                                 CODE OF VIRGINIA

DUTIES AND POWERS OF ASSOCIATION (§ 38.2-1606)

A. The Association shall:

   1. Be obligated to pay covered claims that existed prior to the determination
   of insolvency and which arose before the earliest of (i) ninety-one days after
   the determination of insolvency, (ii) the policy expiration date, or (iii) the
   date the insured replaces or cancels the policy.
   				a. Such obligation shall be satisfied by paying to the claimant an amount
   as follows:

      i. The full amount of a covered claim for benefits under a workers&#8217;
      compensation insurance coverage; or

         ii. An amount not exceeding $300,000 per claimant for all other covered
         claims.
         						b. In no event shall the Association be obligated to pay a claimant
         for an amount in excess of the insolvent insurer&#8217;s obligation for a
         covered claim. Notwithstanding any other provision of this chapter, a
         covered claim shall not include any claim filed with the Guaranty
         Association after the final date set by the court for the filing of claims
         against the liquidator or receiver of an insolvent insurer. The
         Association shall pay only that amount of each unearned premium which is
         in excess of fifty dollars. A covered claim shall not include any claim
         filed with the Association after the final date set by the court for the
         filing of claims against the liquidator or receiver of an insolvent
         insurer.

   2. Be deemed the insurer to the extent of the insolvent insurer&#8217;s
   obligation on the covered claims and to that extent shall have all the rights,
   duties, and obligations of the insolvent insurer as if the insurer had not
   become insolvent.

   3. Allocate claims paid and expenses incurred among the three accounts and
   assess member insurers separately for each account (i) the amounts necessary
   to pay the obligations of the Association under subdivision 1 of this
   subsection subsequent to an insolvency, (ii) the expenses of handling covered
   claims subsequent to an insolvency, and (iii) other expenses authorized by
   this chapter. The assessment of each member insurer shall be based on the
   ratio of the net direct written premiums of the member insurer to the net
   direct written premiums of all member insurers. This ratio shall be determined
   using the premiums for the calendar year preceding the assessment on the
   classes of insurance in the account. Each member insurer shall be notified of
   the assessment at least thirty days before it is due. No member insurer may be
   assessed in any year on any account an amount greater than two percent of that
   member insurer&#8217;s net direct written premiums for the calendar year
   preceding the assessment on the classes of insurance in the account. If the
   sum of the maximum assessment and the assets of the account does not provide
   in any one year an amount sufficient to make all necessary payments from that
   account, the funds available shall be prorated and the unpaid portion shall be
   paid as soon as funds become available. The Association shall pay claims in
   any order which it may deem reasonable, including the payment of claims as
   such are received from the claimants or in groups or categories of claims. The
   Association may exempt or defer, in whole or in part, the assessment of any
   member insurer if payment of the assessment would cause the member
   insurer&#8217;s financial statement to reflect an impairment of the
   insurer&#8217;s minimum capital and surplus in any jurisdiction in which the
   member insurer is authorized to transact insurance; provided, that during the
   period of deferment, no dividends shall be paid to shareholders or
   policyholders. Deferred assessments shall be paid when the payments shall not
   cause an impairment of minimum capital and surplus. These payments shall be
   refunded to those members receiving larger assessments by virtue of the
   deferment, or at the election of any such company, credited against future
   assessments. Each member insurer may set off against any assessment, payments
   authorized by the Association and made on covered claims and expenses incurred
   in the payment of those claims. The offset shall be allowed only if the
   payments are chargeable to the account for which the assessment is made.
   				3a. The Association shall issue to each insurer paying an assessment under
   this chapter, other than assessments paid pursuant to subdivision 3 (iii) of
   this subsection, a certificate of contribution in a form prescribed by the
   Commission, for the amount of the assessment paid, excluding interest
   penalties. All outstanding certificates shall be of equal priority without
   reference to amounts or dates of issue. A certificate of contribution may be
   shown by the insurer on its financial statement as an asset. This shall be
   shown in a form, in an amount, and for a period of time approved by the
   Commission.

   4. Investigate claims brought against the Association and adjust, compromise,
   settle, and pay covered claims to the extent of the Association&#8217;s
   obligation and deny all other claims. The Association may review settlements,
   releases and judgments to which the insolvent insurer or its insureds were
   parties to determine the extent to which the settlements, releases and
   judgments may be properly contested.

   5. Notify those persons as the Commission directs under subdivision 8 of this
   subsection.

   6. Handle claims through its employees or through one or more insurers or
   other persons designated as servicing facilities. Designation of a servicing
   facility is subject to (i) the approval of the Commission and (ii) acceptance
   by the designated insurer.

   7. Reimburse each servicing facility for the Association&#8217;s obligations
   paid by the facility and for expenses incurred by the facility while handling
   claims on behalf of the Association. The Association shall pay the other
   expenses authorized by this chapter.

   8. Notify the insureds of the insolvent insurer and any other interested
   parties of the determination of insolvency and of their rights under this
   chapter. Notification shall be sent by mail to the insureds&#8217; last known
   address. If the Association is unable to obtain the information required to
   mail the notice in a timely manner, the Association shall publish the notice
   in newspapers of general circulation likely to cover geographical areas
   occupied by the policyholders.

B. The Association may:

   1. Employ or retain persons necessary to perform the duties of the
   Association.

   2. Borrow funds necessary to effect the purposes of this chapter in accord
   with the plan of operation.

   3. Sue or be sued.

   4. Negotiate and become a party to those contracts necessary to carry out the
   purpose of this chapter.

   5. Perform any other acts necessary or proper to achieve the purpose of this
   chapter.

   6. Pay refunds to the member insurers in proportion to their contributions
   made to each account during the five years immediately preceding the date of
   the refund. The total refund shall be the amount by which the assets of the
   account are expected to exceed the liabilities for the coming year as
   determined by the board of directors.

   7. Obtain commitments or lines of credit, and in the event a natural disaster
   such as an earthquake, windstorm or fire results in covered claims, with the
   approval of its board of directors and the Commission, secure indebtedness for
   borrowed money to be used for the purpose set forth in subsection A of &#xA7;
   38.2-1622 in an amount not to exceed the amount reasonably estimated by its
   board of directors and the Commission as the aggregate amount of assessments
   which the Association will be authorized to make during the succeeding
   calendar year, by pledge, assignment, transfer in trust or hypothecation of
   any or all of the assessments to be made against its member insurers.

HISTORY: 1970, c. 766, §§ 38.1-763, 38.1-765; 1971, Ex. Sess., c. 1; 1982, c.
353; 1983, c. 486; 1986, c. 562; 1987, cc. 529, 565, 655; 1998, c. 230.