Legal Notice:
The
following statutory enactment is presented on this website
for informational
purposes
only. Neither GFMSSM nor
the fund/association makes any representation as to the accuracy
or correctness of the
enactment as presented, and neither shall be responsible
for or bound by any inaccuracy or lack of correctness thereof.
Any interested
party should consult with an attorney if he/she has any questions
with respect to the foregoing. This disclaimer is not in
lieu
of, but in addition to, the 'Legal Disclaimer'
contained at the bottom of this enactment, which is incorporated
by reference herein.
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| Virginia Property and Casualty Insurance Guaranty Association Act |
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| Top of Page |
| § 38.2-1600 - Purpose |
The purpose of this chapter is to establish an association
that shall provide prompt payment of covered claims to reduce
financial loss to claimants or policyholders resulting from the
insolvency of an insurer. This association shall assist in the
detection and prevention of insurer insolvencies and shall
apportion the cost of this protection among insurers. |
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| § 38.2-1601 - Application |
This chapter shall apply to all classes of direct insurance
written by member insurers but shall not be applicable to the
following:
1. Life, annuity, health or disability insurance;
2. Mortgage guaranty, financial guaranty or other forms of
insurance offering protection against investment risks;
3. Fidelity or surety bonds, or any other bonding obligations;
4. Credit insurance, credit property insurance, and credit
involuntary unemployment insurance;
5. Insurance of warranties or service contracts;
6. Title insurance;
7. Insurance of vessels or craft used primarily in a trade or
business, their cargoes, and marine builders' risk and marine
protection and indemnity;
8. Any transaction or combination of transactions between a
person, including affiliates of such person, and an insurer,
including affiliates of such insurer, which involves the transfer
of investment or credit risk unaccompanied by transfer of
insurance risk; or
9. Any class of insurance written by cooperative nonprofit life
benefit companies, mutual assessment life, accident and sickness
insurers, burial societies, fraternal benefit societies, captive
insurers, risk retention groups, and home protection companies. |
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| § 38.2-1602 - Liberal construction. |
This chapter shall be liberally construed to effect the
purpose under § 38.2-1600, which shall constitute an aid and
guide to interpretation. |
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| § 38.2-1603 - Definitions |
As used in this chapter:
"Account" means any one of the three accounts created by §
38.2-1604.
"Affiliate" means a person who directly, or indirectly, through
one or more intermediaries, controls, is controlled by, or is
under common control with an insolvent insurer on December 31 of
the year next preceding the date the insurer becomes an insolvent
insurer.
"Association" means the Virginia Property and Casualty
Insurance Guaranty Association created under § 38.2-1604.
"Claimant" means any insured making a first party claim or any
person instituting a liability claim; provided that no person who
is an affiliate of the insolvent insurer may be a claimant.
"Control" 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. Control shall be presumed to exist if any
person, directly or indirectly, owns, controls, holds with the
power to vote, or holds proxies representing, ten percent or more
of the voting securities of any other person. This presumption
may be rebutted by a showing that control does not exist in fact.
"Covered claim" means an unpaid claim, including one for unearned premiums, submitted by a claimant, that (i) arises out of and is within the coverage and is subject to the applicable limits of a policy covered by this chapter and issued by an insurer who has been declared to be an insolvent insurer or (ii) arises out of and is within the coverage and is subject to the applicable limits of a policy that would not be excluded from the coverage of this chapter under the provisions of § 38.2-1601 if it were a policy of direct insurance and that has been assumed as a direct obligation by an insurer who has been declared to be an insolvent insurer, where such obligation is assumed through a merger or acquisition, or pursuant to an acquisition of assets and assumption of liabilities, an assumption under the provisions of subsection B or C of § 38.2-136 or a substantially similar law of another jurisdiction, or any other novation agreement. The claimant or insured shall be a resident of the Commonwealth at the time of the insured loss, provided that for entities other than an individual, the residence of a claimant or insured is the state in which its principal place of business is located at the time of the insured loss or the property from which the claim arises shall be permanently located in the Commonwealth. "Covered claim" shall not include any amount awarded as punitive or exemplary damages or sought as a return of premium under any retrospective rating plan; any amount due any reinsurer, insurer, insurance pool, or underwriting association as subrogation recoveries, reinsurance recoveries, contribution, indemnification, or otherwise; any amount due under any policy originally issued by a surplus lines carrier or risk retention group; any obligation assumed by an insolvent insurer after the commencement of any delinquency proceeding, as defined in Chapter 15 (§ 38.2-1500 et seq.) of this title, involving the insolvent insurer or the original insurer, unless it would have been a "covered claim" absent such assumption; or any obligation assumed by an insolvent insurer in a transaction in which the original insurer remains separately liable. An obligation owing under a contract of reinsurance shall not be deemed a direct obligation for the purposes of this definition unless it shall have been assumed pursuant to the provisions of subsection B or C of § 38.2-136 or a substantially similar law of another jurisdiction. No claim for any amount due any reinsurer, insurer, insurance pool, or underwriting association may be asserted against a person insured under a policy issued by an insolvent insurer other than to the extent the claim exceeds the association obligation limitations set forth in § 38.2-1606.
"Insolvent insurer" means an insurer that is (i) licensed to
transact the business of insurance in the Commonwealth either at the time the policy was issued, when the obligation with respect to the covered claim was assumed, or when the insured loss occurred and (ii) against whom an order of liquidation with a finding of insolvency has been entered after July 1, 1987, by a court of competent jurisdiction in the insurer's state of domicile or of the Commonwealth under the provisions of Chapter 15 (§ 38.2-1500 et seq.) of this title, and which order of liquidation has not been stayed or been the subject of a writ of supersedeas or other comparable order.
"Member insurer" means any person who (i) writes any class of
insurance to which this chapter applies under § 38.2-1601,
including reciprocal insurance contracts, and (ii) is licensed to
transact the business of insurance in the Commonwealth but shall not include persons listed in subdivision 9 of § 38.2-1601.
"Net direct written premiums" means direct gross premiums
written in the Commonwealth on insurance policies applicable to
this chapter, less return premiums and dividends paid or credited
to policyholders on direct business. "Net direct written
premiums" does not include premiums on contracts between insurers or reinsurers. |
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| § 38.2-1604 - Association created; members; divided into three accounts. |
The nonprofit unincorporated legal entity known as the
Virginia Property and Casualty Insurance Guaranty Association,
created by former § 38.1-761, shall continue in existence. All
insurers defined as "member insurers" under § 38.2-1603 shall be
and remain members of the Association as a condition of their
license to transact the business of insurance in this
Commonwealth. The Association shall perform its functions under a
plan of operation established and approved under § 38.2-1607 and
shall exercise its powers through a board of directors
established under § 38.2-1605. For purposes of administration and
assessment, the Association shall have three separate accounts:
(i) the workers' compensation insurance account; (ii) the
automobile insurance account; and (iii) the account for all other
insurance to which this chapter applies. These accounts shall be
in addition to and separate from the safety fund authorized by §
38.2-1619. |
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| § 38.2-1605 - Board of directors |
A. The board of directors of the Association shall consist of
at least five but no more than nine persons serving terms
specified in the plan of operation. The members of the board
shall be elected by member insurers, giving consideration among
other things to whether all types of member insurers are fairly
represented. Vacancies on the board shall be filled for the
remaining period of the term in the same manner as initial
appointments.
B. Members of the board may be reimbursed from the assets of
the Association for expenses incurred by them as members of the
board of directors. |
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| § 38.2-1606 - Duties and powers of Association. |
A. The Association shall:
1. Be obligated to pay covered claims that existed prior to
the determination of insolvency and which arose before the
earliest of (i) ninety-one days after the determination of
insolvency, (ii) the policy expiration date, or (iii) the date
the insured replaces or cancels the policy.
a. Such obligation shall be satisfied by paying to the
claimant an amount as follows:
(i) The full amount of a covered claim for benefits under a
workers' compensation insurance coverage; or
(ii) An amount not exceeding $300,000 per claimant for all
other covered claims.
b. In no event shall the Association be obligated to pay a
claimant for an amount in excess of the insolvent insurer's
obligation for a covered claim. Notwithstanding any other
provision of this chapter, a covered claim shall not include
any claim filed with the Guaranty Association after the final
date set by the court for the filing of claims against the
liquidator or receiver of an insolvent insurer. The Association
shall pay only that amount of each unearned premium which is in
excess of fifty dollars. A covered claim shall not include any
claim filed with the Association after the final date set by
the court for the filing of claims against the liquidator or
receiver of an insolvent insurer.
2. Be deemed the insurer to the extent of the insolvent
insurer's obligation on the covered claims and to that extent
shall have all the rights, duties, and obligations of the
insolvent insurer as if the insurer had not become insolvent.
3. Allocate claims paid and expenses incurred among the three
accounts and assess member insurers separately for each account
(i) the amounts necessary to pay the obligations of the
Association under subdivision 1 of this subsection subsequent
to an insolvency, (ii) the expenses of handling covered claims
subsequent to an insolvency, and (iii) other expenses
authorized by this chapter. The assessment of each member
insurer shall be based on the ratio of the net direct written
premiums of the member insurer to the net direct written
premiums of all member insurers. This ratio shall be determined
using the premiums for the calendar year preceding the
assessment on the classes of insurance in the account. Each
member insurer shall be notified of the assessment at least
thirty days before it is due. No member insurer may be assessed
in any year on any account an amount greater than two percent
of that member insurer's net direct written premiums for the
calendar year preceding the assessment on the classes of
insurance in the account. If the sum of the maximum assessment
and the assets of the account does not provide in any one year
an amount sufficient to make all necessary payments from that
account, the funds available shall be prorated and the unpaid
portion shall be paid as soon as funds become available. The
Association shall pay claims in any order which it may deem
reasonable, including the payment of claims as such are
received from the claimants or in groups or categories of
claims. The Association may exempt or defer, in whole or in
part, the assessment of any member insurer if payment of the
assessment would cause the member insurer's financial statement
to reflect an impairment of the insurer's minimum capital and
surplus in any jurisdiction in which the member insurer is
authorized to transact insurance; provided, that during the
period of deferment, no dividends shall be paid to shareholders
or policyholders. Deferred assessments shall be paid when the
payments shall not cause an impairment of minimum capital and
surplus. These payments shall be refunded to those members
receiving larger assessments by virtue of the deferment, or at
the election of any such company, credited against future
assessments. Each member insurer may set off against any
assessment, payments authorized by the Association and made on
covered claims and expenses incurred in the payment of those
claims. The offset shall be allowed only if the payments are
chargeable to the account for which the assessment is made.
3a. The Association shall issue to each insurer paying an
assessment under this chapter, other than assessments paid
pursuant to subdivision 3 (iii) of this subsection, a
certificate of contribution in a form prescribed by the
Commission, for the amount of the assessment paid, excluding
interest penalties. All outstanding certificates shall be of
equal priority without reference to amounts or dates of issue.
A certificate of contribution may be shown by the insurer on
its financial statement as an asset. This shall be shown in a
form, in an amount, and for a period of time approved by the
Commission.
4. Investigate claims brought against the Association and
adjust, compromise, settle, and pay covered claims to the
extent of the Association's obligation and deny all other
claims. The Association may review settlements, releases and
judgments to which the insolvent insurer or its insureds were
parties to determine the extent to which the settlements,
releases and judgments may be properly contested.
5. Notify those persons as the Commission directs under
subdivision 8 of this subsection.
6. Handle claims through its employees or through one or more
insurers or other persons designated as servicing facilities.
Designation of a servicing facility is subject to (i) the
approval of the Commission and (ii) acceptance by the
designated insurer.
7. Reimburse each servicing facility for the Association's
obligations paid by the facility and for expenses incurred by
the facility while handling claims on behalf of the
Association. The Association shall pay the other expenses
authorized by this chapter.
8. Notify the insureds of the insolvent insurer and any other
interested parties of the determination of insolvency and of
their rights under this chapter. Notification shall be sent by
mail to the insureds' last known address. If the Association is
unable to obtain the information required to mail the notice in
a timely manner, the Association shall publish the notice in
newspapers of general circulation likely to cover geographical
areas occupied by the policyholders.
B. The Association may:
1. Employ or retain persons necessary to perform the duties
of the Association.
2. Borrow funds necessary to effect the purposes of this
chapter in accord with the plan of operation.
3. Sue or be sued.
4. Negotiate and become a party to those contracts necessary
to carry out the purpose of this chapter.
5. Perform any other acts necessary or proper to achieve the
purpose of this chapter.
6. Pay refunds to the member insurers in proportion to their
contributions made to each account during the five years
immediately preceding the date of the refund. The total refund
shall be the amount by which the assets of the account are
expected to exceed the liabilities for the coming year as
determined by the board of directors.
7. Obtain commitments or lines of credit, and in the event a
natural disaster such as an earthquake, windstorm or fire
results in covered claims, with the approval of its board of
directors and the Commission, secure indebtedness for borrowed
money to be used for the purpose set forth in subsection A of
§ 38.2-1622 in an amount not to exceed the amount reasonably
estimated by its board of directors and the Commission as the
aggregate amount of assessments which the Association will be
authorized to make during the succeeding calendar year, by
pledge, assignment, transfer in trust or hypothecation of any or
all of the assessments to be made against its member insurers. |
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| § 38.2-1607 - Plan of operation |
A. 1. The plan of operation and any amendments to it shall be
submitted to the Commission by the Association and shall not
become effective until approved by the Commission in writing.
The Commission shall approve the plan or amendment to the plan
if it complies with this chapter and assures the fair,
reasonable, and equitable administration of the Association.
2. The plan of operation approved under former § 38.1-764 shall
remain in effect until modified in accordance with subdivision 3
of this subsection.
3. If the Association fails to submit suitable amendments to
the plan, the Commission shall, after notice and hearing, adopt
and promulgate any reasonable rules that are necessary or
advisable to effect this chapter. Those rules shall continue in
force until modified by the Commission or superseded by a plan
or amendments submitted by the Association and approved by the
Commission.
B. All member insurers shall comply with the plan of
operation.
C. The plan of operation shall:
1. Establish the procedures for exercising the powers and
duties of the Association under § 38.2-1606.
2. Establish procedures for handling assets of the
Association.
3. Establish the amount and method of reimbursing members of
the board of directors under § 38.2-1605.
4. Establish procedures by which claims may be filed with the
Association and establish acceptable forms of proof of covered
claims. Notice of claims to the receiver or liquidator of the
insolvent insurer shall be deemed notice to the Association or
its agent and a list of those claims shall be periodically
submitted to the Association or similar organizations in
another state by the receiver or liquidator.
5. Establish regular places and times for meetings of the
board of directors.
6. Establish procedures for records to be kept of all
financial transactions of the Association, its agents, and the
board of directors.
7. Provide that any member insurer aggrieved by any final
action or decision of the Association may appeal to the
Commission within thirty days after the action or decision.
8. Establish the procedures for submitting to the Commission
the names of elected members of the board of directors.
9. Contain additional provisions necessary or proper for the
execution of the powers and duties of the Association.
D. The plan of operation may provide that any or all powers
and duties of the Association, except those under subdivision
3 of subsection A of § 38.2-1606 and subdivision 2 of subsection
B of § 38.2-1606, shall be delegated to a corporation,
association, or other organization that performs or will perform
functions similar to those of this Association, or its
equivalent, in two or more states. The corporation, association
or organization shall be compensated for providing those and any
other permissible services. A delegation under this subsection
shall take effect only with the approval of both the board of
directors and the Commission. The delegation may be made only to
a corporation, association, or organization that extends
protection which is substantially no less favorable or effective
than that provided by this chapter. |
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| § 38.2-1608 - Duties and powers of Commission; judicial review. |
A. The Commission shall:
1. Notify the Association of the existence of an insolvent
insurer within three days after it receives notice of the
determination of the insolvency. The Association shall be
entitled to a copy of any complaint seeking an order of
liquidation with a finding of insolvency against a member
company at the same time that such complaint is filed with a
court of competent jurisdiction.
2. Upon request of the board of directors, provide the
Association with a statement of the net direct written premiums
of each member insurer.
B. The Commission may:
1. Suspend or revoke, after notice and hearing, the license
to transact the business of insurance in this Commonwealth of
any member insurer which fails to pay an assessment when due or
fails to comply with the plan of operation. As an alternative,
the Commission may levy a fine on any member insurer that fails
to pay an assessment when due. The fine shall not exceed five
percent of the unpaid assessment per month, except that no fine
shall be less than $100 per month.
2. Revoke the designation of any servicing facility if it
finds that claims are being handled unsatisfactorily. |
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§ 38.2-1609 - Insured's rights and liabilities; settlements binding on
receiver or liquidator; priority of claims; statements to be filed with
receiver or liquidator. |
A. 1. Any person recovering under this chapter shall be
deemed to have assigned his rights under the policy to the
Association to the extent of his recovery from the Association.
Each insured or claimant seeking the protection of this chapter
shall cooperate with the Association to the same extent as the
person would have been required to cooperate with the insolvent
insurer. The Association shall have no cause of action against
the insured of the insolvent insurer for any sums it has paid
out except the causes of action the insolvent insurer would
have had if those sums had been paid by the insolvent insurer
and except as provided in subdivision 2 of this subsection. In
the case of an insolvent insurer operating on an assessment
plan, payments of claims by the Association shall not reduce
the liability of insureds to the receiver, liquidator, or
statutory successor for unpaid assessments previously made.
However, the receiver, liquidator, or statutory successor shall
under no circumstances levy an additional assessment against
the insured, regardless of the terms of the policy.
2. The Association shall have the right to recover from the
following persons the amount of any "covered claim" paid on
behalf of such persons pursuant to this chapter:
a. Any insured whose net worth on December 31 of the year
next preceding the date the insurer becomes an insolvent
insurer exceeds fifty million dollars and whose liability
obligations to other persons are satisfied in whole or in part
by payments made under this chapter; and
b. Any person who is an affiliate of the insolvent insurer
and whose liability obligations to other persons are satisfied
in whole or in part by payments made under this chapter.
B. The receiver, liquidator, or statutory successor of an
insolvent insurer shall be bound by settlements of covered
claims by the Association or a similar organization in another
state. The court having jurisdiction shall grant those claims
priority equal to that which the claimant would have been
entitled in the absence of this chapter against the assets of
the insolvent insurer. The expenses of the Association or a
similar organization incurred in handling claims shall be
accorded the same priority as the liquidator's expenses.
C. The Association shall preserve its rights to the insolvent
insurer by periodically filing with the receiver or liquidator
statements of the covered claims paid by the Association and
estimates of anticipated claims on the Association. |
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§ 38.2-1610 - Exhaustion of remedies under policy; claims recoverable from
more than one association. |
A. Any person having a claim against an insurer under any
provision in an insurance policy, other than a policy of an
insolvent insurer under which the claim is also covered, shall
be required to first seek recovery under the policy covered by
the insurer which is not insolvent. Any amount payable on a
covered claim under this chapter shall be reduced by the amount
of any recovery under the insurance policy.
A1. Any person having a claim or legal right of recovery
under any governmental insurance or guaranty program which is
also a covered claim, shall be required to exhaust first his
right under such program. Any amount payable on a covered claim
under this chapter shall be reduced by the amount of any
recovery under such program.
B. Any person having a claim that may be recovered under more
than one insurance guaranty association or its equivalent shall
seek recovery first from the association of the state where the
insured resides. However, if it is a first party claim for
damage to property with a permanent location, the insured shall
seek recovery first from the association of the state where the
property is located. For a workers' compensation claim recovery
shall first be sought from the association of the state where
the claimant resides. Any recovery under this chapter shall be
reduced by the amount of the recovery from any other insurance
guaranty association or its equivalent. |
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| § 38.2-1611 - Aids in detection and prevention of insurer insolvencies. |
To aid in the detection and prevention of insurer
insolvencies:
1. The Association's board of directors has the duty, upon a
majority vote, (i) to make recommendations to the Commission
for the detection and prevention of insurer insolvencies, and
(ii) to respond to requests by the Commission to discuss and
make recommendations regarding the status of any member insurer
whose financial condition may be hazardous to the policyholders
or the public.
2 through 5. [Repealed.]
6. At the request of the Commission and at the conclusion of
any insurer's insolvency in which the Association was obligated
to pay covered claims, the board of directors may prepare a
report on the history and causes of the insolvency based on the
information available to the Association. The report shall be
submitted to the Commission. |
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| § 38.2-1611.1 - Tax write-offs of certificates of contribution. |
A. A member insurer shall have at its option the right to
show a certificate of contribution as an asset in the form
approved by the Commission pursuant to subdivision 3a of
subsection A of § 38.2-1606 at the original face amount for the
calendar year of issuance. Such amount may be amortized as
follows:
1. Certificates of contribution issued prior to January 1,
1998, shall be amortized in each succeeding calendar year
through December 31, 1997, at an amount not to exceed 0.05 of
one percent of the member's direct gross premium income for the
classes of insurance in the account for which the member
insurer is assessed. As used herein, the definition of direct
gross premium income shall be the same as that specified in
§ 58.1-2500. If the amount of the certificate has not been fully
amortized by the contributing insurer by December 31, 1997, the
unamortized balance of the certificate amount shall be amortized,
at the option of the contributing insurer, either (i) in the same
manner as the certificate was amortized prior to January 1, 1998;
however, if not amortized in full prior to calendar year 2010,
the unamortized balance of the certificate shall be amortized in
full during calendar year 2010, or (ii) over the ten successive
calendar years commencing January 1, 1998, in amounts each equal
to ten percent of such unamortized balance. A contributing
insurer whose certificate has not been fully amortized by
December 31, 1997, shall notify the Commission in writing of the
amortization schedule option it has selected on or before March
1, 1998; however, if a contributing insurer fails to notify the
Commission by such date, the insurer shall be deemed to have
selected the option described in clause (i) of the preceding
sentence.
2. Certificates of contribution issued on or after January 1,
1998, shall be amortized over the ten calendar years following
the year the contribution was paid in amounts each equal to ten
percent of the amount of the contribution.
B. The insurer may offset the amount of the certificate
amortized in a calendar year as provided in subsection A. This
amount shall be deducted from the premium tax liability
incurred on business transacted in this Commonwealth for that
year. However, the Association shall diligently pursue all
rights available to it to recover its expenditures made in the
fulfillment of its responsibilities under this chapter. In the
event the Commission determines after a hearing that the
Association is not diligently pursuing available measures of
recovery, participating insurers will not be able to offset
amounts amortized during the period that the Commission
determines that the Association has not been diligently
pursuing available measures of recovery.
C. Any sums that have been (i) amortized by contributing
insurers and offset against premium taxes as provided in
subsection B and (ii) subsequently refunded pursuant to
subdivision 3 of subsection A of § 38.2-1606 or subdivision 6 of
subsection B of § 38.2-1606 shall be paid to the Commission and
deposited with the State Treasurer for credit to the general fund
of this Commonwealth.
D. The amount of any credit against premium taxes provided
for in this section for an insurer shall be reduced by the
amount of reduction in federal income taxes for any deduction
claimed by the insurer for an assessment paid pursuant to this
chapter. |
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§ 38.2-1612 - Examination and regulation of Association by Commission; annual
financial report. |
The Association shall be subject to examination and
regulation by the Commission. The board of directors shall
submit, not later than May 1 of each year, a financial report
for the preceding calendar year in a form approved by the
Commission. |
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| § 38.2-1613 - Exemption from payment of fees and taxes. |
The Association shall be exempt from payment of all fees and
all taxes levied by this Commonwealth or any of its
subdivisions except taxes levied on real or personal property. |
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| § 38.2-1614 - Repealed. |
| Repealed. |
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| § 38.2-1615 - No liability for action taken in good faith. |
There shall be no liability on the part of and no cause of
action shall arise against any member insurer, the Association
or its agents or employees, the board of directors, or the
Commission or its representatives for any action taken or
statement made by them in good faith in the performance of
their powers and duties under this chapter. The Association's
board of directors shall not incur any civil liability for any
statements made in good faith under this provision. |
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§ 38.2-1616 - Stay of proceedings against insolvent insurer; setting aside
judgment, etc.; access to records. |
A. All proceedings in which the insolvent insurer is a party
or is obligated to defend a party in any court in this
Commonwealth shall be stayed for up to six months and such
additional time thereafter as may be determined by the court
from the date the insolvency is determined or an ancillary
proceeding is instituted in the Commonwealth, whichever is
later, to permit proper defense by the Association of all
pending causes of action. For any covered claims arising from
a judgment under any decision, verdict or finding based on the
default of the insolvent insurer or its failure to defend an
insured, the Association either on its own behalf or on behalf
of the insured may apply to have the judgment, order, decision,
verdict or finding set aside by the same court or administrator
that made the judgment, order, decision, verdict or finding and
shall be permitted to defend against the claim on the merits.
B. The liquidator, receiver, or statutory successor of an
insolvent insurer covered by this chapter shall permit access
by the board or its authorized representatives to such of the
insolvent insurer's records which are necessary for the board
in carrying out its functions under this chapter with regard to
covered claims. In addition, the liquidator, receiver or
statutory successor shall provide the board or its
representative with copies of such records upon the request by
the board and at the expense of the board. |
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| § 38.2-1617 - Termination of operation of Association; expiration of chapter. |
A. The Commission shall by order terminate the operation of
the Association for any class of insurance covered by this
chapter with respect to which it has found, after hearing, that
there is in effect a statutory or voluntary plan which:
1. Is a permanent plan that is adequately funded or for which
adequate funding is provided; and
2. Extends or will extend to the policyholders and residents
of this Commonwealth protection and benefits with respect to
insolvent insurers not substantially less favorable and
effective to those policyholders and residents than the
protection and benefits provided with respect to the classes of
insurance under this chapter.
B. The Commission shall, by the same order, authorize
discontinuance of future payments by insurers to the
Association regarding the same classes of insurance. However,
the assessments and payments shall continue, as necessary, to
pay (i) covered claims of insurers determined to be insolvent
prior to the order and (ii) the related expenses not covered by
any other plan.
C. In the event the operation of the Association is
terminated for all other classes of insurance within its scope,
the Association shall, as soon as possible, distribute the
balance of moneys and assets remaining. Distribution shall be
made after the Association has settled all prior insurer
insolvencies not covered by any other plan, including their
related expenses. The distribution shall be made to the
insurers that are then writing in this Commonwealth policies of
the classes of insurance covered by this chapter and that had
made payments to the Association. Distribution shall be made
using a pro rata method based upon the aggregate of the
payments made by the respective insurers during the five years
immediately preceding the date of the order. Upon completion of
the distribution for all of the classes of insurance covered by
this chapter, this chapter shall be deemed to have expired.
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| § 38.2-1618 - Purpose and applicability of article. |
The purpose of this article is to provide directions and
guidelines for the control and use of funds provided pursuant
to § 38.2-225, obtained through secured borrowings made pursuant
to subdivision B 7 of § 38.2-1606, or obtained from sources of
funds not specified in Article 1 (§ 38.2-1600 et seq.) of this
chapter. |
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| § 38.2-1619 - Safety fund. |
The Association shall maintain a separate asset account to be
known as the safety fund. The safety fund shall be used to
assist the Association in meeting the objectives specified in
§ 38.2-1600. |
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§ 38.2-1620 - Financing the safety fund, maximum amount, distribution of
excess. |
A. The safety fund, at the discretion of the Commission,
shall receive penalty payments levied against member insurers
made pursuant to subsection B of § 38.2-225 or any other payments
approved by the Commission. Such payments shall include funds
borrowed under the provisions of subdivision B 7 of § 38.2-1606
in the event of a natural disaster in order to provide for the
prompt payment of covered claims and expenses related thereto.
B. The Commission may approve the payment of funds to the
Association provided the balance in the safety fund account
does not exceed two percent of the total of all member
insurers' net direct written premiums for classes of insurance
covered by the accounts specified in § 38.2-1604.
C. Except as provided in subsection D of this section,
investment income earned on assets held in the safety fund
shall be credited to the safety fund.
D. In the event the safety fund balance exceeds three percent
of the net written premium for all classes of insurance covered
by the accounts specified in § 38.2-1604, at the discretion of
the Commission the difference shall be paid to the state treasury
to the credit of the Literary Fund or shall be subject to
subsection F of § 38.2-1622.
E. In the event the fund is dissolved, remaining assets in
the safety fund will be distributed to the state treasury to
the credit of the Literary Fund. |
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| § 38.2-1621 - Investment of safety fund. |
The assets held in the safety fund may be invested in
securities set forth in § 38.2-1415. |
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| § 38.2-1622 - Use of safety fund, repayment, etc. |
A. The purpose of the safety fund is to provide for the
payment of covered claims in the event the assessment limit
specified in subdivision A 3 of § 38.2-1606 is reached.
B. In the event the assets in the safety fund are needed to
pay covered claims, these assets shall be loaned to the
respective account specified in § 38.2-1604. This loan shall be
the general obligation of the Association
C. Assets in the safety fund derived from borrowed moneys
obtained under the provisions of subdivision B 7 of § 38.2-1606
shall be lent to an account at the rate of interest the
Association is paying the lender providing such moneys. Interest
on any other loan shall be compounded quarterly and be based upon
the average ninety-day treasury bill rate for the most recently
completed calendar quarter as published in the Federal Reserve
Bulletin. This rate will be updated quarterly in order to conform
with the market rates of interest.
D. Loans shall be repaid by levying assessments pursuant to
subdivision A 3 of § 38.2-1606 against the members for the
account on whose behalf the loan was negotiated. Unless otherwise
approved by the Commission, the loan shall be repaid within six
months of its issuance. This assessment in conjunction with any
other assessments levied, shall not exceed the limit specified in
subdivision A 3 of § 38.2-1606.
E. Subject to the approval of the Commission, assets in the
safety fund may be loaned to any account specified in § 38.2-1604
even though the maximum assessment in subdivision A 3 of §
38.2-1606 has not been levied if the directors of the Association
determine that this action will minimize the cost to the
Association in paying covered claims.
F. Excess assets in the safety fund set forth in subsection
D of § 38.2-1620 may be used to pay the Association's covered
claims without the members incurring a liability to repay the
safety fund. |
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| § 38.2-1623 - Association as a fiduciary. |
In handling the assets of the safety fund, the Association
shall be deemed a fiduciary for the Commonwealth. |
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