CHAPTER 654

An Act to amend the Code of Virginia by adding in Title 38.1 a new chapter
numbered 18.1, consisting of sections numbered 88.1-569.1 through
88.1-629.1, relating to fraternal benefit societies; and to repeal, in
Title 88.1 of the Code of Virginia, Chapter 18, consisting of sections
numbered 88.1-569 through 88.1-688, relating to the same subject

matter.
[S 473]
Approved April 5, 1968

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia be amended by adding in Title 38.1 a new
chapter numbered 13.1, consisting of sections numbered 38.1-569.1 through
38.1-629.1, as follows:

Chapter 13.1.

Fraternal Benefit Societies
Article 1
General Provisions

§ 38.1-569.1. FRATERNAL BENEFIT SOCIETIES DEFINED.—
Any corporation, society, order or voluntary association, without capital
stock, organized and carried on solely for the mutual benefit of its members
and their beneficiaries, and not for profit, and having a lodge system with
ritualistic form of work and representative form of government, and which
shall make provisions for the payment of benefits in accordance with
§ 38.1-599.1, is hereby declared to be a fraternal benefit society.

§ 38.1-570.1. LODGE SYSTEM DEFINED.—Any society having a
supreme governing or legislative body and subordinate lodges or branches,
by whatever name known, into which members shall be elected, initiated
and admitted in accordance with its constitution, laws, rules, regula-
tions, and prescribed ritualistic ceremonies, which subordinate lodges or
branches shall be required by the laws of such society to hold regular
or stated meetings at least once in each month, shall be deemed to be
operating on the lodge system.

§ 38.1-571.1. REPRESENTATIVE FORM OF GOVERNMENT DE-
FINED; VOTING BY PROXY.—A society shall be deemed to have a
representative form of government when:

(a) it provides in its constitution or laws for a supreme legislative
or governing body, composed of representatives elected either by the
members or by delegates elected directly or indirectly by the members,
together with such other members of such body as may be prescribed by
the society’s constitution and laws;

(b) the representatives elected constitute a majority in number
and have not less than two-thirds of the votes nor less than the votes
required to amend its constitution and laws;

(c) the meetings of the supreme legislative or governing body and
the election of officers, representatives or delegates are held as often as
once in four calendar years;

each insured member shall be eligible for election to act or
serve as a delegate to such meeting;

(e) the society has a board of directors charged with the responsi-
bility for managing its affairs in the interim between meetings of its
supreme legislative or governing body, subject to control by such body
and having powers and duties delegated to it in the constitution or laws
of the society;

(f) such board of directors is elected by the supreme legislative
or governing body, except in case of filling a vacancy in the interim
between meetings of such body;

(g) the officers are elected either by the supreme legislative or
governing body or by the board of directors; and

( the members, officers, representatives or delegates shall not
vote by proxy.

§ 38.1-572.1. EXEMPTIONS FROM GENERAL INSURANCE
LAWS.—Except as otherwise expressly provided in this title, such societies
shall be governed by this chapter, and shall be exempt from all provisions
of the insurance laws of this State, not only in governmental relations
with the State, but for every other purpose, and no law hereafter enacted
shall apply to them, unless they be expressly designated therein.

§ 38.1-573.1. EXEMPTION OF CERTAIN SOCIETIES FROM
CHAPTER.—Nothing contained in this chapter shall be construed to
affect or apply to:

(1) Grand or subordinate lodges of Masons, Odd Fellows, or Knights
or Pythias, exclusive of the insurance department of the Supreme Lodge
Knights of Pythias, or the Junior Order of United American Mechanics,
exclusive of the beneficiary degree or insurance branch of the National
Council, Junior Order United American Mechanics;

(2) Societies which admit to membership only persons engaged in
one or more hazardous occupations in the same or similar lines of business;
(3) Similar societies which do not issue insurance certificates;

(4) An association of local lodges of a society now doing business
in this State which provides death benefits not exceeding five hundred
dollars to any one person, or disability benefits not exceeding three
hundred dollars in any one year to any one person or both;

(5) Contracts of reinsurance business on such plan in this State;

(6) Domestic societies which limit their membership to the em-
ployees of a particular city or town, designated firm, business house or
corporation; or

(7) Domestic lodges, orders or associations of a purely religious,
charitable or benevolent description, which do not provide for a death
benefit of more than one hundred dollars, or for disability benefits of more
than one hundred and fifty dollars to any one person in any one year.

The Commission may require from any society such information as
will enable it to determine whether such society is exempt from the pro-
visions of this chapter.

Any fraternal benefit society, organized and incorporated and oper-
ating prior to June nineteenth, nineteen hundred and fourteen, within
the definition set forth in §§ 38.1-569.1 to 38.1-571.1, providing for benefits
in case of death or disability resulting solely from accidents, but which
does not obligate itself to pay death or sick benefits, may be licensed under
the provisions of this chapter and shall have all the privileges and be
subject to all the provisions and regulations of this chapter, except that
the provisions of this chapter requiring medical examinations, valuations
of benefit certificates, and that the certificate shall specify the amount
of benefit, shall not apply to such society.

§ 38.1-574.1. NO PERSONAL LIABILITY OF OFFICERS, ETC.—
Officers and memebrs of the supreme, grand or any subordinate body of
any such incorporated society shall not be individually liable for the pay-
ment of any disability or death benefit provided for in the laws and agree-
ments of such society, but the same shall be payable only out of the funds
of such society and in the manner provided by its laws.
§ 38.1-575.1. MERGERS AND TRANSFERS; REINSURANCE.—
No domestic society shall merge with or accept the transfer of the member-
ship or funds of any other society unless such merger or transfer is
evidenced by a contract in writing, setting out in full the terms and
conditions of such merger or transfer, and filed with the Commission,
together with a statement of the financial condition of each of such
societies sworn to by its president and secretary, or corresponding officers,
and a certificate of such officers, duly verified under oath of such officers
of each of the contracting societies, that such merger or transfer has
been approved by a vote of two-thirds of the members of the supreme
legislative or governing body of each of such societies.

Upon the submission of such contract, financial statements and cer-
tificate, the Commission shall examine the same, and, if it shall find such
financial statements to be correct and such contract to be in conformity
with the provisions of this section, and that such merger or transfer is
just and equitable to the members of each of such societies, it shall ap-
prove such merger or transfer, issue its certificate to that effect, and
thereupon such contract of merger or transfer shall be in full force and
effect.

If such contract is not approved, the fact of its submission and its
contents shall not be disclosed by the Commission. ;

A domestic society may, by a reinsurance agreement, cede any indi-
vidual risk or risks in whole or in part to an insurer (other than another
fraternal benefit society) having the power to make such reinsurance and
authorized to do business in this State, or if not so authorized, one which
is approved by the Commissioner of Insurance, but no such society may
reinsure substantially all of its insurance in force without the written
permission of the Commissioner of Insurance. It may take credit for
the reserves on such ceded risks to the extent reinsured, but no credit
shall be allowed as an admitted asset or as a deduction from liability,
to a ceding society for reinsurance made, ceded, renewed, or otherwise
becoming effective after the effective date of this article, unless the
reinsurance is payable by the assuming insurer on the basis of the lia-
bility of the ceding society under the contract or contracts reinsured with-
out diminution because of the insolvency of the ceding society.

§ 38.1-576.1. PLACE OF MEETING; LOCATION OF PRINCIPAL
OFFICE.—Any domestic society may provide that the meetings of its
legislative or governing body may be held in any state, district, province
or territory wherein such society has subordinate branches, and all busi-
ness transacted at such meetings shall be as valid in all respects as if
such meetings were held in this State. But its principal office shall be
located in the State.

§ 38.1-577.1. TAXATION.—Every fraternal benefit society organ-
ized or licensed under this chapter is hereby declared to be a charitable
and benevolent institution, and all of its funds shall be exempt from all
and every state, county, district, municipal and school tax, other than
taxes on real estate and office equipment and the license tax imposed by
§ 88.1-588.1.

§ 38.1-578.1. PENALTIES.—Any person, officer, member or exam-
ining physician of any society authorized to do business under this chapter
who shall knowingly or willfully make any false or fraudulent statement
or representation in or with reference to any application for member-
ship, or for the purpose of obtaining money from or benefit in any society
transacting business under this chapter, shall be guilty of a misdemeanor,
and upon conviction thereof shall be punished by a fine of not less than
one hundred dollars nor more than five hundred dollars, or imprisonment
for not less than thirty days nor more than one year, or both, in the
discretion of the court; and any person who shall willfully make a false
statement of any material fact or thing in a sworn statement as to the
death or disability of a certificate holder in any such society for the
purpose of procuring payment of a benefit named in the certificate of
such holder, and any person who shall willfully make any false statement
in any verified report or declaration under oath required or authorized
by this chapter, shall be guilty of perjury, and shall be proceeded against
and punished as provided by the statutes of this State in relation to the
crime of perjury.

Any person who shall solicit membership for, or in any manner assist
in procuring membership in, any fraternal benefit society not licensed in
this State, or who shall solicit membership for, or in any manner assist
in procuring membership in, any such society not licensed in this State,
shall be guilty of a misdemeanor and upon conviction thereof shall be
punished by a fine of not less than fifty nor more than two hundred
dollars. Any society or any officer, agent, or employee thereof neglecting
or refusing to comply with, or violating any of the provisions of this
chapter, the penalty for which neglect, refusal or violation is not specified
in this section, shall upon conviction thereof be fined not exceeding two
hundred dollars.

Article 2

Organization, Admission and Licensing of Societies

§ 38.1-579.1. INCORPORATION OF SOCIETIES.—Fraternal benefit
societies may be incorporated under the provisions of article 3 (§ 13.1-230
et seq.) of chapter 2 of Title 13.1, as modified by the provisions of this
title, and, except as otherwise provided in this title, shall be subject to
all the general restrictions and shall have all the general powers imposed
and conferred upon such corporations by law.

§ 38.1-580.1. SOCIETIES PREVIOUSLY EXISTING; REINCOR-
PORATION; AMENDMENTS.—Any incorporated society engaged in
transacting business in this State on June nineteen, nineteen hundred and
fourteen, may exercise all of the rights conferred by this chapter, and
all of the rights, powers and privileges exercised or possessed by it under
its charter or articles of incorporation not inconsistent with law; or, if
it be a voluntary association, it may incorporate as provided herein. But
no society organized prior to June nineteen, nineteen hundred and four-
teen, shall be required to reincorporate hereunder. Any society may amend
its certificate of incorporation from time to time in the manner provided

y law.

§ 38.1-581.1. ELECTION OF DIRECTORS, OFFICERS, ETC.—The
supreme legislative or governing body shall elect all the trustees, directors
or other similarly designated persons who are to have and exercise the
general control and management of the affairs and funds of the society.
The officers of the society may be elected either by the supreme legislative
or governing body or by the board of trustees or directors or similarly
designated body. The first election of such trustees, directors and officers
shall be held not later than one year from the date of the issuance of the
license provided for in § 38.1-587.

§ 38.1-582.1. PRELIMINARY CERTIFICATE REQUIRED.—Upon
obtaining a charter as a fraternal benefit society such society shall make
application to the Commission for a preliminary certificate authorizing it
to solicit members as provided in this chapter. Such application shall set
forth or contain:

(1) The names and addresses of the officers, trustees or directors
or other persons who are to have and exercise the general control of the
affairs and funds of the society for the first year, or until the election of
permanent officers and directors as provided in this chapter;

(2) The location of the society’s principal office which shall be main-
tained in this State;
(3) <A copy of the constitution, and the laws, rules and regulations
to be issued by the society; oo.

(4) Acopy of each proposed form of benefit certificate, applications
therefor, and circulars to be issued by the society; and

(5) Such other information as the Commission requires. _

Such application shall be acknowledged by two officers or directors
of the society in the manner required for the acknowledgment of deeds.
Upon approval of the application and the bond required by § 38.1-583.1
the Commission shall issue a temporary certificate authorizing the society
to proceed with the solicitation of members and the completion of its
organization.

§ 38.1-583.1. PERFORMANCE BOND.—Concurrently with the filing
of the application required by § 38.1-582.1, the society shall file with
the Commission a bond payable to the State of Virginia, executed in the
name of the society by its president and secretary or other appropriate
officers and by an insurance company duly licensed in this State to transact
fidelity and surety insurance and approved by the Commission. Such
bond shall be in the penal sum of five thousand dollars, conditioned that
the society, its officers and agents, will faithfully account for all monies
and other property coming into its hands, and that all advanced payments
made by applicants for membership will be returned to them if the or-
ganization is not completed within one year.

§ 38.1-584.1. BEGINNING SOLICITATION; ADVANCED PAY-
MENTS.—Upon receipt of the temporary certificate from the Commis-
sion, such society may solicit members for the purpose of completing its
organization, and shall collect from each applicant the amount of not less
than one regular monthly payment, in accordance with its table of rates
as provided by its constitution and laws, and shall issue to each such
applicant a receipt for the amount so collected. Such advanced payments
shall, during the period of organization, be held in trust, and, if the
organization is not completed within one year, as provided herein, shall
be returned to the applicants who made such payments.

§ 38.1-585.1. EXPIRATION OF PRELIMINARY CERTIFICATE.—
No preliminary certificate granted under the provisions of § 38.1-582.1
shall be valid after one year from its date, or after such further period,
not exceeding one year, as may be authorized by the Commission.

§ 38.1-586.1. LICENSE REQUIRED OF SOCIETIES; HOW OB-
TAINED.—No such society shall incur any liability other than for such
advanced payments, nor issue any benefit certificate, nor pay or allow,
or offer or promise to pay or allow, to any person any death or disability
benefit until it has obtained a license so to do from the Commission. The
Commission shall not grant a license to any such society until it has
filed with the Commission a statement, under the seal of the society
and verified by the oaths of its president and secretary or two of its
directors setting forth:

(1) That the society holds bona fide applications for death benefit
certificates upon at least two hundred and fifty lives for at least one
hundred thousand dollars of insurance;

(2) That all such applicants for death benefits have been regularly
examined by legally qualified practicing physicians, and certificates of such
examinations have been duly filed and approved by the chief medical
examiner of the society ;

(3) That there have been established six subordinate lodges or
lati pe ety into which such two hundred and fifty applicants have been
initiated ;

(4) That there has been submitted to the Commission, under oath
of the president and secretary, or corresponding officers of such society,
a list of such applicants, giving their names, addresses, date examined,
date approved, date initiated, name and number of the subordinate branch
of which each applicant is a member, amount of benefits to be granted,
rate of stated periodical contributions which shall be sufficient to provide
for meeting the mortuary obligation contracted, when valued for death
benefits upon the basis of the National Fraternal Congress Table of Mor-
tality, as adopted by the National Fraternal Congress, August twenty-
third, eighteen hundred and ninety-nine, or some higher standard at the
option of the society, and for meeting disability benefits upon the basis
of tables based upon reliable experience, with an interest assumption not
higher than four percentum per annum; and

(5) That at least two hundred and fifty applicants have each paid
in cash at least one regular monthly payment as herein provided, which
payments in the aggregate shall amount to at least twelve hundred and
fifty dollars, all of which shall be credited to the mortuary or disability
fund on account of such applicants, and no part of which may be used
for expenses.

§ 38.1-587.1. WHEN LICENSE GRANTED.—Upon receipt of such
statement the Commission may make such examination and require such
further information as it deems advisable, and upon presentation of
satisfactory evidence that the society has complied with all the provisions
of a it shall issue to such society a license to transact insurance in this

ate.

§ 38.1-588.1. ANNUAL LICENSE.—The license of such societies
which are now or may hereafter be authorized to transact business in
this State may be renewed annually, but in all cases shall terminate
on the thirtieth day of the succeeding April; provided, however, that the
license shall continue in full force and effect until the new license is issued
or specifically refused. For each such license or renewal the society shall
pay the Commission twenty dollars. A duly certified copy of such
license shall be prima facie evidence that the licensee is a fraternal benefit
society within the meaning of this chapter.

§ 38.1-589.1. PREREQUISITES TO ADMISSION OF FOREIGN
SOCIETY.—No foreign society shall transact any business in this State
until it has complied with the provisions of the general law of this State
in regard to the admission of foreign corporations, and has procured a
certificate from the Commission. Any such society, having complied with
such general law in regard to the admission of foreign corporations, shall
be entitled to a license to transact business within this State upon filing
with the Commission:

(1) <A copy of its constitution and laws, certified by the secretary
or corresponding officer;

(2) <A statement of its business under oath of its president and
secretary, or corresponding officers, in the form required by the Com-
mission, duly verified by an examination made by the supervising insur-
ance office of its home state or other state satisfactory to the Commission;

A certificate from the proper official in its home state, province
or country, that the society is legally organized;

A copy of its contract, which must show that benefits are pro-
vided for by periodical or other payments by persons holding similar
contracts; and

(5) Such other information as the Commission may deem necessary
to a proper showing of its business and plan of working, and satisfactory
evidence that its assets are invested in accordance with the laws of the
state or country where it is organized.

§ 38.1-590.1. QUALIFICATIONS REQUIRED OF FOREIGN SO-
CIETIES.—Any foreign society desiring admission to this State shall have
the qualifications required of domestic societies organized under this chap-
ter, upon a valuation by any one of the standards authorized in § 38.1-613.1,
and shall have its assets invested as required by the laws of the state
or country where it is organized.

§ 38.1-591.1. ISSUE OF LICENSE TO FOREIGN SOCIETY.—Upon
complying with the above requirements, the Commission shall issue a
license to such society to do business in this State until the thirtieth day
of the succeeding April, and such license shall, upon compliance with the
provisions of § 38.1-589.1 to § 38.1-592.1, be renewed annually to ter-
minate on the thirtieth day of the succeeding April, except that it shall
continue in full force and effect until the new license be issued or spe-
cifically refused. For each such license or renewal the society shall pay
the Commission twenty dollars.

§ 38.1-592.1. REFUSAL OR REVOCATION OF LICENSE; AP-
PEAL.—When the Commission refuses to license any society or revokes
its authority to do business in this State, it shall reduce its decision to
writing and file the same in its office, and shall furnish a copy thereof,
together with a statement of its reasons therefor, to the officers of the
society upon request, and any such society shall have the right of appeal
to the Supreme Court of Appeals. But nothing contained in §§ 38.1-588.1
to 38.1-592.1 shall be taken or construed as preventing any such society
from continuing in good faith all contracts made in this State during the
time such society was legally authorized to transact business herein.

§ 38.1-593.1. CONSTITUTION AND BY-LAWS; POWERS—Every
society shall have the power to adopt a constitution and by-laws for its
government, the admission of its members, the management of its affairs
and the fixing and readjusting of the rates of contribution of its members
from time to time. It shall have the power to change, alter, add to or
amend such constitution and by-laws, and such other powers as are neces-
ary mpl incidental to carrying into effect the objects and purposes of

e society.

§ 38.1-594.1. WAIVER OF PROVISIONS OF CONSTITUTION AND
WS.—The constitution and laws of the society may provide that no
subordinate body, nor any of its subordinate officers or members, shall
have the power or authority to waive any of the provisions of the laws
and constitution of the society, and the same shall be binding on the
society and each and every member thereof and on all beneficiaries of
members.

§ 38.1-595.1. AMENDMENTS TO CONSTITUTION AND LAWS.—
Every society transacting business under this chapter shall file with the
Commission a duly certified copy of all amendments of or additions to
its constitution and laws within ninety days after the enactment of the
same. Printed copies of the constitution and laws as amended, changed
or added to, certified by the secretary or corresponding officer of the
society, shall be prima facie evidence of the legal adoption thereof.

Article 3
Members, Benefits and Beneficiaries

§ 38.1-596.1. QUALIFICATIONS FOR MEMBERSHIP.—A society
may admit to benefit membership any person not less than fifteen years
of age, nearest birthday, who has furnished evidence of insurability ac-
ceptable to the society. Any such member who shall apply for additional
benefits more than six months after becoming a benefit member shall
furnish additional evidence of insurability acceptable to the society unless
such additional benefits are issued pursuant to an existing contract under
the terms of which such member is entitled to purchase such additional
benefits without furnishing evidence of insurability.

Any person admitted prior to attaining the full age of twenty-one
vears shall be bound by the terms of the application and certificate and
by all the laws and rules of the society and shall be entitled to all the
rights and privileges of membership therein to the same extent as though
the age of majority had been attained at the time of application.

§ 38.1-597.1. BENEFITS ON LIVES OF CHILDREN.—Any
fraternal benefit society authorized to do business in this State may provide
in its laws, in addition to other benefits provided for therein, for the pay-
ment of death or annuity benefits not to exceed two thousand dollars upon
the lives of children under the minimum age for adult membership but
not greater than twenty-one years of age at time of application therefor,
upon application of some adult member, as the laws of such society may
provide, upon whom such minor child is principally dependent for support
and maintenance. Any such society may, at its option, organize and operate
branches for such children and membership in local lodges and initiation
therein shall not be required of such children nor shall they have any voice
in the management of the society.

A society shall have power to provide for the designation and changing
of designation of beneficiaries in the certificates providing for such benefits
and to provide in all other respects for the regulation, government and
control of such certificates and all rights, obligations and liabilities incident
thereto and connected therewith.

§ 38.1-598.1. BENEFIT CERTIFICATES.—Every society authorized
to do business in this State shall issue to each benefit member a certificate
specifying the amount of benefits provided thereby. The certificate,
together with any riders or endorsements attached thereto, the charter
or articles of incorporation, the constitution and laws of the society, the
application for membership, and declaration of insurability, if any, signed
by the applicant, and all amendments to each thereof, shall constitute
the agreement, as of the date of issuance, between the society and the
member, and the certificate shall so state. A copy of the application for
membership and of the declaration of insurability, if any, shall be endorsed
upon or attached to the certificate.

All statements purporting to be made by the member shall be repre-
sentations and not warranties. Any waiver of this provision shall be void.

Any changes, additions or amendments to the charter or articles of
incorporation, constitution or laws duly made or enacted subsequent to
the issuance of the certificate, shall bind the member and the beneficiaries,
and shall govern and control the agreement in all respects the same as
though such changes, additions or amendments had been made prior to
and were in force at the time of the application for membership, except
that no change, addition or amendment shall destroy or diminish benefits
which the society contracted to give the member as of the date of
issuance.

Copies of any of the documents mentioned in this section, certified
by the secretary or corresponding officer of the society, shall be received
in evidence of the terms and conditions thereof.

A society shall provide in its constitution or laws that if its reserves
as to all or any class of certificates become impaired its board of directors
or corresponding body may require that there shall be paid by the member
to the society the amount of the member’s equitable proportion of such
deficiency as ascertained by its board, and that if the payment be not
made it shall stand as an indebtedness against the certificate and draw
interest not to exceed five per cent per annum compounded annually.

§ 38.1-599.1. BENEFITS.—Every society transacting business
under this chapter shall provide for the payment of death benefits, and
may provide for the payment of benefits in case of temporary or permanent
physical disability, either as the result of disease, accident or old age, and
may provide for monuments or tombstones to the memory of its deceased
members and for the payment of funeral benefits. The period of life at
which the payment of benefits for disability on account of old age shall
commence, shall not be under seventy years.

Such society shall have the power to give a member, when perma-
nently disabled or on attaining the age of seventy, all or such portion of
the face value of his certificate as the laws of the society provide; provided,
that nothing in this chapter contained shall be so construed as to prevent
the issuing of benefit certificates for a term of years less than the whole
of life which are payable upon the death or disability of the member oc-
curring within the term for which the benefit certificate may be issued.

Any society which shall show by the annual valuation hereinafter
provided for that it is accumulating and maintaining a reserve not lower
than the usual reserve computed by the American experience table and
four per centum interest may grant to its members extended and paid-up
protection or such withdrawal equities as its constitution and laws may
provide; but, such grants shall in no case exceed in value the portion of the
reserve to the credit of such members to whom they are made.

§ 38.1-600.1. BENEFICIARIES.—Payment of death benefits shall
be confined to wife, husband, relative by blood to the fourth degree, father-
in-law, mother-in-law, son-in-law, daughter-in-law, stepfather, stepmother,
stepchildren, children by legal adoption, persons dependent upon the mem-
ber, or a fraternal charitable institution, or sanatorium. With the above
restrictions each member shall have the right to designate his beneficiary,
and, from time to time, have the same changed in accordance with the
laws, rules or regulations of the society, and no beneficiary shall have
or obtain any vested interest in such benefit until the same has become due
and payable upon the death of the member; but any society may, by its
laws, limit the scope of beneficiaries within the above classes.

But when any member of a fraternal beneficiary society shall have
designated as his beneficiary any such fraternal charitable institution or
sanatorium, the premium, assessment and charge therefor shall not be paid
out of any funds belonging to the local chapter, lodge or camp to which
such member may belong, but must be paid, if at all, by such member
himself or some other person for him.

§ 38.1-601.1. BENEFITS NOT SUBJECT TO PROCESS.—No money
or other benefit, charity or relief or aid to be paid, provided or rendered
by any such society shall be liable to attachment, garnishment or other
process, or be seized, taken, appropriated or applied by any legal or
equitable process or operation of law to pay any debt or liability of a
member or beneficiary, vr any other person who may have a right there-
under, either before or after payment.

§ 38.1-602.1. NONFORFEITURE BENEFITS, CASH SURRENDER
VALUES, CERTIFICATE LOANS AND OTHER OPTIONS.—A society
may grant paid-up nonforfeiture benefits, cash surrender values, certificate
loans and such other options as its laws may permit. As to certificates
issued on and after the effective date of this Article, a society shall grant
at least one paid-up nonforfeiture benefit, except in the case of pure
endowment, annuity or reversionary annuity contracts, reducing term
insurance contracts or contracts of term insurance of uniform amount
of fifteen years or less expiring before age sixty-six.

In the case of certificates other than those for which reserves are
computed on the Commissioners 1941 Standard Ordinary Mortality Table,
the Commissioners 1941 Standard Industrial Table or the Commissioners
1958 Standard Ordinary Mortality Table, the value of every paid-up non-
forfeiture benefit and the amount of any cash surrender value, loan or
other option granted shall not be less than the excess, if any, of (a) over
(b) as follows:

(a) the reserve under the certificate determined on the basis specified
in the certificate; and
(b) the sum of any indebtedness to the society on the certificate,
including interest due and accrued, and a surrender charge equal to two
and one-half per cent of the face amount of the certificate, which, in the
case of insurance on the lives of children, shall be the ultimate face amount
of the certificate, if death benefits provided therein are graded.

However, in the case of certificates issued on a substandard basis or
in the case of certificates, the reserves for which are computed upon the
American Men Ultimate Table of Mortality, the term of any extended
insurance benefit granted including accompanying pure endowment, if
any, may be computed upon the rates of mortality not greater than one
hundred thirty per cent of those shown by the mortality table specified
in the certificate for the computation of the reserve.

In the case of certificates for which reserves are computed on the
Commissioners 1941 Standard Ordinary Mortality Table, the Commis-
sioners 1941 Standard Industrial Table or the Commissioners 1958 Stand-
ard Ordinary Mortality Table, every paid-up nonforfeiture benefit and the
amount of any cash surrender value, loan or other option granted shall
not be less than the corresponding amount ascertained in accordance
with the provisions of the laws of this State applicable to life insurance
companies issuing policies containing like insurance benefits based upon
such tables.

§ 38.1-603.1. APPROVAL OF BENEFIT CERTIFICATES AND
APPLICATIONS.—No domestic, foreign or alien society authorized to do
business in this State shall issue or deliver in this State any certificate
or other evidence of any contract or policy of life insurance, annuity,
endowment, accident or sickness insurance, or any total and permanent
disability insurance contract unless and until the form thereof, together
with the form of application and all riders or endorsements for use in
connection therewith, shall have been filed with and approved by the
Commission as provided in § 88.1-342.1, and which shall not be incon-
sistent with any other provisions of law applicable thereto. Where the
Commission deems any required provisions to be inapplicable, either in
part or in its entirety, to a fraternal benefit certificate or contract, the
Commission may prescribe that such provision or part thereof need not
be printed on such benefit certificate or contract.

§ 38.1-604.1. INSTITUTIONS.—It shall be lawful for a society to
create, maintain and operate charitable, benevolent or educational insti-
tutions for the benefit of its members and their families and dependents
and for the benefit of children insured by the society. For such purpose
it may own, hold or lease personal property or real property located within
or without this State, with necessary buildings thereon. Such property
shall be reported in every annual statement but shall not be allowed as
an admitted asset of such society.

Maintenance, treatment and proper attendance in any such insti-
tution may be furnished free or a reasonable charge may be made therefor,
but no such institution shall be operated for profit. The society shall
maintain a separate accounting of any income and disbursements under
this section and report them in its annual statement. No society shall
own or operate funeral homes or undertaking establishments.

Article 4
Licensing of Agents
§ 38.1-605.1. LICENSING OF AGENTS.—Agents of societies shall
be licensed in accordance with the provisions of chapter 7 of this title
applicable to life or accident and sickness insurance agents, respectively,
provided that no license shall be required of any officer, employee, or
secretary of any subordinate lodge or branch of, a licensed society who
devotes substantially all of his services to activities other than the
solicitation of fraternal insurance contracts from the public, and who
eceives for the solicitation of such contracts no commission or oth.
ompensation directly dependent upon the amount of business obtaine

38.1-606.1. EXEMPTION OF MEMBER REPRESENTATIVES 0
ERT.AIN SOCIETIES.—The provisions of this article shall not app
o the member representatives of any society organized or licensed und
his chapter which insures its members against death, dismembermer
ind disability resulting from accident only, and which pays no commissio
ry other compensation for the solicitation and procurement of such cor
racts.

§ 38.1-607.1. EXEMPTION FROM EXAMINATION REQUIRE
MEN'T'S.—The examination requirements in chapter 7 of this title appli
sable to life or accident and sickness insurance agents shall not apph
to any person who has acted in the capacity of an agent of a licensed society;
for a period of at least six months immediately preceding the effectiv:
date of this act.

§ 38.1-608.1. LICENSE REQUIRED.—Except as otherwise hereir
provided no person shall act in this State as an insurance agent for s
society without having authority to do so by virtue of a license issued
and in force pursuant to the provisions of this article.

§ 38.1-609.1. PAYMENT OF COMMISSIONS FORBIDDEN.—No
society doing business in this State shall pay any commission or other
compensation to any person for any services in obtaining in this State
any new contract of life, accident or health insurance, or any new annuity
contract, except to a licensed insurance agent of such society.

Article 5
Provisions for Financial Security

§ 38.1-610.1. ASSETS; SPECIAL FUNDS; USE OF PAYMENTS
BY MEMBERS.—AII assets shall be held, invested and disbursed for the
use and benefit of the society and no member or beneficiary shall have
or acquire individual rights therein or become entitled to any apportion-
ment or the surrender of any part thereof, except as provided in the
contract.

A society may create, maintain, invest, disburse and apply any special
fund or funds necessary to carry out any purpose permitted by the laws
of such society.

Every society, the admitted assets of which are less than the sum of
its accrued liabilities and reserves under all of its certificates when valued
according to standards required for certificates issued after one year from
June 27, 1960, shall, in every provision of the laws of the society for
payments by members of such society, in whatever form made, distinctly
state the purpose of the same and the proportion thereof which may be
used for expenses, and no part of the money collected for mortuary or
disability purposes or the net accretions thereto shall be used for expenses.

§ 38.1-611.1. INVESTMENTS.—Every society shall invest its funds
only in securities permitted by the laws of this State for the investment
of the assets of life insurance companies; but any foreign society per-
mitted or seeking to do business in this State, which invests its funds in
accordance with the laws of the state in which it is incorporated, shall
nee to meet the requirements of this chapter for the investment of

unds.
Article 6
Reports and Examinations

§ 38.1-612.1. ANNUAL REPORTS.—Every society transacting busi-
ness in this State shall annually, on or before the first day of March, file
with the Commission, in such form as it may require, a statement under
oath of its president and secretary, or like officers, of its condition and
standing on the thirty-first day of December next preceding, and of its
transactions for the year ending on that date, and also shall furnish
such other information as the Commission may deem_necessary to a
proper exhibit of its business and plan of working. The Commission
may at other times require any further statement it may deem neces-
sary to be made relating to such society. The time prescribed for filing
annual statements or other reports or exhibits of any society may be ex-
tended by the Commission for good cause shown, but the time for filing
annual statements shall not be extended beyond sixty days after the time
prescribed by this section. Any company which fails to file its annual
statement within the time prescribed by this section, or within the extended
time, if such time be extended, shall be subject to a fine of not less than
one hundred dollars nor more than one thousand dollars, and such failure
shall be published by the Commission as soon as it occurs and at the ex-
pense of the company in such newspaper and for such length of time as it
prescribes.

§ 38.1-613.1. VALUATIONS.—(1) As a part of the annual state-
ment herein required, each society shall, on or before the first day of
March, file with the Commission a valuation of its certificates in force
on December thirty-first last preceding, provided the Commission may,
in its discretion for cause shown, extend the time for filing such valuation
for not more than two calendar months. Such report of valuation shall
show, as reserve liabilities, the difference between the present mid-
year value of the promised benefits provided in the certificates of
such society in force and the present midyear value of the future net
premiums as the same are in practice actually collected, not including
therein any value for the right to make extra assessments and not in-
cluding any amount by which the present midyear value of future net
premiums exceeds the present midyear value of promised benefits on
individual certificates. At the option of any society, in lieu of the above,
the valuation may show the net tabular value. Such net tabular value
as to certificates issued prior to one year after the effective date of this
act shall be determined in accordance with the provisions of law appli-
cable prior to the effective date of this act and as to certificates issued
on or after one year from the effective date of this act shall not be less
than the reserves determined according to the Commissioners’ Reserve
Valuation method as hereinafter defined. If the premium charged is less
than the tabular net premium according to the basis of valuation used,
an additional reserve equal to the present value of the deficiency in such
premiums shall be set up and maintained as a liability. The reserve
liabilities shall be properly adjusted in the event that the midyear or
tabular values are not appropriate.

(2) Reserves according to the Commissioners’ Reserve Valuation
method, for the life insurance and endowment benefits of certificates
providing for a uniform amount of insurance and requiring the payment
of uniform premiums shall be the excess, if any, of the present value, at
the date of valuation, of such future guaranteed benefits provided for by
such certificates, over the then present value of any future modified net
premiums therefor. The modified net premiums for any such certificate
shall be such uniform percentage of the respective contract premiums for
such benefits that the present value, at the date of issue of the certificate,
of all such modified net premiums shall be equal to the sum of the then
present value of such benefits provided for by the certificate and the excess
of (a) over (b), as follows:

(a) a net level premium equal to the present value, at the date of
issue, of such benefits provided for after the first certificate year, divided
by the present value, at the date of issue, of an annuity of one per annum
payable on the first and each subsequent anniversary of such certificate on
which a premium falls due; provided however, that such net level annual
premium shall not exceed the net level annual premium on the nineteen
year premium whole life plan for insurance of the same amount at an age one
year higher than the age at issue of such certificate; and

(b) anet one-year term premium for such benefits provided for in the
first certificate year. Reserves according to the Commissioners’ Reserve
Valuation method for (1) life insurance benefits for varying amounts of
benefits or requiring the payment of varying premiums, (2) annuity and
pure endowment benefits, (3) disability and accidental death benefits in
all certificates and contracts, and (4) all other benefits except life insurance
and endowment benefits, shall be calculated by a method consistent with the
principles of this subsection.

The present value of deferred payments due under incurred claims
or matured certificates shall be deemed a liability of the society and shall
be computed upon mortality and interest standards prescribed in the follow-
ing subsection.

(4) Such valuation and underlying data shall be certified by a compe-
tent actuary or, at the expense of the society, verified by the actuary of
the Department of Insurance of the state of domicile of the society.

The minimum standards of valuation for certificates issued prior to one
year from the effective date of this act shall be those provided by the law
applicable immediately prior to the effective date of this act but not lower
than the standards used in the calculating of rates for such certificates.

The minimum standard of valuation for certificates issued after one
year from the effective date of this act shall be three and one-half per cent
interest and the following tables:

(a) for certificates of life insurance—American Men Ultimate Table
of Mortality, with Bowerman’s or Davis’ Extension thereof or with the
consent of the Commissioner of Insurance, the Commissioners 1941 Stand-
ard Ordinary Mortality Table, the Commissioners 1941 Standard Industria]
Mortality Table or the Commissioners 1958 Standard Ordinary Mortality
Table, using actual age of the insured for male risks and an age not more
than three years younger than the actual age of the insured for female
risks ;

(b) for annuity and pure endowment certificates, excluding any dis-
ability and accidental death benefits in such certificates—the 1937 Standard
Annuity Mortality Table or the Annuity Mortality Table for 1949, Ultimate,
or any modification of either of these tables approved by the Commissioner
of Insurance;

(c) for total and permanent disability benefits in or supplementary to
life insurance certificates—Hunter’s Disability Table, or the Class III
Disability Table (1926) modified to conform to the contractual waiting
period, or the tables of Period 2 disablement rates and the 1930 to 1950
termination rates of the 1952 Disability Study of the Society of Actuaries
with due regard to the type of benefit. Any such table shall, for active
lives, be combined with a mortality table permitted for calculating the
reserves for life insurance certificates ;

(d) for accidental death benefits in or supplementary to life insurance
certificates—the Inter-Company Double Indemnity Mortality Table or the
1959 Accidental Death Benefits Table. Either table shall be combined with
a mortality table permitted for calculating the reserves for life insurance
certificates; and

(e) for noncancellable accident and health benefits—the Class III
Disability Table (1926) with conference modifications or, with the consent
of the Commissioner of Insurance, tables based upon the society’s own
experience.

The Commission may, in its discretion, accept other standards for
valuation if it finds that the reserves produced thereby will not be less in
the aggregate than reserves computed in accordance with the minimum
valuation standard herein prescribed. The Commission may, in its discretion,
vary the standards of mortality applicable to all certificates of insurance
on substandard lives or other extra hazardous lives by any society author-
ized to do business in this State. Whenever the mortality experience under
all certificates valued on the same mortality table is in excess of the
expected mortality according to such table for a period of three consecutive
years, the Commission may require additional reserves when deemed neces-
sary in its judgment on account of such certificates.

Any society, with the consent of the Commissioner of Insurance of the
state of domicile of the society and under such conditions, if any, which he
may impose, may establish and maintain reserves on its certificates in
excess of the reserves required thereunder, but the contractual rights of
any insured member shall not be affected thereby.

§ 38.1-614.1. IMPAIRMENT OF RESERVES; ORDER TO MAKE
GOOD DEFICIENCY.—Whenever the Commission finds from any
financial statement or valuation report made to it by any society authorized
to do business in this state or from a filed report on examination of any
such society, that the admitted assets of such society are less than the sum
of its required reserves and accrued liabilities, it shall determine the
amount of such deficiency and shall issue a written requisition to such
society to remove, repair or make good such deficiency within such period
as it shall designate, not less than thirty days nor more than six months
from the service of such requisition, except that if it believes the interests
of the certificate holders of such society will best be served by extending
such period of time beyond six months, it may do so for such period
or periods of time as it, in its discretion deems best. The Commission
may also by official order prohibit such society, while such deficiency
exists, from issuing any new contracts of insurance in this state, and in the
case of a domestic society, from issuing any new contracts in this state
or elsewhere. If such society shall fail or be unable to make good such
deficiency within the time specified in such order, the Commission shall
proceed against such society on the ground that its further transaction
of business will be hazardous to its policyholders, its creditors or the
public. In the case of a foreign or alien society the Commission may also,
or in lieu of such proceeding, revoke its license to do business in this
state or refuse to issue a renewal license.

§ 38.1-615.1. DISTRIBUTION OF REPORT OF VALUATION.—A
report of such valuation and an explanation of the facts concerning the
condition of the society thereby disclosed shall be printed and mailed to
each beneficiary member of the society not later than June one of each
year, or in lieu thereof, such report of valuation and showing of the
society’s condition as thereby disclosed may be published in the society’s
official paper and the issue containing the same mailed to each beneficiary
member of the society.

§ 38.1-616.1. EXAMINATION OF DOMESTIC SOCIETIES.—The
Commission, or any person it may appoint, shall have the power of visita-
tion and examination into the affairs of any domestic society. The Commis-
sion may employ assistants for the purpose of such examination, and it,
or any person it may appoint, shall have free access to all the books, papers
and documents that relate to the business of the society, and may summon
and qualify as witness under oath and examine its officers, agents and em-
ployees or other persons in relating to the affairs, transactions and condi-
tion of the society.

The expense of such examination shall be paid by the society examined,
upon statement furnished by the Commission, and the examination shall
be made at least once in three years.

§ 38.1-617.1. WHEN SOCIETY MAY BE CLOSED AND LIQUI-
DATED.—Whenever after examination the Commission finds that any
domestic society has failed to comply with any provisions of this chapter,
is exceeding its powers, is not carrying out its contracts in good faith,
or is transacting business fraudulently, and, whenever any domestic society
shall after an existence of two years or more have a membership of less than
four hundred members or determine to discontinue operations, the Commis-
sion may institute delinquency proceedings against the society in the man-
ner set out in chapter 3 of this title, whereupon all the provisions of chapter
3 of this title with respect to the rehabilitation, liquidation, conservation
and reorganization of insurance companies generally shall be applicable to
such society.

§ 38.1-618.1 EXAMINATION OF FOREIGN SOCIETIES; SUS-
PENSION OR REFUSAL OF LICENSE.—The Commission, or any person
whom it may appoint, may examine any foreign society transacting or
applying for admission to transact business in this State. The Commission
may employ assistants, and it, or any person it may appoint, shall have
free access to all the books, papers and documents that relate to the business
of the society, and may summon and qualify as witness under oath and
examine its officers, agents and employees and other persons in relation to
the affairs, transactions and condition of the society. It may, in its discre-
tion, accept in lieu of such examination the examination of the insurance
department of the state or country where such society is organized. The
actual expenses of examiners making any such examination shall be paid
by the society upon statement furnished by the Commission.

If any such society or its officers refuse to submit to such examination
or to comply with the provisions of this section relative thereto, the pre-
liminary certificate or license of such society shall be suspended or refused
until satisfactory evidence is furnished the Commission relating to the
condition and affairs of the society, and during such suspension or after
such refusal the society shall not write new business in this State.

§ 38.1-619.1. PUBLICATION OF EXAMINATION RESULTS.—
Pending, during or after an examination or investigation of any such
society, either domestic or foreign, the Commission shall make public no
financial statement, report or finding, nor shall it permit to become public
any financial statement, report or finding affecting the status, standing
or rights of any such society, until a copy thereof shall have been served
upon such society shall at its home office, nor until such society have been
afforded a reasonable opportunity to answer any such financial statement,
report or finding and to make such showing in connection therewith as it
may desire.

§ 38.1-620.1. REVOCATION OF LICENSE OF FOREIGN SOCI-
ETY.—Whenever the Commission finds that any foreign society transact-
ing business under this chapter has exceeded its powers, or has failed to
comply with any provisions of this chapter, or is conducting business
fraudulently, or is not carrying out its contracts in good faith, it shall
notify the society in writing of its findings, and after reasonable notice
require the society to show cause on a date designated in the notice why its
license should not be revoked. If on the date named in such notice the
grounds for the proposed revocation of the society’s license have not been
removed to the satisfaction of the Commission, or the society does not
present good and sufficient reasons why its authority to transact business
in this State should not at that time be revoked, the Commission may revoke
the license of the society to transact business in this State. All decisions
and findings of the Commission made under the provisions of this section
may be reviewed as provided in § 38.1-592.1.

Article 7
Transformation into Mutual Life Company

§ 38.1-621.1. HOW TRANSFORMATION INTO MUTUAL LIFE

INSURANCE COMPANY EFFECTED.—Any domestic fraternal benefit
society organized or operated under this chapter may, upon a two-thirds
vote of its supreme legislative and governing body, amend its articles of
incorporation and laws if already incorporated, or, if not incorporated, may
incorporate, in such manner as to transform itself into a mutual life insur-
ance company with the name by which it is already known, or another
name, as its supreme legislative and governing body shall determine, pro-
vided that the proposed plan for reorganization or reincorporation shall be
submitted to and approved by the Commission. Upon so doing, and upon
procuring from the Commission a license to transact insurance in this State
as a mutual life insurance company, it shall incur the obligations and enjoy
the benefits thereof as if originally thus incorporated. Any such corpora-
tion under its articles and by-laws as so framed or amended shall be a
continuation of the original organization, and the officers thereof shall serve
through their respective terms as provided in the original articles and
laws, but their successors shall be elected and serve as the laws of this State
and the articles of incorporation or by-laws of such company as thus re-
organized provide. Such incorporation, amendment or reincorporation shall
not affect existing suits, rights or contracts. The organization so reorganized
shall have the power, after reorganization, to transact business of the same
nature transacted by it before reorganization, as well as the powers con-
ferred hereby and contemplated by its articles of incorporation, in order
to protect and perform rights and contracts existing before reorganization,
but all new business written shall be as a mutual life insurance company.

§ 38.1-622.1. USE OF ASSETS BY REORGANIZED COMPANY.—
All assets, other than general or expense fund assets, belonging to any such
company so reorganized, prior to reorganization or arising or accruing from
benefit certificates issued prior to such reorganization, shall be used only
rie the benefit of the holders of such benefit certificates or their bene-

ciaries.

§ 38.1-623.1. FUND FOR PAYMENT OF BENEFITS.—If at the
time of reorganization, or at any time thereafter, it shall appear from the
last preceding annual report of any such organization, filed with the Com-
mission, or as the result of any investigation made by the Commission,
that the present value of the contributions to be received from the holders
of such benefit certificates, together with all assets, other than general or
expense fund assets, owned by the company that have been accumulated
from payments made by members holding such certificates, are not equal
to the present value of the benefits thus promised to be paid, including
all matured liabilities on any such benefit certificates, then the company
so reorganized shall establish, provide for, and maintain a fund, which
with such present value of contributions and assets will equal the present
value of such benefits, together with all matured liabilities. Such fund shall
be used for the payment of matured liabilities arising on such benefit
certificates when other assets applicable thereto are exhausted. Such fund
need not be maintained when not required by conditions as herein expressed.

§ 38.1-624.1. TRANSFER OF MEMBERSHIP OF FORMER MEM-
BERS.—Members in good standing in any such society prior to reorganiza-
tion shall have the right after reorganization to transfer their insurance
in such society to the mutual life plan without further medical examination
for the same or a less amount, and at legal reserve or level premium rates.
The interest in the assets of the company of any person so transferring,
as determined by the board of directors, trustees or corresponding body,
shall be transferred to, and be a part of, the assets of such company on the
legal reserve or level premium plan.

§ 38.1-625.1. POWERS AND DUTIES OF REORGANIZED COM-
PANY AND OF COMMISSION.—The Company so organized, and its offi-
cials, shall exercise all the rights and powers and perform all the duties
conferred or imposed by law upon organizations writing the kinds of
insurance written by the company so organized. Such organization and its
officials shall exercise all the rights and powers and have full authority to
perform all the duties necessary to protect rights and contracts existing
prior to reorganization. The Commission shall exercise the powers and dis-
charge the duties concerning any such company so reorganized that are
applicable to companies writing insurance or issuing policies of the same
class, organized or operating in this State. The Commission shall issue a
certificate of authority to any such company so reorganized which is in a
solvent condition and has fully complied with the laws of this State to
transact such insurance business in this State.

§ 38.1-626.1. VALUATION OF CERTIFICATES AND POLICIES OF
REORGANIZED COMPANY.—Any fraternal benefit society reorganized
to transact a mutual life insurance business as above provided shall value
its benefit certificates according to the standard of valuation for fraternal
benefit societies used in this State, and its legal reserve or level premium
policies according to the standard of valuation thereof in this State. The
various kinds of insurance shall be governed by the law applicable thereto.

§ 38.1-627.1. EXPENSE OF OPERATION AND MAINTENANCE
OF REORGANIZED COMPANY.—The expense of operation and mainte-
nance of a company so reorganized shall be apportioned between those hold-
ing benefit certificates issued before such reorganization and those holding
policies issued after such reorganization as may be determined from time to
time by the board of directors, trustees or corresponding body.

Article 8
Miscellaneous Provisions

§ 38.1-628.1. MISREPRESENTATION, DISCRIMINATION AND
REBATES, ETC.—The provisions of Article 6 of Chapter 1 of this Title
relating to misrepresentation, unfair discrimination, rebates and other
unfair trade practices in the business of insurance shall apply to fraternal
benefit societies as expressly therein designated.

§ 38.1-629.1. APPEAL FROM ACTION OF COMMISSION.—From
any action taken by the Commission against a society, whether by petition
from action taken by the Commissioner, or otherwise, the society consider-
ing itself aggrieved may, as a matter of right, appeal to the Supreme
Court of Appeals in the manner provided by law.

2. If any provision of this Chapter 13.1 or the application of such provision

to any circumstance is held invalid, the remainder of the Chapter or the

application of the provision to other circumstances shall not be affected
ereby.

8. Chapter 13, consisting of §§ 38.1-569 through 38.1-638, of Title 38.1

of the Code of Virginia is repealed.