§ 38.2-2619. Requirements for doing business
A. A provider may, but is not required to, appoint an administrator or other designee to be responsible for any or all of the administration of home service contracts and compliance with this article.
B. Home service contracts shall not be issued, sold, or offered for sale in this Commonwealth unless the provider has:
1. Provided a receipt for, or other written evidence of, the purchase of the home service contract to the contract holder; and
2. Provided a copy of the home service contract to the home service contract holder within a reasonable period of time from the date of purchase.
C. Each provider of home service contracts sold in this Commonwealth shall first obtain a license by filing with the Commission their name, full corporate address, telephone number, and contact person and designate a person in this Commonwealth for service of process. Each provider shall pay to the Commission a fee in the amount of $1,000 upon initial licensure and every two years thereafter. Said filing need only be updated by written notification to the Commission if material changes occur in the information on file. All fees paid into the State Treasury pursuant to this subsection shall be deposited in accordance with subsection B of § 38.2-400.
D. No license shall be issued to any home service contract provider unless the applicant:
1. If a resident partnership, limited liability company, or corporation, has recorded the existence of the partnership, limited liability company or corporation pursuant to law, or if a nonresident partnership, limited liability company or corporation, has furnished proof of its authority to transact business in Virginia;
2. Maintains a net worth in an amount not less than 20% of the premiums charged on its contracts currently in force; however, the minimum required net worth shall be not less than $100,000, and the maximum required net worth shall 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 of the 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 consideration received on the sale of the home service contract for all home service contracts issued and in force, but not less than $25,000 or more than $250,000. The Treasurer is authorized to defray expenses associated with the deposit in accordance with § 38.2-1057; and
4. Has filed any financial statement and any reports, certificates, or other documents as the Commission deems necessary to secure a full and accurate knowledge of its affairs and financial condition.
E. In order to assure the faithful performance of a provider's obligations to its contract holders, each provider shall be responsible for complying with any one of the following requirements:
1. Insure all home service contracts under a reimbursement insurance policy issued by an insurer licensed, registered, or otherwise authorized to do business in the Commonwealth, and either:
a. At the time the reimbursement insurance policy is filed with the Commission, and continuously thereafter, (i) maintain surplus as to policyholders of at least $15 million and (ii) annually file copies of the insurer's audited financial statements, its National Association of Insurance Commissioners Annual Statement, and the actuarial certification required by and filed in the insurer's state of domicile; or
b. At the time the reimbursement insurance policy is filed with the Commission, and continuously thereafter, (i) maintain surplus as to policyholders of less than $15 million but at least equal to $10 million, (ii) demonstrate to the satisfaction of the Commission that the company maintains a ratio of net written premiums, wherever written, to surplus as to policyholders of not greater than 3 to 1, and (iii) annually files copies of the insurer's audited financial statements, its National Association of Insurance Commissioners Annual Statement, and the actuarial certification required by and filed in the insurer's state of domicile;
2. Maintain a funded reserve account sufficient to provide for its obligations under its contracts issued and outstanding in this Commonwealth. The reserves shall not be less than 40% of gross consideration received, less claims paid, on the sale of the home service contract for all in-force contracts. This reserve account shall be certified by the company along with reasonable documentation thereof. The reserve account shall be subject to examination and review by the Commission; or
3. Maintain, or together with its parent company maintain, a net worth or stockholders' equity of at least $100 million and upon request, provide the Commission with a copy of the provider's or the provider's parent company's most recent Form 10-K or similar document filed with the federal Securities and Exchange Commission within the last calendar year, or if the company does not file with the federal Securities and Exchange Commission, a copy of the company's audited financial statements, which shows a net worth of the provider or its parent company of at least $100 million. If the provider's parent company's federal Securities and Exchange Commission filing or financial statements are filed to meet the provider's financial stability requirement, then the parent company shall agree to guarantee the obligations of the provider relating to home service contracts sold by the provider in this Commonwealth.
F. Except for the requirements specified in subsections D and E above, no other financial security requirements shall be required by the Commission for home service contract providers.
G. Home service contracts shall require the provider to permit the home service contract holder to return the home service contract within 20 days of the date the home service contract was mailed to the home service contract holder or within 10 days of delivery if the home service contract is delivered to the home service contract holder at the time of sale or within a longer time period permitted under the home service contract. Upon return of the 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 return to the provider, the home service contract is void and the provider shall refund to the home service contract holder, or credit the account of the home service contract holder, with the full purchase price of the home service contract. The right to void the home service contract provided in this subsection is not transferable and shall apply only to the original home service contract purchaser and only if no claim has been made prior to its return to the provider. A 10% penalty per month shall be added to a refund that is not paid or credited within 45 days after return of the home service contract to the provider.
H. Providers shall be subject to the provisions of Chapter 25 (§ 58.1-2500 et seq.) of Title 58.1. Provider fees collected on home service contracts shall be subject to premium taxes of two and one-fourth percent of such provider fees. The premium taxes paid by providers pursuant to this subsection shall be in lieu of all other state and local license fees or license taxes and state income taxes of the provider. Premiums for reimbursement insurance policies shall be subject to applicable premium taxes.
I. Except for the licensing requirements in subsection C, providers and related home service contract sellers, administrators, and other persons marketing, selling, or offering to sell home service contracts are exempt from any licensing requirements of the Commonwealth.
J. The marketing, sale, offering for sale, issuance, making, proposing to make and administration of home service contracts by providers and related home service contract sellers, administrators, and other persons shall be exempt from all other provisions of this title.
(2006, c. 634.)
Sections: Previous 38.2-2612 38.2-2613 38.2-2614 38.2-2615 38.2-2616 38.2-2617 38.2-2618 38.2-2619 38.2-2620 38.2-2621 38.2-2622 38.2-2623 38.2-2624 38.2-2625 38.2-2626 NextLast modified: April 16, 2009