                                 CODE OF VIRGINIA

MISCELLANEOUS PROVISIONS (§ 38.2-1710)

A. Nothing in this chapter shall be construed to reduce the liability for unpaid
assessments of the insureds on an impaired or insolvent insurer operating under
a plan with assessment liability.

B. Records shall be kept of all meetings of the board of directors to discuss
the activities of the Association in carrying out its powers and duties under
&#xA7; 38.2-1704. The records of the Association with respect to an impaired or
insolvent insurer shall not be disclosed prior to the termination of a
liquidation, rehabilitation, or conservation proceeding involving the impaired
or insolvent insurer, except (i) upon the termination of the impairment or
insolvency of the member insurer or (ii) upon the order of a court of competent
jurisdiction. Nothing in this subsection shall limit the duty of the Association
to render a report of its activities under &#xA7; 38.2-1711.

C. For the purpose of carrying out its obligations under this chapter, the
Association shall be deemed to be a creditor of the impaired or insolvent
insurer to the extent of assets attributable to covered policies and contracts
reduced by any amounts to which the Association is entitled as subrogee pursuant
to subsection K of &#xA7; 38.2-1704. Assets of the impaired or insolvent insurer
attributable to covered policies and contracts shall be used to continue all
covered policies and contracts and pay all contractual obligations of the
impaired or insolvent insurer as required by this chapter. &#8220;Assets
attributable to covered policies and contracts&#8221; means that proportion of
the assets which the reserves that should have been established for these
policies and contracts bear to the reserves that should have been established
for all insurance policies, contracts, and health benefit plans written by the
impaired or insolvent insurer.

D. As a creditor of the impaired or insolvent insurer as established in
subsection C and consistent with subsection B of &#xA7; 38.2-1509, the
Association and other similar associations shall be entitled to receive a
disbursement of assets out of the marshaled assets, from time to time as the
assets become available to reimburse it, as a credit against contractual
obligations under this chapter. If the liquidator has not, within 120 days of a
final determination of insolvency of a member insurer by the receivership court,
made an application to the court for the approval of a proposal to disburse
assets out of marshaled assets to guaranty associations having obligations
because of the insolvency, then the Association shall be entitled to make
application to the receivership court for approval of its own proposal to
disburse these assets.

E. 1. Prior to the termination of any liquidation, rehabilitation, or
conservation proceeding, the court, in making an equitable distribution of the
ownership rights of the insolvent insurer, may take into consideration the
contributions of the respective parties, including the Association, the
shareholders, contract owners, certificate holders, enrollees, and policy and
contract owners of the insolvent insurer, and any other party with a legitimate
interest. In this determination, consideration shall be given to the welfare of
the policy owners, contract owners, certificate holders, and enrollees of the
continuing or successor member insurer.

   2. No distribution to any stockholders, if any, of an impaired or insolvent
   insurer shall be made until and unless the total amount of valid claims of the
   Association with interest thereon for funds expended in carrying out its
   powers and duties under &#xA7; 38.2-1704 with respect to the member insurer
   have been fully recovered by the Association.

F. 1. If an order for liquidation or rehabilitation of a member insurer
domiciled in the Commonwealth has been entered, the receiver appointed under
that order shall have a right to recover on behalf of the member insurer, from
any affiliate that controlled it, the amount of distributions, other than stock
dividends paid by the member insurer on its capital stock, made at any time
during the five years preceding the petition for liquidation or rehabilitation,
subject to the limitations of subdivisions 2 through 4.

   2. No such distribution shall be recoverable if the member insurer shows that
   when paid the distribution was lawful and reasonable, and that the member
   insurer did not know and could not reasonably have known that the distribution
   might adversely affect the ability of the member insurer to fulfill its
   contractual obligations.

   3. Any person who was an affiliate that controlled the member insurer at the
   time the distributions were paid shall be liable up to the amount of
   distributions received. Any person who was an affiliate that controlled the
   member insurer at the time the distributions were declared shall be liable up
   to the amount of distributions that would have been received if they had been
   paid immediately. If two or more persons are liable with respect to the same
   distributions, they shall be jointly and severally liable.

   4. The maximum amount recoverable under this subsection shall be the amount in
   excess of all other available assets of the insolvent insurer needed to pay
   (i) the contractual obligations of the insolvent insurer and (ii) the
   reasonable expenses of the Association incurred in connection with the
   performance of its duties for the insolvent insurer.

   5. If any person liable under subdivision 3 is insolvent, all its affiliates
   that controlled it at the time the distribution was paid shall be jointly and
   severally liable for any resulting deficiency in the amount recovered from the
   insolvent affiliate.

HISTORY: 1976, c. 330, § 38.1-482.28; 1986, c. 562; 2010, c. 510; 2018, c. 706.