A. When an association is activated under § 38.2-2801, a stabilization reserve fund shall be created. The fund shall be administered by five directors appointed by the Commission, one of whom shall be a representative of the Commission, two of whom shall be representatives of the association, and two of whom shall be representatives of the association's policyholders.

B. The directors shall act by majority vote with three directors constituting a quorum for the transaction of any business or the exercise of any power of the fund. The directors shall serve without salary, but each director shall be reimbursed for actual and necessary expenses incurred in the performance of his official duties as a director of the fund. The directors shall not be subject to any personal liability with respect to the administration of the fund.

C. Each policyholder shall pay to the association a stabilization reserve fund charge equal to one-third of the annual premium due for medical malpractice insurance through the association until the fund reaches a level deemed appropriate by the Commission. The means of payment shall be set forth in the plan of operation and shall be separately stated in the policy. The association shall cancel the policy of any policyholder who fails to pay the stabilization reserve fund charge. Upon the termination of any policy during the term of the policy, payments made to the stabilization reserve fund shall be returned to the policyholder on a pro rata basis identical to that applied in computing that portion of the premium which is returned to the policyholder.

D. All moneys received by the fund shall be held in a separate restricted cash account under the sole control of an independent fund manager to be selected by the directors. The fund manager may invest the moneys held, subject to the approval of the directors. All investment income shall be credited to the fund. All expenses of administration of the fund shall be charged against the fund. The moneys held shall be used solely for the following purposes: (i) to reimburse the association for any and all expenses, taxes, licenses and fees paid by the association which are properly chargeable or allocable to the stabilization reserve fund; or (ii) to pay any retrospective premium adjustment charge levied by the association. Payment of retrospective premium adjustment charges and other authorized payments shall be made by the directors upon certification to them by the association of the amount due. If all moneys accruing to the fund are exhausted in payment of retrospective premium adjustment charges, all liability and obligations of the association's policyholders with respect to the payment of retrospective premium adjustment charges shall terminate and shall be conclusively presumed to have been discharged.

E. The association shall promptly pay the fund manager of the fund all stabilization reserve fund charges that it collects from its policyholders.

F. Upon dissolution of the association, all assets remaining in the fund shall be distributed equitably to the policyholders who have contributed to the fund under procedures authorized by the directors. Distribution of assets remaining in the fund shall be made after final disposition of all claims, expenses, and liabilities against the fund, including reimbursement of preliminary organizational assessments made pursuant to subsection B of § 38.2-2804.

1976, c. 85, § 38.1-781; 1977, c. 154; 1986, c. 562; 1987, cc. 526, 554; 1988, c. 341.