GENERAL NOTICES
Vol. 32 Iss. 24 - July 25, 2016

STATE CORPORATION COMMISSION

Bureau of Insurance

July 1, 2016

Administrative Letter 2016-05

TO: All Companies Licensed to Write Fire and Fire in Combination with Other Coverages Including Policies Providing Homeowners Coverage, Coverage on Owner-Occupied Dwellings, and Coverage for Tenants; and Interested Parties

RE: Mandatory Notices; Withdrawal of Administrative Letter 2015-05

This administrative letter compiles information provided in a previous administrative letter about notices required by a number of statutes when issuing certain property insurance policies and provides guidance as to when and how such notices should be provided. This letter also reflects the changes made to the statutes referenced below by Chapter 4 of 2016 Acts of the Assembly (House Bill 307), which is effective January 1, 2017. Consequently, the following administrative letter is hereby withdrawn: 2015-05.

The notices described in this letter are not subject to approval by the Bureau of Insurance (Bureau), and should not be filed with the Bureau. Unless otherwise specified in the statute, insurers have flexibility as to the manner in which the notice is provided. For example, a stuffer may be used at the time a policy is mailed to an insured, or the notice may be prominently displayed on the application. However, the notice must not be ambiguous or obscure and must be given no later than at the time the new or renewal policy is delivered.1

Except as noted below, the policies to which the notice requirements identified in this letter apply include all fire policies and fire policies in combination with other coverages, including but not limited to mobile home policies, dwelling fire policies, homeowners policies, renters policies, commercial fire policies, commercial package policies providing fire coverage, and master policies providing mortgage force-placed fire coverage that are issued in Virginia. The notice requirements addressed in this letter do not apply to surplus lines policies or mutual assessment fire policies, except that the notice required by Section 38.2-305 of the Code of Virginia must be provided when issuing mutual assessment fire policies.

Important Information to Policyholders Notice

Subsection B of § 38.2-305 of the Code of Virginia requires that a specific notice be provided with each new or renewal insurance policy, contract, certificate, or evidence of coverage issued to a policyholder, covered person, or enrollee. This notice must read substantially the same as the notice in the Code. Examiners frequently find that this notice is not given when policies are renewed or when a renewal certificate is issued. The insurer should ensure that this notice is being given when required. This notice applies to all classes of insurance except those exempted in § 38.2-300 of the Code of Virginia, and except as specifically noted in subsection E of § 38.2-305 of the Code of Virginia.

Replacement Cost Coverage

Section 38.2-2118 of the Code of Virginia requires every insurer writing new or renewal insurance policies on owner-occupied dwellings and appurtenant structures that have replacement cost provisions to provide a notice with the policy (1) outlining the minimum coverage requirement necessary to make the replacement cost provision fully effective, and (2) the effect on a claim payment of not meeting the minimum coverage requirement.

Functional Replacement Cost Coverage

Subsection C of § 38.2-2119 of the Code of Virginia requires all insurers offering coverage on a functional replacement cost basis to enclose with all new business policies a notice printed in boldface type containing the following statement,

Important Notice

The coverage under this policy applies on a function replacement cost basis which means that under certain conditions, claims may be settled for less than the actual cash value of the property insured.

Coverage for Water that Backs Up Through Sewers and Drains

Section 38.2-2120 of the Code of Virginia provides that any insurer who issues or delivers a homeowners insurance policy (including a tenant's personal property policy) as defined in § 38.2-130 of the Code of Virginia in the Commonwealth shall offer, as an option, coverage insuring against loss caused or resulting from water which backs up through sewers or drains. This offer must accompany all new and renewal policies.

Building Ordinance or Law Coverage

Section 38.2-2124 of the Code of Virginia requires any insurer that issues a policy of fire insurance, or fire insurance in combination with other coverage, to provide a written offer of coverage for the repair or replacement of property in accordance with applicable ordinances or laws that regulate construction, repair, or demolition. This offer must accompany all new and renewal policies.

Flood Notice

Section 38.2-2125 of the Code of Virginia requires any insurer that issues a policy of fire insurance or fire insurance in combination with other coverage that excludes coverage for damage due to flood, surface water, waves, tidal water, or any other overflow of a body of water to provide written notice that explicitly states (1) that flood damage is excluded; (2) that information about flood insurance is available from the insurer, the insurance agent, or the National Flood Insurance Program; and (3) that contents coverage is available on the flood policy for an additional premium. This notice must accompany all new and renewal policies.

Insurance Credit Score Disclosure Notice

Any insurer issuing or delivering a homeowners or tenant policy that uses credit information contained in a consumer report for underwriting, tier placement, or rating an applicant or insured shall disclose, on the insurance application, at the time the application is taken, or at renewal if no previous notice has been given, the information required by § 38.2- 2126 A 1 of the Code of Virginia.

Insurance Credit Score Adverse Action Notice

Subsection A 2 of § 38.2-2126 of the Code of Virginia requires insurers that take adverse actions, based in whole or in part, upon credit information to provide notice to applicants or insureds (on owner-occupied and tenant residential property policies) that the adverse action was based in whole or in part on credit. The notice must also provide a statement of the primary factors or characteristics that were used as the basis for the adverse action, or notify the applicant or insured that he may request such information. For  the purposes of § 38.2-2126 of the Code of Virginia, an adverse action is defined as a denial, nonrenewal or cancellation of, an increase in any charge for or refusal to apply a discount, or placement in less favorable tier, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with underwriting, tier placement, or rating. Adverse action includes, but is not limited to, circumstances where the applicant or insured (i) did not receive the insurer's most favorable rate, (ii) was not placed in the insurer's best tier, and (iii) when there are multiple insurers available within a group of insurers, the applicant or insured did not receive coverage with the group's most favorably priced insurer. In the case of renewals, the circumstances listed in (i), (ii), and (iii) are not adverse actions if, due to the insured's credit information, the insured is not receiving a less favorable rate, or placed in a less favorable tier or company than during the policy period immediately preceding the renewal policy.

Notice of Change in Deductible

Section 38.2-2127 of the Code of Virginia requires an insurer to provide a written notice whenever it unilaterally changes the deductible on a policy written to insure an owner-occupied dwelling (homeowners and dwelling fire policies). The notice must (1) state that the deductible has changed and (2) explain how the new deductible will be applied. The law prohibits the insurer from changing the deductible except at renewal. Insurers should be aware that the law is not limited to changes in the deductible because of the territory or location of the property. For example, if the insurer unilaterally changes the deductible because of the insured's loss history, the notice must be given.

NOTE: Deductibles may only be unilaterally changed at renewal. Therefore, insurers are prohibited from changing a deductible unilaterally during the policy term, including the 90-day underwriting period once coverage is bound. Where the need arises to make a change in a deductible during the underwriting period, insurers must cancel the policy and offer to write with a different deductible. However, insurers may make changes, such as increasing deductibles or increasing limits, during the underwriting period if the insured agrees to such changes, or if the application, signed by the insured, advises the insured that the deductible may be changed.

Earthquake Notice

Section 38.2-2129 of the Code of Virginia requires insurers issuing new or renewal policies of fire insurance, or fire insurance in combination with other insurance coverages, which exclude coverage for damage caused by earthquake, to provide a written notice that explicitly states, "earthquake coverage is excluded unless purchased by endorsement." This notice must state that information regarding such coverage is available from the insurer or the agent if earthquake coverage is otherwise available from the insurer. Insurers may use notices that unambiguously set forth the information required by the law even if the language of the notice is not in the precise language that is quoted in the law.

All insurers issuing policies covering fire and fire in combination with other coverages including policies providing homeowners coverage, coverage on owner-occupied dwellings, and coverage for tenants should review this letter and make the changes required by 2016 Acts of the Assembly c. 558 (House Bill 307) by the effective date of the legislation, January 1, 2017.

Questions about this administrative letter should be directed to Bureau of Insurance Manager, P&C Market Conduct Section, telephone (804) 371-9826, or email bureauofinsurance@scc.virginia.gov.

_________________________________

1Additional information may be found in the Common Problems Found During Examinations Identified by the Property and Casualty Market Conduct and Consumer Services Sections that is located at http://scc.virginia.gov/boi/laws.aspx.

/s/ Jacqueline K. Cunningham
Commissioner of Insurance

July 1, 2016

Administrative Letter 2016-06

TO: All Insurers Licensed to Write Motor Vehicle Policies and Interested Parties

RE: Mandatory Notices; Withdrawal of Administrative Letter 2015-06

This administrative letter compiles information provided in a previous administrative letter about notices required by a number of statutes when issuing motor vehicle insurance policies and provides guidance as to when and how such notices should be provided. This letter also reflects the changes made to the statutes referenced below by Chapter 558 of the 2016 Acts of the Assembly (House Bill 307), which is effective January 1, 2017. Consequently, the following administrative letter is hereby withdrawn: 2015-06.

The notices described in this letter are not subject to approval by the Bureau of Insurance, and should not be filed with the Bureau. Unless otherwise specified in the statute, insurers have flexibility as to the manner in which the notice is provided. For example, when the statute requires a notice to be given on a new policy, a stuffer may be used at the time a policy is mailed to an insured, or the notice may be prominently displayed on the application. However, the notice must not be ambiguous or obscure and must be given not later than when the new policy is delivered.1

Important Information to Policyholders Notice

Subsection B of § 38.2-305 of the Code of Virginia requires that a specific notice be provided with each new or renewal insurance policy, contract, certificate, or evidence of coverage issued to a policyholder, covered person, or enrollee. This notice must read substantially the same as the notice in the Code. Examiners frequently find that this notice is not given when policies are renewed or when a renewal certificate is issued. Insurers should ensure that this notice is given when required. This notice applies to all classes of insurance except those exempted in § 38.2-305 of the Code of Virginia, and except as specifically noted in subsection E of § 38.2-305 of the Code of Virginia.

Point Surcharge Notice

Subsection A of § 38.2-1905 of the Code of Virginia requires insurers to provide notice in writing to a named insured anytime the insurer increases the premium or charges points as a result of a motor vehicle accident. Furthermore, such notice shall inform the named insured that he may appeal the decision of the insurer to the Commissioner if he believes the action of the insurer is without just cause. In addition, the notice shall include the requirement that the appeal be in writing and made within 60 days of the receipt of the notice of any premium increase adjustment or any point charge resulting from a motor vehicle accident.

Offer of Medical Expense and Income Loss Coverages

Section 38.2-2202 A of the Code of Virginia requires insurers issuing new policies in Virginia insuring the ownership, maintenance, or use of a motor vehicle offer at least $2000 in coverage for medical expense benefits and at least $100 per week in income loss benefits. This section requires that insurers include the IMPORTANT NOTICE provided in the statute with the policy. This notice is not required be provided on renewal policies. The notice must be in boldface type and read exactly as stated in the statute. However, insurers are not precluded from offering of both higher and lower limits.

Notice that UM/UIM Limits May Be Reduced

Subsection B of § 38.2-2202 of the Code of Virginia requires insurers issuing new policies covering the ownership, maintenance, or use of a motor vehicles to provide notice that the named insured may reduce his uninsured/underinsured motorist limits to limits less than the liability limits on the policy. The notice must be in boldface type and read exactly as stated in the statute. Once any named insured has reduced the limits on the uninsured/underinsured motorists coverage below those on the liability coverage, the election is binding on all insureds.

Warning Concerning Cancellation of Motor Vehicle Liability Policy

Section 38.2-2210 of the Code of Virginia requires that a specific notice be printed in boldface type on or attached to an application for motor vehicle insurance as defined in § 38.2-2212 of the Code of Virginia. The Bureau frequently finds that this notice is not provided on or with the application.  Insurers should review their applications to ensure compliance with all of the requirements of this section of the Code. The notice required by this section shall be given to an applicant within 10 days of the date of the application in the event the applicant is not provided a written copy of the application and the coverage has been bound by the insurer.

Insurance Credit Score Disclosure Notice

Any insurer issuing or delivering a policy of motor vehicle insurance, as defined in § 38.2-2212, that uses credit information contained in a consumer report for underwriting, tier placement, or rating an applicant or insured shall disclose, on the insurance application, at the time the application is taken, or at renewal if no previous notice has been given, the information required by Subdivision A 1 of § 38.2-2234 of the Code of Virginia.

Insurance Credit Score Adverse Action Notice

Subdivision A 2 of § 38.2-2234 of the Code of Virginia requires insurers that take adverse actions, based in whole or in part, upon credit information to provide notice to applicants or insureds on policies of motor vehicle insurance, as defined in § 38.2-2212 of the Code of Virginia that the adverse action was based in whole or in part on credit. The notice must either provide a statement of the primary factors or characteristics that were used as the basis for the adverse action, or notify the applicant or insured that he may request such information. For the purposes of § 38.2-2234 of the Code of Virginia, an adverse action is defined as a denial, nonrenewal or cancellation of, an increase in any charge for or refusal to apply a discount, or placement in a less favorable tier, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with underwriting, tier placement, or rating. Adverse action includes, but is not limited to, circumstances where the applicant or insured (i) did not receive the insurer's most favorable rate, (ii) was not placed in the insurer's best tier, and (iii) when there are multiple insurers available within a group of insurers, the applicant or insured did not receive coverage with the group's most favorably priced insurer.  In the case of renewals, the circumstances listed in (i), (ii), and (iii) are not adverse actions if, due to the insured's credit information, the insured is not receiving a less favorable rate, or placed in a less favorable tier or company than during the policy period immediately preceding the renewal policy.

Offer of Rental Reimbursement Coverage

Section 38.2-2230 of the Code of Virginia requires that every insurer issuing a new or renewal policy of motor vehicle insurance, as defined in § 38.2-2212 of the Code of Virginia, which provides comprehensive or collision coverage, must offer, in writing, to the named insured the option of purchasing rental reimbursement coverage.  This notice must be given by insurers writing motor vehicle policies insuring as the named insured one individual or a husband and wife who are residents of the same household where the vehicle is a private passenger type vehicle. Commercial policies endorsed to provide coverage for individuals must also provide this notice if the vehicle is a private passenger type vehicle.

All insurers issuing motor vehicle insurance policies should review this letter and make the changes required by 2016 Acts of the Assembly c. 558 (House Bill 307) by the effective date of the legislation, January 1, 2017.

Questions about this administrative letter should be directed to Bureau of Insurance Manager, P&C Market Conduct, telephone (804) 371-9826, or email bureauofInsurance@scc.virginia.gov.

____________________________

1Additional information may be found in the Common Problems Found During Examinations Identified by the Property and Casualty Market Conduct and Consumer Services Sections that is located at http://scc.virginia.gov/boi/laws.aspx.

/s/ Jacqueline K. Cunningham
Commissioner of Insurance

July 1, 2016

Administrative Letter 2016-07

TO: All Companies Licensed, Approved, Registered or Accredited under Title 38.2 of the Code of Virginia

RE: Implementation of Principle-Based Reserving for Life, Annuity, and Accident and Health Contracts pursuant to Article 10 of Chapter 13 of the Code of Virginia

During the 2014 General Assembly Session, the Virginia General Assembly enacted House Bill 631, which added a new Article 10 to Chapter 13 of Title 38.2 (Standard Valuation Act) of the Code of Virginia. House Bill 631 required insurance companies to use a principle-based reserve basis for life, annuity, and accident and health contracts, and to use a Valuation Manual adopted by the National Association of Insurance Commissioners (NAIC). Pursuant to Virginia Code § 38.2-1379, use of the Valuation Manual will become effective on January 1 of the first calendar year following the first July 1 when certain conditions have been met, including that at least 42 states/U.S. jurisdictions have enacted the revised NAIC Standard Valuation Law model, or substantially similar terms and provisions, and that the NAIC has adopted the Valuation Manual. The Bureau of Insurance has determined that these conditions have been met.

In light of the above, the provisions in Virginia Code §§ 38.2-1379 and 38.2-1380 pertaining to principle-based reserving and use of the Valuation Manual shall become effective for life, annuity, and accident and health contracts issued on or after January 1, 2017.

Questions concerning this administrative letter may be addressed to Gregory D. Walker, Supervisor, Financial Analysis Section - Domestic Companies, Financial Regulation Division, Bureau of Insurance, State Corporation Commission, P.O. Box 1157, Richmond, VA 23218, telephone (804) 371-9604, or email greg.walker@scc.virginia.gov.

/s/ Jacqueline K. Cunningham
Commissioner of Insurance

DEPARTMENT OF MEDICAL ASSISTANCE SERVICES

Public Comments on Addiction Treatment Services Benefit Delivery System Design

The Department of Medical Assistance Services (DMAS) is seeking public comment in relation to future DMAS initiatives to improve Medicaid service benefits and delivery systems for individuals with substance use disorders (SUD), including ensuring that a sufficient continuum of care is available to effectively treat the physical, behavioral, and mental dimensions of SUD. DMAS welcomes public comment on the entire addiction treatment services benefit delivery system design.

For more information regarding the substance use disorder benefit, please visit http://www.dmas.virginia.gov
/Content_pgs/bh-sud.aspx
.

Public comment submission by mail: Written comments shall be addressed to Ashley Harrell, Policy and Planning Specialist, Division of Integrated Care and Behavioral Services, Department of Medical Assistance Services, 600 East Broad Street, Suite 1300, Richmond, VA 23219.

Public comment submission electronically: For ease in compilation of comments, all submissions must be in Microsoft Word and submitted as an email attachment to sud@dmas.virginia.gov.

Important Date: To submit public comments, please send comments to sud@dmas.virginia.gov by 5 p.m. on August 1, 2016. There will be additional opportunities for public comment. The department will also continue its longstanding practice of meeting regularly with stakeholder groups, providing information, and gathering additional input on the important features of SUD programs.

Contact Information: Emily McClellan, Regulatory Manager, Division of Policy and Research, 600 East Broad Street, Suite 1300, Richmond, VA 23219, telephone (804) 371-4300, FAX (804) 786-1680, TDD (800) 343-0634, or email emily.mcclellan@dmas.virginia.gov.

STATE WATER CONTROL BOARD AND THE DEPARTMENT OF CONSERVATION AND RECREATION

Total Maximum Daily Load Implementation Plan for the Little Calfpasture River

The Department of Environmental Quality (DEQ) and the Department of Conservation and Recreation (DCR) seek written and oral comments from interested persons on the development of a total maximum daily load (TMDL) implementation plan (IP) for the Little Calfpasture River in Rockbridge County. The Little Calfpasture River was listed on the 1996 § 303(d) TMDL Priority List and Report as impaired due to violations of the state's general (benthic) standard for aquatic life. This impairment extends for 0.82 miles from the Lake Merriweather Dam to the confluence with the Maury River.

Section 303(d) of the Clean Water Act and § 62.1-44.19:7 C of the Code of Virginia require DEQ to develop TMDLs for pollutants responsible for each impaired water contained in Virginia's § 303(d) TMDL Priority List and Report. In addition, § 62.1-44.19:7 C of the Code of Virginia requires expeditious implementation of total maximum daily loads when appropriate. The IP should provide measurable goals and the date of expected achievement of water quality objectives. The IP should also include the corrective actions needed and their associated costs, benefits, and environmental impacts. DEQ completed a benthic TMDL for the Little Calfpasture River in January 2009. The TMDL was approved by the Environmental Protection Agency in April 2010. The TMDL report is available on the DEQ website at http://www.deq.virginia.gov/Programs/Water/WaterQualityInformationTMDLs/TMDL/TMDLDevelopment/ApprovedTMDLReports.aspx.

The Virginia Department of Environmental Quality will host a public meeting to initiate the development of a TMDL implementation plan for the Little Calfpasture River on Tuesday, August 2, 2016, at 7 p.m. at the Goshen Volunteer Fire Hall, 140 Main Street, Goshen VA.

A 30-day public comment period for the meeting begins August 3, 2016, and ends September 1, 2016. Written comments should include the name, address, and telephone number of the person submitting the comments and should be sent to Nesha McRae, Department of Environmental Quality, P.O. Box 3000, Harrisonburg, VA 22801, telephone (540) 574-7850, or email nesha.mcrae@deq.virginia.gov.

VIRGINIA CODE COMMISSION

Notice to State Agencies

Contact Information: Mailing Address: Virginia Code Commission, General Assembly Building, 201 North 9th Street, 2nd Floor, Richmond, VA 23219; Telephone: Voice (804) 786-3591; Email: varegs@dls.virginia.gov.

Meeting Notices: Section 2.2-3707 C of the Code of Virginia requires state agencies to post meeting notices on their websites and on the Commonwealth Calendar at http://www.virginia.gov/connect/commonwealth-calendar.

Cumulative Table of Virginia Administrative Code Sections Adopted, Amended, or Repealed: A table listing regulation sections that have been amended, added, or repealed in the Virginia Register of Regulations since the regulations were originally published or last supplemented in the print version of the Virginia Administrative Code is available at http://register.dls.virginia.gov/documents/cumultab.pdf.

Filing Material for Publication in the Virginia Register of Regulations: Agencies use the Regulation Information System (RIS) to file regulations and related items for publication in the Virginia Register of Regulations. The Registrar's office works closely with the Department of Planning and Budget (DPB) to coordinate the system with the Virginia Regulatory Town Hall. RIS and Town Hall complement and enhance one another by sharing pertinent regulatory information.

ERRATA

DEPARTMENT OF GENERAL SERVICES

Title of Regulation: 1VAC30-45. Certification for Noncommercial Environmental Laboratories.

Publication: 32:22 VA.R. 2754-2805 June 27, 2016

Correction to Final Regulation:

Page 2785, 1VAC30-45-760 A 1, line 6 after "1VAC30-45-775," delete "1VAC30-45-791 through 1VAC30-45-798, and 1VAC30-45-811" and insert "[ 1VAC30-45-791 1VAC30-45-790 ] through 1VAC30-45-798, and1VAC30-45-811 1VAC30-45-810 through 1VAC30-45-818 ]"

Page 2785, 1VAC30-45-760 B 1 b, line 2, after "analyte" insert "or analytes"

Page 2793, 1VAC30-45-791 B 1, line 3, after "organism" insert "or organisms"

Page 2793, 1VAC30-45-791 B 1, line 4, after "organism" insert "or organisms"

VA.R. Doc. No. R12-3334; Filed July 4, 2016, 11:31 a.m.