2006 Code of Virginia § 38.2-2619 - Requirements for doing business

38.2-2619. Requirements for doing business.

A. A provider may, but is not required to, appoint an administrator or otherdesignee to be responsible for any or all of the administration of homeservice contracts and compliance with this article.

B. Home service contracts shall not be issued, sold, or offered for sale inthis Commonwealth unless the provider has:

1. Provided a receipt for, or other written evidence of, the purchase of thehome service contract to the contract holder; and

2. Provided a copy of the home service contract to the home service contractholder within a reasonable period of time from the date of purchase.

C. Each provider of home service contracts sold in this Commonwealth shallfirst obtain a license by filing with the Commission their name, fullcorporate address, telephone number, and contact person and designate aperson in this Commonwealth for service of process. Each provider shall payto the Commission a fee in the amount of $1,000 upon initial licensure andevery two years thereafter. Said filing need only be updated by writtennotification to the Commission if material changes occur in the informationon file. All fees paid into the State Treasury pursuant to this subsectionshall be deposited in accordance with subsection B of 38.2-400.

D. No license shall be issued to any home service contract provider unlessthe applicant:

1. If a resident partnership, limited liability company, or corporation, hasrecorded the existence of the partnership, limited liability company orcorporation pursuant to law, or if a nonresident partnership, limitedliability company or corporation, has furnished proof of its authority totransact business in Virginia;

2. Maintains a net worth in an amount not less than 20% of the premiumscharged on its contracts currently in force; however, the minimum requirednet worth shall be not less than $100,000, and the maximum required net worthshall be that amount required of insurers under the provisions of Article 5( 38.2-1024 et seq.) of Chapter 10 of Title 38.2;

3. Places on deposit with the State Treasurer a financial security deposit ofthe type allowed pursuant to Chapter 45 ( 2.2-4500 et seq.) of Title 2.2.The deposit shall have a value of at least 5% of the gross considerationreceived on the sale of the home service contract for all home servicecontracts issued and in force, but not less than $25,000 or more than$250,000. The Treasurer is authorized to defray expenses associated with thedeposit in accordance with 38.2-1057; and

4. Has filed any financial statement and any reports, certificates, or otherdocuments as the Commission deems necessary to secure a full and accurateknowledge of its affairs and financial condition.

E. In order to assure the faithful performance of a provider's obligations toits contract holders, each provider shall be responsible for complying withany one of the following requirements:

1. Insure all home service contracts under a reimbursement insurance policyissued by an insurer licensed, registered, or otherwise authorized to dobusiness in the Commonwealth, and either:

a. At the time the reimbursement insurance policy is filed with theCommission, and continuously thereafter, (i) maintain surplus as topolicyholders of at least $15 million and (ii) annually file copies of theinsurer's audited financial statements, its National Association of InsuranceCommissioners Annual Statement, and the actuarial certification required byand filed in the insurer's state of domicile; or

b. At the time the reimbursement insurance policy is filed with theCommission, and continuously thereafter, (i) maintain surplus as topolicyholders of less than $15 million but at least equal to $10 million,(ii) demonstrate to the satisfaction of the Commission that the companymaintains a ratio of net written premiums, wherever written, to surplus as topolicyholders of not greater than 3 to 1, and (iii) annually files copies ofthe insurer's audited financial statements, its National Association ofInsurance Commissioners Annual Statement, and the actuarial certificationrequired by and filed in the insurer's state of domicile;

2. Maintain a funded reserve account sufficient to provide for itsobligations under its contracts issued and outstanding in this Commonwealth.The reserves shall not be less than 40% of gross consideration received, lessclaims paid, on the sale of the home service contract for all in-forcecontracts. This reserve account shall be certified by the company along withreasonable documentation thereof. The reserve account shall be subject toexamination and review by the Commission; or

3. Maintain, or together with its parent company maintain, a net worth orstockholders' equity of at least $100 million and upon request, provide theCommission with a copy of the provider's or the provider's parent company'smost recent Form 10-K or similar document filed with the federal Securitiesand Exchange Commission within the last calendar year, or if the company doesnot file with the federal Securities and Exchange Commission, a copy of thecompany's audited financial statements, which shows a net worth of theprovider or its parent company of at least $100 million. If the provider'sparent company's federal Securities and Exchange Commission filing orfinancial statements are filed to meet the provider's financial stabilityrequirement, then the parent company shall agree to guarantee the obligationsof the provider relating to home service contracts sold by the provider inthis Commonwealth.

F. Except for the requirements specified in subsections D and E above, noother financial security requirements shall be required by the Commission forhome service contract providers.

G. Home service contracts shall require the provider to permit the homeservice contract holder to return the home service contract within 20 days ofthe date the home service contract was mailed to the home service contractholder or within 10 days of delivery if the home service contract isdelivered to the home service contract holder at the time of sale or within alonger time period permitted under the home service contract. Upon return ofthe home service contract to the provider within the applicable time period,if no claim has been made under the home service contract prior to its returnto the provider, the home service contract is void and the provider shallrefund to the home service contract holder, or credit the account of the homeservice contract holder, with the full purchase price of the home servicecontract. The right to void the home service contract provided in thissubsection is not transferable and shall apply only to the original homeservice contract purchaser and only if no claim has been made prior to itsreturn to the provider. A 10% penalty per month shall be added to a refundthat is not paid or credited within 45 days after return of the home servicecontract to the provider.

H. Providers shall be subject to the provisions of Chapter 25 ( 58.1-2500 etseq.) of Title 58.1. Provider fees collected on home service contracts shallbe subject to premium taxes of two and one-fourth percent of such providerfees. The premium taxes paid by providers pursuant to this subsection shallbe in lieu of all other state and local license fees or license taxes andstate income taxes of the provider. Premiums for reimbursement insurancepolicies shall be subject to applicable premium taxes.

I. Except for the licensing requirements in subsection C, providers andrelated home service contract sellers, administrators, and other personsmarketing, selling, or offering to sell home service contracts are exemptfrom any licensing requirements of the Commonwealth.

J. The marketing, sale, offering for sale, issuance, making, proposing tomake and administration of home service contracts by providers and relatedhome service contract sellers, administrators, and other persons shall beexempt from all other provisions of this title.

(2006, c. 634.)