1976 South Carolina Code of Laws
Updated through the end of the 2000 Session
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Title 38 - Insurance
JOINT UNDERWRITING ASSOCIATION FOR PRIVATE PASSENGER AND COMMERCE AUTOMOBILE INSURANCE [EFF MARCH 1, 1999 AND CEASES TO BE OF ANY FORCE OR EFFECT AFTER FEBRUARY 28, 2003]
SECTION 38-91-10. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Purpose of chapter.
(A) The purposes of this chapter are to:
(1) promote the public welfare by establishing a mechanism to provide automobile insurance to those required to have such insurance,
(2) provide controls over such mechanism in order to lower expenses and prevent abuses,
(3) provide for competitive bidding of servicing carriers,
(4) provide controls over the application process to prevent fraud and inaccuracies as well as other improper practices.
(B) The provisions of this chapter must cease to be of any force or effect after February 28, 2003. In other words, the joint underwriting association cannot accept any business after February 28, 2003. However, any policy currently issued by or written through the joint underwriting association, pursuant to this chapter, on February 28, 2003 shall continue to be a valid contract of insurance until the end of the policy period unless canceled by the insurer or insured. Furthermore, the director of the Department of Insurance may promulgate regulations which he deems necessary to implement this transition including, but not limited to, the termination of the joint underwriting association and its wind-up period.
SECTION 38-91-30. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Definitions.
As used in this chapter:
(a) "association" means the joint underwriting association established pursuant to the provisions of this act.
(b) "automobile insurance" means direct insurance against injury or damage arising out of the ownership, operation, maintenance, or use of motor vehicles, or insurance against loss for damage to motor vehicles. Private passenger automobile insurance and commercial automobile insurance are two distinct kinds of automobile insurance.
(c) "director" means the director of the Department of Insurance.
(d) "plan of operation" means the plan of operation approved pursuant to the provisions of this act or ordered by the director.
(e) "qualified applicant" means (1) a resident of this State who owns a motor vehicle registered in this State or has a valid driver's license or is required to file proof of financial responsibility in order to register his motor vehicle or obtain a driver's license, or (2) a nonresident of this State who owns a vehicle registered or principally garaged in this State; provided, however, that no one shall be a qualified applicant if he has any unpaid premium due for prior automobile insurance or if any person who usually drives the motor vehicle to be insured does not hold or is not eligible to obtain a driver's license under suspension.
(f) "residual market mechanism" means a means of providing a market for insureds in South Carolina where the voluntary market is inadequate.
SECTION 38-91-110. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Creation of Associated Auto Insurers Plan; membership; purpose; powers.
(a) A joint underwriting association, hereinafter referred to as the "Associated Auto Insurers Plan", is hereby created consisting of all insurers authorized to write and engaged in writing automobile insurance within this State. Each insurer shall be a member of the association and shall remain a member as a condition of its authority to continue to transact such insurance in this State.
(b) The purpose of the association shall be to guarantee that automobile insurance will be available to any qualified applicant who is unable to procure such insurance through ordinary methods while preserving to the public the benefits of competition among financially sound automobile insurers by encouraging maximum use of the normal private insurance system.
(c) Pursuant to the provisions of this act and its plan of operation, the association is empowered on behalf of its members:
(1) To issue automobile insurance policies to qualified applicants or to arrange for the issuance of such policies through members of the association;
(2) To establish procedures for the sharing among the members of profit or loss on association business and other costs, charges, expenses, liabilities, income, property and other assets of the association. The assessment of members for their appropriate shares may be based on the member's premium volume or exposure units for business other than association business or on a combination of such bases or on any other equitable basis with allowances for incentive programs for insurers to write in the voluntary market business written in the association. Allowances may be provided for existing debits and credits under any automobile insurance plans replaced or terminated as a result of this legislation;
(3) To reinsure association business;
(4) To establish the compensation to be paid to any licensed resident insurance agent or broker;
(5) To join, advise, assist, associate, cooperate and contract with its members and with such organizations, associations, insurers, governmental agencies, and others as may be necessary or proper to accomplish the purpose of the association;
(6) To sue and be sued in the name of the association. No judgment against the association shall create any direct liability in the individual participating members thereof;
(7) To do anything not specifically enumerated above or related thereto which is otherwise necessary or proper to accomplish the purpose of the association.
SECTION 38-91-130. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Director to call organizational meeting; Advisory Board; membership; proposed plan of operation; revisions.
(a) Within ninety days after the effective date of this section, the director or his designee shall call the first or organizational meeting of the association and seat an advisory board (hereinafter referred to as the board).
The initial board shall consist of three individuals who are licensed agents or brokers and four consumer representatives to be appointed by the director or his designee, five association members, the Consumer Advocate or his designee, the director of Public Safety or his designee, and one member from the Department of Insurance. The representative from the Department of Insurance shall be a nonvoting board member. All board members, other than the director of the Department of Public Safety or his designee and the Consumer Advocate or his designee, must be appointed by the director or his designee.
The American Insurance Association, the Alliance of American Insurers, and the National Association of Independent Insurers and any individual, group, or insurance agent trade or professional association may nominate qualified individuals for consideration. Vacancies on the board must be published in newspapers of general, statewide circulation.
The terms of office for the initial and subsequent members of the board shall be as provided in the plan of operation. Members of the board must be appointed for the terms specified in the plan and shall serve until their successors are appointed and qualify. Any vacancy must be filled for the unexpired term only. Such plan shall provide for the appointment by the director of three individuals who are licensed as agents or brokers in this State. The board shall elect a chairperson who is not an insurer representative.
No more than one representative of a domestic insurer may serve on the board at any one time. No insurer may serve on the board if such insurer is a servicing carrier for the association or is a member of a group of insurers which has one insurer as a servicing carrier unless the carrier or group of carriers participates in the voluntary automobile market with a level at least twice the premium level for the Associated Auto Insurers Plan. If a servicing contract is awarded mid-term, then the affected representative must resign at the next board meeting.
(b) Within sixty days after the organizational meeting, the board shall file with the director or his designee for his approval, a proposed plan of operation, consistent with the provisions of this act, which shall provide for the prompt and efficient provision of automobile insurance to qualified applicants unable to procure such insurance through ordinary methods. Distinct and separate plans may be filed for private passenger automobile insurance and commercial automobile insurance. The plan(s) of operation shall provide for, among other matters, preliminary assessments of members for initial expenses to commence operations, establishment of necessary facilities, the operation of the association, assessments of members to defray losses and expenses, compensation to licensed agents or brokers, eligibility requirements, the coverages and amounts of insurance to be provided and premium payment plans. The plan(s) of operation must be approved by the department as evidenced by a returned copy stamped approved by the department. The plan(s) of operation must include a provision that all meetings of the board will be held in Columbia unless approval is given by the director. Approval must consist of request stamped approved by the department.
(c) If the director or his designee shall disapprove all or any part of the proposed plan of operation, he shall do so in writing, specifying in what respect the plan of operation fails to meet the requirements of this act. Unless the board takes other appropriate legal action to contest the disapproval, it shall within thirty days thereafter file for his review an appropriately revised plan of operation.
(d) If, after a hearing, the director or his designee finds that any activity or practice of insurers participating in the association or any other residual market mechanism is unfair, unreasonable, or otherwise inconsistent with the provisions of this title, the director or his designee must issue a written order specifying in what respects such activity or practice is unfair, unreasonable, or otherwise inconsistent with the provisions of this title and require the discontinuance of such activity or practice. The director or his designee may establish a residual market mechanism by written order if the director or his designee finds that the existing residual market mechanism is unfair, unreasonable, or inconsistent with the provisions of this chapter.
(e) Any revision of the proposed plan of operation or any subsequent amendments to an approved plan of operation shall be subject to the provisions in subsection (c) relating to the initial plan of operation.
(f) If no plan of operation is submitted to the director or his designee within sixty days after the organizational meeting, the director or his designee shall, after consulting with the representatives of the industry, prepare and promulgate a plan of operation in accordance with the requirements of this act which shall continue in force until superseded by a plan of operation effective in accordance with subsections (b) and (c).
SECTION 38-91-210. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Application for coverage through the association; review of applications; penalties against agents or brokers who improperly assign applicants.
(a) Any qualified applicant shall, on or after the effective date of the plan of operation, be entitled to apply for coverage through the association. The application may be made on his behalf by any licensed resident agent or broker authorized by him. Every licensed resident agent or broker shall offer to place insurance through the association for any qualified applicant for whom he is unable to procure such insurance through the markets available to him. Coverage limits may be provided up to $250,000 per person and $500,000 per accident for bodily injury, $100,000 property damage or a combined single limit of $500,000 and fire, theft, comprehensive and collision coverage. In order to place the insurance of the applicant through the association, the agent or broker on the application must show (i) that the applicant has been refused automobile insurance coverage by at least one insurer, agent, or broker, and (ii) the reasons for refusal. The applicant must by his signature acknowledge this showing.
(b) The director of the Department of Insurance or his designee may review each application and provide such application to other qualified insurers. The director or his designee may assign the applicant to any qualified insurer other than the association willing to accept such coverage in the voluntary market. The agent who placed such applicant in the association for automobile insurance coverage shall not receive any commission from this insurance policy or applicant upon placement by the director or his designee of this applicant voluntary market; provided, however, any commission received or paid on the sale of this policy for such applicant must be refunded.
(c) If the director or his designee determines that any agent or broker has placed ten percent or more of his applications with the association and if the director or his designee further determines that the agent improperly assigned applicants insurable through regular underwriting in the voluntary market to the association, then the director or his designee shall assess any one of, a combination thereof, or all, of the following penalties against the agent or broker: (i) a fine up to five thousand dollars per violation; (ii) suspension of that agent's or broker's right to place coverages with the association, or his binding authority, for a specified period of time; or (iii) suspension or revocation of the agent's or broker's license to offer automobile insurance in the State. In his review of the agent's or broker's residual market business, the director or his designee may consider whether the insurer, agent, or broker is participating in a pattern of unfair discrimination as provided in Section 38-77-122 and Section 38-77-123.
(d) If the association determines that the applicant is a qualified applicant eligible under the plan of operation, then the association, upon receipt of the premium, or such portion thereof as is prescribed in the plan of operation, shall issue or cause to be issued a policy of automobile insurance and policy periods as are available under the plan of operation as may be requested.
If the director or his designee finds, after a hearing, with respect to any specified geographical area in the State, that a large number of persons are failing to gain the benefits of the association because they do not have the services of an agent or broker, the association shall provide service to assist the public in applying to the association for insurance.
(e) The association shall monitor applications submitted to the association in order to ascertain if applications are correct, complete, and reflect that actual risk of the insured. The association shall select a subcommittee of three board members who will review applications. The subcommittee may develop and enforce requirements on applications and if requirements are not met by agents submitting applications, shall suspend the ability of that agent to bind applications for thirty days as well as prescribe audit fees to be applied to applications from particular agents. In the event of three suspensions for a particular agent in any five-year period, the ability of that agent to bind applications shall be suspended for three years. In the event of four suspensions for agents in a particular agency in any five-year period, the ability of that agency to bind applications shall be suspended for three years. Appeals of the subcommittee shall be made to the full board and then the director or his designee.
The association shall monitor agents to ensure that insureds are not forced to purchase other insurance coverages in order for the agent to submit the application to the association. The association or the director of the Department of Insurance may require agents to disclose all policies written in conjunction with a policy through the association.
SECTION 38-91-220. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Classifications, rules, rating plans, and planning forms proposed for use for automobile insurance issued by or through the association; filing with director or designee.
(a) The classifications, rules, rating plans, and policy forms proposed for use for automobile insurance issued by or through the association may be made by the association or by any licensed rating organization and shall be filed with the director or his designee. Such filings may incorporate by reference any other material on file with the director.
(b) The classifications, rules, rates, rating plans, and policy forms proposed for use for automobile insurance issued by or through the association shall be subject to appropriate statutes concerning approval of filings including Section 38-73-910. The association and every member shall be required to use the classifications, rules, rates, rating plans, and policy forms so approved for automobile insurance issued by or through the association for business written through the association.
(c) The rates used for the Associated Auto Insurers Plan must be actuarially sound, self-supporting, and provide adequate premiums to pay losses and expenses associated with the Associated Auto Insurers Plan. Any deficits incurred by the plan should be recovered prospectively by rate changes for the Associated Auto Insurers Plan.
SECTION 38-91-230. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Filing of private automobile loss components for automobile insurance coverages; determination of expense component.
(A) Effective March 1, 1999 the association shall file private passenger automobile loss components for automobile insurance coverages based on the total experience of all risks ceded to the South Carolina Reinsurance Facility which are actuarially sound and supported by statistical evidence. The association shall contract with independent actuarial services to develop such loss component. Due consideration must be given to actual loss experience within the reinsurance facility for the most recent three-year period for which such information is available. The loss component developed under this section is applicable to the risk and territorial classification plan adopted by the association.
(B) In the initial year of operation, the expense component used to develop the final rate or premium charge when combined with the loss component filed in subsection (A) shall be that expense component filed in accordance with Section 38-73-1420 by the governing board of the Reinsurance Facility.
(C) After the initial year of operation, rates, rating plans, and rating rules must be based upon the Underwriting Association's loss and expense experience and investment income. The resultant final rate or premium charges must be on an actuarially sound basis and must be calculated to be self-supporting.
SECTION 38-91-310. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Power of board to direct operation of association.
The board shall have all power to direct the operation of the association, except as may be specifically delegated to others or reserved to the members in the plan of operation and may delegate ministerial duties, hire a manager, and contract for goods and services from others.
SECTION 38-91-320. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Filing of statement containing information regarding transactions, condition, operations and affairs of association.
The association shall file in the office of the department annually, by March first, a statement which contains information with respect to its transactions, condition, operations, and affairs during the preceding year. The statement shall contain such matters and information as are prescribed by the director or his designee and must be in the form he directs. The director or his designee may, at any reasonable time, require the association to furnish additional information with respect to its transactions, condition, or any matter connected therewith considered to be material and of assistance in evaluating the scope, operation, and experience of the association.
SECTION 38-91-330. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Examination into financial condition and affairs of association; report.
The director or his designee shall make an examination into the financial condition and affairs of the association at least annually and shall file a report thereon with the department, the Governor, and the General Assembly. The expenses of the examination must be paid by the association.
SECTION 38-91-340. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Competitive bidding by servicing carriers for the association; standards and procedures.
The servicing carriers for the association may be competitively bid as provided for in this subsection. Separate bidding processes may be done for private passenger and commercial automobile insurance. If the carriers are competitively bid, then the director or his designee must appoint a committee or committees of individuals as he considers qualified to establish standards and procedures for the consideration and evaluation of bids. The committee must include incentive and disincentive programs that encourage proper claims processing of policies and claims handling. Insurers, or other vendors in conjunction with a licensed insurer, may submit bids. The committee or committees must evaluate and award contracts pursuant to the final approval of the director or his designee. The director may require a bid fee to cover the expenses of implementing this section. A serving carrier may be an entity other than a licensed insurance carrier if that entity can prove to the satisfaction of the director that it has the experience and capability to perform the duties of a servicing carrier and if that entity has a licensed automobile insurance carrier to which a policyholder can be issued an automobile insurance policy.
SECTION 38-91-410. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Request for hearing on alleged violations; appeal of formal rulings; appeal to circuit court.
(a) Any applicant for an association policy, any person insured under such a policy, and any member of the association may request a hearing and ruling the board of the association on any alleged violation of the plan of operation or any alleged improper act or ruling of the association directly affecting it as to coverage or premium or in the case of a member directly affecting its assessment. Any member of the association may request a hearing and ruling on the application to him of the plan of operation. Any such member may request the board to act upon or to rule upon any proposed change in or addition to the plan of operation. The final action of the board in respect of any such proposed changes or additions shall be deemed a formal ruling for purposes of applying sections (b) and (c) below. The request for hearing must be made within thirty days after the date of the alleged violation or improper act or ruling. The hearing shall be held within thirty days after the receipt of the request. The hearing may be held by a panel appointed by the chairman of the advisory board consisting of not less than three members thereof, of which one must be a consumer representative, and the ruling of a majority of the panel shall be deemed to be the formal ruling of the board, unless the full board on its own motion shall modify or rescind the action of the panel.
(b) Any formal ruling by the board may be appealed to the director or his designee by filing notice of appeal with the association and director within thirty days after issuance of the ruling.
(c) The director, after a hearing if requested in the notice of appeal, shall issue an order approving the action or decision, disapproving the action or decision, or directing the board to reconsider the ruling.
(d) In any hearing held pursuant to this section by the board or the director or his designee, the board or the commissioner as the case may be, shall issue a ruling or order within thirty days after the close of the hearing.
(e) All rulings or orders of the director or his designee under this section shall be subject to appeal to circuit court.
SECTION 38-91-420. [Eff March 1, 1999 and ceases to be of any force or effect after February 28, 2003] Promulgation of regulations.
The director of the Department of Insurance shall promulgate regulations to implement the provisions of this chapter.