H 4081 Session 111 (1995-1996)
H 4081 General Bill, By Seithel
A Bill to amend Chapter 43, Title 38, Code of Laws of South Carolina, 1976,
relating to insurance agents and agencies, by adding Article 5 so as to enact
provisions regulating the cancellation of an agent's agreement with an
insurer, and by adding Article 7 so as to enact provisions regarding agent
termination review process.
04/12/95 House Introduced and read first time HJ-42
04/12/95 House Referred to Committee on Labor, Commerce and
Industry HJ-43
A BILL
TO AMEND CHAPTER 43, TITLE 38, CODE OF LAWS OF
SOUTH CAROLINA, 1976, RELATING TO INSURANCE
AGENTS AND AGENCIES, BY ADDING ARTICLE 5 SO AS
TO ENACT PROVISIONS REGULATING THE
CANCELLATION OF AN AGENT'S AGREEMENT WITH AN
INSURER, AND BY ADDING ARTICLE 7 SO AS TO ENACT
PROVISIONS REGARDING AGENT TERMINATION REVIEW
PROCESS.
Be it enacted by the General Assembly of the State of South
Carolina:
SECTION 1. Chapter 43 of Title 38 of the 1976 Code is
amended by adding:
"Article 5
Cancellation of Agent's Agreement
Section 38-43-510. (A) An insurer may not cancel a written
agreement with an agent or reduce or restrict an agent's
underwriting authority with respect to property or casualty
insurance, based solely on the loss ratio experience on that agent's
book of business, if:
(1) the insurer required the agent to submit the application for
underwriting approval,
(2) all material information on the application was fully
completed, and
(3) the agent has not omitted or altered any information
provided by the applicant.
(B) For the purposes of this article `loss ratio experience' means
the ratio of premiums paid divided by the claims paid during the
previous two-year period.
(C) This article applies only to agents who write eighty percent
or more of their gross annual insurance business for one company
or any or all of its subsidiaries and are not in the direct employ of
the company.
(D) An insurer that cancels a written agreement with an agent in
violation of this section must pay to the agent terminated all
commissions earned by that agent before or after termination.
(E) An insurance company may not terminate or otherwise
penalize an insurance agent solely because the agent contacted any
governmental department or agency regarding a problem that the
agent or an insured may be having with an insurance company.
(F) If any changes or modifications are made or offered on
existing contracts between exclusive property/casualty insurance
agents and their primary insurance company, or any of such
company's subsidiaries, all agency/company contracts shall conform
to existing state law.
Article 7
Agent Termination Review Process
Section 38-43-710. For the purposes of this article:
(1) `Agent' means an insurance agent who is not an employee
of the insurer, who has an agency contractual relationship that has
been in effect for five or more years, and who writes eighty percent
or more of the agent's business through one insurer or its
subsidiaries.
(2) `Insurer' means an insurance company writing property or
casualty loss insurance in this State through agents.
Section 38-43-720. (A) An insurer shall establish a termination
reviewing process for an agent involuntarily terminated by the
insurer. The review process shall be available for use at the option
of the agent. The review process must be completed within fifteen
days of the request or before the date of termination, whichever is
later.
(B) If an agent is terminated by an insurer, the agent may
request a hearing before the Board of Review, as provided for in
Section 38-43-730. If an insurer initiates the termination of an
agent's agreement, the written notice of termination must advise the
agent of the agent's right to a hearing before the board. Upon
receipt of an agent's request for a hearing, the Director of the
Department of Insurance or his designee shall establish a hearing
date within thirty days of the request or longer with the approval of
the agent and the insurer. The agent and the insurer must be
notified in writing of the date, time, and place of the hearing. The
board shall provide the parties to the hearing with an opportunity to
present evidence and arguments in support of their respective
positions.
Section 38-43-730. A three-member board of review must be
selected from a list of ten agents and ten insurer representatives
compiled by the Director of the Department of Insurance or his
designee. One member must be selected by the agent and one by
the insurer. The third member must be mutually agreed upon by
both parties. If the parties do not agree upon a third member, the
director or his designee shall request the American Arbitration
Association to provide the director or his designee with three names
of potential members. If the American Arbitration Association
declines to provide the names, the director or his designee shall
provide the names. The agent member and the insurer member
shall each strike one person from the list. The remaining person
must be selected as the third member of the board. The insurer and
the agent shall each pay one-half of the fee charged by the third
member. The board member selected by the agent may not be a
relative of the agent. The board members selected by the agent and
insurer may not be presently or formerly associated with an insurer
represented by the agent. An insurer is immune from civil liability
to the agent for disclosures made at the hearing. This immunity
does not extend to disclosures made in bad faith or with knowledge
of their falseness.
Section 38-43-740. Upon completion of the hearing, the Board of
Review shall determine whether the termination of the agent's
agreement is justified. If in the opinion of the board an involuntary
termination is not justified, and in the absence of a reasonable
contractual financial provision for termination as determined by the
board, the board shall order the insurer to pay an amount of
compensation that the board considers appropriate to the agent.
If in the opinion of the board a voluntary termination was not
voluntary and the insurer is not justified in terminating the agent's
agreement, and in the absence of a reasonable contractual financial
provision for termination as determined by the board, the board
shall order the insurer to pay the amount of compensation that the
board considers appropriate to the agent.
Section 38-43-745. If an agent believes that he has been
terminated by an insurer without just cause, then the agent has a
right to be heard before the Board of Review in accordance with
the procedures set forth in this article.
Section 38-43-750. An order of the Director of the Department
of Insurance or a determination of the Board of Review under
Section 38-43-740 may be appealed to the Circuit Court of the
county of the agent's residence by either party for a trial de novo.
If the insurer appeals and the agent prevails, the insurer shall pay
the agent's legal fees as approved by the court.
Section 38-43-760. A person who intimidates or coerces a
member of the Board of Review is subject to a civil penalty
imposed by the Director of the Department of Insurance in an
amount not to exceed twenty-five thousand dollars.
Section 38-43-770. This article does not apply to an agent whose
license has expired, is revoked, or is under suspension.
Section 38-43-780. Failure to comply with a final order or
determination of the Board of Review constitutes a basis for
disciplinary action by the Director of the Department of Insurance
in accordance with the authority granted the director under the laws
of this State."
SECTION 2. This act takes effect upon approval by the
Governor.
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