Virginia Code Title 38.2. Insurance § 38.2-2119. Approval of forms or provisions for certain risks

A. The Commission may approve and authorize the use of appropriate forms or provisions for supplemental contracts or extended coverage endorsements where the insured may be indemnified for (i) the difference between the actual cash value of the property at the time of loss and the cost of repair or replacement of the property on the same site with new materials of like kind and quality, within a reasonable time after the loss, and without deduction for depreciation, (ii) additional cost or loss by reason of any ordinance or law in force at the time of loss which necessitates the demolition of any portion of the insured property, (iii) any increased cost of repair or replacement by reason of any ordinance or law regulating construction or repair of the insured building, and (iv) loss from interruption of business, untenantability, or termination of leasehold interest because of damage to or destruction of the property described in the policy. These forms or provisions shall apply to coverage provided to an insured having any interest in an insured building or structure which is a part of the building described in the policy, including service equipment for the building.

B. Where any policy of insurance issued or delivered in this Commonwealth pursuant to this chapter provides for the payment of the full replacement cost of property insured thereunder, the policy shall permit the insured to assert a claim for the actual cash value of the property without prejudice to his right to thereafter assert a claim for the difference between the actual cash value and the full replacement cost unless a claim for full replacement cost has been previously resolved. Any claim for such difference must be made within six months of (i) the last date on which the insured received a payment for actual cash value or (ii) date of entry of a final order of a court of competent jurisdiction declaratory of the right of the insured to full replacement cost, whichever shall last occur.

C. Notwithstanding the provisions of § 38.2-2104, insurers may offer, as an option, coverage limited to the amount necessary to repair or replace damaged property with functionally equivalent property at a lower cost than would be required to repair or replace the damaged property with material of like kind and quality. Such policies may also permit, at the option of the insured, settlement based on the market value of the damaged property at the time of loss. No new policy of insurance covering property insured on a functional replacement cost basis shall be issued or delivered in the Commonwealth unless the following statement, printed in boldface type, is enclosed with the policy:

Important Notice

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