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Code of Virginia
Title 38.2. Insurance
Chapter 41. Fraternal Benefit Societies
12/9/2024

Article 3. Governance.

§ 38.2-4109. Organization of domestic society on or after October 1, 1986.

A. On or after October 1, 1986, seven or more citizens of the United States, a majority of whom are citizens of this Commonwealth, who desire to form a fraternal benefit society, may make, sign and acknowledge before some officer competent to take acknowledgement of deeds, articles of incorporation, which shall state:

1. The proposed corporate name of the society, which shall not so closely resemble the name of any other society or insurer as to be misleading or confusing;

2. The purposes for which it is being formed and the mode in which its corporate powers are to be exercised. Such purposes shall not include more liberal powers than are granted by this chapter;

3. The names and residences of the incorporators and the names, residences and official titles of all officers, trustees, directors, or other persons who are to have and exercise the general control of the management of the affairs and funds of the society for the first year or until the ensuing election at which all such officers shall be elected by the supreme governing body, which election shall be held not later than one year from the date of issuance of the permanent certificate of authority.

B. Such articles of incorporation, duly certified copies of the society's bylaws and rules, copies of all proposed forms of certificates, applications therefor, and circulars to be issued by the society and a bond conditioned upon the return to applicants of the advanced payments if the organization is not completed within one year shall be filed with the Commission, which may require any further information it deems necessary. The bond, with sureties approved by the Commission, shall be not less than $50,000 nor more than $200,000, as required by the Commission. All documents filed are to be in the English language. If the purposes of the society conform to the requirements of this chapter and all provisions of the law have been complied with, the Commission shall so certify, retain, and file the articles of incorporation and furnish the incorporators a preliminary certificate of authority authorizing the society to solicit members as hereinafter provided.

C. No preliminary certificate of authority granted under the provisions of this section shall be valid after one year from its date or after such further period, not exceeding one year, as may be authorized by the Commission upon cause shown, unless the 500 required applicants have been secured and the organization has been duly completed. The articles of incorporation and all other proceedings under those articles shall become void in one year from the date of the preliminary certificate of authority, or at the expiration of the extended period, unless the society has completed its organization and received a certificate of authority to do business.

D. Upon receipt of a preliminary certificate of authority from the Commission, the society may solicit members for the purpose of completing its organization, shall collect from each applicant the amount of not less than one regular monthly premium in accordance with its table of rates, and shall issue to each such applicant a receipt for the amount collected. No society shall incur any liability other than for the return of such advance premium, nor issue any certificate, nor pay, allow, or offer or promise to pay or allow, any benefit to any person until:

1. Actual bona fide applicants for benefits have been secured on not less than 500 applicants, and any necessary evidence of insurability has been furnished to and approved by the society;

2. At least 10 subordinate lodges have been established into which the 500 applicants have been admitted;

3. There has been submitted to the Commission, a list of such applicants, giving their names, addresses, date each was admitted, name and number of the subordinate lodge of which each applicant is a member, amount of benefits to be granted and their premiums; and

4. It has been shown to the Commission, by sworn statement of the treasurer, or corresponding officer of such society, that at least 500 applicants have each paid in cash at least one regular monthly premium, which shall total at least $150,000. Advance premiums shall be held in trust during the period of organization and, if the society has not qualified for a certificate of authority within one year, such premiums shall be returned to the applicants.

E. The Commission may examine and require any further information it deems advisable. Upon presentation of satisfactory evidence that the society has complied with all the provisions of law, the Commissioner shall issue to the society a certificate of authority to that effect and that the society is authorized to do business pursuant to the provisions of this chapter. The certificate of authority shall be prima facie evidence of the existence of the society at the date of such certificate. The Commission shall cause a record of such certificate of authority to be made. A certified copy of such record shall have the same effect as the original certificate of authority.

F. Any incorporated society authorized to do business in this Commonwealth at the time this chapter becomes effective shall not be required to reincorporate.

G. The provisions of this section shall not apply in any instance in which the provisions of this section are inconsistent or in conflict with a provision of Article 6 (§ 38.2-3438 et seq.) of Chapter 34.

Code 1950, §§ 38-264 through 38-268, 38.1-582 through 38.1-587; 1952, c. 317, §§ 38.1-638.14 through 38.1-638.19; 1968, c. 654; 1975, c. 262; 1986, c. 562; 2013, c. 751.

§ 38.2-4110. Incorporation of fraternal benefit societies.

Domestic fraternal benefit societies may be incorporated under the provisions of Article 3 (§ 13.1-818 et seq.) of Chapter 10 of Title 13.1, as modified by the provisions of this title, and, except as otherwise provided in this title, shall be subject to all the general restrictions and shall have all the general powers imposed and conferred by law upon companies so incorporated.

Code 1950, §§ 38-264, 38.1-579; 1952, c. 317, § 38.1-638.11; 1956, c. 431; 1968, c. 654; 1986, c. 562.

§ 38.2-4111. Amendments to laws.

A. A domestic society may amend its laws in accordance with the provisions of those laws by action of its supreme governing body at any regular or special meeting or, if its laws so provide, by referendum. Such referendum may be held in accordance with the provisions of its laws by the vote of the voting members of the society, by the vote of delegates or representatives of voting members, or by the vote of local lodges. A society may provide for voting by mail. No amendment submitted for adoption by referendum shall be adopted unless, within six months from the date of submission of the amendment, a majority of the members voting shall have signified their consent to such amendment by one of the methods herein specified.

B. No amendment to the laws of any domestic society shall take effect unless filed with the Commission.

C. Within ninety days from the filing specified in subsection B of this section, all such amendments, or a synopsis of the amendments, shall be furnished to all members of the society either by mail or by publication in full in the official publication of the society. The affidavit of any officer of the society or of anyone authorized by it to mail any amendments or synopsis of the amendments, stating facts which show that same have been duly addressed and mailed, shall be prima facie evidence that such amendments or their synopsis have been furnished the addressee.

D. At the request of the Commissioner, a foreign or alien society authorized to do business in this Commonwealth shall file with the Commissioner a duly certified copy of all amendments of, or additions to, its laws.

E. Printed copies of the laws as amended, certified by the secretary or corresponding officer of the society, shall be prima facie evidence of their legal adoption.

Code 1950, §§ 38-277, 38-279, 38.1-593, 38.1-595; 1952, c. 317, §§ 38.1-638.25, 38.1-638.27; 1968, c. 654; 1986, c. 562; 2002, c. 147.

§ 38.2-4112. Institutions.

A society may create, maintain and operate, or may establish organizations to operate, not for profit institutions to further the purposes permitted by subdivision 2 of subsection A of § 38.2-4104. Such institutions may furnish services free or at a reasonable charge. Any real or personal property owned, held or leased by the society for this purpose shall be reported in every annual statement. No society shall own or operate funeral homes or undertaking establishments.

1968, c. 654, § 38.1-638.36; 1986, c. 562.

§ 38.2-4113. Reinsurance.

A. A domestic society may, by a reinsurance agreement, cede any individual risk or risks in whole or in part to an insurer, other than another fraternal benefit society, having the power to make such reinsurance and authorized to do business in this Commonwealth, or if not so authorized, one which is approved by the Commission, but no such society may reinsure substantially all of its insurance in force without the written permission of the Commission. It may take credit for the reserves on such ceded risks to the extent reinsured, but no credit shall be allowed as an admitted asset or as a deduction from liability, to a ceding society for reinsurance made, ceded, renewed, or otherwise becoming effective after the effective date of this chapter, unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding society under the contract or contracts reinsured without diminution because of the insolvency of the ceding society.

B. Notwithstanding the limitation in subsection A, a society may reinsure the risks of another society in a consolidation or merger approved by the Commission under § 38.2-4114.

Code 1950, §§ 38-270, 38.1-575; 1952, c. 317, § 38.1-638.7; 1968, c. 654; 1986, c. 562.

§ 38.2-4114. Consolidations and mergers.

A. A domestic society may consolidate or merge with any other society by complying with the provisions of this section. It shall file with the Commission:

1. A certified copy of the written contract containing in full the terms and conditions of the consolidation or merger;

2. A sworn statement by the president and secretary or corresponding officers of each society showing its financial condition on a date fixed by the Commission but not earlier than December 31 next preceding the date of the contract;

3. A certificate of such officers, duly verified, that the consolidation or merger has been approved by a two-thirds vote of the supreme governing body of each society, such vote being conducted at a regular or special meeting of each such body, or, if the society's laws permit, by mail; and

4. Evidence that at least sixty days prior to the action of the supreme governing body of each society, the text of the contract has been furnished to all members of each society either by mail or by publication in full in the official publication of each society.

B. If the Commission finds that the contract conforms to the provisions of this section, that the financial statements are correct and that the consolidation or merger is just and equitable to the members of each society, the Commission shall approve the contract and issue a certificate to such effect. Upon such approval, the contract shall be effective unless any society which is a party to the contract is incorporated under the laws of any other state or territory. In such event, the consolidation or merger shall not become effective until it has been approved as provided by the laws of such state or territory and a certificate of such approval filed with the Commission. If the laws of such state or territory contain no such provision, then the consolidation or merger shall not become effective until it has been approved by the Commission of such state or territory and a certificate of such approval filed with the Commission.

C. When the consolidation or merger becomes effective, all the rights, franchises, and interests of the consolidated or merged societies in and to every species of property and things in action belonging to the societies shall be vested in the society resulting from or remaining after the consolidation or merger without any other instrument. Conveyances of real property, however, may be evidenced by proper deeds, and the title to any real estate or interest therein, vested under the laws of this Commonwealth in any of the societies consolidated or merged, shall not revert or be in anyway impaired by reason of the consolidation or merger but shall vest absolutely in the society resulting from or remaining after such consolidation or merger.

D. The affidavit of any officer of the society or of anyone authorized by it to mail any notice or document, stating that such notice or document has been duly addressed and mailed, shall be prima facie evidence that such notice or document has been furnished the addressees.

Code 1950, §§ 38-270, 38.1-575; 1952, c. 317, § 38.1-638.7; 1968, c. 654; 1986, c. 562.

§ 38.2-4115. Conversion of fraternal benefit society into mutual life insurer.

A. Any domestic fraternal benefit society organized or operated under this chapter may, upon a two-thirds vote of its supreme governing body, amend its articles of incorporation and laws if already incorporated, or, if not incorporated, may incorporate, in a manner to transform itself into a mutual life insurer. It may use the name by which it is already known, or another name, as its supreme governing body shall determine. However, the proposed plan for reorganization or reincorporation shall be submitted to and approved by the Commission. Upon so doing, and upon procuring from the Commission a license to do the business of insurance in this Commonwealth as a mutual life insurer, it shall incur the obligations and enjoy the benefits of a mutual life insurer as if originally incorporated as a mutual life insurer. Any such corporation under its articles and bylaws as so framed or amended shall be a continuation of the original organization, and the officers of the organization shall serve through their respective terms as provided in the original articles and laws. However, their successors shall be elected and serve as the laws of this Commonwealth and the articles of incorporation or bylaws of the reorganized company provide. The incorporation, amendment or reincorporation shall not affect existing suits, rights or contracts. The organization, after reorganization, shall have the power to do business of the same nature done by it before reorganization, as well as the powers conferred in this section and contemplated by its articles of incorporation, in order to protect and perform rights and contracts existing before reorganization, but all new business written shall be as a mutual life insurer.

B. All assets, other than general or expense fund assets, belonging to any reorganized insurer, prior to reorganization or arising or accruing from benefit certificates issued prior to the reorganization, shall be used only for the benefit of the holders of the benefit certificates or their beneficiaries.

C. If at the time of reorganization, or at any time after reorganization, it appears from the last preceding annual report of any such organization, filed with the Commission, or any investigation made by the Commission, that the present value of the contributions to be received from the holders of the benefit certificates, together with all assets, other than general or expense fund assets, owned by the insurer that have been accumulated from payments made by members holding such certificates, are not equal to the present value of the benefits promised to be paid, including all matured liabilities on any benefit certificates, then the insurer so reorganized shall establish, provide for, and maintain a fund, which with the present value of contributions and assets will equal the present value of the benefits, together with all matured liabilities. The fund shall be used for the payment of matured liabilities arising on the benefit certificates when other assets applicable thereto are exhausted. The fund need not be maintained unless required by conditions expressed in this chapter.

D. Members in good standing in any society prior to reorganization shall have the right after reorganization to transfer their insurance in the society to the mutual life plan without further medical examination for the same or lesser amount, and at legal reserve or level premium rates. The interest in the assets of the society of any person so transferring, as determined by the board of directors, trustees or corresponding body, shall be transferred to, and be a part of, the assets of the insurer on the legal reserve or level premium plan.

E. The insurer so organized, and its officials, shall exercise all the rights and powers and perform all the duties conferred or imposed by law upon organizations writing the kinds of insurance written by the insurer so organized. The organization and its officials shall exercise all the rights and powers and have full authority to perform all the duties necessary to protect rights and contracts existing prior to reorganization. The Commission shall exercise the powers and discharge the duties concerning any such insurer so reorganized that are applicable to insurers writing insurance or issuing policies of the same class, organized or operating in this Commonwealth. The Commission shall issue a certificate of authority to any solvent insurer so reorganized that has fully complied with the laws of this Commonwealth to do such insurance business in this Commonwealth.

F. Any fraternal benefit society reorganized to do mutual life insurance business as provided in this chapter shall value its benefit certificates according to the standard of valuation for fraternal benefit societies used in this Commonwealth, and its legal reserve or level premium policies according to the standard of valuation for those policies in this Commonwealth. The various classes of insurance shall be governed by the law applicable to each class of insurance.

G. The expense of operation and maintenance of a reorganized insurer shall be apportioned between those holding benefit certificates issued before the reorganization and those holding policies issued after the reorganization as may be determined by the board of directors, trustees or corresponding body.

Code 1950, §§ 38-323 through 38-329, 38.1-632 through 38.1-638; 1952, c. 317, §§ 38.1-638.53 through 38.1-638.59; 1968, c. 654; 1986, c. 562.