Code of Virginia

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Code of Virginia
Title 59.1. Trade and Commerce
Chapter 33.1. Home Service Contract Providers

§ 59.1-434.3. Bond or letter of credit required.

A. Every provider shall maintain a funded reserve account for its obligations under its home service contracts issued and outstanding in the Commonwealth. The reserves shall not be less than 40 percent of gross consideration received, less claims paid, on the sale of the home service contract for all in-force home service contracts sold in the Commonwealth.

B. Each provider, before it is registered under § 59.1-434.2, shall file and maintain with the Commissioner, in form and substance satisfactory to him, a bond with corporate surety, from a company authorized to transact business in the Commonwealth or a letter of credit from a bank insured by the Federal Deposit Insurance Corporation, in the amount of $10,000. Additional bond or letter of credit amounts shall be similarly filed with the Commissioner and shall be adjusted from time to time, in accordance with the following schedule:

aTotal Amount of Unexpired Home Service ContractsAmount of Bond or Letter of Credit
b$50,001 to $300,000$40,000
c$300,001 to $750,000$65,000
d$750,001 or more$90,000

The total amount of unexpired home service contracts shall be the total consideration paid by all purchasers to the provider for all home service contracts currently in effect. The bond or letter of credit required by this subsection shall be in favor of the Commonwealth for the benefit of purchasers of home service contracts for property in the event that the provider does not fulfill its obligations under such home service contracts for any reason, including insolvency or bankruptcy.

C. The aggregate liability of the bond or letter of credit to all persons for all breaches of the conditions of the bond or letter of credit shall in no event exceed the amount of the bond or letter of credit. The bond or letter of credit shall not be cancelled or terminated except with the consent of the Commissioner.

D. In lieu of compliance with subsections A and B, a provider may demonstrate financial responsibility by filing with the Commissioner a copy of a liability insurance policy issued by an insurer authorized to transact business in the Commonwealth and that covers 100 percent of the provider's home service contract liabilities, including the administration of claims and the cost for such administration. Reimbursement insurance policies filed pursuant to this section may not be canceled by either the provider or the issuing insurer without providing 60 days' notice to the Commissioner.

The chapters of the acts of assembly referenced in the historical citation at the end of this section may not constitute a comprehensive list of such chapters and may exclude chapters whose provisions have expired.