§ 38.2-1700. Purpose and applicability of chapter.
A. The purpose of this chapter is to protect, subject to certain limitations,the persons specified in subsection B against failure in the performance ofcontractual obligations, under life and accident and sickness insurancepolicies and annuity contracts specified in subsection C because of theimpairment or insolvency of the member insurer that issued the policies orcontracts. This chapter shall be construed to effect this purpose. To providethis protection, an association of insurers is created to pay benefits and tocontinue coverage as limited by this chapter, and members of the Associationare subject to assessments to provide funds to carry out the purpose of thischapter.
B. This chapter shall provide coverage for the policies and contractsspecified in subsection C as follows:
1. This chapter shall provide coverage, for the policies and contractsspecified in subsection C, to persons who, regardless of where they reside,except for nonresident certificate holders under group policies or contracts,are the beneficiaries, assignees, or payees of the persons covered undersubdivision B 2.
2. This chapter shall provide coverage, for the policies and contractsspecified in subsection C, to persons who are owners of or certificateholders under the policies or contracts, other than unallocated annuitycontracts and structured settlement annuities, and in each case who:
a. Are residents; or
b. Are not residents and (i) the insurer that issued the policies orcontracts is domiciled in the Commonwealth, (ii) the states in which thepersons reside have associations similar to the Association, and (iii) thepersons are not eligible for coverage by an association in any other statedue to the fact that the insurer was not licensed in the state at the timespecified in the state's guaranty association law.
3. For unallocated annuity contracts specified in subsection C, subdivisionsB 1 and B 2 shall not apply, and this chapter, except as provided insubdivisions B 5 and B 6, shall provide coverage to persons who are theowners of the unallocated annuity contracts if the contracts are issued to orin connection with a specific benefit plan whose plan sponsor has itsprincipal place of business in this Commonwealth.
4. For structured settlement annuities specified in subsection C, subdivisionB 1 and B 2 shall not apply and this chapter, except as provided insubdivisions B 5 and B 6, shall provide coverage to a person who is a payeeunder a structured settlement annuity, or beneficiary of a payee if the payeeis deceased, if the payee:
a. Is a resident, regardless of where the contract owner resides; or
b. Is not a resident and both (i) the contract owner of the structuredsettlement annuity is (a) a resident or (b) not a resident but the insurerthat issued the structured settlement annuity is domiciled in theCommonwealth and the state in which the contract owner resides has anassociation similar to the Association; and (ii) neither the payee orbeneficiary, nor the contract owner is eligible for coverage by theassociation of the state in which the payee or contract owner resides.
5. This chapter shall not provide coverage to:
a. A person who is a payee, or beneficiary, of a contract owner resident ofthe Commonwealth if the payee, or beneficiary, is afforded any coverage bythe association of another state; or
b. A person covered under subdivision B 3 if any coverage is provided by theassociation of another state to the person.
6. This chapter is intended to provide coverage to a person who is a residentof the Commonwealth and, in special circumstances, to a nonresident. In orderto avoid duplicate coverage, if a person who would otherwise receive coverageunder this chapter is provided coverage under the laws of any other state,the person shall not be provided coverage under this chapter. In determiningthe application of the provisions of this subdivision in situations where aperson could be covered by the association of more than one state, whether asan owner, payee, beneficiary, or assignee, this chapter shall be construed inconjunction with other state laws to result in coverage by only oneassociation.
C. This chapter shall:
1. Provide coverage to the persons specified in subsection B for direct,nongroup life, accident and sickness, or annuity policies or contracts andsupplemental contracts to any of these, for certificates under direct grouppolicies and contracts, and for unallocated annuity contracts issued bymember insurers, in each case except as limited by this chapter. Annuitycontracts and certificates under group annuity contracts include guaranteedinvestment contracts, deposit administration contracts, unallocated fundingagreements, allocated funding agreements, structured settlement annuities,and any immediate or deferred annuity contracts. This chapter shall applyalso to dental benefit contracts entered into with a dental plan organizationas provided in Chapter 61 (§ 38.2-6100 et seq.).
2. Not provide coverage for:
a. A portion of a policy or contract not guaranteed by an insurer or underwhich the risk is borne by the policy or contract owner;
b. A policy or contract of reinsurance, unless assumption certificates havebeen issued pursuant to the reinsurance policy or contract;
c. A portion of a policy or contract to the extent that the rate of intereston which it is based, or the interest rate, crediting rate, or similar factordetermined by use of an index or other external reference stated in thepolicy or contract employed in calculating returns or changes in value:
(1) Averaged over the period of four years prior to the date on which themember insurer becomes an impaired or insolvent insurer under this chapter,whichever is earlier, exceeds the rate of interest determined by subtractingtwo percentage points from Moody's Corporate Bond Yield Average averaged forthat same four-year period or for such lesser period if the policy orcontract was issued less than four years before the member insurer becomes animpaired or insolvent insurer under this chapter, whichever is earlier; and
(2) On and after the date on which the member insurer becomes an impaired orinsolvent insurer under this chapter, whichever is earlier, exceeds the rateof interest determined by subtracting three percentage points from Moody'sCorporate Bond Yield Average as most recently available;
d. A portion of a policy or contract issued to a plan or program of anemployer, association, or other person to provide life, health, or annuitybenefits to its employees, members, or others, to the extent that the plan orprogram is self-funded or uninsured, including but not limited to benefitspayable by an employer, association, or other person under:
(1) A multiple employer welfare arrangement as defined in 29 U.S.C. § 1144;
(2) A minimum premium group insurance plan;
(3) A stop-loss agreement described in subsection B of § 38.2-109; or
(4) An administrative services only contract;
e. A portion of a policy or contract to the extent that it provides for:
(1) Dividends or experience rating credits;
(2) Voting rights; or
(3) Payment of any fees or allowances to any person, including the policy orcontract owner, in connection with the service to or administration of thepolicy or contract;
f. A policy or contract issued in the Commonwealth by a member insurer at atime when its license to issue the policy or contract in the Commonwealth hadbeen suspended, revoked, not renewed, or voluntarily withdrawn;
g. An unallocated annuity contract issued to or in connection with a benefitplan protected under the federal Pension Benefit Guaranty Corporation,regardless of whether the federal Pension Benefit Guaranty Corporation hasyet become liable to make any payments with respect to the benefit plan;
h. A portion of an unallocated annuity contract that is not issued to or inconnection with a specific employee, union, or association of natural personsbenefit plan;
i. A portion of a policy or contract to the extent that the assessmentsrequired by § 38.2-1705 with respect to the policy or contract are preemptedby federal or state law;
j. An obligation that does not arise under the express written terms of thepolicy or contract issued by the insurer to the contract owner or policyowner, including:
(1) Claims based on marketing materials;
(2) Claims based on side letters, riders, or other documents that were issuedby the insurer without meeting applicable policy form filing or approvalrequirements;
(3) Misrepresentations of or regarding policy benefits;
(4) Extra-contractual claims; or
(5) A claim for penalties or consequential or incidental damages;
k. A contractual agreement that establishes the member insurer's obligationsto provide a book value accounting guaranty for defined contribution benefitplan participants by reference to a portfolio of assets that is owned by thebenefit plan or its trustee, which in each case is not an affiliate of themember insurer;
l. A portion of a policy or contract to the extent it provides for interestor other changes in value to be determined by the use of an index or otherexternal reference stated in the policy or contract, but which have not beencredited to the policy or contract, or as to which the policy or contractowner's rights are subject to forfeiture, as of the date the member insurerbecomes an impaired or insolvent insurer under this chapter, whichever isearlier. If a policy's or contract's interest or changes in value arecredited less frequently than annually, then for purposes of determining thevalues that have been credited and are not subject to forfeiture under thissubdivision, the interest or change in value determined by using theprocedures defined in the policy or contract will be credited as if thecontractual date of crediting interest or changing values was the date ofimpairment or insolvency, whichever is earlier, and will not be subject toforfeiture;
m. A policy or contract providing any hospital, medical, prescription drug orother health care benefits pursuant to Part C or Part D of Subchapter XVIII,chapter 7 of Title 42 of the United States Code (known as Medicare Parts Cand D) or any regulations issued pursuant thereto; or
n. A charitable gift annuity as defined in § 38.2-106.1.
D. The benefits that the Association may become obligated to cover shall inno event exceed the lesser of:
1. The contractual obligations for which the insurer is liable or would havebeen liable if it were not an impaired or insolvent insurer; or
2. With respect to:
a. One life, regardless of the number of policies or contracts:
(1) $300,000 in life insurance death benefits, but not more than $100,000 innet cash surrender and net cash withdrawal values for life insurance;
(2) In health insurance benefits, (i) $100,000 for coverage not defined asdisability insurance, basic hospital, medical and surgical insurance, majormedical insurance or long-term care insurance including any net cashsurrender and net cash withdrawal values; (ii) $300,000 for accident andsickness insurance that constitutes disability insurance or long-term careinsurance; and (iii) $500,000 for accident and sickness insurance thatconstitutes basic hospital medical and surgical insurance or major medicalinsurance; and
(3) $250,000 in the present value of annuity benefits, including net cashsurrender and net cash withdrawal values;
b. Each individual participating in a benefit plan established under Section401, 403(b) or 457 of the U.S. Internal Revenue Code who (i) selected aninvestment option that includes investment in unallocated annuity contractsand (ii) is covered by such an unallocated annuity contract, including thebeneficiaries of each such individual if deceased, in the aggregate, $250,000in present value of annuity benefits, including net cash surrender and netcash withdrawal values;
c. Each payee of a structured settlement annuity (or beneficiary orbeneficiaries of the payee if deceased), $250,000 in present value annuitybenefits, in the aggregate, including net cash surrender and net cashwithdrawal values, if any; and
d. One plan sponsor whose plans own directly or in trust one or moreunallocated annuity contracts part or all of any of which is not included insubdivision 2 b, $5 million in benefits, irrespective of the number ofcontracts with respect to the plan sponsor. However, in the case where one ormore unallocated annuity contracts are covered contracts under this chapterand are owned by a trust or other entity for the benefit or two or more plansponsors, coverage shall be afforded by the Association if the largestinterest in the trust or entity owning the contract or contracts is held by aplan sponsor whose principal place of business is in the Commonwealth and inno event shall the Association be obligated to cover more than $5 million inbenefits with respect to all such unallocated contracts.
In no event shall the Association be obligated to cover (i) more than anaggregate of $350,000 in benefits with respect to any one life undersubdivisions D 2 a, b, and c except with respect to benefits for basichospital, medical and surgical insurance, and major medical insurance undersubdivision D 2 a (2), in which case the aggregate liability of theAssociation shall not exceed $500,000 with respect to any one individual, or(ii) with respect to one owner of multiple nongroup policies of lifeinsurance, whether the policy owner is an individual, firm, corporation, orother person, and whether the persons insured are officers, managers,employees, or other persons, more than $5 million in benefits, regardless ofthe number of policies and contracts held by the owner.
The limitations set forth in this subsection are limitations on the benefitsfor which the Association is obligated before taking into account either itssubrogation and assignment rights or the extent to which those benefits couldbe provided out of the assets of the impaired or insolvent insurerattributable to covered policies. The costs of the Association's obligationsunder this chapter may be met by the use of assets attributable to coveredpolicies or reimbursed to the Association pursuant to its subrogation andassignment rights.
E. In performing its obligations to provide coverage under § 38.2-1704, theAssociation shall not be required to guarantee, assume, reinsure or perform,or cause to be guaranteed, assumed, reinsured or performed, the contractualobligations of the insolvent or impaired insurer under a covered policy orcontract that the Association has determined, with the concurrence of theCommission, do not materially affect the economic values or economic benefitsof the covered policy or contract.
(1976, c. 330, § 38.1-482.18; 1986, c. 562; 1988, c. 178; 1991, c. 340; 1992,c. 299; 2000, c. 206; 2004, c. 668; 2010, c. 510.)
§ 38.2-1700. Purpose and applicability of chapter.
A. The purpose of this chapter is to protect, subject to certain limitations,the persons specified in subsection B against failure in the performance ofcontractual obligations, under life and accident and sickness insurancepolicies and annuity contracts specified in subsection C because of theimpairment or insolvency of the member insurer that issued the policies orcontracts. This chapter shall be construed to effect this purpose. To providethis protection, an association of insurers is created to pay benefits and tocontinue coverage as limited by this chapter, and members of the Associationare subject to assessments to provide funds to carry out the purpose of thischapter.
B. This chapter shall provide coverage for the policies and contractsspecified in subsection C as follows:
1. This chapter shall provide coverage, for the policies and contractsspecified in subsection C, to persons who, regardless of where they reside,except for nonresident certificate holders under group policies or contracts,are the beneficiaries, assignees, or payees of the persons covered undersubdivision B 2.
2. This chapter shall provide coverage, for the policies and contractsspecified in subsection C, to persons who are owners of or certificateholders under the policies or contracts, other than unallocated annuitycontracts and structured settlement annuities, and in each case who:
a. Are residents; or
b. Are not residents and (i) the insurer that issued the policies orcontracts is domiciled in the Commonwealth, (ii) the states in which thepersons reside have associations similar to the Association, and (iii) thepersons are not eligible for coverage by an association in any other statedue to the fact that the insurer was not licensed in the state at the timespecified in the state's guaranty association law.
3. For unallocated annuity contracts specified in subsection C, subdivisionsB 1 and B 2 shall not apply, and this chapter, except as provided insubdivisions B 5 and B 6, shall provide coverage to persons who are theowners of the unallocated annuity contracts if the contracts are issued to orin connection with a specific benefit plan whose plan sponsor has itsprincipal place of business in this Commonwealth.
4. For structured settlement annuities specified in subsection C, subdivisionB 1 and B 2 shall not apply and this chapter, except as provided insubdivisions B 5 and B 6, shall provide coverage to a person who is a payeeunder a structured settlement annuity, or beneficiary of a payee if the payeeis deceased, if the payee:
a. Is a resident, regardless of where the contract owner resides; or
b. Is not a resident and both (i) the contract owner of the structuredsettlement annuity is (a) a resident or (b) not a resident but the insurerthat issued the structured settlement annuity is domiciled in theCommonwealth and the state in which the contract owner resides has anassociation similar to the Association; and (ii) neither the payee orbeneficiary, nor the contract owner is eligible for coverage by theassociation of the state in which the payee or contract owner resides.
5. This chapter shall not provide coverage to:
a. A person who is a payee, or beneficiary, of a contract owner resident ofthe Commonwealth if the payee, or beneficiary, is afforded any coverage bythe association of another state; or
b. A person covered under subdivision B 3 if any coverage is provided by theassociation of another state to the person.
6. This chapter is intended to provide coverage to a person who is a residentof the Commonwealth and, in special circumstances, to a nonresident. In orderto avoid duplicate coverage, if a person who would otherwise receive coverageunder this chapter is provided coverage under the laws of any other state,the person shall not be provided coverage under this chapter. In determiningthe application of the provisions of this subdivision in situations where aperson could be covered by the association of more than one state, whether asan owner, payee, beneficiary, or assignee, this chapter shall be construed inconjunction with other state laws to result in coverage by only oneassociation.
C. This chapter shall:
1. Provide coverage to the persons specified in subsection B for direct,nongroup life, accident and sickness, or annuity policies or contracts andsupplemental contracts to any of these, for certificates under direct grouppolicies and contracts, and for unallocated annuity contracts issued bymember insurers, in each case except as limited by this chapter. Annuitycontracts and certificates under group annuity contracts include guaranteedinvestment contracts, deposit administration contracts, unallocated fundingagreements, allocated funding agreements, structured settlement annuities,and any immediate or deferred annuity contracts. This chapter shall applyalso to dental benefit contracts entered into with a dental plan organizationas provided in Chapter 61 (§ 38.2-6100 et seq.).
2. Not provide coverage for:
a. A portion of a policy or contract not guaranteed by an insurer or underwhich the risk is borne by the policy or contract owner;
b. A policy or contract of reinsurance, unless assumption certificates havebeen issued pursuant to the reinsurance policy or contract;
c. A portion of a policy or contract to the extent that the rate of intereston which it is based, or the interest rate, crediting rate, or similar factordetermined by use of an index or other external reference stated in thepolicy or contract employed in calculating returns or changes in value:
(1) Averaged over the period of four years prior to the date on which themember insurer becomes an impaired or insolvent insurer under this chapter,whichever is earlier, exceeds the rate of interest determined by subtractingtwo percentage points from Moody's Corporate Bond Yield Average averaged forthat same four-year period or for such lesser period if the policy orcontract was issued less than four years before the member insurer becomes animpaired or insolvent insurer under this chapter, whichever is earlier; and
(2) On and after the date on which the member insurer becomes an impaired orinsolvent insurer under this chapter, whichever is earlier, exceeds the rateof interest determined by subtracting three percentage points from Moody'sCorporate Bond Yield Average as most recently available;
d. A portion of a policy or contract issued to a plan or program of anemployer, association, or other person to provide life, health, or annuitybenefits to its employees, members, or others, to the extent that the plan orprogram is self-funded or uninsured, including but not limited to benefitspayable by an employer, association, or other person under:
(1) A multiple employer welfare arrangement as defined in 29 U.S.C. § 1144;
(2) A minimum premium group insurance plan;
(3) A stop-loss agreement described in subsection B of § 38.2-109; or
(4) An administrative services only contract;
e. A portion of a policy or contract to the extent that it provides for:
(1) Dividends or experience rating credits;
(2) Voting rights; or
(3) Payment of any fees or allowances to any person, including the policy orcontract owner, in connection with the service to or administration of thepolicy or contract;
f. A policy or contract issued in the Commonwealth by a member insurer at atime when its license to issue the policy or contract in the Commonwealth hadbeen suspended, revoked, not renewed, or voluntarily withdrawn;
g. An unallocated annuity contract issued to or in connection with a benefitplan protected under the federal Pension Benefit Guaranty Corporation,regardless of whether the federal Pension Benefit Guaranty Corporation hasyet become liable to make any payments with respect to the benefit plan;
h. A portion of an unallocated annuity contract that is not issued to or inconnection with a specific employee, union, or association of natural personsbenefit plan;
i. A portion of a policy or contract to the extent that the assessmentsrequired by § 38.2-1705 with respect to the policy or contract are preemptedby federal or state law;
j. An obligation that does not arise under the express written terms of thepolicy or contract issued by the insurer to the contract owner or policyowner, including:
(1) Claims based on marketing materials;
(2) Claims based on side letters, riders, or other documents that were issuedby the insurer without meeting applicable policy form filing or approvalrequirements;
(3) Misrepresentations of or regarding policy benefits;
(4) Extra-contractual claims; or
(5) A claim for penalties or consequential or incidental damages;
k. A contractual agreement that establishes the member insurer's obligationsto provide a book value accounting guaranty for defined contribution benefitplan participants by reference to a portfolio of assets that is owned by thebenefit plan or its trustee, which in each case is not an affiliate of themember insurer;
l. A portion of a policy or contract to the extent it provides for interestor other changes in value to be determined by the use of an index or otherexternal reference stated in the policy or contract, but which have not beencredited to the policy or contract, or as to which the policy or contractowner's rights are subject to forfeiture, as of the date the member insurerbecomes an impaired or insolvent insurer under this chapter, whichever isearlier. If a policy's or contract's interest or changes in value arecredited less frequently than annually, then for purposes of determining thevalues that have been credited and are not subject to forfeiture under thissubdivision, the interest or change in value determined by using theprocedures defined in the policy or contract will be credited as if thecontractual date of crediting interest or changing values was the date ofimpairment or insolvency, whichever is earlier, and will not be subject toforfeiture;
m. A policy or contract providing any hospital, medical, prescription drug orother health care benefits pursuant to Part C or Part D of Subchapter XVIII,chapter 7 of Title 42 of the United States Code (known as Medicare Parts Cand D) or any regulations issued pursuant thereto; or
n. A charitable gift annuity as defined in § 38.2-106.1.
D. The benefits that the Association may become obligated to cover shall inno event exceed the lesser of:
1. The contractual obligations for which the insurer is liable or would havebeen liable if it were not an impaired or insolvent insurer; or
2. With respect to:
a. One life, regardless of the number of policies or contracts:
(1) $300,000 in life insurance death benefits, but not more than $100,000 innet cash surrender and net cash withdrawal values for life insurance;
(2) In health insurance benefits, (i) $100,000 for coverage not defined asdisability insurance, basic hospital, medical and surgical insurance, majormedical insurance or long-term care insurance including any net cashsurrender and net cash withdrawal values; (ii) $300,000 for accident andsickness insurance that constitutes disability insurance or long-term careinsurance; and (iii) $500,000 for accident and sickness insurance thatconstitutes basic hospital medical and surgical insurance or major medicalinsurance; and
(3) $250,000 in the present value of annuity benefits, including net cashsurrender and net cash withdrawal values;
b. Each individual participating in a benefit plan established under Section401, 403(b) or 457 of the U.S. Internal Revenue Code who (i) selected aninvestment option that includes investment in unallocated annuity contractsand (ii) is covered by such an unallocated annuity contract, including thebeneficiaries of each such individual if deceased, in the aggregate, $250,000in present value of annuity benefits, including net cash surrender and netcash withdrawal values;
c. Each payee of a structured settlement annuity (or beneficiary orbeneficiaries of the payee if deceased), $250,000 in present value annuitybenefits, in the aggregate, including net cash surrender and net cashwithdrawal values, if any; and
d. One plan sponsor whose plans own directly or in trust one or moreunallocated annuity contracts part or all of any of which is not included insubdivision 2 b, $5 million in benefits, irrespective of the number ofcontracts with respect to the plan sponsor. However, in the case where one ormore unallocated annuity contracts are covered contracts under this chapterand are owned by a trust or other entity for the benefit or two or more plansponsors, coverage shall be afforded by the Association if the largestinterest in the trust or entity owning the contract or contracts is held by aplan sponsor whose principal place of business is in the Commonwealth and inno event shall the Association be obligated to cover more than $5 million inbenefits with respect to all such unallocated contracts.
In no event shall the Association be obligated to cover (i) more than anaggregate of $350,000 in benefits with respect to any one life undersubdivisions D 2 a, b, and c except with respect to benefits for basichospital, medical and surgical insurance, and major medical insurance undersubdivision D 2 a (2), in which case the aggregate liability of theAssociation shall not exceed $500,000 with respect to any one individual, or(ii) with respect to one owner of multiple nongroup policies of lifeinsurance, whether the policy owner is an individual, firm, corporation, orother person, and whether the persons insured are officers, managers,employees, or other persons, more than $5 million in benefits, regardless ofthe number of policies and contracts held by the owner.
The limitations set forth in this subsection are limitations on the benefitsfor which the Association is obligated before taking into account either itssubrogation and assignment rights or the extent to which those benefits couldbe provided out of the assets of the impaired or insolvent insurerattributable to covered policies. The costs of the Association's obligationsunder this chapter may be met by the use of assets attributable to coveredpolicies or reimbursed to the Association pursuant to its subrogation andassignment rights.
E. In performing its obligations to provide coverage under § 38.2-1704, theAssociation shall not be required to guarantee, assume, reinsure or perform,or cause to be guaranteed, assumed, reinsured or performed, the contractualobligations of the insolvent or impaired insurer under a covered policy orcontract that the Association has determined, with the concurrence of theCommission, do not materially affect the economic values or economic benefitsof the covered policy or contract.
(1976, c. 330, § 38.1-482.18; 1986, c. 562; 1988, c. 178; 1991, c. 340; 1992,c. 299; 2000, c. 206; 2004, c. 668; 2010, c. 510.)
§ 38.2-1700. Purpose and applicability of chapter.
A. The purpose of this chapter is to protect, subject to certain limitations,the persons specified in subsection B against failure in the performance ofcontractual obligations, under life and accident and sickness insurancepolicies and annuity contracts specified in subsection C because of theimpairment or insolvency of the member insurer that issued the policies orcontracts. This chapter shall be construed to effect this purpose. To providethis protection, an association of insurers is created to pay benefits and tocontinue coverage as limited by this chapter, and members of the Associationare subject to assessments to provide funds to carry out the purpose of thischapter.
B. This chapter shall provide coverage for the policies and contractsspecified in subsection C as follows:
1. This chapter shall provide coverage, for the policies and contractsspecified in subsection C, to persons who, regardless of where they reside,except for nonresident certificate holders under group policies or contracts,are the beneficiaries, assignees, or payees of the persons covered undersubdivision B 2.
2. This chapter shall provide coverage, for the policies and contractsspecified in subsection C, to persons who are owners of or certificateholders under the policies or contracts, other than unallocated annuitycontracts and structured settlement annuities, and in each case who:
a. Are residents; or
b. Are not residents and (i) the insurer that issued the policies orcontracts is domiciled in the Commonwealth, (ii) the states in which thepersons reside have associations similar to the Association, and (iii) thepersons are not eligible for coverage by an association in any other statedue to the fact that the insurer was not licensed in the state at the timespecified in the state's guaranty association law.
3. For unallocated annuity contracts specified in subsection C, subdivisionsB 1 and B 2 shall not apply, and this chapter, except as provided insubdivisions B 5 and B 6, shall provide coverage to persons who are theowners of the unallocated annuity contracts if the contracts are issued to orin connection with a specific benefit plan whose plan sponsor has itsprincipal place of business in this Commonwealth.
4. For structured settlement annuities specified in subsection C, subdivisionB 1 and B 2 shall not apply and this chapter, except as provided insubdivisions B 5 and B 6, shall provide coverage to a person who is a payeeunder a structured settlement annuity, or beneficiary of a payee if the payeeis deceased, if the payee:
a. Is a resident, regardless of where the contract owner resides; or
b. Is not a resident and both (i) the contract owner of the structuredsettlement annuity is (a) a resident or (b) not a resident but the insurerthat issued the structured settlement annuity is domiciled in theCommonwealth and the state in which the contract owner resides has anassociation similar to the Association; and (ii) neither the payee orbeneficiary, nor the contract owner is eligible for coverage by theassociation of the state in which the payee or contract owner resides.
5. This chapter shall not provide coverage to:
a. A person who is a payee, or beneficiary, of a contract owner resident ofthe Commonwealth if the payee, or beneficiary, is afforded any coverage bythe association of another state; or
b. A person covered under subdivision B 3 if any coverage is provided by theassociation of another state to the person.
6. This chapter is intended to provide coverage to a person who is a residentof the Commonwealth and, in special circumstances, to a nonresident. In orderto avoid duplicate coverage, if a person who would otherwise receive coverageunder this chapter is provided coverage under the laws of any other state,the person shall not be provided coverage under this chapter. In determiningthe application of the provisions of this subdivision in situations where aperson could be covered by the association of more than one state, whether asan owner, payee, beneficiary, or assignee, this chapter shall be construed inconjunction with other state laws to result in coverage by only oneassociation.
C. This chapter shall:
1. Provide coverage to the persons specified in subsection B for direct,nongroup life, accident and sickness, or annuity policies or contracts andsupplemental contracts to any of these, for certificates under direct grouppolicies and contracts, and for unallocated annuity contracts issued bymember insurers, in each case except as limited by this chapter. Annuitycontracts and certificates under group annuity contracts include guaranteedinvestment contracts, deposit administration contracts, unallocated fundingagreements, allocated funding agreements, structured settlement annuities,and any immediate or deferred annuity contracts. This chapter shall applyalso to dental benefit contracts entered into with a dental plan organizationas provided in Chapter 61 (§ 38.2-6100 et seq.).
2. Not provide coverage for:
a. A portion of a policy or contract not guaranteed by an insurer or underwhich the risk is borne by the policy or contract owner;
b. A policy or contract of reinsurance, unless assumption certificates havebeen issued pursuant to the reinsurance policy or contract;
c. A portion of a policy or contract to the extent that the rate of intereston which it is based, or the interest rate, crediting rate, or similar factordetermined by use of an index or other external reference stated in thepolicy or contract employed in calculating returns or changes in value:
(1) Averaged over the period of four years prior to the date on which themember insurer becomes an impaired or insolvent insurer under this chapter,whichever is earlier, exceeds the rate of interest determined by subtractingtwo percentage points from Moody's Corporate Bond Yield Average averaged forthat same four-year period or for such lesser period if the policy orcontract was issued less than four years before the member insurer becomes animpaired or insolvent insurer under this chapter, whichever is earlier; and
(2) On and after the date on which the member insurer becomes an impaired orinsolvent insurer under this chapter, whichever is earlier, exceeds the rateof interest determined by subtracting three percentage points from Moody'sCorporate Bond Yield Average as most recently available;
d. A portion of a policy or contract issued to a plan or program of anemployer, association, or other person to provide life, health, or annuitybenefits to its employees, members, or others, to the extent that the plan orprogram is self-funded or uninsured, including but not limited to benefitspayable by an employer, association, or other person under:
(1) A multiple employer welfare arrangement as defined in 29 U.S.C. § 1144;
(2) A minimum premium group insurance plan;
(3) A stop-loss agreement described in subsection B of § 38.2-109; or
(4) An administrative services only contract;
e. A portion of a policy or contract to the extent that it provides for:
(1) Dividends or experience rating credits;
(2) Voting rights; or
(3) Payment of any fees or allowances to any person, including the policy orcontract owner, in connection with the service to or administration of thepolicy or contract;
f. A policy or contract issued in the Commonwealth by a member insurer at atime when its license to issue the policy or contract in the Commonwealth hadbeen suspended, revoked, not renewed, or voluntarily withdrawn;
g. An unallocated annuity contract issued to or in connection with a benefitplan protected under the federal Pension Benefit Guaranty Corporation,regardless of whether the federal Pension Benefit Guaranty Corporation hasyet become liable to make any payments with respect to the benefit plan;
h. A portion of an unallocated annuity contract that is not issued to or inconnection with a specific employee, union, or association of natural personsbenefit plan;
i. A portion of a policy or contract to the extent that the assessmentsrequired by § 38.2-1705 with respect to the policy or contract are preemptedby federal or state law;
j. An obligation that does not arise under the express written terms of thepolicy or contract issued by the insurer to the contract owner or policyowner, including:
(1) Claims based on marketing materials;
(2) Claims based on side letters, riders, or other documents that were issuedby the insurer without meeting applicable policy form filing or approvalrequirements;
(3) Misrepresentations of or regarding policy benefits;
(4) Extra-contractual claims; or
(5) A claim for penalties or consequential or incidental damages;
k. A contractual agreement that establishes the member insurer's obligationsto provide a book value accounting guaranty for defined contribution benefitplan participants by reference to a portfolio of assets that is owned by thebenefit plan or its trustee, which in each case is not an affiliate of themember insurer;
l. A portion of a policy or contract to the extent it provides for interestor other changes in value to be determined by the use of an index or otherexternal reference stated in the policy or contract, but which have not beencredited to the policy or contract, or as to which the policy or contractowner's rights are subject to forfeiture, as of the date the member insurerbecomes an impaired or insolvent insurer under this chapter, whichever isearlier. If a policy's or contract's interest or changes in value arecredited less frequently than annually, then for purposes of determining thevalues that have been credited and are not subject to forfeiture under thissubdivision, the interest or change in value determined by using theprocedures defined in the policy or contract will be credited as if thecontractual date of crediting interest or changing values was the date ofimpairment or insolvency, whichever is earlier, and will not be subject toforfeiture;
m. A policy or contract providing any hospital, medical, prescription drug orother health care benefits pursuant to Part C or Part D of Subchapter XVIII,chapter 7 of Title 42 of the United States Code (known as Medicare Parts Cand D) or any regulations issued pursuant thereto; or
n. A charitable gift annuity as defined in § 38.2-106.1.
D. The benefits that the Association may become obligated to cover shall inno event exceed the lesser of:
1. The contractual obligations for which the insurer is liable or would havebeen liable if it were not an impaired or insolvent insurer; or
2. With respect to:
a. One life, regardless of the number of policies or contracts:
(1) $300,000 in life insurance death benefits, but not more than $100,000 innet cash surrender and net cash withdrawal values for life insurance;
(2) In health insurance benefits, (i) $100,000 for coverage not defined asdisability insurance, basic hospital, medical and surgical insurance, majormedical insurance or long-term care insurance including any net cashsurrender and net cash withdrawal values; (ii) $300,000 for accident andsickness insurance that constitutes disability insurance or long-term careinsurance; and (iii) $500,000 for accident and sickness insurance thatconstitutes basic hospital medical and surgical insurance or major medicalinsurance; and
(3) $250,000 in the present value of annuity benefits, including net cashsurrender and net cash withdrawal values;
b. Each individual participating in a benefit plan established under Section401, 403(b) or 457 of the U.S. Internal Revenue Code who (i) selected aninvestment option that includes investment in unallocated annuity contractsand (ii) is covered by such an unallocated annuity contract, including thebeneficiaries of each such individual if deceased, in the aggregate, $250,000in present value of annuity benefits, including net cash surrender and netcash withdrawal values;
c. Each payee of a structured settlement annuity (or beneficiary orbeneficiaries of the payee if deceased), $250,000 in present value annuitybenefits, in the aggregate, including net cash surrender and net cashwithdrawal values, if any; and
d. One plan sponsor whose plans own directly or in trust one or moreunallocated annuity contracts part or all of any of which is not included insubdivision 2 b, $5 million in benefits, irrespective of the number ofcontracts with respect to the plan sponsor. However, in the case where one ormore unallocated annuity contracts are covered contracts under this chapterand are owned by a trust or other entity for the benefit or two or more plansponsors, coverage shall be afforded by the Association if the largestinterest in the trust or entity owning the contract or contracts is held by aplan sponsor whose principal place of business is in the Commonwealth and inno event shall the Association be obligated to cover more than $5 million inbenefits with respect to all such unallocated contracts.
In no event shall the Association be obligated to cover (i) more than anaggregate of $350,000 in benefits with respect to any one life undersubdivisions D 2 a, b, and c except with respect to benefits for basichospital, medical and surgical insurance, and major medical insurance undersubdivision D 2 a (2), in which case the aggregate liability of theAssociation shall not exceed $500,000 with respect to any one individual, or(ii) with respect to one owner of multiple nongroup policies of lifeinsurance, whether the policy owner is an individual, firm, corporation, orother person, and whether the persons insured are officers, managers,employees, or other persons, more than $5 million in benefits, regardless ofthe number of policies and contracts held by the owner.
The limitations set forth in this subsection are limitations on the benefitsfor which the Association is obligated before taking into account either itssubrogation and assignment rights or the extent to which those benefits couldbe provided out of the assets of the impaired or insolvent insurerattributable to covered policies. The costs of the Association's obligationsunder this chapter may be met by the use of assets attributable to coveredpolicies or reimbursed to the Association pursuant to its subrogation andassignment rights.
E. In performing its obligations to provide coverage under § 38.2-1704, theAssociation shall not be required to guarantee, assume, reinsure or perform,or cause to be guaranteed, assumed, reinsured or performed, the contractualobligations of the insolvent or impaired insurer under a covered policy orcontract that the Association has determined, with the concurrence of theCommission, do not materially affect the economic values or economic benefitsof the covered policy or contract.
(1976, c. 330, § 38.1-482.18; 1986, c. 562; 1988, c. 178; 1991, c. 340; 1992,c. 299; 2000, c. 206; 2004, c. 668; 2010, c. 510.)
