CHAPTER 559

An Act to amend the Code of Virginia by adding in Title 88.1 thereof a
chapter numbered 19, containing, §§ 838.1-746 through $38.1-755, re-
lating to a basic property insurance inspection and placement plan
and joint underwriting association, and providing regulatory powers
to the State Corporation Commission. 3 ROR

[S 528]

Approved April 4, 1968

Be it enacted by the General Assembly of Virginia:
1. That the Code of Virginia be amended by adding in Title 38.1 thereof,
a chapter number 19, containing §§ 38.1-746 through 38.1-755, as follows:

CHAPTER 19.

Basic Property Insurance Inspection and Placement Plan and Joint
Underwriting Association

§ 38.1-746. The purposes of this chapter are:

Stat (1) To assure stability in the property insurance market of this

e;

(2) To assure the availability of basic property insurance for quali-
fied property established by this chapter ;

(3) To encourage maximum use, in obtaining basic property insur-
ance, of the available, normal insurance market provided by authorized
insurers ;

(4) To provide for the equitable distribution among authorized in-
surers of the responsibility for insuring qualified property for which basic
property insurance cannot be obtained through the normal insurance
market.

§ 38.1-747. As used in this chapter, unless the context otherwise
requires:

(1) “Basic property insurance” means insurance against direct loss
to any property caused by perils as defined and limited in the standard fire
poliey as prescribed in §§ 38.1-363 through 38.1-371, and in the extended
phi endorsement, as approved by the Commission pursuant to
38.1-373 ;

(2) “Inspection bureau” means any organization designated or ap-
proved by the Commission to act as the inspection bureau to determine the
insurability and conditions of the properties for which basic property
insurance is sought ;

(3) “Qualified property” means all real and tangible personal prop-
erty at a fixed location in an urban area whether or not subject to exposure
from an external hazard located on property not owned or controlled by
the prospective insured, and whether or not subject to exposure from riot
hazard, which

(a) is not used for farm or manufacturing purposes; and

(b) complies with applicable State laws and regulations and local
building codes and ordinances; and

(c) is not commonly owned or controlled, or combinable for rating
purposes, with property insured for similar coverages elsewhere; and

(d) has characteristics of ownership, condition or occupancy which
do not violate any public policy.

(4) “Premiums written” means gross direct premiums charged on
all policies less all premiums and dividends returned to policyholders or
the unused or unabsorbed portions of premium deposits.

§ 38.1-748. (1) Any person having an insurable interest in real
and tangible personal property at a fixed location in an urban area shall
be entitled upon request to an inspection of the property by representa-
tives of the inspection bureau. Such request shall be upon forms approved
by the Commission.

(2) The plan of operation of the inspection bureau, the manner and
scope of the inspection, and the form of the inspection report shall be
prescribed by the inspection bureau in written report subject to approval
by the Commission.

(3) <A copy of the inspection report shall be made available to the
applicant or his agent or the insurer upon request.

(4) As of the effective date of this chapter an industry placement
facility shall, with the approval of the Commission be established by
authorized insurers to formulate and administer a program for the equi-
table distribution and placement of applications for fire and extended
coverage insurance for qualified property which has been so inspected.
The program may establish separate classifications for the purpose of
equitable distribution but shall not include farm or manufacturing prop-
perties.

§ 38.1-749. If the Commission finds, after a reasonable period of
time, that the plan of operation set forth in § 38.1-748 is not creating a
market which meets the purposes of this chapter then the Commission
may order the implementation of §§ 38.1-750 and 38.1-751.

§ 38.1-750. (1) After hearing and upon promulgation of an order
by the Commission pursuant to § 38.1-749, a joint underwriting associa-
tion shall be created consisting of all insurers authorized to write and
engaged in writing within this state, on a direct basis, fire and extended
coverage insurance, including insurers covering such perils in homeowners
and commercial multiple peril package policies, but excluding insurers
exempted from rate regulation by § 38.1-222. Every such insurer shall be
a member of the association and shall remain a member as a condition of
its authority to continue to transact such kinds of insurance in this state.

(2) The association shall, pursuant to the provisions of this chapter
and the plan of operation and with respect to basic property insurance on
qualified property, have the power to, (a) cause its members to issue
policies of insurance to applicants; (b) assume reinsurance from members;
and (c) cede reinsurance.
(3) (a) Within ninety days following the effective date of the
order of the Commission, the association shall submit to the Commission
for its review, a proposed plan of operation, consistent with the provisions
of this chapter, which shall provide for economical, fair and nondiscriml-
natory administration and for the prompt and efficient provision of basic
property insurance to promote orderly community development, including,
but not limited to, preliminary assessment of all members for initial ex-
penses necessary to commence operations, establishment of necessary facill-
ties, management of the association, assessment of members to defray
losses and expenses, commission arrangements, reasonable underwriting
standards and limits of liability, acceptance and cession of reinsurance,
and procedures for determining amounts of insurance to be provided.

(b) The plan of operation shall be subject to approval by the Com-
mission, after consultation with affected individuals and organizations,
and shall take effect ten days after having been approved by it. If the
Commission disapproves all or any part of the proposed plan of operation,
the association shall within thirty days, submit for review an appropri-
ately revised plan of operation or part thereof, and, if the association fails
to do so, or if the revised plan so filed is unacceptable, the Commission
shall promulgate such a plan of operation or part thereof, as it may deem
necessary to carry out the purpose of this chapter.

(c) The association may, on its own initiative, or at the request of
the Commission, amend the plan of operation, subject to approval by the
Commission.

§ 38.1-751. (1) Any member of the association may cede to the
association basic property insurance written on qualified property, to the
extent, if any, and on the terms and conditions set forth in the plan of
operation.

(2) All members of the association shall participate in its writings,
expenses, profits and losses (or in such categories thereof as may be sepa-
rately established by the association) in the proportion that the premiums
written by each such member (but excluding (a) premiums on property
used for farm or manufacturing purposes, and (b) that portion of pre-
miums attributable to the operation of the association) during the preced-
ing calendar year bear to the aggregate premiums written in this state by
all members of the association. Such participation by each insurer in the
association shall be determined annually on the basis of such premiums
written during the preceding calendar year as disclosed in the annual state-
ments and other reports filed by the insurer with the Commission.

(3) The association shall be governed by a board of eleven directors,
elected annually by cumulative voting by the members of the association,
whose votes in such election shall be weighted in accordance with each
member’s premiums written during the preceding calendar year. The
first board shall be elected at a meeting of the members or their author-
ized representatives, which shall be held within thirty days after approval
of the plan of operation as provided in § 38.1-750.

§ 38.1-752. The operation of the inspection bureau, the industry
placement facility and any joint underwriting association shall at all times
be subject to the supervision and regulation of the Commission. The Com-
mission, or any person designated by it, shall have the power of visitation
of and examination into such operations and free access to all the books,
records, files, papers, and documents that relate to such operations, may
summon and qualify witnesses under oath, and may examine directors,
officers, agents, or employees, or any other person having knowledge of
such operations.

§ 38.1-753. There shall be no liability on the part of, and no cause
of action of any nature shall arise against insurers, the inspection bureau,
the industry placement facility, the joint underwriting association, or
their agents or employees, or the Commission or its authorized representa-
tives, for any inspections undertaken or statements made by them in any
reports and communications concerning the property to be insured, or at
the time of the hearings conducted in connection therewith, or in the
findings required by the provisions of this chapter. The reports and com-
munications of the inspection bureau, the industry placement facility and
joint underwriting association shall not be considered public documents.

§ 38.1-754. Any person aggrieved by any action or decision of the
inspection bureau or industry placement facility may appeal to the Com-
mission within 30 days from the action or the decision. The Commission
shall after hearing held upon not less than 10 days’ written notice to the
aggrieved person and the inspection bureau or the industry placement
facility, issue an order approving the action or decision, disapproving the
action or decision, or directing the inspection bureau or the industry place-
ment facility to reassign and place the application pursuant to said plan.

§ 38.1-755. This Act shall cease to be of any force or effect on July
1, 1970, unless extended by the General Assembly of Virginia; provided
that obligations incurred by the joint underwriting association, if estab-
lished pursuant to the provisions of this Act, and policies issued by its
members shall not be impaired by the expiration of this Act, and such
association shall be continued for the purpose of performing such out-
standing obligations.