Chap. 259.—An ACT to provide for the organization or admission and the
regulation and taxation of incorporated mutual insurance companies other
than life, providing a penalty for any violation hereof and repealing all
acts or parts of acts in conflict herewith. (S B 98]

Approved March 16, 1920.

Sec. 1. Be it enacted by the general assembly of Virginia, That
any number of persons not less than twenty, a majority of whom shall
be bona fide residents of this State, by complying with the provisions
of this act, may become together with others who may hereafter be
associated with them or their successors, a body corporate for the pur-
pose of carrying on the business of mutual insurance as herein pro-
vided :

Sec. 2. Any person proposing to form any such company shall
subscribe and acknowledge articles of incorporation specifying:

(a) The name, the purpose for which formed, and the location of
its principal or home office, which shall be within this State;

(b) The names and addresses of those composing the board of
directors in which the management shall be vested until the first meet-
ing of the members ;

(c) The names and places of residence of the incorporators.

Sec. 3. No name shall be adopted by such company which does
not contain the word “mutual” or which is so similar to any name
already in use by any such existing corporation, company or associa-
tion, organized or doing business in the United States, as to be con-
fusing or misleading. ,

Sec. 4. Such articles of incorporation, executed in duplicate, shall
be presented in terms or in vacation to the judge of the circuit court
of the county, or of the circuit, corporation or chancery court of the

city wherein the principal office of the corporation is to be located.
Such judge shall thereupon certify thereon whether in his opinion,
such certificates are signed and acknowledged in accordance with the
requirements of this act, and if not, in what respects they are faulty.
As soon as the certificates are so indorsed by the judge and the fee,
if any, required by law to be paid to the State upon the charter shall
have been duly paid, they together with the receipt for such payment,
may be presented to the commissioner of insurance for the State who
shall examine same, indicate on each whether he recommends or disap-
proves the issuance of a charter, and, in case of disapproval, his rea-
sons for same. He shall file one copy and forward the other to the
State corporation commission which shall ascertain and declare
whether the applicants have, by complying with the requirements of
the law, entitled themselves to the charter and shall issue or refuse
the same accordingly. When so issued the certificate, with all in-
dorsements, together with the order thereon of the State corporation
commission, shall be certified by the said commission, as required by
law, to the secretary of the Commonwealth and by the last named
officer recorded in the charter records of his office, who shall thereupon
certify the same to the clerk of the circuit court of the county, or the
corporation court of the city wherein the principal office of such cor-
poration is to be located, or to the clerk of the chancery court of the
city of Richmond, when such principal office is to be located in said
city, who shall likewise record the same in a book to be provided and
kept for the purpose in his office and when so recorded, the fact of
such recordation shall be endorsed upon the said certificate and the
said certificate, with all endorsements thereon, shall be returned by the
said clerk to the State corporation commission and lodged and pre-
served in the office of its clerk. Such articles of incorporation may be
amended in the manner provided for other corporations in which no
capital stock is issued or as may be provided in such articles and any
such amendment shall be approved, recorded, and filed as in the case
of the original articles.

Sec. 5. The corporation shall have legal existence as soon as
the charter shall have been lodged for recordation in the office of the
secretary of the Commonwealth. The board of directors named in
such articles may thereupon adopt by-laws, accept applications for in-
surance, and proceed to transact the business of such company; pro-
vided, that no insurance shall be put into force until the company has
been licensed to transact insurance as provided by this act. Such by-
laws and any amendments thereto shall within thirty days after
adoption be filed with said commissioner.

Sec. 6. Any company organized under the provisions of this act
is empowered and authorized to make contracts of insurance or to re-
insurance or accept reinsurance or any portion thereof, to the extent
specified in its articles of incorporation, for the kinds of insurance
following: :

(a) Fire Insurance. Against loss or damage to property and
loss of use and occupancy by fire, lightning, windstorm, tornado, cy-

clone, hail, tempest, flood, earthquake, frost or snow, bombardment,
invasion, insurrection, riot, civil war or commotion, military or
usurped power, explosion, fire ensuing and explosion, no fire ensuing,
except explosion by steam boilers or fly-wheels; against loss or dam-
age by water caused by the breakage or leakage of sprinklers, pumps,
or other apparatus, water pipes, plumbing, or their fixtures, erected for
extinguishing fires, and against accidental injury to such sprinklers,
pumps, other apparatus, water pipes, plumbing or fixtures; against
loss or damage to any goods or premises of the assured and loss or
damage to the property of another for which the assured is liable,
caused by the leakage of roofs, leaders and spouting, or by rain and
snow driven through broken and open windows and skylights, or
caused by the contents of any tank, or impact of any falling tank, tank
platform or supports erected in or upon any building; against the
risks of inland transportation and navigation; upon automobiles, air-
planes, seaplanes, dirigibles or other aircraft, whether or not operated
under their own power, against loss or damage by any of the causes
or risks specified in this sub-section, including also explosion, trans-
portation, collision, liability for damage to property resulting from
owning, maintaining or using automobiles, and including burglary and
theft, but not including loss or damage by reason of bodily injury
to the person.

(b) Liability Insurance. Against loss, expense or liability by
reason of bodily injury or death by accident, disability, sickness or
disease suffered by others for which the insured may be liable or
have assumed liability, including workmen’s compensation.

(c) Disability Insurance. Against bodily injury or death by
accident and disability by sickness. |

(d) Automobile Insurance. Against any or all loss, expense and
liability resulting from the ownership, maintenance or use of any
automobile or other vehicle.

(e) Steam Boiler Insurance. Against loss or liability to persons
or property resulting from explosions or accidents to boilers, con-
tainers, pipes, engines, fly-wheels, elevators and machinery in connec-
tion therewith and against loss of use and occupancy caused thereby,
and to make inspections and issue certificates of inspection thereon.

(f) Plate Glass. To insure against the breakage of plate glass,
local or in transit.

(g) Burglary. To insure against property loss or damage by
burglary, robbery, any larceny, any breaking and entry, or entry with-
out breaking, or any house, building, ship, vessel or railroad car, and
loss or damage by forgery. |

(h) Use and Occupancy Insurance. Against loss from interrup-
tion of trade or business which may be the result of any accident or
casualty. )

(i) Miscellaneous Insurance. Against loss or damage by any
hazard upon any risk not provided for in this section, which is not
prohibited by statute or at common law from being the subject of
insurance, excepting fidelity and surety and life insurance.
Sec. 7. No corporation organized under this act shall issue polli-

cies or transact any business of insurance unless it shall comply with
the conditions following, nor until the State corporation commission
acting upon a report of the commissioner of insurance has, by formal
license, authorized it to do so which license shall not issue until the
corporation has complied with the following conditions :
' (a) It Shall hold bona fide applications for insurance upon which
it shall issue simultaneously, or it shall have in force, at least twenty
policies to at least twenty members for the same kind of insurance
upon not less than two hundred separate risks, each within the maxi-
inum single risk described herein;

(b) The “maximum single risk” shall not exceed twenty per cent
of the admitted assets or three times the average risk or one per cent
of the insurance in force, whichever is the greater, any approved re-
insurance taking effect simultaneously with the policy being deducted
in determining such maximum single risk ;

(c) It shall have collected a premium upon each application which
premiums shall be held in cash or securities approved by the commis-
sioner of insurance or in which insurance companies are authorized
to invest and shall be equal, in case of fire or steam boiler insurance
to not less than twice the maximum single risk assumed subject to
one fire or to one loss nor less than ten thousand dollars, and in any
other kind of insurance to not less than fifty thousand dollars ;

(d) For the purpose of transacting employer’s liability and work-
men’s compensation insurance the applications shall cover not less than
one thousand five hundred employees, each such employee being con-
sidered a separate risk for determining the maximum single risk;

(e) Satisfy the State corporation commission through the com-
missioner of insurance that its financial condition, methods of opera-
tion and manner of doing business are adequate to meet its obliga-
tions to all policy-holders. ,

sec. 8. Any public or private corporation, in this State or else-
where, may make applications, enter into agreements for and hold
policies in any such mutual insurance company. |

Sec. 9. Every member of the company shall be entitled to one
vote, or to a number of votes based upon the insurance in force, the
number of policies held, or the amount of premiums paid, as may be
provided in the by-laws.

Sec. 10. The maximum premium payable by any member shall
be expressed in the policy and in the application for the insurance.
Such maximum premiums may be a cash premium and an additional
contingent premium not less than the cash premium, or may be solely
a cash premium. No policy shall be issued for a cash premium with-
out an additional contingent premium unless the company has a sur-
plus of at least one hundred thousand dollars.

Sec. 11. No such domestic company shall invest any of its assets
except in securities approved by the commissioner of insurance or in
accordance with the laws of this State relating to the investment of
assets of domestic stock insurance companies transacting the same
kinds of insurance.

Sec. 12. Such company shall maintain unearned premiums and
other reserves separately for each kind of insurance, upon the same
basis as that required of domestic stock insurance companies trans-
acting the same kind of insurance ; provided that any reserve for losses
or claims based upon the premium income shall be computed upon
the net premium income after deducting any so-called dividend or
premium returned or credited to the member.

Sec. 13. Any foreign company not possessed of a surplus of two
hundred thousand dollars and assets at least equal to the unearned
premium reserve and other liabilities shall make an assessment upon
its members liable to assessment to provide for such deficiency, such
assessment to be against each such member in proportion to such lia-
bility as expressed in his policy; provided, the commissioner of insur-
ance may by written order, relieve the company from an assessment
or other proceedings to restore such assets during the time fixed in
such order; and provided that any domestic company which shall
be deficient in providing the unearned premium reserve required here-
by, may, notwithstanding such deficiency, come under this act on the
condition that it shall within two years thereafter reduce such de-
ficiency. —

Sec. 14. Any director, officer or member of any such company,
or any other person, may advance to such company, any sum or sums
of money necessary for the purpose of its business or to enable it to
comply with any of the requirements of the law and such moneys and
such interest thereon as may have been agreed upon, not exceeding
ten per centum per annum shall be payable only out of the surplus
remaining after providing for all reserves and other liabilities, and
shall not otherwise be a liability or claim against the company or any
of its assets. No commission or promotion expenses shall be paid in
connection with the advancement of any such money to the company
and the amount of such advances shall be reported in each annual
statement.

Sec. 15. Such mutual company may insert in any form of policy
prescribed by the law of this State any provisions or conditions re-
quired by its plan of insurance which are not inconsistent or in con-
flict with any. law of this State. Such policy. in lieu of conforming
to the language and forms prescribed by law, may conform thereto in
substance if such policy includes a provision or endorsement reciting
that the policy shall be construed as if in the language and form pre-
scribed bv such law, and a copy of such policy and endorsement, if
any, shall have been first filed with and shall not have been disap-
proved by the commissioner of insurance.

Sec. 16. (1) Any mutual insurance company organized outside
of this State and authorized to transact the business of insurance on
the mutual plan in any State, district or territory, may be admitted
and licensed subject to the approval of the State corporation commis-
sion as aforesaid, to transact the kinds of insurance authorized by its
charter or articles to the extent and with the powers and privileges
specified in this act and when it shall be solvent under this act, and
shall have complied with the following requirements:

(a) Filed with the State corporation commission through the
commissioner of insurance a certified copy of its charter or articles
and a certificate of the supervising insurance official of the State, dis-
trict or territory in which it is incorporated, that it is there organized
and authorized to do such business as it desires to transact in this
State. .

(b) Filed with the State corporation commission through the
commissioner of insurance a copy of its by-laws certified to by its
secretary ;

(c) Appointed the secretary of the Commonwealth its agent for
service of process, in any action, suit or proceeding in any court of
this State, which authority shall continue as long as any liability shall
remain outstanding in this State;

(d) Filed with the secretary of the Commonwealth a resolution
adopted by its board of directors, consenting that service of process or
notice upon the secretary of the Commonwealth in any action brought
or pending in this State, shall be valid service of such process or notice
upon said company.

(e) Filed a financial statement under oath, in such form as the
commissioner of insurance may require, and have complied with other
provisions of the law applicable to the filing of papers and furnishing
information by stock companies on application for authority to trans-
act the same kinds of insurance;

(f) If organized without the United States, make and maintain
the deposit required of stock insurance companies formed without the
United States transacting the same kinds of insurance;

(g) Its name shall not be so similar to any name already in use
by any such existing corporation, company or association organized
or licensed in this State as to be confusing or misleading.

(2) Upon compliance by any such company organized outside of
this State with the provisions of this section, such company may be
licensed and authorized to transact business in this State, subject to
all the provisions of the following section and to the annual renewal
of licenses at the times provided for the renewal of licenses of stock
insurance companies transacting the same kinds of insurance; pro-
vided, further, that such company shall have a surplus of not less than
two hundred thousand dollars.

Sec. 17. Every such mutual insurance company whether organ-
ized within or without this State shall be subject to all provisions of
laws relating to the issuance of policies, policy forms, the supervision
of rates, prohibiting of discrimination and rebates, annual reports, re-
serves, taxes and fees, and shall make its annual report in such form
and submit to such examination and furnish such information as may
be required by the State corporation commission through the commis-
sioner of insurance. As far as practicable the examination of mutual
insurance companies organized outside of this State shall be made in

co-operation with the insurance departments of other States and the
forms of annual report shall be such as are in general use throughout
the United States.

Sec. 18. Except as provided herein, or as such companies may
be hereafter expressly designated in any other law, insurance com-
panies organized or admitted to do business in this State under this
act shall not be subject to any other insurance law of this State.

Sec. 19. The taxable premiums or premium receipts of any mutual
insurance company organized in or admitted to this State, for the
purpose of taxation under any law of this State, shall be the gross
premiums received for direct insurance upon property or risks in this
State, deducting amounts paid for reinsurance upon which a tax has
been or is to be paid in this State, and deducting premiums upon
policies not taken, premiums returned or cancelled policies, and any
refund or return made to policyholders other than for losses. The
taxes paid by mutual insurance companies, into the State treasury
through the auditor of public accounts shall be in lieu of all fees,
licenses, and taxes, State, county and municipal, except such taxes on
real estate and tangible personal property as may be levied under
other provisions of law and except such fees as are specifically directed
to be levied on corporations generally by section one hundred and
fifty-seven of article twelve of the Constitution.

Sec. 20. Any such mutual insurance company organized or ad-
mitted to transact insurance in this State may by policy, treaty, or
other agreement cede to or accept from any insurance company or
insurer licensed in any State, territory or district of the United States
reinsurance upon the whole or any part of any risk with or without
contingent liability or participation and with or without membership
in such mutual insurance company ; provided, that no such reinsurance
shall be effected with any company or insurer not first approved there-
for by written order of the commissioner of insurance filed in his
office. °

Sec. 21. Any person or corporation violating the provisions of
this act shall be guilty of a misdemeanor, and upon conviction shall
be punished by a fine of not less than fifty dollars nor more than
five hundred dollars and the State corporation commission through the
commissioner of insurance shall have the power to revoke the license
of any such person or corporation.

Sec. 22. All laws or parts of laws in conflict with the provisions
of this act, so far as companies organized or admitted under this act
are concerned, are repealed, but no such repeal and nothing in this act
shall apply to or affect any company or association of this State now
doing business or to any law under which any such company or asso-
ciation is organized or doing business. Any such company or associa-
tion may, however, by resolution of its board of directors duly ap-
proved by a majority of the members at a meeting especially called
for that purpose, and duly certified to by the president and secretary
and filed with and approved by the State corporation commissior
through the commissioner of insurance elect to adopt and become sub-
ject to the provisions of this act, in lieu of any act or acts theretofore
governing such company or association. Any company or association
so electing and fully complying with this act may thereafter effect such
kinds of insurance as authorized by this act and specified in its certifi-
cate of incorporation then in force, or as then or thereafter amended,
together with such additional kinds of insurance as are specified in
such resolution and authorized by this act.