3. The risks insured against;
   4. The time the insurance takes effect and, except in the case of group insurance, title insurance, and insurance written under perpetual policies, the period during which the insurance is to continue;
   5. A statement of the premium, except in the case of group insurance and title insurance; and
   6. The conditions pertaining to the insurance.In addition, each policy of property and casualty insurance shall contain a list of all policy forms and endorsements applicable to that policy, which shall display the respective form numbers and, if those form numbers are not unique identifiers of such forms, the applicable edition dates.
2. Each new or renewal insurance policy, contract, certificate, or evidence of coverage issued to a policyholder, covered person, or enrollee shall be accompanied by a notice stating substantially:“IMPORTANT INFORMATION REGARDING YOUR INSURANCE”“In the event you need to contact someone about this insurance for any reason, please contact your agent. If no agent was involved in the sale of this insurance, or if you have additional questions, you may contact the insurance company issuing this insurance at the following address and telephone number: [Insert the appropriate address and telephone number, toll free number if available, for the company’s home or regional office].”“If you have been unable to contact or obtain satisfaction from the company or the agent, you may contact the Virginia State Corporation Commission’s Bureau of Insurance at: [Insert the appropriate address, toll free phone number, and phone number for out-of-state calls for the Bureau of Insurance].”“Written correspondence is preferable so that a record of your inquiry is maintained. When contacting your agent, company or the Bureau of Insurance, have your policy number available.”Health maintenance organizations shall add the following: “We recommend that you familiarize yourself with our grievance procedure and make use of it before taking any other action.”
3. In any life insurance or annuity contract containing a beneficiary designation in which the designated beneficiary is the spouse of the policy owner, the following notice shall be included with the policy when issued, either attached to or incorporated into the front or first page of such contract:“BENEFICIARY DESIGNATION MAY NOT APPLY IN THE EVENT OF ANNULMENT OR DIVORCE”“Under Virginia law (Virginia Code § 20-111.1 ), a revocable beneficiary designation in a policy owned by one spouse that names the other spouse as beneficiary becomes void upon the entry of a decree of annulment or divorce, and the death benefit prevented from passing to a former spouse will be paid as if the former spouse had predeceased the decedent. In the event of annulment or divorce proceedings, and if it is the intent of the parties that the beneficiary designation of the former spouse is to continue, you are advised to make certain that one of the following courses of action is taken prior to the entry of a decree of annulment or divorce: (i) change the beneficiary designation to make it irrevocable; (ii) change the ownership of the policy or contract; (iii) execute a separate written agreement stating the intention of both parties that the beneficiary designation is to remain in effect beyond the date of entry of the decree of annulment or divorce; or (iv) make certain that the decree of annulment or divorce contains a provision stating that the beneficiary designation is not to be revoked pursuant to § 20-111.1 .”
4. If, under the contract, the exact amount of premiums is determinable only at the termination of the contract, a statement of the basis and rates upon which the final premium is to be determined and paid shall be furnished to any policy-examining bureau having jurisdiction or to the insured upon request.
5. This section shall not apply to surety insurance contracts.

History. 1952, c. 317, § 38.1-333; 1986, c. 562; 1987, c. 519; 1988, c. 333; 1997, c. 688; 2000, c. 193; 2012, c. 264; 2013, c. 27.

The 2000 amendments.

The 2000 amendment by c. 193 inserted present subsection C, and redesignated former subsections C and D as present subsections D and E.

The 2012 amendments.

The 2012 amendment by c. 264, effective October 1, 2012, added the paragraph following subdivision A 6.

The 2013 amendments.

The 2013 amendment by c. 27, in subsection B, transferred the former third paragraph of the notice to become the present last paragraph thereof.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 18.

§ 38.2-306. Additional contents.

A policy or contract may contain additional provisions that are not substantially in conflict with this title and that:

1. Are required to be inserted by the laws of the insurer’s state or country of domicile or of the state or country in which the policy is to be delivered or issued for delivery; or
2. Are necessary to state the rights and obligations of the parties to the contract because of the manner in which the insurer is constituted or operated.

History. Code 1950, § 38-513; 1952, c. 317, § 38.1-334; 1986, c. 562.

§ 38.2-307. Charter and bylaw provisions in policies.

No policy shall contain any provision purporting to make any portion of the charter, bylaws or other organic law of the insurer, however designated, a part of the contract unless that portion is set out in full in the policy. Any policy provision in violation of this section shall be invalid.

History. 1952, c. 317, § 38.1-335; 1986, c. 562.

§ 38.2-308. Contingent liability provisions in policies issued by certain mutual insurers.

Except in the case of nonassessable policies, the contingent liability of each member of a mutual insurer, other than a life insurer, shall be clearly stated in the mutual insurer’s policies. The contingent liability may be limited, but such limitation shall not be less than one additional annual premium on each policy held by the member.

History. Code 1950, § 38-508; 1952, c. 317, § 38.1-335.1; 1986, c. 562.

§ 38.2-309. When answers or statements of applicant do not bar recovery on policy.

All statements, declarations and descriptions in any application for an insurance policy or for the reinstatement of an insurance policy shall be deemed representations and not warranties. No statement in an application or in any affidavit made before or after loss under the policy shall bar a recovery upon a policy of insurance unless it is clearly proved that such answer or statement was material to the risk when assumed and was untrue.

History. Code 1950, § 38-7; 1952, c. 317, § 38.1-336; 1986, c. 562.

Law Review.

For comment on materiality of ownership in automobile liability policies, see 19 Wash. & Lee L. Rev. 141 (1962).

For note on automobile liability insurance and the voluntary-certified policy dichotomy, see 29 Wash. & Lee L. Rev. 426 (1972).

For 2000 survey of Virginia insurance law, see 34 U. Rich. L. Rev. 883 (2000).

Research References.

Virginia Forms (Matthew Bender). No. 1-903 Complaint on a Medical Insurance Policy, et seq.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 40.

§ 38.2-310. All fees, charges, etc., to be stated in policy.

1. All fees, charges, premiums or other consideration charged for the insurance or for the procurement of insurance shall be stated in the policy except in the case of fidelity, surety, title, and group insurance, and except for consulting services as provided in Article 4 (§ 38.2-1837 et seq.) of Chapter 18 of this title. Except as provided in this subsection, no person shall charge or receive any fee, compensation, or consideration for insurance or for the procurement of insurance that is not included in the premium or stated in the policy.
2. Service charges for installment payments of insurance premiums do not need to be stated in the policy if the charges are provided to the insured in writing.

History. Code 1950, § 38-508; 1952, c. 317, § 38.1-337; 1986, c. 562; 1990, c. 281.

§ 38.2-311. Type size in which conditions and restrictions to be printed.

Except as otherwise provided in this title, no restriction, condition or provision in or endorsed on any insurance policy shall be valid unless the condition or provision is printed in type as large as eight point type, or is written in ink or typewritten in or on the policy. This section shall not apply to a copy of an application or parts thereof, attached to or made part of an insurance policy.

History. Code 1950, § 38-9; 1952, c. 317, § 38.1-338; 1986, c. 562.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 19.

§ 38.2-312. Provisions limiting jurisdiction, or requiring construction of contracts by law of other states, prohibited.

No insurance contract delivered or issued for delivery in this Commonwealth and covering subjects which are located or residing in this Commonwealth, or which are performed in this Commonwealth shall contain any condition, stipulation or agreement:

1. Requiring the contract to be construed according to the laws of any other state or country, except as may be necessary to meet the requirements of the motor vehicle financial responsibility laws of the other state or country; or
2. Depriving the courts of this Commonwealth of jurisdiction in actions against the insurer.

   Any such condition, stipulation or agreement shall be void, but such voiding shall not affect the validity of the remainder of the contract.

History. 1952, c. 317, § 38.1-339; 1986, c. 562.

Cross references.

As to binding arbitration provisions in home protection company contracts, notwithstanding the provisions of § 38.2-312 , see § 38.2-2616 .

§ 38.2-313. Where certain contracts deemed made.

All insurance contracts on or with respect to the ownership, maintenance or use of property in this Commonwealth shall be deemed to have been made in and shall be construed in accordance with the laws of this Commonwealth.

History. Code 1950, § 38-162; 1952, c. 317, § 38.1-340; 1986, c. 562.

§ 38.2-314. Limitation of action and proof of loss.

No provision in any insurance policy shall be valid if it limits the time within which an action may be brought to less than one year after the loss occurs or the cause of action accrues.

If an insurance policy requires a proof of loss, damage or liability to be filed within a specified time, all time consumed in an effort to adjust the claim shall not be considered part of such time.

History. Code 1950, § 38-9; 1952, c. 317, § 38.1-341; 1986, c. 562.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 61.

§ 38.2-315. Intervening breach.

If any breach of warranty or condition in any insurance contract covering property located in this Commonwealth occurs prior to a loss under the contract, the breach shall not void the contract nor permit the insurer to avoid liability unless the breach existed at the time of the loss.

History. Code 1950, § 38-8; 1952, c. 317, § 38.1-342; 1986, c. 562.

Michie’s Jurisprudence.

For related discussion, see 17 M.J. Statutes, § 90.

§ 38.2-316. Policy forms to be filed with Commission; notice of approval or disapproval; exceptions.

1. No policy of life insurance, industrial life insurance, variable life insurance, modified guaranteed life insurance, group life insurance, accident and sickness insurance, or group accident and sickness insurance; no annuity, modified guaranteed annuity, pure endowment, variable annuity, group annuity, group modified guaranteed annuity, or group variable annuity contract; no health services plan, legal services plan, dental or optometric services plan, or health maintenance organization contract; no dental plan organization dental benefit contract; and no fraternal benefit certificate nor any certificate or evidence of coverage issued in connection with such policy, contract, or plan issued or issued for delivery in Virginia shall be delivered or issued for delivery in this Commonwealth unless a copy of the form has been filed with the Commission. In addition to the above requirement, no policy of accident and sickness insurance shall be delivered or issued for delivery in this Commonwealth unless the rate manual showing rates, rules, and classification of risks applicable thereto has been filed with the Commission.
2. Except as provided in this section, no application form shall be used with the policy or contract and no rider or endorsement shall be attached to or printed or stamped upon the policy or contract unless the form of such application, rider or endorsement has been filed with the Commission. No individual certificate and no enrollment form shall be used in connection with any group life insurance policy, group accident and sickness insurance policy, group annuity contract, or group variable annuity contract unless the form for the certificate and enrollment form have been filed with the Commission.
3. 1. None of the policies, contracts, and certificates specified in subsection A of this section shall be delivered or issued for delivery in this Commonwealth and no applications, enrollment forms, riders, and endorsements shall be used in connection with the policies, contracts, and certificates unless the forms thereof have been approved in writing by the Commission as conforming to the requirements of this title and not inconsistent with law. C. 1. None of the policies, contracts, and certificates specified in subsection A of this section shall be delivered or issued for delivery in this Commonwealth and no applications, enrollment forms, riders, and endorsements shall be used in connection with the policies, contracts, and certificates unless the forms thereof have been approved in writing by the Commission as conforming to the requirements of this title and not inconsistent with law.
   2. In addition to the above requirement, no premium rate change applicable to individual accident and sickness insurance policies, subscriber contracts of health services plans, dental or optometric services plans, or fraternal benefit contracts providing individual accident and sickness coverage as authorized in § 38.2-4116 shall be used unless the premium rate change has been approved in writing by the Commission. No premium rate change applicable to individual or group Medicare supplement policies shall be used unless the premium rate change has been approved in writing by the Commission.
4. The Commission may disapprove or withdraw approval of the form of any policy, contract or certificate specified in subsection A of this section, or of any application, enrollment form, rider or endorsement, if the form:
   1. Does not comply with the laws of this Commonwealth;
   2. Has any title, heading, backing or other indication of the contents of any or all of its provisions that is likely to mislead the policyholder, contract holder or certificate holder; or
   3. Contains any provisions that encourage misrepresentation or are misleading, deceptive or contrary to the public policy of this Commonwealth.
5. Within 30 days after the filing of any form requiring approval, the Commission shall notify the organization filing the form of its approval or disapproval of the form which has been filed, and, in the event of disapproval, its reason therefor. The Commission, at its discretion, may extend for up to an additional 30 days the period within which it shall approve or disapprove the form. Any form received but neither approved nor disapproved by the Commission shall be deemed approved at the expiration of the 30 days if the period is not extended, or at the expiration of the extended period, if any; however, no organization shall use a form deemed approved under the provisions of this section until the organization has filed with the Commission a written notice of its intent to use the form together with a copy of the form and the original transmittal letter thereof. The notice shall be filed in the offices of the Commission at least 10 days prior to the organization’s use of the form.
6. If the Commission proposes to withdraw approval previously given or deemed given to the form of any policy, contract or certificate, or of any application, rider or endorsement, it shall notify the insurer in writing at least 15 days prior to the proposed effective date of withdrawal giving its reasons for withdrawal.
7. Any insurer or fraternal benefit society aggrieved by the disapproval or withdrawal of approval of any form may proceed as indicated in § 38.2-1926 .
8. This section shall not apply to any special rider or endorsement on any policy, except an accident and sickness insurance policy that relates only to the manner of distribution of benefits or to the reservation of rights and benefits under such policy, and that is used at the request of the individual policyholder, contract holder or certificate holder.
9. The Commission may exempt any categories of such policies, contracts, and certificates and any applicable rate manuals from (i) the filing requirements, (ii) the approval requirements of this section, or (iii) both such requirements. The Commission may modify such requirements, subject to such limitations and conditions which the Commission finds appropriate. In promulgating an exemption, the Commission may consider the nature of the coverage, the person or persons to be insured or covered, the competence of the buyer or other parties to the contract, and other criteria the Commission considers relevant.
10. In lieu of complying with the requirements of subsections A, B, and C, any legal services organization operating, conducting, or administering a legal services plan may provide the Commission with an informational filing regarding a subscription contract, enrollment form, rider, or endorsement used by the legal services organization in connection with a legal services plan offered in the Commonwealth together with written notice of its intent to use the form. Upon providing such informational filing and notice, the legal services organization may use the subscription contract, enrollment form, rider, or endorsement without its prior approval by the Commission. This subsection shall not limit the authority of the Commission to review a legal services plan and any subscription contract, enrollment form, rider, or endorsement used in connection therewith and to disapprove the use of such form for any of the grounds set forth in subsection D.
11. Pursuant to the authority granted by § 38.2-223 , the Commission may promulgate such rules and regulations as it may deem necessary to set standards for policy and other form submissions required by this section or § 38.2-3501 .

History. 1952, c. 317, § 38.1-342.1; 1972, c. 836; 1973, c. 504; 1977, c. 325; 1986, c. 562; 1990, c. 332; 1994, c. 316; 1996, c. 12; 1998, c. 17; 2004, c. 668; 2020, c. 408.

Cross references.

As to filing and approval of viatical settlement contracts, see § 38.2-6003 .

The 1998 amendment, in the second sentence of subsection B, inserted “and no enrollment form,” and substituted “and enrollment form have been filed” for “has been filed”; in subdivision 1 of subsection C, inserted “enrollment forms”; and in the introductory language of subsection D, inserted “enrollment form.”

The 2004 amendments.

The 2004 amendment by c. 668 inserted “no dental plan organization dental benefit contract” in subsection A; substituted “30 days” for “thirty days” three times and “10 days” for “ten days” once in subsection E; and substituted “15 days” for “fifteen days” in subsection F.

The 2020 amendments.

The 2020 amendment by c. 408 inserted subsection J and redesignated accordingly.

§ 38.2-316.1. Premium rates.

1. As used in this section:“Anticipated loss ratio” means the ratio of the present value of the future benefits to the present value of the future premiums of a policy form over the entire period for which rates are computed to provide coverage.“Student health insurance coverage” means a type of individual health insurance coverage offered in the individual market that is provided pursuant to a written agreement between an institution of higher education, as defined by the Higher Education Act of 1965, P.L. 89-329, and a health carrier to students enrolled in that institution of higher education and their dependents; that does not make health insurance coverage available other than in connection with enrollment as a student or as a dependent of a student in the institution of higher education; and that does not condition eligibility for health insurance coverage on any health status-related factor related to a student or a dependent of the student.
2. The Commission shall review and approve accident and sickness insurance premium rates applicable to (i) health benefit plans issued in the Commonwealth in the individual and small group markets, as those terms are defined in § 38.2-3431 , and (ii) health benefit plans providing health insurance coverage, as defined in § 38.2-3431 , in the individual market to residents of the Commonwealth through a group trust, association, purchasing cooperative, or other group that is not an employer plan. In connection therewith, the Commission is authorized to establish minimum loss ratios to assure that the benefits provided by accident and sickness insurance policies are or are likely to be reasonable in relation to the premiums charged. The Commission shall promulgate regulations to establish standards applicable to such review and approval.
3. Premium rate filings for a health benefit plan issued in the Commonwealth in the individual and small group markets shall include a description of agent commissions and any limitations or exceptions as they relate to the payment of such commissions.
4. Every policy, rider, or endorsement form affecting benefits that is submitted for approval shall be accompanied by a rate filing, as required by § 38.2-316 . Any subsequent addition to or change in rates applicable to such policy, rider, or endorsement form shall also be filed. Each rate submission shall comply with the requirements of 14VAC5-130.
5. Benefits shall be deemed reasonable in relation to premiums, provided that the anticipated loss ratio of the policy form, including riders and endorsements, is at least as great as provided in 14VAC5-130. The reasonableness of benefits with respect to filings of rate revisions for a previously approved form shall be determined as provided in 14VAC5-130.
6. A health insurance issuer shall consider the claims experience of all enrollees in all health benefit plans, other than grandfathered plans and student health insurance coverage, in the individual market to be members of a single risk pool. A health insurance issuer shall consider the claims experience of all enrollees in all health plans, other than grandfathered plans, in the small group market to be members of a single risk pool. Each plan year or policy year, as applicable, a health insurance issuer shall establish an index rate based on the total combined claims costs for providing essential health benefits within the single risk pool of the individual or small group market as provided in 14VAC5-130. A health insurance issuer may vary premium rates for a particular plan from its index rate for a relevant state market only on the basis of an actuarially justified plan-specific factor permitted under 14VAC5-130.
7. If the Commission finds that the premium rate filed in accordance with this section is not meeting or will not meet the originally filed and approved loss ratio, the Commission may require appropriate rate adjustments, premium refunds, or premium credits (i) as deemed necessary for the coverage to conform with the minimum loss ratio standards established pursuant to subsection B and (ii) that are expected to result in a loss ratio at least as great as that originally anticipated in the rates used to produce current rates by the health insurance issuer for the coverage. The Commission may take into consideration any previous or expected premium refunds or credits. The Commission may require the submission of detailed supporting documents as necessary to justify the adjustment.
8. The Commission may request information subsequent to approval of a policy form or rate revision so that it may determine whether premium rates are reasonable in relation to the benefits provided as specified in 14VAC5-130.
9. Except as otherwise provided, nothing contained in this section shall be construed to relieve a health insurance issuer from complying with other statutory requirements set forth in this title.
10. The Commission may prescribe procedures for the effective monitoring of actual experience under any form subject to 14VAC5-130.

History. 2013, cc. 670, 679; 2018, c. 708; 2019, c. 607.

The 2018 amendments.

The 2018 amendment by c. 708 designated the existing provisions as subsection A, added subsection B, and made a stylistic change.

The 2019 amendments.

The 2019 amendment by c. 607 added subsections A and D through J and redesignated the remaining subsections accordingly; in subsection B, inserted the second sentence.

§ 38.2-317. Delivery and use of certain policies and endorsements.

1. No insurance policy or endorsement of the kind to which Chapter 19 (§ 38.2-1900 et seq.) applies shall be delivered or issued for delivery in the Commonwealth unless the policy form or endorsement is filed with the Commission prior to its effective date. The provisions of this section shall not apply to statutory fire insurance policies, standard automobile policy forms and endorsements, workers’ compensation and employers’ liability insurance as defined in § 38.2-119 , surety insurance as defined in § 38.2-121 , or insurance of large commercial risks as defined in § 38.2-1903.1 .
2. The Commission may disapprove or withdraw approval of the policy form or endorsement to which the section applies if the policy form or endorsement:
   1. Is in violation of any provision of this title;
   2. Contains provisions that are contrary to the public policy of this Commonwealth;
   3. Contains or incorporates by reference, even where such incorporation is otherwise permissible, any inconsistent, ambiguous, or misleading clauses or exceptions and conditions that deceptively affect the risk purported to be assumed in the general coverage of the policy;
   4. Has any title, heading, or other indication of its provisions that is misleading;
   5. Contains provisions that are so unclear or deceptively worded that they encourage misrepresentation; or
   6. Provides coverage of such a limited nature that it is contrary to the public interest of the Commonwealth.
3. No policy form or endorsement specified in subsection A shall be delivered, issued for delivery, or used in the Commonwealth unless the policy form or endorsement has been approved in writing by the Commission as conforming to the requirements of this title and not inconsistent with law. Within 30 days after the filing of any policy form or endorsement requiring approval pursuant to this section, the Commission shall notify the insurer or rate service organization filing the policy form or endorsement of its approval or disapproval, and in the event of disapproval, its reason therefor. The Commission, at its discretion, may extend for up to an additional 30 days the period within which it shall approve or disapprove the policy form or endorsement. Any policy form or endorsement received but neither approved nor disapproved by the Commission shall be deemed approved at the expiration of the 30 days if the period is not extended, or at the expiration of the extended period, if any; however, no policy form or endorsement shall be deemed approved under the provisions of this section unless written notice of the intent to use the policy form or endorsement has been filed with the Commission.
4. If the Commission proposes to withdraw approval previously given or deemed given to the policy form or endorsement to which this section applies, it shall notify the insurer in writing at least ninety days prior to the proposed effective date of withdrawal giving its reasons for withdrawal.
5. The policy and endorsement forms referred to in subsection A of this section in use on October 1, 1976, may continue to be used, subject to disapproval by the Commission.
6. The Commission may by rule exempt any person, class of persons, or market segment from any or all of the provisions of this section. In promulgating an exemption, the Commission may consider the nature of the coverage, the person or persons to be insured or covered, the competence of the buyer or other parties to the contract, and other criteria the Commission considers relevant.
7. The policy and endorsement forms referred to in subsection A of this section shall be open to public inspection. Copies may be obtained by any person on request and upon payment of a reasonable charge for the copies.
8. Any insurer whose rate service organization files on behalf of such insurer shall notify the Commission prior to the effective date of any filing if the insurer is not going to accept the filing made on its behalf.
9. Notwithstanding anything to the contrary in subsection A, the provisions of this section shall apply to policies and endorsements of credit involuntary unemployment insurance, as defined in § 38.2-122.1 , and to policies and endorsements of credit property insurance, as defined in § 38.2-122.2 , delivered or issued for delivery in this Commonwealth, and to certificates of credit involuntary unemployment insurance and credit property insurance delivered or issued for delivery in this Commonwealth where the group policy is delivered in another state.

History. 1976, c. 278, § 38.1-279.48:1; 1986, c. 562; 1988, c. 523; 1993, c. 985; 1997, c. 26; 2000, cc. 526, 548; 2021, Sp. Sess. I, c. 138.

The 2000 amendments.

The 2000 amendment by c. 526 added subsection I.

The 2000 amendment by c. 548, in the last sentence of subsection A, deleted “or” following “§ 38.2-119 ” and added “or insurance of large commercial risks as defined in § 38.2-1903.1 .”

The 2021 Sp. Sess. I amendments.

The 2021 amendment by Sp. Sess. I, c. 138, effective July 1, 2021, in subsection A, deleted “at least thirty days” following “Commission” in the first sentence; in subsection C, inserted the first sentence; and made stylistic changes.

CIRCUIT COURT OPINIONS

Endorsement deemed approved. —

As an insurer filed an endorsement limiting liability for mold damage with the Virginia Corporation Commission, Bureau of Insurance before December 16, 2001, and the Commission did not indicate its intent to withdraw approval until December 13, 2003, thirty days after December 16, 2001, the endorsement was deemed approved, as the Commission did not disapprove it within the time required by subsection C of § 38.2-317 . Byrnes v. United Servs. Auto. Ass'n, 68 Va. Cir. 274, 2005 Va. Cir. LEXIS 120 (Fairfax County July 22, 2005).

Withdrawal of endorsement approval. —

The Virginia Corporation Commission, Bureau of Insurance’s withdrawal letter from an endorsement limiting an insurer’s liability for mold damage used the term “withdraw” instead of “disapprove” and complied with all of the statutory requirements for a withdrawal of approval, which indicated that the Commission recognized the endorsement had been approved. Byrnes v. United Servs. Auto. Ass'n, 68 Va. Cir. 274, 2005 Va. Cir. LEXIS 120 (Fairfax County July 22, 2005).

§ 38.2-318. Validity of noncomplying forms.

1. Any insurance policy or form containing any condition or provision that is not in compliance with this title shall be valid, but shall be construed and applied in accordance with the conditions and provisions required by this title.
2. As used in this section, “form” means any contract, rider, endorsement, amendment, certificate, or application or other instrument providing, modifying, or eliminating insurance coverage.

History. 1952, c. 317, § 38.1-343; 1986, c. 562.

§ 38.2-319. Validity of contracts in violation of law.

Any insurance contract made in violation of the laws of this Commonwealth may be enforced against the insurer.

History. Code 1950, §§ 38-32, 38-223; 1952, c. 317, § 38.1-344; 1986, c. 562.

Law Review.

For 2000 survey of Virginia insurance law, see 34 U. Rich. L. Rev. 883 (2000).

§ 38.2-320. Insurer to furnish forms for proof of loss.

Whenever notice of any loss or damage has been given to the insurer or its agent, the insurer shall, upon written request, deliver to the insured or to the person to whom the benefits are payable the forms for such preliminary proof of loss or damage as may be required under the policy. Such forms shall be delivered within fifteen days after written request has been made or mailed to the insurer by the insured or person to whom benefits are payable. The failure or refusal of an insurer or its agent to deliver such forms within fifteen days of written request shall be deemed a waiver of any condition, stipulation or provision in the policy requiring preliminary proof.

History. Code 1950, § 38-11; 1952, c. 317, § 38.1-345; 1986, c. 562.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 56.

§ 38.2-321. Payment discharges insurer.

1. An insurer shall be fully discharged from all claims under a life insurance policy, accident and sickness insurance policy, or annuity contract:
   1. When the proceeds of or payments under a policy or contract become payable in accordance with (i) the terms of the policy or contract or (ii) the exercise of any right or privilege under the contract; and
   2. If the insurer makes payments in accordance with the terms of the policy or contract or any written assignment to the person designated in the policy or contract or by assignment as being entitled to the proceeds or payments.
2. An insurer may not be fully discharged from all claims under a life insurance policy, accident and sickness insurance policy, or annuity contract before payment is made and if the insurer has received, at its home office, written notice that some other person claims to be entitled to payment or some interest in the policy or contract.

History. 1952, c. 317, § 38.1-346.1; 1986, c. 562.

§ 38.2-322. Standardized claims forms.

1. No accident and sickness insurer, health maintenance organization, health services plan, or optometric services plan licensed in the Commonwealth shall refuse to accept, as a standard claims form for physician services or for services provided by chiropractors, optometrists, opticians, professional counselors, psychologists, clinical social workers, podiatrists, physical therapists, clinical nurse specialists who render mental health services, audiologists, and speech pathologists, the standardized HCFA-1500 health insurance claims form, or its successor as it may be amended from time to time. However, nothing in this section shall prohibit an insurer, health maintenance organization, health services plan, or optometric services plan from accepting any other claims form.
2. No accident and sickness insurer, health maintenance organization, or health services plan licensed in the Commonwealth shall refuse to accept as a standard claims form for hospital services the standardized UB-82 claims form, or its successor as it may be amended from time to time. However, nothing in this section shall prohibit an accident and sickness insurer, health maintenance organization, or health services plan from accepting any other claims form.
3. No accident and sickness insurer, health maintenance organization, health services plan, or dental services plan licensed in the Commonwealth shall refuse to accept as a standard claims form for dental services the standardized ADA form prepared by the American Dental Association, or its successor as it may be amended from time to time. However, nothing in this section shall prohibit an accident and sickness insurer, health maintenance organization, health services plan, or dental services plan from accepting any other claims form.
4. The forms specified in this section may be modified as necessary to accommodate the transmission and administration of claims by electronic means.
5. After July 1, 1998, no health maintenance organization authorized to transact business in this Commonwealth and no health insurer, health services plan or preferred provider organization authorized to offer health benefits in this Commonwealth that requires the use of the Physicians’ Current Procedural Terminology (CPT) identifying codes published by the American Medical Association for reporting claims for medical services and procedures, including any standardized form, shall refuse to accept and utilize these identifying codes and any appropriate modifiers listed therein when the same are appropriately used for processing such claims for provider services and procedures.

History. 1993, c. 307; 1997, c. 531.

§ 38.2-323. Repealed by Acts 2010, c. 337, cl. 1.

Editor’s note.

Former § 38.2-323 , prohibiting countersignature requirements in policies, was enacted by Acts 2002, c. 70.

§ 38.2-324. Disclosure of property damage information.

Nothing in this title shall prohibit an insurer or its agent from disclosing information obtained from policyholders or other persons regarding claims or reports of property damage resulting from a natural disaster, as defined in clause (ii) of the definition of “disaster” in § 44-146.16, to the Director of the Department of Emergency Management or his designees or other state officials, to federal officials, or to local government officials of the locality where the damage occurred; provided that the disclosures (i) do not identify persons whose property is damaged or the address thereof and (ii) include only aggregated data that relates to the assessment of damage from a natural disaster, including, but not limited to, the number of claims, estimates of the dollar amount of damage, and types of damage, for a specified geographic area, such as a census tract or zip code area.

History. 2005, c. 192; 2008, cc. 121, 157.

The 2008 amendments.

The 2008 amendments by cc. 121 and 157 are identical, and inserted “clause (ii) of the definition of ‘disaster’ in” preceding “§ 44-146.16.”

§ 38.2-325. Electronic delivery.

1. If parties have agreed to conduct business by electronic means, and the agent of record, if applicable, has been so notified by the insurer, any information that is required to be delivered in writing may be delivered by (i) placing such information within the body of the electronic message; (ii) placing such information as an attachment to the electronic message that may be opened through the use of software that is readily available; (iii) displaying the information, or a clear and conspicuous link to the information, as an essential step to completing the transaction to which the information relates; or (iv) placing such information on the insurer’s secured server and an electronic message is provided advising that insurance information or, when appropriate, time-sensitive insurance information has been placed on the insurer’s secured server and is available for retrieval. This section should be construed to be consistent with the Electronic Signatures in Global and National Commerce Act (15 U.S.C. § 7001 et seq.).
2. If parties have agreed to conduct business by electronic means, and notice is provided by the insurer to the named insured pursuant to § 38.2-231 , 38.2-2113 , 38.2-2114 , 38.2-2208 , or 38.2-2212 , an electronic notification shall also be provided to the agent of record of the named insured, if the named insured has an agent of record. Such electronic notification shall be transmitted to the agent of record as soon as practicable, but in no case more than 72 hours after electronic notice is transmitted to the named insured.
3. The insurer shall retain evidence of electronic notification to the agent of record for at least one year from the date of transmittal. Failure to provide such notice to the agent of record shall not be deemed to invalidate any electronic notice otherwise properly provided to the named insured. For purposes of this section, an electronic notification to the agent of record shall mean a copy of the actual notice, as set forth herein, or in the alternative, shall include the named insured’s name, policy number, and termination date. Electronic notice need not be given to the agent of record if the agent (i) is an employee of the insurer, (ii) is a non-employee exclusive agent of the insurer, or (iii) has waived the receipt of such notices in writing.
4. Notwithstanding any other provision of law, any property and casualty insurance forms and endorsements that do not contain personally identifiable information may be posted to the insurer’s publicly available website in lieu of any other method of delivery, provided that:
   1. Such forms and endorsements are readily accessible on the insurer’s website and that once such forms or endorsements are no longer used in the Commonwealth they are stored in a readily accessible archive portion of the insurer’s website;
   2. Such forms and endorsements are posted in such a manner that they may be readily printed and downloaded without charge and without the use of any special program or application that is not readily available to the public without charge;
   3. The insurer provides written notice at time of the issuance of the initial policy forms and any renewal forms of a method by which policyholders may obtain, upon request and without charge, a paper or electronic copy of their policy or contract; and
   4. The insurer gives notice, in the manner it customarily communicates with a policyholder, of any changes to the forms or endorsements, and of the policyholder’s right to obtain, upon request and without charge, a paper or electronic copy of such forms or endorsements.
5. The notification to an insurer of any change of the electronic address for the named insured shall be the sole responsibility of the named insured. The giving to the agent of record by any person of notice of such change of the named insured’s electronic address shall not be deemed to be notice to the insurer unless it is specifically identified as a change and receipt has been accepted by the agent of record.
6. Notwithstanding any other provision of law, any evidence of coverage or other forms that do not contain personally identifiable information that a health carrier is required to provide to a policyholder, subscriber, or enrollee may be delivered electronically to the policyholder, subscriber, or enrollee or posted to the health carrier’s publicly available website in lieu of any other method of delivery, provided that:
   1. Such evidence of coverage and endorsements, riders, or amendments to it are readily accessible on the health carrier’s website and that once such evidence of coverage and endorsements, riders, or amendments to it are no longer used in the Commonwealth they will be made available electronically upon request;
   2. Such evidence of coverage and endorsements, riders, or amendments to it are posted in such a manner that they may be readily printed and downloaded without charge and without the use of any special program or application that is not readily available to the public without charge;
   3. The health carrier provides written notice at the time of the issuance of the initial evidence of coverage and any renewals of a method by which the policyholder, subscriber, or enrollee may obtain, upon request and without charge, a paper or electronic copy of such person’s evidence of coverage or endorsements, riders, or amendments to it; and
   4. The health carrier gives notice, in the manner in which it customarily communicates with a policyholder, subscriber, or enrollee, of any changes to the evidence of coverage or endorsements, riders, or amendments to it and of the right of such policyholder, subscriber, or enrollee to obtain a paper or electronic copy of such evidence of coverage or endorsements, riders, or amendments to it.

History. 2009, c. 215; 2012, c. 293; 2013, c. 257; 2016, c. 475.

Editor’s note.

Acts 2016, c. 475, cl. 2, and Acts 2016, c. 508, cl. 1, repealed Acts 2013, c. 257, cl. 2, which had provided for the December 31, 2016, expiration date for subsection E. Subsection E will not expire December 31, 2016.

The 2012 amendments.

The 2012 amendment by c. 293 added subsection D.

The 2013 amendments.

The 2013 amendment by c. 257 deleted “other than a notice of cancellation of a policy” following “delivered in writing” in subsection A; and added subsection E. For expiration of subsection E, see Editor’s note.

The 2016 amendments.

The 2016 amendment by c. 475 added subsection F.

§ 38.2-326. Plan management functions.

1. As used in this section:“Exchange” means either the (i) federal health benefit exchange established by the Secretary of the U.S. Department of Health and Human Services pursuant to § 1321 of the Patient Protection and Affordable Care Act codified as 42 U.S.C. § 18041(c) in the Commonwealth or (ii) state-based exchange established pursuant to Chapter 65 (§ 38.2-6500 et seq.) and § 1311(b) of the Patient Protection and Affordable Care Act codified as 42 U.S.C. § 18031.“Plan management functions” means analyses and reviews necessary to support the certification, decertification, and recertification of qualified health plans and stand-alone dental plans for the participation in an exchange and the collection of data necessary to perform the above functions.
2. The Commission’s Bureau of Insurance, with the assistance of the Virginia Department of Health, shall perform plan management functions required to certify health benefit plans and stand-alone dental plans for participation in the exchange, provided that: (i) full funding is available; (ii) the technology infrastructure, including integration with federal, state, and other necessary entities, is made available to the Commission in order for it to carry out the plan management functions authorized in this section; and (iii) there are no other impediments that effectively prevent the Commission from performing any required plan management functions.
3. The Commission’s Bureau of Insurance may contract and enter into memoranda of understanding to carry out its plan management functions.
4. The Commission shall not use any special fund revenues dedicated to its other functions and duties unrelated to exchange operations, including revenues from utility consumer taxes or fees from licensees or registrants regulated by the Commission or fees paid to the Clerk’s Office, to fund the plan management functions.
5. Technology resources provided by the Commission in carrying out the plan management functions shall be limited to existing Commission technology support functions such as desktop support, network administration support, web services support, or other similar support functions.
6. The Commission shall make available to the public on its website a written report on the implementation and performance of its plan management functions during the preceding fiscal year, including, at a minimum, the manner in which all funds utilized for its plan management functions were expended.

History. 2013, cc. 670, 679; 2020, cc. 916, 917.

Editor’s note.

Acts 2020, cc. 916 and 917, cl. 5 provides: “That the State Corporation Commission shall implement the provisions of this act as it receives notice of approval by the Centers for Medicare and Medicaid Services and to the extent of such approval.”

The 2020 amendments.

The 2020 amendments by cc. 916 and 917 are identical, and added subsection A; redesignated and rewrote former subsections A and B as B and C, relating to plan management function definitions; deleted former subsection C, relating to funding; and substituted “unrelated to exchange operations, including revenues” for “but not limited to, revenues” in subsection D.

§ 38.2-400. Expense of administration of insurance laws borne by licensees; minimum contribution.

1. The expense of maintaining the Bureau of the Commission responsible for administering the insurance laws of this Commonwealth, including a reasonable margin in the nature of a reserve fund, shall be assessed annually by the Commission against all companies and surplus lines brokers subject to this title except premium finance companies and providers of continuing care registered pursuant to Chapter 49 (§ 38.2-4900 et seq.) of this title. The assessment shall be in proportion to the direct gross premium income on business done in this Commonwealth. The assessment shall not exceed one-tenth of one percent of the direct gross premium income and shall be levied pursuant to § 38.2-403 . For any year a company is subject to an assessment, the assessment shall not be less than $300.
2. All fees assessed under any provision of this title and paid into the state treasury shall be deposited to a special fund designated “Bureau of Insurance Special Fund — State Corporation Commission,” and out of such special fund and the unexpended balance thereof shall be appropriated the sums necessary for the regulation, supervision and examination of all entities subject to regulation under this title. Any references in the Code of Virginia to funds being paid directly into the state treasury and credited to the fund for the maintenance of the Bureau of Insurance shall hereinafter mean the “Bureau of Insurance Special Fund — State Corporation Commission.”

History. Code 1950, § 38-17; 1952, c. 317, § 38.1-44; 1954, c. 231; 1960, c. 294; 1977, cc. 317, 613; 1978, c. 4; 1981, c. 605; 1986, c. 562; 1987, cc. 558, 565, 655; 1994, c. 316.

Cross references.

As to powers of the Commission with respect to supervisory colleges, see § 38.2-1332.1 .

As to the application of this article to licensed group self-insurance associations formed by employers subject to Virginia Workers’ Compensation Act, see § 65.2-802 .

§ 38.2-401. Fire Programs Fund.

1. 1. There is hereby established in the state treasury a special nonreverting fund to be known as the Fire Programs Fund, hereinafter referred to as “the Fund.” The Fund shall be administered by the Department of Fire Programs under policies and definitions established by the Virginia Fire Services Board. All moneys collected pursuant to the assessment made by the Commission pursuant to subdivision 2 of this subsection shall be paid into the state treasury and credited to the Fund. The Fund shall also consist of any moneys appropriated thereto by the General Assembly and any grants or other moneys received by the Virginia Fire Services Board or Department of Fire Programs for the purposes set forth in this section. Any moneys deposited to or remaining in such Fund during or at the end of each fiscal year or biennium, including interest thereon, shall not revert to the general fund but shall remain in the Fund. Interest earned on all moneys in the Fund and interest earned on moneys held by the Commission pursuant to subdivision 2 of this subsection prior to the deposit of such moneys into the Fund, including interest earned on such moneys during any period when the Commission is reconciling payments from insurers, shall remain in or be deposited into the Fund, as the case may be, and be credited to it. Such interest shall be set aside for fire service purposes in accordance with policies developed by the Virginia Fire Services Board. Notwithstanding any other provision of law to the contrary, policies established by the Virginia Fire Services Board for the administration of the Fund, and any grants provided from the Fund, that are not inconsistent with the purposes set out in this section shall be binding upon any locality that accepts such funds or related grants. The Commission shall be reimbursed from the Fund for all expenses necessary for the administration of this section. The balance of moneys in the Fund shall be allocated periodically as provided in this section. Expenditures and disbursements from the Fund shall be made by the State Treasurer on warrants issued by the Comptroller upon written request signed by the Executive Director of the Department of Fire Programs (Director) or his designee. A. 1. There is hereby established in the state treasury a special nonreverting fund to be known as the Fire Programs Fund, hereinafter referred to as “the Fund.” The Fund shall be administered by the Department of Fire Programs under policies and definitions established by the Virginia Fire Services Board. All moneys collected pursuant to the assessment made by the Commission pursuant to subdivision 2 of this subsection shall be paid into the state treasury and credited to the Fund. The Fund shall also consist of any moneys appropriated thereto by the General Assembly and any grants or other moneys received by the Virginia Fire Services Board or Department of Fire Programs for the purposes set forth in this section. Any moneys deposited to or remaining in such Fund during or at the end of each fiscal year or biennium, including interest thereon, shall not revert to the general fund but shall remain in the Fund. Interest earned on all moneys in the Fund and interest earned on moneys held by the Commission pursuant to subdivision 2 of this subsection prior to the deposit of such moneys into the Fund, including interest earned on such moneys during any period when the Commission is reconciling payments from insurers, shall remain in or be deposited into the Fund, as the case may be, and be credited to it. Such interest shall be set aside for fire service purposes in accordance with policies developed by the Virginia Fire Services Board. Notwithstanding any other provision of law to the contrary, policies established by the Virginia Fire Services Board for the administration of the Fund, and any grants provided from the Fund, that are not inconsistent with the purposes set out in this section shall be binding upon any locality that accepts such funds or related grants. The Commission shall be reimbursed from the Fund for all expenses necessary for the administration of this section. The balance of moneys in the Fund shall be allocated periodically as provided in this section. Expenditures and disbursements from the Fund shall be made by the State Treasurer on warrants issued by the Comptroller upon written request signed by the Executive Director of the Department of Fire Programs (Director) or his designee.
   2. The Commission shall annually assess against all licensed insurance companies doing business in the Commonwealth by writing any type of insurance as defined in §§ 38.2-110 , 38.2-111 , 38.2-126 , 38.2-130 and 38.2-131 and those combination policies as defined in § 38.2-1921 that contain insurance as defined in §§ 38.2-110 , 38.2-111 and 38.2-126 , an assessment in the amount of one percent of the total direct gross premium income for such insurance. Such assessment shall be apportioned, assessed and paid as prescribed by § 38.2-403 . In any year in which a company has no direct gross premium income or in which its direct gross premium income is insufficient to produce at the rate of assessment prescribed by law an amount equal to or in excess of $100, there shall be so apportioned and assessed against such company a contribution of $100.
2. After reserving funds for the Fire Services Grant Program and Dry Fire Hydrant Grant Program pursuant to subsection D, 75 percent of the remaining moneys available for allocation from the Fund shall be allocated to the several counties, cities, and towns of the Commonwealth providing fire service operations to be used for the improvement of volunteer and career fire services in each of the receiving localities. Funds allocated to the counties, cities, and towns pursuant to this subsection shall not be used directly or indirectly to supplant or replace any other funds appropriated by the counties, cities, and towns for fire service operations. Such funds shall be used solely for the purposes of (i) training volunteer or career firefighting personnel in each of the receiving localities; (ii) funding fire prevention and public safety education programs; (iii) constructing, improving, and expanding regional or local fire service training facilities; (iv) purchasing emergency medical care and equipment for fire personnel; (v) payment of personnel costs related to fire and medical training for fire personnel; (vi) purchasing personal protective equipment, vehicles, equipment, and supplies for use in the receiving locality specifically for fire service purposes; or (vii) providing training and education and purchasing products, including personal protective equipment, diesel exhaust removal systems, decontamination equipment, and commercial extractors, that are designed to reduce the incidence of cancer among firefighters. Notwithstanding any other provision of the Code, when localities use such funds to construct, improve, or expand fire service training facilities, fire-related training provided at such training facilities shall be by instructors certified or approved according to policies developed by the Virginia Fire Services Board. Distribution of this 75 percent of the Fund shall be made on the basis of population as provided for in §§ 4.1-116 and 4.1-117 ; however, no county or city eligible for such funds shall receive less than $10,000, nor eligible town less than $4,000. The Virginia Fire Services Board shall be authorized to exceed allocations of $10,000 for eligible counties and cities and $4,000 for eligible towns, respectively. Allocations to counties, cities, and towns receiving such allocations shall be fair and equitable as set forth in Board policy. Any increases or decreases in such allocations shall be uniform for all localities. In order to remain eligible for such funds, each receiving locality shall report annually to the Department on the use of the funds allocated to it for the previous year and shall provide a completed Fire Programs Fund Disbursement Agreement form. Each receiving locality shall be responsible for certifying the proper use of the funds. If, at the end of any annual reporting period, a satisfactory report and a completed agreement form have not been submitted by a receiving locality, any funds due to that locality for the next year shall not be retained. Such funds shall be added to the 75 percent of the Fund allocated to the counties, cities, and towns of the Commonwealth for improvement of fire services in localities.
3. The remainder of the moneys available for allocation from the Fund shall be used for (i) the purposes of carrying out the powers and duties assigned to the Department of Fire Programs under Chapter 2 (§ 9.1-200 ) of Title 9.1, which shall include providing funded training and administrative support services for nonfunded training to localities and (ii) the payment of the compensation and costs of expenses of the members of the Fire Services Board in performing their official duties; however, the Fund shall not be used for salaries or operating expenses associated with the Office of the State Fire Marshal.
4. The Fire Services Grant Program is hereby established and will be used as grants to provide regional fire services training facilities, to finance the Virginia Fire Incident Reporting System and to build or repair live fire training structures as determined by the Virginia Fire Services Board. Beginning January 1, 1996, $1 million from the assessments made pursuant to this section shall be distributed each year for the Fire Services Grant Program to be used as herein provided, and $100,000 shall be distributed annually for continuing the statewide Dry Fire Hydrant Grant Program. Moneys allocated pursuant to this subsection shall be used for the purposes stated in this subsection, and for no other purpose. All grants provided from these programs shall be administered by the Department according to the policies established by the Virginia Fire Services Board.
5. Moneys in the Fund shall not be diverted or expended for any purpose not authorized by this section.
6. The Director shall establish written standards for determining the extent to which clients outside the Commonwealth shall be financially responsible for the cost of fire and emergency services training provided by the Department of Fire Programs. Revenues generated by such training shall be retained in the Fire Programs Fund and may be used solely for providing additional funded direct training to members of Virginia’s fire and emergency services.

History. 1985, c. 545, § 38.1-44.1; 1986, cc. 60, 562; 1988, c. 336; 1995, cc. 615, 637; 1997, c. 791; 1998, cc. 166, 877; 2000, c. 820; 2001, cc. 397, 413; 2002, c. 389; 2004, c. 164; 2006, cc. 58, 322; 2007, cc. 647, 741; 2018, c. 649; 2019, c. 509.

Cross references.

As to the powers of the executive director of the Department of Fire Programs, see § 9.1-201 .

As to the powers, duties and limitations of the Virginia Fire Services Board, see § 9.1-203 .

As to establishment of the Virginia Thermal Imaging Camera Grant Fund, see § 9.1-205 .

Editor’s note.

Pursuant to § 30-152, effect has been given in this section, as set out above, to Acts 1986, c. 60, which amended former § 38.1-44.1, the comparable provision in former Title 38.1.

Acts 1989, cc. 19 and 103 repealed Acts 1985, c. 545, cl. 3, which had provided an expiration date for Acts 1985, c. 545, the act which enacted § 38.1-44.1 (now this section).

Acts 2020, c. 1289, as amended by Acts 2021, Sp. Sess. I, c. 552, Item 415 A, effective for the biennium ending June 30, 2022, provides: “Notwithstanding the provisions of § 38.2-401 , Code of Virginia, up to 25 percent of the revenue available from the Fire Programs Fund, after making the distributions set out in § 38.2-401 D, Code of Virginia, may be used by the Department of Fire Programs to pay for the administrative costs of all activities assigned to it by law.”

The 1998 amendments.

The 1998 amendments by cc. 166 and 877 are identical, and, in subsection D, in the second sentence, substituted “one million dollars” for “$1,000,000,” and in the last sentence, substituted “this Fund” for “the fund”; and added subsection E.

The 2000 amendments.

The 2000 amendment by c. 820 rewrote this section.

The 2001 amendments.

The 2001 amendment by c. 397, in subsection B, substituted “not be retained” for “be retained until said documents are submitted to the Department” in the next-to-last sentence, and added the last sentence.

The 2001 amendment by c. 413 inserted “purchasing emergency medical care and equipment for fire personnel; payment of personnel costs related to fire and medical training for fire personnel;” near the middle of subsection B.

The 2002 amendments.

The 2002 amendment by c. 389 inserted the present third sentence in subsection D.

The 2004 amendments.

The 2004 amendment by c. 164 inserted “(Director)” in the last sentence of subdivision A 1; substituted “75” for “seventy-five” in three places in subsection B; substituted “$1 million” for “one million dollars” in the first sentence of subsection D; added subsection F; and made a minor stylistic change.

The 2006 amendments.

The 2006 amendment by c. 58 added clause (ii) in subsection C.

The 2006 amendment by c. 322 inserted the sixth through eighth sentences in subsection B.

The 2007 amendments.

The 2007 amendments by cc. 647 and 741, effective July 1, 2008, are identical, and added the proviso at the end of subsection C.

The 2018 amendments.

The 2018 amendment by c. 649, in subsection B, designated existing provisions of the third sentence as clauses (i) through (vi), added clause (vii) and made related changes.

The 2019 amendments.

The 2019 amendment by c. 509 substituted “live fire training structures” for “burn buildings” in subsection D.

§ 38.2-401.1. Dam Safety, Flood Prevention and Protection Assistance Fund assessment.

The Commission shall annually assess against all licensed insurance companies doing business in this Commonwealth by writing any type of flood insurance an assessment in the amount of one percent of the total direct gross premium income for such insurance. Such assessment shall be apportioned, assessed, and paid as prescribed by § 38.2-403 . In any year in which a company has no direct gross premium income from flood insurance or in which its direct gross premium income from flood insurance is insufficient to produce at the rate of assessment prescribed by law an amount equal to or in excess of $100, there shall be so apportioned and assessed against such company a contribution of $100. One hundred percent of the total amount collected annually pursuant to this section shall be paid into the Dam Safety, Flood Prevention and Protection Assistance Fund established per § 10.1-603.17 . The assessment established by this section shall not apply to premium income for policies written pursuant to the National Flood Insurance Act of 1968 or for policies providing comprehensive motor vehicle insurance coverage.

History. 1990, c. 916; 2006, cc. 648, 765.

Editor’s note.

Repeal of this section by Acts 1997, c. 590 was contingent on funding in the general appropriation act. The funding was not provided, and therefore, the repeal never took effect.

Acts 2006, cc. 648 and 765, cl. 3, provides: “That the Department of Conservation and Recreation shall repeal through an exempt action the Flood Prevention and Protection Assistance Fund Regulations (4 VAC 5-50-10 et seq.).”

Acts 2006, cc. 648 and 765, cl. 4, provides: “That upon the effective date of this act, the Department of Accounts, with the concurrence of the Department of Conservation and Recreation, may transfer the Dam Safety, Flood Prevention and Protection Assistance Fund and its unobligated balance to the Virginia Resources Authority to be administered and managed in accordance with this act.”

The 2006 amendments.

The 2006 amendments by cc. 648 and 765 are identical, and inserted “Dam Safety” in the fourth sentence.

§ 38.2-402. Definitions.

As used in this chapter:

“Assessable year” means the calendar year upon which the direct gross premium income is computed under this chapter. In the case of direct gross premium income for a fraction of a calendar year, the term includes the period in which that direct gross premium income is received or derived from business in this Commonwealth.

“Direct gross premium income” means direct gross premium as defined in § 58.1-2500 .

“License year” means the 12-month period beginning on July 1 next succeeding the assessable year and ending on June 30 of the subsequent year. This shall also be the year in which annual reports of direct gross premium income are required to be filed under § 38.2-406 and the annual assessment paid under the provisions of this chapter.

History. 1977, c. 317, §§ 38.1-48.1, 38.1-48.2; 1978, c. 4; 1986, c. 562; 1996, c. 22; 2012, c. 584.

Cross references.

As to the application of this article to licensed group self-insurance associations formed by employer subject to the Virginia Workers’ Compensation Act, see § 65.2-802 .

The 2012 amendments.

The 2012 amendment by c. 584 deleted the former paragraph defining “Estimated assessment,” and made a minor stylistic change.

§ 38.2-403. Assessment for expenses.

The Commission shall assess each company annually for its just share of expenses. The assessment shall be in proportion to direct gross premium income for the year immediately preceding that for which the assessment is made. The Commission shall give the companies notice of the assessment which shall be paid to the Commission on or before March 1 of each year for deposit into the state treasury as provided in subsection B of § 38.2-400 . Any company that fails to pay the assessment on or before the date herein prescribed shall be subject to a penalty imposed by the Commission. The penalty shall be ten percent of the assessment and interest shall be charged at a rate pursuant to § 58.1-1812 for the period between the due date and the date of full payment. If a payment is made in an amount later found to be in error, the Commission shall, (i) if an additional amount is due, notify the company of the additional amount and the company shall pay the additional amount within fourteen days of the date of the notice or, (ii) if an overpayment is made, process a refund.

History. Code 1950, § 38-18; 1952, c. 317, § 38.1-45; 1977, c. 317; 1978, c. 4; 1986, c. 562; 1994, c. 316; 2012, c. 584; 2017, c. 39.

The 2012 amendments.

The 2012 amendment by c. 584 deleted “as provided for in subsection B of § 38.2-410” at the end of the last sentence.

The 2017 amendments.

The 2017 amendment by c. 39 substituted “process a refund” for “order a refund” at the end of the section.

§ 38.2-403.1. Omitted assessments.

If the Commission ascertains that any assessment that could have been assessed during any current assessable year has not been assessed for any assessable year of the three years last past, or that the same has been assessed at less than the law required for any one or more of such years, or that the assessment, for any cause, has not been realized, the Commission shall list and assess the same at the rate prescribed for that year, adding thereto a penalty of 10 percent and interest at the rate established pursuant to § 58.1-1812 which shall be computed upon the assessment from the due date of the assessment until the assessment is paid.

History. 2016, c. 193.

§ 38.2-404. Recovery of such assessments; revocation or suspension of license.

If an assessment made under § 38.2-403 is not paid to the Commission by the prescribed date, the amount of the assessment, penalty, and interest may be recovered from the defaulting company on motion of the Commission made in the name and for the use of the Commonwealth in the appropriate circuit court after ten days’ notice to the company. The license or certificate of authority of any defaulting company to transact business in this Commonwealth may be revoked or suspended by the Commission until it has paid such assessment.

History. Code 1950, § 38-19; 1952, c. 317, § 38.1-46; 1978, c. 4; 1986, c. 562.

§ 38.2-405. Application for correction of assessment.

Any corporation aggrieved by the assessment assessed or imposed by or under authority of this chapter and collected from any corporation, domestic or foreign, may, within one year from the date of the payment of such assessment, apply to the Commission for a refund, in whole or in part, of the amount so assessed or imposed and paid. No payment shall be recovered after a formal adjudication in a proceeding in which the right of appeal existed and was not taken. Such application shall be by written petition, in duplicate and verified by affidavit. Such application shall be filed with the Commission and shall set forth the names and addresses of every party in interest.

History. Code 1950, § 38-20; 1952, c. 317, § 38.1-47; 1978, c. 4; 1986, c. 562; 2016, c. 193.

The 2016 amendments.

The 2016 amendments by c. 193 rewrote section, which read “A company aggrieved by the assessment may appeal to the Supreme Court of Virginia in accordance with the Rules of Court applicable to appeals from the State Corporation Commission. If the court is of the opinion that the assessment is either excessive or insufficient, the court shall by its order request the Commission to make appropriate adjustments. If the appellant fails to pay the assessment when due and the court affirms the action of the Commission, judgment shall be entered against the appellant for damages, which are to be paid to the Commission, equal to legal interest upon the amount of the assessment from the time the assessment was payable. If relief is granted in whole or in part, judgment shall be rendered against the Commonwealth for any excess that may have been paid, with legal interest.”

§ 38.2-406. Report of gross premium income.

Each company subject to assessment under this chapter shall, on or before March 1 of each year, report under oath to the Commission, upon forms to be furnished or approved by, and in such detail as may be prescribed by, the Commission, the direct gross premium income derived from its business in this Commonwealth during the preceding year ending December 31. Every company failing to file the assessment report on or before March 1 shall be subject to a penalty of $50 for each day after the report is due. If such failure is due to providential or other good cause shown to the satisfaction of the Commission, such report may be accepted exclusive of penalties.

History. Code 1950, § 38-21; 1952, c. 317, § 38.1-48; 1977, c. 317; 1978, c. 4; 1986, c. 562; 2003, c. 371; 2012, c. 584.

The 2003 amendments.

The 2003 amendment by c. 371 rewrote the section.

The 2012 amendments.

The 2012 amendment by c. 584 added the second and third sentences.

§§ 38.2-407 through 38.2-411. Repealed by Acts 2012, c. 584, cl. 2.

Editor’s note.

Former § 38.2-407 , pertaining to declarations of estimated assessment, derived from 1977, c. 317, § 38.1-48.2; 1986, c. 562; 1998, c. 15. Former § 38.2-408, pertaining to time for filing declarations of estimated assessment, derived from 1977, c. 317, § 38.1-48.3; 1986, c. 562. Former § 38.2-409, pertaining to installment payment of estimated assessment, derived from 1977, c. 317, § 38.1-48.4; 1986, c. 562. Former § 38.2-410, pertaining to where declarations filed and how payments made; refunding overpayments, derived from 1977, c. 317, § 38.1-48.5; 1986, c. 562. Former § 38.2-411, pertaining to failure to pay estimated assessment, derived from 1977, c. 317, § 38.1-48.6; 1986, c. 562.

§ 38.2-412. Companies going out of business.

If a company goes out of business or ceases to be a company in this Commonwealth in any assessable or license year, the company shall remain liable for the payment of the assessment measured by direct gross premium income for the period in which it operated as a company and received or derived direct gross premium income from business in this Commonwealth.

History. 1977, c. 317, § 38.1-48.7; 1986, c. 562.

§ 38.2-413. Double assessment respecting same direct gross premium income negated.

This chapter shall not be construed to require including any direct gross premium income used previously in calculating the assessment imposed by this chapter for any license year or fraction thereof, and the assessment paid thereon.

History. 1977, c. 317, § 38.1-48.9; 1986, c. 562.

§ 38.2-414. Assessments to fund program to reduce losses from motor vehicle thefts.

1. To provide funds to establish and operate a statewide program to receive and reward information leading to the arrest of persons who commit motor vehicle theft-related crimes in Virginia, each insurer licensed to write insurance coverage as defined in § 38.2-124 shall, prior to March 1 of each year, pay an assessment equal to one-quarter of one percent of the total direct gross premium income for automobile physical damage insurance other than collision written in the Commonwealth during the preceding calendar year.
2. Assessments received pursuant to subsection A of this section, and all other moneys received by the Commission for the same purpose, shall be segregated and placed in a fund to be known as the Help Eliminate Automobile Theft Fund, hereinafter referred to as the HEAT Fund.
3. Any insurer that fails to pay the assessment on or before the date prescribed in subsection A shall be subject to a penalty imposed by the Commission.  The penalty shall be ten percent of the assessment and interest shall be charged at a rate pursuant to § 58.1-1812 for the period between the date due and the date of full payment.  If a payment is made in an amount later found to be in error, the Commission shall, (i) if an additional amount is due, notify the insurer of the additional amount, which the insurer shall pay within fourteen days of the date of the notice or, (ii) if an overpayment is made, order a refund of the amount of the overpayment, which shall be paid out of the HEAT Fund.  The Commission shall be reimbursed from the Fund for all expenses necessary for the administration of this section.
4. The HEAT Fund shall be controlled and administered by the Superintendent of the Department of State Police.  The Superintendent shall appoint an advisory committee of seven members to assist in developing and annually reviewing the plan of operation for the HEAT Fund program.
5. Money in the HEAT Fund shall be expended as follows:
   1. To pay the costs of establishing and operating a program to receive and reward information leading to the arrest of persons who commit motor vehicle theft-related crimes in Virginia.
   2. Any uncommitted funds remaining in the HEAT Fund on the last day of February of each year may be transferred to the Department of State Police, Department of Motor Vehicles, or Department of Criminal Justice Services for the following purposes:  (i) providing financial support to state or local law-enforcement agencies for motor vehicle theft enforcement efforts, (ii) providing financial support to local prosecutors or judicial agencies for programs designed to reduce the incidence of motor vehicle theft, and (iii) conducting educational programs to inform vehicle owners of methods of preventing motor vehicle theft.

History. 1991, c. 318; 1993, c. 196.

§ 38.2-415. Assessment to fund program to reduce losses from insurance fraud.

1. Each licensed insurer doing business in the Commonwealth by writing any type of insurance as defined in §§ 38.2-110 through 38.2-122.2 and 38.2-124 through 38.2-132 shall pay, in addition to any other assessments provided in this title, an assessment in an amount equal to 0.05 of one percent of the direct gross premium income during the preceding calendar year. The assessment shall be apportioned and assessed and paid as prescribed by § 38.2-403 . The Commission shall be reimbursed from the fund for all necessary expenses for the administration of this section.
2. The assessments made by the Commission under subsection A and paid into the state treasury shall be deposited to a special fund designated “Virginia State Police, Insurance Fraud,” and out of such special fund and the unexpended balance thereof shall be appropriated the sums necessary for accomplishing the powers and duties assigned to the Virginia State Police under Chapter 9 (§ 52-36 et seq.) of Title 52. All interest earned from the deposit of moneys accumulated in the Fund shall be deposited in the Fund for the same use.
3. The moneys deposited in the Fund shall not be considered general revenue of the Commonwealth but shall be used only to (i) effectuate the purposes enumerated in Chapter 9 (§ 52-36 et seq.) of Title 52 and (ii) reimburse the Commission for its necessary expenses for the administration of this section. The Fund shall be subject to audit by the Auditor of Public Accounts.
4. In the event that the Insurance Fraud Investigation Unit is dissolved by operation of law or otherwise, any balance remaining in the Fund, after deducting administrative costs associated with the dissolution, shall be returned to insurers in proportion to their financial contributions to the Fund in the preceding calendar year.

History. 1998, c. 590; 1999, c. 483; 2000, c. 526.

Editor’s note.

Acts 1998, c. 590, cl. 3 provides: “That the provisions of this act will expire on January 1, 2003.” However Acts 2002, c. 316, cl. 1 deleted cl. 3 of the 1998 act. Therefore, this section remains in effect.

Acts 2020, c. 1289, as amended by Acts 2021, Sp. Sess. I, c. 552, Item 425 E 1, effective for the biennium ending June 30, 2022, provides: “Notwithstanding the provisions of § 19.2-386.14 , 38.2-415 , 46.2-1167 and 52-4.3 , Code of Virginia, the Department of State Police may use revenue from the State Asset Forfeiture Fund, the Insurance Fraud Fund, the Drug Investigation Trust Account — State, and the Safety Fund to modify, enhance or procure automated systems that focus on the Commonwealth’s law enforcement activities and information gathering processes.”

The 1999 amendment deleted “collected” preceding “during the preceding” in the first sentence of subsection A.

The 2000 amendments.

The 2000 amendment by c. 526 substituted “38.2-122.2” for “38.2-122.1” in subsection A.

§ 38.2-500. Declaration of purpose.

The purpose of this chapter is to regulate trade practices in the business of insurance in accordance with the intent of Congress as expressed in the McCarran-Ferguson Act, 15 U.S.C. §§ 1011 through 1015, by defining and prohibiting all practices in this Commonwealth that constitute unfair methods of competition or unfair or deceptive acts or practices.

History. 1952, c. 317, § 38.1-49; 1986, c. 562.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 7.

§ 38.2-501. Definitions.

As used in this chapter:

“Insurance policy” or “insurance contract” includes annuities and any group or individual contract, certificate, or evidence of coverage, including, but not limited to, those issued by a health services plan, health maintenance organization, legal services organization, legal services plan, or dental or optometric services plan as provided for in Chapters 42 (§ 38.2-4200 et seq.), 43 (§ 38.2-4300 et seq.), 44 (§ 38.2-4400 et seq.) and 45 (§ 38.2-4500 et seq.) of this title issued, proposed for issuance, or intended for issuance, by any person.

“Lending institution” means any corporation, company or organization that accepts deposits from the public and lends money in this Commonwealth, including banks and savings institutions.

“Person,” in addition to the definition in Chapter 1 (§ 38.2-100 et seq.) of this title, extends to any other legal entity transacting the business of insurance, including agents, brokers and adjusters. “Person” also means health, legal, dental, and optometric service plans and health maintenance organizations, as provided for in Chapters 42, 43, 44 and 45 of this title. For the purposes of this chapter, such service plans shall be deemed to be transacting the business of insurance. “Person” also means premium finance companies.

History. 1952, c. 317, § 38.1-50; 1977, c. 529; 1980, c. 404; 1986, c. 562; 1989, c. 653; 1992, c. 7; 2001, c. 707.

The 2001 amendments.

The 2001 amendment by c. 707 substituted “legal services organization” for “legal organization” in the paragraph defining “Insurance policy.”

§ 38.2-502. Misrepresentations and false advertising of insurance policies.

No person shall make, issue, circulate, cause or knowingly allow to be made, issued or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison that:

1. Misrepresents the benefits, advantages, conditions or terms of any insurance policy;
2. Misrepresents the dividends or share of the surplus to be received on any insurance policy;
3. Makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy;
4. Misrepresents or is misleading as to the financial condition of any person or the legal reserve system upon which any life insurer operates;
5. Uses any name or title of any insurance policy or class of insurance policies that misrepresents the true nature of the policy or policies;
6. Misrepresents any material fact for the purpose of inducing or tending to induce the lapse, forfeiture, exchange, conversion, replacement, or surrender of any insurance policy;
7. Misrepresents any material fact for the purpose of effecting a pledge, assignment, or loan on any insurance policy; or
8. Misrepresents any insurance policy as being a share of stock.

History. Code 1950, § 38.1-52; 1952, c. 317, § 38.1-52.1; 1977, c. 529; 1978, c. 441; 1979, c. 324; 1980, c. 404; 1986, c. 562; 1990, c. 265.

§ 38.2-503. False information and advertising generally.

No person shall knowingly make, publish, disseminate, circulate, or place before the public, or cause or knowingly allow, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio or television station, or in any other way, an advertisement, announcement or statement containing any assertion, representation or statement relating to (i) the business of insurance or (ii) any person in the conduct of his insurance business, which is untrue, deceptive or misleading.

History. Code 1950, § 38.1-52; 1952, c. 317, § 38.1-52.2; 1977, c. 529; 1978, c. 441; 1979, c. 324; 1980, c. 404; 1986, c. 562.

§ 38.2-504. Defamation.

No person shall make, publish, disseminate, or circulate, directly or indirectly, or aid, abet or encourage the making, publishing, disseminating or circulating of any oral or written statement or any pamphlet, circular, article or literature that is false, and maliciously critical of, or derogatory to, any person with respect to the business of insurance or with respect to any person in the conduct of his insurance business and that is calculated to injure that person.

History. Code 1950, § 38.1-52; 1952, c. 317, § 38.1-52.3; 1977, c. 529; 1978, c. 441; 1979, c. 324; 1980, c. 404; 1986, c. 562.

§ 38.2-505. Boycott, coercion and intimidation.

No person shall enter into any agreement to commit, or by any concerted action commit, any act of boycott, coercion or intimidation resulting in or tending to result in unreasonable restraint of, or monopoly in, the business of insurance.

History. Code 1950, § 38.1-52; 1952, c. 317, § 38.1-52.4; 1977, c. 529; 1978, c. 441; 1979, c. 324; 1980, c. 404; 1986, c. 562.

§ 38.2-506. False statements and entries.

No person shall:

1. Knowingly file with any supervisory or other public official, or knowingly make, publish, disseminate, circulate, or deliver to any person, or place before the public, or knowingly cause, directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false material statement of fact as to the financial condition of a person; or
2. Knowingly make any false entry of a material fact in any book, report or statement of any person or knowingly fail to make a true entry of any material fact pertaining to the business of any person in any book, report or statement of that person.

History. Code 1950, § 38.1-52; 1952, c. 317, § 38.1-52.5; 1977, c. 529; 1978, c. 441; 1979, c. 324; 1980, c. 404; 1986, c. 562.

§ 38.2-507. Stock operations and advisory board contracts.

No person shall issue or deliver or permit agents, officers, or employees to issue or deliver capital stock, benefit certificates or shares in any corporation, securities, any special or advisory board contracts or any contract promising returns and profits as an inducement to insurance.

History. Code 1950, § 38.1-52; 1952, c. 317, § 38.1-52.6; 1977, c. 529; 1978, c. 441; 1979, c. 324; 1980, c. 404; 1986, c. 562.

§ 38.2-508. Unfair discrimination.

No person shall:

1. Unfairly discriminate or permit any unfair discrimination between individuals of the same class and equal expectation of life (i) in the rates charged for any life insurance or annuity contract, or (ii) in the dividends or other benefits payable on the contract, or (iii) in any other of the terms and conditions of the contract;
2. Unfairly discriminate or permit any unfair discrimination between individuals of the same class and of essentially the same hazard (i) in the amount of premium, policy fees, or rates charged for any policy or contract of accident or health insurance, (ii) in the benefits payable under such policy or contract, (iii) in any of the terms or conditions of such policy or contract, or (iv) in any other manner;
3. Refuse to insure, refuse to continue to insure, or limit the amount, extent or kind of insurance coverage available to an individual, or charge an individual a different rate for the same coverage solely because of blindness, or partial blindness, or mental or physical impairments, unless the refusal, limitation or rate differential is based on sound actuarial principles. This paragraph shall not be interpreted to modify any other provision of law relating to the termination, modification, issuance or renewal of any insurance policy or contract;
4. Unfairly discriminate or permit any unfair discrimination between individuals or risks of the same class and of essentially the same hazards by refusing to issue, refusing to renew, cancelling or limiting the amount of insurance coverage solely because of the geographic location of the individual or risk, unless:
   1. The refusal, cancellation or limitation is for a business purpose that is not a mere pretext for unfair discrimination; or
   2. The refusal, cancellation or limitation is required by law or regulatory mandate;
5. Make or permit any unfair discrimination between individuals or risks of the same class and of essentially the same hazards by refusing to issue, refusing to renew, cancelling or limiting the amount of insurance coverage on a residential property risk, or the personal property contained in a residential property risk, solely because of the age of the residential property, unless:
   1. The refusal, cancellation or limitation is for a business purpose that is not a mere pretext for unfair discrimination; or
   2. The refusal, cancellation or limitation is required by law or regulatory mandate;
6. Refuse to issue or renew any individual accident and sickness insurance policy or contract for coverage over and above any lifetime benefit of a group accident and sickness policy or contract solely because an individual is insured under a group accident and sickness insurance policy or contract, provided that medical expenses covered by both individual and group coverage shall be paid first by the group policy or contract to the extent of the group coverage; or
7. Consider the status of a victim of domestic violence as a criterion in any decision with regard to insurance underwriting, pricing, renewal, scope of coverage, or payment of claims on any and all insurance defined in § 38.2-100 and further classified in Article 2 (§ 38.2-101 et seq.) of Chapter 1 of this title, other than (i) legal services plans as provided for in Chapter 44 (§ 38.2-4400 et seq.) of this title and (ii) the insurance classified in §§ 38.2-110 through 38.2-133 . The term “domestic violence” means the occurrence of one or more of the following acts by a current or former family member, household member as defined in § 16.1-228, person against whom the victim obtained a protective order or caretaker:
   1. Attempting to cause or causing or threatening another person physical harm, severe emotional distress, psychological trauma, rape or sexual assault;
   2. Engaging in a course of conduct or repeatedly committing acts toward another person, including following the person without proper authority, under circumstances that place the person in reasonable fear of bodily injury or physical harm;
   3. Subjecting another person to false imprisonment; or
   4. Attempting to cause or causing damage to property so as to intimidate or attempt to control the behavior of another person.Nothing in this subsection shall prohibit an insurer or insurance professional from asking about a medical condition or from using medical information to underwrite or to carry out its duties under an insurance policy even if the medical information is related to a medical condition that the insurer or insurance professional knows or has reason to know resulted from domestic violence, to the extent otherwise permitted under this section and other applicable law.

History. Code 1950, § 38.1-52; 1952, c. 317, § 38.1-52.7; 1977, c. 529; 1978, c. 441; 1979, c. 324; 1980, c. 404; 1986, c. 562; 1993, c. 130; 2001, c. 34; 2013, cc. 136, 210.

The 2001 amendments.

The 2001 amendment by c. 34 added subdivision 7.

The 2013 amendments.

The 2013 amendments by cc. 136 and 210, effective January 1, 2014, are identical and deleted “This subsection shall not apply to individual policies or contracts issued or renewed pursuant to § 38.2-4216.1 ” preceding “; or” at the end of subdivision 6.

Law Review.

For article, “Family Law,” see 35 U. Rich. L. Rev. 651 (2001).

§ 38.2-508.1. Unfair discrimination; members of the armed forces.

1. No person shall refuse to issue or refuse to continue a life insurance policy on the life of any member of the United States Armed Forces, the Reserves of the United States Armed Forces or the National Guard due to (i) their status as a member of any such military organization or (ii) their duty assignment while a member of any such military organization.
2. In circumstances where an individual’s or family member’s coverage under a group life or group health insurance policy or contract was terminated due to such individual’s status as a member of the United States Armed Forces, the Reserves of the United States Armed Forces or the National Guard, no person shall refuse to reinstate such coverage, regardless of continuation, renewal, reissue or replacement of the group insurance policy, upon the occurrence of the individual’s return to eligibility status under the policy or contract. Such reinstated coverage shall not contain any new preexisting condition or other exclusions or limitations except that the remainder of a preexisting condition requirement that was not satisfied prior to termination of the individual’s coverage resulting from such military status may be applied once the individual returns and coverage under the group policy is reinstated.
3. The provisions of this section shall not apply in any instance in which the provisions of this section are inconsistent or in conflict with a provision of Article 6 (§ 38.2-3438 et seq.) of Chapter 34.

History. 1991, cc. 663, 678; 2013, c. 751.

The 2013 amendments.

The 2013 amendment by c. 751, effective January 1, 2014, added subsection C.

Michie’s Jurisprudence.

For related discussion, see 10B M.J. Insurance, § 82.

§ 38.2-508.2. Discrimination prohibited.

No person shall refuse to issue or refuse to continue a life insurance policy on the life of any individual solely because of that individual’s race, color, sexual orientation, gender identity, religion, national origin, or sex.

History. 1993, c. 152; 2020, c. 1137.

The 2020 amendments.

The 2020 amendment by c. 1137 substituted “sexual orientation, gender identity, religion, national origin, or sex” for “religion, national origin, or gender.”

§ 38.2-508.3. Consideration of Medicaid eligibility prohibited.

1. No person shall, in determining the eligibility of an individual for coverage under an individual or group accident and sickness policy, health services plan or health maintenance organization contract, consider the eligibility of such individual for medical assistance (“Medicaid”) from this Commonwealth or from any other state.
2. No person shall, in determining benefits payable to, or on behalf of an individual covered under an individual or group accident and sickness policy, health services plan or health maintenance organization contract, take into account the eligibility of such individual for medical assistance (“Medicaid”) from this Commonwealth or from any other state.

History. 1994, c. 213.

§ 38.2-508.4. Genetic information privacy.

1. As used in this section:“Genetic characteristic” means any scientifically or medically identifiable gene or chromosome, or alteration thereof, which is known to be a cause of a disease or disorder, or determined to be associated with a statistically increased risk of development of a disease or disorder, and which is asymptomatic of any disease or disorder.“Genetic information” means information about genes, gene products, or inherited characteristics that may derive from an individual or a family member.“Genetic test” means a test for determining the presence or absence of genetic characteristics in an individual in order to diagnose a genetic characteristic.
2. No person proposing to issue, re-issue, or renew any policy, contract, or plan of accident and sickness insurance defined in § 38.2-109 , but excluding disability income insurance, issued by any (i) insurer providing hospital, medical and surgical or major medical coverage on an expense incurred basis, (ii) corporation providing a health services plan, or (iii) health maintenance organization providing a health care plan for health care services shall, on the basis of any genetic information obtained concerning an individual or on the individual’s request for genetic services, with respect to such policy, contract, or plan:
   1. Terminate, restrict, limit, or otherwise apply conditions to coverage of an individual or restrict the sale to an individual;
   2. Cancel or refuse to renew the coverage of an individual;
   3. Exclude an individual from coverage;
   4. Impose a waiting period prior to commencement of coverage of an individual;
   5. Require inclusion of a rider that excludes coverage for certain benefits and services; or
   6. Establish differentials in premium rates for coverage.In addition, no discrimination shall be made in the fees or commissions of an agent or agency for an enrollment, a subscription, or the renewal of an enrollment or subscription of any person on the basis of a person’s genetic characteristics which may, under some circumstances, be associated with disability in that person or that person’s offspring.
3. Notwithstanding any other provisions of law, all information obtained from genetic screening or testing conducted prior to the repeal of this section shall be confidential and shall not be made public nor used in any way, in whole or in part, to cancel, refuse to issue or renew, or limit benefits under any policy, contract or plan subject to the provisions of this section.

History. 1996, c. 704.

Cross references.

For provision prohibiting use of genetic testing or genetic characteristics as a condition of employment, see § 40.1-28.7:1 .

Editor’s note.

Acts 1996, ch. 704, cl. 2, which provided for the expiration of this section on July 1, 1998, was repealed by Acts 1998, ch. 356, cl. 1.

§ 38.2-508.5. Re-underwriting individual under existing group or individual accident and sickness insurance policy prohibited; exceptions.

1. No premium increase, including a reduced premium increase in the form of a discount, may be implemented for an insured individual under existing individual health insurance coverage as defined in subsection B of § 38.2-3431 subsequent to the initial effective date of coverage under such policy or certificate to the extent that such premium increase is determined based upon: (i) a change in a health-status-related factor of the individual insured as defined in subsection B of § 38.2-3431 or (ii) the past or prospective claim experience of the individual insured.
2. No reduction in benefits may be implemented for an insured individual under existing individual health insurance coverage as defined in subsection B of § 38.2-3431 subsequent to the initial effective date of coverage under such policy or certificate to the extent that such reduction in benefits is determined based upon: (i) a change in a health-status-related factor of the individual insured as defined in subsection B of § 38.2-3431 or (ii) the past or prospective claim experience of the individual insured.
3. No modifications to contractual terms and conditions may be implemented for an insured individual under existing individual health insurance coverage as defined in subsection B of § 38.2-3431 subsequent to the initial effective date of coverage under such policy or certificate to the extent that such modifications to contractual terms and conditions are determined based upon: (i) a change in a health-status-related factor of the individual insured as defined in subsection B of § 38.2-3431 or (ii) the past or prospective claim experience of the individual insured.
4. This section shall not prohibit adjustments to premium, rescission of, or amendments to the insurance contract in the following circumstances:
   1. When an insurer learns of information subsequent to issuing the policy or certificate that was not disclosed in the underwriting process and that, had it been known, would have resulted in a higher premium level or denial of coverage. Any adjustment to premium or rescission of coverage made for this reason may be made only to extent that it would have been made had the information been disclosed in the application process, and shall not be imposed beyond any period of incontestability, or beyond any time period proscribing an insurer from asserting defenses based upon misstatements in applications, as otherwise may be provided by applicable law. Any such rescission shall be consistent with § 38.2-3430.3 regarding guaranteed availability.
   2. When an insurer provides a lifestyle-based good health discount based upon an individual’s adherence to a healthy lifestyle and this discount is not based upon a specific health condition or diagnosis.
   3. When an insurer removes waivers or riders attached to the policy at issue that limit coverage for specific named pre-existing medical conditions.
5. For purposes of this section, re-underwriting means the reevaluation of any health-status-related factor of an individual for purposes of adjusting premiums, benefits or contractual terms as provided in subsections A, B, and C.
6. The provisions of this section shall not apply to individual health insurance coverage issued to members of a bona fide association, as defined in subsection B of § 38.2-3431 , where coverage is available to all members of the association and eligible dependents of such members without regard to any health-status-related factor.
7. The provisions of this section shall not apply in any instance in which the provisions of this section are inconsistent or in conflict with a provision of Article 6 (§ 38.2-3438 et seq.) of Chapter 34.

History. 2003, c. 699; 2011, c. 882.

Editor’s note.

Acts 2013, c. 751, cl. 4, repealed Acts 2011, c. 882, cl. 2, which would have made amendments by Acts 2011, c. 882, expire on July 1, 2014.

The 2011 amendments.

The 2011 amendment by c. 882 deleted “of this section” at the end of subsection E; and added subsection G. See Editor’s note.

§ 38.2-509. Rebates.

1. Except as otherwise expressly provided by law, no person shall:
   1. Knowingly permit, offer, or make any insurance or annuity contract or agreement which is not plainly expressed in the contract issued;
   2. Pay, allow or give, or offer to pay, allow or give, directly or indirectly, as inducement to any insurance or annuity contract, any rebate of premium payable on the contract, any special favor or advantage in the dividends or other benefits on the contract, any valuable consideration or inducement not specified in the contract, except in accordance with an applicable rating plan authorized for use in this Commonwealth;
   3. Give, sell, purchase, or offer to give, sell or purchase as inducement to insurance, or annuity contracts, or in connection with such contracts, any stocks, bonds, or other securities of any company, any dividends or profits accrued on any stocks, bonds or other securities of any company, or anything of value not specified in the contract; or
   4. Receive or accept as inducement to insurance, or annuity contracts, any rebate of premium payable on the contract, any special favor or advantage in the dividends or other benefit to accrue on the contract, or any valuable consideration or inducement not specified in the contract.
2. Nothing in § 38.2-508 or in this section shall be construed to include within the definition of discrimination or rebates any of the following practices:
   1. In the case of any life insurance or annuity contract, paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance if the bonuses or abatement of premiums are fair and equitable to policyholders and in the best interests of the insurer and its policyholders;
   2. In the case of life or accident and sickness insurance policies issued on the industrial debit plan, making allowance to policyholders who, for a specified period, have continuously made premium payments directly to an office of the insurer in an amount that fairly represents the savings in collection expense;
   3. Readjustment of the rate of premium for a group insurance policy based on the loss or expense experience under the policy, at the end of the first or any subsequent policy year of insurance;
   4. In the case of insurers, allowing their bona fide employees to receive a reduction on the premiums paid by them on policies or contracts on their own lives and property, and on the lives and property of their spouses and dependent children;
   5. Issuing life or accident and sickness policies or annuity contracts on a salary savings or payroll deduction plan at a reduced rate consistent with the savings made by the use of such plan;
   6. Paying commissions or other compensation to duly licensed agents or brokers; or
   7. Allowing or returning to participating policyholders, members or subscribers, dividends, savings or unabsorbed premium payments.

History. Code 1950, § 38.1-52; 1952, c. 317, § 38.1-52.8; 1977, c. 529; 1978, c. 441; 1979, c. 324; 1980, c. 404; 1986, c. 562.

§ 38.2-510. Unfair claim settlement practices.

1. No person shall commit or perform with such frequency as to indicate a general business practice any of the following:
   1. Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;
   2. Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
   3. Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
   4. Refusing arbitrarily and unreasonably to pay claims;
   5. Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
   6. Not attempting in good faith to make prompt, fair and equitable settlements of claims in which liability has become reasonably clear;
   7. Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;
   8. Attempting to settle claims for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application;
   9. Attempting to settle claims on the basis of an application that was altered without notice to, or knowledge or consent of, the insured;
   10. Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which payments are being made;
   11. Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;
   12. Delaying the investigation or payment of claims by requiring an insured, a claimant, or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, when both contain substantially the same information;
   13. Failing to promptly settle claims where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage;
   14. Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement;
   15. Failing to comply with § 38.2-3407.15 , or to perform any provider contract provision required by that section;
   16. Payment to an insurer or its representative by a repair facility, or acceptance by an insurer or its representative from a repair facility, directly or indirectly, of any kickback, rebate, commission, thing of value, or other consideration in connection with such person’s appraisal service; or
   17. Making appraisals of the cost of repairing a motor vehicle that has been damaged as a result of a covered loss unless such appraisal is based upon a personal inspection by a representative of the repair facility or a representative of the insurer who is making the appraisal. Notwithstanding the requirement that an appraisal be based upon a personal inspection, the repair facility or the insurer making the appraisal may prepare an initial, which may be the final, repair appraisal on a motor vehicle that has been damaged as a result of a covered loss either from the representative’s personal inspection of the motor vehicle or from photographs, videos, or electronically transmitted digital imagery of the motor vehicle; however, no insurer may require an owner of a motor vehicle to submit photographs, videos, or electronically transmitted digital imagery as a condition of an appraisal. Supplemental repair estimates that become necessary after the repair work has been initiated due to discovery of additional damage to the motor vehicle may also be made from photographs, videos, or electronically transmitted digital imagery of the motor vehicle, provided that in the case of disputed repairs a personal inspection is required.
2. No violation of this section shall of itself be deemed to create any cause of action in favor of any person other than the Commission; but nothing in this subsection shall impair the right of any person to seek redress at law or equity for any conduct for which action may be brought.
3. 1. No insurer shall prepare or use an estimate of the cost of automobile repairs based on the use of an after market part, as defined herein, unless:The insurer discloses to the claimant in writing either on the estimate or in a separate document attached to the estimate the following information:“THIS ESTIMATE HAS BEEN PREPARED BASED ON THE USE OF AUTOMOBILE PARTS NOT MADE BY THE ORIGINAL MANUFACTURER. PARTS USED IN THE REPAIR OF YOUR VEHICLE BY OTHER THAN THE ORIGINAL MANUFACTURER ARE REQUIRED TO BE AT LEAST EQUAL IN LIKE KIND AND QUALITY IN TERMS OF FIT, QUALITY AND PERFORMANCE TO THE ORIGINAL MANUFACTURER PARTS THEY ARE REPLACING.” C. 1. No insurer shall prepare or use an estimate of the cost of automobile repairs based on the use of an after market part, as defined herein, unless:The insurer discloses to the claimant in writing either on the estimate or in a separate document attached to the estimate the following information:“THIS ESTIMATE HAS BEEN PREPARED BASED ON THE USE OF AUTOMOBILE PARTS NOT MADE BY THE ORIGINAL MANUFACTURER. PARTS USED IN THE REPAIR OF YOUR VEHICLE BY OTHER THAN THE ORIGINAL MANUFACTURER ARE REQUIRED TO BE AT LEAST EQUAL IN LIKE KIND AND QUALITY IN TERMS OF FIT, QUALITY AND PERFORMANCE TO THE ORIGINAL MANUFACTURER PARTS THEY ARE REPLACING.”
   2. “After market part” as used in this section shall mean an automobile part which is not made by the original equipment manufacturer and which is a sheet metal or plastic part generally constituting the exterior of a motor vehicle, including inner and outer panels.

History. Code 1950, § 38.1-52; 1952, c. 317, § 38.1-52.9; 1977, c. 529; 1978, c. 441; 1979, c. 324; 1980, c. 404; 1986, c. 562; 1988, c. 29; 1999, cc. 709, 739; 2000, c. 187; 2001, c. 335; 2016, cc. 183, 286.

The 1999 amendments.

The 1999 amendments by cc. 709 and 739 are identical, and in subsection A, deleted “or” at the end of subdivision 13, inserted “or” at the end of subdivision 14, and added subdivision 15.

The 2000 amendments.

The 2000 amendment by c. 187 substituted “38.2-3407.15” for “38.2-3407.13” in subdivision A 15.

The 2001 amendments.

The 2001 amendment by c. 335, in subsection A, deleted “or” at the end of subdivision 14 and added subdivisions 16 and 17.

The 2016 amendments.

The 2016 amendments by cc. 183 and 286 are identical, and in subdivision A 17, substituted “a motor vehicle” for “an automobile” and “covered loss” for “collision” and inserted “a representative of” in the first sentence and added the last two sentences.

Law Review.

For comment, “Insurers’ Liability for Excess Judgments in Virginia: Negligence or Bad Faith,” see 15 U. Rich. L. Rev. 153 (1980).

For article, “On Opioids and ERISA: The Urgent Case for a Federal Ban on Discretionary Clauses,” see 53 U. Rich. L. Rev. 687 (2019).

Research References.

Virginia Forms (Matthew Bender). No. 1-901 Complaint on a Fire Insurance Policy.

§ 38.2-511. Failure to maintain record of complaints.

No person other than agents or brokers, shall fail to maintain a complete record of all the complaints that it has received since the date of its last examination under § 38.2-1317 , provided that the records of complaints of a health carrier subject to Chapter 58 (§ 38.2-5800 et seq.) of this title shall be retained for no less than five years. The record shall indicate the total number of complaints, their classification by line of insurance, the nature of each complaint, the disposition of these complaints, and the time it took to process each complaint.

As used in this section, “complaint” shall mean any written communication from a policyholder, subscriber or claimant primarily expressing a grievance.

History. Code 1950, § 38.1-52; 1952, c. 317, § 38.1-52.10; 1977, c. 529; 1978, c. 441; 1979, c. 324; 1980, c. 404; 1986, c. 562; 1998, c. 891.

The 1998 amendment, in the first paragraph, in the first sentence, substituted “provided that the records of complaints of a health carrier subject to Chapter 58 (§ 38.2-5800 et seq.) of this title shall be retained for no less than five years” for “or during the last three years, whichever is the more recent time period.”

§ 38.2-512. Misrepresentation in insurance documents or communications.

1. No person shall make or cause or allow to be made false or fraudulent statements or representations on or relative to an application or any document or communication relating to the business of insurance for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, agent, broker, premium finance company, or individual.
2. No person shall, with respect to any document pertaining to the business of insurance, including payments made to an insurer or by an insurer, affix or cause or allow to be affixed the signature of any other person to such document without the written authorization of the person whose signature appears on such document.
3. No person shall, with respect to any document pertaining to the business of insurance, obtain or cause or allow to be obtained by false pretense the signature of another person or utilize such signature for the purpose of altering, changing or effecting the benefits, advantages, terms or conditions of any insurance contract or document related thereto, including payments made to an insurer or by an insurer.

History. Code 1950, § 38.1-52; 1952, c. 317, § 38.1-52.11; 1977, c. 529; 1978, c. 441; 1979, c. 324; 1980, c. 404; 1986, c. 562; 1998, c. 12.

The 1998 amendment rewrote subsection A and added subsections B and C.

§ 38.2-513. Repealed by Acts 2001, c. 371.

§ 38.2-513.1. Insurance sales by depository institutions and other lending institutions.

1. No depository institution, in the sale or solicitation of insurance, shall:
   1. Reject an insurance policy required in connection with a loan or extension of credit solely because the policy has been issued or underwritten by a person who is not associated with such depository institution or its affiliate;
   2. Require a debtor, insurer, agent, or surplus lines broker to pay a separate charge in connection with the handling of insurance required in connection with a loan or extension of credit or other banking product, unless such charge would be required when the depository institution or its affiliate is the licensed agent or surplus lines broker;
   3. Use any advertisement that would cause a reasonable person to believe mistakenly that (i) the federal government or the Commonwealth is responsible for the insurance sales activities of, or stands behind the credit of, the depository institution or its affiliate; or (ii) the federal government or the Commonwealth guarantees any returns on insurance products or is a source of payment on any insurance obligation of or sold by the depository institution or its affiliate;
   4. Act as an agent unless licensed in accordance with the provisions of Chapter 18 (§ 38.2-1800 et seq.) of this title;
   5. Pay or receive commissions or other valuable consideration except in accordance with the provisions of Chapter 18 (§ 38.2-1800 et seq.) of this title; however, nothing herein shall prohibit the payment of compensation to a person not licensed under Chapter 18 (§ 38.2-1800 et seq.) of this title for the referral of a customer, provided that (i) such compensation is not based on the purchase of insurance by the customer, (ii) such compensation is a one-time, nominal fee of a fixed dollar amount for each referral, and (iii) the referral does not include a discussion of specific insurance policy terms and conditions;
   6. Release insurance information of a customer to any person other than an officer, director, employee, agent, or affiliate of the depository institution, for the purpose of soliciting or selling insurance, without the express written consent of the customer. This provision shall not apply to (i) the release of information as otherwise authorized by state or federal law or (ii) the transfer of insurance information to an unaffiliated insurer in connection with transferring insurance in force on existing insureds of the depository institution or its affiliate, or in connection with a merger with or acquisition of an unaffiliated insurer. A depository institution or its affiliate shall be deemed to be in compliance with this paragraph if it complies with Chapter 6 (§ 38.2-600 et seq.) of this title;
   7. Use, disclose, or release health information obtained from the insurance records of a customer for any purpose other than for its activities as a licensed agent or surplus lines broker, without the express written consent of the customer. A depository institution or its affiliate shall be deemed to be in compliance with this paragraph if it complies with Chapter 6 (§ 38.2-600 et seq.) of this title;
   8. Extend credit or provide any product or service that is equivalent to an extension of credit, lease or sell property of any kind, furnish any services, or fix or vary the consideration for any of the foregoing on the condition or requirement that the customer obtain insurance from the depository institution or its affiliate, or a particular insurer, agent, or surplus lines broker; except that nothing shall prohibit the depository institution or its affiliate from:
      1. Engaging in any activity that would not violate section 106 of the Bank Holding Company Act Amendments of 1970, as interpreted by the Board of Governors of the Federal Reserve System, or
      2. Informing a customer that (i) insurance is required in order to obtain a loan or credit approval; (ii) the loan or credit approval is contingent upon the procurement by the customer of acceptable insurance; or (iii) insurance is available from the depository institution or its affiliate;
   9. Offer, sell, or require insurance in connection with a loan or extension of credit, when an application for a loan or extension of credit from a depository institution is pending, unless a written disclosure is given to the customer indicating that the customer’s choice of an insurer will not affect the credit decision or credit terms in any way; provided, however, that the depository institution may impose reasonable requirements concerning the creditworthiness of the insurer and the scope of coverage chosen. Any disapproval of an insurer shall be deemed unreasonable if it is not based on reasonable standards uniformly applied, relating to the extent of coverage required and the financial soundness and the services of an insurer. Such standards shall not discriminate against any particular type of insurer, nor shall such standards call for disapproval of an insurance policy because the policy contains coverage in addition to that required by the creditor. Use of the ratings of a nationally recognized rating service shall not be deemed unreasonable provided such ratings are based on reasonable standards uniformly applied. If an insurer, duly licensed in Virginia, does not possess the required rating of a nationally recognized rating service, no person who lends money or extends credit shall refuse to accept from the insurer a certificate of 100 percent reinsurance issued by another insurer pursuant to § 38.2-136 , which does possess the required rating;
   10. Sell an insurance policy unless:
       1. A clear and conspicuous disclosure is given, in writing, where practicable, to the customer prior to the sale stating that such insurance policy (i) is not a deposit; (ii) is not insured by the Federal Deposit Insurance Corporation or any other federal government agency; (iii) is not guaranteed by the depository institution or, if appropriate, its affiliate or any person soliciting or selling insurance on its premises; and (iv) where appropriate, involves investment risk, including the potential loss of principal, and
       2. Written acknowledgment of the disclosure is obtained from the customer at the time the customer receives the disclosure or at the time of the initial purchase of the insurance policy;
   11. Solicit or sell insurance, other than credit insurance or flood insurance, unless such solicitation or sale is completed through documents separate from any credit transactions;
   12. Include the expense of insurance premiums, other than credit insurance premiums, title insurance premiums, or flood insurance premiums, in the primary credit transaction without the express written consent of the customer; or
   13. Solicit or sell insurance unless (i) its insurance sales activities are, to the extent practicable, physically segregated from areas where retail deposits are routinely accepted; (ii) it maintains separate and distinct books and records relating to such insurance transactions for the three previous calendar years; and (iii) it makes all such books and records available to the Commission for inspection upon reasonable notice.
2. As used in this section:“Affiliate” means any company that controls, is controlled by, or is under common control with another company.“Credit insurance” means the lines of insurance defined in §§ 38.2-103 , 38.2-108 , 38.2-122.1 , and 38.2-122.2 .“Customer” means an individual who obtains, applies for, or is solicited to obtain insurance.“Depository institution” means any bank or savings association.“Insurance information” means information concerning the premiums, terms, and conditions of insurance coverage, including expiration dates and rates, and insurance claims of a customer contained in the records of a depository institution or its affiliate.
3. Notwithstanding anything to the contrary, the provisions of this section, except subdivision A. 10., shall also apply to any person who lends money or extends credit and who sells or solicits any insurance as classified and defined in Article 2 (§ 38.2-101 et seq.) of Chapter 1 of this title in connection therewith. However, this section shall not apply to premium finance companies licensed under Chapter 47 (§ 38.2-4700 et seq.) of this title or agents who extend credit as authorized in § 38.2-1806 to the extent that such premium finance companies or agents are not affiliated with a depository institution.
4. If the customer agrees, the written disclosures and acknowledgements required by subsection A of this section may be provided electronically. Such disclosures shall be provided in a format that the customer may retain and reproduce for later reference. When a purchase of insurance is made by telephone, the disclosures and acknowledgements required by subsection A of this section may be given orally, provided that (i) such disclosures are mailed or provided in electronic form within three working days after the sale, solicitation, or offer of the insurance policy; (ii) documentation is maintained showing that oral acknowledgement was given by the customer; and (iii) a reasonable effort is made to obtain written acknowledgement from the customer.
5. The Commission shall have the power to examine and investigate the affairs of any person to whom this section applies to determine whether that person has violated this section. If a violation of this section is found, the person in violation shall be subject to the same procedures and penalties as are applicable to other provisions of this chapter.
6. Except as provided for specifically in subsection A, this section shall not prevent or restrict a depository institution or its affiliate from engaging directly or indirectly, either by itself or in conjunction with an affiliate, or any other person, in any activity authorized or permitted under state or federal law.

History. 2001, c. 371; 2002, c. 76.

Editor’s note.

Section 106 of the Bank Holding Company Act Amendments of 1970, as referred to in subdivision A 8 above, is codified as 12 U.S.C.S. § 1971.

The 2002 amendments.

The 2002 amendment by c. 76 deleted “in connection with any lending of money or extension of credit” following “policy” in subdivision A 10.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 2.

§ 38.2-514. Failure to make disclosure.

1. No person shall sell, solicit, or negotiate the sale of an annuity, a life insurance policy or an accident and sickness insurance policy without furnishing the disclosure information required by any rules and regulations of the Commission.
2. No person shall provide to an insured, claimant, subscriber or enrollee under an accident and sickness insurance policy, subscription contract, or health maintenance organization contract, an explanation of benefits which does not clearly and accurately disclose the method of benefit calculation and the actual amount which has been or will be paid to the provider of services.

History. Code 1950, § 38.1-52; 1952, c. 317, § 38.1-52.13; 1977, c. 529; 1978, c. 441; 1979, c. 324; 1980, c. 404; 1986, c. 562; 1991, c. 620; 1992, c. 7; 1994, c. 320; 2001, cc. 371, 706.

The 2001 amendments.

The 2001 amendment by c. 371 deleted subsection B, which formerly read: “Any lending institution, bank holding company, savings institution holding company or subsidiary or affiliate of either the lending institution or holding company, including any officer or employee thereof, licensed as an insurance agency or insurance agent in this Commonwealth shall, prior to the sale of any policy of life insurance in which there is or will be an accumulation of cash value during the term of the policy, make a written disclosure to the purchaser of the policy’s ‘interest adjusted net cost index’ in compliance with regulations or forms approved by the Commission,” and redesignated former subsection C as subsection B.

The 2001 amendment by c. 706, effective September 1, 2002, substituted “sell, solicit, or negotiate” for “solicit, or effect” in subsection A; and also deleted subsection B; and redesignated former subsection C as subsection B.

§ 38.2-514.1. Disclosure required.

1. Any agent selling, soliciting, or negotiating a contract of insurance in conjunction with any automobile club service agreement or in conjunction with any accidental death and dismemberment policy shall provide to the applicant, at the time of application, a written disclosure which shall contain:
   1. The name or type of each policy or contract of insurance and automobile club service agreement for which application has been made;
   2. The premium quotation associated with each policy or contract of insurance and the cost of any dues, assessments or periodic payments of money associated with each automobile club service agreement for which application has been made; and
   3. A statement that the applicant has elected to purchase such policies, contracts, or automobile club service agreements.
2. The disclosure required by this section shall be signed and dated by the agent and the applicant. A copy of the signed disclosure shall be given to the applicant at the time of application. If the application is made by telephonic or electronic request, a copy of the disclosure shall be signed and dated by the agent and shall be mailed to the applicant within ten calendar days of the application.
3. The provisions of this section shall apply only to the original issuance of policies or contracts of insurance and automobile club service agreements covering personal, family, or household needs rather than business or professional needs. As used in this section, an automobile club service agreement is an agreement issued by an automobile club as defined in subsection E.
4. Notwithstanding subsections A, B and C, this section shall not apply to the sale of group insurance.
5. As used in this section, “automobile club” means a legal entity that, in consideration of dues, assessments, or periodic payments of money, promises its members or subscribers to assist them in matters relating to motor travel or the operation, use, or maintenance of a motor vehicle by supplying services that may include, but are not limited to, towing service, emergency road service, indemnification service, guaranteed arrest bond certificate service, discount service, financial service, theft service, map service, or touring service.

History. 1996, c. 473; 2001, c. 706; 2016, c. 250; 2017, c. 653.

The 2001 amendments.

The 2001 amendment by c. 706, effective September 1, 2002, substituted “selling, soliciting, or negotiating” for “soliciting, negotiating, procuring, or effecting” in the introductory language of subsection A; and inserted “calendar” near the end of subsection B.

The 2016 amendments.

The 2016 amendment by c. 250, in subsection C, substituted “subsection E” for “§ 13.1-400.1 ”; and added subsection E.

The 2017 amendments.

The 2017 amendment by c. 653 inserted “but are not limited to” in subsection E.

§ 38.2-514.2. Disclosures required of motor vehicle rental contract insurance agents and enrollers.

No insurance may be sold, solicited, or negotiated by a motor vehicle rental contract insurance agent or enroller unless a conspicuous written disclosure is provided to the prospective renter that (i) summarizes clearly and correctly the material terms of coverage offered, including the identity of the insurer or insurers, (ii) advises that the coverage offered may duplicate coverage already provided by the renter’s personal motor vehicle insurance policy, homeowner’s insurance policy, personal liability insurance policy, or other source of coverage, and (iii) states that the purchase of the coverages offered is not required in order to rent a motor vehicle.

History. 1998, c. 47; 1999, c. 493; 2001, c. 706.

The 1999 amendment added “or enroller” following “insurance agent.”

The 2001 amendments.

The 2001 amendment by c. 706, effective September 1, 2002, substituted “sold, solicited, or negotiated” for “solicited, negotiated, procured, or effected” near the beginning of the section.

§ 38.2-515. Power of Commission.

1. The Commission shall have power to examine and investigate the affairs of each person subject to this chapter to determine whether such person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice prohibited by this chapter.
2. The Commission is further empowered to gather information from any person subject to this chapter relative to trade practices and whether such practices adequately and fairly serve the public interest.
3. Any person who refuses or fails to provide information in a timely manner to the Commission as provided in this section shall be subject to the enforcement and penalty provisions set forth in Chapter 2 (§ 38.2-200 et seq.).

History. 1952, c. 317, § 38.1-53; 1977, c. 529; 1980, c. 404; 1986, c. 562; 1991, c. 356; 2012, cc. 273, 277.

The 2012 amendments.

The 2012 amendments by cc. 273 and 277 are identical, and substituted “this chapter” for “§§ 38.2-502 through 38.2-514 ” at the end of subsection A, and deleted “of this title” at the end of subsection C.

Law Review.

For survey of Virginia law on insurance for the year 1976-77, see 63 Va. L. Rev. 1448 (1977).

§ 38.2-515.1. Power of Commission; policies issued outside of the Commonwealth.

1. Notwithstanding any other provision of law to the contrary, the Commission shall have the power to assist consumers and to examine and investigate complaints and inquiries relating to trade practices and claim settlement practices of insurers involving policies issued outside of the Commonwealth but covering residents of the Commonwealth, provided that the policy was issued (i) as a policy of group accident and sickness insurance in accordance with § 38.2-3521.1 or (ii) to a group other than one described in § 38.2-3521.1 in compliance with the requirements of § 38.2-3522.1 .
2. The Commission’s investigatory powers with respect to residents of the Commonwealth are limited to assisting consumers and examining and investigating complaints and inquiries as provided in subsection A and shall not extend to applying or enforcing federal laws or the laws of another state or jurisdiction.
3. The Commission shall have no jurisdiction to adjudicate controversies arising out of this section.

History. 2018, c. 256.

§ 38.2-516. Prohibited compensation for intra-company replacement.

No insurer shall pay a commission or other compensation to an appointed agent who has replaced an existing individual accident and sickness policy with a policy issued by the same insurer when such new policy provides benefits substantially similar to the benefits under the replaced policy, except that an insurer may pay to such agent a commission or other compensation to the extent that the commission or other compensation does not exceed the renewal commission that would have been paid to the agent had the replaced policy continued in force.

History. 1990, c. 265.

§ 38.2-517. Unfair settlement practices; replacement and repair; penalty.

1. No person shall:
   1. Require an insured or claimant to utilize designated replacement or repair facilities or services, or the products of designated manufacturers, as a prerequisite to settling or paying any claim arising under a policy or policies of insurance;
   2. Engage in any act of coercion or intimidation causing or intended to cause an insured or claimant to utilize designated replacement or repair facilities or services, or the products of designated manufacturers, in connection with settling or paying any claim arising under a policy or policies of insurance;
   3. Fail to disclose to the insured or claimant, prior to being referred to a third party representative in connection with a glass claim arising under a motor vehicle insurance policy, that the third party representative is not the insurer and is acting on behalf of the insurer;
   4. Fail to disclose to the insured or claimant, at such time as the insurer or its third party representative recommends the use of a designated motor vehicle replacement or repair facility or service, or products of a designated manufacturer, in connection with settling or paying any claim arising under a policy or policies of insurance, that the insured or claimant is under no obligation to use the replacement or repair facility or service or products of the manufacturer recommended by the insurer or by a representative of the insurer;
   5. Fail to disclose to the insured or claimant, at such time as it or its third party representative recommends the use of a designated motor vehicle replacement or repair facility in connection with settling or paying any claim arising under a policy or policies of insurance, that the insurer or its third party representative has a financial interest in such replacement or repair facility, if the insurer or its third party representative has such an interest; or
   6. Engage in the practice of capping. As used in this subdivision, “capping” means the setting of arbitrary and unreasonable limits on what an insurer will allow as reimbursement for paint and materials.
2. This section shall not be construed to require an insurer to pay an amount for motor vehicle repair services or repair products necessary to properly and fairly repair the vehicle to its pre-loss condition that is greater than the prevailing competitive charges for equivalent services or products charged by similar contractors or repair shops within a reasonable geographic or trade area of the address of the repair facility. Offering an explanation of the extent of an insurer’s obligation under this section to its policyholder or third party claimant shall not constitute a violation of this section.
3. Any person violating this section shall be subject to the injunctive, penalty, and enforcement provisions of Chapter 2 (§ 38.2-200 et seq.) of this title. The Commission shall investigate, with the written authorization of the insured or the claimant, any written complaints received pursuant to this section, regardless of whether such written complaints are submitted by an individual or a repair facility. For the purpose of this section, any insurance company utilizing a third party representative shall be held accountable for any violation of this section by such third party representative.

History. 1992, cc. 870, 882; 1999, c. 129; 2003, c. 361; 2004, c. 767; 2008, cc. 111, 516.

Editor’s note.

Acts 2003, c. 361, cl. 2, provides: “That the provisions of this act shall apply to motor vehicle insurance policies issued or renewed on or after July 1, 2003.”

The 1999 amendment added the last two sentences of subsection B.

The 2003 amendments.

The 2003 amendment by c. 361 added subdivisions A 3 and A 4; inserted the present subsection B; and redesignated former subsection B as subsection C.

The 2004 amendments.

The 2004 amendment by c. 767 added subdivision A 3; redesignated former subdivisions A 4 and A 5 as subdivisions A 4 and A 5, respectively; substituted “the insurer or its third party representative recommends” for “it recommends” in present subdivision A 4; inserted “or its third party representative” three times in present subdivision 5; substituted “third party claimant” for “third-party claimant” in subsection B; in subsection C, substituted “of this section” for “of this subsection,” and inserted representative” following “third party” twice.

The 2008 amendments.

The 2008 amendments by cc. 111 and 516 are identical, and inserted subdivision A 6; and made minor stylistic changes.

§ 38.2-518. Certificates of insurance.

1. As used in this section, “certificate of insurance” means a document, regardless of how titled or described, that is provided to a third party and is prepared or issued by an insurer or insurance producer as a statement or summary of an insured’s property or casualty insurance coverage. The term does not include any (i) policy of insurance, (ii) insurance binder, (iii) policy endorsement, (iv) automobile identification card, (v) certificate issued under a group or master policy, or (vi) evidence of coverage provided to a lender in a lending transaction involving a mortgage, lien, deed of trust, or other security interest in or on any real or personal property.
2. No person shall issue or deliver any certificate of insurance that attempts to confer any rights upon a third party beyond what the referenced policy of insurance expressly provides.
3. No certificate of insurance may represent an insurer’s obligation to give notice of cancellation or nonrenewal to a third party unless the giving of such notice is required by the policy.
4. No person shall issue or deliver a certificate of insurance unless it contains a substantially similar statement to the following: “This certificate of insurance is issued as a matter of information only. It confers no rights upon the third party requesting the certificate beyond what the referenced policy of insurance expressly provides. This certificate of insurance does not extend, amend, or alter the coverage, terms, exclusions, or conditions afforded by the policy referenced in this certificate of insurance.” If a certificate of insurance is required by a state or federal agency and accurately reflects the coverage provided by the underlying policies, no such statement is required.
5. No person shall knowingly demand or require the issuance of a certificate of insurance from an insurer, insurance producer, or policyholder that contains any false or misleading information concerning the policy of insurance to which the certificate makes reference.
6. No person shall knowingly prepare or issue a certificate of insurance that contains any false or misleading information or that purports to affirmatively or negatively alter, amend, or extend the coverage provided by the policy of insurance to which the certificate makes reference.
7. The provisions of this section shall apply to all certificate holders, policyholders, insurers, insurance producers, and certificate of insurance forms issued as a statement or summary of insurance coverages on property, operations, or risks located in the Commonwealth.

History. 2012, cc. 273, 277.

§ 38.2-600. Purposes.

The purposes of this article are to:

1. Establish standards for the collection, use, and disclosure of information gathered in connection with insurance transactions by insurance institutions, agents or insurance-support organizations;
2. Maintain a balance between the need for information by those conducting the business of insurance and the public’s need for fairness in insurance information practices, including the need to minimize intrusiveness;
3. Establish a regulatory mechanism to enable natural persons to ascertain what information is being or has been collected about them in connection with insurance transactions and to have access to such information for the purpose of verifying or disputing its accuracy;
4. Limit the disclosure of information collected in connection with insurance transactions; and
5. Enable insurance applicants and policyholders to obtain the reasons for any adverse underwriting decision.

History. 1981, c. 389, § 38.1-57.3; 1986, c. 562; 2020, c. 264.

The 2020 amendments.

The 2020 amendment by c. 264 substituted “article” for “chapter” in the introductory wording.

Research References.

Bryson on Virginia Civil Procedure (Matthew Bender). Chapter 9 Discovery. § 9.04 Privileges Against Discovery. Bryson.

§ 38.2-601. Application of article.

1. The obligations imposed by this article shall apply to those insurance institutions, agents or insurance-support organizations that:
   1. In the case of life or accident and sickness insurance:
      1. Collect, receive or maintain information in connection with insurance transactions that pertains to natural persons who are residents of the Commonwealth; or
      2. Engage in insurance transactions with applicants, individuals, or policyholders who are residents of the Commonwealth; and
   2. In the case of property or casualty insurance:
      1. Collect, receive or maintain information in connection with insurance transactions involving policies, contracts or certificates of insurance delivered, issued for delivery or renewed in the Commonwealth; or
      2. Engage in insurance transactions involving policies, contracts or certificates of insurance delivered, issued for delivery or renewed in the Commonwealth.
2. The rights granted by this article shall extend to:
   1. In the case of life or accident and sickness insurance, the following persons who are residents of the Commonwealth:
      1. Natural persons who are the subject of information collected, received or maintained in connection with insurance transactions; and
      2. Applicants, individuals or policyholders who engage in or seek to engage in insurance transactions; and
   2. In the case of property or casualty insurance, the following persons:
      1. Natural persons who are the subject of information collected, received or maintained in connection with insurance transactions involving policies, contracts or certificates of insurance delivered, issued for delivery or renewed in the Commonwealth; and
      2. Applicants, individuals, or policyholders who engage in or seek to engage in insurance transactions involving policies, contracts or certificates of insurance delivered, issued for delivery or renewed in the Commonwealth.
3. For purposes of this section, a person shall be considered a resident of the Commonwealth if the person’s last known mailing address, as shown in the records of the insurance institution, agent or insurance-support organization, is located in the Commonwealth.
4. Notwithstanding subsections A and B, this article shall not apply to information collected from the public records of a governmental authority and maintained by an insurance institution or its representatives for the purpose of insuring the title to real property located in the Commonwealth.
5. The provisions of this article shall apply only to insurance purchased primarily for personal, family or household purposes.

History. 1981, c. 389, § 38.1-57.4; 1986, c. 562; 2001, c. 371; 2020, c. 264.

The 2001 amendments.

The 2001 amendment by c. 371 added subsection E.

The 2020 amendments.

The 2020 amendment by c. 264 substituted “article” for “chapter” wherever it appears and “the Commonwealth” for “this Commonwealth” wherever it appears; and deleted “of this section” in subsection D following “subsections A and B.”

§ 38.2-602. Definitions.

As used in this article:

“Adverse underwriting decision” means:

1. Any of the following actions with respect to insurance transactions involving insurance coverage that is individually underwritten:
   1. A declination of insurance coverage;
   2. A termination of insurance coverage;
   3. Failure of an agent to apply for insurance coverage with a specific insurance institution that an agent represents and that is requested by an applicant;
   4. In the case of a property or casualty insurance coverage:
      1. Placement by an insurance institution or agent of a risk with a residual market mechanism or an unlicensed insurer; or
      2. The charging of a higher rate on the basis of information that differs from that which the applicant or policyholder furnished; or
   5. In the case of a life or accident and sickness insurance coverage, an offer to insure at higher than standard rates, or with limitations, exceptions or benefits other than those applied for.
2. Notwithstanding subdivision 1 of this definition, the following actions shall not be considered adverse underwriting decisions, but the insurance institution or agent responsible for their occurrence shall provide the applicant or policyholder with the specific reason or reasons for their occurrence:
   1. The termination of an individual policy form on a class or statewide basis;
   2. A declination of insurance coverage solely because such coverage is not available on a class or statewide basis;
   3. The rescission of a policy. “Affiliate” or “affiliated” means a person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with another person. “Agent” shall have the meaning as set forth in § 38.2-1800 and shall include surplus lines brokers. “Applicant” means any person who seeks to contract for insurance coverage other than a person seeking group insurance that is not individually underwritten. “Clear and conspicuous notice” means a notice that is reasonably understandable and designed to call attention to the nature and significance of the information in the notice. “Consumer report” means any written, oral, or other communication of information bearing on a natural person’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living that is used or expected to be used in connection with an insurance transaction. “Consumer reporting agency” means any person who:
3. Furnishes consumer reports to other persons.

   “Control,” including the terms “controlled by” or “under common control with,” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person.

   “Declination of insurance coverage” means a denial, in whole or in part, by an insurance institution or agent of requested insurance coverage.

   “Financial information” means personal information other than medical record information or records of payment for the provision of health care to an individual.

   “Financial institution” means any institution the business of which is engaging in financial activities as described in Section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. § 1843 (k)).

   “Financial product or service” means any product or service that a financial holding company could offer by engaging in an activity that is financial in nature or incidental to such a financial activity under Section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. § 1843 (k)).

   “Individual” means any natural person who:

4. Is a past or present applicant;
5. Is a past or present claimant;
6. Derived, derives, or is proposed to derive insurance coverage under an insurance policy or certificate subject to this article;
7. For the purposes of §§ 38.2-612.1 and 38.2-613 , is a beneficiary of a life insurance policy;
8. For the purposes of §§ 38.2-612.1 and 38.2-613 , is a mortgagor of a mortgage covered under a mortgage guaranty insurance policy; or
9. For the purposes of §§ 38.2-612.1 and 38.2-613 , is an owner of property used as security for an indebtedness for which single interest insurance is required by a lender. Notwithstanding any provision of this definition to the contrary, for purposes of § 38.2-612.1 , “individual” shall not include any natural person who is covered under an employee benefit plan, group or blanket insurance contract, or group annuity contract when the insurance institution or agent that provides such plan or contract: (i) furnishes the notice required under § 38.2-604.1 to the employee benefit plan sponsor, group or blanket insurance contract holder, or group annuity contract holder; and (ii) does not disclose the financial information of the person to a nonaffiliated third party other than as permitted under § 38.2-613 . “Institutional source” means any person or governmental entity that provides information about an individual to an agent, insurance institution or insurance-support organization, other than: “Insurance institution” means any corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyd’s type of organization, fraternal benefit society, or other person engaged in the business of insurance, including health maintenance organizations, and health, legal, dental, and optometric service plans. “Insurance institution” shall not include agents or insurance-support organizations. “Insurance-support organization” means any person who regularly engages, in whole or in part, in the practice of assembling or collecting information about natural persons for the primary purpose of providing the information to an insurance institution or agent for insurance transactions, including (i) the furnishing of consumer reports or investigative consumer reports to an insurance institution or agent for use in connection with an insurance transaction or (ii) the collection of personal information from insurance institutions, agents or other insurance-support organizations for the purpose of detecting or preventing fraud, material misrepresentation or material nondisclosure in connection with insurance underwriting or insurance claim activity. However, the following persons shall not be considered “insurance-support organizations” for purposes of this article: agents, governmental institutions, insurance institutions, medical-care institutions and medical professionals. “Insurance transaction” means any transaction involving insurance primarily for personal, family, or household needs rather than business or professional needs that entails: “Investigative consumer report” means a consumer report or a portion thereof in which information about a natural person’s character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with the person’s neighbors, friends, associates, acquaintances, or others who may have knowledge concerning such items of information. “Joint marketing agreement” means a formal written contract pursuant to which an insurance institution jointly offers, endorses, or sponsors a financial product or service with another financial institution. “Life insurance” includes annuities. “Medical-care institution” means any facility or institution that is licensed to provide health care services to natural persons, including but not limited to, hospitals, skilled nursing facilities, home-health agencies, medical clinics, rehabilitation agencies, and public-health agencies or health-maintenance organizations. “Medical professional” means any person licensed or certified to provide health care services to natural persons, including but not limited to, a physician, dentist, nurse, chiropractor, optometrist, physical or occupational therapist, social worker, clinical dietitian, clinical psychologist, licensed professional counselor, licensed marriage and family therapist, pharmacist, or speech therapist. “Medical-record information” means personal information that: “Nonaffiliated third party” means any person who is not an affiliate of an insurance institution but does not mean (i) an agent who is selling or servicing a product on behalf of the insurance institution or (ii) a person who is employed jointly by the insurance institution and the company that is not an affiliate. “Personal information” means any individually identifiable information gathered in connection with an insurance transaction from which judgments can be made about an individual’s character, habits, avocations, finances, occupation, general reputation, credit, health, or any other personal characteristics. “Personal information” includes an individual’s name and address and medical-record information, but does not include (i) privileged information or (ii) any information that is publicly available. “Policyholder” means any person who: “Policyholder information” means personal information about a policyholder, whether in paper, electronic, or other form, that is maintained by or on behalf of an insurance institution, agent, or insurance-support organization. “Pretext interview” means an interview whereby a person, in an attempt to obtain information about a natural person, performs one or more of the following acts: “Privileged information” means any individually identifiable information that (i) relates to a claim for insurance benefits or a civil or criminal proceeding involving an individual, and (ii) is collected in connection with or in reasonable anticipation of a claim for insurance benefits or civil or criminal proceeding involving an individual. “Residual market mechanism” means an association, organization, or other entity defined, described, or provided for in the Virginia Automobile Insurance Plan as set forth in § 38.2-2015 , or in the Virginia Property Insurance Association as set forth in Chapter 27 (§ 38.2-2700 et seq.) of this title. “Termination of insurance coverage” or “termination of an insurance policy” means either a cancellation or nonrenewal of an insurance policy other than by the policyholder’s request, in whole or in part, for any reason other than the failure to pay a premium as required by the policy. “Unlicensed insurer” means an insurance institution that has not been granted a license by the Commission to transact the business of insurance in Virginia.

1. Regularly engages, in whole or in part, in the practice of assembling or preparing consumer reports for a monetary fee;

2. Obtains information primarily from sources other than insurance institutions; and

1. In the case of property or casualty insurance, is a past, present, or proposed named insured or certificate holder;

2. In the case of life or accident and sickness insurance, is a past, present, or proposed principal insured or certificate holder;

3. Is a past, present or proposed policyowner;

1. An agent;

2. The individual who is the subject of the information; or

3. A natural person acting in a personal capacity rather than in a business or professional capacity.

1. The determination of an individual’s eligibility for an insurance coverage, benefit or payment; or

2. The servicing of an insurance application, policy, contract, or certificate.

1. Relates to an individual’s physical or mental condition, medical history, or medical treatment; and

2. Is obtained from a medical professional or medical-care institution, from the individual, or from the individual’s spouse, parent, or legal guardian.

1. In the case of individual property or casualty insurance, is a present named insured;

2. In the case of individual life or accident and sickness insurance, is a present policyowner; or

3. In the case of group insurance that is individually underwritten, is a present group certificate holder.

1. Pretends to be someone he or she is not;

2. Pretends to represent a person he or she is not in fact representing;

3. Misrepresents the true purpose of the interview; or

4. Refuses to identify himself or herself upon request.

History. 1981, c. 389, § 38.1-57.5; 1986, c. 562; 2001, c. 371; 2003, c. 729; 2006, c. 638; 2020, c. 264.

The 2001 amendments.

The 2001 amendment by c. 371 added the paragraphs defining “Clear and conspicuous notice,” “Financial Information,” “Financial Institution,” and “Financial product or service”; under the paragraph defining “Individual,” deleted “or” at the end of subdivision 5, added subdivisions 7 through 9, and added the paragraph following subdivision 9; added the paragraphs defining “Joint marketing agreement,” and “Nonaffiliated third party”; in the paragraph defining “Personal information,” inserted “(i),” and inserted “or (ii) any information that is publicly available”; and deleted “However, information otherwise meeting the requirements of this subsection shall nevertheless be considered personal information under this chapter if it is disclosed in violation of § 38.2-613 of this chapter” at the end of the paragraph defining “Privileged information.”

The 2003 amendments.

The 2003 amendment by c. 729 added the paragraph defining “Policyholder information.”

The 2006 amendments.

The 2006 amendment by c. 638, in the paragraph defining “Medical professional,” deleted “psychiatric” preceding “social worker” and inserted “licensed professional counselor, licensed marriage and family therapist.”

The 2020 amendments.

The 2020 amendment by c. 264 substituted “article” for “chapter” wherever it appears in lowercase form.

Law Review.

For 2006 survey article, “Health Care Law,” see 41 U. Rich. L. Rev. 179 (2006).

§ 38.2-603. Pretext interviews.

No insurance institution, agent, or insurance-support organization shall use or authorize the use of pretext interviews to obtain information in connection with an insurance transaction. However, a pretext interview may be undertaken to obtain information from a person or institution that does not have a generally or statutorily recognized privileged relationship with the person about whom the information relates for the purpose of investigating a claim where, based upon specific information available for review by the Commission, there is a reasonable basis for suspecting criminal activity, fraud, material misrepresentation, or material nondisclosure in connection with the claim.

History. 1981, c. 389, § 38.1-57.6; 1986, c. 562.

§ 38.2-604. Notice of information collection and disclosure practices.

1. An insurance institution or agent shall provide a notice of insurance information practices to all applicants or policyholders in connection with insurance transactions as provided in this section:
   1. In the case of an application for insurance a notice shall be provided no later than:
      1. At the time of the delivery of the insurance policy or certificate when personal information is collected only from the applicant or from public records;
      2. At the time the collection of personal information is initiated when personal information is collected from a source other than the applicant or public records; or
      3. Notwithstanding the provisions of subdivision 1 b of subsection A, when an application for insurance is made by telephone and personal information is collected from a source other than the applicant or public records, the notice of insurance information practices may be given orally at the time of application, provided that, if a policy is issued, such notice is given in writing or, if the applicant agrees, in electronic format, no later than at the time of the delivery of the insurance policy or certificate.
   2. In the case of a policy renewal, a notice shall be provided no later than the policy renewal date, except that no notice shall be required in connection with a policy renewal if:
      1. Personal information is collected only from the policyholder or from public records; or
      2. A notice meeting the requirements of this section has been given within the previous 24 months; or
   3. In the case of a policy reinstatement or change in insurance benefits, a notice shall be provided no later than the time a request for a policy reinstatement or change in insurance benefits is received by the insurance institution, except that no notice shall be required if personal information is collected only from the policyholder or from public records.
2. The notice required by subsection A of this section shall be in writing or, if the applicant or policyholder agrees, in electronic format, and shall state:
   1. Whether personal information may be collected from persons other than an individual proposed for coverage;
   2. The types of personal information that may be collected and the types of sources and investigative techniques that may be used to collect such information;
   3. The types of disclosures made under subdivisions 1, 2, 3, 4, 5, 8, 10, and 12 of subsection B and subdivision 2 of subsection C of § 38.2-613 and the circumstances under which such disclosures may be made without prior authorization, however only those circumstances need be described that occur with such frequency as to indicate a general business practice;
   4. A description of the rights established under §§ 38.2-608 and 38.2-609 and the manner in which those rights may be exercised; and
   5. That information obtained from a report prepared by an insurance-support organization may be retained by the insurance-support organization and disclosed to other persons.
3. Instead of the notice prescribed in subsection B of this section, the insurance institution or agent may provide an abbreviated notice in writing or, if the applicant or policyholder agrees, in electronic format, informing the applicant or policyholder that:
   1. Personal information may be collected from persons other than an individual proposed for coverage;
   2. The information, as well as other personal or privileged information subsequently collected by the insurance institution or agent, in certain circumstances, may be disclosed to third parties without authorization;
   3. A right of access and correction exists with respect to all personal information collected; and
   4. The notice prescribed in subsection B of this section will be furnished to the applicant or policyholder upon request.
4. The obligations imposed by this section upon an insurance institution or agent may be satisfied by another insurance institution or agent authorized to act on its behalf.
5. An insurance agent shall not be subject to the requirements of this section in any instance where the insurance institution on whose behalf the agent is acting otherwise complies with the requirements contained herein, and the agent does not disclose any personal information to any person other than the insurance institution or its affiliates, or as permitted by § 38.2-613 .
6. [Repealed.]
7. An insurance agent seeking to place coverage on behalf of a current policyholder shall be deemed to be in compliance with the requirements of this section in any instance where the agent has provided the notice required by this section within the previous 12 months.

History. 1981, c. 389, § 38.1-57.7; 1986, c. 562; 2001, c. 371; 2002, c. 76; 2003, c. 266.

The 2001 amendments.

The 2001 amendment by c. 371, in subdivision B, inserted “or, if the applicant or policyholder agrees, in electronic format,” in the introductory language, and in subdivision 3, substituted “made under subdivisions 1, 2, 3, 4, 5, 8, 10, and 12 of subsection B and subdivision 2 of subsection C of” for “identified in subdivisions 2, 3, 4, 5, 6, 9, 11, 12, and 14 of,” and deleted the last sentence, which formerly read: “However, only those circumstances need be described that occur with such frequency as to indicate a general business practice”; inserted “in writing or, if the applicant or policyholder agrees, in electronic format” in subsection C; and added subsections E and F.

The 2002 amendments.

The 2002 amendment by c. 76 deleted subsection F, which provided for the satisfaction of the requirements of this section by providing notice as set forth in § 38.2-604.1 C.

The 2003 amendments.

The 2003 amendment by c. 266 inserted subdivision A 1 c; substituted “24” for “twenty-four” in subdivision A 2 b; inserted “however only those circumstances need be described that occur with such frequency as to indicate a general business practice” in subdivision B 3; and added subsection G.

§ 38.2-604.1. Notice of financial information collection and disclosure practices.

1. An insurance institution or agent shall provide clear and conspicuous notice of financial information collection and disclosure practices in connection with insurance transactions as required by subsection B of this section:
   1. To an applicant before any financial information is disclosed about that applicant to any nonaffiliated third party, if the disclosure is made other than as permitted under § 38.2-613 . For purposes of this subdivision, a notice provided to an employer benefit plan sponsor, group or blanket insurance contract holder, or group annuity contract holder shall satisfy the notice requirements of this subdivision for applicants of such plan, policy, or annuity, provided the insurance institution or agent does not disclose the financial information of those applicants to a nonaffiliated third party, other than as permitted under § 38.2-613 ;
   2. To a policyholder no later than delivery or issuance of the policy or any other evidence of coverage, or at the later of these events. For purposes of this subdivision, a notice provided to an employee benefit plan sponsor, group or blanket insurance contract holder, or group annuity contract holder shall satisfy the notice requirements of this subdivision for persons covered under such plans, policies, or annuities, provided the insurance institution or agent does not disclose the financial information of those persons to a nonaffiliated third party, other than as permitted under § 38.2-613; and
   3. To a policyholder, other than a policyholder of a title insurance policy, not less than once in each calendar year. A notice provided to the sponsor of an employee benefit plan or the owner of a group or blanket insurance policy or group annuity contract shall satisfy the notice requirements of this subdivision for persons covered under such plan, policy or contract. For purposes of this subdivision only, “policyholder” does not include a person who owns a policy that is lapsed, expired or otherwise inactive or dormant under the insurance institution’s business practices, and with whom the insurance institution has not communicated about the relationship for a period of 12 consecutive months, other than annual privacy notices, material required by law or regulation, communication at the direction of a state or federal authority, or promotional materials. An insurance institution or agent that provides nonpublic personal information to nonaffiliated third parties only in accordance with § 38.2-613 and has not changed its policies and practices with regard to disclosing nonpublic financial information from the policies and practices that were disclosed in the most recent notice sent to the policyholder in accordance with this section shall not be required to provide an annual notice under this section until such time as the licensee does not comply with any criteria described in this subdivision.
2. Any notice required by subsection A of this section shall be in writing or, if the applicant or policyholder agrees, in electronic format, and shall state:
   1. The types of financial information that may be collected;
   2. The types of financial information that may be disclosed;
   3. The categories of persons to whom financial information may be disclosed; however, when disclosures are made pursuant to subsection B of § 38.2-613 , the notice is only required to state that disclosures may be made without prior authorization as permitted by law;
   4. If financial information is disclosed pursuant to subdivision C 1 of § 38.2-613 , the types of financial information that may be disclosed and the categories of nonaffiliated third parties to whom financial information may be disclosed by contractual agreement;
   5. An explanation of the right to direct that financial information not be disclosed to nonaffiliated third parties as provided in § 38.2-612.1 , provided that this explanation shall not be required to be given when information is disclosed pursuant to the provisions of § 38.2-613;
   6. A description of the policies and practices for protecting the confidentiality and security of financial information;
   7. The disclosure required, if any, under Section 603 (d)(2)(A)(iii) of the federal Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.) pertaining to the notices regarding the ability to opt out of disclosure of information among affiliates; and
   8. A description of the types of financial information about former policyholders that may be disclosed and a description of the types of affiliates and nonaffiliated third parties to whom financial information about former policyholders may be disclosed; however, when disclosures are made pursuant to subsection B of § 38.2-613, the notice is only required to state that disclosures may be made without prior authorization as permitted by law.
3. An insurance institution or agent that does not disclose, and does not wish to reserve the right to disclose, financial information about policyholders or former policyholders to affiliates or nonaffiliated third parties except as authorized in subsection B of § 38.2-613 may satisfy the requirements of this section by providing a notice, as set forth in subdivisions A 2 and A 3 of this section, that:
   1. States the foregoing information regarding such insurance institution or agent;
   2. Includes the information described in subdivisions B 1 and B 6 of this section; and
   3. States that the insurance institution or agent makes disclosures to other affiliated or nonaffiliated third parties, as applicable, as permitted by law.
4. An insurance institution or agent may satisfy the notice requirements of subdivision A 1 of this section by providing a short form notice at the same time that the insurance institution or agent delivers an opt out notice as required by § 38.2-612.1 . Such a short form notice shall: (i) be clear and conspicuous; (ii) state that the notice prescribed in subsection B of this section is available upon request; (iii) explain a reasonable means by which the applicant may obtain that notice; and (iv) be in writing or, if the applicant agrees, in electronic format. The insurance institution or agent is not required to deliver the notice prescribed in subsection B of this section with its short form notice, provided the insurance institution or agent provides the applicant with a reasonable means to obtain such notice.
5. The obligations imposed by this section upon an insurance institution or agent may be satisfied by another insurance institution or agent authorized to act on its behalf. An insurance institution may provide a joint notice from the insurance institution and one or more of its affiliates or other financial institutions, as identified in the notice, if the notice is accurate with respect to the insurance institution and the other institutions.
6. An insurance institution or agent, prior to disclosing financial information to a nonaffiliated third party other than as described in the notice prescribed in subsection B of this section, shall send a revised notice that accurately describes its information collection and disclosure practices. Such notice shall comply with the provisions of subsection B of this section.
7. An insurance institution or agent may satisfy the notice requirements of § 38.2-604 and this section through the use of separate notices or a combined notice.
8. An insurance agent shall not be subject to the requirements of this section in any instance where the insurance institution on whose behalf the agent is acting otherwise complies with the requirements contained herein, and the agent does not disclose any financial information to any person other than the insurance institution or its affiliates, or as permitted by § 38.2-613 .
9. An insurance agent seeking to place coverage on behalf of a current policyholder shall be deemed to be in compliance with the requirements of this section in any instance where the agent has provided the notice required by this section within the previous 12 months.

History. 2001, c. 371; 2002, c. 76; 2003, c. 266; 2017, c. 648.

The 2002 amendments.

The 2002 amendment by c. 76 substituted “each calendar year” for “any consecutive twelve-month period” at the end of the first sentence of subdivision A 3; and inserted “as set forth in subdivisions A 2 and A 3 of this section” in subsection C.

The 2003 amendments.

The 2003 amendment by c. 266 substituted “12” for “twelve” in subdivision A 3; and added subsection I.

The 2017 amendments.

The 2017 amendment by c. 648 added the last sentence in subdivision A 3.

§ 38.2-605. Marketing and research surveys.

An insurance institution or agent shall clearly specify those questions designed to obtain information solely for marketing or research purposes from an individual in connection with an insurance transaction.

History. 1981, c. 389, § 38.1-57.8; 1986, c. 562.

§ 38.2-606. Content of disclosure authorization forms.

Notwithstanding any other provision of law of this Commonwealth, no insurance institution, agent, or insurance-support organization shall utilize as its disclosure authorization form in connection with insurance transactions involving insurance policies or contracts issued after January 1, 1982, a form or statement that authorizes the disclosure of personal or privileged information about an individual to the insurance institution, agent, or insurance-support organization unless the form or statement:

1. Is written in plain language;
2. Is dated;
3. Specifies the types of persons authorized to disclose information about the individual;
4. Specifies the nature of the information authorized to be disclosed;
5. Names the insurance institution or agent and identifies by generic reference representatives of the insurance institution to whom the individual is authorizing information to be disclosed;
6. Specifies the purposes for which the information is collected;
7. Specifies the length of time such authorization shall remain valid, which shall be no longer than:
   1. In the case of authorizations signed for the purpose of collecting information in connection with an application for an insurance policy, a policy reinstatement, or a request for change in policy benefits:
      1. Thirty months from the date the authorization is signed if the application or request involves life, accident and sickness, or disability insurance; or
      2. Two years from the date the authorization is signed if the application or request involves property or casualty insurance;
   2. In the case of authorizations signed for the purpose of collecting information in connection with a claim for benefits under an insurance policy:
      1. The term of coverage of the policy if the claim is for an accident and sickness insurance benefit; or
      2. The duration of the claim if the claim is not for an accident and sickness insurance benefit; and
8. Advises the individual or a person authorized to act on behalf of the individual that the individual or the individual’s authorized representative is entitled to receive a copy of the authorization form.

History. 1981, c. 389, § 38.1-57.9; 1986, c. 562; 2001, c. 371.

The 2001 amendments.

The 2001 amendment by c. 371 substituted “Two years” for “One year” at the beginning of subdivision 7 a (2).

§ 38.2-607. Investigative consumer reports.

1. No insurance institution, agent, or insurance-support organization may prepare or request an investigative consumer report about an individual in connection with an insurance transaction involving an application for insurance, a policy renewal, a policy reinstatement or a change in insurance benefits unless the insurance institution or agent informs the individual:
   1. That he may request to be interviewed in connection with the preparation of the investigative consumer report; and
   2. That upon a request pursuant to § 38.2-608 , he is entitled to receive a copy of the investigative consumer report.
2. If an investigative consumer report is to be prepared by an insurance institution or agent, the insurance institution or agent shall institute reasonable procedures to conduct a personal interview requested by an individual.
3. If an investigative consumer report is to be prepared by an insurance-support organization, the insurance institution or agent desiring the report shall inform the insurance-support organization whether a personal interview has been requested by the individual. The insurance-support organization shall institute reasonable procedures to conduct such interviews, if requested.

History. 1981, c. 389, § 38.1-57.10; 1986, c. 562.

§ 38.2-608. Access to recorded personal information.

1. If any individual, after proper identification, submits a written request to an insurance institution, agent, or insurance-support organization for access to recorded personal information about the individual that is reasonably described by the individual and reasonably able to be located and retrieved by the insurance institution, agent, or insurance-support organization, the insurance institution, agent, or insurance-support organization shall within 30 business days from the date the request is received:
   1. Inform the individual of the nature and substance of the recorded personal information in writing, by telephone, or by other oral communication, whichever the insurance institution, agent, or insurance-support organization prefers;
   2. Permit the individual to see and copy, in person, the recorded personal information pertaining to him or to obtain a copy of the recorded personal information by mail, whichever the individual prefers, unless the recorded personal information is in coded form, in which case an accurate translation in plain language shall be provided in writing;
   3. Disclose to the individual the identity, if recorded, of those persons to whom the insurance institution, agent, or insurance-support organization has disclosed the personal information within two years prior to such request, and if the identity is not recorded, the names of those insurance institutions, agents, insurance-support organizations or other persons to whom such information is normally disclosed; and
   4. Provide the individual with a summary of the procedures by which he may request correction, amendment, or deletion of recorded personal information.
2. Any personal information provided pursuant to subsection A of this section shall identify the source of the information if it is an institutional source.
3. Medical-record information supplied by a medical-care institution or medical professional and requested under subsection A of this section, together with the identity of the medical professional or medical care institution that provided the information, shall be supplied either directly to the individual or to a medical professional designated by the individual and licensed to provide medical care with respect to the condition to which the information relates, whichever the individual prefers. If the individual elects to have the information disclosed to a medical professional designated by him, the insurance institution, agent or insurance-support organization shall notify the individual, at the time of the disclosure, that it has provided the information to the medical professional.However, disclosure directly to the individual may be denied if a treating physician, clinical psychologist, or clinical social worker has determined, in the exercise of professional judgment, that the disclosure requested would be reasonably likely to endanger the life or physical safety of the individual or another person or that the information requested makes reference to a person other than a health care provider and disclosure of such information would be reasonably likely to cause substantial harm to the referenced person.If disclosure to the individual is denied, upon the individual’s request, the insurance institution, agent or insurance support organization shall either (i) designate a physician, clinical psychologist, or clinical social worker acceptable to the insurance institution, agent or insurance support organization, who was not directly involved in the denial, and whose licensure, training, and experience relative to the individual’s condition are at least equivalent to that of the physician, clinical psychologist, or clinical social worker who made the original determination, who shall, at the expense of the insurance institution, agent or insurance support organization, make a judgment as to whether to make the information available to the individual; or (ii) if the individual so requests, make the information available, at the individual’s expense to a physician, clinical psychologist, or clinical social worker selected by the individual, whose licensure, training and experience relative to the individual’s condition are at least equivalent to that of the physician, clinical psychologist, or clinical social worker who made the original determination, who shall make a judgment as to whether to make the information available to the individual. The insurance institution, agent, or insurance support organization shall comply with the judgment of the reviewing physician, clinical psychologist, or clinical social worker made in accordance with the foregoing procedures.
4. Except for personal information provided under § 38.2-610 , an insurance institution, agent, or insurance-support organization may charge a reasonable fee to cover the costs incurred in providing a copy of recorded personal information to individuals.
5. The obligations imposed by this section upon an insurance institution or agent may be satisfied by another insurance institution or agent authorized to act on its behalf. With respect to the copying and disclosure of recorded personal information pursuant to a request under subsection A of this section, an insurance institution, agent, or insurance-support organization may make arrangements with an insurance-support organization or a consumer reporting agency to copy and disclose recorded personal information on its behalf.
6. The rights granted to individuals in this section shall extend to all natural persons to the extent information about them is collected and maintained by an insurance institution, agent or insurance-support organization in connection with an insurance transaction. The rights granted to all natural persons by this subsection shall not extend to information about them that relates to and is collected in connection with or in reasonable anticipation of a claim or civil or criminal proceeding involving them.
7. For purposes of this section, the term “insurance-support organization” does not include “consumer reporting agency.”

History. 1981, c. 389, § 38.1-57.11; 1986, c. 562; 2004, cc. 65, 1014; 2020, c. 945.

The 2004 amendments.

The 2004 amendments by cc. 65 and 1014 are identical, and in subsection C, in the first paragraph, at the end of the first sentence, substituted “individual” for “insurance institution, agent or insurance support organization” and in the last sentence, substituted “If the individual elects to have the information disclosed to a medical professional designated by him” for “If it elects to disclose the information to a medical professional designated by the individual”; and added the next-to-last and last paragraphs; and made a minor stylistic change.

The 2020 amendments.

The 2020 amendment by c. 945, in subsection C in the second paragraph, substituted “clinical psychologist, or clinical social worker” for “or treating clinical psychologist” and in the third paragraph, substituted “clinical psychologist, or clinical social worker” for “or clinical psychologist” throughout the section.

§ 38.2-609. Correction, amendment, or deletion of recorded personal information.

1. Within thirty business days from the date of receipt of a written request from an individual to correct, amend, or delete any recorded personal information about the individual within its possession, an insurance institution, agent, or insurance-support organization shall either:
   1. Correct, amend, or delete the portion of the recorded personal information in dispute; or
   2. Notify the individual of:
      1. Its refusal to make the correction, amendment, or deletion;
      2. The reasons for the refusal; and
      3. The individual’s right to file a statement as provided in subsection C of this section.
2. If the insurance institution, agent, or insurance-support organization corrects, amends, or deletes recorded personal information in accordance with subdivision 1 of subsection A of this section, the insurance institution, agent, or insurance-support organization shall so notify the individual in writing and furnish the correction, amendment, or fact of deletion to:
   1. Any person specifically designated by the individual who, within the preceding two years, may have received the recorded personal information;
   2. Any insurance-support organization whose primary source of personal information is insurance institutions if the insurance-support organization has systematically received the recorded personal information from the insurance institution within the preceding seven years.  The correction, amendment, or fact of deletion need not be furnished if the insurance-support organization no longer maintains recorded personal information about the individual; and
   3. Any insurance-support organization that furnished the personal information that has been corrected, amended, or deleted.
3. Whenever an individual disagrees with an insurance institution’s, agent’s, or insurance-support organization’s refusal to correct, amend, or delete recorded personal information, the individual shall be permitted to file with the insurance institution, agent, or insurance-support organization:
   1. A concise statement setting forth what the individual thinks is the correct, relevant, or fair information; and
   2. A concise statement of the reasons why the individual disagrees with the insurance institution’s, agent’s, or insurance-support organization’s refusal to correct, amend, or delete recorded personal information.
4. In the event an individual files either statement as described in subsection C of this section, the insurance institution, agent, or support organization shall:
   1. File the statement with the disputed personal information and provide a means by which anyone reviewing the disputed personal information will be made aware of the individual’s statement and have access to it; and
   2. In any subsequent disclosure by the insurance institution, agent, or support organization of the recorded personal information that is the subject of disagreement, clearly identify the matter or matters in dispute and provide the individual’s statement along with the recorded personal information being disclosed; and
   3. Furnish the statement to the persons and in the manner specified in subsection B of this section.
5. The rights granted to individuals in this section shall extend to all natural persons to the extent information about them is collected and maintained by an insurance institution, agent, or insurance-support organization in connection with an insurance transaction. The rights granted to all natural persons by this subsection shall not extend to information about them that relates to and is collected in connection with or in reasonable anticipation of a claim or civil or criminal proceeding involving them.
6. For purposes of this section, the term “insurance-support organization” does not include “consumer reporting agency.”

History. 1981, c. 389, § 38.1-57.12; 1986, c. 562.

§ 38.2-610. Notice of adverse underwriting decision; furnishing reasons for decisions and sources of information.

1. In the event of an adverse underwriting decision, including those that involve policies referred to in subdivision 1 of subsection E of § 38.2-2114 and in subdivision 3 of subsection F of § 38.2-2212 , the insurance institution or agent responsible for the decision shall give a written notice in a form approved by the Commission that:
   1. Either provides the applicant, policyholder, or individual proposed for coverage with the specific reason or reasons for the adverse underwriting decision in writing or advises such person that upon written request he may receive the specific reason or reasons in writing; and
   2. Provides the applicant, policyholder, or individual proposed for coverage with a summary of the rights established under subsection B of this section and §§ 38.2-608 and 38.2-609 .
2. Upon receipt of a written request within ninety business days from the date of the mailing of notice or other communication of an adverse underwriting decision to an applicant, policyholder or individual proposed for coverage, the insurance institution or agent shall furnish to such person within twenty-one business days from the date of receipt of the written request:
   1. The specific reason or reasons for the adverse underwriting decision, in writing, if that information was not initially furnished in writing pursuant to subdivision 1 of subsection A of this section;
   2. The specific items of personal and privileged information that support those reasons, however:
      1. The insurance institution or agent shall not be required to furnish specific items of privileged information if it has a reasonable suspicion, based upon specific information available for review by the Commission, that the applicant, policyholder, or individual proposed for coverage has engaged in criminal activity, fraud, material misrepresentation, or material nondisclosure; and
      2. Specific items of medical-record information supplied by a medical-care institution or medical professional shall be disclosed either directly to the individual about whom the information relates or to a medical professional designated by the individual and licensed to provide medical care with respect to the condition to which the information relates, whichever the insurance institution or agent prefers; and
   3. The names and addresses of the institutional sources that supplied the specific items of information given pursuant to subdivision 2 of subsection B of this section. However, the identity of any medical professional or medical-care institution shall be disclosed either directly to the individual or to the designated medical professional, whichever the insurance institution or agent prefers.
3. The obligations imposed by this section upon an insurance institution or agent may be satisfied by another insurance institution or agent authorized to act on its behalf. However, the insurance institution or agent making an adverse underwriting decision shall remain responsible for compliance with the obligations imposed by this section.
4. When an adverse underwriting decision results solely from an oral request or inquiry, the explanation of reasons and summary of rights required by subsection A of this section may be given orally.

History. 1981, c. 389, § 38.1-57.13; 1986, c. 562.

§ 38.2-611. Information concerning previous adverse underwriting decisions.

No insurance institution, agent, or insurance-support organization may seek information in connection with an insurance transaction concerning: (i) any previous adverse underwriting decision experienced by an individual, or (ii) any previous insurance coverage obtained by an individual through a residual market mechanism, unless the inquiry also requests the reasons for any previous adverse underwriting decision or the reasons why insurance coverage was previously obtained through a residual market mechanism.

History. 1981, c. 389, § 38.1-57.14; 1986, c. 562.

§ 38.2-612. Bases for adverse underwriting decisions.

1. No insurance institution or agent may base an adverse underwriting decision in whole or in part:
   1. On the fact of a previous adverse underwriting decision or on the fact that an individual previously obtained insurance coverage through a residual market mechanism. However, an insurance institution or agent may base an adverse underwriting decision on further information obtained from an insurance institution or agent responsible for a previous adverse underwriting decision;
   2. On personal information received from an insurance-support organization whose primary source of information is insurance institutions. However, an insurance institution or agent may base an adverse underwriting decision on further personal information obtained as the result of information received from an insurance-support organization; or
   3. On the fact that an individual previously obtained insurance coverage from a particular insurance institution or agent.
2. No insurance institution or agent may base an adverse underwriting decision solely on the loss history of a previous owner of the property to be insured.

History. 1981, c. 389, § 38.1-57.15; 1986, c. 562; 1990, c. 524; 2003, c. 415.

The 2003 amendments.

The 2003 amendment by c. 415 inserted the subsection A designation; and added subsection B.

§ 38.2-612.1. Special requirements for providing financial information to nonaffiliated third parties.

1. Except as otherwise provided in § 38.2-613 , no insurance institution, agent, or insurance-support organization may, directly or through an affiliate, disclose to a nonaffiliated third party financial information about an individual collected or received in connection with an insurance transaction, unless:
   1. The individual has been given a clear and conspicuous notice in writing, or in electronic form if the individual agrees, stating that such financial information may be disclosed to such nonaffiliated third party;
   2. The individual is given an opportunity, before such financial information is initially disclosed, to direct that such information not be disclosed, and in no case shall the individual be given less than 30 days from the date of notice to direct that such information not be disclosed;
   3. The individual is given a reasonable means by which to exercise the right to direct that such information not be disclosed as well as an explanation that such right may be exercised at any time and that such right remains effective until revoked by the individual; and
   4. The nonaffiliated third party agrees not to disclose such financial information to any other person unless such disclosure would otherwise be permitted by this article if made by the insurance institution, agent, or insurance-support organization.
2. 1. No insurance institution, agent, or insurance-support organization may disclose to a nonaffiliated third party, directly or through an affiliate, other than to a consumer reporting agency, a policy number or similar form of access number or transaction account of a policyholder or applicant for use in telemarketing, direct mail marketing or other marketing through electronic mail to an applicant or policyholder, other than to: B. 1. No insurance institution, agent, or insurance-support organization may disclose to a nonaffiliated third party, directly or through an affiliate, other than to a consumer reporting agency, a policy number or similar form of access number or transaction account of a policyholder or applicant for use in telemarketing, direct mail marketing or other marketing through electronic mail to an applicant or policyholder, other than to:
      1. An agent or other person solely for the purpose of marketing the insurance institution’s own products or services as long as the agent or other person is not authorized to directly initiate charges to the account; or
      2. A participant in a private label credit card program or an affinity or similar program where the participants in the program are identified to the policyholder or applicant at the time the policyholder or applicant enters the program.
   2. A policy or transaction account shall not include an account to which third parties cannot initiate charges.
3. No insurance institution or agent shall unfairly discriminate against an individual because (i) the individual has directed that his personal information not be disclosed pursuant to subsection A or (ii) the individual has refused to grant authorization of the disclosure of his privileged information or medical record information by an insurance institution, agent or insurance support organization pursuant to subsection A of § 38.2-613 .
4. The requirements of subsection A may be satisfied by providing a single notice if two or more applicants or policyholders jointly obtain or apply for an insurance product. Such notice shall allow one applicant or policyholder to direct that financial information not be disclosed to nonaffiliated third parties on behalf of all of the joint applicants or policyholders, provided that each applicant or policyholder may separately direct that his financial information not be disclosed to nonaffiliated third parties.
5. An insurance agent shall not be subject to the requirements of subsection A in any instance where the insurance institution on whose behalf the agent is acting otherwise complies with the requirements contained herein, and the agent does not disclose any financial information to any person other than the insurance institution or its affiliates, or as permitted by § 38.2-613 .
6. An insurance agent seeking to place coverage on behalf of a current policyholder shall be deemed to be in compliance with the requirements of this section in any instance where the agent has provided the notice required by this section within the previous 12 months.

History. 2001, c. 371; 2003, c. 266; 2020, c. 264.

The 2003 amendments.

The 2003 amendment by c. 266 substituted “30” for “thirty” in subdivision A 2; and added subsection F.

The 2020 amendments.

The 2020 amendment by c. 264, in subdivision A 4, substituted “article” for “chapter”; and in subsections D and E, deleted “of this section” following “subsection A.”

§ 38.2-612.2. Protection of the Fair Credit Reporting Act.

Nothing in this article shall be construed to modify, limit, or supersede the operation of the federal Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.), and no inference shall be drawn on the basis of the provisions of this article regarding whether information is transaction or experience information under Section 603 of that Act.

History. 2001, c. 371; 2020, c. 264.

The 2020 amendments.

The 2020 amendment by c. 264 substituted “article” for “chapter” twice.

§ 38.2-613. Disclosure limitations and conditions.

1. An insurance institution, agent, or insurance-support organization shall not disclose any medical-record information or privileged information about an individual collected or received in connection with an insurance transaction unless the disclosure is with the written authorization of the individual, provided:
   1. If the authorization is submitted by another insurance institution, agent, or insurance-support organization, the authorization meets the requirements of § 38.2-606 ; or
   2. If the authorization is submitted by a person other than an insurance institution, agent, or insurance-support organization, the authorization is:
      1. Dated,
      2. Signed by the individual, and
      3. Obtained two years or less prior to the date a disclosure is sought pursuant to this subdivision.
2. Notwithstanding the provisions of subsection A, an insurance institution, agent, or insurance-support organization may disclose personal or privileged information about an individual collected or received in connection with an insurance transaction, without written authorization, if the disclosure is:
   1. To a person other than an insurance institution, agent, or insurance-support organization, provided the disclosure is reasonably necessary:
      1. To enable that person to perform a business, professional or insurance function for the disclosing insurance institution, agent, or insurance-support organization and that person agrees not to disclose the information further without the individual’s written authorization unless the further disclosure:
         1. Would otherwise be permitted by this section if made by an insurance institution, agent, or insurance-support organization; or
         2. Is reasonably necessary for that person to perform its function for the disclosing insurance institution, agent, or insurance-support organization; or
      2. To enable that person to provide information to the disclosing insurance institution, agent, or insurance-support organization for the purpose of:
         1. Determining an individual’s eligibility for an insurance benefit or payment; or
         2. Detecting or preventing criminal activity, fraud, material misrepresentation, or material nondisclosure in connection with an insurance transaction; or
   2. To an insurance institution, agent, or insurance-support organization, or self-insurer, provided the information disclosed is limited to that which is reasonably necessary:
      1. To detect or prevent criminal activity, fraud, material misrepresentation, or material nondisclosure in connection with insurance transactions; or
      2. For either the disclosing or receiving insurance institution, agent or insurance-support organization to perform its function in connection with an insurance transaction involving the individual; or
   3. To a medical-care institution or medical professional for the purpose of (i) verifying insurance coverage or benefits, (ii) informing an individual of a medical problem of which the individual may not be aware or (iii) conducting an operations or services audit, provided only that information is disclosed as is reasonably necessary to accomplish the foregoing purposes; or
   4. To an insurance regulatory authority; or
   5. To a law-enforcement or other government authority:
      1. To protect the interests of the insurance institution, agent or insurance-support organization in preventing or prosecuting the perpetration of fraud upon it; or
      2. If the insurance institution, agent, or insurance-support organization reasonably believes that illegal activities have been conducted by the individual; or
      3. Upon written request of any law-enforcement agency, for all insured or claimant information in the possession of an insurance institution, agent, or insurance-support organization which relates an ongoing criminal investigation. Such insurance institution, agent, or insurance-support organization shall release such information, including, but not limited to, policy information, premium payment records, record of prior claims by the insured or by another claimant, and information collected in connection with an insurance company’s investigation of an application or claim. Any information released to a law-enforcement agency pursuant to such request shall be treated as confidential criminal investigation information and not be disclosed further except as provided by law. Notwithstanding any provision in this article, no insurance institution, agent, or insurance-support organization shall notify any insured or claimant that information has been requested or supplied pursuant to this section prior to notification from the requesting law-enforcement agency that its criminal investigation is completed. Within ninety days following the completion of any such criminal investigation, the law-enforcement agency making such a request for information shall notify any insurance institution, agent, or insurance-support organization from whom information was requested that the criminal investigation has been completed; or
   6. Otherwise permitted or required by law; or
   7. In response to a facially valid administrative or judicial order, including a search warrant or subpoena; or
   8. Made for the purpose of conducting actuarial or research studies, provided:
      1. No individual may be identified in any actuarial or research report, and
      2. Materials allowing the individual to be identified are returned or destroyed as soon as they are no longer needed, and
      3. The actuarial or research organization agrees not to disclose the information unless the disclosure would otherwise be permitted by this section if made by an insurance institution, agent, or insurance-support organization; or
   9. To a party or a representative of a party to a proposed or consummated sale, transfer, merger, or consolidation of all or part of the business of the insurance institution, agent, or insurance-support organization, provided:
      1. Prior to the consummation of the sale, transfer, merger, or consolidation only such information is disclosed as is reasonably necessary to enable the recipient to make business decisions about the purchase, transfer, merger, or consolidation, and
      2. The recipient agrees not to disclose the information unless the disclosure would otherwise be permitted by this section if made by an insurance institution, agent, or insurance-support organization; or
   10. To a nonaffiliated third party whose only use of such information will be in connection with the marketing of a nonfinancial product or service, provided:
       1. No medical-record information, privileged information, or personal information relating to an individual’s character, personal habits, mode of living, or general reputation is disclosed, and no classification derived from the information is disclosed,
       2. The individual has been given an opportunity, in accordance with the provisions of subsection A of § 38.2-612.1 , to indicate that he does not want financial information disclosed for marketing purposes and has given no indication that he does not want the information disclosed, and
       3. The nonaffiliated third party receiving such information agrees not to use it except in connection with the marketing of the product or service; or
   11. 1. To a consumer reporting agency in accordance with the Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.) or (ii) from a consumer report reported by a consumer reporting agency; or 11. (i) To a consumer reporting agency in accordance with the Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.) or (ii) from a consumer report reported by a consumer reporting agency; or
   12. To a group policyholder for the purpose of reporting claims experience or conducting an audit of the insurance institution’s or agent’s operations or services, provided the information disclosed is reasonably necessary for the group policyholder to conduct the review or audit; or
   13. To a professional peer review organization for the purpose of reviewing the service or conduct of a medical-care institution or medical professional; or
   14. To a governmental authority for the purpose of determining the individual’s eligibility for health benefits for which the governmental authority may be liable; or
   15. To a certificate holder or policyholder for the purpose of providing information regarding the status of an insurance transaction; or
   16. To a lienholder, mortgagee, assignee, lessor or other person shown on the records of an insurance institution or agent as having a legal or beneficial interest in a policy of insurance, or to persons acting in a fiduciary or representative capacity on behalf of the individual, provided that:
       1. No medical record information is disclosed unless the disclosure would be permitted by this section; and
       2. The information disclosed is limited to that which is reasonably necessary to permit such person to protect his interest in the policy; or
   17. Necessary to effect, administer, or enforce a transaction requested or authorized by the individual, or in connection with servicing or processing an insurance product or service requested or authorized by the individual, or necessary for reinsurance purposes, or for stop loss or excess loss agreements provided for in subsection B of § 38.2-109 ; or
   18. Pursuant to any federal Health Insurance Portability and Accountability Act privacy rules promulgated by the United States Department of Health and Human Services.
3. An insurance institution, agent, or insurance-support organization may disclose information about an individual collected or received in connection with an insurance transaction, without written authorization, if the disclosure is:
   1. To a nonaffiliated third party whose only use of such information will be to perform services for or functions on behalf of the insurance institution in connection with the marketing of the insurance institution’s product or service or the marketing of products or services offered pursuant to a joint marketing agreement, provided:
      1. No medical-record information or privileged information is disclosed without the individual’s written authorization unless such disclosure is otherwise permitted by subsection B,
      2. With respect to financial information, the individual has been given the notice required by subsection B of § 38.2-604.1 , and
      3. The person receiving such financial information agrees, by contract, (i) not to use it except to perform services for or functions on behalf of the insurance institution in connection with the marketing of the insurance institution’s product or service or the marketing of products or services offered pursuant to a joint marketing agreement, or as permitted under subsection B and (ii) to maintain the confidentiality of such information and not disclose it to any other nonaffiliated third party unless such disclosure would otherwise be permitted by this section if made by the insurance institution, agent, or insurance-support organization;
   2. To an affiliate, provided:
      1. No medical-record information or privileged information is disclosed without the individual’s written authorization unless such disclosure is otherwise permitted by subsection B, and
      2. The affiliate receiving the information does not disclose the information except as would otherwise be permitted by this section if such disclosure were made by the insurance institution, agent, or insurance-support organization.
4. 1. No person proposing to issue, re-issue, or renew any policy, contract, or plan of accident and sickness insurance defined in § 38.2-109 , but excluding disability income insurance, issued by any (i) insurer providing hospital, medical and surgical or major medical coverage on an expense incurred basis, (ii) corporation providing a health services plan, or (iii) health maintenance organization providing a health care plan for health care services shall disclose any genetic information about an individual or a member of such individual’s family collected or received in connection with any insurance transaction unless the disclosure is made with the written authorization of the individual. D. 1. No person proposing to issue, re-issue, or renew any policy, contract, or plan of accident and sickness insurance defined in § 38.2-109 , but excluding disability income insurance, issued by any (i) insurer providing hospital, medical and surgical or major medical coverage on an expense incurred basis, (ii) corporation providing a health services plan, or (iii) health maintenance organization providing a health care plan for health care services shall disclose any genetic information about an individual or a member of such individual’s family collected or received in connection with any insurance transaction unless the disclosure is made with the written authorization of the individual.
   2. For the purpose of this subsection, “genetic information” means information about genes, gene products, or inherited characteristics that may derive from an individual or a family member.
   3. Agents and insurance support organizations shall be subject to the provisions of this subsection to the extent of their participation in the issue, re-issue, or renewal of any policy, contract, or plan of accident and sickness insurance defined in § 38.2-109, but excluding disability income insurance.
5. Any notices, disclosures, or authorizations required by this section may be provided electronically if the individual agrees.
6. Any privileged information about an individual that is disclosed in violation of this section shall be available to that individual in accordance with the provisions of §§ 38.2-608 and 38.2-609 .
7. Except in the case of disclosures made pursuant to subdivision B 10, the requirements of subsection A of § 38.2-612.1 shall not apply when information is disclosed pursuant to this section.

History. 1981, c. 389, § 38.1-57.16; 1986, c. 562; 1987, c. 325; 1996, c. 704; 2001, c. 371; 2020, c. 264.

The 2001 amendments.

The 2001 amendment by c. 371, in subsection A, substituted “medical-record information” for “personal,” deleted the subdivision designator 1 following “disclosure is” and combined the language of said subdivision with the introductory language of A, substituted the subdivision designators 1 and 2 for a and b, substituted the subdivision designators a, b, and c for (1), (2), and (3), and in c, substituted “two years” for “one year,” and deleted “or” at the end; in subsection B, added the introductory language, substituted subdivision designators 1 through 10 for 2 through 11, inserted “or” at the end of subdivision 5 c, substituted “nonaffiliated third party” for “person,” in subdivision 10 and in 10 c, and inserted “nonfinancial” in subdivision 10, and in subdivision 10 b, inserted “in accordance with the provisions of subsection A of § 38.2-612.1 ,” and substituted “financial” for “personal”; deleted subdivision 12, which formerly read: “To an affiliate whose only use of the information will be in connection with an audit of the insurance institution or agent or the marketing of an insurance product or service, provided the affiliate agrees not to disclose the information for any other purpose or to unaffiliated persons; or”; redesignated former subdivisions 13 through 18 as present subdivisions 11 through 16; rewrote present subdivision 11, which formerly read: “By a consumer reporting agency, provided the disclosure is to a person other than an insurance institution or agent; or”; inserted “or to persons acting in a fiduciary or representative capacity on behalf of the individual” in subdivision 16; inserted “or” at the end of subdivision 16 b; and added subdivisions 17 and 18; added subsection C; redesignated former subsection B as subsection D; and added subsections E through G.

The 2020 amendments.

The 2020 amendment by c. 264, in subsection B, deleted “of this section” following “subsection A” in the introductory language; in subdivision B 5 c, substituted “article” for “chapter”; in subdivisions C 1 a, C 1 b and C 2 a, deleted “of this section” following “subsection B”; and in subsection G, deleted “of this section” following “subdivision B 10.”

§ 38.2-613.01. Commission to promulgate regulations on disclosure of certain medical test results to insurance applicants.

Pursuant to the authority granted by §§ 38.2-223 and 38.2-3100.1 , the Commission shall promulgate such regulations as may be necessary or appropriate to ensure that applicants for life or accident and sickness insurance coverage or for modifications to existing coverage are notified of test results whenever insurers require such applicants to submit to testing for human immunodeficiency viruses (HIV).

History. 1997, c. 290.

§ 38.2-613.1. Disclosure of agent’s moratorium required.

If a duly appointed agent of an insurer proposes to place a policy of motor vehicle insurance as defined in § 38.2-2212 with another insurer or proposes to submit an application to the Virginia Automobile Insurance Plan solely because of a moratorium on such agent’s selling, soliciting, or negotiating new motor vehicle insurance that would otherwise be acceptable to such insurer and such placement or submission would result in the applicant’s being charged a higher rate, the agent shall disclose to the applicant the existence of the moratorium prior to such placement or submission.

History. 1991, c. 269; 2001, c. 706.

The 2001 amendments.

The 2001 amendment by c. 706, effective September 1, 2002, substituted “selling, soliciting, or negotiating” for “soliciting, negotiating, procuring, or effecting” near the middle of the section.

§ 38.2-613.2. Repealed by Acts 2020, c. 264, cl. 2.

Cross references.

For current provisions related to insurance data security, see Article 2 (§ 38.2-621 et seq.) of this chapter.

Editor’s note.

Former § 38.2-613.2 , pertaining to the information security program, derived from Acts 2003, c. 729.

§ 38.2-614. Powers of Commission.

1. The Commission shall have the power to examine and investigate the affairs of any insurance institution or agent doing business in the Commonwealth to determine whether the insurance institution or agent has been or is engaged in any conduct in violation of this article.
2. The Commission shall have the power to examine and investigate the affairs of any insurance-support organization that acts on behalf of an insurance institution or agent and that either (i) transacts business in the Commonwealth, or (ii) transacts business outside the Commonwealth and has an effect on a person residing in the Commonwealth, in order to determine whether the insurance-support organization has been or is engaged in any conduct in violation of this article.

History. 1981, c. 389, § 38.1-57.17; 1986, c. 562; 2020, c. 264.

The 2020 amendments.

The 2020 amendment by c. 264 substituted “the Commonwealth” for “this Commonwealth” and “article” for “chapter” throughout the section.

§ 38.2-615. Hearings and procedures.

1. Whenever the Commission has reason to believe that an insurance institution, agent or insurance-support organization has been or is engaged in conduct in the Commonwealth that violates this article, or whenever the Commission has reason to believe that an insurance-support organization has been or is engaged in conduct outside the Commonwealth that has an effect on a person residing in the Commonwealth and that violates this article, the Commission may issue and serve upon the insurance institution, agent, or insurance-support organization a statement of charges and notice of hearing to be held at a time and place fixed in the notice. The date for such hearing shall be at least ten days after the date of service.
2. At the time and place fixed for the hearing, the insurance institution, agent, or insurance-support organization charged shall have an opportunity to answer the charges against it and present evidence on its behalf. Upon good cause shown, the Commission shall permit any adversely affected person to intervene, appear, and be heard at the hearing by counsel or in person.
3. In all matters in connection with such investigation, charge, or hearing the Commission shall have the jurisdiction, power and authority granted or conferred upon it by Title 12.1.

History. 1981, c. 389, § 38.1-57.18; 1986, c. 562; 2020, c. 264.

The 2020 amendments.

The 2020 amendment by c. 264, in subsection A, substituted “article” for “chapter” and “the Commonwealth” for “this Commonwealth” throughout the section.

§ 38.2-616. Service of process on insurance-support organizations.

For the purpose of this article, an insurance-support organization transacting business outside the Commonwealth that has an effect on a person residing in the Commonwealth and which is alleged to violate this article shall be deemed to have appointed the clerk of the Commission to accept service of process on its behalf. Service on the clerk shall be made in accordance with § 12.1-19.1 .

History. 1981, c. 389, § 38.1-57.19; 1986, c. 562; 1991, c. 672; 2020, c. 264.

The 2020 amendments.

The 2020 amendment by c. 264 substituted “article” for “chapter” and “the Commonwealth” for “this Commonwealth” throughout the section.

§ 38.2-617. Individual remedies.

1. If any insurance institution, agent, or insurance-support organization fails to comply with §§ 38.2-608 , 38.2-609 , or § 38.2-610 , any person whose rights granted under those sections are violated may apply to a court of competent jurisdiction for appropriate equitable relief.
2. An insurance institution, agent, or insurance-support organization that discloses information in violation of § 38.2-613 shall be liable for damages sustained by the individual to whom the information relates. No individual, however, shall be entitled to a monetary award that exceeds the actual damages sustained by the individual as a result of a violation of § 38.2-613 .
3. In any action brought pursuant to this section, the court may award the cost of the action and reasonable attorney’s fees to the prevailing party.
4. An action under this section must be brought within two years from the date the alleged violation is or should have been discovered.
5. Except as specifically provided in this section, there shall be no remedy or recovery available to individuals, in law or in equity, for occurrences constituting a violation of any provision of this article.

History. 1981, c. 389, § 38.1-57.24; 1986, c. 562; 2020, c. 264.

The 2020 amendments.

The 2020 amendment by c. 264 substituted “article” for “chapter” in subsection E.

§ 38.2-618. Immunity of persons disclosing information.

No cause of action in the nature of defamation, invasion of privacy, or negligence shall arise against any person for disclosing personal or privileged information in accordance with this article, nor shall such a cause of action arise against any person for furnishing personal or privileged information to an insurance institution, agent, or insurance-support organization. However, this section shall provide no immunity for disclosing or furnishing false information with malice or willful intent to injure any person.

History. 1981, c. 389, § 38.1-57.25; 1986, c. 562; 2020, c. 264.

The 2020 amendments.

The 2020 amendment by c. 264 substituted “article” for “chapter” in the first sentence.

§ 38.2-619. Obtaining information under false pretenses.

Any person who knowingly and willfully obtains information about an individual from an insurance institution, agent or insurance-support organization under false pretenses shall be fined not more than $10,000 or punished by confinement in jail for not more than 12 months, or both.

History. 1981, c. 389, § 38.1-57.26; 1986, c. 562.

§ 38.2-620. Repealed by Acts 2020, c. 264, cl. 2.

Editor’s note.

Former § 38.2-620 , pertaining to the effective date of certain provisions, derived from Acts 1981, c. 389, § 38.1-57.28; 1986, c. 562.

§ 38.2-621. Definitions.

As used in this article:

“Authorized person” means a person known to and authorized by the licensee and determined to be necessary and appropriate to have access to the nonpublic information held by the licensee and its information systems.

“Consumer” means an individual, including applicants, policyholders, insureds, beneficiaries, claimants, and certificate holders, who is a resident of the Commonwealth and whose nonpublic information is in the possession, custody, or control of a licensee or an authorized person.

“Cybersecurity event” means an event resulting in unauthorized access to, disruption of, or misuse of an information system or nonpublic information in the possession, custody, or control of a licensee or an authorized person. “Cybersecurity event” does not include (i) the unauthorized acquisition of encrypted nonpublic information if the encryption, process, or key is not also acquired, released, or used without authorization or (ii) an event in which the licensee has determined that the nonpublic information accessed by an unauthorized person has not been used or released and has been returned or destroyed.

“Encrypted” means the transformation of data into a form that results in a low probability of assigning meaning without the use of a protective process or key.

“HIPAA” means the federal Health Insurance Portability and Accountability Act (42 U.S.C. § 1320d et seq.).

“Home state” means the jurisdiction in which the producer maintains its principal place of residence or principal place of business and is licensed by that jurisdiction to act as a resident insurance producer.

“Information security program” means the administrative, technical, and physical safeguards that a licensee uses to access, collect, distribute, process, protect, store, use, transmit, dispose of, or otherwise handle nonpublic information.

“Information system” means a discrete set of electronic information resources organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of electronic information, as well as any specialized system such as industrial or process control systems, telephone switching and private branch exchange systems, and environmental control systems.

“Insurance-support organization” has the same meaning as provided in § 38.2-602 .

“Licensee” means any person licensed, authorized to operate, or registered, or required to be licensed, authorized, or registered pursuant to the insurance laws of the Commonwealth. “Licensee” does not include a purchasing group or a risk retention group chartered and licensed in a state other than the Commonwealth or a person that is acting as an assuming insurer that is domiciled in another state or jurisdiction.

“Nonpublic information” means information that is not publicly available information and is:

1. Business-related information of a licensee the tampering with which, or the unauthorized disclosure, access, or use of which, would cause a material adverse impact to the business, operations, or security of the licensee;
2. Any information concerning a consumer that because of name, number, personal mark, or other identifier can be used to identify such consumer, in any combination with a consumer’s (i) social security number; (ii) driver’s license number or nondriver identification card number; (iii) financial account, credit card, or debit card number; (iv) security code, access code, or password that would permit access to a consumer’s financial account; (v) passport number; (vi) military identification number; or (vii) biometric records; or
3. Any information or data, except age or gender, in any form or medium created by or derived from a health care provider or a consumer that can be used to identify a particular consumer, and that relates to (i) the past, present, or future physical, mental, or behavioral health or condition of any consumer or a member of the consumer’s family; (i) the provision of health care to any consumer; or (iii) payment for the provision of health care to any consumer.

   “Nonpublic information” does not include a consumer’s personally identifiable information that has been anonymized using a method no less secure than the safe harbor method under HIPAA.

   “Person” means any individual or any nongovernmental entity, including any nongovernmental partnership, corporation, branch, agency, or association.

   “Publicly available information” means any information that a licensee has a reasonable basis to believe is lawfully made available to the general public from federal, state, or local government records; widely distributed media; or disclosures to the general public that are required to be made by federal, state, or local law. A licensee has a reasonable basis to believe that information is lawfully made available to the general public if the licensee has taken steps to determine (i) that the information is of the type that is available to the general public and (ii) whether a consumer can direct that the information not be made available to the general public and, if so, that such consumer has not done so.

   “Third-party service provider” means (i) a person, not otherwise defined as a licensee, that contracts with a licensee to maintain, process, or store nonpublic information, or otherwise is permitted access to nonpublic information through its provision of services to the licensee or (ii) an insurance-support organization.

History. 2020, c. 264.

§ 38.2-622. Private cause of action; neither created nor curtailed.

Nothing in this article shall be construed to create or imply a private cause of action for violation of its provisions, nor shall it be construed to curtail a private cause of action which would otherwise exist in the absence of this article.

History. 2020, c. 264.

§ 38.2-623. Information security program.

1. Commensurate with the size and complexity of the licensee; the nature and scope of the licensee’s activities, including its use of third-party service providers; and the sensitivity of the nonpublic information used by the licensee or in the licensee’s possession, custody, or control, each licensee shall develop, implement, and maintain a comprehensive written information security program based on the licensee’s assessment of the licensee’s risk and that contains administrative, technical, and physical safeguards for the protection of nonpublic information and the licensee’s information system.
2. Each licensee’s information security program shall be designed to:
   1. Protect the security and confidentiality of nonpublic information and the security of the information system;
   2. Protect against any reasonably foreseeable threats or hazards to the security or integrity of nonpublic information and the information system;
   3. Protect against unauthorized access to or use of nonpublic information, and minimize the likelihood of harm to any consumer; and
   4. Define and periodically reevaluate a schedule for retention of nonpublic information and a mechanism for its destruction.
3. Each licensee shall:
   1. Designate one or more employees, an affiliate, or an outside vendor designated to act on behalf of the licensee who is responsible for the information security program;
   2. Design its information security program to mitigate the identified risks, commensurate with the size and complexity of the licensee; the nature and scope of the licensee’s activities, including its use of third-party service providers; and the sensitivity of the nonpublic information used by the licensee or in the licensee’s possession, custody, or control;
   3. Place access controls on information systems, including controls to authenticate and permit access only to authorized persons to protect against the unauthorized acquisition of nonpublic information;
   4. At physical locations containing nonpublic information, restrict access to nonpublic information to authorized persons only;
   5. Implement measures to protect against destruction, loss, or damage of nonpublic information due to environmental hazards, such as fire and water damage or other catastrophes or technological failures;
   6. Develop, implement, and maintain procedures for the secure disposal of nonpublic information in any format;
   7. Stay informed regarding emerging threats or vulnerabilities and utilize reasonable security measures when sharing information relative to the character of the sharing and the type of information shared; and
   8. Provide its personnel with cybersecurity awareness training.
4. 1. If a licensee has a board of directors, the board or an appropriate committee of the board shall, at a minimum, require the licensee’s information executive management or its delegates to (i) develop, implement, and maintain the licensee’s information security program and (ii) report in writing (a) the overall status of the information security program and the licensee’s compliance with this article and (b) material matters related to the information security program, addressing issues such as risk assessment, risk management and control decisions, third-party service provider arrangements, results of testing, cybersecurity events or violations and management’s responses thereto, and recommendations for changes in the information security program. D. 1. If a licensee has a board of directors, the board or an appropriate committee of the board shall, at a minimum, require the licensee’s information executive management or its delegates to (i) develop, implement, and maintain the licensee’s information security program and (ii) report in writing (a) the overall status of the information security program and the licensee’s compliance with this article and (b) material matters related to the information security program, addressing issues such as risk assessment, risk management and control decisions, third-party service provider arrangements, results of testing, cybersecurity events or violations and management’s responses thereto, and recommendations for changes in the information security program.
   2. If executive management delegates any of its responsibilities under this section, it shall oversee the development, implementation, and maintenance of the licensee’s information security program prepared by the delegate and shall receive a report from the delegate complying with the requirements of subdivision 1.
5. Beginning July 1, 2022, if a licensee utilizes a third-party service provider, the licensee shall:
   1. Exercise due diligence in selecting its third-party service provider; and
   2. Require a third-party service provider to implement appropriate administrative, technical, and physical measures to protect and secure the information systems and nonpublic information that are accessible to, or held by, the third-party service provider.
6. Each licensee shall monitor, evaluate, and adjust, as appropriate, the information security program consistent with any relevant changes in technology, the sensitivity of its nonpublic information, internal or external threats to information, and the licensee’s own changing business arrangements, such as mergers and acquisitions, alliances and joint ventures, outsourcing arrangements, and changes to information systems.
7. As part of its information security program, each licensee shall establish a written incident response plan designed to promptly respond to, and recover from, any cybersecurity event that compromises the confidentiality, integrity, or availability of nonpublic information in its possession; the licensee’s information systems; or the continuing functionality of any aspect of the licensee’s business or operations. Such incident response plan shall address:
   1. The internal process for responding to a cybersecurity event;
   2. The goals of the incident response plan;
   3. The definition of clear roles, responsibilities, and levels of decision-making authority;
   4. External and internal communications and information sharing;
   5. Identification of requirements for the remediation of any identified weaknesses in information systems and associated controls;
   6. Documentation and reporting regarding cybersecurity events and related incident response activities; and
   7. The evaluation and revision, as necessary, of the incident response plan following a cybersecurity event.
8. Beginning in 2023 and annually thereafter, each insurer domiciled in the Commonwealth shall, by February 15, submit to the Commissioner a written statement certifying that the insurer is in compliance with the requirements set forth in this section, any rules adopted pursuant to this article, and any requirements prescribed by the Commission. Each insurer shall maintain for examination by the Bureau all records, schedules, and data supporting this certificate for a period of five years. To the extent an insurer has identified areas, systems, or processes that require material improvement, updating, or redesign, the insurer shall document the identification and the remedial efforts planned and underway to address such areas, systems, or processes. Such documentation must be available for inspection by the Commissioner.

History. 2020, c. 264.

§ 38.2-624. Investigation of a cybersecurity event.

1. If a licensee learns that a cybersecurity event has or may have occurred, the licensee or an investigator shall conduct a prompt investigation.
2. During the investigation, the licensee or an investigator shall, at a minimum, determine as much of the following information as possible:
   1. Determine whether a cybersecurity event has occurred;
   2. Assess the nature and scope of the cybersecurity event;
   3. Identify any nonpublic information that may have been involved in the cybersecurity event; and
   4. Perform or oversee reasonable measures to restore the security of the information systems compromised in the cybersecurity event in order to prevent further unauthorized acquisition, release, or use of nonpublic information in the licensee’s possession, custody, or control.
3. If a licensee learns that a cybersecurity event has or may have occurred in a system maintained by a third-party service provider, the licensee will complete the steps listed in subsection B or make reasonable efforts to confirm and document that the third-party service provider has completed those steps.
4. Each licensee shall maintain records concerning all cybersecurity events for a period of at least five years from the date of the cybersecurity event and shall produce those records upon demand of the Commissioner.

History. 2020, c. 264.

§ 38.2-625. Notice to Commissioner.

1. If a licensee has determined that a cybersecurity event has actually occurred, such licensee shall notify the Commissioner, in accordance with requirements prescribed by the Commission, as promptly as possible but in no event later than three business days from such determination if:
   1. The licensee is a domestic insurance company, or in the case of a producer, the Commonwealth is the licensee’s home state and the cybersecurity event meets threshold and other requirements prescribed by the Commission; or
   2. The licensee reasonably believes that the nonpublic information involved is of 250 or more consumers residing in the Commonwealth or the licensee is required under federal law or the laws of another state to provide notice of the cybersecurity event to any government body, self-regulatory agency, or other supervisory body.
2. Notice provided pursuant to this section shall be in electronic form and shall include as much of the following information as possible:
   1. The date of the cybersecurity event;
   2. A description of how the nonpublic information was exposed, lost, stolen, or breached, including the specific roles and responsibilities of third-party service providers, if any;
   3. How the cybersecurity event was discovered;
   4. Whether any lost, stolen, or breached information has been recovered and, if so, how this was done;
   5. The identity of the source of the cybersecurity event;
   6. Whether the licensee has filed a police report or has notified any regulatory, government, or law-enforcement agencies and, if so, when such notification was provided;
   7. A description of the specific types of information acquired without authorization. Specific types of information include particular data elements such as medical information, financial information, or other information allowing identification of the consumer;
   8. The period during which the information system was compromised by the cybersecurity event;
   9. The number of consumers in the Commonwealth affected by the cybersecurity event. The licensee shall provide the best estimate in the initial report to the Commissioner and update this estimate with each subsequent report to the Commissioner pursuant to this section;
   10. The results of any internal review identifying a lapse in either automated controls or internal procedures, or confirming that all automated controls or internal procedures were followed;
   11. A description of efforts being undertaken to remediate the situation that permitted the cybersecurity event to occur;
   12. A copy of the licensee’s consumer privacy policy and a statement outlining the steps the licensee will take to investigate and notify consumers affected by the cybersecurity event; and
   13. The name of a contact person who is both familiar with the cybersecurity event and authorized to act for the licensee.
3. A licensee shall have a continuing obligation to update and supplement initial and subsequent notifications to the Commissioner concerning the cybersecurity event.
4. Each licensee shall notify consumers in compliance with § 38.2-626 , and provide a copy of the notice sent to consumers under such section to the Commissioner, when a licensee is required to notify the Commissioner under this section.
5. If there is a cybersecurity event in a system maintained by a third-party service provider, the licensee, once it has become aware of such cybersecurity event, shall treat such event as it would under this section, unless the third-party service provider provides notice in accordance with this section. The computation of a licensee’s deadlines shall begin on the day after the third-party service provider notifies a licensee of the cybersecurity event or the licensee otherwise has actual knowledge of the cybersecurity event, whichever is sooner.
6. If a cybersecurity event involves nonpublic information that is used by a licensee that is acting as an assuming insurer or is in the possession, control, or custody of a licensee that is acting as an assuming insurer or its third-party service provider and the licensee does not have a direct contractual relationship with the affected consumers, the licensee shall notify its affected ceding insurers and the head of its supervisory state agency of its state of domicile within three business days of making the determination or receiving notice from its third-party service provider that a cybersecurity event has occurred. Ceding insurers that have a direct contractual relationship with affected consumers shall fulfill the consumer notification requirements imposed under § 38.2-626 and any other notification requirements relating to a cybersecurity event imposed under this section.
7. If there is a cybersecurity event involving nonpublic information that is in the possession, custody, or control of a licensee that is an insurer or its third-party service provider and for which a consumer accessed the insurer’s services through an independent insurance producer, the insurer shall notify the producers of record of all affected consumers as soon as practicable as directed by the Commissioner. The insurer is excused from this obligation for those instances in which it does not have the current producer of record information for any individual consumer.
8. Nothing in this article shall prevent or abrogate an agreement between a licensee and another licensee, a third-party service provider, or any other party to fulfill any of the investigation requirements imposed under § 38.2-624 or notice requirements imposed under this section.

History. 2020, c. 264.

§ 38.2-626. Notice to consumers.

1. A licensee that maintains consumers’ nonpublic information shall notify the consumer of any cybersecurity event without unreasonable delay after making a determination or receiving notice the cybersecurity event has occurred, if consumers’ nonpublic information was accessed and acquired by an unauthorized person or such licensee reasonably believes consumers’ nonpublic information was accessed and acquired by an unauthorized person and the cybersecurity event has a reasonable likelihood of causing or has caused identity theft or other fraud to such consumers. Such notice shall include a description of the following:
   1. The incident in general terms;
   2. The type of nonpublic information that was subject to the unauthorized access and acquisition;
   3. The general acts of the licensee to protect the consumer’s nonpublic information from further unauthorized access;
   4. A telephone number that the consumer may call for further information and assistance, if one exists; and
   5. Advice that directs the consumer to remain vigilant by reviewing account statements and monitoring the consumer’s credit reports.
2. Notice to consumers under this section shall be given as written notice to the last known postal address in the records of the licensee, telephone notice, or electronic notice. However, if the licensee required to provide notice demonstrates that the cost of providing notice will exceed $50,000, the affected class of consumers to be notified exceeds 100,000 consumers, or the licensee does not have sufficient contact information or consent to provide notice, substitute notice may be provided. Substitute notice shall consist of (i) e-mail notice if the licensee has e-mail addresses for the members of the affected class of consumers; (ii) conspicuous posting of the notice on the website of the licensee if the licensee maintains a website; and (iii) notice to major statewide media.
3. In the event that a licensee provides notice to more than 1,000 consumers at one time pursuant to this section, the licensee shall also notify, without unreasonable delay, all consumer reporting agencies that compile and maintain files on consumers on a nationwide basis, as defined in 15 U.S.C. § 1681a (p), of the timing, distribution, and content of the notice.
4. Notice required by this section shall not be considered a debt communication as defined by the Fair Debt Collection Practices Act in 15 U.S.C. § 1692a.
5. Notice required by this section and § 38.2-625 may be delayed if, after the person notifies a law-enforcement agency, the law-enforcement agency determines and advises the person that the notice will impede a criminal or civil investigation or jeopardize national or homeland security. Notice shall be made without unreasonable delay after the law-enforcement agency determines that the notification will no longer impede the investigation or jeopardize national or homeland security.
6. If there is a cybersecurity event in a system maintained by a third-party service provider, the licensee, once it has become aware of such cybersecurity event, shall treat such event as it would under this section, unless the third-party service provider provides notice in accordance with this section. The computation of a licensee’s deadlines shall begin on the day after the third-party service provider notifies a licensee of the cybersecurity event or the licensee otherwise has actual knowledge of the cybersecurity event, whichever is sooner.

History. 2020, c. 264.

§ 38.2-627. Powers and duties of the Commission; exclusive state standards.

1. The Commissioner may examine and investigate the affairs of any licensee to determine whether a licensee has been or is engaged in any conduct in violation of this article. This power is in addition to the powers that the Commissioner has under Article 4 of Chapter 13 (38.2-1300 et seq.) and Chapter 18 (38.2-1800 et seq.). Any such investigation or examination shall be conducted pursuant to Chapters 13 and 18.
2. Whenever the Commissioner has reason to believe that a licensee has been or is engaged in conduct in the Commonwealth that violates this article, the Commissioner may take action that is necessary or appropriate to enforce the provisions of this article.
3. The Commission may examine and investigate the affairs of any insurance-support organization that acts on behalf of an insurance institution or agent as defined in § 38.2-602 and that either (i) transacts business in the Commonwealth or (ii) transacts business outside the Commonwealth and has an effect on a person residing in the Commonwealth, in order to determine whether the insurance-support organization has been or is engaged in any conduct in violation of this article.
4. The Commission shall adopt rules and regulations implementing the provisions of this article.
5. This article and any rules adopted pursuant to this article establish the exclusive state standards applicable to licensees for data security, the security of nonpublic information, the investigation of cybersecurity events, and notification of cybersecurity events for those individuals and entities subject to this article.

History. 2020, c. 264.

§ 38.2-628. Confidentiality.

1. Any documents, materials, or other information in the control or possession of the Bureau that are furnished by a licensee or an employee or agent thereof acting on behalf of licensee pursuant to subsection H of § 38.2-623 or subdivisions B 2, 3, 4, 5, 8, 10, and 11 § 38.2-625 , or that are obtained by the Commissioner in an investigation or examination pursuant to § 38.2-627 , shall be confidential by law and privileged, shall not be subject to § 12.1-19 , shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the Commissioner is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the Commissioner’s duties.
2. Neither the Commissioner nor any person who received documents, materials, or other information while acting under the authority of the Commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection A.
3. In order to assist in the performance of the Commissioner’s duties under this article, the Commissioner may:
   1. Share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection A, with other state, federal, and international regulatory agencies; with the National Association of Insurance Commissioners (NAIC), its affiliates, or its subsidiaries; and with state, federal, and international law-enforcement authorities, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the documents, materials, or other information;
   2. Receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC, its affiliates, or its subsidiaries and from regulatory and law-enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any documents, materials, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the documents, materials, or information;
   3. Share documents, materials, or other information subject to subsection A with a third-party consultant or vendor provided the consultant agrees in writing to maintain the confidentiality and privileged status of the documents, materials, or other information; and
   4. Enter into agreements governing sharing and use of information consistent with this subsection.
4. No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the Commissioner under this section or as a result of sharing as authorized in subsection C.
5. Documents, materials, or other information in the possession or control of the NAIC or a third-party consultant or vendor as a result of an examination or investigation pursuant to subsection H of § 38.2-623 or subdivisions B 2, 3, 4, 5, 8, 10, and 11 of § 38.2-625 shall be confidential by law and privileged, shall not be subject to § 12.1-19 , shall not be subject to subpoena, and shall not be subject to discovery in any private civil action.
6. Nothing in this article shall prohibit the Commissioner from releasing final, adjudicated actions that are open to public inspection to a database or other clearinghouse service maintained by the NAIC, its affiliates, or its subsidiaries.

History. 2020, c. 264.

§ 38.2-629. Exceptions.

1. The following exceptions shall apply to this article:
   1. A licensee subject to HIPAA that has established and maintains an information security program pursuant to such statutes, rules, regulations, or procedures established thereunder shall be considered to meet the requirements of § 38.2-623 , provided that licensee is compliant with, and submits a written statement certifying its compliance with, the same, and certifies that it will protect nonpublic information not subject to HIPAA in the same manner it protects information that is subject to HIPAA, and any such licensee that investigates a cybersecurity event and notifies consumers in accordance with HIPAA and any HIPAA-established rules, regulations, or procedures shall be considered compliant with the requirements of §§ 38.2-624 and 38.2-626 .
   2. An employee, agent, representative or designee of a licensee, who is also a licensee, is exempt from §§ 38.2-623 , 38.2-624 , 38.2-625 , and 38.2-626 and need not develop its own information security program or conduct an investigation of or provide notices to the Commissioner and consumers relating to a cybersecurity event, to the extent that the employee, agent, representative, or designee is covered by the information security program, investigation, and notification obligations of the other licensee.
   3. A licensee affiliated with a depository institution that maintains an information security program in compliance with the Interagency Guidelines Establishing Standards for Safeguarding Customer Information (Interagency Guidelines) as set forth pursuant to §§ 501 and 505 of the federal Gramm-Leach-Bliley Act, P.L. 106-102, shall be considered to meet the requirements of § 38.2-623 and any rules, regulations, or procedures established thereunder, provided that the licensee produces, upon request, documentation satisfactory to the Commissioner that independently validates the affiliated depository institution’s adoption of an information security program that satisfies the Interagency Guidelines.
2. If a licensee ceases to qualify for an exception, such licensee shall have 180 days from the date it ceases to qualify to comply with this article.

History. 2020, c. 264.

§ 38.2-700. When domestic insurer may hold stock of another insurer.

Subject to Article 6 (§ 38.2-1335 et seq.) of Chapter 13 and Chapter 14 (§ 38.2-1400 et seq.) of this title, any domestic insurer may retain, invest in or acquire the whole or any part of the capital stock of any other insurer, unless the effect of such action (i) substantially lessens competition generally or (ii) tends to create a monopoly, in the business of insurance.

History. 1952, c. 317, § 38.1-58; 1983, c. 457; 1986, c. 562.

Michie’s Jurisprudence.

For related discussion, see 13A M.J. Monopolies and Restraints of Trade, § 8.

§ 38.2-701. When director of a domestic insurer may be a director of another insurer.

Any domestic insurer may have a director who is also a director of another domestic, foreign or alien insurer, unless the effect thereof (i) substantially lessens competition generally or (ii) tends to create a monopoly, in the business of insurance.

History. 1952, c. 317, § 38.1-59; 1986, c. 562.

§ 38.2-702. Violations; procedure; cease and desist orders.

If the Commission has reason to believe that there is a violation of either § 38.2-700 or § 38.2-701 , it shall issue and serve upon the insurer or the director concerned a statement of the charges and a notice of a hearing to be held at a time and place fixed in the notice, which shall not be less than thirty days after notice is served. The notice shall require the insurer or director to show cause why an order should not be issued directing the alleged offender to cease and desist from the violation. At such hearing, the insurer or director shall have an opportunity to be heard and to show cause why an order should not be issued requiring the insurer or director to cease and desist from the violation. In all matters in connection with such charges or hearing, the Commission shall have the jurisdiction, power, and authority granted or conferred upon it by Title 12.1, and, except as otherwise provided in this chapter, the procedure shall conform to and the right of appeal shall be the same as that provided in that title.

History. 1952, c. 317, § 38.1-60; 1971, Ex. Sess., c. 1; 1986, c. 562.

§ 38.2-703. Cease and desist orders may be entered.

If, after a hearing, the Commission finds that there has been a violation of § 38.2-700 or § 38.2-701 , it may issue an order reciting its findings and directing the insurer or director to cease and desist from the violation.

History. 1952, c. 317, § 38.1-61; 1986, c. 562.

§ 38.2-704. Penalties.

1. Any person who violates a cease and desist order entered under § 38.2-703 shall be subject to the provisions of § 38.2-218 .
2. Any person convicted of violating this chapter may, in addition, be punished under the provisions of Chapter 1.1 (§ 59.1-9.1 et seq.) of Title 59.1.

History. 1952, c. 317, § 38.1-62; 1986, c. 562.

§ 38.2-705. Antitrust provision.

Conduct subject to regulation, review or examination pursuant to this title shall, in addition, be subject to the provisions of the Virginia Antitrust Act (§ 59.1-9.1 et seq.).

History. 1986, c. 562.

§ 38.2-800. Definition.

For the purposes of this article, “insurer” includes health services plans, health maintenance organizations, legal services plans, dental or optometric services plans, and unlicensed insurers approved by the Commission to issue surplus lines coverage as respectively provided for in Chapters 42, 43, 44, 45, and 48 of this title.

History. 1986, c. 562; 2007, c. 157.

The 2007 amendments.

The 2007 amendment by c. 157 inserted “and unlicensed insurers approved by the Commission to issue surplus lines coverage” and “and 48” and made related changes.

§ 38.2-801. What constitutes appointment of agent for service of process.

1. The clerk of the Commission shall be deemed to be appointed by any insurer unlicensed in this Commonwealth as its agent for the service of process in accordance with § 13.1-758 if any of the following acts are effected by mail or otherwise in this Commonwealth:
   1. The issuance or delivery of insurance contracts to residents of this Commonwealth or to corporations authorized to do business in this Commonwealth;
   2. The solicitation of applications for these insurance contracts;
   3. The collection of premiums, membership fees, assessments or other considerations for these insurance contracts; or
   4. The transaction of any other insurance business in connection with these insurance contracts.

History. 1952, c. 317, § 38.1-64; 1956, c. 431; 1958, c. 597; 1986, c. 562.

§ 38.2-802. How process served.

Service of process or notice upon any unlicensed insurer in any suit, action or proceeding arising out of or in connection with the acts listed in § 38.2-801 in this Commonwealth shall be made in the manner prescribed in § 13.1-758 .

History. 1952, c. 317, § 38.1-65; 1956, c. 431; 1958, c. 597; 1986, c. 562.

§ 38.2-803. Alternate method of service.

1. Service of process or notice in any action, suit or proceeding shall be valid if:
   1. Served upon any person within this Commonwealth who, in this Commonwealth on behalf of the unlicensed insurer, is (i) soliciting insurance, (ii) making, issuing, or delivering any insurance contract, or (iii) collecting or receiving any premium, membership fee, assessment or other consideration for insurance; and
   2. A copy of the process or notice is sent within ten days thereafter by registered mail to the unlicensed insurer at its last known principal place of business.
2. A post-office receipt showing the sender’s name, and the unlicensed insurer’s name and address, and the plaintiff’s or plaintiff’s attorney’s affidavit of compliance with the procedures set out in subsection A of this section shall be filed with the clerk of the court in which the proceeding is pending on or before the date the unlicensed insurer is required to appear, or within such further time as the court allows.

History. 1952, c. 317, § 38.1-66; 1986, c. 562.

§ 38.2-804. Other legal service not limited.

Nothing in this article shall limit the right to serve any process or notice upon any licensed insurer in any other manner permitted by law.

History. 1952, c. 317, § 38.1-67; 1986, c. 562.

§ 38.2-805. When judgment may be entered.

No judgment based on default of appearance shall be entered against any defendant served pursuant to § 38.2-803 until the expiration of thirty days from the date that the affidavit of compliance is filed.

History. 1952, c. 317, § 38.1-68; 1986, c. 562.

§ 38.2-806. Defense of action by unlicensed insurer.

1. Before any unlicensed insurer files or causes to be filed any pleading in any action, suit or proceeding instituted against it, that insurer shall either:
   1. Deposit cash or securities with the clerk of the court in which the action, suit or proceeding is pending, or file with the clerk a bond in an amount to be fixed by the court which shall be sufficient to secure the payment of any final judgment; or
   2. Procure a certificate of authority and a license to transact the business of insurance in this Commonwealth.
2. The court may order a postponement in any action, suit or proceeding in which service is made in the manner provided in § 38.2-802 or § 38.2-803 to afford the unlicensed insurer reasonable opportunity to comply with the provisions of subsection A of this section and to defend the action.
3. Nothing in subsection A of this section shall be construed to prevent any unlicensed insurer from appearing specially in the suit or other proceeding in which service was made in the manner provided in this article on the ground either that (i) the insurer has not done any of the acts listed in § 38.2-801 , or (ii) the person on whom service was made pursuant to § 38.2-803 was not doing any of the acts listed in § 38.2-803 .

History. 1952, c. 317, § 38.1-69; 1986, c. 562.

§ 38.2-807. Attorney fees.

1. In any action against an unlicensed insurer upon an insurance contract issued or delivered in this Commonwealth to a resident of this Commonwealth or to a corporation authorized to do business in this Commonwealth, the court may allow the plaintiff a reasonable attorney fee if (i) the insurer has failed to make payment in accordance with the terms of the contract for 30 days after demand prior to the commencement of the action and (ii) the court concludes that the refusal was vexatious and without reasonable cause. The fee shall not exceed 33 1/3 percent of the amount that the court or jury finds the plaintiff is entitled to recover against the insurer, but shall be at least $200.
2. Failure of the insurer to defend the action shall be deemed prima facie evidence that its failure to make payment was vexatious and without reasonable cause.

History. 1952, c. 317, § 38.1-70; 1986, c. 562; 2010, c. 343.

The 2010 amendments.

The 2010 amendment by c. 343 substituted “33 1/3 percent” for “12 1/2 percent” and “$200” for “$100” in the last sentence of subsection A and made a minor stylistic change.

Research References.

Bryson on Virginia Civil Procedure (Matthew Bender). Chapter 14 Costs. § 14.02 Items Included. Bryson.

Michie’s Jurisprudence.

For related discussion, see 5A M.J. Costs, § 3.

§ 38.2-808. Definition.

For the purposes of this article, “agent” shall have the meaning as set forth in § 38.2-1800 which shall include a legal services agent, a health agent and a dental or optometric services agent.

History. 1986, c. 562.

§ 38.2-809. What constitutes appointment of agent for service of process.

The clerk of the Commission shall be deemed to be appointed by any unlicensed nonresident broker or agent as its agent for the service of process pursuant to § 13.1-758 if any of the following acts are effected by mail or otherwise in this Commonwealth by such unlicensed nonresident broker or agent: (i) the issuance or delivery of insurance contracts to residents of this Commonwealth or to corporations authorized to do business in this Commonwealth, (ii) the solicitation of applications for such contracts, (iii) the collection of premiums, membership fees, assessments or other considerations for such contracts, or (iv) the transaction of any other insurance business in connection with such contracts.

History. 1958, c. 180, § 38.1-70.2; 1986, c. 562.

§ 38.2-810. How process or notice served.

Service of process or notice upon any unlicensed nonresident broker or agent in any suit, action or proceeding arising out of or in connection with the acts enumerated in § 38.2-809 in this Commonwealth shall be made in the manner prescribed in § 13.1-758 .

History. 1958, c. 180, § 38.1-70.3; 1986, c. 562.

§ 38.2-811. Other legal service not limited.

Nothing in this article shall limit the right to serve any process or notice upon any unlicensed nonresident broker or agent in any other manner permitted by law.

History. 1958, c. 180, § 38.1-70.4; 1986, c. 562.

Michie’s Jurisprudence.

For related discussion, see 14B M.J. Process, § 27.

§ 38.2-812. Definition.

For the purposes of this article, “public adjuster” shall have the meaning as set forth in § 38.2-1845.1 .

History. 2012, cc. 734, 735.

Editor’s note.

Acts 2012, cc. 734 and 735, cl. 2 provides: “That the provisions of this act shall become effective on January 1, 2013.”

§ 38.2-813. What constitutes appointment of agent for service of process.

The Clerk of the Commission shall be deemed to be appointed by any unlicensed public adjuster as its agent for the service of process pursuant to § 13.1-758 if any of the following acts are effected by mail or otherwise in the Commonwealth by such unlicensed public adjuster: (i) the investigation, negotiation, adjustment, or provision of advice to insureds in relation to first party claims arising under insurance contracts that insure real or personal property located in the Commonwealth; (ii) the solicitation of public adjusting for such contracts; (iii) the collection of fees, commissions, salaries, or other considerations for such contracts; or (iv) the transaction of any other insurance business in connection with such contracts.

History. 2012, cc. 734, 735.

Editor’s note.

Acts 2012, cc. 734 and 735, cl. 2 provides: “That the provisions of this act shall become effective on January 1, 2013.”

§ 38.2-814. How process or notice served.

Service of process or notice upon any unlicensed public adjuster in any suit, action, or proceeding arising out of or in connection with the acts enumerated in § 38.2-813 in the Commonwealth shall be made in the manner prescribed in § 13.1-758 .

History. 2012, cc. 734, 735.

Editor’s note.

Acts 2012, cc. 734 and 735, cl. 2 provides: “That the provisions of this act shall become effective on January 1, 2013.”

§ 38.2-815. Other legal service not limited.

Nothing in this article shall limit the right to serve any process or notice upon any unlicensed public adjuster in any other manner permitted by law.

History. 2012, cc. 734, 735.

Editor’s note.

Acts 2012, cc. 734 and 735, cl. 2 provides: “That the provisions of this act shall become effective on January 1, 2013.”

§ 38.2-900. Workers’ compensation.

All acts and parts of acts inconsistent with the provisions of this title are hereby repealed to the extent of the inconsistency. However, the provisions of this title shall not amend or repeal any provisions of Title 65.2 relating to workers’ compensation.

History. 1952, c. 317, § 38.1-43.1; 1986, c. 562.

§ 38.2-901. References to former sections of Title 38 or Title 38.1.

Wherever any of the conditions, requirements, provisions or contents of any section of Title 38 as such title existed prior to July 1, 1952, or Title 38.1, as that title existed before July 1, 1986, are transferred to a new or different section, and wherever any such old section is given a new section number in this title, all references to the former section of Title 38 or Title 38.1 appearing elsewhere in this Code than in this title shall be construed to apply to the new or renumbered section containing the conditions, requirements, provisions or contents.

History. 1952, c. 317, § 38.1-43.2; 1986, c. 562.

§ 38.2-902. Existing licenses.

Each license of an insurer, agent, surplus lines broker, or other person, issued and in force immediately before July 1, 1986, shall continue in force until its date of expiration or until terminated as provided in this title.

History. 1952, c. 317, § 38.1-43.3; 1986, c. 562.

§ 38.2-903. Existing form of policy, contract, certificate, application, rider or endorsement.

If any form does not comply with the provisions of this title but did comply with the provisions of any regulation or statute repealed by this Act of Assembly, it may continue to be used for a period of twelve months following July 1, 1986, unless the Commission prescribes otherwise pursuant to authority conferred by law.

History. 1952, c. 317, § 38.1-43.4; 1986, c. 562.

§ 38.2-904. Existing rates.

Every rate filed and presently in effect is continued and made effective until new rates are filed and become effective in accordance with the provisions of this title.

History. 1952, c. 317, § 38.1-43.5; 1972, c. 836; 1973, c. 504; 1986, c. 562.

§ 38.2-1000. Incorporation of domestic stock insurers.

Domestic stock insurers shall be incorporated under the provisions of Article 3 (§ 13.1-618 et seq.) of Chapter 9 of Title 13.1. A foreign insurer may become a domestic insurer under the provisions of Article 11 (§ 13.1-705 et seq.) or Article 12 (§ 13.1-715.1 et seq.) of Chapter 9 of Title 13.1. Except as otherwise provided in this title, domestic stock insurers shall be subject to all the general restrictions and shall have all the general powers imposed and conferred by law.

History. Code 1950, §§ 38-27, 38-28; 1952, c. 317, § 38.1-71; 1956, c. 431; 1986, c. 562; 1995, c. 69; 2005, c. 765.

The 2005 amendments.

The 2005 amendment by c. 765 substituted “(§ 13.1-715.1 et seq.)” for “(§ 13.1-716 et seq.).”

§ 38.2-1001. Incorporation of domestic mutual insurers.

Domestic mutual insurers shall be incorporated under the provisions of Article 3 (§ 13.1-818 et seq.) of Chapter 10 of Title 13.1. A foreign insurer may become a domestic insurer under the provisions of Article 10 (§ 13.1-884 et seq.) or Article 11 (§ 13.1-893.1 et seq.) of Chapter 10 of Title 13.1. Except as otherwise provided in this title, domestic mutual insurers shall be subject to all the general restrictions and shall have all the general powers imposed and conferred by law.

History. Code 1950, §§ 38-27, 38-497, 38-498, 38-500, 38-501, 38-502; 1952, c. 317, § 38.1-74; 1956, c. 431; 1986, c. 562; 1995, c. 69.

Editor’s note.

At the direction if the Virginia Code Commission, “Article 11 (§ 13.1-893.1 et seq.)” was substituted for “Article 11 (§ 13.1-894 et seq.).”

Cross references.

For constitutional provisions concerning corporations, see Va. Const., Art. IX.

§ 38.2-1002. Additional requirements of articles of incorporation; name.

The articles of incorporation for a domestic mutual insurer shall be signed by at least twenty natural persons, a majority of whom are legal residents of this Commonwealth. The articles shall, in addition to complying with the requirements of Article 3 (§ 13.1-818 et seq.) of Chapter 10 of Title 13.1, set forth the classes of insurance the insurer proposes to write.

History. Code 1950, §§ 38-28, 38-497, 38-498, 38-499; 1952, c. 317, § 38.1-75; 1956, c. 431; 1958, c. 596; 1986, c. 562.

§ 38.2-1003. When corporate status attained; bylaws filed with Commission.

A domestic mutual insurer shall have legal existence as soon as the charter has been recorded with the Commission, after which the board of directors named in the charter may adopt bylaws and accept applications for insurance. However, no insurance shall be put in force until the insurer has been licensed to transact the business of insurance as provided by this chapter. The bylaws and any amendments shall be filed with the Commission within thirty days after adoption.

History. Code 1950, § 38-503; 1952, c. 317, § 38.1-76; 1986, c. 562.

§ 38.2-1004. Voting.

Each member of a domestic mutual insurer shall have one vote, or a number of votes based upon the insurance in force, the number of policies held, or the amount of premiums paid, as provided in the bylaws of the insurer.

History. Code 1950, § 38-507; 1952, c. 317, § 38.1-77; 1986, c. 562.

§ 38.2-1005. Certain mutual companies and societies not to become stock companies without approval of Commission.

No mutual insurance company, mutual assessment property and casualty insurer, cooperative nonprofit life benefit company, mutual assessment life, accident and sickness company, burial society, or fraternal benefit society shall be converted into a stock corporation unless such conversion and the plan for conversion are approved by the Commission. The insurer shall comply with § 38.2-1028 before approval for conversion is granted by the Commission unless the Commission finds that the insurer will have the required capital and surplus within a reasonable time after conversion. A society or other nonstock company licensed under any chapter of this title except Chapter 10 (§ 38.2-1000 et seq.) shall be licensed as a mutual insurer subject to § 38.2-1029 prior to seeking approval for conversion under § 38.2-1005.1 or § 38.2-1005.1:9 .

History. 1952, c. 317, § 38.1-79; 1970, c. 636; 1986, c. 562; 2001, c. 726.

The 2001 amendments.

The 2001 amendment by c. 726 inserted “mutual assessment property and casualty insurer” near the beginning of the first sentence and added the last sentence.

§ 38.2-1005.1. Conversion of a domestic mutual insurer to a domestic stock insurer.

1. Any domestic mutual insurer may convert to a domestic stock insurer pursuant to a plan of conversion approved by the Commission.
2. The Commission shall approve any such plan of conversion if, after giving notice and an opportunity to be heard to the policyholders of the domestic mutual insurer, the Commission determines that:
   1. The terms and conditions of the plan are fair and equitable to the policyholders of the domestic mutual insurer;
   2. The plan is subject to approval by a vote of more than two-thirds of all votes cast on the plan at a meeting of the members of the domestic mutual insurer called for that purpose at which a quorum is present;
   3. Except as otherwise provided in subdivision 4 of this subsection, the plan allocates and directs that the entire stock ownership interests and other consideration to be distributed pursuant to the plan of conversion be distributed to the policyholders of the domestic mutual insurer;
   4. In the case of a domestic mutual insurer that converted from a health services plan that was in existence prior to December 31, 1987, the plan of conversion allocates and distributes to the State Treasurer, in addition to any shares of stock that the Commonwealth may be entitled to receive as a policyholder, shares of stock or cash or both with a value equal to the surplus, computed in accordance with generally accepted accounting principles, of such health services plan on December 31, 1987, plus ten million dollars; and
   5. Immediately after the conversion, the insurer will have the fully paid capital stock and surplus required by applicable law.
3. A plan of conversion that utilizes a statutory merger in order to effect a conversion may be approved in accordance with this section and § 38.2-1005.1:9 , and the provisions of § 38.2-1018 shall not be applicable to such plan of conversion.

History. 1996, cc. 801, 831; 2001, c. 726.

Editor’s note.

Acts 1996, cc. 801 and 831, cls. 2, provide: “[t]hat the provisions of this act shall be applicable to all plans of conversion acted on by the State Corporation Commission after the effective date of this act [July 1, 1996].”

Acts 1996, cc. 801 and 831, cls. 3, provide: “[t]hat, on the effective date of this act [July 1, 1996], any plan of conversion then pending before the State Corporation Commission shall not be approved by the Commission unless such plan provides for, or is amended to provide for, the appointment to the initial board of directors of the insurer’s parent company, for a term of three years each, one director from a list of three nominees submitted by the Joint Rules Committee, as defined in § 51.1-124.3 , and one director from a list of three nominees submitted by the Attorney General. Such nominees shall be citizens who do not hold public office and have no direct or indirect financial interest, except as a consumer, in the insurer.”

The 2001 amendments.

The 2001 amendment by c. 726 substituted “in accordance with this section and § 38.2-1005.1:9 ” for “under this section” in subsection C.

§ 38.2-1005.1:1. Definitions.

As used in this article:

“Converted company” means a stock insurance company incorporated and organized under the laws of this Commonwealth that continues in existence after a reorganization under this article in connection with the formation of a mutual holding company.

“Converted mutual holding company” means the stock corporation into which a mutual holding company has been converted pursuant to § 38.2-1005.1:9 .

“Eligible member” means a member as of the date the board of directors of a mutual company adopts a plan of MHC conversion under this article. For the conversion of a mutual holding company, the term eligible member means a member of the mutual holding company who is of record on the date the board of directors of the mutual holding company adopts a plan of conversion authorized pursuant to this article.

“Intermediate holding company” means a corporation authorized to issue one or more classes of capital stock, the corporate purposes of which include holding, directly or indirectly, the voting stock of a converted company.

“Member” means a person who, on the records of a mutual company and pursuant to the articles of incorporation or bylaws of a mutual company, is deemed to be the holder of a membership interest in a mutual company. The term member also includes a person insured under a group policy if:

1. The person is insured or covered under a group life insurance policy or group annuity contract under which funds are accumulated and allocated to the respective persons covered under such policy or contract;
2. The person has the right to direct the application of the funds so allocated;
3. The group policyholder does not pay any portion of the premiums or deposits for the policy or contract; and
4. The mutual company has the names and addresses of the persons covered under the group life insurance policy or group annuity contract.When a plan of MHC conversion has become effective under this article, the term “member” shall mean a member of the mutual holding company created by such plan. “Mutual company” means a mutual insurance company incorporated and organized under the laws of this Commonwealth and licensed pursuant to Chapter 10 (§ 38.2-1000 et seq.) of this title. “Mutual holding company” or “MHC” means a corporation organized under the provisions of the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.) in connection with the reorganization of a mutual company under this article. A MHC shall be subject to the provisions of this article and any other provisions of this title that are applicable to mutual companies and not inconsistent with the provisions of this article. The articles of incorporation of a MHC shall state:
5. That its assets shall be subject to inclusion in the estate of the converted company in any proceeding initiated against the converted company under Chapter 15 (§ 38.2-1500 et seq.) of this title. “Plan of MHC conversion” or “plan” means a plan adopted pursuant to this article by the board of directors of a mutual company for the conversion of a mutual company into a direct or indirect stock subsidiary of a mutual holding company. “Policy” includes any group or individual policy or contract issued by a mutual company, including an annuity contract, but does not include a certificate of insurance issued in connection with a group policy or contract. “Policyholder” means the holder of a policy other than a reinsurance contract.

1. That the corporation is organized under this article as a MHC;

2. That the MHC shall hold not less than a majority of the shares of voting stock of a converted company or an intermediate holding company that, in turn, directly or indirectly holds all of the voting shares of a converted company;

3. That the corporation is not authorized to issue capital stock except in accordance with the provisions of § 38.2-1005.1:9 ;

4. That its members shall have the rights specified in this article and its articles of incorporation and bylaws; and

History. 2001, c. 726.

§ 38.2-1005.1:2. Formation of mutual holding company and conversion of mutual company.

A mutual company, upon approval of the Commission, may reorganize by forming a mutual holding company and continue the corporate existence of the reorganizing mutual company as a stock insurance company in accordance with the provisions of this article. At the time a plan of MHC conversion becomes effective and without any further action:

1. The mutual company shall become a stock corporation, the membership interests of the policyholders in the mutual company shall be deemed extinguished and all eligible members of the mutual company shall become members of the mutual holding company in accordance with the articles of incorporation and bylaws of the mutual holding company and the applicable provisions of this article and Chapter 10 (§ 38.2-1000 et seq.) of this title; and
2. All of the shares of capital stock of the converted company shall be issued to the mutual holding company that, at all times thereafter, shall own not less than a majority of the issued shares of the voting stock of the converted company; however, either at the time the conversion becomes effective or, with the Commission’s approval, at any later time, the voting shares of the converted company may be held by one or more intermediate holding companies so long as the mutual holding company at all times owns, directly or indirectly, a majority of the voting shares of the converted company.

History. 2001, c. 726.

§ 38.2-1005.1:3. Mutual holding company membership interest.

1. A member of a mutual holding company shall not transfer membership in the company or any right arising from membership.
2. A member of a mutual holding company shall not, as a member, be personally liable for or subject to assessment on account of any act, debt, liability or obligation of the MHC or of any entity owned or controlled by the MHC.
3. A membership interest in a mutual holding company shall not constitute a security under the laws of the Commonwealth.

History. 2001, c. 726.

§ 38.2-1005.1:4. Contents of plan of MHC conversion.

A plan of MHC conversion shall:

1. Include:
   1. The reasons for the proposed conversion; and
   2. The effect of the proposed conversion on the mutual company’s existing policies.
2. Provide that:
   1. All policies of the converted company in force on the effective date of the conversion shall continue in force under the terms of those policies, except that all voting and other membership rights of the policyholders provided for under the policies or under the laws of this Commonwealth and any provisions for contingent liability of members shall be extinguished on the effective date of the plan of MHC conversion.
   2. The holders of participating policies in force on the date of conversion shall continue to have the right to receive dividends as provided in such policies, if any. However, except in the case of a mutual company’s life insurance policies, guaranteed renewable accident and sickness insurance policies, and non-cancelable accident and sickness insurance policies, if any, a plan may provide that the converted stock company will issue the insured a nonparticipating policy as a substitute for the participating policy on the renewal date of the participating policy next following the date the plan becomes effective.
   3. If a mutual life insurance company has participating life insurance policies in force on the effective date of the plan of conversion, the converted company will maintain such participating life policies as a closed block of business for dividend purposes, except that any or all classes of group participating policies may be excluded from the closed block. The plan shall provide for the establishment of one or more segregated accounts in connection with the closed block of business and shall allocate to such segregated accounts sufficient assets of the mutual company so that the assets so allocated, together with the revenue for the closed block of business, are sufficient to support the closed block including, but not limited to, the payment of claims, expenses, taxes and any dividends that are provided for under the terms of the participating policies with appropriate adjustments in the dividends for experience changes. The plan shall be accompanied by an opinion of a qualified actuary or appointed actuary who meets the standards provided in this title or the Commission’s regulations for the submission of actuarial opinions as to the adequacy of reserves or assets. The actuarial opinion shall relate to the adequacy of the assets allocated to the segregated accounts of the closed block and shall be based on methods of analysis deemed appropriate for such purposes by the Actuarial Standards Board. The amount of assets allocated to the segregated accounts of the closed block shall be based upon the mutual company’s most recent annual statement updated to the effective date of the conversion. After the effective date of the conversion, the converted company shall keep a separate accounting for the closed block and shall make and include in each annual statement to be filed with the Commission a separate statement showing gains, losses and expenses properly attributable to the closed block. With the Commission’s prior approval, assets allocated to the closed block of business that are in excess of the amount of assets necessary to support the policies then remaining in the closed block shall revert to the benefit of the converted company. Notwithstanding the provisions of this subdivision, the Commission may waive the requirement for the establishment of a closed block of participating policies when it deems a waiver to be in the best interests of the participating policyholders of the mutual company.
3. Include the requirements for granting membership interest to persons who become policyholders of the converted company subsequent to the effective date of the conversion.
4. Include information sufficient to demonstrate that the financial condition of the converted company will not be diminished by the plan of MHC conversion.
5. Include a description of any current proposal to issue shares of the converted company or an intermediate holding company to the public or to other persons or entities who are not direct or indirect subsidiaries of the mutual holding company.
6. Include the identity of each of the proposed directors and officers of the mutual holding company and each intermediate holding company, if any, together with such biographical information the Commission may require.
7. Include such other information as the Commission considers appropriate for inclusion in the plan of MHC conversion.

History. 2001, c. 726.

§ 38.2-1005.1:5. Adoption and approval of plan of MHC conversion.

1. The board of directors of a mutual company may adopt a plan of MHC conversion that is consistent with the provisions of § 38.2-1005.1:4 by the affirmative vote of not less than two-thirds of the members of the board. At any time before approval of the plan by the mutual company’s eligible members, the board of directors, by affirmative vote of not less than two-thirds of its members, may amend or withdraw the plan.
2. After a plan of MHC conversion has been adopted by the board of directors, the plan and all amendments subsequently adopted shall be filed with the Commission for review and approval. In addition to the plan and supporting documents, the filing shall include (i) the form of notice to eligible members required by subdivision E 1 of this section, (ii) the form of any proxy to be solicited from eligible members together with all material to be distributed in connection with such solicitation, (iii) the proposed articles of incorporation and bylaws of the mutual holding company and each intermediate holding company, if any, and (iv) the revised articles of incorporation and bylaws of the converted company.
3. Upon receipt of the plan and other documents specified in subsection B of this section, the Commission shall conduct a review of the plan. The Commission shall approve the plan if it determines that the provisions of this article have been complied with and that the plan is fair and equitable as regards the interests of the members of the mutual company. The Commission may in its discretion order a public hearing for the purpose of determining whether the plan complies with the conditions listed in the preceding sentence. The Commission may retain, at the mutual company’s expense, any qualified expert not a member of its staff to assist in its review of the plan.
4. The Commission may condition approval of the plan upon such conditions, stipulations or provisions as it determines are reasonably necessary to protect policyholder interests of the converted company, including, but not limited to:
   1. Its prior approval of:
      1. Any acquisition or formation of affiliate entities of the mutual holding company;
      2. The capital structure of any intermediate holding company or any subsequent change thereto;
      3. Any initial public offering or other issuance of equity or debt securities of an intermediate holding company or the converted company by private sale or public offering; and
      4. Expansion of the activities of the mutual holding company into lines of business, industries or operations not identified or apparent at the time of approval of the plan.
   2. Limitations on:
      1. Dividends and distributions, in addition to those otherwise provided by law, if their effect would be to reduce the capital and surplus of the converted company; and
      2. The pledge, encumbrance or transfer of the stock of the converted company.
5. 1. Upon approval of a plan of MHC conversion by the Commission, the plan shall be submitted to a vote of the eligible members at an annual or special meeting of the members of the mutual company held not less than twenty-five nor more than sixty days from the date notice of the meeting is given. Notice of the members’ meeting to act on the plan shall be given to each eligible member at the member’s address as shown on the company’s records not later than forty-five days following the date of the Commission’s approval of the plan. The notice shall identify in reasonable detail the benefits and risks of the plan of MHC conversion and shall be accompanied by a copy of the plan or, if authorized by the Commission, a summary thereof; provided, however, that if a summary of the plan is sent with the notice, members shall be advised that a complete copy of the plan will be available without charge upon request. The notice shall state that the Commission has approved the plan but that such approval does not constitute a recommendation that members vote to adopt the plan. E. 1. Upon approval of a plan of MHC conversion by the Commission, the plan shall be submitted to a vote of the eligible members at an annual or special meeting of the members of the mutual company held not less than twenty-five nor more than sixty days from the date notice of the meeting is given. Notice of the members’ meeting to act on the plan shall be given to each eligible member at the member’s address as shown on the company’s records not later than forty-five days following the date of the Commission’s approval of the plan. The notice shall identify in reasonable detail the benefits and risks of the plan of MHC conversion and shall be accompanied by a copy of the plan or, if authorized by the Commission, a summary thereof; provided, however, that if a summary of the plan is sent with the notice, members shall be advised that a complete copy of the plan will be available without charge upon request. The notice shall state that the Commission has approved the plan but that such approval does not constitute a recommendation that members vote to adopt the plan.
   2. Approval of the plan shall be by the affirmative vote of more than two-thirds of the votes cast by eligible members at a meeting at which a quorum is present. Eligible members may vote in person or by proxy. The number of votes an eligible member may cast shall be determined by the bylaws of the mutual company. If the bylaws contain no such provisions, each eligible member shall be entitled to cast one vote.
   3. Upon approval of the plan by the eligible members of the mutual company, the articles of incorporation of the mutual holding company, any intermediate holding company, and the converted company shall be adopted and filed with the Commission. In addition, the converted company shall file with the Commission a copy of the minutes of the meeting at which the members approved the plan together with a copy of the bylaws of the mutual holding company, any intermediate holding company, and the converted company. The plan of MHC conversion shall become effective on the date that all of the provisions of this section have been complied with and the new and revised articles of incorporation have been filed and admitted to record in the office of the clerk of the Commission in the manner provided by Chapter 9 (§ 13.1-601 et seq.) of Title 13.1.

History. 2001, c. 726.

§ 38.2-1005.1:6. Corporate existence.

1. Upon conversion of a mutual company to a converted company in accordance with the provisions of this article, the corporate existence of the mutual company shall be continued in the converted company with the original date of incorporation of the mutual company. All rights, franchises and interests of the mutual company in and to any type of property, real, personal, mixed, tangible or intangible, held immediately prior to the effective date of the conversion shall be deemed transferred to and vested in the converted company without further act or deed. Simultaneously, the converted company shall be deemed to have assumed all obligations and liabilities of the mutual company that existed immediately prior to the conversion.
2. Unless otherwise provided in the plan of MHC conversion, the directors and officers of the mutual company shall serve as the directors and officers of the converted company until new directors and officers of the converted company are elected in accordance with the articles of incorporation and bylaws of the converted company.

History. 2001, c. 726.

§ 38.2-1005.1:7. Regulation and authority of a mutual holding company.

1. A mutual holding company organized under Title 13.1 pursuant to the authority granted by this article shall have all of the powers granted to a domestic mutual insurance company licensed under Chapter 10 (§ 38.2-1000 et seq.) and shall be subject to the same limitations and restrictions imposed on insurance holding companies by Article 5 (§ 38.2-1322 et seq.), Article 5.1 (§ 38.2-1334.3 et seq.), Article 5.2 (§ 38.2-1334.11 et seq.), and Article 6 (§ 38.2-1335 et seq.) of Chapter 13 as well as all requirements and provisions of the laws of this Commonwealth that are not inconsistent with the provisions of this article except that a mutual holding company shall not have authority to transact insurance pursuant to this title.
2. Neither the mutual holding company nor any intermediate holding company shall issue or reinsure policies of insurance.
3. A mutual holding company may enter into an affiliation agreement or merger agreement either at the time of the conversion, or at some later time with the approval of the Commission, with any mutual insurance company licensed to transact insurance in this Commonwealth or another mutual holding company. Any such merger agreement may authorize members of the mutual insurance company or other mutual holding company to become members of the mutual holding company. Any such affiliation or merger agreement shall be subject to the provisions of this title relating to transactions entered into by a mutual insurance company organized and licensed under the laws of this Commonwealth.
4. The assets of the mutual holding company shall be held in trust under such arrangements and on such terms as the Commission may approve for the benefit of the policyholders of the converted company. Any residual rights of the MHC in such assets or any of the assets of the MHC determined not to be held in trust shall be subject to a lien in favor of the policyholders of the converted company under such terms as the Commission may approve. Upon conversion of the mutual holding company as provided for in § 38.2-1005.1:9 , such assets shall be released from trust in accordance with the plan of conversion approved by the Commission.

History. 2001, c. 726; 2014, c. 248; 2017, c. 643.

The 2014 amendments.

The 2014 amendment by c. 248, effective January 1, 2015, in subsection A, deleted “of this title” following “(§ 38.2-1000 et seq.),” inserted “Article 5.1 (§ 38.2-1334.3 et seq.)” and deleted “of this title” following “of Chapter 13.”

The 2017 amendments.

The 2017 amendment by c. 643, effective January 1, 2018, inserted “Article 5.2 (§ 38.2-1334.11 et seq.)” in subsection A.

§ 38.2-1005.1:8. Diversion of business to affiliates.

Without prior approval of the Commission, neither the converted company nor any person affiliated with or controlling the converted company shall divert business from the converted company to any insurance company affiliated with the converted company if the purpose or effect of such diversion would be to reduce significantly the number of members of the mutual holding company.

History. 2001, c. 726.

§ 38.2-1005.1:9. Conversion of mutual holding company.

A mutual holding company may reorganize as a stock holding company by complying with the applicable provisions of § 38.2-1005.1 . For the purposes of effecting such conversion, the mutual holding company shall be deemed a mutual insurer and the converted mutual holding company shall be deemed a stock insurer. Notwithstanding any provision of § 38.1-1005.1 to the contrary, the Commission shall approve the reorganization of the mutual holding company as a stock holding company if the Commission determines that the provisions of applicable law have been complied with and that the reorganization is fair and equitable as regards the interests of the members of the mutual holding company. The Commission may in its discretion order a public hearing for the purpose of determining whether the reorganization complies with such conditions.

History. 2001, c. 726.

§ 38.2-1005.1:10. Conflicts of interest.

No director, officer, agent or employee of a mutual company or other person shall receive any fee, commission or other valuable consideration, other than such person’s regular salary or compensation, for in any manner aiding, promoting, arranging, or assisting in a conversion except as set forth in the plan of MHC conversion approved by the Commission. This provision shall not prohibit the payment of reasonable fees and compensation to attorneys, accountants or actuaries for services performed in the independent practice of their professions notwithstanding the fact that such attorney, accountant or actuary is a director of the mutual company.

History. 2001, c. 726.

§ 38.2-1005.1:11. Costs and expenses.

All costs and expenses incurred in connection with a plan of MHC conversion shall be paid either by the mutual company or the converted company.

History. 2001, c. 726.

§ 38.2-1005.1:12. Failure to give notice.

If a mutual company complies substantially and in good faith with the notice requirements in this article, its failure to give any member a required notice shall not impair the validity of any action taken under this article.

History. 2001, c. 726.

§ 38.2-1005.1:13. Limitation on actions.

Any action challenging the validity of or arising out of any act taken or proposed to be taken under this article shall be commenced within thirty days after the date the plan of MHC conversion becomes effective.

History. 2001, c. 726.

§ 38.2-1006. Conversion of a domestic stock insurer to a mutual insurer.

1. Any domestic stock life insurer may become a mutual life insurer, and to that end may carry out a plan for the acquisition of shares of its capital stock by purchase, gift or bequest, if the plan:
   1. Has been adopted by a vote of a majority of the directors of the insurer;
   2. Has been approved by a vote of the holders of at least two-thirds of the stock outstanding at a meeting called for that purpose;
   3. Has been submitted to and approved by the Commission; and
   4. Has been approved by a majority vote of the policyholders voting at a meeting called for that purpose. Only those policyholders whose insurance is then in force and has been in force for at least one year before the meeting shall be entitled to vote.
2. For the purpose of this article, “policyholder” shall include the employer, or the president, secretary or other executive officer of any corporation or association, to which a master group policy has been issued, but shall exclude the holders of certificates or policies issued under or in connection with a master group policy.

History. Code 1950, §§ 38-420, 38-424; 1952, c. 317, §§ 38.1-489, 38.1-493; 1986, c. 562.

§ 38.2-1007. Notice to policyholders of meeting to approve conversion.

At least thirty days before the meeting of policyholders required by § 38.2-1006 , the insurer shall mail notice of the meeting to each policyholder at the last known address or shall deliver the notice in person to the policyholder.

History. Code 1950, § 38-421; 1952, c. 317, § 38.1-490; 1986, c. 562.

§ 38.2-1008. Conduct of and voting at meeting.

The meeting required by § 38.2-1006 shall be conducted in the manner provided in the plan, subject to the following requirements:

1. Policyholders may vote in person, by proxy, or by mail, but all votes shall be cast by ballot; and
2. A representative of the Commission shall supervise the procedure of the meeting and shall appoint an adequate number of inspectors to oversee the voting at the meeting. The inspectors, acting under any rules and regulations prescribed by the Commission, shall have power to determine all questions concerning the verification and validity of the ballots, the qualifications of the voters, and the canvass of the vote. The inspectors shall certify the results of the voting to the representative of the Commission and to the insurer.

   All necessary expenses incurred by the Commission or its representative in connection with the meeting shall be paid by the insurer.

History. Code 1950, § 38-422; 1952, c. 317, § 38.1-491; 1986, c. 562.

§ 38.2-1009. Payment for shares pursuant to conversion plan.

Every payment for the acquisition of any shares of the capital stock of the insurer, the purchase price of which is not fixed by the plan, shall be subject to the approval of the Commission. Neither the plan, nor any payment under the plan, nor any payment not fixed by the plan, shall be approved by the Commission if the making of the payment reduces the surplus to policyholders to an amount less than that required at that time for the licensure of domestic mutual insurers.

History. Code 1950, § 38-423; 1952, c. 317, § 38.1-492; 1986, c. 562.

§ 38.2-1010. How acquired shares held.

Until all shares are acquired, the acquired shares shall be held in trust for the policyholders of the insurer as provided in this article and shall be assigned and transferred on the books of the insurer to not less than three nor more than five trustees and shall be held by them in trust. Shares transferred to the trustees shall be voted by them at all corporate meetings at which stockholders have the right to vote until all of the capital stock of the insurer is acquired. The trustees shall be appointed and vacancies in the office of trustee shall be filled as provided in the plan adopted under § 38.2-1006 . The trustees shall file with the insurer and with the Commission a verified acceptance of their appointment and a declaration that they will faithfully discharge their duties as such trustees.

History. Code 1950, § 38-425; 1952, c. 317, § 38.1-494; 1986, c. 562.

§ 38.2-1011. Disposition of dividends after payments provided in conversion plan.

After the payment of stockholder dividends as provided in the plan adopted under § 38.2-1006 , and after paying the necessary expenses of executing the trust all dividends and other sums received by the trustees on the shares of acquired stock, shall be immediately repaid to the insurer for the benefit of those who are or may become policyholders of the insurer and entitled to participate in the profits of the insurer. These payments shall be added to and become a part of the earned surplus of the insurer.

History. Code 1950, § 38-426; 1952, c. 317, § 38.1-495; 1986, c. 562.

§ 38.2-1012. Jurisdiction to compel completion of mutualization.

Whenever (i) a plan of mutualization approved in accordance with the laws of this Commonwealth has been in effect for more than five years, and (ii) the insurer has acquired in the name of its trustees under the plan at least ninety percent of its outstanding stock, and (iii) the plan itself contains no provision for the compulsory completion of mutualization inconsistent with the terms of this article, circuit courts shall have jurisdiction to compel completion of the mutualization of the insurer upon the petition of either the insurer or any stockholder of the insurer.

History. 1954, c. 20, § 38.1-495.1; 1986, c. 562.

§ 38.2-1013. Venue of proceedings.

The petition may be filed in the circuit court of record with general equity jurisdiction in the county or city in which the principal office of the insurer is located.

History. 1954, c. 20, § 38.1-495.2; 1986, c. 562.

§ 38.2-1014. Parties and process.

Necessary parties to the proceeding shall be (i) the insurer, (ii) the registered holders of all its stock still outstanding in the hands of the public, and (iii) its policyholders as a class. Process may be served on the policyholders as a class by publication but any policyholder may, on motion, be admitted as an individual party. The court shall appoint an attorney to represent all other policyholders.

History. 1954, c. 20, § 38.1-495.3; 1986, c. 562.

§ 38.2-1015. Determining value of stock outstanding; dismissal of petition or entry of decree requiring payment for and transfer of stock.

The court shall determine the per share fair cash value as of the date of the filing of the petition of the stock remaining in the hands of the public. If the court finds that on that basis, completion of mutualization may not be effected without jeopardizing the solvency of the insurer or the security of its policyholders, the petition shall be dismissed. Otherwise, the court shall enter an appropriate decree to require (i) the payment into court by the insurer of the aggregate amount due the remaining stockholders, with any interest and costs, which may include attorneys’ fees that the court may require, and (ii) the transfer and delivery to the insurer of all stock certificates still outstanding in the hands of the public. Upon payment by the insurer, the trustees under the plan of mutualization shall be considered, for all purposes of the plan of mutualization, to have acquired all of its outstanding stock. The holders of the stock shall possess no further right with respect to the stock, except to receive its fair cash value as determined by the court. The court shall retain jurisdiction over the distribution of the funds.

History. 1954, c. 20, § 38.1-495.4; 1986, c. 562.

§ 38.2-1016. Amendment of charter and bylaws; change of name; retirement and cancellation of stock; when mutualization effective; assets and liabilities; officers and directors; general restrictions and powers.

1. Upon acquisition by the trustees of all of the capital stock of the insurer pursuant to the provisions of this article, the charter of the insurer shall be amended to reflect its mutualization. The charter may be amended in any other respect considered necessary by the board of directors and trustees of the insurer in accordance with the provisions of this article and Article 11 (§ 13.1-705 et seq.) of Chapter 9 of Title 13.1. Upon the amendment of the charter of the insurer, the board of directors named in the amendment shall adopt any changes in the bylaws considered necessary, and the bylaws and any amendments to them shall be filed with the Commission within thirty days after adoption.
2. As soon as the charter of the insurer has been amended as provided in this section, the capital stock of the insurer held by the trustees shall be assigned to the insurer and shall be retired and cancelled. Certification of that action by the proper officers of the insurer shall be made to the Commission, and the trustees acting under the plan shall be discharged.  The insurer shall then immediately become a mutual insurer owning all the assets of the converted stock insurer and subject to all its liabilities.
3. The officers and directors of the insurer named in the amended charter shall continue as the officers and directors of the mutual insurer until their successors are duly elected in accordance with the provisions of the amended charter and the bylaws adopted under it.
4. The converted mutual insurer, except as otherwise provided in this title, shall be subject to all the general restrictions and have all the general powers imposed and conferred upon nonstock corporations by law.

History. 1954, c. 20, § 38.1-495.5; 1956, c. 431; 1986, c. 562.

§ 38.2-1016.1. Conversion of a health maintenance organization to an accident and sickness insurer.

1. Any health maintenance organization domiciled in the Commonwealth and subject to the provisions of Chapter 43 (§ 38.2-4300 et seq.) may, at its option and without reincorporation, convert to an insurer licensed to write accident and sickness insurance, hereinafter referred to as the “converted insurer,” by following the procedures set forth in this section. A health maintenance organization that becomes a converted insurer under this section shall have all of the rights to and titles and interests in the assets of the original health maintenance organization, as well as all of its liabilities and obligations.
2. A health maintenance organization eligible to become a converted insurer under subsection A may effect such conversion by (i) complying with the requirements for formation of a domestic insurer under Article 1 (§ 38.2-1000 et seq.); (ii) promptly filing with the Commission any necessary amendments to its articles of incorporation, bylaws, and other corporate documents pursuant to the provisions of Chapter 9 (§ 13.1-601 et seq.) of Title 13.1; and (iii) filing with the Commission such other information as the Commission may require to meet all of the requirements of an insurer in Virginia. When those requirements have been met, the Commission shall issue a license in accordance with the provisions of Article 5 (§ 38.2-1024 et seq.) to permit the converted insurer to conduct the business of accident and sickness insurance in the Commonwealth. Upon the issuance of the converted insurer’s license, and except as provided in this section, the converted insurer shall be subject to all of the provisions of this title that pertain to insurers licensed pursuant to Article 5 (§ 38.2-1024 et seq.) of this chapter and the business of accident and sickness insurance.
3. After the effective date of the health maintenance organization’s conversion to and licensure as an insurer, all of the converted insurer’s individual and group health care plans, contracts, and evidences of coverage shall remain valid and in force in accordance with their terms until the earlier of (i) the expiration or termination of the plans, contracts, or evidences of coverage; or (ii) the last day of the eighteenth month after the effective date of conversion. For the period during which the converted insurer continues to provide or arrange for health care services under such health care plan or plans, the insurer’s obligation to pay license taxes under Chapter 25 (§ 58.1-2500 et seq.) of Title 58.1 and fees for maintaining the Bureau of Insurance under Chapter 4 (§ 38.2-400 et seq.), which are, in all cases, attributable to such health care plan or plans, shall be the same as the license taxes and fees required of health maintenance organizations generally.
4. Except as provided herein, a converted insurer shall not, after the effective date of its conversion, use in its accident and sickness insurance policies, contracts or other literature (i) the words “health maintenance organization” or “HMO” or (ii) any other words descriptive of a health maintenance organization or deceptively similar to the name or description of any health maintenance organization then doing business in the Commonwealth in any manner that misrepresents the benefits, advantages, conditions, or terms of the converted insurer’s insurance policies, contracts, or other literature.
5. For the purposes of handling the rehabilitation, liquidation, or conservation of a converted insurer, the provisions of Chapter 15 (§ 38.2-1500 et seq.) shall apply. Whenever an order has been entered pursuant to Chapter 15 authorizing the Commission or other receiver to proceed with the rehabilitation, liquidation, or conservation of a converted insurer, the Commission may utilize the provisions of § 38.2-4310 , to protect the interests of enrollees in the converted insurer’s health care plans. If a receivership occurs in a converted insurer that continues to provide or arrange for health care services under such health care plan or plans, contracts, or policies, the receiver shall consider these plans, contracts, or policies as existing in the converted insurer. The Commission or other receiver appointed pursuant to Chapter 15 shall allocate the assets, liabilities, and obligations of the insolvent converted insurer in the manner that the Commission or other receiver determines is fair and equitable to the insurer’s accident and sickness insurance policyholders, health care plan enrollees, and other creditors. The accident and sickness insurance contracts and policies issued by the converted insurer shall be governed by the provisions applicable to the Virginia Life, Accident and Sickness Insurance Guaranty Association pursuant to Chapter 17 (§ 38.2-1700 et seq.). The health care plans, contracts, or policies of the converted insurer, associated with the business written as a health maintenance organization, shall be governed by the provisions of § 38.2-4310 .

History. 2007, c. 579; 2018, c. 706.

The 2018 amendments.

The 2018 amendment by c. 706 substituted “§ 38.2-4310 ” for “§§ 38.2-4310 , 38.2-4317 , and 38.2-4317 .1” twice in subsection E.

§ 38.2-1017. Applicability of Title 13.1.

Except as otherwise provided in this title, Article 12 (§ 13.1-715.1 et seq.) of Chapter 9 of Title 13.1 shall apply to mergers involving a domestic stock insurer and Article 11 (§ 13.1-893.1 et seq.) of Chapter 10 of Title 13.1 shall apply to mergers involving a domestic mutual insurer.

History. 1952, c. 317, § 38.1-80; 1956, c. 431; 1986, c. 562; 2005, c. 765.

Editor’s note.

At the direction if the Virginia Code Commission, “Article 11 (§ 13.1-893.1 et seq.)” was substituted for “Article 11 (§ 13.1-894 et seq.).”

The 2005 amendments.

The 2005 amendment by c. 765 substituted “(§ 13.1-715.1 et seq.)” for “(§ 13.1-716 et seq.).”

§ 38.2-1018. Plan of merger to be approved by Commission.

Before any joint agreement for the merger of domestic insurers is submitted to the stockholders or members, it shall first be submitted to and approved by the Commission. The Commission shall not approve the agreement unless, after a hearing, it finds that the plan of merger is fair, equitable, consistent with law, and that no reasonable objection to the plan exists. If the Commission fails to approve the plan it shall state the reasons in its order.

History. 1952, c. 317, § 38.1-81; 1956, c. 431; 1986, c. 562.

§ 38.2-1019. Change of status from foreign to domestic insurer.

1. Any foreign insurer licensed to transact the business of insurance in this Commonwealth may become a domestic insurer upon (i) complying with the requirements for formation of a domestic insurer under Article 1 (§ 38.2-1000 et seq.) of this chapter at the date of redomestication, and (ii) promptly filing any necessary amendments to its articles of incorporation, charters, bylaws and other corporate documents. When those requirements have been met, the Commission may issue a license dated as of the date of redomestication in accordance with the provisions of Article 5 (§ 38.2-1024 et seq.) of this chapter to permit the company to transact the business of insurance in the Commonwealth as a domestic insurer. Such insurer shall be recognized under the laws of this Commonwealth as an insurer initially licensed in another jurisdiction, as of the date it was first licensed as an insurer in its original domiciliary state.
2. An insurer that changes its status from foreign to domestic in accordance with subsection A of this section has all the rights, titles and interests in the assets of the original corporation, as well as all of its liabilities and obligations.

History. 1983, c. 441, § 38.1-949; 1986, c. 562; 2000, c. 169.

The 2000 amendments.

The 2000 amendment by c. 169, added the present last sentence of subsection A, and deleted the former final sentence, which read: “The license shall state the date and domicile of the original incorporation of the insurer, and shall indicate its redomestication into this Commonwealth under the provisions of this chapter.”

§ 38.2-1020. Transfer of domicile from Virginia to another state.

Any domestic insurer, upon the approval of the Commission, may transfer its domicile from this Commonwealth to any other state in which it is licensed to transact the business of insurance. The Commission may approve the proposed transfer of domicile if it determines that the transfer is in the best interests of the insurer’s policyholders and this Commonwealth. If the Commission does not approve the transfer, it shall give the insurer written notice of the refusal and the reasons for it within thirty days after the date the request for transfer was made. If the request for transfer is granted and the insurer is otherwise qualified, it may transact the business of insurance in this Commonwealth as a foreign insurer without interruption in licensing.

History. 1983, c. 441, § 38.1-950; 1986, c. 562.

§ 38.2-1021. Change of domicile of foreign insurer to another foreign state.

Any foreign insurer licensed to transact the business of insurance in this Commonwealth, upon proper notice to the Commission, may change its domicile to another foreign state without interruption in licensing and without reapplying as a foreign insurer if:

1. For a foreign stock insurer, the change in domicile does not result in a reduction in its capital and surplus to policyholders below the capital and surplus requirements for licensure specified in § 38.2-1028 ;
2. For a foreign mutual insurer, the change in domicile does not result in a reduction in its surplus below the surplus requirements for licensure specified in § 38.2-1029 ;
3. There is no substantial change in the lines of insurance to be written by the insurer;
4. There is no substantial change in the nature of the insurer or its method of operations and there is no deterioration in its financial condition; and
5. The change in domicile has been approved by the supervising regulatory officials of both the former and new state of domicile.

History. 1983, c. 441, § 38.1-951; 1986, c. 562.

§ 38.2-1022. Commission to be notified of proposed transfer of domicile.

Each insurer licensed to transact the business of insurance in this Commonwealth that transfers its domicile to any other state shall notify the Commission of the proposed transfer and shall file promptly with it any necessary amendments to articles of incorporation, charters, and other corporate documents.

History. 1983, c. 441, § 38.1-952; 1986, c. 562; 2006, c. 329.

The 2006 amendments.

The 2006 amendment by c. 329 deleted “bylaws” following “charters.”

§ 38.2-1023. Effect of transfer of domicile on certificate of authority, agents’ appointments and licenses, etc.

When any insurer licensed to transact the business of insurance in this Commonwealth transfers its domicile to this or any other state, its certificate of authority, agents’ appointments and licenses, policy forms, rates, authorizations, and other filings and approvals that existed at the time of the transfer shall remain in effect after the transfer of domicile occurs.

History. 1983, c. 441, § 38.1-953; 1986, c. 562.

§ 38.2-1024. License required to transact the business of insurance; application fee requirements for license.

1. No insurer unless authorized pursuant to Chapter 48 (§ 38.2-4805.1 et seq.) shall transact the business of insurance in this Commonwealth until it has obtained a license from the Commission. For a foreign or alien insurer or reciprocal, this license shall be in addition to the certificate of authority required by § 38.2-1027 . Each application for a license to transact the business of insurance in this Commonwealth shall be accompanied by a nonrefundable license application fee of $500. The fee shall be collected by the Commission and paid directly into the state treasury and credited to the Bureau of Insurance’s maintenance fund as provided in subsection B of § 38.2-400 . The license shall be signed by a member or other duly authorized agent of the Commission and shall expire on the next June 30 after the date on which it becomes effective, subject to renewal pursuant to § 38.2-1025 .
2. The Commission shall not grant a license to do the business of insurance in this Commonwealth to any insurer until it is satisfied that, from the evidence it requires under uniform procedures suitable to and applied equally to all classes of insurers, the insurer:
   1. Has paid all fees, taxes, and charges required by law;
   2. Has made any deposit required by this title;
   3. Has the minimum capital and surplus if a stock insurer, the minimum surplus if a mutual or a reciprocal insurer, and the minimum trusteed surplus if an alien insurer, prescribed in this title for insurers transacting the same class of insurance;
   4. Has filed a financial statement or statements and any reports, certificates or other documents the Commission considers necessary to secure a full and accurate knowledge of its affairs and financial condition;
   5. Is solvent and its financial condition, method of operation, and manner of doing business are such as to satisfy the Commission that it can meet its obligations to all policyholders; and
   6. Has otherwise complied with all the requirements of law.

History. Code 1950, §§ 38-31 to 38-33, 38-505, 38-514; 1952, c. 317, §§ 38.1-85, 38.1-86; 1978, cc. 4, 20; 1981, c. 605; 1986, c. 562; 1994, c. 316; 2017, c. 655.

Cross references.

As to surplus lines coverage placed with domestic surplus lines insurers, see § 38.2-4811.1 .

The 2017 amendments.

The 2017 amendment by c. 655 inserted “or reciprocal” in the first sentence of subsection A.

§ 38.2-1025. Annual renewal of license.

Each insurer licensed to transact the business of insurance in this Commonwealth shall obtain an annual renewal of its license from the Commission. The Commission may refuse to renew the license of any insurer or may renew the license, subject to any restrictions considered appropriate by the Commission, if it finds an impairment of required capital and surplus or if it finds that the insurer has not satisfied all the conditions set forth in subsection B of § 38.2-1024 . The Commission shall not fail to renew the license of any insurer to transact the business of insurance without giving the insurer ten days’ notice and giving it an opportunity to be heard. The hearing may be informal, and the required notice may be waived by the Commission and the insurer.

History. Code 1950, § 38-57; 1952, c. 317, § 38.1-98; 1986, c. 562.

§ 38.2-1026. Retaliatory provisions as to taxes, fees, deposits and other requirements.

1. When a domestic insurer or its agents are subject to regulatory costs in another state that are greater than those imposed in this Commonwealth upon insurers domiciled in that state or their agents, then the regulatory costs imposed by this Commonwealth on those foreign insurers or their agents shall be increased to equal the regulatory costs imposed by the other state on the domestic insurer or its agents. For the purpose of this section, regulatory cost includes (i) any deposits of securities, (ii) payment of taxes, fines, penalties or fees exacted for the privilege of doing business or (iii) any restitutions, obligations or conditions necessary for doing business.
2. For the purposes of this section an alien insurance company shall be considered domiciled in the state wherein it has the largest amount of its assets held in trust and on deposit for the benefit of its policyholders, or of its policyholders and creditors in the United States. An insurance company incorporated in Canada shall be considered domiciled in Canada.
3. Any foreign or alien insurance company subject to this section shall annually, on or before March 1, file a report with the Department of Taxation which compares the regulatory costs imposed on such insurer by this Commonwealth during the preceding calendar year to the regulatory costs that would have been imposed on a similar insurer domiciled in this Commonwealth by such insurer’s state of domicile during the preceding calendar year. This report shall be filed on a form and in such detail as prescribed by the Department of Taxation. Amounts owed due to the equalization of the regulatory costs imposed on such insurer by this Commonwealth and the regulatory costs of such insurer’s state of domicile shall be remitted to the Department of Taxation on or before March 1 of each year. Upon the failure of any insurance company to pay amounts due under this section before the date herein prescribed, the Department of Taxation shall impose a penalty of 10 percent of the amount due and interest shall be charged at a rate established pursuant to § 58.1-15 for the period between the due date and the date of full payment.

History. Code 1950, §§ 38-12, 38-13; 1952, c. 317, § 38.1-87; 1986, c. 562; 1998, c. 60; 2011, c. 850.

Editor’s note.

Acts 2011, c. 850, cl. 2 provides: “That the provisions of this act shall become effective for the taxable year commencing on or after January 1, 2013, except that the provisions of this act in subdivisions A 1 through A 4 of § 38.2-4809 of the Code of Virginia and § 38.2-4809.1 of the Code of Virginia shall be effective on July 1, 2011.”

The 1998 amendment added the subsection A and B designations and added subsection C.

The 2011 amendments.

The 2011 amendment by c. 850, effective for the taxable year commencing on or after January 1, 2013, in subsection C, substituted “Department of Taxation” for “Commission” throughout, and made a minor stylistic change in the last sentence.

§ 38.2-1027. Admission of foreign and alien insurers.

Before transacting any insurance business in this Commonwealth, each foreign or alien insurer or reciprocal shall obtain a certificate of authority and shall comply with the applicable provisions of Article 17 (§ 13.1-757 et seq.) of Chapter 9 of Title 13.1 in the case of a stock insurer, of Article 14 (§ 13.1-919 et seq.) of Chapter 10 of Title 13.1 in the case of a mutual insurer, and of Article 1 (§ 38.2-1200 et seq.) of Chapter 12 in the case of a reciprocal. The certificate shall be in addition to the license to transact the business of insurance required by § 38.2-1024 .

History. Code 1950, §§ 38-32, 38-34; 1952, c. 317, § 38.1-83; 1956, c. 431; 1986, c. 562; 2017, c. 655.

The 2017 amendments.

The 2017 amendment by c. 655, in the first sentence, inserted “or Reciprocal” and “and of Article 1 (§ 38.2-1200 et seq.) of Chapter 12 in the case of a reciprocal” and made related changes.

Law Review.

For article, “Insurance and Antitrust Law: The McCarran-Ferguson Act and Beyond,” see 25 Wm. & Mary L. Rev. 81 (1983).

Michie’s Jurisprudence.

For related discussion, see 14B M.J. Process, § 27.

§ 38.2-1028. Additional licensing requirements for stock insurers.

No stock insurer shall be licensed to transact the business of insurance in this Commonwealth unless it has fully paid in capital stock of at least one million dollars and surplus of at least three million dollars.

History. Code 1950, §§ 38-29, 38-33, 38-36, 38-330; 1952, c. 317, §§ 38.1-88, 38.1-89; 1966, c. 580; 1977, c. 322; 1978, c. 20; 1986, c. 562; 1991, c. 261.

§ 38.2-1029. Additional licensing requirements for mutual insurers.

No mutual insurer shall be licensed to transact the business of insurance in this Commonwealth unless it has a surplus of at least $1,600,000.

History. Code 1950, § 38-514; 1952, c. 317, § 38.1-94; 1966, c. 580; 1978, c. 20; 1986, c. 562; 1991, c. 261.

§ 38.2-1030. Surplus requirements for issuing policies without contingent liability.

No domestic or foreign mutual insurer shall issue policies without contingent liability unless, at the time of issue, the insurer has at least four million dollars of surplus. In the case of an alien insurer, policies without contingent liability shall not be issued unless, at the time of issue, the insurer has at least four million dollars of trusteed surplus.

However, any mutual insurer that on June 30, 1991, was authorized to issue and was engaged in issuing policies without contingent liability may continue to do so, until July 1, 1994, by maintaining at all times the minimum surplus if a domestic or foreign insurer, and the minimum trusteed surplus if an alien insurer, required at the time of authorization.

History. Code 1950, § 38-508; 1952, c. 317, § 38.1-95.1; 1966, c. 580; 1977, c. 322; 1986, c. 562; 1987, c. 520; 1991, c. 261.

§ 38.2-1031. Additional requirements, alien insurers.

1. No alien insurer shall be licensed to transact the business of insurance in this Commonwealth unless it (i) has a “trusteed surplus,” as defined in subsection B of this section, of at least four million dollars and (ii) has filed with the Commission a certificate from the supervising insurance official of the state of entry certifying that it is authorized to write the classes of insurance it proposes to write in this Commonwealth or it has filed with the Commission a certificate of the supervising insurance official of its domiciliary country that it is authorized there to transact the kind of insurance business it proposes to transact in this Commonwealth.
2. “Trusteed surplus” of an alien insurer means the excess of the aggregate value of the assets set forth in subsection C of this section over the aggregate net amount of all of its liabilities in the United States.
3. 1. General state deposits are all of the alien insurer’s assets within the United States on deposit with officers of any state for the benefit and security of all of its policyholders and creditors in the United States. C. 1. General state deposits are all of the alien insurer’s assets within the United States on deposit with officers of any state for the benefit and security of all of its policyholders and creditors in the United States.
   2. Special state deposits are all of the alien insurer’s assets in the United States, other than general state deposits, which are on deposit with officers of any state for the benefit and security of its policyholders and creditors in the state of deposit, or for the benefit and security of certain classes of its policyholders and creditors either in the state of deposit or in the United States. The value of special state deposits shall in no event exceed the value of the liability secured by the special state deposits.
   3. Trusteed assets are all of its assets in the United States, other than general state deposits and special state deposits, held by any trustee for the benefit and security of all of its policyholders and creditors in the United States.
   4. Interest receivable includes any interest collectable by the state or trustee that is receivable, due and accrued on the general state deposits, the special state deposits, and the trusteed assets of the alien insurer.
4. An alien insurer’s liabilities in the United States are all of the reserves and other liabilities incurred by the alien insurer in the United States, from which may be deducted:
   1. An amount equal to the reinsurance credits allowed by Article 3.1 (§ 38.2-1316.1 et seq.) of Chapter 13;
   2. From the amount of such liabilities for unearned premiums, the unearned portion of premiums receivable by an alien insurer from its agents or policyholders under policies issued by it in the United States and not more than ninety days past due on the date of such statement;
   3. Those liabilities in the United States pertaining to any asset in the United States of the alien insurer other than the assets described in subsection C of this section. This deduction shall be allowed only to the extent considered appropriate by the Commission and shall in no case exceed that portion of the value of the asset that is applicable to the liability pertaining to the asset; and
   4. The amount of the unpaid principal and interest of any loan made by the alien insurer to the holder of, and solely on the security of, any life insurance policy or annuity contract issued or assumed by it on the life of or to any person in the United States.  This amount shall in no case exceed the amount of the reserve it is required to maintain on the policy or annuity contract.

History. Code 1950, §§ 38-38, 38-514; 1952, c. 317, § 38.1-95; 1966, c. 580; 1977, c. 322; 1978, c. 20; 1985, c. 243; 1986, c. 562; 1991, c. 261.

§ 38.2-1032. Additional licensing requirements for domestic insurers.

No domestic insurer shall be licensed to transact the business of insurance in this Commonwealth until it has furnished the Commission with a statement under the seal of the insurer, verified by the president or treasurer or two of its directors, showing (i) the amount of surplus, (ii) the amount of capital stock fully paid in, (iii) the amount of actual cash in its treasury, (iv) the amount invested with a list of the investments and their cash value, and (v) any other information the Commission requires. In its discretion the Commission may make or direct to be made an examination of the insurer to ascertain if it is entitled to the license.

History. Code 1950, § 38-505; 1952, c. 317, § 38.1-91; 1960, c. 289; 1966, c. 580; 1986, c. 562.

§ 38.2-1033. Additional licensing requirements for foreign insurers.

No foreign insurer shall be licensed to transact the business of insurance in this Commonwealth until it has filed with the Commission a certificate from the supervising insurance official of the state in which it is incorporated certifying that it is authorized to write the classes of insurance it proposes to write in this Commonwealth.

History. Code 1950, §§ 38-36, 38-330; 1952, c. 317, § 38.1-89; 1966, c. 580; 1977, c. 322; 1978, c. 20; 1986, c. 562.

§ 38.2-1034. How domestic mutual insurers may acquire initial surplus.

Any domestic mutual insurer or mutual assessment property and casualty insurer may, without pledging any of its assets, provide a guaranty fund sufficient to defray the expenses of its organization and its initial minimum surplus required to obtain a license to do the business of insurance. The fund may be increased with the prior approval of the Commission by receiving advances or by borrowing funds upon an agreement that the funds, including interest at a rate not exceeding the one-year treasury bill interest rate plus three percentage points at the time the loan is made or renewed, shall be repaid only if the insurer has sufficient earned surplus. The agreement shall provide that the insurer may repay the advances or loans or any part of them whenever it is able to do so in accordance with the requirements of this article. No commission or brokerage shall be paid in acquiring the funds. No repayments of principal, either in whole or in part, and no payments of interest, shall be made without the prior written approval of the Commission. Neither the principal advanced or borrowed nor any interest accrued thereon under this provision shall form a part of the legal liabilities of the insurer until the Commission approves the repayment of such principal or the payment of interest thereon. However, all statements published or filed by the insurer shall show accrued interest and the amount of principal remaining unpaid. All claims under the instrument shall be subordinated to policyholder, claimant and beneficiary claims as well as debts owed to all other classes of creditors.

History. Code 1950, § 38-512; 1952, c. 317, § 38.1-92; 1960, c. 291, § 38.1-92.1; 1970, c. 595; 1980, c. 187; 1986, c. 562; 1994, c. 503.

§ 38.2-1035. Domestic insurers to maintain minimum capital and surplus; proceedings by Commission if impairment found.

1. Each domestic insurer shall maintain at all times the minimum surplus if a mutual insurer, and the minimum capital and surplus if a stock insurer, required by §§ 38.2-1028 , 38.2-1029 or § 38.2-1030 . If the Commission finds that (i) the minimum capital and surplus of a domestic stock insurer is impaired or (ii) the minimum surplus of a domestic mutual insurer is impaired, the Commission shall issue an order requiring the insurer to eliminate the impairment within a period not exceeding ninety days. The Commission may by order served upon the insurer prohibit the insurer from issuing any new policies while the impairment exists.
2. Any domestic mutual insurer may make an assessment upon its assessable members for an amount that will provide funds to cover all or any part of the impairment.  However, no member shall be liable for an assessment exceeding the limit specified in his policy, and no assessment shall be made upon any member under a nonassessable policy.  The assessment shall be made upon each assessable member in proportion to the liability as expressed in the policy. With the prior approval of the Commission, the deficiency may be made up from advances or borrowed funds and subject to the restrictions provided in § 38.2-1034 for obtaining guaranty funds.
3. If at the expiration of the designated period the insurer has not satisfied the Commission that the impairment has been eliminated, an order for the rehabilitation or liquidation of the insurer may be entered as provided in Chapter 15 (§ 38.2-1500 et seq.) of this title.

History. Code 1950, § 38-511; 1952, c. 317, §§ 38.1-90, 38.1-93; 1966, c. 580; 1977, c. 322; 1986, c. 562.

§ 38.2-1036. Impairment of capital and surplus of foreign and alien company ground for suspension or revocation of license.

Each foreign and each alien insurer shall maintain at all times the minimum surplus, capital and surplus, or trusteed surplus required by §§ 38.2-1028 , 38.2-1029 , 38.2-1030 or § 38.2-1031 . If the Commission finds an impairment of (i) the required minimum capital and surplus of any foreign stock insurer, (ii) the required minimum surplus of any foreign mutual insurer, or (iii) the required minimum trusteed surplus of any alien insurer, the Commission may order the insurer to eliminate the impairment and restore the minimum capital and surplus, minimum surplus or minimum trusteed surplus, to the amount required by law. The Commission may, by order served upon the insurer, prohibit the insurer from issuing any new policies while the impairment exists. If the insurer fails to comply with the Commission’s order within a period of not more than ninety days, the Commission may, in the manner set out in Article 6 (§ 38.2-1040 et seq.) of this chapter, suspend or revoke the license of the insurer to transact the business of insurance in this Commonwealth.

History. Code 1950, § 38-511; 1952, c. 317, § 38.1-96; 1978, c. 20; 1986, c. 562.

§ 38.2-1037. Exceptions for licensed and operating insurers.

1. Notwithstanding the other provisions of this chapter with respect to minimum required capital and surplus, any insurer which, on June 30, 1991, was licensed to write and was writing any class of insurance in this Commonwealth may continue to write that class of insurance under the appropriate license from the Commission, until July 1, 1994, if it maintains at all times (i) the minimum capital and surplus if a stock insurer, (ii) the minimum surplus if a mutual insurer, and (iii) the minimum trusteed surplus if an alien insurer, required of the insurer as of June 30, 1991.
2. Any insurer not licensed to write a class of insurance in this Commonwealth on June 30, 1991, shall meet all the capital surplus and trusteed surplus requirements of this article before it obtains a license to write that class of insurance.

History. 1952, c. 317, § 38.1-97; 1966, c. 580; 1977, c. 322; 1978, c. 20; 1986, c. 562; 1987, c. 520; 1991, c. 261.

§ 38.2-1038. Authority of Commission to issue orders covering insurers in hazardous financial condition.

If, after reviewing an insurer’s financial condition, method of operation, or manner of doing business, the Commission finds that (i) the insurer cannot, or there is a reasonable expectation that the insurer will not be able to, meet its obligations to all policyholders or (ii) the insurer’s continued operation in this Commonwealth is hazardous to policyholders, creditors and the public in this Commonwealth the Commission may order the insurer to take appropriate action to remedy the Commission’s concerns. The insurer shall be given ten days’ notice prior to issuing the order and shall be given the opportunity to be heard and introduce evidence on its behalf. The hearing may be informal, and the required notice may be waived by the Commission and the insurer. If the insurer fails to comply with the Commission’s order within the prescribed time, the Commission may suspend or revoke the license of the insurer to transact the business of insurance in this Commonwealth as set forth in Article 6 (§ 38.2-1040 et seq.) of this chapter.

History. 1978, c. 20, § 38.1-97.2; 1986, c. 562; 1991, c. 261.

§ 38.2-1039. Enjoining unlicensed foreign or alien insurers from transacting the business of insurance in Commonwealth.

1. For the purposes of issuing a temporary or permanent injunction under § 38.2-220 to restrain unlicensed foreign or alien insurers from transacting the business of insurance in this Commonwealth, the following acts, effected by mail or otherwise, shall constitute transacting the business of insurance in this Commonwealth:
   1. The issuance or delivery of insurance contracts to residents of this Commonwealth or to corporations authorized to do business in this Commonwealth;
   2. The solicitation of applications for such contracts;
   3. The collection of premiums, membership fees, assessments or other considerations for such contracts; or
   4. The transaction of any other insurance business in connection with such contracts.
2. Process may be served in accordance with § 13.1-758 or in any other manner prescribed by law.
3. This section shall not apply to any nonprofit life insurance or annuity company which is organized and operated for the purpose of issuing insurance and annuity contracts, exclusively to or for the benefit of nonprofit educational or scientific institutions and individuals engaged in the service of those institutions. The clerk of the Commission shall be considered the attorney for service of process in this Commonwealth for all of such insurer’s policy and contract holders in this Commonwealth. The appointment shall (i) be irrevocable, (ii) bind the insurer and any successors in interest, and (iii) remain in effect as long as there is in force in this Commonwealth any contract made by the insurer or any obligation arising from the contract.
4. This section shall not apply to the following acts:
   1. The procuring of a policy of insurance upon a risk within this Commonwealth in compliance with Chapter 48 of this title;
   2. Issuance of contracts of reinsurance;
   3. Acts in this Commonwealth involving a policy lawfully solicited, written and delivered outside this Commonwealth covering only subjects of insurance not resident, located, or to be performed in this Commonwealth at the time of issuance of the policy;
   4. Acts in this Commonwealth involving a group or blanket insurance policy or a group annuity lawfully issued and delivered in a state where the insurer was licensed to transact the business of insurance;
   5. Acts in the Commonwealth involving insurance contracts issued to an “industrial insured.” For the purposes of this section, an “industrial insured” is an insured (i) who procures the insurance of any risk or risks other than life and annuity contracts by use of the services of a full-time employee acting as an insurance manager or buyer or the services of a regularly and continuously retained licensed insurance consultant, (ii) whose aggregate annual premiums for insurance on all risks, except for life, annuity, and accident and sickness insurance, total at least $100,000, (iii) who has at least 25 full-time employees, and (iv) either has gross assets in excess of $3 million or has annual gross revenues in excess of $5 million.
5. Nothing in this section shall apply to nonprofit Railroad Brotherhood or other similar fraternal organizations.

History. 1968, c. 266, § 38.1-98.1; 1986, c. 562; 2008, c. 95.

The 2008 amendments.

The 2008 amendment by c. 95, in subdivision D 5, substituted “Acts in the Commonwealth involving” for “The procuring of” at the beginning, inserted “or risks other than life and annuity contracts” and “or the services of a regularly and continuously retained life insurance consultant” in clause (i), inserted “except for life, annuity, and accident and sickness insurance” and substituted “$100,000” for “$25,000” in clause (ii), and added clause (iv).

§ 38.2-1039.1. Risk retention groups.

Except in the case of a risk retention group all of whose members are insurers, no risk retention group, as defined in Chapter 51 of this title, shall be licensed in this Commonwealth if an insurer is directly or indirectly a member or owner of such risk retention group.

History. 1987, c. 585.

§ 38.2-1040. Refusal, suspension or revocation of license.

1. The Commission may refuse to issue a license to any domestic, foreign or alien insurer to transact the business of insurance in this Commonwealth, and may suspend or revoke the license of any licensee, whenever it finds that the applicant or licensee:
   1. Has refused to submit its books, papers, accounts, or affairs to the reasonable inspection of the Commission or its representative;
   2. Has refused, or its officers or agents have refused, to furnish satisfactory evidence of its financial and business standing or solvency;
   3. Is insolvent, or is in a condition that any further transaction of business in this Commonwealth is hazardous to its policyholders, creditors and public in this Commonwealth;
   4. Has failed to pay a final judgment against it within sixty days after (i) the judgment became final, (ii) the time for making an appeal has expired, or (iii) the dismissal of an appeal before final determination, whichever date is the latest;
   5. Has violated any law of this Commonwealth, or has in this Commonwealth violated its charter or exceeded its corporate powers;
   6. Has failed to pay any fees, taxes or charges imposed in this Commonwealth within sixty days after they are due and payable, or within sixty days after final disposition of any legal contest with respect to liability for the fees, taxes or charges;
   7. Has had its corporate existence dissolved or its certificate of authority revoked in the state in which it was organized or in this Commonwealth;
   8. Has been found insolvent by a court of any other state, or by the Commission or other proper officer or agency of any other state, and has been prohibited from doing business in that state;
   9. Has had all its risks reinsured in their entirety in another insurer; or
   10. Has notified the insured in writing or by any other means that any policy of insurance covering the ownership or operation of a motor vehicle issued by the insurer will be cancelled if the insured institutes any legal action against the insurer to pursue any rights of the insured under the policy.
2. The grounds for suspension or revocation of licenses in subsection A of this section are in addition to those provided for elsewhere in this title.

History. Code 1950, §§ 38-68, 38-132, 38-133, 38-134, 38-169, 38-370; 1952, c. 317, § 38.1-99; 1966, c. 457; 1986, c. 562; 1987, c. 431.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 5.

§ 38.2-1041. Notice to company of proposed suspension or revocation.

The Commission shall not revoke or suspend the license of any insurer to do the business of insurance in this Commonwealth upon any of the grounds set out in § 38.2-1040 until it has given the insurer ten days’ notice of the reasons for the proposed revocation or suspension and has given the insurer an opportunity to introduce evidence and be heard. However, the Commission may immediately suspend the license on any of the grounds specified in subdivisions 7 and 8 of subsection A of § 38.2-1040 without prior notice to the insurer. The suspension shall remain in force until the hearing is held. Any hearing authorized by this section may be informal, and the required notice may be waived by the Commission and the insurer.

History. Code 1950, §§ 38-132, 38-169, 38-370; 1952, c. 317, § 38.1-100; 1986, c. 562.

§ 38.2-1042. Agent’s authority likewise suspended or revoked.

Upon the suspension or revocation of the license of any insurer, the Commission shall suspend or revoke the authority of the insurer’s agents in this Commonwealth to act for the insurer.

History. 1952, c. 317, § 38.1-101; 1986, c. 562.

§ 38.2-1043. Suspension or revocation published.

Unless an appeal is taken within thirty days, the Commission shall have published in one or more newspapers having general circulation in this Commonwealth a notice of any final order that suspends or revokes the license of an insurer.

History. Code 1950, §§ 38-68, 38-133, 38-169; 1952, c. 317, § 38.1-102; 1986, c. 562.

§ 38.2-1044. New business prohibited.

No new business shall be done by any insurer or its agents on behalf of that insurer while its license to do business is suspended or revoked.

History. Code 1950, §§ 38-68, 38-135; 1952, c. 317, § 38.1-103; 1986, c. 562.

§ 38.2-1045. Deposits required of insurers generally.

1. Except as otherwise provided in this title, before the Commission issues a license to transact the business of insurance in this Commonwealth to any insurer, that insurer shall deposit with the State Treasurer securities that (i) are legal investments under the laws of this Commonwealth for public sinking funds or for other public funds, (ii) are not in default as to principal or interest, (iii) have a current market value of not less than $50,000 nor more than $500,000, and (iv) are issued pursuant to a system of book-entry evidencing ownership interests of the securities with transfers of ownership interests effected on the records of a depository and its participants pursuant to rules and procedures established by the depository.
2. The Commission may require a reasonable amount of additional deposits in securities that meet the requirements of clauses (i), (ii) and (iv) of subsection A of this section, whenever the Commission determines that the insurer’s financial condition, method of operation, or manner of doing business is such that the Commission is not satisfied that it can meet its obligations to all policyholders.
3. Neither the deposit referred to in this section nor the alternate deposit permitted by § 38.2-1049 shall be required of (i) any mutual assessment property and casualty insurance company, (ii) any fraternal benefit society, or (iii) any insurer transacting exclusively an ocean marine business in this Commonwealth.
4. Any insurer which on June 30, 1991, instead of the deposit of securities required by subsection A, has entered into a bond with surety, approved by the Commission, with any conditions the Commission requires, shall have until the next renewal, anniversary, or expiration date of such bond, or until June 30, 1992, whichever comes first, to comply with the deposit provisions of subsection A.  The surety shall be licensed in this Commonwealth to transact the business of suretyship and shall not be directly or indirectly under the same ownership or management as the principal on the bond.
5. Every insurer subject to the provisions of this section having physical securities deposited with the State Treasurer on or before June 30, 1992, shall comply with the provisions of clause (iv) in subsection A not later than January 1, 1993.

History. Code 1950, § 38-39; 1952, c. 317, § 38.1-108; 1956, c. 234; 1960, c. 558; 1964, c. 605; 1973, c. 178; 1975, c. 556; 1986, c. 562; 1991, c. 261; 1992, c. 14.

Cross references.

As to captive insurance companies, see §§ 38.2-1105 and 38.2-1106 .

Law Review.

For survey of Virginia law on insurance for the year 1974-1975, see 61 Va. L. Rev. 1759 (1975).

§ 38.2-1046. Purpose of deposits; enforcement of lien.

1. An insurer’s deposits required by § 38.2-1045 shall be held as a special fund in trust for the insurer’s liabilities which are incurred or which may be incurred as a result of a loss sustained by (i) this Commonwealth or any of its political subdivisions, (ii) any citizen or inhabitant of this Commonwealth, or (iii) any other person owning property in this Commonwealth, when the insurer fails to meet its obligations incurred in this Commonwealth. Policyholders, without preference, shall have a lien on the deposits for the amounts due or which may become due as a result of any failure of the insurer to meet its obligations. General creditors, without preference, shall be entitled to have a similar lien on the deposits which shall be subordinate to the claims of the policyholders.
2. Whenever any such insurer becomes insolvent or bankrupt, or makes an assignment for the benefit of its creditors, any person given a lien by this section may file a bill in the Circuit Court of the City of Richmond for the benefit of himself and all others given a lien by this section to subject such securities as may be on deposit with the State Treasurer or its agent to the payment of the liens thereon. The State Treasurer shall be made a party to such suit and a copy of such bill shall be served upon the Commissioner of Insurance as if he were a party to such suit. The funds shall be distributed by the court.

History. Code 1950, § 38-50; 1952, c. 317, § 38.1-110; 1981, c. 208; 1986, c. 562; 1988, c. 298; 1992, c. 20; 1995, c. 60.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, §§ 4, 5.

§ 38.2-1047. How deposits applied to payment of claims; deficit to be made good.

1. This section shall apply only where:
   1. The insurer has failed to pay any of its liabilities after the liabilities have been ascertained (i) by any agreement of the parties binding the insurer, or (ii) by judgment, order or decree of a court of competent jurisdiction which has not been appealed, superseded or stayed; and
   2. The provisions of subsection B of § 38.2-1046 are not applicable.
2. Upon application of the person to whom the debt or money is due and after giving notice as provided in subsection C of this section, the State Treasurer shall (i) sell an amount of securities with accrued interest that provides sufficient funds to pay the sums due and the expenses of the sale and (ii) pay the sums due and expenses out of the available funds. This shall be subject to the approval of the Commission.
3. The State Treasurer shall give the insurer or its agent ten days’ notice, either by mail or personally, of the time and place of the sale. The sale shall be advertised daily for ten days in a newspaper of general circulation published in the City of Richmond.
4. The insurer shall immediately make good any deficit in its deposit resulting from a sale. The State Treasurer shall report to the Commission in writing (i) the amount and kind of securities sold in accordance with the provisions of this section and (ii) the amount and kind of securities deposited to make good the deficit.

History. Code 1950, § 38-49; 1950, p. 996; 1952, c. 317, § 38.1-111; 1986, c. 562; 1988, c. 298.

§ 38.2-1048. Return of deposits.

1. The Commission, at its discretion, may direct the State Treasurer to return to any insurer all or a part of the deposit made by it under § 38.2-1045 if the insurer (i) has complied with § 38.2-1049 , or (ii) has ceased to transact business in this Commonwealth. In the case of the latter, the fixed or contingent liabilities secured by the deposit shall have been satisfied or terminated or shall have been assumed by another insurer licensed to transact the business of insurance in this Commonwealth. If the Commission finds that any voluntary deposit of any insurer made under § 38.2-1050 no longer is required in whole or in part to comply with the laws of this or any other state, it may to such extent direct the return of that deposit. The Commission, before directing the return of any deposit, may require evidence it considers satisfactory that the insurer is entitled to the return of all or part of the deposit.
2. Notwithstanding the provisions in § 38.2-1046 and subsection A of this section, if an insurer domiciled in this Commonwealth is placed in receivership, and a receiver is appointed, pursuant to the provisions of Chapter 15 (§ 38.2-1500 et seq.) of this title, the Commission shall direct the State Treasurer to return any deposit made with it by the insurer to such receiver for distribution, disbursement, or other application in accordance with provisions set forth in Chapter 15 (§ 38.2-1500 et seq.) of this title and any applicable order of liquidation, conservation or rehabilitation.

History. Code 1950, § 38-52; 1952, c. 317, § 38.1-112; 1986, c. 562; 1988, c. 298; 1995, c. 60.

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 4.

§ 38.2-1049. Alternate deposit requirements.

1. The insurer, at the discretion of the Commission, may be relieved of making the deposit required by § 38.2-1045 if the insurer makes deposits according to the following provisions:
   1. Acceptable securities as defined in subsection B of this section are deposited with the State Treasurer in the form prescribed in clause (iv) of subsection A of § 38.2-1045 or with the insurance commissioner, treasurer or other officer or official body of any other state first for the protection of the insurer’s policyholders.
   2. The securities are not to be in default as to principal and interest.
   3. The securities have a market value of at least $500,000.
   4. A certificate is furnished to the Commission and authenticated by the appropriate state official holding the deposit that the requirements of this subsection have been met.
2. For the purpose of this section, acceptable securities are defined as bonds of the United States, or of any state, or of any city, county or town of any state, or bonds or notes secured by mortgages or deeds of trust on otherwise unencumbered real estate of a market value in each case of not less than double the amount loaned, or other securities approved by the Commission.

History. Code 1950, §§ 38-37, 38-40, 37-175, 38-516; 1952, c. 317, § 38.1-113; 1964, c. 605; 1975, c. 556; 1986, c. 562; 1992, c. 14.

§ 38.2-1050. Voluntary deposit in excess of amount required.

Any domestic insurer, in order to comply with the laws of any other state or of the United States, may make a voluntary deposit with the State Treasurer in excess of the amount required by § 38.2-1045 . This excess deposit shall be subject to all other applicable provisions of the laws of this Commonwealth relating to the deposits of insurers. However, this excess deposit shall be for the protection of all the insurer’s policyholders and general creditors, notwithstanding the provisions of § 38.2-1046 .

History. Code 1950, § 38-41; 1952, c. 317, § 38.1-114; 1966, c. 263; 1986, c. 562.

§ 38.2-1051. Repealed by Acts 1992, c. 14.

§ 38.2-1052. Exchange of securities.

A depositing insurer may from time to time exchange for any of the deposited securities other securities eligible for deposit under this article if in the opinion of the Commission the aggregate value of the deposit will not be reduced below the amount required by law.

History. 1952, c. 317, § 38.1-116; 1986, c. 562.

§ 38.2-1053. Interest on deposits; to whom paid.

The State Treasurer, at the time of receiving any securities deposited under this title, shall give the insurer authority to collect the interest for its own use as the interest is paid. This authority shall continue in force until the insurer fails to pay any of its liabilities for which the deposit is security. In that case, the party paying interest shall be notified of the failure, and thereafter the interest shall be payable to the State Treasurer, and shall be applied, if necessary, to the payment of the liabilities.

History. Code 1950, § 38-48; 1952, c. 317, § 38.1-117; 1986, c. 562.

§ 38.2-1054. Duty of State Treasurer when securities deposited are paid.

When the principal of any securities deposited under this title is paid to the State Treasurer, the money received shall be paid to the insurer. However, if the securities were required to be deposited under § 38.2-1045 , the payment shall not be made until the insurer deposits an equal amount of other securities of the character required for similar deposits. If the insurer fails to deliver to the State Treasurer, within thirty days after receiving notice of this requirement, the securities necessary to maintain its required deposit, the State Treasurer with the approval in writing of the Commission, may use the money to purchase and hold other securities of the required character.

History. Code 1950, § 38-51; 1952, c. 317, § 38.1-118; 1986, c. 562.

§ 38.2-1055. Annual report of State Treasurer to Commission.

Each January the State Treasurer shall certify to the Commission the kind and face value of all securities, bonds, notes, mortgages or deeds of trust deposited under this title and held at the end of the preceding calendar year.

History. Code 1950, § 38-45; 1952, c. 317, § 38.1-119; 1986, c. 562.

§ 38.2-1056. Treasurer to receipt for deposits; responsibility of Commonwealth; taxation of deposited bonds.

The State Treasurer shall provide receipts to the insurer for all securities deposited with him under the provisions of this title. The Commonwealth shall be responsible for the safekeeping of the securities. If some or all of the securities are lost, destroyed or misappropriated, the Commonwealth shall pay or satisfy the loss to the insurer making the deposit. Securities deposited with the State Treasurer shall not be subject to taxation.

History. Code 1950, §§ 38-42, 38-46; 1952, c. 317, § 38.1-120; 1986, c. 562.

§ 38.2-1057. Assessment for expense of holding deposits; Insurance Collateral Assessment Fund.

1. For the purpose of defraying the expense of the State Treasurer’s office in the safekeeping and handling of the securities or surety bonds deposited under the provisions of this title, the State Treasurer shall levy annually against each insurer an assessment. The assessment shall be a percentage of the par or face value of the securities or surety bonds on deposit with the State Treasurer’s office in each insurer’s account at the end of each calendar year. The percentage shall be determined annually by the State Treasurer as the amount necessary to meet the estimated annual expenses incurred by the State Treasurer to meet the provisions of this title. The percentage shall not exceed one-fourth of one percent of the par or face value of the securities or surety bonds on deposit with the State Treasurer’s office. Assessment collections that are more than actual expenses in any year shall be added to the next year’s assessment calculation. The assessment shall be collected every January. No part of the amount collected shall be used to increase the compensation of any person connected with the office of the State Treasurer.
2. All moneys collected from the annual assessment imposed under subsection A shall be paid into the state treasury and credited to a special, nonreverting fund known as the Insurance Collateral Assessment Fund which is hereby established. The Fund shall be established on the books of the Comptroller and be administered by the State Treasurer’s office. Disbursements from the Fund shall be on warrants issued by the Comptroller to pay expenses associated with the safekeeping and handling of the securities or surety bonds deposited under the provisions of this title. Any moneys remaining in the Fund at the end of a fiscal year shall not revert to the general fund but shall remain in the Fund and be used to offset subsequent years’ expenses as provided in subsection A.

History. Code 1950, § 38-43; 1952, c. 317, § 38.1-121; 1973, c. 173; 1986, c. 562; 2005, c. 38.

The 2005 amendments.

The 2005 amendment by c. 38 inserted the A designation at the beginning of the first paragraph and in subsection A, deleted “of not more than one tenth of one percent of the par or face value of the securities or surety bonds deposited to its account” from the end of the first sentence; added the second through fifth sentences; deleted the last sentence, which formerly read: “Whatever remains of the assessment after the payment of the expense described above shall be paid into the general fund of the state treasury”; and added subsection B.

§ 38.2-1058. Felony for State Treasurer to dispose of securities illegally.

If the State Treasurer disposes of any securities deposited with him under this title, other than as provided in this title, he shall be guilty of a Class 3 felony, and, upon conviction, shall be punished by a fine double the amount of the disposed securities.

History. Code 1950, § 38-53; 1952, c. 317, § 38.1-122; 1986, c. 562.

Cross references.

As to punishment for Class 3 felonies, see § 18.2-10 .

§ 38.2-1100. Scope of chapter.

The provisions of this chapter shall apply solely to captive insurers or association captive insurers domiciled in this Commonwealth.

History. 1980, c. 665, § 38.1-916; 1986, c. 562.

§ 38.2-1101. Definitions.

As used in this chapter:

“Affiliated company” means (i) any company that directly or indirectly owns, controls, or holds, with power to vote, ten percent or more of the outstanding voting securities of a pure captive insurer, or (ii) any company of which ten percent or more of the voting securities are directly or indirectly owned, controlled, or held, with power to vote, by a parent, subsidiary, or associated company.

“Associated company” means any company in the same corporate system with a pure captive insurer.

“Association captive insurer” means any domestic insurer transacting the business of insurance and reinsurance only on risks, hazards, and liabilities of the members of an insurance association.

“Captive insurer” means any pure captive insurer or any association captive insurer.

“Insurance association” means any group of individuals, corporations, partnerships, associations, or governmental units or agencies whose members collectively own, control, or hold with power to vote all of the outstanding voting securities of an association captive insurer.

“Parent” means a corporation, partnership, governmental unit or agency, or individual who directly or indirectly owns, controls or holds, with power to vote, more than fifty percent of the outstanding voting securities of a pure captive insurer.

“Pure captive insurer” means any domestic insurer transacting the business of insurance and reinsurance only on risks, hazards, and liabilities of its parent, subsidiary companies of its parent, and associated and affiliated companies.

“Subsidiary company” means any corporation of which fifty percent or more of the outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by a parent or by a company that is a subsidiary of the parent.

History. 1980, c. 665, § 38.1-917; 1981, c. 494; 1986, c. 562.

§ 38.2-1102. Application for license; limitations on authority.

1. No captive insurer shall transact any insurance business in this Commonwealth unless (i) it is permitted to do so by its articles of incorporation or charter and (ii) it procures a license to transact the business of insurance from the Commission in accordance with Article 5 (§ 38.2-1024 et seq.) of Chapter 10 of this title. The license shall be renewed in accordance with § 38.2-1025 . A captive insurer may only be licensed to write the classes of insurance described in §§ 38.2-110 through 38.2-120 , 38.2-124 , 38.2-126 and reinsure in accordance with § 38.2-136 .
2. 1. The Commission shall not issue a license to transact the business of insurance in this Commonwealth to any pure captive insurer until it is satisfied that the total insurance coverage necessary to insure all risks, hazards, and liabilities would develop, in the aggregate, gross annual premiums of at least $500,000. B. 1. The Commission shall not issue a license to transact the business of insurance in this Commonwealth to any pure captive insurer until it is satisfied that the total insurance coverage necessary to insure all risks, hazards, and liabilities would develop, in the aggregate, gross annual premiums of at least $500,000.
   2. The Commission shall not issue a license to transact the business of insurance in this Commonwealth to any association captive insurer until it is satisfied (i) that the total insurance coverage necessary to insure all risks, hazards, and liabilities would develop, in the aggregate, gross annual premiums of at least one million dollars and (ii) that its insurance association has been in existence for at least one year.  The Commission may waive the requirement that the insurance association be in existence for at least 1 year if the association captive insurer satisfies the Commission that each member of the insurance association would have a gross annual premium in excess of $100,000.
3. No captive insurer may write classes of personal insurance coverage for individuals unless the individual is a parent.
4. No captive insurer may write insurance or reinsurance on personally owned motor vehicles or homeowners’ insurance or any component of them.

History. 1980, c. 665, § 38.1-918; 1986, c. 562.

§ 38.2-1103. Name.

A captive insurer shall not adopt the name of any existing company transacting a similar business or any name so familiar that it may mislead the public.

History. 1980, c. 665, § 38.1-919; 1986, c. 562.

§ 38.2-1104. Formation; licensure after examination; amendment of articles; principal and home office.

1. Captive insurers with shares of capital stock shall be incorporated under Article 3 (§ 13.1-618 et seq.) of Chapter 9 of Title 13.1 as modified by this title and, except as provided in this title, shall be subject to all the general restrictions and shall have all the general powers imposed and conferred upon such corporations by law.
2. Captive insurers without shares of capital stock shall be incorporated under Article 3 (§ 13.1-818 et seq.) of Chapter 10 of Title 13.1, as modified by this title and, except as provided in this title, shall be subject to all the general restrictions and shall have all the general powers imposed and conferred upon such corporations by law.
3. 1. No charter shall be granted to any captive insurer until the Commission receives a certificate from the State Treasurer showing that (i) cash, bonds or other securities in the amount required by § 38.2-1105 have been deposited or (ii) an irrevocable letter of credit in that amount has been deposited and is to be held under the provisions, terms and conditions set forth in § 38.2-1105 . C. 1. No charter shall be granted to any captive insurer until the Commission receives a certificate from the State Treasurer showing that (i) cash, bonds or other securities in the amount required by § 38.2-1105 have been deposited or (ii) an irrevocable letter of credit in that amount has been deposited and is to be held under the provisions, terms and conditions set forth in § 38.2-1105.
   2. When the certificate has been presented to the Commission, the Commission may make or direct to be made an examination of the captive insurer.
   3. The Commission shall issue a license if the captive insurer complies with this chapter.
4. Any amendment of the articles of incorporation of a captive insurer shall be pursuant to Article 11 (§ 13.1-705 et seq.) of Chapter 9 or of Article 10 (§ 13.1-884 et seq.) of Chapter 10 of Title 13.1.
5. The principal and home office of every captive insurer shall be in this Commonwealth.

History. 1980, c. 665, § 38.1-920; 1986, c. 562.

§ 38.2-1105. Deposit of minimum capital; letter of credit instead of deposit.

1. No captive insurer shall be issued a license to transact the business of insurance in this Commonwealth until it has met the requirements of Article 5 (§ 38.2-1024 et seq.) of Chapter 10 of this title.
2. The captive insurer shall deposit with the State Treasurer cash, bonds, or securities equal to the minimum capital or, if a mutual insurer, fifty percent of the minimum surplus, as required by Article 5 (§ 38.2-1024 et seq.) of Chapter 10 of this title. The State Treasurer shall accept an irrevocable letter of credit, in a form acceptable to the Commission, on behalf of a captive insurer instead of requiring the above-mentioned deposit. The letter of credit shall be issued by a national or state bank and approved by the Commission.
3. The deposit or letter of credit shall be held by the State Treasurer for the benefit of all policyholders and creditors wherever located and shall be administered as provided in Article 7 (§ 38.2-1045 et seq.) of Chapter 10 of this title.
4. The State Treasurer shall furnish to the captive insurer a certificate certifying that the State Treasurer holds the securities or letters of credit in trust for the benefit of the policyholders and creditors of the captive insurer.

History. 1980, c. 665, § 38.1-921; 1986, c. 562.

§ 38.2-1106. Minimum surplus in form of letter of credit.

1. Any licensed captive insurer may, subject to the approval of the Commission, hold all or a portion of (i) the minimum surplus as set forth in Article 5 (§ 38.2-1024 et seq.) of Chapter 10 in the form of an irrevocable letter of credit, if a stock insurer, or (ii) fifty percent of minimum surplus not subject to subsection B of § 38.2-1105 , if a mutual insurer.  The letter of credit shall be issued by a national or state bank and approved by the Commission.
2. Any letter of credit permitted pursuant to this section shall be held by the State Treasurer for the benefit of all policyholders and creditors and shall be administered as provided in Article 7 (§ 38.2-1045 et seq.) of Chapter 10 of this title.

History. 1980, c. 665, § 38.1-922; 1986, c. 562.

§ 38.2-1107. Membership in rating organizations.

No captive insurer shall be required to join a rating organization.

History. 1980, c. 665, § 38.1-926; 1986, c. 562.

§ 38.2-1108. Tax on premiums collected.

All captive insurers transacting business in this Commonwealth shall pay taxes as provided for in Chapter 25 of Title 58.1, except that taxes shall be paid on risks and property situated in any state in which the captive insurer is not licensed and upon which no premium tax is otherwise paid or payable.

History. 1980, c. 665, § 38.1-928; 1986, c. 562.

§ 38.2-1109. Applicability of other provisions of title.

Except as otherwise provided, all laws of this title that apply to insurers writing the same classes of insurance that captive insurers are permitted to write, shall apply in every respect to captive insurers.

History. 1980, c. 665, § 38.1-930; 1986, c. 562.

§ 38.2-1200. Scope of chapter.

This chapter applies to all reciprocals and reciprocal insurance as defined in § 38.2-1201 .

History. 1952, c. 317, § 38.1-688; 1986, c. 562.

Michie’s Jurisprudence.

For related discussion, see 19 M.J. Trust, Guaranty and Surety Companies, § 1.

§ 38.2-1201. Definitions.

1. As used in this title:“Reciprocal” means the aggregation of subscribers under a common name.“Reciprocal insurance” means insurance resulting from the mutual exchange of insurance contracts among persons in an unincorporated association under a common name through an attorney-in-fact having authority to obligate each person both as insured and insurer.
2. As used in this chapter:“Attorney” means the person designated and authorized by subscribers as the attorney-in-fact having authority to obligate them on reciprocal insurance contracts.“Subscriber” means a person obligated under a reciprocal insurance agreement.

History. 1952, c. 317, § 38.1-689; 1986, c. 562.

§ 38.2-1202. Insuring power of reciprocals.

A reciprocal licensed to transact the business of insurance in this Commonwealth may write the classes of insurance enumerated in Article 2 (§ 38.2-101 et seq.) of Chapter 1 of this title, except life insurance, annuities, and title insurance.

History. Code 1950, § 38-543; 1952, c. 317, § 38.1-690; 1986, c. 562.

§ 38.2-1203. What laws applicable to reciprocals; compliance with § 38.2-208.

1. Except as otherwise provided, all the provisions of this title relating to insurers generally, and those relating to insurers writing the same classes of insurance that reciprocals are permitted to write, are applicable to reciprocals.
2. A reciprocal shall be deemed to have complied with § 38.2-208 if:
   1. It issues policies containing a contingent assessment liability as provided for in § 38.2-1212 ; and
   2. It has and maintains reinsurance in an amount that the Commission considers adequate to reasonably limit the reciprocal’s aggregate losses to the lesser of:
      1. Ten percent of the surplus to policyholders of the reciprocal multiplied by the number of subscribers;
      2. The surplus to policyholders of the reciprocal multiplied by three; or
      3. Five million dollars.

History. Code 1950, § 38-543; 1952, c. 317, § 38.1-691; 1977, c. 58; 1986, c. 562.

§ 38.2-1204. Power to enter into reciprocal insurance contracts.

1. Persons of this Commonwealth may enter into reciprocal insurance contracts with each other and with persons of other states and countries.  For the purposes of this chapter, the definition of “person” shall also include any county, city, or town, school board, Transportation District Commission, or any other local governmental authority or local agency or public service corporation owned, operated or controlled by a locality or local government authority, with power to enter into contractual undertakings within or without the Commonwealth.
2. For any corporation now existing or hereafter organized under the laws of this Commonwealth, the power and authority to enter into reciprocal insurance contracts shall be in addition to the powers conferred upon it in its certificate of incorporation, and shall be incidental to the purposes for which the corporation is organized.

History. Code 1950, §§ 38-543, 38-550; 1952, c. 317, §§ 38.1-692, 38.1-693; 1986, c. 562.

§ 38.2-1205. Name.

Every reciprocal shall have and use a business name that includes the word “reciprocal,” “interinsurer,” “interinsurance,” “exchange,” “underwriters,” or “underwriting.”

History. Code 1950, § 38-546; 1952, c. 317, § 38.1-694; 1986, c. 562.

§ 38.2-1206. License required of reciprocals; surplus.

1. No reciprocal shall engage in any insurance transaction in this Commonwealth until it has obtained a license to do so in accordance with the applicable provisions of Articles 5 (§ 38.2-1024 et seq.) and 7 (§ 38.2-1045 et seq.)  of Chapter 10 of this title.
2. No domestic or foreign reciprocal shall be licensed to transact the business of insurance in this Commonwealth unless it has a surplus to policyholders of at least $1,600,000, and no alien reciprocal shall be so licensed unless it has a trusteed surplus, as defined in § 38.2-1031 , of at least $1,600,000.

History. Code 1950, § 38-549; 1952, c. 317, § 38.1-695; 1977, c. 322; 1986, c. 562; 1991, c. 261.

§ 38.2-1207. Exceptions as to reciprocals licensed and operating.

1. Notwithstanding other provisions of this chapter regarding minimum required surplus, any reciprocal that was licensed to write and was writing any class of insurance in this Commonwealth on June 30, 1991, may continue to write that class of insurance under the appropriate license from the Commission until July 1, 1994. The reciprocal shall maintain at all times the minimum surplus, and the minimum trusteed surplus if an alien reciprocal, required on June 30, 1991.
2. Before any reciprocal obtains a license to write in this Commonwealth any class of insurance that it was not writing and licensed to write in this Commonwealth on June 30, 1991, it shall comply with all the requirements of this article regarding surplus.

History. 1977, c. 322, § 38.1-695.1; 1986, c. 562; 1991, c. 261.

§ 38.2-1208. Additional requirements, foreign and alien reciprocals.

No foreign reciprocal shall be licensed to transact the business of insurance in this Commonwealth unless it has filed with the Commission a certificate of the supervising insurance official of the state in which it is organized. The certificate shall show that the foreign reciprocal is licensed to write and is writing actively in that state or an affiliate of the foreign reciprocal is licensed to write and is writing actively in its state of domicile or at least two other states the class of insurance it proposes to write in this Commonwealth. No alien reciprocal shall be licensed to transact the business of insurance until it has filed with the Commission a certificate of the supervising insurance official of (i) the state through which it entered the United States or (ii) the alien reciprocal’s domiciliary country. The certificate shall show that the alien reciprocal is licensed to write and is writing actively in that state or country the class of insurance it proposes to write in this Commonwealth.

History. 1952, c. 317, § 38.1-696; 1986, c. 562; 2017, c. 655.

The 2017 amendments.

The 2017 amendment by c. 655, in the second sentence, deleted the duplicate phrase “and is writing actively” and inserted “or an affiliate of the foreign reciprocal is licensed to write and is writing actively in its state of domicile or at least two other states.”

§ 38.2-1209. Residence and office of attorney of foreign and alien reciprocals.

Nothing in this title regarding the admission and licensing of foreign and alien insurers requires that the attorney of a foreign or alien reciprocal be resident or domiciled in this Commonwealth, or that the principal office of the attorney be maintained in this Commonwealth. The office or offices of the attorney shall be determined by the subscribers through the power of attorney.

History. Code 1950, § 38-545; 1952, c. 317, § 38.1-698; 1986, c. 562.

§ 38.2-1210. Contracts executed by attorney.

Reciprocal insurance contracts shall be executed by the attorney of the reciprocal.

History. Code 1950, § 38-545; 1952, c. 317, § 38.1-699; 1986, c. 562.

§ 38.2-1211. License required of agent.

No person shall act in this Commonwealth as an agent of a reciprocal in the selling, solicitation or negotiation of applications for insurance, subscriber’s agreements and powers of attorney, or in the collection of premiums in connection with the reciprocal insurer, without first procuring a license from the Commission pursuant to the requirements in Chapter 18 of this title. An agent shall be appointed by each reciprocal the agent represents.

History. 1977, c. 313, § 38.1-700.1; 1986, c. 562; 2001, c. 706.

The 2001 amendments.

The 2001 amendment by c. 706, effective September 1, 2002, substituted “selling, solicitation or negotiation” for “solicitation or procurement.”

§ 38.2-1212. Subscribers’ liability.

1. Each subscriber insured under an assessable policy shall have a contingent assessment liability for payment of actual losses and expenses incurred while his policy was in force. This shall be in the amount provided for in the power of attorney or subscriber’s agreement.
2. The contingent assessment liability on any one policy in any one calendar year shall equal the premiums earned, as defined in § 38.2-1226 , on the policy for that year multiplied by not less than one nor more than ten.
3. The contingent assessment liability shall not be joint, but shall be individual and several.
4. Each assessable policy issued by the insurer shall plainly set forth a statement of the contingent assessment liability on the front of the policy in capital letters in no less than ten point type.

History. 1952, c. 317, §§ 38.1-702, 38.1-716; 1986, c. 562.

§ 38.2-1213. Nonassessable policies.

1. The Commission may issue a certificate authorizing the reciprocal to reduce or extinguish the contingent assessment liability of subscribers under its policies then in force in this Commonwealth, and to omit provisions imposing contingent assessment liability in all policies delivered or issued for delivery in this Commonwealth for as long as all such surplus to policyholders remains unimpaired. The certificate may be issued if, in the case of a domestic or foreign reciprocal, the reciprocal has surplus to policyholders of at least four million dollars, or, if in the case of an alien reciprocal, the reciprocal has a trusteed surplus, as defined in § 38.2-1031 , of at least four million dollars.  No certificate may be issued until an application of the attorney has been approved by the subscribers’ advisory committee.However, any reciprocal that on June 30, 1991, was authorized to issue and was engaged in issuing policies without contingent liability may continue to do so until July 1, 1994, by maintaining at all times the minimum surplus to policyholders if a domestic or foreign reciprocal, and the minimum trusteed surplus if an alien reciprocal, required at the time of authorization.
2. The Commission shall issue this certificate if it determines that the reciprocal’s surplus to policyholders is reasonable in relation to the reciprocal’s outstanding liabilities and adequate to meet its financial needs. In making that determination the following factors, among others, shall be considered:
   1. The size of the reciprocal as measured by its assets, capital and surplus, reserves, premium writings, insurance in force and other appropriate criteria;
   2. The extent to which the reciprocal’s business is diversified among different classes of insurance;
   3. The number and size of risks insured in each class of insurance;
   4. The extent of the geographical dispersion of the reciprocal’s insured risks;
   5. The nature and extent of the reciprocal’s reinsurance program;
   6. The quality, diversification, and liquidity of the reciprocal’s investment portfolio;
   7. The recent past and trend in the size of the reciprocal’s surplus to policyholders;
   8. The surplus to policyholders maintained by other comparable insurers; and
   9. The adequacy of the reciprocal’s reserves.
3. Upon impairment of the surplus to policyholders, the Commission shall revoke the certificate. After revocation, the reciprocal shall not issue or renew any policy without providing for the contingent assessment liability of subscribers.
4. The Commission shall not authorize a domestic reciprocal to extinguish the contingent assessment liability of any of its subscribers or in any of its policies to be issued, unless it has the required surplus to policyholders and extinguishes the contingent assessment liability of all of its subscribers and in all policies to be issued for all classes of insurance written by it. However, if required by the laws of another state in which the domestic reciprocal is transacting the business of insurance as a licensed insurer, it may issue policies providing for the contingent assessment liability of its subscribers acquiring policies in that state and need not extinguish the contingent assessment liability applicable to policies already in force in that state.

History. 1952, c. 317, § 38.1-703; 1977, cc. 58, 322; 1986, c. 562; 1991, c. 261.

§ 38.2-1214. Savings returned to subscribers.

A reciprocal may return to its subscribers any savings or credits accruing to their accounts. Any such distribution shall not unfairly discriminate between classes of risks or policies, or between subscribers. However, the distribution may vary for classes of subscribers based upon the experience of those classes.

History. 1952, c. 317, § 38.1-704; 1986, c. 562.

§ 38.2-1215. Reserves.

Each reciprocal shall maintain the same unearned premium and loss or claim reserves required for stock and mutual companies writing the same classes of insurance.

History. Code 1950, §§ 38-558, 38-559; 1952, c. 317, § 38.1-705; 1986, c. 562.

§ 38.2-1216. Clerk of Commission to be appointed agent for service of process; procedure thereafter.

1. Each attorney of a domestic reciprocal who files the declaration required by § 38.2-1219 , and each attorney of a foreign or alien reciprocal who applies for a license to transact the business of insurance in this Commonwealth shall file with the Commission a written power of attorney executed in duplicate by the attorney appointing the clerk of the Commission as agent of the reciprocal. Upon the appointment, the clerk of the Commission (i) may be served all lawful process against or notice to such reciprocal, and (ii) shall be authorized to enter an appearance in behalf of the reciprocal. A copy of the power of attorney, duly certified by the Commission, shall be received in evidence in all courts of this Commonwealth.  Any domestic, foreign or alien reciprocal that, on July 1, 1986, has appointed the Secretary of the Commonwealth as its agent for service of process shall comply with the requirements of this section within six months of July 1, 1986.
2. Whenever any such process or notice is served upon the clerk of the Commission, a copy of the process or notice shall be mailed to the attorney at the address shown on the power of attorney.  Nothing in this section shall limit the right to serve any process or notice upon any reciprocal in any other manner permitted by law.

History. Code 1950, § 38-547; 1952, c. 317, § 38.1-706; 1968, c. 125; 1976, c. 559; 1986, c. 562.

§ 38.2-1217. Reciprocal may be sued as such; where action or suit may be brought; upon whom service of process had.

1. Any reciprocal doing business in this Commonwealth may sue or be sued in the name or designation under which its insurance contracts are effected.
2. Any action or suit against a reciprocal may be brought in any county or city (i) where its principal office is located, or (ii) where the cause of action or any part of the cause of action arose. If the action or suit is to recover a loss under a policy of insurance, it may also be brought in the county or city where the property insured was situated at the date of the policy. Any action or suit against a foreign or alien reciprocal may also be brought in any county or city of this Commonwealth in which it has any debts owed to it.
3. In an action or suit against a reciprocal, process against or notice to the reciprocal may be served upon the clerk of the Commission. If the defendant in the action or suit is a domestic reciprocal, process against or notice to that domestic reciprocal shall be served upon the attorney for that domestic reciprocal unless service upon that attorney is not feasible.

History. Code 1950, § 38-547; 1952, c. 317, § 38.1-707; 1986, c. 562.

§ 38.2-1218. Effect of judgment against reciprocal.

Any judgment against a reciprocal based upon legal process duly served as provided in this chapter shall be binding upon the reciprocal and upon each of the reciprocal’s subscribers as their respective interests may appear, in an amount not exceeding their respective contingent assessment liabilities.

History. 1952, c. 317, § 38.1-708; 1986, c. 562.

§ 38.2-1219. Organization of reciprocals; what declaration to contain.

1. Twenty-five or more persons domiciled in this Commonwealth and designated as subscribers may organize a domestic reciprocal and apply to the Commission for a license to transact the business of insurance. The original subscribers and the proposed attorney shall execute and file with the Commission a declaration setting forth:
   1. The name of the attorney, and the name of the reciprocal;
   2. The location of the reciprocal’s principal office, which shall be the same as that of the attorney, and shall be in this Commonwealth;
   3. The classes of insurance proposed to be written;
   4. The names and addresses of the original subscribers;
   5. The designation and appointment of the attorney, and a copy of the power of attorney and subscriber’s agreement;
   6. The names and addresses of the officers and directors of the attorney if a corporation, or of its members if not a corporation;
   7. The powers of the subscribers’ advisory committee, and the names and terms of office of its members;
   8. A statement that each of the original subscribers has in good faith applied for insurance of the class proposed to be written and that the reciprocal has received from each original subscriber the anticipated premium or premium deposit for a term of not less than six months for the policy for which application is made;
   9. A statement of the financial condition of the reciprocal including a schedule of its assets;
   10. A statement that the reciprocal has the surplus to policyholders required by § 38.2-1206 ; and
   11. A copy of each policy, endorsement and application form it proposes to issue or use.
2. The declaration shall be acknowledged by each original subscriber and by the attorney in the manner required for the acknowledgment of deeds in § 55.1-612 .

History. Code 1950, § 38-546; 1952, c. 317, § 38.1-709; 1986, c. 562.

Editor’s note.

To conform to the recodification of Title 55 by Acts 2019, c. 712, effective October 1, 2019, the following substitution was made at the direction of the Virginia Code Commission: substituted “55.1-612” for “55-113.”

§ 38.2-1220. Attorney to file bond.

1. Concurrent with the filing of the declaration provided for in § 38.2-1219 , the attorney of a domestic reciprocal shall certify to the Commission, and thereafter for each year in which the reciprocal is licensed under this chapter shall keep in force, a bond payable to this Commonwealth that complies with the requirements of this chapter.
2. The bond shall be in an amount established at the discretion of the Commission, which shall be at least $50,000. The bond shall be on the condition that the attorney will faithfully account for all moneys and other property of the reciprocal coming into the attorney’s control and that the attorney will not withdraw or appropriate for his own use from the funds of the reciprocal any moneys or property to which he is not entitled under the power of attorney.
3. The bond shall provide that it is not subject to cancellation unless thirty days’ written notice of intent to cancel is given to both the attorney and the Commission.
4. The bond shall be executed by the attorney and by a fidelity insurer licensed in this Commonwealth and shall be subject to the approval of the Commission.

History. 1952, c. 317, § 38.1-710; 1986, c. 562; 2001, c. 706.

The 2001 amendments.

The 2001 amendment by c. 706, effective July 1, 2001, in subsection A, substituted “certify to” for “file with,” inserted “and thereafter for each year in which the reciprocal is licensed under this chapter shall keep in force,” and added “that complies with the requirements of this chapter” at the end of the subsection; deleted the former second sentence of subsection A, which read: “The bond shall be executed by the attorney and by a fidelity insurer licensed in this Commonwealth and shall be subject to the approval of the Commission”; and added subsection D.

§ 38.2-1221. Deposit instead of bond.

Instead of filing the bond required by § 38.2-1220 , the attorney may maintain on deposit with the State Treasurer an equal amount in cash or in value of securities of the kind specified in § 38.2-1045 , subject to the same conditions as the bond.

History. 1952, c. 317, § 38.1-711; 1986, c. 562.

§ 38.2-1222. Subscribers’ advisory committee.

The advisory committee exercising the subscribers’ rights in a domestic reciprocal shall be selected under rules adopted by the subscribers. At least three-fourths of the committee shall be composed of subscribers other than the attorney or any person employed by, representing, or having a financial interest in the attorney. The committee shall supervise the finances of the reciprocal and the reciprocal’s operations to the extent required to assure their conformity with the subscriber’s agreement and power of attorney and shall exercise any other powers conferred on it by the subscriber’s agreement. The committee may also be referred to as a board of directors or a board of trustees or by such other name as the committee chooses.

History. 1952, c. 317, § 38.1-712; 1986, c. 562; 1990, c. 10.

§ 38.2-1223. Subscriber’s agreement and power of attorney.

1. Every subscriber of a domestic assessable reciprocal shall execute a subscriber’s agreement and power of attorney setting forth the rights, privileges and obligations of the subscriber as an underwriter and as a policyholder, and the powers and duties of the attorney.  Every subscriber of a nonassessable reciprocal may execute a subscriber’s agreement and power of attorney setting forth the rights, privileges, and obligations of the subscriber as an underwriter and as a policyholder, and the powers and duties of the attorney.  If a nonassessable reciprocal does not require execution of a subscriber’s agreement and power of attorney, the reciprocal shall include on its policies a statement that the subscriber shall be bound by the terms and conditions of the then current subscriber’s agreement and power of attorney on file with the attorney and the Commission, a copy of which shall be provided to each subscriber with each new or renewal policy, and each subscriber shall by operation of law be bound by such subscriber’s agreement and power of attorney as if individually executed.  Without additional execution, notice or acceptance, every subscriber of a reciprocal agrees to be bound by any modification of the terms of the power of attorney and subscriber’s agreement which is jointly made by the attorney and the subscribers’ advisory committee pursuant to § 38.2-1224 , and which shall be on file with the attorney and the Commission.  Notwithstanding the provisions of this subsection, the original organizing subscribers of a reciprocal shall be required to execute and file with the declaration referred to in § 38.2-1219 the subscriber’s agreement and power of attorney when such filing is in conjunction with the original organization and licensure by the Commission of a reciprocal as provided in § 38.2-1219 . The subscriber’s agreement and power of attorney shall contain in substance the following provisions:
   1. A designation and appointment of the attorney to act for and bind the subscriber in all transactions relating to or arising out of the operations of the reciprocal;
   2. A provision empowering the attorney (i) to accept service of process on behalf of the reciprocal and (ii) to appoint the clerk of the Commission agent of the reciprocal upon whom may be served all lawful process against or notice to the reciprocal;
   3. Except for nonassessable policies, a provision for a contingent assessment liability of each subscriber in a specified amount in accordance with § 38.2-1212 ; and
   4. The maximum amount to be deducted from advance premiums or deposits to be paid the attorney, and the items of expense, in addition to losses, to be paid by the reciprocal.
2. The subscriber’s agreement may:
   1. Provide for the right of substitution of the attorney and revocation of the power of attorney;
   2. Impose any restrictions upon the exercise of the power agreed upon by the subscribers;
   3. Provide for the exercise of any right reserved to the subscribers directly or through an advisory committee; or
   4. Contain other lawful provisions considered advisable.

History. 1952, c. 317, § 38.1-700; 1986, c. 562; 1990, c. 10.

§ 38.2-1224. Modification of power of attorney and subscriber’s agreement.

Modification of the terms of the power of attorney and subscriber’s agreement of a domestic reciprocal shall be made jointly by the attorney and the subscribers’ advisory committee. Any such modification shall be filed with the attorney and the Commission and such filing shall by operation of law bind all subscribers the same as if each subscriber individually adopted and executed the modified, altered, or amended subscriber’s agreement and power of attorney, and a copy of such agreement and power of attorney shall be provided to each subscriber within ninety days of such modifications, alterations, or amendments. No modification shall be effective retroactively, nor shall it affect any insurance contract issued prior to the modification.

History. 1952, c. 317, § 38.1-701; 1986, c. 562; 1990, c. 10.

§ 38.2-1225. Contributions.

The attorney or other interested persons may advance to a domestic reciprocal any funds required in its operations. No repayment of the principal, or any payment of interest thereon, in whole or in part, shall be made without the approval of the Commission. The principal advanced and any interest accrued thereon shall not be treated as a liability of the reciprocal until the repayment of principal or payment of interest is approved by the Commission; nonetheless, all statements published or filed shall show accrued interest and the amount of principal remaining unpaid. In the event of a liquidation or dissolution, all claims under the instrument shall be subordinated to subscriber, claimant and beneficiary claims as well as debts owed to all other classes of creditors. The principal advanced shall not be withdrawn or repaid and no payments of interest thereon shall be made unless the reciprocal has sufficient earned surplus in excess of its minimum required surplus. No commission or brokerage shall be paid in acquiring the funds. Interest on the principal advanced shall be at a rate not exceeding the one-year treasury bill interest rate plus three percentage points at the time the loan is made or renewed.

History. 1952, c. 317, § 38.1-713; 1986, c. 562; 1994, c. 503.

§ 38.2-1226. Assessments.

1. Assessments may be levied upon the subscribers of a domestic reciprocal by the attorney in accordance with § 38.2-1212 . The assessments shall be approved in advance by the subscribers’ advisory committee and the Commission.
2. Each domestic reciprocal subscriber’s share of a deficiency for which an assessment is made shall be computed by multiplying the premiums earned on the subscriber’s policies during the period to be covered by the assessment by the ratio of the total deficiency to the total premiums earned during the period upon all policies subject to the assessment. However, no assessment shall exceed the aggregate contingent assessment liability computed in accordance with § 38.2-1212 . For the purposes of this section, the premiums earned on the subscriber’s policies are the gross premiums charged by the reciprocal for the policies minus any charges not recurring upon the renewal or extension of the policies. No subscriber shall have an offset against any assessment for which he is liable on account of any claim for unearned premium or losses payable.

History. 1952, c. 317, § 38.1-714; 1986, c. 562.

§ 38.2-1227. Time limit for assessment.

Every subscriber of a domestic reciprocal having contingent assessment liability shall be liable for and shall pay his share of any assessment computed in accordance with this article if, while the policy is in force or within one year after its termination, the subscriber is notified (i) by the attorney of his intention to levy the assessment or (ii) that delinquency proceedings have been commenced against the reciprocal under the provisions of Chapter 15 of this title, and the Commission or receiver intends to levy an assessment.

History. 1952, c. 317, § 38.1-715; 1986, c. 562.

§ 38.2-1228. Subscribers’ share in assets.

Upon the liquidation of a domestic reciprocal, the assets remaining after discharge of its (i) indebtedness and policy obligations, (ii) the return of any contributions of the attorney or other person made as provided in § 38.2-1225 , and (iii) the return of any unused deposits, savings or credits, shall be distributed. The distribution shall be according to a formula approved by the Commission or the court to the persons who were its subscribers within the twelve months prior to the final termination of its license.

History. 1952, c. 317, § 38.1-717; 1986, c. 562.

§ 38.2-1229. Impaired reciprocals.

1. If (i) the assets of a domestic reciprocal are at any time insufficient to settle the sum of its liabilities, except those on account of funds contributed by the attorney or other parties, and its required surplus to policyholders, and (ii) the deficiency is not cured from other sources, its attorney shall levy an assessment upon subscribers made subject to assessment by the terms of their policies for the amount needed to make up the deficiency. However, the assessment shall be subject to § 38.2-1212 .
2. If the attorney fails to make the assessment within thirty days after the Commission orders him to do so, or if the deficiency is not fully made up within sixty days after the date the assessment was made, delinquency proceedings may be instituted and conducted against the insurer as provided in Chapter 15 of this title.
3. If liquidation of the reciprocal is ordered, an assessment shall be levied upon the subscribers for the amount the Commission or the court, as the case may be, determines to be necessary to discharge all liabilities of the reciprocal. This assessment shall exclude any funds contributed by the attorney or other persons, but shall include the reasonable cost of the liquidation. However, the assessment shall be subject to § 38.2-1212 .

History. 1952, c. 317, § 38.1-718; 1986, c. 562.

§ 38.2-1230. Material transactions.

1. Prior written approval of the Commission shall be required for a material transaction between a domestic reciprocal and any of its related parties or between any two or more of the reciprocal’s related parties when the material transaction occurs on or after July 1, 2004, and involves more than three percent of the domestic reciprocal’s admitted assets as reported in its most recent statutory statement filed with the Commission. All other material transactions between any such parties involving more than 0.5 percent of the domestic reciprocal’s admitted assets as reported in its most recent statutory statement filed with the Commission shall be reported to the Commission within 15 days after the end of the month in which the transaction occurs. In addition, all transactions shall meet the following standards:
   1. The terms shall be fair and equitable;
   2. Charges or fees for services performed shall be reasonable;
   3. Expenses incurred and payments received shall be allocated to the reciprocal on an equitable basis in conformity with statutory insurance accounting practices consistently applied;
   4. The books, accounts, and records of each party shall disclose clearly and accurately the precise nature and details of the transaction; and
   5. The  reciprocal’s surplus following any dividends or distribution to any of the reciprocal’s related parties shall be reasonable in relation to the reciprocal’s outstanding liabilities and adequate to its financial needs.
2. The Commission, in reviewing a material transaction under this section, shall consider whether the material transaction complies with the standards set forth in subsection A and also whether the transaction may adversely affect the interests of the subscribers or the solvency of the reciprocal.
3. Within 60 days after written notification of any transaction requiring approval pursuant to this section, the Commission shall notify the insurer of its approval or disapproval, and, in the event of disapproval, its reason thereof. Failure of the Commission to act within 60 days of notification by the insurer shall constitute approval of the transaction.
4. For the purposes of this section:
   1. “Affiliate” of a specific person means a person that directly or indirectly through one or more intermediaries, owns, is owned by, or is under common ownership with the person specified. An affiliate relationship shall be presumed to exist if any person, directly or indirectly, owns or holds with the power to vote, or holds proxies representing collectively 10 percent or more of the voting securities of the person specified.
   2. “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person or entity, whether (i) through the ownership of voting securities, (ii) by contract, other than a commercial contract for goods or nonmanagement services, (iii) by contract for goods or nonmanagement services where the volume of activity results in a reliance relationship, (iv) by common management, or (v) by any other means. Control shall be presumed to exist if a reporting entity and its affiliates directly or indirectly, own, control, hold with the power to vote, or hold proxies representing 10 percent or more of the voting interests of the entity.
   3. “Material transaction” means a transaction, other than a claim payment or a premium payment, that (i) affects surplus or involves an exchange of assets or liabilities of the reciprocal, requires performance by or creates an obligation for the reciprocal, or results in transfer of the risks or rewards of ownership to or by the reciprocal and (ii) exceeds any minimum limits set forth in subsection A of this section. Any series of transactions affecting, involving, or impacting the reciprocal as described in clause (i) and occurring within a 12-month period that are sufficiently similar in nature as to be reasonably construed as a single transaction and that in the aggregate exceed any minimum limits set forth in subsection A of this section shall be deemed a material transaction.
   4. “Related parties” means entities that have common interests as a result of ownership, control, or affiliation or by contract. The related parties of a domestic reciprocal include, but are not limited to: (i) an affiliate of the reciprocal; (ii) the attorney of the reciprocal; (iii) an affiliate of the attorney; (iv) any insurer or other reciprocal managed by the attorney of the reciprocal or by an affiliate of the attorney of the reciprocal; or (v) any other person who, directly or indirectly, by contract or otherwise, acts on behalf of, or at the direction of, the attorney of the reciprocal or any affiliate of the attorney of the reciprocal.
5. Any report or other information filed pursuant to this section shall not be open to public inspection and shall receive confidential treatment by the Commission consistent with the treatment described in § 38.2-1320.5 .
6. A domestic reciprocal and its attorney shall annually file a related parties summary containing current information on:
   1. The capital structure, general financial condition, ownership, and management of the reciprocal, its attorney, and any person controlling the reciprocal;
   2. The identity of “related parties”;
   3. The following agreements in force, continuing relationships, and transactions currently outstanding between the reciprocal and any related party or among any two or more related parties:
      1. Loans, other investments or purchases, or sales or exchanges of securities of the reciprocal or a related party made by the reciprocal or by any one or more related party;
      2. Purchases, sales, or exchanges of assets;
      3. Transactions not in the ordinary course of business;
      4. Guarantees or undertakings by the reciprocal for the benefit of a related party or by a related party for the benefit of the reciprocal that result in an actual contingent exposure of the reciprocal’s assets to liability, other than insurance contracts entered into in the ordinary course of the reciprocal’s business;
      5. All management and service contracts and all cost-sharing arrangements;
      6. Reinsurance agreements or other risk-sharing arrangements; and
      7. Dividend and other distributions to any of the reciprocal’s related parties.Unless the Commission prescribes otherwise, information about transactions that are not material transactions as defined in subsection D shall not be deemed material for purposes of this subsection and need not be disclosed in the related parties summary required by this subsection.
7. A reciprocal shall file its initial related parties summary required by subsection F with the Commission on or before the later of (i) August 15, 2004, or (ii) 15 days after initial licensure as a reciprocal by the Commission. Thereafter, a licensed domestic reciprocal shall file a related parties summary on or before April 1 of each year reporting information as of December 31 of the previous year.

History. 1996, c. 304; 2004, c. 174.

The 2004 amendments.

The 2004 amendment by c. 174 rewrote the section.

§ 38.2-1231. Attorney’s financial statement.

1. The subscribers’ advisory committee of a domestic reciprocal shall annually obtain from its attorney an audited financial report of the attorney’s financial position and the results of its operations as related to its management of the reciprocal. A copy of the report shall be filed with the Commission.
2. Unless the Commission provides otherwise in writing, the report required by this section shall be due within 120 days after the end of the attorney’s fiscal year, shall be prepared in conformity with generally accepted accounting practices, and shall be audited by an independent certified public accountant.
3. If the attorney obtains an independent audit on a consolidated basis, the audited consolidated financial statements shall satisfy the requirements of this section provided the attorney’s financial position and results of its operation as related to its management of the reciprocal are separately disclosed.
4. The report filed pursuant to this section and any information provided in connection with the preparation of such report shall not be open to public inspection and shall receive confidential treatment by the Commission.

History. 1996, c. 304.

§ 38.2-1300. Annual statements.

1. Each domestic, foreign, and alien insurer licensed to transact the business of insurance in this Commonwealth shall file with the Commission annually, on or before March 1, an annual statement showing its financial condition on December 31 of the previous year. The annual statement shall be considered filed on the date the statement was sent by mail as shown by the postmark or on the date it is received electronically by the National Association of Insurance Commissioners (NAIC) in accordance with subsection D. The Commission shall prescribe the type of filing required for each type of insurer. The annual statement shall contain a detailed report of the insurer’s assets and liabilities, the investment of its assets, its income and disbursements during the previous year, and all other information which the Commission considers necessary to secure a full and accurate knowledge of the affairs and condition of the insurer. The annual statement of every domestic or foreign insurer shall be signed by at least two of its principal officers subject to § 38.2-1304 . No publication of the annual statement shall be required.
2. The annual statement of an alien insurer shall relate only to its transactions and affairs in the United States unless the Commission requires otherwise. The annual statement shall be verified by the alien insurer’s United States manager, assistant manager, or by any of its duly authorized officers.
3. The Commission may prescribe the form of the annual statement and supplemental schedules and exhibits to include additional copies in machine-readable format, and may vary the form for different types of insurers. However, as far as practicable, the form for annual statements, supplementary schedules, and exhibits shall be the same as other such forms in general use in the United States. Unless otherwise prescribed by the Commission, such annual statements shall be prepared using an annual statement convention blank developed by the NAIC. The annual statement, and supplementary schedules and exhibits required by this section, shall be prepared in accordance with the appropriate annual statement instructions and the accounting practices and procedures manuals adopted by the NAIC, or any other successor publications.
4. Each insurer that is authorized to transact insurance in this Commonwealth shall annually on or before March 1 of each year, file electronically with the NAIC a copy of its annual statement convention blank, along with such additional filings as prescribed by the Commission for the preceding year. The information filed with the NAIC shall be in the same format and scope as that required by the Commission and shall include any actuarial certification required by the Commission. Any amendments and addenda to the annual statement filing subsequently filed with the Commission shall also be filed with the NAIC. However, an insurer may apply to the Commission for an exemption from this subsection.
5. Foreign insurers that are domiciled in a state, which has a law substantially similar to subsection D of this section, shall be deemed to be in compliance with subsection D of this section.

History. Code 1950, §§ 38-122, 38-516; 1952, c. 317, § 38.1-159; 1986, c. 562; 1990, c. 240; 1991, c. 312; 1992, c. 588; 1994, c. 308; 2009, c. 602.

The 2009 amendments.

The 2009 amendment by c. 602, in subsection A, inserted “domestic, foreign, and alien” near the beginning of the first sentence, added the language beginning “or on the date it is received” at the end of the second sentence and inserted the third sentence; substituted “NAIC” for “National Association of Insurance Commissioners (NAIC)” in the next-to-last sentence of subsection C; and in subsection D, deleted “domestic, foreign and alien” following “Each” and inserted “electronically” in the first sentence and deleted “the signed jurat page and” following “and shall include” in the second sentence.

§ 38.2-1301. Additional reports.

1. In addition to the annual statement, the Commission may require a licensed insurer to file additional reports, exhibits or statements considered necessary to secure complete information concerning the condition, solvency, experience, transactions or affairs of the insurer. The Commission shall establish deadlines for filing these additional reports, exhibits or statements and may require verification by any officers of the insurer designated by the Commission.
2. The Commission may require a domestic, foreign or alien insurer that is authorized to transact insurance in this Commonwealth to file with the National Association of Insurance Commissioners (NAIC) a copy of the insurer’s financial statement required to be filed pursuant to § 38.2-1301 , on a quarterly basis. Unless otherwise prescribed by the Commission, all such financial statements, whether filed with the Commission or the NAIC, shall be prepared in accordance with applicable provisions of the annual statement instructions and the accounting practices and procedures manuals adopted by the NAIC, or any successor publications. The Commission may prescribe that additional copies of financial statements and other reports be filed in machine-readable format.

History. Code 1950, § 38-122; 1952, c. 317, § 38.1-160; 1986, c. 562; 1991, c. 312; 1992, c. 588; 1994, c. 308.

§ 38.2-1301.1. Material transaction disclosures.

1. Every insurer domiciled in this Commonwealth shall file a report with the Commission disclosing material acquisitions and dispositions of assets or material nonrenewals, cancellations or revisions of ceded reinsurance agreements unless such acquisitions and dispositions of assets or material nonrenewals, cancellations or revisions of ceded reinsurance agreements have been submitted to the Commission for review, approval or information purposes pursuant to other provisions of Title 38.2 or the rules and regulations of the Commission.
   1. The report required by this subsection is due within fifteen days after the end of the calendar month in which any of the foregoing transactions occur.
   2. One complete copy of the report, including any exhibits or other attachments filed as part thereof, shall be filed with the National Association of Insurance Commissioners unless the insurer has applied for and has been granted an exemption from this requirement by the Commission.
2. All reports obtained by or disclosed to the Commission pursuant to this section, shall be given confidential treatment, shall not be subject to subpoena, and shall not be made public by the Commission, the National Association of Insurance Commissioners, or any other person without the prior written consent of the insurer to which it pertains unless the Commission, after giving the insurer which would be affected thereby, notice and an opportunity to be heard, determines that the interest of policyholders, shareholders, or the public will be served by the publication thereof, in which event the Commission may publish all or any part thereof in such manner as it may deem appropriate. Notwithstanding the foregoing, the Commission may at its discretion disclose such reports to (i) a regulatory official of any state or country; (ii) the National Association of Insurance Commissioners, its affiliate or its subsidiary; or (iii) a law-enforcement authority of any state or country. Any such disclosure by the Commission shall not constitute a waiver of confidentiality of any such report.
3. No acquisitions or dispositions of assets need be reported pursuant to subsection A if the acquisitions or dispositions are not material. For purposes of this section, a material acquisition, or the aggregate of any series of related acquisitions during any thirty-day period, or disposition, or the aggregate of any series of related dispositions during any thirty-day period, is one that is nonrecurring and not in the ordinary course of business and involves more than five percent of the reporting insurer’s total admitted assets as reported in its most recent statutory statement filed with the Commission.
   1. Asset acquisitions subject to this section include every purchase, lease, exchange, merger, consolidation, succession, or other acquisition other than the construction or development of real property by or for the reporting insurer or the acquisition of materials for such purpose.
   2. Asset dispositions subject to this section include every sale, lease, exchange, merger, consolidation, mortgage, pledge or hypothecation, assignment, whether for the benefit of creditors or otherwise, abandonment, destruction, or other disposition.
   3. The following information is required to be disclosed in any report of a material acquisition or disposition of assets:
      1. Date of the transaction;
      2. Manner of acquisition or disposition;
      3. Description of the assets involved;
      4. Nature and amount of the consideration given or received;
      5. Purpose of, or reason for, the transaction;
      6. Manner by which the amount of consideration was determined;
      7. Gain or loss recognized or realized as a result of the transaction; and
      8. Name of all persons from whom the assets were acquired or to whom they were disposed.
   4. Insurers are required to report material acquisitions and dispositions on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or 100 percent reinsurance agreement that affects the solvency and integrity of the insurer’s reserves and such insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five percent of the insurer’s capital and surplus.
4. No nonrenewals, cancellations or revisions of ceded reinsurance agreements need be reported pursuant to this section if the nonrenewals, cancellations or revisions are not material. For purposes of this section, a material nonrenewal, cancellation or revision is one that affects for property and casualty business, including accident and health business when written as such, more than fifty percent of an insurer’s ceded written premium, or for life, annuity and accident and health business, more than fifty percent of the total reserve credit taken for business ceded, on an annualized basis as indicated in the insurer’s most recently filed statutory statement; however, no filing is required if the insurer’s ceded written premium or the total reserve credit taken for business ceded represents, on an annualized basis, less than ten percent of direct plus assumed written premium or ten percent of the statutory reserve requirement prior to any cession, respectively.
   1. Subject to the foregoing criteria, a report is to be filed without regard to which party has initiated the nonrenewal, cancellation or revision of ceded reinsurance whenever one or more of the following conditions exist:
      1. The entire cession has been cancelled, nonrenewed or revised and ceded indemnity and loss adjustment expense reserves after any nonrenewal, cancellation or revision represent less than fifty percent of the comparable reserves that would have been ceded had the nonrenewal, cancellation or revision not occurred;
      2. An authorized or accredited reinsurer has been replaced on an existing cession by an unauthorizing reinsurer; or
      3. Collateral requirements previously established for unauthorized reinsurers have been reduced; e.g., the requirement to collateralize incurred but not reported (IBNR) claim reserves has been waived with respect to one or more unauthorized reinsurers newly participating in an existing cession.Subject to the materiality criteria, for purposes of the foregoing subdivisions b and c, a report shall be filed if the result of the revision affects more than ten percent of the cession.
   2. The following information is required to be disclosed in any report of a material nonrenewal, cancellation or revision of ceded reinsurance agreements:
      1. Effective date of the nonrenewal, cancellation or revision;
      2. The description of the transaction with an identification of the initiator thereof;
      3. Purpose of, or reason for, the transaction; and
      4. If applicable, the identity of the replacement reinsurers.
   3. Insurers are required to report all material nonrenewals, cancellations or revisions of ceded reinsurance agreements on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or 100 percent reinsurance agreement that affects the solvency and integrity of the insurer’s reserves and such insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five percent of the insurer’s capital and surplus.

History. 1994, c. 308; 2001, c. 519.

The 2001 amendments.

The 2001 amendment by c. 519, in subsection B, deleted “except to insurance departments of other states” preceding “without the prior written consent,” and added the last two sentences of the subsection.

§ 38.2-1302. Extension of filing time.

The Commission may extend an insurer’s deadline for filing annual statements, other reports or exhibits provided the deadline for annual statements is not extended beyond April 30.

History. Code 1950, § 38-126; 1952, c. 317, § 38.1-161; 1986, c. 562.

§ 38.2-1303. Printed forms to be filed by insurers; certificates to domestic insurers.

1. The Commission shall be responsible for prescribing the type of blank or may prepare and distribute printed forms or blanks to licensed insurers for statements, reports, schedules or exhibits required by law or order.
2. The Commission shall furnish without charge to domestic insurers any certificates required to entitle them to do business in other states or countries.

History. Code 1950, § 38-129; 1952, c. 317, § 38.1-162; 1986, c. 562; 1994, c. 316.

§ 38.2-1304. False statements, reports, etc., deemed a Class 5 felony.

Any officer, manager, attorney, agent or employee of any insurer or surplus lines broker who is responsible for making or filing any annual or other statement, report, exhibit or other instrument required by this title and who knowingly or willfully makes or files any false or fraudulent statement, report or other instrument shall be charged with a Class 5 felony. If convicted, such person shall be guilty of a Class 5 felony.

History. Code 1950, § 38-123; 1952, c. 317, § 38.1-163; 1986, c. 562.

Cross references.

As to punishment for Class 5 felonies, see § 18.2-10 .

For general statutory provisions as to perjury, see §§ 18.2-434 through 18.2-437 .

§ 38.2-1305. Voluntary reports.

Any insurer may elect to file with the Commission, in addition to the annual statement required by § 38.2-1300 , a statement in condensed form of its financial condition as of the end of any calendar year or as of any other date. Any statement shall be signed by at least two of the principal officers of the insurer subject to § 38.2-1304 . No insurer nor anyone on its behalf shall publish in any manner in this Commonwealth a statement purporting to show its financial condition if that statement does not correspond in substance with the verified statement last filed with the Commission by the insurer pursuant to §§ 38.2-1300 , 38.2-1301 , or this section.

History. Code 1950, § 38-23; 1952, c. 317, § 38.1-164; 1986, c. 562.

§ 38.2-1306. Reports to be open to public inspection.

The Commission shall keep on file for at least three years all reports required by law and all special reports required by it to be filed by insurers. The Commission shall keep copies of the annual statement convention blanks and the quarterly financial statements filed with the Commission and, pursuant to subsection D of § 38.2-1300 and subsection B of § 38.2-1301 respectively, with the National Association of Insurance Commissioners (NAIC), available for inspection by interested persons at any reasonable time.

For companies not required to file with the NAIC, the Commission shall make available for inspection copies of such comparable financial statements of financial condition as those companies may be required to file routinely with the Commission pursuant to the provisions of this title. Except as provided otherwise by statute, or by order, rule or regulation promulgated by the Commission, no special report shall be open to public inspection.

History. Code 1950, § 38-124; 1952, c. 317, § 38.1-165; 1986, c. 562; 1994, c. 308.

§ 38.2-1306.1. Insurance companies’ analyses confidential.

1. All regulatory or financial analyses, ratios and examination synopses concerning insurance companies or insurance transactions that are submitted to the Commission by the National Association of Insurance Commissioners (NAIC), including information generated by any NAIC databases developed for use by regulators, shall be given confidential treatment, are not subject to subpoena, and may not be made public by the Commission or any other person.
2. Financial analyses and test ratios generated by the Commission, pursuant to the NAIC’s Insurance Regulatory Information System (IRIS) or Financial Analysis and Solvency Tracking (FAST) System, any successor program, or any similar program developed by the Commission, shall be given confidential treatment, are not subject to subpoena, and may not be made public by the Commission or any other person.
3. All working papers, recorded information, documents and copies thereof produced by, obtained by, or disclosed to the Commission or any other person pursuant to this article shall be given confidential treatment, are not subject to subpoena, and may not be made public by the Commission or any other person, except to the extent provided in § 38.2-1306 .
4. Notwithstanding other provisions to the contrary, nothing contained in this chapter shall prevent or be construed as prohibiting the Commission from disclosing otherwise confidential information, administrative or judicial orders, or the content of any analysis or any matter related thereto, at any time to (i) a regulatory official of any state or country; (ii) the NAIC, its affiliate or its subsidiary; or (iii) a law-enforcement authority of any state or country, provided that those officials are required under their law to maintain its confidentiality. Any such disclosure by the Commission shall not constitute a waiver of confidentiality of any such documents or information. Any parties receiving such papers shall agree in writing prior to receiving the information to provide it the same confidential treatment as required by this section, unless the prior written consent of the company to which it pertains has been obtained.
5. Documents or information received from the insurance regulatory officials of any state or country which are confidential in those jurisdictions are not open to public inspection and shall receive confidential treatment by the Commission.

History. 1987, c. 691; 1994, c. 308; 1996, c. 32; 2001, c. 519; 2007, c. 488.

The 2001 amendments.

The 2001 amendment by c. 519 inserted “or insurance transactions” in subsection A; inserted “shall not be subject to subpoena” in subsection B; and in subsection C, substituted “at any time to (i) a regulatory official of any state or country; (ii) the NAIC, its affiliate or its subsidiary; or (iii) a law-enforcement authority of any state or country” for “to the insurance regulatory officials of any state or country, directly or indirectly through officials at NAIC, or to law-enforcement officials of this or any other state or agency of the federal government at any time,” and added the last sentence.

The 2007 amendments.

The 2007 amendment by c. 488 substituted “shall be given confidential treatment, are not subject to subpoena, and may not be made public by the Commission or any other person” for “are not open to public inspection and shall receive confidential treatment by the Commission” at the end of subsection A; substituted “shall be given confidential treatment, are not subject to subpoena, and may not be made public by the Commission or any other person” for “are not public records, shall not be subject to subpoena, and shall receive confidential treatment” at the end of subsection B; added subsection C; redesignated former subsections C and D as present subsections D and E; and added the last sentence in subsection D.

§ 38.2-1306.2. Valuation of investments and other assets.

The value of investments and other assets, other than those not admitted pursuant to § 38.2-1306.3 , and their reporting as admitted or nonadmitted assets shall be determined in accordance with valuations or valuation guidance set forth in the National Association of Insurance Commissioners (NAIC) accounting practices and procedures manuals. The Commission may grant exception to or modification of NAIC accounting practices and procedures otherwise prescribed by this section upon petition from an insurer organized and operating under the laws of this Commonwealth and licensed pursuant to the provisions of Chapter 25 (§ 38.2-2500 et seq.) of this title.

History. 1992, c. 588; 1993, c. 158; 2000, c. 46.

The 2000 amendments.

The 2000 amendment by c. 46, effective January 1, 2001, deleted the subsection A designation; in the first sentence inserted “investments and other” following “The value of,” substituted “§ 38.2-1306.3 , and their reporting as admitted or nonadmitted assets” for “§ 38.2-1310.1 ,” substituted “guidance set forth in” for “standards announced by,” and inserted “accounting practices and procedures manuals” following “(NAIC)”; added the last sentence; and deleted former subsections B and C, relating to investments as to which the NAIC has not announced valuations or valuation standards, and to alternative methods of valuation.

§ 38.2-1306.3. Nonadmitted assets.

1. “Nonadmitted assets” or “not admitted assets” means those assets identified and reported as nonadmitted assets by or in accordance with the National Association of Insurance Commissioners (NAIC) accounting practices and procedures manuals, and any other asset or category of assets identified as nonadmitted in this title or which the Commission by rule or regulation identifies as an asset which shall be reported as a nonadmitted asset.
2. Goodwill, if admitted, may be admitted on or after January 1, 2001, subject to the guidance in the NAIC accounting practices and procedures manuals.

History. 2000, c. 46.

Effective date.

This section is effective January 1, 2001.

§§ 38.2-1307 through 38.2-1309. Repealed by Acts 2000, c. 46, cl. 2, effective January 1, 2001.

§ 38.2-1310. Repealed by Acts 1993, c. 158.

Cross references.

As to present provisions relating to valuation of investments, see § 38.2-1306.2 et seq.

§ 38.2-1310.1. Repealed by Acts 2000, c. 46, cl. 2, effective January 1, 2001.

§ 38.2-1311. Valuation reserves.

1. Every insurer licensed to transact the kinds of insurance specified in §§ 38.2-102 , 38.2-106 and 38.2-109 and subject to the applicable provisions of this title, shall maintain:
   1. Reserves on all of its life insurance policies or certificates and annuity contracts in force, computed according to the applicable tables of mortality and interest rates prescribed in this title;
   2. Reserves for both reported and unreported (i) disability benefits, including reserves for disabled lives, and (ii) accidental death benefits; and
   3. Any additional reserves prescribed by the Commission as necessary on account of the insurer’s policies, certificates and contracts.
2. For all accident and sickness insurance policies the insurer shall maintain an active life reserve that shall (i) place a reasonable value on its liabilities under the policies, (ii) be not less than the reserve according to appropriate standards set forth in any regulations issued by the Commission and, (iii) be not less in the aggregate than the pro rata gross unearned premiums for those policies.

History. 1952, c. 317, § 38.1-170; 1962, c. 562; 1986, c. 562.

§ 38.2-1312. Unearned premium reserves.

1. Except for risks or policies for which reserves are required under §§ 38.2-1311 and 38.2-4610.1 , each insurer licensed to transact business in this Commonwealth, subject to the applicable provisions of this title, shall maintain reserves not less than the unearned portions of the gross premiums charged on unexpired or unterminated risks and policies.
2. Premiums charged for bulk assumption reinsurance assumed from other insurers shall be included in gross premiums charged on the basis of the original premiums and the original terms of the policies of the ceding insurer.
3. No deduction shall be made from the gross unearned premiums except for premiums paid or credited for risks reinsured as provided in Article 3.1 (§ 38.2-1316.1 et seq.) of this chapter.
4. Reserves required by this section shall be computed, valued, and reported in conformity with guidance set forth in the National Association of Insurance Commissioners accounting practices and procedures manuals.

History. Code 1950, § 38-228; 1952, c. 317, § 38.1-171; 1982, c. 430; 1986, c. 562; 2000, c. 46.

The 2000 amendments.

The 2000 amendment by c. 46, effective January 1, 2001, substituted “not less than” for “equal to” following “shall maintain reserves” in subsection A; and substituted the present subsection D for former language which allowed for optional computation methods, gave the NAIC the discretion to prescribe methods, and set specific requirements for marine and perpetual fire insurance.

§ 38.2-1313. Loss records.

Each insurer licensed to transact business in this Commonwealth shall, except for accident and sickness insurance as defined in § 38.2-109 , maintain a complete and itemized record showing all losses and claims for which notice has been given. When necessary, the insurers shall maintain a record of all notices received of the occurrence of any event that may result in a loss.

History. 1952, c. 317, § 38.1-172; 1986, c. 562.

§ 38.2-1314. Loss or claim reserves.

Except as provided in §§ 38.2-1311 and 38.2-4609 , each insurer licensed to transact the business of insurance in this Commonwealth shall maintain reserves:

1. In an amount estimated in the aggregate as being sufficient to provide for reported and unreported unpaid losses or claims arising on or prior to the date of any annual or other statement for which the insurer may be liable;
2. In an amount estimated to provide for loss adjustment expenses; and
3. For those classes of insurance specified by the Commission, any additional reserves for unpaid losses, policy obligations, or deficiencies in the unearned premium reserve as required by the Commission. Each insurer authorized to write these classes of insurance shall file with its annual statement, schedules of its experience for such insurance in the form the Commission requires and shall calculate the reserves required by this paragraph in the manner prescribed by the Commission.

History. Code 1950, §§ 38-229 through 38-232; 1952, c. 317, § 38.1-173; 1982, c. 430; 1986, c. 562; 1994, c. 503.

§ 38.2-1315. Mortgage guaranty insurance contingency reserve.

1. To protect against the effect of adverse economic cycles, each insurer transacting the business of mortgage guaranty insurance in this Commonwealth shall establish and maintain a contingency reserve equal to fifty percent of its earned premium.
2. Allocations to the contingency reserve shall be maintained for 120 months. That portion of the contingency reserve that has been maintained for more than 120 months shall be released and shall no longer constitute part of the contingency reserve and shall be allocated to surplus to policyholders.
3. Upon approval by the Commission, the contingency reserve shall be available for loss payments only when the incurred losses in any one twelve-month period, less any amounts already released from the contingency reserve during that period, exceed thirty-five percent of the corresponding earned premium.
4. In the event of release of the contingency reserve for payment of losses, the contributions required by subsection A of this section shall be treated on a first-in-first-out basis.
5. Whenever the laws of any other state require a greater unearned premium reserve than that set forth in § 38.2-1312 , the mortgage guaranty insurance contingency reserve of mortgage guaranty insurers organized under the laws of that state may be an amount that, when added to such unearned premium reserve, will result in a reserve equal to the sum of the unearned premium reserve required by § 38.2-1312 and the contingency reserve required by this section.
6. The authority of the Commission under § 38.2-223 to issue rules and regulations includes the authority to require that a greater reserve be established for mortgage guaranty insurance on liens other than first liens.

History. 1973, c. 250, §§ 38.1-173.1, 38.1-173.2; 1981, c. 209; 1986, c. 562; 1989, c. 236; 2000, c. 46.

The 2000 amendments.

The 2000 amendment by c. 46, effective January 1, 2001, substituted “approval by” for “notification to” near the beginning of subsection C.

§ 38.2-1315.1. Actuarial statements of opinion, reports, memoranda, and summaries.

1. Effective December 31, 2004, and except as otherwise provided by this section or Article 10 (§ 38.2-1365 et seq.) of Chapter 13, every insurer doing business in the Commonwealth shall annually submit an actuarial opinion that has been prepared by an appointed actuary and that satisfies at a minimum the standards set forth in the appropriate National Association of Insurance Commissioners (NAIC) annual statement instructions.
2. Every insurer domiciled in the Commonwealth that is required to submit an actuarial opinion pursuant to subsection A shall annually submit an actuarial opinion summary, also written by the insurer’s appointed actuary. Every insurer domiciled in the Commonwealth that is required to submit an actuarial opinion pursuant to subsection A or § 38.2-1367 , at the request of the Commission, shall submit underlying work papers and an actuarial report or memorandum that satisfies the minimum standards set forth in the appropriate NAIC annual statement instructions and complies with all additional standards or requirements established by statute or by the Commission in accordance with the provisions of this section or Article 10 (§ 38.2-1365 et seq.) of Chapter 13. A company licensed but not domiciled in the Commonwealth shall provide such summary, work papers, report, and memorandum upon request of the Commission. Any summary, work papers, report, or memorandum filed in accordance with the appropriate NAIC annual statement 13 instructions shall be considered as a document supporting the actuarial opinion required by subsection A or § 38.2-1367 .
3. If the insurer fails to provide supporting work papers or a required report or memorandum at the request of the Commission, or the Commission determines that the work papers or report or memorandum are unacceptable, the Commission may engage a qualified actuary at the expense of the insurer to review the opinion and the basis for the opinion and to prepare supporting work papers, or a report or memorandum.
4. The appointed actuary shall not be liable for damages to any person, other than the insurer and the Commission for any act, error, omission, decision, or conduct with respect to the actuary’s opinion, except in cases of fraud or willful misconduct on the part of the actuary.
5. An actuarial opinion provided with the annual statement in accordance with the appropriate NAIC annual statement instructions shall be open to public inspection in accordance with § 38.2-1306 .
6. Documents, materials, or other information in the possession or control of the Commission that are considered an actuarial report, work papers, an actuarial opinion summary, or an actuarial opinion report or memorandum provided in support of the opinion, and any other material provided by the insurer to the Commission in connection with the report, work papers, or summary, shall be confidential by law and privileged, shall not be subject to inspection or review by the general public, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, this provision shall not be construed to limit the Commission’s authority to release the documents to any actuarial board established for counseling or discipline so long as the material is required for the purpose of professional disciplinary proceedings and such board establishes procedures satisfactory to the Commission for preserving the confidentiality of the documents. Moreover, the Commission is authorized to use the documents, materials, or other information in furtherance of any regulatory or legal action brought as part of the Commission’s official duties.
   1. Neither the Commission nor any person who received documents, materials, or other information while acting under the authority of the Commission shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to this subsection.
   2. In order to assist in the performance of the Commission’s duties under this section, the Commission:
      1. May share documents, material, or other information, including the confidential and privileged documents, materials, or information subject to this subsection, with other state, federal, and international regulatory agencies, with the NAIC, its affiliates, or subsidiaries, and with state, federal, and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information.
      2. May receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC, its affiliates, or subsidiaries and from regulatory and law-enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.
7. The Commission may waive or modify submission requirements for a foreign insurer that has been exempted by its domiciliary commissioner from filing an actuarial opinion under a substantially similar law in its state of domicile. The Commission may modify requirements in any year for an insurer that makes application, with good cause shown, for exemption due to the nature of business written or the size and volume of business activity, or because the insurer is under supervision or an order of conservation, or if the imposition of an annual filing requirement would create a financial hardship.

History. 2004, c. 315; 2006, c. 320; 2014, c. 571.

The 2006 amendments.

The 2006 amendment by c. 320, in subsection B, divided the former first sentence into the first and second sentences by substituting the language “Every insurer domiciled in the Commonwealth . . . or § 38.2-3127.1,” for “and” and deleted “or § 38.2-3127.1” following “subsection A of this section” and substituted “an actuarial opinion summary” for “a summary of opinion or issues” in the first sentence; and in the first sentence in subsection F, substituted “an actuarial opinion summary” for “a summary of opinion or issues.”

The 2014 amendments.

The 2014 amendment by c. 571, effective January 1, 2015, in subsections A and B substituted “10” for “3,” “38.2-1365” for “38.2-3126,” and “13” for “31 of this title”; deleted “of this section” following “subsection A” in three places in subsection B and substituted “38.2-1367” for “38.2-3127.1” twice.

§ 38.2-1316. Repealed by Acts 1991, c. 264.

Cross references.

For present provisions relating to reinsurance, see § 38.2-1316.1 et seq.

§ 38.2-1316.1. Definitions.

As used in this article unless the context requires another meaning:

“Accredited reinsurer” means an assuming insurer accredited pursuant to the provisions of subdivision C 2 of § 38.2-1316.2 .

“Certified reinsurer” means an insurer certified by the Commission pursuant to subsection D of § 38.2-1316.2 .

“Covered agreement” means an agreement entered into pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, 31 U.S.C. §§ 313 and 314, that is currently in effect or in a period of provisional application and addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in the Commonwealth or for allowing the ceding insurer to recognize credit for reinsurance.

“Credit” includes any credit for reinsurance (i) allowed as an admitted asset or as a deduction from liability and (ii) used to compute the valuation reserves required by § 38.2-1311 , unearned premium reserves required by § 38.2-1312 or 38.2-4610.1 , or loss or claim reserves required by § 38.2-1314 or 38.2-4609 .

“NAIC” means the National Association of Insurance Commissioners.

“Qualified United States financial institution,” as used in subdivision 2 c of § 38.2-1316.4 , means an institution that:

1. Is organized or, in the case of a United States office of a foreign banking organization, is licensed, under the laws of the United States or any state thereof;
2. Is regulated, supervised, and examined by the United States federal or state authorities having regulatory authority over banks and trust companies; and
3. Has been determined by either the Commission or the Securities Valuation Office of the NAIC to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the Commission. “Qualified United States financial institution” means, for purposes of those provisions of this article specifying those institutions that are eligible to act as a fiduciary of a trust, an institution that: “Reciprocal jurisdiction” means (i) a non-United States jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and the European Union, is a member state of the European Union; (ii) a United States jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation program; or (iii) a qualified jurisdiction, as determined by the Commission pursuant to subdivision D 3 of § 38.2-1316.2 , that is not otherwise described in clause (i) or (ii) and that meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the Commission in regulation.

1. Is organized or, in the case of a United States branch or agency office of a foreign banking organization, is licensed, under the laws of the United States or any state thereof and has been granted authority to operate with fiduciary powers; and

2. Is regulated, supervised and examined by federal or state authorities having regulatory authority over banks and trust companies.

History. 1991, c. 264; 2012, c. 539; 2017, c. 477; 2020, c. 208.

The 2012 amendments.

The 2012 amendment by c. 539 inserted “unless the context requires another meaning” in the introductory language and added the paragraph defining “Certified reinsurer.”

The 2017 amendments.

The 2017 amendment by c. 477 substituted “subdivision C 2” for “subdivision A 2” in the definition for “Accredited reinsurer”; and substituted “subsection D” for “subsection B” in the definition for “Certified reinsurer.”

The 2020 amendments.

The 2020 amendment by c. 208 added the definitions for “Covered agreement,” “NAIC” and “Reciprocal jurisdiction” and substituted “NAIC“ for “National Association of Insurance Commissioners” in subdivision 3 in the definition for “Qualified United States financial institution.”

Michie’s Jurisprudence.

For related discussion, see 10A M.J. Insurance, § 59.

§ 38.2-1316.2. Credit allowed a domestic ceding insurer.

1. Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a reduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of subsection C, D, or E or § 38.2-1316.4 , provided that the Commission may adopt by regulation pursuant to subsection B of § 38.2-1316.7 specific additional requirements relating to or setting forth any one or more of the following: (i) the valuation of assets or reserve credits, (ii) the amount and forms of security supporting reinsurance arrangements described in subsection B of § 38.2-1316.7 , and (iii) the circumstances pursuant to which credit will be reduced or eliminated.
2. Credit shall be allowed under subdivisions C 1, 2, and 3 only as respects cessions of those kinds or classes of business that the assuming insurer is licensed or otherwise permitted to write or assume in its state of domicile or, in the case of a U.S. branch of an alien assuming insurer, in the state through which it is entered and licensed to transact insurance or reinsurance. Credit shall be allowed under subdivision C 3 or 4 only if the applicable requirements of subsection B of 14VAC5-300-150 of the Virginia Administrative Code have been satisfied.
3. Credit shall be allowed a domestic ceding insurer for reinsurance ceded only when the assuming insurer meets one of the following criteria:
   1. Credit shall be allowed when the assuming insurer is licensed to transact insurance in the Commonwealth.
   2. Credit shall be allowed when the assuming insurer is accredited as a reinsurer in the Commonwealth. An accredited reinsurer is one which:
      1. Files with the Commission evidence of its submission to the Commission’s jurisdiction;
      2. Submits to the Commission’s authority to examine its books and records;
      3. Is licensed to transact insurance or reinsurance in at least one state or, in the case of a United States branch of an alien assuming insurer, is entered through and licensed to transact insurance or reinsurance in at least one state;
      4. Files annually with the Commission a copy of its annual statement filed with the insurance department of its state of domicile or entry and a copy of its most recent audited financial statement; and
      5. Demonstrates to the satisfaction of the Commission that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is deemed to meet this requirement as of the time of its application if it maintains a surplus as regards policyholders in an amount not less than $20 million and its accreditation has not been denied by the Commission within 90 days of its initial submission.
   3. Credit shall be allowed when the assuming insurer is domiciled and licensed in or, in the case of a United States branch of an alien insurer, is entered through, a state which employs standards regarding credit for reinsurance substantially similar to those applicable under this statute and the assuming insurer or United States branch of an alien assuming insurer:
      1. Submits to the authority of the Commission to examine its books and records; and
      2. Maintains a surplus as regards policyholders in an amount not less than $20 million. However, unless specifically required by the Commission, this surplus requirement shall be deemed waived when reinsurance is ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.
   4. Credit shall be allowed when the assuming insurer maintains a trust fund in a qualified United States financial institution for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns and successors in interest. The assuming insurer shall report annually to the Commission information substantially the same as that required to be reported on the NAIC Annual Statement form by licensed insurers to enable the Commission to determine the sufficiency of the trust fund.
      1. In the case of a single assuming insurer, the trust shall consist of a trusteed account representing the assuming insurer’s liabilities attributable to business written in the United States, and in addition, the assuming insurer shall maintain a trusteed surplus amount not less than $20 million, except as provided in subdivision 4 b.
      2. At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three full years, the commissioner with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of United States ceding insurers, policyholders, and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including when applicable the lines of business involved, the stability of the incurred loss estimates and the effect of the surplus requirements on the assuming insurer’s liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than 30 percent of the assuming insurer’s liabilities attributable to reinsurance ceded by United States ceding insurers covered by the trust.
      3. In the case of an association, including incorporated and individual unincorporated underwriters, the trust shall consist of a trusteed account representing the association’s liabilities attributable to business written in the United States and in addition, the association shall maintain a trusteed surplus of which $100 million shall be held jointly for the benefit of United States ceding insurers of any member of the association, the incorporated members of which shall not be engaged in any business other than underwriting as a member of the association and shall be subject to the same level of solvency regulation and control by the association’s domiciliary regulator as are the unincorporated members; and the association shall make available to the Commission an annual certification of the solvency of each underwriter by the association’s domiciliary regulator and its independent public accountants.
      4. In the case of an association of incorporated underwriters under common administration that complies with the filing requirements contained in subdivision 4 c, and that has continuously transacted an insurance business outside the United States for at least three years, and submits to the Commission’s authority to examine its books and records and bears the expense of the examination, and which has aggregate policyholders’ surplus of $10 billion; the trust shall be in an amount equal to the association’s several liabilities attributable to business ceded by United States ceding insurers to any member of the association pursuant to reinsurance contracts issued in the name of such association. In addition, the association shall maintain a joint trusteed surplus of which $100 million shall be held jointly for the benefit of United States ceding insurers of any member of the association as additional security for any such liabilities, and each member of the association shall make available to the Commission an annual certification of the member’s solvency by the member’s domiciliary regulator and its independent public accountant.
4. Credit shall be allowed when the reinsurance is ceded to an assuming insurer that has been certified by the Commission as a reinsurer in the Commonwealth and secures its obligations in accordance with the following:
   1. In order to be eligible for certification, the assuming insurer shall:
      1. Be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the Commission pursuant to subdivision 3;
      2. Maintain minimum capital and surplus, or its equivalent, in an amount to be determined by the Commission pursuant to regulation;
      3. Maintain financial strength ratings from two or more rating agencies deemed acceptable by the Commission pursuant to regulation;
      4. Agree to submit to the jurisdiction of the Commonwealth, appoint the Commission as its agent for service of process in the Commonwealth, and agree to provide security for 100 percent of the assuming insurer’s liabilities attributable to reinsurance ceded by United States ceding insurers if it resists enforcement of a final United States judgment;
      5. Agree to meet applicable information filing requirements as determined by the Commission, both with respect to an initial application for certification and on an ongoing basis; and
      6. Satisfy other requirements for certification deemed relevant by the Commission.
   2. In order to be eligible for certification as a certified reinsurer, an association including incorporated and individual unincorporated underwriters, in addition to satisfying requirements of subdivision 1, shall satisfy the following requirements:
      1. The association shall satisfy its minimum capital and surplus requirements through the capital and surplus equivalents, net of liabilities, of the association and its members, which shall include a joint central fund that may be applied to any unsatisfied obligation of the association or any of its members, in an amount determined by the Commission to provide adequate protection;
      2. The incorporated members of the association shall not be engaged in any business other than underwriting as a member of the association and shall be subject to the same level of regulation and solvency control by the association’s domiciliary regulator as are the unincorporated members; and
      3. Within 90 days after its financial statements are due to be filed with the association’s domiciliary regulator, the association shall provide to the Commission an annual certification by the association’s domiciliary regulator of the solvency of each underwriter member; or if a certification is unavailable, financial statements prepared by independent public accountants, of each underwriter member of the association.
   3. The Commission shall create and publish a list of qualified jurisdictions, under which an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for certification by the Commission as a certified reinsurer. With regard to determinations of qualified jurisdictions:
      1. In order to determine whether the domiciliary jurisdiction of a non-United States assuming insurer is eligible to be recognized as a qualified jurisdiction, the Commission shall evaluate the appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits, and the extent of reciprocal recognition afforded by the non-United States jurisdiction to reinsurers licensed and domiciled in the United States. A qualified jurisdiction must agree to share information and cooperate with the Commission with respect to all certified reinsurers domiciled within that jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction if the Commission has determined that the jurisdiction does not adequately and promptly enforce final United States judgments and arbitration awards. Additional factors may be considered in the discretion of the Commission;
      2. A list of qualified jurisdictions shall be published through the NAIC Committee Process. The Commission shall consider this list in determining qualified jurisdictions. If the Commission approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the Commission shall provide thoroughly documented justification in accordance with criteria to be developed under regulations;
      3. United States jurisdictions that meet the requirement for accreditation under the NAIC financial standards and accreditation program shall be recognized as qualified jurisdictions; and
      4. If a certified reinsurer’s domiciliary jurisdiction ceases to be a qualified jurisdiction, the Commission has the discretion to suspend the reinsurer’s certification indefinitely, in lieu of revocation.
   4. The Commission shall assign a rating to each certified reinsurer, giving due consideration to the financial strength ratings that have been assigned by rating agencies deemed acceptable to the Commission pursuant to regulation. The Commission shall publish a list of all certified reinsurers and their ratings.
   5. A certified reinsurer shall secure obligations assumed from United States ceding insurers under this subsection at a level consistent with its rating, as specified in regulations promulgated by the Commission. With regard to securing obligations:
      1. In order for a domestic ceding insurer to qualify for full financial statement credit for reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form acceptable to the Commission and consistent with the provisions of § 38.2-1316.4 , or in a multibeneficiary trust in accordance with subdivision C 4, except as otherwise provided in this subsection;
      2. If a certified reinsurer maintains a trust to fully secure its obligations subject to subdivision C 4, and chooses to secure its obligations incurred as a certified reinsurer in the form of a multibeneficiary trust, the certified reinsurer shall maintain separate trust accounts for its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer with reduced security as permitted by this subsection or comparable laws of other United States jurisdictions and for its obligations subject to subdivision C 4. It shall be a condition to the grant of certification under this section that the certified reinsurer shall have bound itself, by the language of the trust and agreement with the Commissioner with principal regulatory oversight of each such trust account, to fund, upon termination of any such trust account, out of the remaining surplus of such trust any deficiency of any other such trust account;
      3. The minimum trusteed surplus requirements provided in subdivision C 4 are not applicable with respect to a multibeneficiary trust maintained by a certified reinsurer for the purpose of securing obligations incurred under this subsection, except that such trust shall maintain a minimum trusteed surplus of $10 million;
      4. With respect to obligations incurred by a certified reinsurer under this subsection, if the security is insufficient, the Commission shall reduce the allowable credit by an amount proportionate to the deficiency and has the discretion to impose further reductions in allowable credit upon finding that there is a material risk that the certified reinsurer’s obligations will not be paid in full when due; and
      5. For purposes of this subsection, a certified reinsurer whose certification has been terminated for any reason shall be treated as a certified reinsurer required to secure 100 percent of its obligations. As used in this subsection, the term “terminated” means revocation, suspension, voluntary surrender, and inactive status. If the Commission continues to assign a higher rating as permitted by other provisions of this section, this requirement does not apply to a certified reinsurer in inactive status or to a reinsurer whose certification has been suspended.
   6. If an applicant for certification has been certified as a reinsurer in an NAIC accredited jurisdiction, the Commission has the discretion to defer to that jurisdiction’s certification and has the discretion to defer to the rating assigned by that jurisdiction, and such assuming insurer shall be considered to be a certified reinsurer in the Commonwealth.
   7. A certified reinsurer that ceases to assume new business in the Commonwealth may request to maintain its certification in inactive status in order to continue to qualify for a reduction in security for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this subsection, and the Commission shall assign a rating that takes into account, if relevant, the reasons why the reinsurer is not assuming new business.
5. Credit shall be allowed when the reinsurance is ceded to an assuming insurer in accordance with the following:
   1. The assuming insurer shall:
      1. Be domiciled in, or its head office shall be located in, as applicable, a reciprocal jurisdiction identified by the Commission pursuant to this subsection and shall be licensed in such reciprocal jurisdiction;
      2. Maintain minimum capital and surplus, or its equivalent, calculated according to the methodology of its domiciliary jurisdiction, in an amount to be determined by the Commission in regulation. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it shall maintain minimum capital and surplus equivalents, net of liabilities, calculated according to the methodology applicable in its domiciliary jurisdiction, and a central fund containing a balance in amounts to be determined by the Commission in regulation;
      3. Maintain a minimum solvency or capital ratio, as applicable, which will be determined by the Commission in regulation. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it shall maintain a minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer is domiciled or its head office is located, as applicable, and is licensed;
      4. Agree and provide adequate assurance to the Commission, in a form specified by the Commission pursuant to regulation, as follows:
         1. Provide prompt written notice and explanation to the Commission if it falls below the minimum requirements set forth in subdivision b or c, or if any regulatory action is taken against it for serious noncompliance with applicable law;
         2. Consent in writing to the jurisdiction of the courts of the Commonwealth and to the appointment of the Commission as an agent for service of process. The Commission may require that consent for service of process be provided to the Commission and included in each reinsurance agreement. Nothing in this subdivision shall limit, or in any way alter, the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws;
         3. Consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or its legal successor, that have been declared enforceable in the jurisdiction where the judgment was obtained;
         4. Include, in each reinsurance agreement, a provision requiring the assuming insurer to provide security in an amount equal to 100 percent of the assuming insurer’s liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its resolution estate; and
         5. Confirm that it is not presently participating in any solvent scheme of arrangement that involves the Commonwealth’s ceding insurers, and agree to notify the ceding insurer and the Commission and to provide security in an amount equal to 100 percent of the assuming insurer’s liabilities to the ceding insurer, should the assuming insurer enter into such a solvent scheme of arrangement. Such security shall be in a form consistent with the provisions of subsection D of this section and subdivision 2 of § 38.2-1316.4 and as determined by the Commission in regulation;
      5. Provide, or its legal successor shall provide, if requested by the Commission, on behalf of itself and any legal predecessors, certain documentation to the Commission, as specified by the Commission in regulation; and
      6. Maintain a practice of prompt payment of claims under reinsurance agreements, pursuant to criteria set forth by regulation.Nothing in this subdivision 1 precludes an assuming insurer from providing the Commission with information on a voluntary basis.
   2. The assuming insurer’s supervisory authority shall confirm to the Commission on an annual basis as of the preceding December 31, or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in subdivisions 1 b and c.
   3. The Commission shall create and publish a list of reciprocal jurisdictions. With regard to determinations of reciprocal jurisdictions, the Commission:
      1. Shall include (i) any non-United States jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and the European Union, is a member state of the European Union; (ii) any United States jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation program; or (iii) any qualified jurisdiction, as determined by the Commission pursuant to subdivision D 3 of § 38.2-1316.2 , that is not otherwise described in clause (i) or (ii) and that meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the Commission in regulation;
      2. Shall consider including any other reciprocal jurisdiction included on the NAIC list published through the NAIC Committee Process. The Commission may approve a jurisdiction that does not appear on the NAIC list of reciprocal jurisdictions in accordance with criteria to be developed under regulations issued by the Commission; and
      3. May remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets the requirements of a reciprocal jurisdiction, in accordance with a process set forth in regulations issued by the Commission, except that the Commission shall not remove from the list a reciprocal jurisdiction described in clause (i) or (ii) of subdivision a. Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer that is domiciled or has its home office in that jurisdiction shall be allowed, if otherwise allowed pursuant to this section.
   4. The Commission shall create and publish a list of assuming insurers that have satisfied the conditions set forth in this subsection and to which cessions shall be granted credit in accordance with this subsection. The Commission may add an assuming insurer to such list if an NAIC-accredited jurisdiction has added such assuming insurer to a list of such assuming insurers or if, upon initial eligibility, the assuming insurer submits the information to the Commission as required under subdivision 1 d and complies with any additional requirements that the Commission may impose by regulation, except to the extent that they conflict with an applicable covered agreement.
   5. If the Commission determines that an assuming insurer no longer meets one or more of the requirements under this subsection, the Commission may revoke or suspend the eligibility of the assuming insurer for recognition under this subsection in accordance with procedures set forth in regulation.
      1. While an assuming insurer’s eligibility is suspended, no reinsurance agreement issued, amended, or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer’s obligations under the contract are secured in accordance with subdivision 2 of § 38.2-1316.4 .
      2. If an assuming insurer’s eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into prior to the date of revocation, except to the extent that the assuming insurer’s obligations under the contract are secured in a form acceptable to the Commission and consistent with the provisions of subdivision 2 of § 38.2-1316.4 .
   6. If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding ceded liabilities.
   7. Nothing in this subsection shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this article or other applicable law or regulation.
   8. Credit may be taken under this subsection only for reinsurance agreements entered into, amended, or renewed on or after July 1, 2020, and only with respect to losses incurred and reserves reported on or after the later of (i) the date on which the assuming insurer has met all eligibility requirements pursuant to subdivision 1 and (ii) the effective date of the new reinsurance agreement, amendment, or renewal. This subdivision does not alter or impair a ceding insurer’s right to take credit for reinsurance, to the extent that credit is not available under this subsection, as long as the reinsurance qualifies for credit under any other applicable provision of this article.
   9. Nothing in this subsection shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement.
   10. Nothing in this subsection shall limit, or in any way alter, the capacity of parties to any reinsurance agreement to renegotiate the agreement.
6. If an accredited or certified reinsurer ceases to meet the requirements for accreditation or certification, the Commission may suspend or revoke the reinsurer’s accreditation or certification in accordance with the following:
   1. The Commission shall give the reinsurer notice and opportunity for hearing. The suspension or revocation may not take effect until after the Commission’s order on hearing, unless:
      1. The reinsurer waives its right to hearing;
      2. The Commission’s order is based on regulatory action by the reinsurer’s domiciliary jurisdiction or the voluntary surrender or termination of the reinsurer’s eligibility to transact insurance or reinsurance business in its domiciliary jurisdiction or in the primary certifying state of the reinsurer under subdivision D 6; or
      3. The Commission finds that an emergency requires immediate action and a court of competent jurisdiction has not stayed the Commission’s action.
   2. While a reinsurer’s accreditation or certification is suspended, no reinsurance contract issued or renewed after the effective date of the suspension qualifies for credit except to the extent that the reinsurer’s obligations under the contract are secured in accordance with § 38.2-1316.4 . If a reinsurer’s accreditation or certification is revoked, no credit for reinsurance may be granted after the effective date of the revocation except to the extent that the reinsurer’s obligations under the contract are secured in accordance with subdivision D 5 or § 38.2-1316.4 .
7. A ceding insurer shall take steps to manage its concentration risk and diversify its reinsurance program in the following manner:
   1. A ceding insurer shall take steps to manage its reinsurance recoverables proportionate to its own book of business. A domestic ceding insurer shall notify the Commission within 30 days after reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, exceeds 50 percent of the domestic ceding insurer’s last reported surplus to policyholders, or after it is determined that reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.
   2. A ceding insurer shall take steps to diversify its reinsurance program. A domestic ceding insurer shall notify the Commission within 30 days after ceding to any single assuming insurer, or group of affiliated assuming insurers, more than 20 percent of the ceding insurer’s gross written premium in the prior calendar year, or after it has determined that the reinsurance ceded to any single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.
8. The trusts described in subdivision C 4 shall be established in a form acceptable to the Commission.
   1. The trust instrument shall provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States.
   2. The trust shall vest legal title to its assets in the trustees of the trust for its United States policyholders and ceding insurers, their assigns and successors in interest.
   3. The trust and the assuming insurer shall be subject to examination as determined by the Commission.
   4. The trust described herein must remain in effect for as long as the assuming insurer shall have outstanding obligations due under the reinsurance agreements subject to the trust.
   5. No later than February 28 of each year the trustees of the trust shall report to the Commission in writing setting forth the balance of the trust and listing the trust’s investments at the preceding year end and shall certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the next following December 31.

History. 1991, c. 264; 1994, c. 647; 2012, c. 539; 2017, c. 477; 2020, c. 208.

The 2012 amendments.

The 2012 amendment by c. 539 rewrote the section.

The 2017 amendments.

The 2017 amendment by c. 477, inserted subsections A and B, and redesignated remaining subsections accordingly; deleted “Except as provided in § 38.2-1316.4 ” at the beginning of subsection C, and made related changes.

The 2020 amendments.

The 2020 amendment by c. 208, in subsection A, deleted “or” following “subsection C” and added “or E”; in subdivision C 4, substituted “NAIC” for “National Association of Insurance Commissioners (NAIC),”; added subsection E and redesignated the remaining subsections accordingly; and made stylistic changes throughout.

§ 38.2-1316.3. Repealed by Acts 2012, c. 539, cl. 2.

Editor’s note.

Former § 38.2-1316.3 , pertaining to credit allowed a foreign or alien ceding insurer, derived from 1991, c. 264.

§ 38.2-1316.4. Credit allowed any ceding insurer.

Credit shall be allowed any ceding insurer under the following conditions:

1. Credit shall be allowed when reinsurance is ceded to an assuming insurer not meeting the requirements of § 38.2-1316.2 but only with respect to the insurance of risks located in jurisdictions where such reinsurance is required by applicable law or regulation of that jurisdiction.
2. Credit, in the form of a reduction from liability for reinsurance ceded to an assuming insurer not meeting the requirements of § 38.2-1316.2 , shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer and attributable to the reinsurance, provided that the Commission may adopt by regulation pursuant to subsection B of § 38.2-1316.7 specific additional requirements relating to or setting forth any one or more of the following: (i) the valuation of assets or reserve credits, (ii) the amount and forms of security supporting reinsurance arrangements described in subsection B of § 38.2-1316.7 , and (iii) the circumstances pursuant to which credit will be reduced or eliminated. Additionally, such reduction shall not exceed the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with such assuming insurer as security for the payment of obligations thereunder, if such security is (a) held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer or (b) in the case of a trust, held in a qualified United States financial institution. The required security may be in the form of:
   1. Cash.
   2. Securities listed by the Securities Valuation Office of the NAIC, including those deemed exempt from filing as defined by the Purposes and Procedures Manual of the Investment Analysis Office, and qualifying as admitted assets with adequate liquidity and readily determinable market value.
   3. Clean, irrevocable, unconditional letters of credit issued or confirmed by a qualified United States financial institution, as defined in this article, no later than December 31 in respect of the year for which filing is being made, and in the possession of the ceding insurer on or before the filing date of its annual statement. Letters of credit meeting applicable standards of insurer acceptability as of the dates of their issuance (or confirmation) shall, notwithstanding the issuing (or confirming) institution’s subsequent failure to meet applicable standards of insurer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification or amendment, whichever first occurs.
   4. Any other form of security acceptable to the Commission.

History. 1991, c. 264; 2012, c. 539; 2017, c. 477; 2020, c. 208.

The 2012 amendments.

The 2012 amendment by c. 539 deleted “or § 38.2-1316.3 ” following “§ 38.2-1316.2 ” in subdivisions 1 and 2, inserted “including those deemed exempt from filing as defined by the Purposes and Procedures Manual of the Securities Valuation Office,” in subdivision 2 b, and substituted “the ceding insurer on” for “the ceding company on” in the first sentence of subdivision 2 c.

The 2017 amendments.

The 2017 amendment by c. 477, in subdivision 2, added “that the Commission may adopt by regulation pursuant to subsection B of § 38.2-1316.7 specific additional requirements relating to or setting forth any one or more of the following: (i) the valuation of assets or reserve credits, (ii) the amount and forms of security supporting reinsurance arrangements described in subsection B of § 38.2-1316.7 , and (iii) the circumstances pursuant to which credit will be reduced or eliminated” in the first sentence, and in the second sentence, added “Additionally,” substituted “shall” for “does,” deleted the clause (i) designation, inserted the clause (a) designation, and redesignated clause (ii) as clause (b).

The 2020 amendments.

The 2020 amendment by c. 208, in subdivision 2 b, substituted “NAIC” for “National Association of Insurance Commissioners,” and “Investment Analysis” for “Securities Valuation.”

§§ 38.2-1316.5, 38.2-1316.6. Repealed by Acts 2012, c. 539, cl. 2.

Editor’s note.

Former § 38.2-1316.5 , pertaining to terms of agreements, derived from 1991, c. 264. Former § 38.2-1316.6, pertaining to purpose, calculation and effect of reinsurance credits, derived from 1991, c. 264

§ 38.2-1316.7. Rules and regulations.

1. The Commission may adopt rules and regulations implementing the provisions of this article.
2. The Commission is further authorized to adopt rules and regulations applicable to reinsurance arrangements described in subdivision 1. A regulation adopted pursuant to:
   1. This subsection shall apply only to reinsurance relating to:
      1. Life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits;
      2. Universal life insurance policies with provisions resulting in the ability of a policyholder to keep a policy in force over a secondary guarantee period;
      3. Variable annuities with guaranteed death or living benefits;
      4. Long-term care insurance policies; or
      5. Such other life and health insurance and annuity products as to which the NAIC adopts model regulatory requirements with respect to credit for reinsurance.
   2. Subdivision 1 a or 1 b shall apply to any treaty containing (i) policies issued on or after January 1, 2015, and (ii) policies issued prior to January 1, 2015, if risk pertaining to such pre-2015 policies is ceded in connection with the treaty, in whole or in part, on or after January 1, 2015.
   3. This subsection may require the ceding insurer, in calculating the amounts or forms of security required to be held under regulations promulgated under this authority, to use the Valuation Manual adopted by the NAIC under subdivision B 1 of § 38.2-1379 , including all amendments adopted by the NAIC and in effect on the date as of which the calculation is made, to the extent applicable.
   4. This subsection shall not apply to cessions to an assuming insurer that:
      1. Is certified in the Commonwealth;
      2. Meets the conditions set forth in subsection E of § 38.2-1316.2 ; or
      3. Maintains at least $250 million in capital and surplus when determined in accordance with the NAIC Accounting Practices and Procedures Manual, including all amendments thereto adopted by the NAIC, excluding the impact of any permitted or prescribed practices, and is (i) licensed in at least 26 states or (ii) licensed in at least 10 states and licensed or accredited in a total of at least 35 states.
3. The authority to adopt regulations pursuant to subsection B does not limit the Commission’s general authority to adopt regulations pursuant to subsection A.

History. 1991, c. 264; 2017, c. 477; 2020, c. 208.

The 2017 amendments.

The 2017 amendment by c. 477 rewrote the section that formerly read: “The Commission may adopt rules and regulations implementing the provisions of this article.”

The 2020 amendments.

The 2020 amendment by c. 208, in subdivision B 1 e, substituted “NAIC” for “National Association of Insurance Commissioners (NAIC),” added subdivision B 3 b and redesignated former B 3 b as B 3 c.

§ 38.2-1316.8. Reinsurance agreements affected.

The provisions of this article shall apply to all cessions after the effective date of this article under reinsurance agreements which have had an inception, anniversary or renewal date not less than six months after July 1, 2012.

History. 1991, c. 264; 2012, c. 539.

The 2012 amendments.

The 2012 amendment by c. 539 deleted the subsection A designator and subsection B; and substituted “July 1, 2012” for “July 1, 1991.”

§ 38.2-1317. Examinations; when authorized or required.

1. Whenever the Commission considers it expedient for the protection of the interests of the people of this Commonwealth, it may make or direct to be made an examination into the affairs of any person licensed to transact any insurance business in this Commonwealth or any other person subject to the jurisdiction of the Commission pursuant to provisions of this title. The Commission may also make or direct to be made, whenever necessary or advisable an examination into the affairs of:
   1. Any person having a contract under which he has the exclusive or dominant right to manage or control any licensed insurer,
   2. Any person holding the shares of capital stock or policyholder proxies of any domestic insurer amounting to control as defined in § 38.2-1322 either as voting trustee or otherwise,
   3. Any person engaged or assisting in, or proposing or claiming to engage or assist in the promotion or formation of a domestic insurer, or
   4. Any person seeking a license to transact any insurance business in this Commonwealth.
2. The Commission shall examine or cause to be examined every domestic insurer at least once in every five years; however, on or after January 1, 1993, the Commission shall examine every insurer licensed in this Commonwealth at least once in every five years.
3. The examination of any foreign or alien insurer or any other foreign or alien person subject to examination shall be made to the extent practicable in cooperation with the insurance departments of other states.
4. Instead of making its own examination, the Commission may accept a full report of the examination of a foreign or alien person, duly authenticated by the insurance supervisory official of the state of domicile or of entry until January 1, 1994. Thereafter, such reports may only be accepted if:
   1. The insurance department was at the time of the examination accredited under the National Association of Insurance Commissioners’ (NAIC) Financial Regulation Standards and Accreditation Program;
   2. The examination is performed under the supervision of such an accredited insurance department or with the participation of one or more examiners who are employed by an accredited insurance department and who, after a review of the examination work papers and report, state under oath that the examination was performed in a manner consistent with the standards and procedures required by their insurance department; or
   3. The Commission determines, in its sole discretion, that the examination was performed in a manner consistent with standards and procedures employed by the Commission in the examination of domestic insurers, and the report of examination is duly authenticated by the insurance supervisory official of the insurer’s state of domicile or entry.

History. Code 1950, §§ 38-125, 38-126, 38-216, 38-253.40, 38-253.86, 38-516; 1952, c. 317, § 38.1-174; 1972, c. 836; 1973, c. 504; 1977, c. 321; 1986, c. 562; 1992, c. 588; 1996, c. 47.

Cross references.

As to procedures for preventing disclosure of confidential proprietary information submitted to the Commission pursuant to this section, see § 38.2-221.1 .

As to examinations for viatical settlement providers and brokers, see § 38.2-6006 .

As to examinations of financial records by the Commission, see § 38.2-4410.1 et seq.

Law Review.

For survey of Virginia law on insurance for the year 1972-1973, see 59 Va. L. Rev. 1535 (1973).

§ 38.2-1317.1. Examinations; nature and scope.

1. In scheduling and determining the nature, scope and frequency of examinations, the Commission shall consider such matters as the conduct of business in the marketplace, results of financial statement analyses and ratios, results of market analyses, changes in management or ownership, actuarial opinions, reports of independent certified public accountants and other criteria as set forth in any Examiners’ Handbook, or any successor publications, adopted by the NAIC and in effect when the Commission exercises discretion under this article.Procedures for examinations concerning the conduct of business in the marketplace shall be exclusively subject to the provisions of §§ 38.2-218 through 38.2-222 and §§ 38.2-1318 , 38.2-1319 , 38.2-1320.5 , and 38.2-1321.1 .
2. For purposes of completing an examination of any company under this article, the Commission may examine or investigate any person, or the business of any person, in so far as such examination or investigation is, in the sole discretion of the Commission, necessary or material to the examination of the company.
3. The examination of any alien insurer or person shall be limited to its insurance transactions in the United States unless the Commission considers a complete examination of the alien insurer or person to be necessary.
4. As used in this article:“Company” means any person engaging in or proposing or attempting to engage in any transaction or kind of insurance or surety business and any person or group of persons who, pursuant to the provisions of this title, Title 58.1, or any rule or regulation promulgated by the Commission, may otherwise be subject to the administrative or regulatory authority of the Commission as set forth in the provisions of this title.“Insurance department” means the supervising regulatory officials of a given state who are responsible for administering the insurance laws of said state.“Insurer” means an insurance institution as defined by § 38.2-602 .“NAIC” means the National Association of Insurance Commissioners.“Person” means any association, aggregate of individuals, business, company, corporation, individual, joint-stock company, Lloyds type of organization, organization, partnership, receiver, reciprocal or interinsurance exchange, trustee or society, or any affiliate thereof.

History. 1992, c. 588; 2008, c. 249.

The 2008 amendments.

The 2008 amendment by c. 249, in subsection A, inserted “results of market analyses” in the first paragraph and inserted “38.2-1320.5, and 38.2-1321.1 ” and made a related change in the second paragraph; and in subsection D, added the paragraph defining “NAIC.”

§ 38.2-1317.2. Market analyses confidential.

1. All market analyses concerning companies or insurance transactions that are obtained by the Commission from the NAIC, including information generated by any NAIC databases developed for use by regulators, and all market analyses generated by the Commission based on documents or information submitted to the Commission by a company or person, including its officers, directors, and agents, shall receive confidential treatment by the Commission, shall not be subject to subpoena, and are not public records. All working papers, recorded information, documents and copies thereof produced by, obtained by, or disclosed to the Commission or any other person in the course of a market analysis or market conduct action shall receive confidential treatment by the Commission, shall not be subject to subpoena, and are not public records. Any such disclosure to the Commission shall not constitute a waiver of confidentiality of any such documents or information.
2. Notwithstanding other provisions to the contrary, nothing shall prevent or be construed as prohibiting the Commission from disclosing otherwise confidential information, administrative or judicial orders, or the content of any analysis or any matter related thereto, at any time to (i) a regulatory official of any state or country; (ii) the NAIC, its affiliate or its subsidiary; or (iii) a law-enforcement authority of any state or country, provided that those officials are required under their law to maintain its confidentiality. Any such disclosure by the Commission shall not constitute a waiver of confidentiality of any such documents or information.
3. Documents or information received in the course of a market analysis or market conduct action from the NAIC, a law-enforcement official of any state or country, or regulatory officials of any state or country that are confidential in those jurisdictions shall receive confidential treatment by the Commission, shall not be subject to subpoena, and are not public records.
4. Nothing in this section shall prohibit the Commission from releasing a report containing aggregated findings.

History. 2008, c. 249.

§ 38.2-1318. Examinations; how conducted.

1. Whenever the Commission examines the affairs of any person, as set forth in § 38.2-1317 , it may appoint as examiners one or more competent persons.
   1. To the extent practicable, the examiners shall be regular employees of the Commission.
   2. No examiner may be appointed by the Commission if such examiner, either directly or indirectly, has a conflict of interest or is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this article; however, this section shall not be construed to automatically preclude an examiner from being:
      1. A policyholder or claimant under an insurance policy;
      2. A grantor of a mortgage or similar instrument on the examiner’s residence to a regulated entity if done under customary terms and in the ordinary course of business;
      3. An investment owner in shares of regulated diversified investment companies; or
      4. A settlor or beneficiary of a “blind trust” into which any otherwise impermissible holdings have been placed.
   3. Notwithstanding the requirements of this subsection, the Commission may retain from time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals or firms who are independently practicing their professions, even though said persons may from time to time be similarly employed or retained by persons subject to examination under this article.
2. The examiners shall be instructed as to the scope of the examination, and, in conducting the examination, the examiner shall observe, to the extent practicable, those guidelines and procedures set forth in the Examiners’ Handbook, or any successor publications, adopted by the NAIC and such other guidelines or procedures as the Commission may deem appropriate.
3. Every company or person from whom information is sought, its officers, directors, and agents shall provide the examiners convenient access at all reasonable hours to its books, records, files, securities, accounts, papers, documents, and any or all computer or other recordings relating to the property, assets, business and affairs of the company being examined or those of any person, including any affiliates or subsidiaries of the person examined, that are relevant to the examination.
   1. The officers, directors, employees and agents of the company or person shall facilitate the examination and aid in the examination so far as it is in their power to do so.
   2. The refusal of any company, by its officers, directors, employees or agents, to submit to examination or to comply with any reasonable written request of the examiners shall be grounds for suspension or refusal of, or nonrenewal of, any license or authority held by the company to engage in an insurance or other business subject to the Commission’s jurisdiction. Any such proceedings for suspension, revocation or refusal of any license or authority shall be conducted pursuant to § 38.2-1040 .
4. For the purpose of any investigation or proceeding under this article, the Commission or any individual designated by it may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence and require the production of any books, papers, correspondence, memoranda, agreements or other documents or records which the Commission determines are relevant to the examination.
5. In connection with any examination, the Commission may retain attorneys, appraisers, independent actuaries, independent certified public accountants, security analysts or other professionals and specialists as examiners; the cost of which shall be borne by the company which is the subject of the examination.
6. Nothing contained in this article shall be construed to limit the Commission’s authority to terminate or suspend any examination in order to pursue other legal or regulatory action pursuant to the provisions of this title.
7. Nothing contained in this article shall be construed to limit the Commission’s authority to use and, if appropriate, to make public any final or preliminary examination report, any examiner or company workpapers or other documents, or any other information discovered or developed during the course of any examination in the furtherance of any legal or regulatory action which the Commission may deem appropriate.
8. Whenever the Commission examines the affairs of any person providing benefits pursuant to Title XIX or Title XXI of the Social Security Act, as amended, as set forth in § 38.2-1317 , nothing contained in this article shall be construed to limit the Commission’s authority to consult with the Department of Medical Assistance Services about such person before taking any action as a result of services the person provides pursuant to Title XIX or Title XXI of the Social Security Act, as amended.

History. Code 1950, §§ 38-69, 38-125; 1952, c. 317, § 38.1-175; 1986, c. 562; 1992, c. 588; 2006, c. 866.

The 2006 amendments.

The 2006 amendment by c. 866 added subsection H.

§ 38.2-1319. Expense of examination.

1. Any person examined shall be liable for the necessary traveling and other expenses reasonably attributable to the examiners or incurred by the Commission on account of its examination. The Commission may require the person to pay either a reasonable living expense allowance or the actual living expenses of an examiner, whichever the Commission determines to be more appropriate. Where the examiner is other than a full-time employee of the Commission, the person may, in addition, be required to pay to the Commission’s examiners, upon presentation of an itemized statement, consulting fees or a per diem compensation at a reasonable rate approved by the Commission.
2. Where the examination concerns a person domiciled or having its home office in this Commonwealth, the Commission may, at its discretion and for good cause, waive payment of expenses.
3. If the Commission finds the accounts to be inadequate, or inadequately kept or posted, it may employ experts to rewrite, post or balance them at the expense of the person examined if that person has failed to complete or correct the accounts after notice and reasonable opportunity has been given by the Commission.

History. Code 1950, §§ 38-70, 38-125; 1952, c. 317, § 38.1-176; 1986, c. 562; 1992, c. 588.

§ 38.2-1320. Examination reports; general description.

The Commission’s examiners shall make a true report of every examination. The report shall include only facts appearing upon the books, records or other documents of the person examined or as ascertained from the sworn testimony of its directors, officers, employees, agents or other persons examined concerning its affairs and any conclusions and recommendations reasonably warranted from such facts. Findings of fact and conclusions made pursuant to any examination, and reported in any filed examination report for which the period for appeal has expired, shall be prima facie evidence in any subsequent legal or regulatory action.

History. Code 1950, §§ 38-127, 38-216; 1952, c. 317, § 38.1-177; 1986, c. 562; 1992, c. 588.

§ 38.2-1320.1. Submission of examination report.

No later than ninety days following completion of any examination, the Commission shall furnish two copies of the report to the person examined and shall notify the person that he may, within thirty days, make a written submission with respect to any facts, conclusions or recommendations contained in the examination report.

1. If the report contains any recommendation for corrective action by or on behalf of the person examined, the person shall make a written submission explaining what procedures have been implemented or are anticipated with respect to each recommendation of corrective action.
2. Any person seeking to take issue with any matter contained in the examination report shall do so by including in its written submission a request for a hearing before the Commission.

History. 1992, c. 588; 1994, c. 308.

§ 38.2-1320.2. Filing of report on examination.

Within thirty days of the end of the period allowed for the receipt of written submissions, the Commission shall fully consider and review the report, together with any written submissions and any relevant portions of the examiner’s workpapers and act upon the report by:

1. Certifying that the examination report as initially provided to the person examined, or with modifications or corrections, is the Commission’s true examination report and filing such report in the offices of the Commission;
2. Rejecting the examination report with notice to the person examined that the Commission’s examiners are being directed to reopen the examination for purposes of obtaining additional data, documentation or information, and resubmission pursuant to § 38.2-1320.1 ; or
3. Calling for an investigatory hearing before the Commission with no less than ten days’ notice to the company for purposes of obtaining additional documentation, data, information and testimony.

History. 1992, c. 588.

§ 38.2-1320.3. Examination reports; orders and procedures.

1. A certified copy of the examination report filed pursuant to subdivision 1 of § 38.2-1320.2 shall be served upon the company by certified mail.  Within thirty days of the filing of the report, the company shall file affidavits executed by each of its directors stating under oath that they have received a copy of the filed report and any related orders.
2. If the examination report reveals that the company is operating in violation of any law, regulation or prior order of the Commission, the Commission may order the company to take any action the Commission considers necessary and appropriate to cure such violation.
3. Any hearing conducted by the Commission under subdivision 2 of § 38.2-1320.1 or subdivision 3 of § 38.2-1320.2 shall be conducted as a nonadversarial confidential investigatory proceeding as necessary for the resolution of any inconsistencies, discrepancies or disputed issues apparent upon the face of the examination report or raised by or as a result of the Commission’s review of relevant workpapers or by the written submission of the company.

History. 1992, c. 588.

§ 38.2-1320.4. Publication and use of examination reports.

1. Upon the filing of the examination report under subdivision 1 of § 38.2-1320.2 , the Commission shall continue to hold the content of the examination report as private and confidential information for a period of ten days except to the extent provided in § 38.2-1320.3 . Thereafter, the Commission may open the report for public inspection so long as no court of competent jurisdiction has stayed its publication.
2. Nothing contained in this Code shall prevent or be construed as prohibiting the Commission from disclosing the content of an examination report, preliminary examination report or results, or any matter relating thereto, at any time to (i) a regulatory official of any state or country; (ii) the NAIC, its affiliate or its subsidiary; or (iii) a law-enforcement authority of any state or country, so long as such agency, authority or office receiving the report or matters relating thereto agrees in writing to hold it confidential and in a manner consistent with this article. Any such disclosure by the Commission shall not constitute a waiver of confidentiality of any such reports or any matter relating thereto.
3. In the event the Commission determines that regulatory action is appropriate as a result of any examination, it may initiate any proceedings or actions as provided by law.

History. 1992, c. 588; 2001, c. 519.

The 2001 amendments.

The 2001 amendment by c. 519, in subsection B, substituted “at any time to (i) a regulatory official of any state or country; (ii) the NAIC, its affiliate or its subsidiary; or (iii) a law-enforcement authority of any state or country” for “to the insurance department of any state or country, or to law-enforcement officials of this or any other state or agency of the federal government at any time,” inserted “authority,” preceding “or office,” and added the last sentence.

§ 38.2-1320.5. Confidentiality of ancillary information.

All working papers, recorded information, documents and copies thereof produced by, obtained by or disclosed to the Commission or any other person in the course of an examination made under this article shall be given confidential treatment, are not subject to subpoena, and may not be made public by the Commission or any other person, except to the extent provided in § 38.2-1320.4 . Access may also be granted to (i) a regulatory official of any state or country; (ii) the NAIC, its affiliate or its subsidiary; or (iii) a law-enforcement authority of any state or country, provided that those officials are required under their law to maintain its confidentiality. Any such disclosure by the Commission shall not constitute a waiver of confidentiality of such papers, recorded information, documents or copies thereof. Any parties receiving such papers must agree in writing prior to receiving the information to provide to it the same confidential treatment as required by this section, unless the prior written consent of the company to which it pertains has been obtained.

History. 1992, c. 588; 2001, c. 519; 2007, c. 488.

The 2001 amendments.

The 2001 amendment by c. 519, in the second sentence, inserted clause (i), inserted the clause (ii) designator, inserted “its affiliate or its subsidiary; or (iii) a law-enforcement authority of any state or country,” and added the third sentence.

The 2007 amendments.

The 2007 amendment by c. 488 added the proviso at the end of the second sentence.

§ 38.2-1321. Records of examination preserved.

The Commission shall keep and preserve in permanent form the reports of all its official examinations, including all records, orders, exhibits or schedules filed in connection with these reports.

History. Code 1950, § 38-124; 1952, c. 317, § 38.1-178; 1986, c. 562; 1992, c. 588.

§ 38.2-1321.1. Immunity from liability.

1. No cause of action shall arise nor shall any liability be imposed against the Commission, the Commission’s authorized representatives or any examiner appointed by the Commission for any statements made or conduct performed in good faith while carrying out the provisions of this article.
2. No cause of action shall arise, nor shall any liability be imposed against any person for the act of communicating or delivering information or data to the Commission or the Commission’s authorized representative or examiner pursuant to an examination made under this article, if such act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.
3. This section does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subsection A of this section.

History. 1992, c. 588.

§ 38.2-1322. Definitions.

As used in this article:

“Acquiring person” means any person by whom or on whose behalf acquisition of control of any domestic insurer is to be effected.

“Affiliate” of a specific person or a person “affiliated” with a specific person means a person that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the person specified.

“Control,” including the terms “controlling,” “controlled by” and “under common control with,” means direct or indirect possession of the power to direct or cause the direction of the management and policies of a person, through (i) the ownership of voting securities, (ii) by contract other than a commercial contract for goods or nonmanagement services, or (iii) otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person directly or indirectly owns, controls, holds with the power to vote, or holds proxies representing collectively 10 percent or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided by subsection K of § 38.2-1329 that control does not exist. After giving all interested persons notice and opportunity to be heard and making specific findings to support its determination, the Commission may determine that control exists, notwithstanding the absence of a presumption to that effect.

“Enterprise risk” means any activity, circumstance, event, or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole, including, but not limited to, anything that would cause the insurer’s risk-based capital to fall into company action level as set forth in § 38.2-5503 or would cause the insurer to be in hazardous financial condition pursuant to 14VAC5-290-30 and 14VAC5-290-40 of the Virginia Administrative Code.

“Group-wide supervisor” means the regulatory official authorized to engage in conducting and coordinating group-wide supervision activities who is determined or acknowledged by the Commission under § 38.2-1332.2 to have sufficient significant contacts with the internationally active insurance group.

“Insurance holding company system” means two or more affiliated persons, one or more of which is an insurer.

“Insurer” means an insurance company as defined in § 38.2-100 .

“Internationally active insurance group” means an insurance holding company system that includes an insurer registered under § 38.2-1329 and that meets the following criteria: (i) premiums written in at least three countries; (ii) the percentage of gross premiums written outside the United States is at least 10 percent of the insurance holding company system’s total gross written premiums; and (iii) based on a three year rolling average, (a) the total assets of the insurance holding company system are at least $50 billion or (b) the total gross written premiums of the insurance holding company system are at least $10 billion.

“Material transaction” means (i) any sale, purchase, exchange, loan or extension of credit, or investment; (ii) any dividend or distribution; (iii) any reinsurance treaty or risk-sharing arrangement; (iv) any management contract, service contract or cost-sharing arrangement; (v) any merger with or acquisition of control of any corporation; or (vi) any other transaction or agreement that the Commission by order, rule or regulation determines to be material. Any series of transactions occurring within a 12-month period that are sufficiently similar in nature as to be reasonably construed as a single transaction and that in the aggregate exceed any minimum limits shall be deemed a material transaction.

“NAIC” means the National Association of Insurance Commissioners.

“SEC” means the U.S. Securities and Exchange Commission.

“Subsidiary” of a specified person means an affiliate directly or indirectly controlled by that person through one or more intermediaries.

“Voting security” means any security that enables the owner to vote for the election of directors. “Voting security” includes any security convertible into or evidencing a right to acquire a voting security.

History. 1973, c. 505, § 38.1-178.1; 1977, c. 414, § 38.1-178.1:2; 1986, c. 562; 1992, c. 588; 1993, c. 158; 1998, c. 42; 2014, c. 309; 2019, c. 692.

Editor’s note.

Acts 2014, c. 309, cl. 3 provides: That the provisions of Article 5 (§ 38.2-1322 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia as such article was in effect on June 30, 2014, shall apply to any insurance holding company transaction that was commenced prior to January 1, 2015, unless otherwise provided in such article as amended by the first and second enactments of this act.”

The 1998 amendment added the paragraph defining “Insurer.”

The 2014 amendments.

The 2014 amendment by c. 309, in the definition of “Control,” substituted “K” for “I”; added the definitions of “Enterprise risk,” “NAIC” and “SEC”; in the definition of “Insurance holding company system,” substituted “an insurer” for “a person licensed pursuant to this title”; deleted “and means also a health maintenance organization licensed under Chapter 43 (§ 38.2-4300 et seq.) of this title” at the end of the definition of “Insurer”; and made minor stylistic changes. For applicability, see Editor’s note.

The 2019 amendments.

The 2019 amendment by c. 692 inserted the definitions for “Group-wide supervisor” and “Internationally active insurance group.”

Law Review.

For survey of Virginia law on insurance for the year 1972-1973, see 59 Va. L. Rev. 1535 (1973).

For survey of Virginia law on business associations for the year 1976-77, see 63 Va. L. Rev. 1369 (1977).

§ 38.2-1323. Acquisition of control of insurers.

1. No person other than the issuer shall make a tender offer or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire, or acquire, in the open market or otherwise, any voting security of a domestic insurer if, after the consummation thereof, such person would, directly or indirectly (or by conversion or by exercise of any right to acquire) be in control of the insurer. No person shall enter into an agreement to merge with or otherwise to acquire control of a domestic insurer or any person controlling a domestic insurer unless, at the time the offer, request, or invitation is made or the agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is involved, such person has filed with the Commission and has sent to the insurer a statement containing the information required by this section and the offer, request, invitation, agreement, or acquisition has been approved by the Commission pursuant to this article.
2. If the merger or acquisition of an insurer not covered by subsection A causes or tends to cause a substantial lessening of competition in any line of insurance and such lessening of competition is detrimental to policyholders or the public in general, then the Commission may suspend such insurer’s license after giving the insurer 10 days’ notice and the opportunity to be heard.
3. Any notice issued pursuant to the provisions of subsection B shall be accompanied by a request for such information as required by § 38.2-1324 . Any hearing held pursuant to the provisions of this section shall begin, unless waived by the insurer, within 40 days of the receipt by the Commission of all material required by this subsection.
4. For purposes of this section, any controlling person of a domestic insurer seeking to divest its controlling interest in the domestic insurer, in any manner, shall file with the Commission, with a copy to the insurer, confidential notice of its proposed divestiture at least 30 days prior to the cessation of control. The Commission shall determine those instances in which the party or parties seeking to divest or to acquire a controlling interest in an insurer will be required to file for and obtain approval of the transaction. The information shall remain confidential until the conclusion of the transaction unless the Commission, in its discretion, determines that confidential treatment will interfere with enforcement of this section. If the statement referred to in subsection A is otherwise filed, this subsection shall not apply.
5. With respect to a transaction subject to this section, the acquiring person may also be required to file a pre-acquisition notification as established by the Commission.
6. For purposes of this section:“Domestic insurer” includes any person controlling a domestic insurer unless the person, as determined by the Commission, is either directly or through its affiliates primarily engaged in business other than the business of insurance.“Person” does not include any securities broker holding, in the usual and customary broker’s function, less than 20 percent of the voting securities of an insurance company or of any person that controls an insurance company.

History. 1977, c. 414, § 38.1-178.1:1; 1986, c. 562; 1992, c. 588; 1993, c. 158; 2014, c. 309.

Editor’s note.

Acts 2014, c. 309, cl. 3 provides: “That the provisions of Article 5 (§ 38.2-1322 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia as such article was in effect on June 30, 2014, shall apply to any insurance holding company transaction that was commenced prior to January 1, 2015, unless otherwise provided in such article as amended by the first and second enactments of this act.”

The 2014 amendments.

The 2014 amendment by c. 309 rewrote subsection A; deleted “of this section” following “subsection A” in subsection B and substituted “10” for “ten”; in subsection C substituted “40” for “forty”; and added subsections D, E and F. For applicability, see Editor’s note.

Law Review.

For survey of Virginia law on business associations for the year 1976-77, see 63 Va. L. Rev. 1369 (1977).

§ 38.2-1324. Contents of application.

1. The application filed with the Commission under § 38.2-1323 shall be made under oath or affirmation and shall contain the following information:
   1. The name and address of each acquiring person including:
      1. If the acquiring person is a natural person, his principal occupation, all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past 10 years; and
      2. If the acquiring person is not a natural person, (i) a report of the nature of its business operations during the existence of the acquiring person and any of its predecessors, not to exceed five years; (ii) an informative description of the business intended to be done by the person and the person’s subsidiaries; and (iii) a list of all individuals who are or who have been selected to become directors or executive officers of the person or who perform or will perform functions appropriate to those positions. The report shall include the information required by subdivision 1 a.
   2. The source, nature, and amount of the consideration used or to be used in effecting the acquisition of control, a description of any transaction in which funds were or are to be obtained for that purpose, and the identity of persons furnishing the consideration. However, where a source of the consideration is a loan made in the lender’s ordinary course of business, the identity of the lender shall remain confidential if requested by the person filing the application;
   3. Fully audited financial information regarding the earnings and financial condition of each acquiring person during the existence of the acquiring person or the predecessors, not to exceed five years, and similar unaudited information as of a date not earlier than 90 days prior to the filing of the application;
   4. Any plans or proposals that each acquiring person may have to liquidate the insurer, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management;
   5. The number of shares of any security of the insurer that each acquiring person proposes to acquire and the terms of the acquisition;
   6. The amount of each class of any such security that each acquiring person beneficially owns or has a right to acquire beneficial ownership of;
   7. A full description of any contracts, arrangements, or understandings with respect to any security in which an acquiring person is involved, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. The description shall identify the persons with whom the contracts, arrangements, or understandings have been made;
   8. A description of any acquiring person’s purchase of any such security during the 12 calendar months preceding the filing of the application, including the dates of purchases, names of the purchasers, and consideration paid or agreed to be paid for the security;
   9. A description of any recommendations to purchase any such security made by any acquiring person or by any person based upon interviews or at the suggestion of any acquiring person during the 12 calendar months preceding the filing of the application;
   10. Copies of all tender offers, requests or invitations for tenders of exchange offers and agreements to acquire or exchange any such security and of additional related soliciting material which has been distributed;
   11. The terms of any agreement, contract, or understanding made with any broker-dealer as to solicitation of these securities for tender and the amount of any associated fees, commissions, or other compensation to be paid to broker-dealers;
   12. An agreement by the person required to file the statement referred to in subsection A of § 38.2-1323 that it will provide the annual enterprise risk report specified in subsection L of § 38.2-1329 , for so long as control exists;
   13. An acknowledgment by the person required to file the statement referred to in subsection A of § 38.2-1323 that the person and all subsidiaries within its control in the insurance holding company system will provide information to the Commission upon request as necessary to evaluate enterprise risk to the insurer; and
   14. Any additional information the Commission may prescribe as necessary or appropriate for the protection of the policyholders or the public.
2. If the person required to file the application referred to in § 38.2-1323 is a partnership, limited partnership, syndicate, or other group, the Commission may require that the information called for by subsection A be given with respect to (i) each partner of the partnership or limited partnership, (ii) each member of the syndicate or group, and (iii) each person who controls any partner or member. If any partner, member, or person is a corporation, or if the person required to file the application referred to in § 38.2-1323 is a corporation, the Commission may require that information be given for the corporation, each officer and director of the corporation, and each person who is directly or indirectly the beneficial owner of more than 10 percent of the outstanding voting securities of the corporation as required by subsection A.
3. If any material change occurs in the facts set forth in the application filed with the Commission and sent to an insurer pursuant to § 38.2-1323 , an amendment setting forth the change, together with copies of all documents and other material relevant to the change, shall be filed with the Commission and sent to the insurer within two business days after the person filing the application learns of the change.

History. 1977, c. 414, § 38.1-178.1:2; 1986, c. 562; 2014, c. 309.

Editor’s note.

Acts 2014, c. 309, cl. 3 provides: “That the provisions of Article 5 (§ 38.2-1322 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia as such article was in effect on June 30, 2014, shall apply to any insurance holding company transaction that was commenced prior to January 1, 2015, unless otherwise provided in such article as amended by the first and second enactments of this act.”

The 2014 amendments.

The 2014 amendment by c. 309, in subdivision A 1 a and subsection B, substituted “10” for “ten”; deleted “of this subsection” at the end of subdivision A 1 b; in subdivision A 3 substituted “90” for “ninety”; in subdivisions A 8 and A 9 substituted “12” for “twelve”; deleted “of this section” twice in subsection B following “subsection A” and at the end; and made minor stylistic changes. For applicability, see Editor’s note.

Law Review.

For survey of Virginia law on business associations for the year 1976-77, see 63 Va. L. Rev. 1369 (1977).

§ 38.2-1325. Alternate filing materials.

If any acquisition referred to in § 38.2-1323 is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, the person required by § 38.2-1323 to file an application may use these documents in furnishing the required information.

History. 1977, c. 414, § 38.1-178.1:3; 1986, c. 562; 2014, c. 309.

Editor’s note.

Acts 2014, c. 309, cl. 3 provides: “That the provisions of Article 5 (§ 38.2-1322 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia as such article was in effect on June 30, 2014, shall apply to any insurance holding company transaction that was commenced prior to January 1, 2015, unless otherwise provided in such article as amended by the first and second enactments of this act.”

The 2014 amendments.

The 2014 amendment by c. 309 deleted “or under the Take-Over-Bid Disclosure Act (§ 13.1-528 et seq.)” following “1934.” For applicability, see Editor’s note.

§ 38.2-1326. Approval by Commission.

The Commission shall approve the application required by § 38.2-1323 unless, after giving notice and opportunity to be heard, it determines that:

1. After the change of control, the insurer would not be able to satisfy the requirements for the issuance of a license to write the classes of insurance for which it is presently licensed;
2. The acquisition of control would lessen competition substantially or tend to create a monopoly in insurance in this Commonwealth;
3. The financial condition of any acquiring person might jeopardize the financial stability of the insurer, or prejudice the interest of its policyholders;
4. Any plans or proposals of the acquiring party to liquidate the insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the insurer and not in the public interest;
5. The competence, experience, and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the acquisition of control;
6. After the change of control, the insurer’s surplus as regards policyholders would not be reasonable in relation to its outstanding liabilities or adequate to its financial needs; or
7. The acquisition is likely to be hazardous or prejudicial to the insurance-buying public.

History. 1977, c. 414, § 38.1-178.1:4; 1986, c. 562; 2014, c. 309.

Editor’s note.

Acts 2014, c. 309, cl. 3 provides: “That the provisions of Article 5 (§ 38.2-1322 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia as such article was in effect on June 30, 2014, shall apply to any insurance holding company transaction that was commenced prior to January 1, 2015, unless otherwise provided in such article as amended by the first and second enactments of this act.”

The 2014 amendments.

The 2014 amendment by c. 309, in subdivision 6, substituted “as regards” for “to”; added subdivision 7; and made minor stylistic changes. For applicability, see Editor’s note.

Law Review.

For survey of Virginia law on business associations for the year 1976-77, see 63 Va. L. Rev. 1369 (1977).

§ 38.2-1327. Time for hearing; order of Commission.

1. Any hearing held pursuant to § 38.2-1326 shall begin within 40 days of the date the application is filed with the Commission. In approving any application filed pursuant to § 38.2-1323 , the Commission may include in its order any conditions, stipulations, or provisions that the Commission determines to be necessary to protect the interests of the policyholders of the insurer and the public.
2. The Commission may retain at the acquiring person’s expense any attorneys, actuaries, accountants, and other experts not otherwise a part of the Commission’s staff as may be reasonably necessary to assist the Commission in reviewing the proposed acquisition of control.

History. 1977, c. 414, § 38.1-178.1:6; 1986, c. 562; 2014, c. 309.

Editor’s note.

Acts 2014, c. 309, cl. 3 provides: “That the provisions of Article 5 (§ 38.2-1322 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia as such article was in effect on June 30, 2014, shall apply to any insurance holding company transaction that was commenced prior to January 1, 2015, unless otherwise provided in such article as amended by the first and second enactments of this act.”

The 2014 amendments.

The 2014 amendment by c. 309 designated the existing provision as subsection A, substituted “40” for “forty” and “that” for “which”; and added subsection B. For applicability, see Editor’s note.

§ 38.2-1328. Exemption.

The provisions of §§ 38.2-1323 through 38.2-1327 shall not apply to any acquisition that the Commission, by order, exempts from those sections. Acquisitions granted exemption shall include those which (i) have not been made or entered into for the purpose of and do not have the effect of changing or influencing the control of a domestic insurer, or (ii) otherwise are not comprehended within these sections.

History. 1977, c. 414, § 38.1-178.1:7; 1986, c. 562.

§ 38.2-1329. Registration of insurers that are members of holding company system.

1. Each insurer licensed to do business in the Commonwealth that is a member of an insurance holding company system shall register with the Commission.
2. 1. This section shall not apply to any foreign insurer subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile that are substantially similar to those contained in this section, subsection A of § 38.2-1330 , subsection D of § 38.2-1330 , § 38.2-1330.1 , and either (i) a provision substantially similar to subsection B of § 38.2-1330 or (ii) a provision such as the following: “Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions within 15 days after the end of the month in which it learns of each change or addition.” B. 1. This section shall not apply to any foreign insurer subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile that are substantially similar to those contained in this section, subsection A of § 38.2-1330, subsection D of § 38.2-1330, § 38.2-1330.1 , and either (i) a provision substantially similar to subsection B of § 38.2-1330 or (ii) a provision such as the following: “Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions within 15 days after the end of the month in which it learns of each change or addition.”
   2. Any insurer that is subject to registration under this section shall register within 15 days after it becomes subject to registration, and annually thereafter by April 30 of each year for the previous calendar year, unless the Commission for good cause shown extends the time for registration, and then within the extended time.
   3. Any licensed insurer that is a member of an insurance holding company system but not subject to registration under this section may be required by the Commission to furnish a copy of the registration statement, or other information filed by the insurer, with the insurance regulatory authority of its domiciliary jurisdiction.
3. Each insurer subject to registration under this section shall file a registration statement on a form provided by the Commission. Such statement shall contain current information on:
   1. The capital structure, general financial condition, ownership, and management of the insurer and any person controlling the insurer;
   2. The identity of every member of the insurance holding company system;
   3. The following agreements in force, continuing relationships and transactions currently outstanding between the insurer and its affiliates:
      1. Loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates;
      2. Purchases, sales, or exchanges of assets;
      3. Transactions not in the ordinary course of business;
      4. Guarantees or undertakings for the benefit of an affiliate that result in an actual contingent exposure of the insurer’s assets to liability, other than insurance contracts entered into in the ordinary course of the insurer’s business;
      5. All management and service contracts and all cost-sharing arrangements;
      6. Reinsurance agreements or other risk-sharing arrangements;
      7. Dividends and other distributions to shareholders; and
      8. Consolidated tax allocation agreements;
   4. Any pledge of the insurer’s stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system;
   5. If requested by the Commission, financial statements of or within an insurance holding company system, including all affiliates. Financial statements may include but are not limited to annual audited financial statements filed with the SEC pursuant to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. An insurer required to file financial statements pursuant to this subdivision may satisfy the request by providing the Commission with the most recently filed parent corporation financial statements that have been filed with the SEC;
   6. Other matters relating to transactions between registered insurers and any affiliates which may be included from time to time in any registration forms adopted or approved by the Commission;
   7. Statements that the corporate governance and internal controls are managed under the direction of the insurer’s board of directors in a manner consistent with § 13.1-673 or § 13.1-853 as applicable, and that the insurer’s officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal control procedures; and
   8. Any other information required by the Commission by rule or regulation.
4. All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.
5. If information is not material for the purposes of this section, it need not be disclosed on the registration statement filed pursuant to subsection C. Unless the Commission prescribes otherwise, sales, purchases, exchanges, loans or extensions of credit, investments, or guarantees involving one-half of one percent or less of an insurer’s admitted assets as of the immediately preceding December 31 shall not be deemed material for purposes of this section.
6. Each registered insurer shall report all additional material transactions with affiliates and any material changes in previously reported material transactions with affiliates on amendment forms provided by the Commission. Each insurer shall make its report within 15 days after the end of the month in which it learns of each additional material transaction or material change in material transaction. Subject to § 38.2-1330.1 , each insurer shall report to the Commission all dividends and other distributions to shareholders within five business days following their declaration, and such declaration shall confer no rights upon shareholders until:
   1. The Commission has approved the payment of such dividend or distribution; or
   2. Thirty days after the Commission has received written notice of the declaration thereof and has not within such period disapproved such payment.Each registered insurer shall also keep current the information required by subsection C by filing an amendment to its registration statement within 120 days after the end of each fiscal year of the ultimate controlling person of the insurance holding company system.
7. The Commission shall terminate the registration of any insurer that demonstrates it no longer is a member of an insurance holding company system.
8. The Commission may require or allow two or more affiliated insurers subject to registration under this section to file a consolidated registration statement or consolidated reports amending their consolidated registration statement or their individual registration statements.
9. The Commission may allow an insurer that is authorized to do business in this Commonwealth and that is part of an insurance holding company system to register on behalf of any affiliated insurer required to register under subsection A and to file all information and material required to be filed under this section.
10. The provisions of this section shall not apply to any insurer, information, or transaction if and to the extent that the Commission by rule, regulation, or order shall exempt the same from the provisions of this section.
11. Any person may file with the Commission a disclaimer of affiliation with any authorized insurer. The disclaimer shall fully disclose all material relationships and bases for affiliation between the person and the insurer as well as the basis for disclaiming the affiliation. A disclaimer of affiliation shall be deemed to have been granted unless the Commission, within 30 days following receipt of a complete disclaimer, notifies the filing party the disclaimer is disallowed. In the event of disallowance, the disclaiming party may request a hearing. The disclaiming party shall be relieved of its duty to register under this section if approval of the disclaimer has been granted by the Commission or if the disclaimer is deemed to have been approved.
12. The ultimate controlling person of every insurer subject to registration shall also file an annual enterprise risk report. The report shall be appropriate to the nature, scale, and complexity of the operations of the insurance holding company system, and shall, to the best of the ultimate controlling person’s knowledge and belief, identify the material risks within the insurance holding company system that could pose enterprise risk to the insurer. The report shall be filed with the insurance commissioner, director, or superintendent of the lead state of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC.
13. The failure to file a registration statement or any summary of the registration statement or enterprise risk filing required by this section within the time specified for filing shall be a violation of this section.

History. 1973, c. 505, § 38.1-178.2; 1977, c. 414; 1986, c. 562; 1992, c. 588; 2000, c. 46; 2006, c. 577; 2009, c. 717; 2014, c. 309.

Editor’s note.

Acts 2014, c. 309, cl. 3 provides: “That the provisions of Article 5 (§ 38.2-1322 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia as such article was in effect on June 30, 2014, shall apply to any insurance holding company transaction that was commenced prior to January 1, 2015, unless otherwise provided in such article as amended by the first and second enactments of this act.”

s The 2000 amendment by c. 46, effective January 1, 2001, deleted “other than cost allocation arrangements based upon generally accepted accounting principles” from the end of subdivision C 3 e.

The 2006 amendments.

The 2006 amendment by c. 577 deleted “and” from the end of subdivision C 3 f; and in subsection E, in the third sentence, substituted “Subject to § 38.2-1330.1 , each” for “Each” and “five business days” for “two business days” and added “thereof and at least 30 days prior to payment thereof” at the end.

The 2009 amendments.

The 2009 amendment by c. 717, in subsection E, substituted “and such declaration shall confer no rights upon shareholders until” for “thereof, and at least 30 days prior to payment thereof”; added subdivisions E 1 and E 2; and in subsection I, inserted the fourth sentence.

The 2014 amendments.

The 2014 amendment by c. 309, in subsection A, deleted the last sentence, which read “Any insurer subject to registration under this section shall register within fifteen days after it becomes subject to registration, unless the Commission extends the time for registration for good cause shown.”; rewrote subdivision B 1; added subdivisions B 2, C 3 g, C 3 h, C 4, C 5, C 7, C 8 and subsections D, J, L and M, and redesignated the remaining subparts accordingly; in subdivision B 3, substituted “an insurance” for “a”; in subsection E, substituted “sales, purchases, exchanges, loans or extensions of credit, investments, or guarantees involving one-half of one percent or less of an insurer’s admitted assets as of the immediately preceding December 31” for “information about transactions that are not material transactions”; rewrote subsection K; and made minor stylistic changes. For applicability, see Editor’s note.

Law Review.

For survey of Virginia law on business associations for the year 1976-77, see 63 Va. L. Rev. 1369 (1977).

§ 38.2-1330. Standards for transactions within an insurance holding company system; adequacy of surplus.

1. Transactions within an insurance holding company system to which an insurer subject to registration is a party shall be subject to the following standards:
   1. The terms shall be fair and reasonable;
   2. Agreements for cost-sharing services and management shall include such provisions as required by rule or regulation promulgated by the Commission;
   3. Charges or fees for services performed shall be reasonable;
   4. Expenses incurred and payments received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied;
   5. The books, accounts, and records of each party shall disclose clearly and accurately the precise nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties; and
   6. The insurer’s surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer’s outstanding liabilities and adequate to meet its financial needs.
2. Transactions described in subdivisions 1 through 7 that involve a domestic insurer and any person in its insurance holding company system, including amendments or modifications of affiliate agreements previously filed pursuant to this section, that are subject to materiality standards contained in such subdivisions may not be entered into unless the insurer has notified the Commission in writing of its intention to enter into the transaction at least 30 days prior thereto, or such shorter period as the Commission may permit, and the Commission has not disapproved it within that period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer. Informal notice shall be reported, within 30 days after a termination of a previously filed agreement, to the Commission for determination of the type of filing required, if any. Transactions to which this subsection applies, with their materiality standards, are:
   1. Sales, purchases, exchanges, loans, extensions of credit, or investments, provided the transactions are equal to or exceed:
      1. With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders as of the immediately preceding December 31; or
      2. With respect to life insurers, three percent of the insurer’s admitted assets as of the immediately preceding December 31;
   2. Loans or extensions of credit to any person who is not an affiliate, where the insurer makes loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit, provided the transactions are equal to or exceed:
      1. With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders as of the immediately preceding December 31; or
      2. With respect to life insurers, three percent of the insurer’s admitted assets as of the immediately preceding December 31;
   3. Reinsurance agreements or modifications thereto, including:
      1. All reinsurance pooling agreements; and
      2. Agreements in which the reinsurance premium or a change in the insurer’s liabilities, or the projected reinsurance premium or a change in the insurer’s liabilities in any of the next three years, equals or exceeds five percent of the insurer’s surplus as regards policyholders, as of the immediately preceding December 31, including those agreements that may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of the assets will be transferred to one or more affiliates of the insurer;
   4. All management agreements, service contracts, tax allocation agreements, guarantees, and cost-sharing arrangements;
   5. Guarantees when made by a domestic insurer, provided, however, that a guarantee that is quantifiable as to amount is not subject to the notice requirements of this subdivision unless it exceeds the lesser of one-half of one percent of the insurer’s admitted assets or 10 percent of surplus as regards policyholders as of the immediately preceding December 31. Further, all guarantees that are not quantifiable as to amount are subject to the notice requirements of this subdivision;
   6. Direct or indirect acquisitions or investments in a person that controls the insurer or in an affiliate of the insurer in an amount that, together with its present holdings in such investments, exceeds two and one-half percent of the insurer’s surplus to policyholders. The Commission may exempt such a transaction by regulation; and
   7. Any material transactions that the Commission determines may adversely affect the interests of the insurer’s policyholders.Nothing in this subsection shall be deemed to authorize or permit any transactions that, in the case of an insurer not a member of the same insurance holding company system, would be otherwise contrary to law.
3. In addition:
   1. Notwithstanding the control of a domestic insurer by any person, the officers and directors of the insurer shall not thereby be relieved of any obligation or liability to which they would otherwise be subject by law, and the insurer shall be managed so as to assure its separate operating identity consistent with this article;
   2. Nothing in this section shall preclude a domestic insurer from having or sharing a common management or cooperative or joint use of personnel, property, or services with one or more other persons under arrangements meeting the standards of subsection A;
   3. Not less than one-third of the directors of a domestic insurer, and not less than one-third of the members of each committee of the board of directors of any domestic insurer, shall be persons who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or entity. At least one such person shall be included in any quorum for the transaction of business at any meeting of the board of directors or any committee thereof;
   4. The board of directors of a domestic insurer shall establish one or more committees composed solely of directors who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or any such entity. The committee or committees shall have responsibility for nominating candidates for director for election by shareholders or policyholders, evaluating the performance of officers deemed to be principal officers of the insurer, and recommending to the board of directors the selection and compensation of the principal officers;
   5. The provisions of subdivisions 3 and 4 shall not apply to a domestic insurer if the person controlling the insurer, such as an insurer, a mutual insurance holding company, or a publicly held corporation, has a board of directors and committees thereof that meet the requirements of subdivisions 3 and 4 with respect to such controlling entity; and
   6. An insurer may make application to the Commission for a waiver from the requirements of this subsection if the insurer’s annual direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and National Flood Insurance Program, is less than $300 million. An insurer may also make application to the Commission for a waiver from the requirements of this subsection based upon unique circumstances. The Commission may consider various factors including the type of business entity, volume of business written, availability of qualified board members, or ownership or organizational structure of the entity.
4. For purposes of this article, in determining whether an insurer’s surplus as regards policyholders is reasonable in relation to the insurer’s outstanding liabilities and adequate to meet its financial needs, the following factors, among others, shall be considered:
   1. The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria;
   2. The extent to which the insurer’s business is diversified among different lines of insurance;
   3. The number and size of risks insured in each line of business;
   4. The extent of the geographical dispersion of the insurer’s insured risk;
   5. The nature and extent of the insurer’s reinsurance program;
   6. The quality, diversification, and liquidity of the insurer’s investment portfolio;
   7. The recent past and projected future trend in the size of the insurer’s surplus to policyholders;
   8. The recent past and projected future trend in the size of the insurer’s investment portfolio;
   9. The surplus as regards policyholders maintained by other comparable insurers;
   10. The adequacy of the insurer’s reserves;
   11. The quality of the insurer’s earnings and the extent to which the reported earnings of the insurer include extraordinary items; and
   12. The quality and liquidity of investments in affiliates. The Commission in its judgment may classify any investment as a nonadmitted asset for the purpose of determining the adequacy of surplus as regards policyholders.
5. No domestic insurer shall enter into transactions that are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that otherwise would be required. If the Commission determines that separate transactions were entered into over any 12-month period for that purpose, the Commission may exercise its authority under § 38.2-1334.2:2 .
6. The Commission, in reviewing transactions pursuant to subsection B, shall consider whether the transactions comply with the standards set forth in subsection A and whether they may adversely affect the interests of policyholders.
7. The Commission shall be notified in writing within 30 days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds 10 percent of such corporation’s voting securities.

History. 1973, c. 505, § 38.1-178.3; 1986, c. 562; 1987, c. 417; 1992, c. 588; 2006, c. 577; 2014, c. 309.

Editor’s note.

Acts 2014, c. 309, cl. 3 provides: “That the provisions of Article 5 (§ 38.2-1322 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia as such article was in effect on June 30, 2014, shall apply to any insurance holding company transaction that was commenced prior to January 1, 2015, unless otherwise provided in such article as amended by the first and second enactments of this act.”

The 2006 amendments.

The 2006 amendment by c. 577 deleted “dividends and other distributions” from the end of the section catchline; in subsection B, added present subdivision B 10, redesignated former subdivision B 10 as present subdivision B 11, and made related changes; and rewrote subsections C and D.

The 2014 amendments.

The 2014 amendment by c. 309 rewrote subsection A; added subdivision A 2 and redesignated the remaining subdivisions accordingly; in subdivision A 5, inserted “including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties”; in subdivision A 6 and throughout subsection D, substituted “as regards” for “to” and inserted “meet”; added subsections B, C, F, and subdivision D 8 and redesignated the remaining subsections accordingly; in subdivision D 2, substituted a variation of “line” for a variation of “class”; in subdivision D 12, substituted “affiliates” for “subsidiaries”; in subsection E, inserted “insurance” and added the last sentence; and in subsection G, substituted “10” for “ten.” For applicability, see Editor’s note.

§ 38.2-1330.1. Dividends and other distributions.

1. Except as otherwise provided by law, a domestic insurer shall not declare or pay a dividend or other distribution from any source other than earned surplus without the Commission’s prior written approval. For purposes of this section, “earned surplus” means an amount equal to the unassigned funds (surplus) of an insurer as set forth in the most recent annual statement of the insurer filed with the Commission including all or part of the surplus arising from unrealized capital gains or revaluation of assets. No domestic insurer shall pay an extraordinary dividend or make any other extraordinary distribution to its shareholders until the earlier of:
   1. Thirty days after the Commission has received written notice of the declaration thereof and has not within such period disapproved such payment; or
   2. The Commission’s approval of such payment.
2. For purposes of this section, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property whose fair market value together with that of other dividends or distributions made within the preceding 12 months exceeds the greater of (i) 10 percent of such insurer’s surplus as regards policyholders as of the immediately preceding December 31 or (ii) the net gain from operations of such insurer, if such insurer is a life insurer, or the net income, if such insurer is not a life insurer, not including realized capital gains, for the 12-month period ending the immediately preceding December 31, but shall not include pro rata distributions of any class of the insurer’s own securities.
3. In determining whether a dividend or distribution is extraordinary, an insurer other than a life insurer may carry forward net income from the previous two calendar years that has not already been paid out as dividends. This carry-forward shall be computed by taking the net income from the second and third preceding calendar years, not including realized capital gains, less dividends paid in the second and immediate preceding calendar years.
4. Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution that is conditional upon the Commission’s approval thereof, and such declaration shall confer no rights upon shareholders until:
   1. The Commission has approved the payment of such dividend or distribution; or
   2. The Commission has not disapproved such payment within the 30-day period described in subsection A.
5. The Commission may limit or disallow the payment of ordinary dividends by a domestic insurer if the insurer is presently or potentially financially distressed or troubled. The Commission shall set forth the specific reasons for limiting or disallowing the payment of any ordinary dividends.

History. 2006, c. 577; 2014, c. 309.

Editor’s note.

Acts 2014, c. 309, cl. 3 provides: “That the provisions of Article 5 (§ 38.2-1322 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia as such article was in effect on June 30, 2014, shall apply to any insurance holding company transaction that was commenced prior to January 1, 2015, unless otherwise provided in such article as amended by the first and second enactments of this act.”

The 2014 amendments.

The 2014 amendment by c. 309, in subsection B, substituted “10 percent” for “10%” and “12-month” for “12 month”; and added subsection C and redesignated the remaining subsections accordingly. For applicability, see Editor’s note.

§ 38.2-1331. Repealed by Acts 2014, c. 309, cl. 2. For applicability, see Editor’s note.

Editor’s note.

Acts 2014, c. 309, cl. 3 provides: “That the provisions of Article 5 (§ 38.2-1322 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia as such article was in effect on June 30, 2014, shall apply to any insurance holding company transaction that was commenced prior to January 1, 2015, unless otherwise provided in such article as amended by the first and second enactments of this act.”

Former § 38.2-1331 , pertaining to required Commission approval for certain transactions, derived from 1977, c. 414, § 38.1-178.3:1; 1986, c. 562; 1989, c. 606; 1992, c. 588; 1993, c. 158; 1994, c. 308; 2000, c. 187.

§ 38.2-1332. Examinations.

1. In addition to the powers the Commission has under Article 4 (§ 38.2-1317 et seq.), the Commission shall have the power to examine any insurer registered under § 38.2-1329 and its affiliates to ascertain the financial condition of the insurer, including the enterprise risk to the insurer by the ultimate controlling party, or by any entity or combination of entities within the insurance holding company system, or by the insurance holding company system on a consolidated basis.
2. The Commission may order any insurer registered under § 38.2-1329 to produce such records, books, or other information papers in the possession of the insurer or its affiliates as are reasonably necessary to determine compliance with this article.
3. To determine compliance with this article, the Commission may order any insurer registered under § 38.2-1329 to produce information not in the possession of the insurer if the insurer can obtain access to such information pursuant to contractual relationships, statutory obligations, or other method. In the event the insurer cannot obtain the information requested by the Commission, the insurer shall provide the Commission a detailed explanation of the reason that the insurer cannot obtain the information and the identity of the holder of such information. Whenever it appears to the Commission that the detailed explanation is without merit, the Commission may require, after notice and hearing, the insurer to pay a penalty pursuant to § 38.2-218 for each day’s delay or may suspend or revoke the insurer’s license.
4. The Commission may retain at the registered insurer’s expense any attorneys, actuaries, accountants and other experts reasonably necessary to assist in the conduct of the examination under subsection A. Any persons so retained shall be under the direction and control of the Commission and shall act in a purely advisory capacity.
5. Each insurer producing books and papers for examination records pursuant to subsection B shall be liable for and shall pay the expense of the examination in accordance with the provisions of Article 4 (§ 38.2-1317 et seq.).
6. In the event the insurer fails to comply with an order, the Commission shall have the power to examine the affiliates to obtain the information.

History. 1973, c. 505, § 38.1-178.4; 1986, c. 562; 1992, c. 588; 2014, c. 309.

Editor’s note.

Acts 2014, c. 309, cl. 3 provides: “That the provisions of Article 5 (§ 38.2-1322 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia as such article was in effect on June 30, 2014, shall apply to any insurance holding company transaction that was commenced prior to January 1, 2015, unless otherwise provided in such article as amended by the first and second enactments of this act.”

The 2014 amendments.

The 2014 amendment by c. 309 rewrote subsections A, B and F; added subsection C and redesignated the remaining subsections accordingly; deleted “of this section” following “subsection A” in subsection D; and in subsection E, substituted “B” for “A of this section” and “(§ 38.2-1317 et seq.)” for “of this chapter.” For applicability, see Editor’s note.

§ 38.2-1332.1. Supervisory colleges.

1. With respect to any insurer registered under § 38.2-1329 , and in accordance with subsection C, the Commission shall also have the power to participate in a supervisory college for any domestic insurer that is part of an insurance holding company system with international operations in order to determine compliance by the insurer with this article. The powers of the Commission with respect to supervisory colleges include the following:
   1. Initiating the establishment of a supervisory college;
   2. Clarifying the membership and participation of other supervisors in the supervisory college;
   3. Clarifying the functions of the supervisory college and the role of other regulators, including the establishment of a group-wide supervisor;
   4. Coordinating the ongoing activities of the supervisory college, including planning meetings, supervisory activities, and processes for information sharing; and
   5. Establishing a crisis management plan.
2. Each registered insurer subject to this section shall be liable for and shall pay the necessary traveling and other expenses reasonably attributable to other regulators or incurred by the Commission for its participation in a supervisory college in accordance with subsection C. For purposes of this section, a supervisory college may be convened as either a temporary or permanent forum for communication and cooperation between the regulators charged with the supervision of the insurer or its affiliates, and the Commission may establish a regular assessment to the insurer for the payment of these expenses. If an assessment is required by this subsection, it shall be collected by the Commission and paid directly into the state treasury and credited to the “Bureau of Insurance Special Fund — State Corporation Commission” for the maintenance of the Bureau of Insurance as provided in subsection B of § 38.2-400 .
3. In order to assess the business strategy, financial position, legal and regulatory position, risk exposure, risk management, and governance processes, and as part of the examination of individual insurers in accordance with § 38.2-1332 , the Commission may participate in a supervisory college with other regulators charged with supervision of the insurer or its affiliates, including other state, federal, and international regulatory agencies. The Commission may enter into agreements in accordance with subsection C of § 38.2-1333 providing the basis for cooperation between the Commission and the other regulatory agencies and the activities of the supervisory college. Nothing in this section shall delegate to the supervisory college the authority of the Commission to regulate or supervise the insurer or its affiliates within its jurisdiction.

History. 2014, c. 309.

Editor’s note.

Acts 2014, c. 309, cl. 3 provides: “That the provisions of Article 5 (§ 38.2-1322 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia as such article was in effect on June 30, 2014, shall apply to any insurance holding company transaction that was commenced prior to January 1, 2015, unless otherwise provided in such article as amended by the first and second enactments of this act.”

§ 38.2-1332.2. Group-wide supervision of internationally active insurance groups.

1. The Commission is authorized to act as the group-wide supervisor for any internationally active insurance group in accordance with the provisions of this section. However, the Commission may otherwise acknowledge another regulatory official as the group-wide supervisor where the internationally active insurance group:
   1. Does not have substantial insurance operations in the United States;
   2. Has substantial insurance operations in the United States but not in the Commonwealth; or
   3. Has substantial insurance operations in the United States and the Commonwealth, but the Commission has determined pursuant to the factors set forth in subsections B and F that the other regulatory official is the appropriate group-wide supervisor.An insurance holding company system that does not otherwise qualify as an internationally active insurance group may request that the Commission make a determination or acknowledgment as to a group-wide supervisor pursuant to this section.
2. In cooperation with other state, federal, and international regulatory agencies, the Commission shall identify a single group-wide supervisor for an internationally active insurance group. The Commission may determine that the Commission is the appropriate group-wide supervisor for an internationally active insurance group that conducts substantial insurance operations concentrated in the Commonwealth. However, the Commission may acknowledge that a regulatory official from another jurisdiction is the appropriate group-wide supervisor for the internationally active insurance group. The Commission shall consider the following factors when making a determination or acknowledgment under this subsection:
   1. The place of domicile of the insurers within the internationally active insurance group that holds the largest share of the internationally active insurance group’s written premiums, assets, or liabilities;
   2. The place of domicile of the top-tiered insurer or insurers in the insurance holding company system of the internationally active insurance group;
   3. The location of the executive offices or largest operational offices of the internationally active insurance group;
   4. Whether another regulatory official is acting or is seeking to act as the group-wide supervisor under a regulatory system that the Commission determines to be:
      1. Substantially similar to the system of regulation provided under the laws of the Commonwealth; or
      2. Otherwise sufficient in terms of providing for group-wide supervision, enterprise risk analysis, and cooperation with other regulatory officials; and
   5. Whether another regulatory official acting or seeking to act as the group-wide supervisor provides the Commission with reasonably reciprocal recognition and cooperation.However, a regulatory official identified under this section as the group-wide supervisor may determine that it is appropriate to acknowledge another supervisor to serve as the group-wide supervisor. The acknowledgment of the group-wide supervisor shall be made after consideration of the factors listed in subdivisions 1 through 5, and shall be made in cooperation with and subject to the acknowledgment of other regulatory officials involved with supervision of members of the internationally active insurance group and in consultation with the internationally active insurance group.
3. Notwithstanding any other provision of this section, the Commission’s regulatory authority under this section shall not be impaired. To the extent that the Commission acknowledges a regulatory official from another jurisdiction as a group-wide supervisor and in the event of a material change in the internationally active insurance group that results in (i) the internationally active insurance group’s insurers domiciled in the Commonwealth holding the largest share of the group’s premiums, assets, or liabilities or (ii) the Commonwealth being the place of domicile of the top-tiered insurer or insurers in the insurance holding company system of the internationally active insurance group, the Commission may make a determination or acknowledgment as to the appropriate group-wide supervisor for such an internationally active insurance group pursuant to subsection B.
4. Pursuant to § 38.2-1332 , the Commission is authorized to collect from any insurer registered pursuant to § 38.2-1329 all information necessary to determine whether the Commission may act as the group-wide supervisor of an internationally active insurance group or if the Commission may acknowledge another regulatory official to act as the group-wide supervisor. Prior to issuing a determination that an internationally active insurance group is subject to group-wide supervision by the Commission, the Commission shall notify the insurer registered pursuant to § 38.2-1329 and the ultimate controlling person within the internationally active insurance group. The internationally active insurance group shall have not less than 30 days to provide the Commission with additional information pertinent to the pending determination. The Commission shall publish in any manner it considers appropriate and on its website the identity of internationally active insurance groups that the Commission has determined are subject to group-wide supervision by the Commission.
5. If the Commission is the group-wide supervisor for an internationally active insurance group, the Commission is authorized to engage in any of the following group-wide supervision activities:
   1. Assess the enterprise risks within the internationally active insurance group to ensure that:
      1. The material financial condition and liquidity risks to the members of the internationally active insurance group that are engaged in the business of insurance are identified by management; and
      2. Reasonable and effective mitigation measures are in place;
   2. Request, from any member of an internationally active insurance group subject to the Commission’s supervision, information necessary and appropriate to assess enterprise risk, including information about the members of the internationally active insurance group regarding:
      1. Governance, risk assessment, and management;
      2. Capital adequacy; and
      3. Material intercompany transactions;
   3. Coordinate and, through the authority of the regulatory officials of the jurisdictions where members of the internationally active insurance group are domiciled, compel development and implementation of reasonable measures designed to ensure that the internationally active insurance group is able to timely recognize and mitigate enterprise risks to members of such internationally active insurance group that are engaged in the business of insurance;
   4. Communicate with other state, federal, and international regulatory agencies for members within the internationally active insurance group and share relevant information, subject to the confidentiality provisions of § 38.2-1333 , through supervisory colleges as set forth in § 38.2-1332.1 or otherwise;
   5. Enter into agreements with or obtain documentation from any insurer registered under § 38.2-1329 , any member of the internationally active insurance group, and any other state, federal, or international regulatory agencies for members of the internationally active insurance group, providing the basis for or otherwise clarifying the Commission’s role as group-wide supervisor, including provisions for resolving disputes with other regulatory officials. Such agreements or documentation shall not serve as evidence in any proceeding that any insurer or person within an insurance holding company system not domiciled or incorporated in the Commonwealth is doing business in the Commonwealth or is otherwise subject to jurisdiction in the Commonwealth; and
   6. Engage in other group-wide supervision activities, consistent with the authorities and purposes enumerated above, as considered necessary by the Commission.
6. If the Commission acknowledges that another regulatory official from a jurisdiction that is not accredited by the NAIC is the group-wide supervisor, the Commission is authorized to reasonably cooperate, through supervisory colleges or otherwise, with group-wide supervision undertaken by the group-wide supervisor, provided that:
   1. The Commission’s cooperation is in compliance with the laws of the Commonwealth; and
   2. The regulatory official acknowledged as the group-wide supervisor also recognizes and cooperates with the Commission’s activities as a group-wide supervisor for other internationally active insurance groups where applicable. Where such recognition and cooperation is not reasonably reciprocal, the Commission is authorized to refuse recognition and cooperation.
7. The Commission is authorized to enter into agreements with or obtain documentation from any insurer registered under § 38.2-1329 , any affiliate of the insurer, and other state, federal, or international regulatory agencies for members of the internationally active insurance group that provide the basis for or otherwise clarify a regulatory official’s role as group-wide supervisor.
8. Each registered insurer subject to this section shall be liable for and shall pay the necessary traveling and other expenses incurred by the Commission for its participation in the administration of this section. The Commission may retain at the registered insurer’s expense any attorneys, actuaries, accountants, and other experts reasonably necessary to assist in the administration of this section. Any persons so retained shall be under the direction and control of the Commission and shall act in a purely advisory capacity. The Commission may establish a regular assessment to the insurer for the payment of these expenses. If an assessment is required by this subsection, it shall be collected by the Commission and paid directly into the state treasury and credited to the “Bureau of Insurance Special Fund — State Corporation Commission” for the maintenance of the Bureau of Insurance as provided in subsection B of § 38.2-400 .