CHAPTER 503

An Act to amend the Code of Virginia by adding in Chapter 7 of Title
$8.1 thereof an article numbered 3.1, consisting of §§ 38.1-314.1
through 38.1-314.16, so as to provide for licensing of surplus lines
brokers; to prescribe the fee for such licenses; to impose certain re-
quirements on licensees; to prescribe the conditions under which cer-
tain policies of insurance may be procured; and to prescribe penalties
for violations.

[H 399]

Approved March 31, 1960

Be it enacted by the General Assembly of Virginia: .
1. That the Code of Virginia be amended by adding in Chapter 7 of Title
38.1 thereof an article numbered 3.1, consisting of §§ 38.1-314.1 through
38.1-314.16 as follows:
Article 3.1

§ 38.1-314.1. The Commission may issue a surplus lines broker’s
license to any person licensed as a resident agent for the procuring of
insurance of the kinds and types classified in §§ 38.1-5 through 38.1-18; and
§§ 38.1-21 through 38.1-24 from insurers who or which are not licensed to
transact insurance business in this State. For the purposes of this section,
any person, partnership or corporation as defined in § 38.1-280, except life
agents, special agents and company representatives, shall be considered
resident agents.

§ 38.1-314.2. Every original applicant for a surplus lines broker’s
license shall make application for such license on a form prescribed by the
Commission, signed by the applicant, and containing such information as
the Commission may require.

§ 38.1-314.3. The annual fee for each surplus lines broker’s license
shall be fifty dollars, which fee shall be paid when the application for
license is filed and prior to March fifteen of each year thereafter. The
fee for any such license, application for which is filed after September
fifteen, shall be twenty-five dollars. All fees shall be collected by the Com-
mission and paid into the State treasury to the credit of the fund for the
maintenance of the bureau of the Commission established to administer the
insurance laws of the State.

§ 38.1-314.4. Every license issued pursuant to this article shall be for
a term expiring on the fifteenth day of March next following the date of
its issuance and may be renewed for the ensuing license year, upon the
filing of an application in such form as may be prescribed by the Com-
mission and payment of the fee prescribed in § 38.1-314.3.

§ 38.1-314.5. Prior to issuance of license the applicant shall file
with the Commission, and thereafter for as long as the license remains
in effect he shall keep in force a bond in favor of the State in the penal
sum of twenty-five thousand dollars with authorized corporate sureties
approved by the Commission. The bond shall be conditioned that the
broker will conduct business under the license in accordance with the
provisions of the surplus lines insurance law and that he will promptly
remit the taxes provided by such law. The bond shall not be terminated
unless at least thirty days prior written notice thereof is filed with the
Commission.

§ 38.1-314.6. The surplus lines broker may accept surplus lines
business from any dulv licensed resident agent of an authorized insurer
and may compensate him therefor; and any duly licensed resident agent
may place surplus lines business with a surplus lines broker as constituted
under this article and accept compensation therefor.
§ 38.1-314.7. When any policy of insurance is procured under the
provisions of this article, there shall be executed by the surplus lines broker
procuring such policy and the insured under the provisions of such policy
an affidavit in form and content as prescribed by the Commission stating
that such surplus lines broker and such insured were unable, after diligent
effort, to procure from among insurers licensed to transact and actually
writing insurance business in this State the full amount of insurance of
that kind and type, of insurance in this State; and further showing that
the amount of insurance procured from an insurer or insurers not licensed
to transact insurance business in this State is only the excess over the
amount procurable from licensed insurers. Such affidavit shall also state
that such surplus lines insurance was not procured for the purpose of
securing advantages as to premium rate nor as to terms of the insurance
contract. Such affidavit shall be filed with the Commission not more than
fifteen days after any such insurance shall have been procured and at least
fifteen days before any premium therefor has been remitted by the surplus
lines broker.

§ 38.1-314.8. Every person licensed pursuant to the provisions of this
article shall keep in his office a complete record of and file in the office of
the Commission annually on or before the first day of March a statement
setting forth each policy of insurance procured by him under the pro-
visions of this article during the previous calendar year; the name and
address of the insurer or insurers; the inception and expiration dates
thereof; the perils insured against; the location of each risk so insured
and the premium rate and the gross premium charged for each such
policy of insurance; the amount of premium returned; and such other
information as the Commission may require. Such annual statement
angen on a form furnished by the Commission and shall be verified by oath
or affidavit.

§ 38.1-314.9. Every person licensed under the provisions of this
article shall pay annually to the Commission the assessment provided for
In §§ 38.1-44 and 38.1-45 and taxes provided for in §§ 58-486 and 58-490
on each policy of insurance procured by him during the preceding
on year with a company not licensed to transact insurance business
in this te.

§ 38.1-314.10. Each policy or other written evidence of insurance
procured pursuant to the provisions of this article shall be delivered
promptly to the insured and have endorsed thereon a statement that the
same is registered and delivered as surplus lines coverage under the
provisions of this article and is issued by an insurer or insurers not
licensed to transact business in this State. Such endorsement shall be
countersigned by the surplus lines broker procuring such policy, showing
also his license number and mailing address. No surplus lines broker
shall issue or deliver any policy or other written evidence of insurance or
represent the insurance will be or has been granted by an unlicensed
insurer unless he has prior written authority from such insurer for the
insurance, or received information from such insurer in the regular
course of business that such insurance has been granted, or an insurance
policy providing the insurance actually has been issued by such insurer
and delivered to the insured.

§ 38.1-314.11. Each surplus lines broker, before procuring a policy
of insurance with any insurer not licensed to transact insurance business
in this State, shall make a diligent investigation of the reputation, integrity
and financial stability of such company. In no event shall he procure any
such policy from any insurer unless such insurer has prior approval of the
Commission.

§ 38.1-814.12. Every insurer issuing surplus lines coverage under the
provisions of this article shall be subject to the provisions of §§ 38.1-64
through 38.1-67.

§ 38.1-314.13. The provisions of this article shall not apply to the
kind and type of insurance or insurers exempt under the provisions of
subparagraphs (1) through (5) of § 38.1-291.

§ 38.1-314.14. The Commission shall make, approve and adopt reason-
able rules and regulations consistent with this article to effectuate the
purpose of this article.

§ 38.1-314.15. Any violation of this article shall be punished as pro-
vided for in §§ 38.1-40 and 38.1-311.

§ 38.1-314.16. Except as is otherwise provided herein, the provisions
relating to the licensing and control of surplus lines brokers shall have
no effect on or in any way alter any of the other provisions of this title.