Current Status Bill Number:4081 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:19950412 Primary Sponsor:Seithel All Sponsors:Seithel Drafted Document Number:bbm\9826jm.95 Residing Body:House Current Committee:Labor, Commerce and Industry Committee 26 HLCI Subject:Insurance agent's agreement, cancellation of
Body Date Action Description Com Leg Involved
______ ________ _______________________________________ _______ ____________
House 19950412 Introduced, read first time, 26 HLCI
referred to Committee
View additional legislative information at the LPITS web site.
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:
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.
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.