2006 Code of Virginia § 38.2-2806 - Policy forms; applicants to be issued policies; cancellation of policies; rates; examination of bus...

38.2-2806. Policy forms; applicants to be issued policies; cancellation ofpolicies; rates; examination of business of association.

A. All policies issued by the association shall be subject to the groupretrospective premium adjustment and to the stabilization reserve fundrequired by 38.2-2807. No policy form shall be used by the associationunless it has been filed with the Commission and either (i) the Commissionhas approved it or (ii) thirty days have elapsed and the Commission has notdisapproved the form or endorsement for one or more of the reasons enumeratedin subsection A of 38.2-317.

B. Policies shall be issued by the association, after receipt of the premiumor portion of the premium prescribed by the plan of operation, to applicantsthat (i) meet the minimum underwriting standards, and (ii) have no unpaid oruncontested premium due as evidenced by the applicant having failed to makewritten objection to premium charges within thirty days after billing.

C. Any policy issued by the association may be cancelled for any one of thefollowing reasons: (i) nonpayment of premium or portion of the premium; (ii)suspension or revocation of the insured's license; (iii) failure of theinsured to meet the minimum underwriting standards; (iv) failure of theinsured to meet other minimum standards prescribed by the plan of operation;and (v) nonpayment of any stabilization reserve fund charge.

D. The rates, rating plans, rating rules, rating classifications, premiumpayment plans and territories applicable to the insurance written by theassociation, and related statistics shall be subject to the provisions ofChapter 20 ( 38.2-2000 et seq.) of this title. Due consideration shall begiven to the past and prospective loss and expense experience for medicalmalpractice insurance written and to be written in this Commonwealth, trendsin the frequency and severity of losses, the investment income of theassociation, and other information the Commission requires. All rates shallbe on an actuarially sound basis, giving due consideration to thestabilization reserve fund, and shall be calculated to be self-supporting.The Commission shall take all appropriate steps to make available to theassociation the loss and expense experience of insurers writing or havingwritten medical malpractice insurance in this Commonwealth.

E. All policies issued by the association shall be subject to a nonprofitgroup retrospective premium adjustment to be approved by the Commission underwhich the final premium for all policyholders of the association, as a group,will be calculated based upon the experience of all policyholders. Theexperience of all policyholders shall be calculated following the end of eachfiscal period and shall be based upon earned premiums, administrativeexpenses, loss and loss adjustment expenses, and taxes, plus a reasonableallowance for contingencies and servicing. Policyholders shall be given fullcredit for all investment income, net of expenses and a reasonable managementfee on policyholder supplied funds. Any final premium resulting from aretrospective premium adjustment will be collected from the stabilizationfund set forth in 38.2-2807. The maximum premium for all policyholders as agroup shall be limited as provided in 38.2-2807.

F. 1. The association shall certify to the Commission the estimated amount ofany deficit remaining after the stabilization reserve fund has been exhaustedin payment of the maximum final premium for all policyholders of theassociation. Within sixty days after such certification, the Commission shallauthorize the association to recover from the members their respective shareof the deficit.

2. Members shall be permitted to recover any assessment made by theassociation under subdivision 1 by deducting the members' share of thedeficit from future premium taxes due the Commonwealth. The amount of premiumtax deduction for each member's share of the deficit shall be apportioned bythe Commission so that the amount of each member's premium tax deduction ineach of the ten calendar years following the payment of the member'sassessment is equal to ten percent of the assessment paid by the member.

G. In the event that sufficient funds are not available for the soundfinancial operation of the association, subject to recoupment as provided inthis chapter and the plan of operation, all members shall, on a temporarybasis, contribute to the financial requirements of the association in themanner provided in this chapter. The contribution shall be reimbursed to themembers by the procedure set forth in subdivision F 2.

H. The Commission shall examine the business of the association as often asit deems appropriate to make certain that the group retrospective premiumadjustments are being calculated and applied in a manner consistent with thissection. If the Commission finds that they are not being calculated andapplied in a manner consistent with this section, it shall issue an order tothe association, specifying (i) how the calculation and application are notconsistent and (ii) stating what corrective action shall be taken.

(1976, c. 85, 38.1-780; 1986, c. 562; 1987, cc. 520, 554; 1988, c. 341;1997, c. 160.)