CHAPTER 67

An Act to amend the Code of Virginia by adding tn Chapter 9 of Title
$8.1 thereof a new article numbered 5.1 containing sections numbered
$8.1-482.1 through 38.1-482.16, to prescribe the form and content of
policies, certificates and statements of credit life and credit accident
and sickness insurance, to prescribe the amount and terms of such
insurance, to require filing of forms and premium schedules, to re-
quire certain refunds, to provide for compensation for providing and
servicing such insurance, to provide for licensing of agents, to regu-
late the payment of claims, to provide for enforcement and the powers
of the State Corporation Commission with respect thereto; and to
provide penalties.

[H 122]

Approved February 23, 1960

Be it enacted by the General Assembly of Virginia: _
1. That the Code of Virginia be amended by adding in Chapter 9 of
Title 38.1 thereof a new article numbered 5.1 containing sections num-
bered 38.1-482.1 through 38.1-482.16, as follows:
Article 5.1

CREDIT LIFE INSURANCE AND CREDIT ACCIDENT AND
SICKNESS INSURANCE

§ 38.1-482.1. All life insurance and all accident and sickness insurance
sold in connection with loans or other credit transactions shall except as
provided in § 38.1-482.12 be subject to the provisions of this article except
such insurance sold in connection with a loan or other credit transaction of
more than five years duration. The provisions of this article shall be
controlling as to such insurance and no other provisions of this title shall
be applicable unless otherwise specifically provided.

§ 38.1-482.2. As used in this article, unless the context requires other-
wise, the following words or terms shall have the meanings herein
ascribed to them, respectively:

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

(b) “Credit accident and sickness insurance” means insurance on a
debtor to provide indemnity for payments becoming due on a specific loan
or other credit transaction while the debtor is disabled as defined in the

policy ;

(c) “Creditor” means the lender of money or vendor or lessor of
goods, services, property, rights or privileges, for which payment is
arranged through a credit transaction or any successor to the right, title
or interest of any such lender, vendor or lessor, and an affiliate, associate
or subsidiary of any of them or any director, officer or employee of any
of them or any other person in any way associated with any of them;

(d) “Debtor” means a borrower of money or a purchaser or lessee of
goods, services, property, rights or privileges for which payment is ar-
ranged through a credit transaction;

(e) “Indebtedness” means the total amount payable by a debtor to a
creditor in connection with a loan or other credit transaction:

(f) “Franchise credit life insurance” and “franchise credit accident
and sickness insurance” mean that form of insurance by which a master
policy is issued to and in favor of a creditor, under which policy debtors
are insured at the option of the creditor, in a manner similar to, but
without the necessity of issuance of, individual policies;

(zg) “Credit life insurance agent”? means an agent of an insurance
company licensed in this State, who is authorized to solicit, negotiate or
effect credit life insurance or credit accident and sickness insurance, or
both, but only to the extent as is authorized and limited in this article;

(h) “Commission” means the State Corporation Commission ;

(i) “Commissioner” means the Commissioner of Insurance. _

§ 38.1-482.3. Credit life insurance and credit accident and sickness
insurance shall be issued only in the following forms:

(a) Individual policies of life insurance issued to debtors on the term
pian ;

(b) Individual policies of accident and sickness insurance issued to
debtors on a term plan or disability benefit provisions in individual policies
of credit life insurance;

-(c) Group policies of life insurance issued to creditors providing
insurance upon the lives of debtors on the term plan subject to the follow-
ing requirements:

(1) The debtors eligible for insurance under the policy shall be all of
the debtors of the creditor whose indebtedness is repayable either (i) in
installments over a period not to exceed five years or (ii) in one sum at the
end of a period not in excess of eighteen months from the initial date of
debt or all of any class or classes thereof determined by conditions per-
taining to the indebtedness or to the purchase giving rise to the indebted-
ness. The policy may provide that the term “debtors” shall include the
debtors of one or more subsidiary corporations and the debtors of one or
more affiliated corporations, proprietors or partnerships if the business of
the policyholder and of such affiliated corporations, proprietors or partner-
ships is under common control through stock ownership, contract, or other-
wise. No debtor shall be eligible unless the indebtedness constitutes an
irrevocable obligation to repay which is binding upon him during his
lifetime at the time the insurance becomes effective upon his life.

(2) The premium for the policy shall be paid by the policyholder,
either from the creditor’s funds, or from charges collected from the
insured debtors, or from both. No policy covering debtors under obliga-
tions outstanding at the date of its issuance shall, when a part or all of the
premium is to be derived from the collection from the insured debtors of
identifiable charges for insurance, include in the class or classes eligible
for insurance without evidence of insurability, any such debtors unless at
least seventy-five per centum of the then eligible debtors elect to pay the
required charges; and no such policy on which no part of the premium is
to be derived from collection of such identifiable charges shall be issued
unless it insures all eligible debtors, or all except any as to whom evidence
of individual insurability is not satisfactory to the insurer.

(3) The policy may be issued only if the group of eligible debtors is
then receiving new entrants at the rate of at least one hundred persons
yearly, or may reasonably be expected to receive at least one hundred new
entrants during the first policy year, and only if the policy reserves to the
insurer the right to require evidence of individual insurability if less than
seventy-five per centum of the new entrants become insured. The policy
may exclude from the classes eligible for insurance classes of debtors
determined by age.

(4) The amount of insurance on the life of any debtor shall at no time
exceed the amount owed by him which is repayable in instalments to the
creditor, or ten thousand dollars, whichever is less. Where the indebted-
ness is repayable in one sum to the creditor, the insurance on the life of
any debtor shall in no instance be in effect for a period in excess of eighteen
months except that such insurance may be continued for an additional
period not exceeding six months in the case of default, extension or recast-
ing of the loan. The amount of the insurance on the life of any debtor
shall at no time exceed the amount of the unpaid indebtedness, or ten
thousand dollars, whichever is less.
(5) The insurance shall be payable to the policyholder. Such pay-
ment shall reduce or extinguish the unpaid indebtedness of the debtor to
the extent of such payment. ;

(d) Group policies of accident and sickness insurance issued to
creditors on a term plan insuring debtors or disability benefit provisions
in group credit life insurance policies to provide such coverage; a

(e) Franchise master policies issued to creditors to provide life in-
surance coverage for debtors on the term plan; and

(f) Franchise master policies issued to creditors to provide accident
and sickness insurance coverage for debtors on the term plan.

§ 38.1-482.4. (a) The amount of credit life insurance shall not exceed
the initial indebtedness. Whether an indebtedness is repayable in sub-
stantially equal instalments or in a single sum, the amount of insurance
shall at no time exceed the amount of the unpaid indebtedness.

(b) The total amount of periodic indemnity payable by credit accident
and sickness insurance in the event of disability, as defined in the policy,
shall not exceed the total amount of the initial indebtedness, nor shall any
one payment of periodic indemnity exceed the initial indebtedness divided
by the number of such periodic payments.

§ 38.1-482.5. The term of any credit life insurance or credit accident
and sickness insurance shall, subject to acceptance by the insurer, com-
mence on the date when the debtor becomes obligated to the creditor,
except that, where a group policy or a franchise master policy provides
coverage with respect to existing obligations, the insurance on a debtor
with respect to such indebtedness shall commence on the effective date of
the policy. The term of such insurance shall not extend more than fifteen
days beyond the scheduled maturity date of the indebtedness or final
instalment thereof except when extended without additional cost to the
debtor. If the indebtedness is discharged due to renewal or refinancing
prior to such maturity date, the insurance in force shall be terminated
before any new insurance may be issued in connection with the renewed
or refinanced indebtedness. In all cases of termination prior to scheduled
maturity, a refund shall be paid or credited as provided in § 38.1-482.8.

§ 88.1-482.6 (a) All credit life insurance and credit accident and
sickness insurance sold shall be evidenced by an individual policy, or in
the case of group insurance or insurance under a franchise master policy
where any part of the premium is paid by the debtors or by the creditors
from identifiable charges collected from the insured debtors not required
of an uninsured debtor, by a certificate or statement of insurance.

(b) Each individual policy or certificate or statement of credit life
insurance, and/or credit accident and sickness insurance shall set forth the
name and home office address of the insurer, the name or names of the
debtor, the premium or amount of payment, if any, by the debtor sep-
arately for credit life insurance and credit accident and sickness insurance,
a description of the coverage including the amount and term thereof,
and any exceptions, limitations or restrictions, and shall state that the
benefits shall be paid to the creditor to reduce or extinguish the unpaid
indebtedness.

(c) No individual policy of credit life insurance or credit accident and
sickness insurance, no group policy of credit life insurance or credit acci-
dent and sickness insurance, and no franchise master policy of credit life
insurance or credit accident and sickness insurance shall be delivered or
issued for delivery in this State, unless each contains in substance all of the
following provisions:

(1) In each policy there shall be a provision that the policy, or the
policy and application therefore, if any and if a copy of the application is
andorsed upon or attached to the policy when issued, shall constitute the
antire contract between the parties, and that all statements made by the
creditor or by the individual debtors shall, in the absence of fraud, be
deemed representations and not warranties.

(2) In each such policy there shall be a provision that the validity of
the policy shall not be contested, except for nonpayment of premiums,
after it has been in force for two years from its date of issue; and that no
statement made by any person insured under the policy relating to his
insurability shall be used in contesting the validity of the insurance with
respect to which such statement was made after such insurance has been
in force for a period of two years during such person’s lifetime, and prior
to the date on which the claim thereunder arose.

(3) In each such policy there shall be a provision that when a claim
for the death or disability of the insured arises thereunder, settlement
shall be made upon receipt of due proof of such death or such disability.

(4) On the face of each such policy there shall be placed a title which
shall briefly and accurately describe the nature and form of the policy.

(5) Each such policy, including rider and endorsement, shall be
identified by a form number in the lower left-hand corner of the first page
thereof, and no restriction, condition or provision in or endorsed on such
policy shall be valid unless such provision or condition is printed in type
as large as brevier or eight point type, or is written in pen and ink or
typewritten in or on such policy.

(d) No individual policy of credit life insurance or credit accident and
sickness insurance, no group policy of credit life insurance or credit
accident and sickness insurance, and no franchise master policy of credit
life insurance or credit accident and sickness insurance shall be delivered
or issued for delivery in this State if it contains any provision:

(1) Limiting the time within which any action at law or in equity may
be commenced to less than one year after the cause of action accrues; or

(2) To the effect that the agent soliciting the insurance is the agent
of the person insured under the policy, or making the acts or representa-
tions of such agent binding upon the person so insured under the policy.

(e) Where any part of the premium is paid by the debtors, or by the
creditor from identifiable charges collected from the insured debtors not
required of uninsured debtors, then a copy of the individual policy or
certificate or statement of insurance shall be delivered to the insured debtor
at the time the insurance is effected or within five days thereafter.

§ 38.1-482.7. (a) All forms of policies, certificates of insurance, state-
ments of insurance, endorsements and riders intended for use in this State
shall be filed with the Commission.

(b) The Commission shall within thirty days after the filing of any
such policies, certificates of insurance, statements of insurance, endorse-
ments and riders, disapprove any such form if it contains provisions which
are contrary to, or not in accordance with, any provision of this article or
of any rule or regulation promulgated thereunder.

(c) If the Commission notifies the insurer that the form is dis-
approved, it is unlawful thereafter for such insurer to issue or use such
form. In such notice, the Commission shall specify the reason for its
disapproval and state that a hearing will be granted within twenty days
after request in writing by the insurer. No such policy, certificate of
insurance, statement of insurance, endorsement or rider, shall be issued
or used until the expiration of thirty days after it has been so filed, unless
the Commission shall give its prior written approval thereto.

(d) The Commission may, at any time after a hearing held not less
than twenty days after written notice to the insurer, withdraw its approva
of any such form on any ground set forth in subsection (b) above. The
written notice of such hearing shall state the reason for the proposec
withdrawal.
(e) No insurer shall issue such forms or use them after the effective
date of such withdrawal.

§ 38.1-482.8. (a) Each insurer issuing credit life insurance or credit
accident and sickness insurance shall file with the Commission its schedules
of premium rates for use in connection with such insurance. Any insurer
May revise such schedules from time to time, and shall file such revised
schedules with the Commission. No insurer shall issue any credit life
insurance policy or credit accident and sickness insurance policy for
which the premium rate exceeds that shown by the schedules of such
Insurer as then on file with the Commission.

(b) Each individual policy, certificate or statement of insurance shall
provide that in the event of termination of the insurance prior to the
schedule maturity date of the indebtedness, any refund of an amount
paid by the debtor for insurance shall be paid or credited promptly to the
person entitled thereto; provided, however, that the Commission shall
prescribe a minimum refund and no refund which would be less than such
minimum need be made. The formula to be used in computing such refund
shall be filed with and approved by the Commission.

(c) If a creditor requires a debtor to make any payment for credit
life insurance or credit accident and sickness insurance and an individual
policy or certificate or statement of insurance is not issued, the creditor
shall immediately give written notice to such debtor and shall promptly
make an appropriate credit to the account.

(d) The amount charged by the creditor to the debtor for any credit
life or credit accident and sickness insurance shall not exceed the premium
rate filed with the Commission for the coverage provided.

§ 38.1-482.9. Credit life insurance and credit accident and sickness
Insurance is usually effected when the creditor deems it is essential to
the making of the loan or other extension of credit giving rise to such
insurance, and such insurance is necessarily arranged for simultaneously
with the entering into such credit transaction. In recognition of the
foregoing conditions, and notwithstanding the provisions of any other
statutes of this State which expressly or by construction may provide
otherwise:

(a) A portion of the premium of credit life insurance or credit
accident and sickness insurance may be allowed by the insurer to a
creditor, its affiliate or associate or subsidiary or a director, officer or
employee of any of them for providing and servicing such insurance, and
such portion of the premium so allowed shall not be deemed as a rebate
of premium or as interest or charges or consideration or an amount in
excess of permitted charges in connection with the loan or other credit
transaction; and

(b) All of the acts necessary to provide and service credit life insur-
ance and credit accident and sickness insurance may be performed within
the same place of business in which is transacted the business giving rise
to the loan or other credit transaction.

§ 38.1-482.10. (a) All policies of credit life insurance and credit
accident and sickness insurance shall be delivered or issued for delivery
in this State only by an insurer authorized under § 38.1-85 to § 38.1-98
inclusive to do an insurance business therein, and shall be issued only
through holders of licenses or authorizations issued by the Commission
under § 38.1-301.1 to § 38.1-301.9 inclusive or under subsection (b) of
this section.

(b) Every individual who desires to obtain a license as a credit life
insurance agent shall make written application to the Commission in
such form and containing such information as the Commission shall
prescribe. Each such applicant shall, at the time of filing his application,
pay a fee of two dollars, which shall be collected by the Commission and
paid directly into the State treasury and placed to the credit of the fund
for the maintenance of the division or bureau of the Commission estab-
lished for the administration of the insurance laws of the State. The fee
shall not be refundable. Upon the Commission being satisfied that an appli-
cant is of good character, that he bears a good reputation, is honest and his
application shows he has sufficient knowledge of the requirements of this
article to intelligently conduct the insurance business as authorized there-
under, then such applicant shall be entitled to and shall receive from the
Commission a license as a credit life insurance agent. The contents and
duration of such license, the annual fee therefor and the grounds and
procedure for refusing, suspending or revoking such license shall be sub-
ject to the applicable provisions of § 38.1-302 to § 38.1-314 inclusive.

§ 38.1-482.11. (a) All claims shall be promptly reported to the
insurer or its designated claim representative, and the insurer shall main-
tain adequate claim files. All claims shall be settled as soon as possible and
in accordance with the terms of the insurance contract.

(b) All claims shall be paid either by draft drawn upon the insurer
or by check of the insurer to the order of the claimant to whom payment
of the claim is due pursuant to the policy provisions, or upon direction of
such claimant to one specified.

(c) No plan or arrangement shall be used whereby any person, firm
or corporation other than the insurer or its designated claim representative
shall be authorized to settle or adjust claims. The creditor shall not be
designated as claim representative for the insurer in adjusting claims;
provided, that a group or franchise policyholder may, by arrangement
with the insurer, draw drafts or checks in payment of claims due to the
group or franchise policyholder subject to audit and review by the insurer.

§ 38.1-482.12. When credit life insurance or credit accident and
sickness insurance is required as security for any indebtedness, the
debtor shall, upon request to the creditor, have the option of furnish-
ing the required amount of insurance through existing policies of insur-
ance owned or controlled by him or of procuring and furnishing the
required coverage through any insurer authorized to transact an insurance
business within this State.

§ 38.1-482.13. (a) The Commission may, after notice and hearing,
issue such rules and regulations consistent with the provisions of this
article as it deems appropriate for the supervision of the regulatory
provisions of this article. Every such regulation, every administrative
ruling, and every requirement of general application shall be in writing
and maintained as a public record in an indexed permanent book with
date of each suitably indicated. A copy of each regulation and order
promulgating it shall be mailed by the Commission to all insurers licensed
to write insurance under this article.

(b) Whenever the Commission finds that there has been a violation
of this article or any rules or regulations issued pursuant thereto, and
after written notice thereof and hearing given to the insurer or other
person authorized or licensed by the Commission, it shall set forth the
details of its findings together with an order for compliance by a specified
date. Such order shall be binding on the insurer and other person author-
ized or licensed by the Commission on the date specified unless sooner
withdrawn by the Commission or a stay thereof has been ordered by the
Supreme Court of Appeals.

§ 38.1-482.14. In addition to any other remedy, an insurer or any
other person in interest considering himself aggrieved by an action of the
Commissioner hereunder pursuant to authority conferred upon him or
delegated to him by the Commission, may within thirty days of the action
complained of, file a petition as a matter of right with the Commission to
review the action. The proceedings on review shall be de novo and the
record and summary of the evidence before, and findings of, the Com-
missioner shall be admissible as evidence before the Commission.

§ 38.1-482.15. From any action taken by the Commission hereunder.
whether upon petition from action taken by the Commissioner, or other-
wise, any insurer, or any other person in interest considering himself
aggrieved, may, as a matter of right, appeal to the Supreme Court of
Appeals in the manner provided by law.

§ 38.1-482.16. In addition to any other penalty provided by law, any
person who violates an order of the Commission after it has become final,
and while such order is in effect, upon proof thereof to the satisfaction of
the Commission, shall be subject to a fine to be imposed by the Commission,
of not less than ten dollars nor more than two hundred fifty dollars,
except that if such violation is found by the Commission to be willful, the
amount of such fine may be in a sum not to exceed one thousand dollars.
The Commission, in its discretion, may revoke or suspend the license or
certificate of authority of the person guilty of such violation. All action
under this section including any such order for suspension or revocation
shall be upon notice and hearing.

f any provision of this article, or the application of such provi-
sion to any person or circumstances, shall be held invalid, the remainder
of the article, and the application of such provision to any person or cir-
cumstances other than those as to which it is held invalid, shall not be
affected thereby.