                                 CODE OF VIRGINIA

STABILIZATION RESERVE FUND (§ 38.2-2807)

A. When an association is activated under &#xA7; 38.2-2801, a stabilization
reserve fund shall be created. The fund shall be administered by five directors
appointed by the Commission, one of whom shall be a representative of the
Commission, two of whom shall be representatives of the association, and two of
whom shall be representatives of the association&#8217;s policyholders.

B. The directors shall act by majority vote with three directors constituting a
quorum for the transaction of any business or the exercise of any power of the
fund. The directors shall serve without salary, but each director shall be
reimbursed for actual and necessary expenses incurred in the performance of his
official duties as a director of the fund. The directors shall not be subject to
any personal liability with respect to the administration of the fund.

C. Each policyholder shall pay to the association a stabilization reserve fund
charge equal to one-third of the annual premium due for medical malpractice
insurance through the association until the fund reaches a level deemed
appropriate by the Commission. The means of payment shall be set forth in the
plan of operation and shall be separately stated in the policy. The association
shall cancel the policy of any policyholder who fails to pay the stabilization
reserve fund charge. Upon the termination of any policy during the term of the
policy, payments made to the stabilization reserve fund shall be returned to the
policyholder on a pro rata basis identical to that applied in computing that
portion of the premium which is returned to the policyholder.

D. All moneys received by the fund shall be held in a separate restricted cash
account under the sole control of an independent fund manager to be selected by
the directors. The fund manager may invest the moneys held, subject to the
approval of the directors. All investment income shall be credited to the fund.
All expenses of administration of the fund shall be charged against the fund.
The moneys held shall be used solely for the following purposes: (i) to
reimburse the association for any and all expenses, taxes, licenses and fees
paid by the association which are properly chargeable or allocable to the
stabilization reserve fund; or (ii) to pay any retrospective premium adjustment
charge levied by the association. Payment of retrospective premium adjustment
charges and other authorized payments shall be made by the directors upon
certification to them by the association of the amount due. If all moneys
accruing to the fund are exhausted in payment of retrospective premium
adjustment charges, all liability and obligations of the association&#8217;s
policyholders with respect to the payment of retrospective premium adjustment
charges shall terminate and shall be conclusively presumed to have been
discharged.

E. The association shall promptly pay the fund manager of the fund all
stabilization reserve fund charges that it collects from its policyholders.

F. Upon dissolution of the association, all assets remaining in the fund shall
be distributed equitably to the policyholders who have contributed to the fund
under procedures authorized by the directors. Distribution of assets remaining
in the fund shall be made after final disposition of all claims, expenses, and
liabilities against the fund, including reimbursement of preliminary
organizational assessments made pursuant to subsection B of &#xA7; 38.2-2804.

HISTORY: 1976, c. 85, § 38.1-781; 1977, c. 154; 1986, c. 562; 1987, cc. 526,
554; 1988, c. 341.