S*1110(Rat #0426, Act #0411 of 1998)  General Bill, By McConnell and Saleeby
 A BILL TO AMEND SECTION 38-3-240, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA,
 1976, RELATING TO THE DEPARTMENT OF INSURANCE AND THE CONVERSION OF CERTAIN
 LICENSES TO A BIENNIAL FEE-COLLECTION PERIOD, SO AS TO PROVIDE THAT AN AGENT
 TRANSACTING THE BUSINESS OF INSURANCE SHALL PAY A LICENSE FEE FOR TWO YEARS TO
 THE DEPARTMENT WITHIN THIRTY DAYS AFTER SEPTEMBER 1, 1992, AND EVERY TWO YEARS
 AFTER THAT TIME WITHIN THIRTY DAYS AFTER SEPTEMBER FIRST, RATHER THAN JULY
 FIRST, EVERY EVEN-NUMBERED YEAR; TO AMEND SECTION 38-9-40, AS AMENDED,
 RELATING TO THE INSURANCE LAW, CAPITAL, SURPLUS, RESERVES, AND OTHER FINANCIAL
 MATTERS, AND THE DUTY OF THE DIRECTOR OF THE DEPARTMENT OF INSURANCE TO NOTIFY
 INSURERS OF CERTAIN REQUIRED AMOUNTS, SO AS TO REQUIRE THAT A SCHEDULE OF THE
 REQUIRED AMOUNTS MUST BE MAINTAINED BY EACH INSURER, AND TO DELETE THE
 REQUIREMENT THAT THE SCHEDULE BE PUBLISHED IN ALL SUCCEEDING ANNUAL REPORTS OF
 THE DEPARTMENT THAT ARE SUBMITTED TO THE GENERAL ASSEMBLY THROUGH THE
 GOVERNOR; TO AMEND SECTION 38-39-90, AS AMENDED, RELATING TO CANCELLATION OF
 AN INSURANCE CONTRACT BY A PREMIUM SERVICE COMPANY, SO AS TO PROVIDE THAT
 NOTICE IS SUFFICIENT WHEN IT IS HAND DELIVERED OR MAILED UNDER CERTAIN
 CONDITIONS; TO AMEND SECTION 38-45-90, AS AMENDED, RELATING TO INSURANCE
 BROKERS AND SURPLUS LINES INSURANCE, THE DUTIES OF BROKERS WHEN PLACING
 BUSINESS WITH NONADMITTED INSURERS, AND CERTAIN STATEMENTS AND REPORTS, SO AS
 TO, AMONG OTHER THINGS, DELETE THE REQUIREMENT THAT THE DEPARTMENT OF
 INSURANCE LIST ALL ELIGIBLE SURPLUS LINES INSURERS IN ITS ANNUAL REPORT TO THE
 DIRECTOR OF THE DEPARTMENT OF INSURANCE WHO SHALL SUBMIT THIS REPORT TO THE
 GENERAL ASSEMBLY; TO AMEND SECTION 38-61-20, AS AMENDED, RELATING TO APPROVAL
 OF INSURANCE FORMS, SO AS TO PROVIDE FOR AN OPTIONAL ACCIDENT, HEALTH, OR
 ACCIDENT AND HEALTH INSURANCE RIDER TO A LIFE INSURANCE CONTRACT UPON APPROVAL
 BY THE DIRECTOR OF

   03/11/98  Senate Introduced and read first time SJ-5
   03/11/98  Senate Referred to Committee on Banking and Insurance SJ-5
   03/19/98  Senate Committee report: Favorable with amendment
                     Banking and Insurance SJ-13
   03/24/98  Senate Amended SJ-20
   03/24/98  Senate Read second time SJ-20
   03/24/98  Senate Ordered to third reading with notice of
                     amendments SJ-20
   03/25/98  Senate Read third time and sent to House SJ-13
   03/26/98  House  Introduced and read first time HJ-4
   03/26/98  House  Referred to Committee on Labor, Commerce and
                     Industry HJ-5
   05/14/98  House  Committee report: Favorable with amendment Labor,
                     Commerce and Industry HJ-32
   05/20/98  House  Amended HJ-92
   05/20/98  House  Read second time HJ-98
   05/21/98  House  Read third time and returned to Senate with
                     amendments HJ-8
   05/27/98  Senate House amendment amended SJ-29
   05/27/98  Senate Returned to House with amendments SJ-29
   06/02/98  House  Concurred in Senate amendment and enrolled HJ-63
   06/04/98         Ratified R 426
   06/09/98         Signed By Governor
   06/25/98         Effective date 06/09/98
   06/25/98         Copies available
   06/30/98         Act No. 411

AN ACT TO AMEND SECTION 38-3-240, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE DEPARTMENT OF INSURANCE AND THE CONVERSION OF CERTAIN LICENSES TO A BIENNIAL FEE-COLLECTION PERIOD, SO AS TO PROVIDE THAT AN AGENT TRANSACTING THE BUSINESS OF INSURANCE SHALL PAY A LICENSE FEE FOR TWO YEARS TO THE DEPARTMENT WITHIN THIRTY DAYS AFTER SEPTEMBER 1, 1992, AND EVERY TWO YEARS AFTER THAT TIME WITHIN THIRTY DAYS AFTER SEPTEMBER FIRST, RATHER THAN JULY FIRST, EVERY EVEN-NUMBERED YEAR; TO AMEND SECTION 38-9-40, AS AMENDED, RELATING TO THE INSURANCE LAW, CAPITAL, SURPLUS, RESERVES, AND OTHER FINANCIAL MATTERS, AND THE DUTY OF THE DIRECTOR OF THE DEPARTMENT OF INSURANCE TO NOTIFY INSURERS OF CERTAIN REQUIRED AMOUNTS, SO AS TO REQUIRE THAT A SCHEDULE OF THE REQUIRED AMOUNTS MUST BE MAINTAINED BY EACH INSURER, AND TO DELETE THE REQUIREMENT THAT THE SCHEDULE BE PUBLISHED IN ALL SUCCEEDING ANNUAL REPORTS OF THE DEPARTMENT THAT ARE SUBMITTED TO THE GENERAL ASSEMBLY THROUGH THE GOVERNOR; TO AMEND SECTION 38-39-90, AS AMENDED, RELATING TO CANCELLATION OF AN INSURANCE CONTRACT BY A PREMIUM SERVICE COMPANY, SO AS TO PROVIDE THAT NOTICE IS SUFFICIENT WHEN IT IS HAND DELIVERED OR MAILED UNDER CERTAIN CONDITIONS; TO AMEND SECTION 38-45-90, AS AMENDED, RELATING TO INSURANCE BROKERS AND SURPLUS LINES INSURANCE, THE DUTIES OF BROKERS WHEN PLACING BUSINESS WITH NONADMITTED INSURERS, AND CERTAIN STATEMENTS AND REPORTS, SO AS TO, AMONG OTHER THINGS, DELETE THE REQUIREMENT THAT THE DEPARTMENT OF INSURANCE LIST ALL ELIGIBLE SURPLUS LINES INSURERS IN ITS ANNUAL REPORT TO THE DIRECTOR OF THE DEPARTMENT OF INSURANCE WHO SHALL SUBMIT THIS REPORT TO THE GENERAL ASSEMBLY; TO AMEND SECTION 38-61-20, AS AMENDED, RELATING TO APPROVAL OF INSURANCE FORMS, SO AS TO PROVIDE FOR AN OPTIONAL ACCIDENT, HEALTH, OR ACCIDENT AND HEALTH INSURANCE RIDER TO A LIFE INSURANCE CONTRACT UPON APPROVAL BY THE DIRECTOR OF THE DEPARTMENT OF INSURANCE; TO AMEND SECTIONS 38-71-310 AND 38-71-720, BOTH AS AMENDED, BOTH RELATING TO ACCIDENT AND HEALTH INSURANCE, SO AS TO PROVIDE FOR AN OPTIONAL LIFE INSURANCE RIDER TO AN INDIVIDUAL OR GROUP ACCIDENT, HEALTH, OR ACCIDENT AND HEALTH INSURANCE POLICY UPON APPROVAL BY THE DIRECTOR; TO AMEND SECTION 38-81-370, AS AMENDED, RELATING TO LEGAL MALPRACTICE JOINT UNDERWRITERS, AND SECTION 38-89-160, AS AMENDED, RELATING TO DAY CARE JOINT UNDERWRITERS, SO AS TO PROVIDE FOR THE MEMBERSHIP AND SELECTION OF MEMBERS OF THE RESPECTIVE ASSOCIATIONS; AND TO REPEAL SECTION 38-3-70 RELATING TO CERTAIN ANNUAL REPORTS AND RECOMMENDATIONS OF THE DEPARTMENT OF INSURANCE TO THE GENERAL ASSEMBLY, SECTION 38-79-10 RELATING TO THE REQUIREMENT THAT MEDICAL MALPRACTICE INSURANCE CLAIMS BE FILED BY INSURERS WITH THE DEPARTMENT OF INSURANCE, AND SECTION 38-81-10 RELATING TO THE REQUIREMENT THAT LEGAL MALPRACTICE CLAIMS BE FILED BY INSURERS WITH THE DEPARTMENT.

Be it enacted by the General Assembly of the State of South Carolina:

Payment of biennial fee

SECTION 1. Section 38-3-240(A)(6) of the 1976 Code, as amended by Section 532 of Act 181 of 1993, is further amended to read:

(6) An agent transacting the business of insurance in this State shall pay a license fee for two years to the department within thirty days after September 1, 1992, and every two years after that time within thirty days after September first every even-numbered year.

Schedules of required amounts

SECTION 2. Section 38-9-40 of the 1976 Code, as amended by Section 535 of Act 181 of 1993, is further amended to read:

"Section 38-9-40. The director or his designee shall notify each licensed insurer that does not comply with Section 38-9-10 or 38-9-20 of the amounts of capital and surplus if a stock insurer, or the amount of surplus if a mutual insurer, the insurer shall maintain in order to continue to remain licensed in this State. A schedule of the amounts required must be maintained by each insurer. This schedule must be revised annually as to those insurers whose minimum capital and surplus requirements are increased periodically as required by Section 38-9-30."

Cancellation of policy by premium service company

SECTION 3. Section 38-39-90 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:

"Section 38-39-90. (a) When a premium service agreement contains a power of attorney enabling the company to cancel any insurance contract listed in the agreement, the insurance contract may not be canceled by the premium service company unless the cancellation is effectuated in accordance with this section.

(b) The premium service company shall deliver the insured at least ten days' written notice of its intent to cancel the insurance contract unless the default is cured within the ten-day period.

(c) Not less than five days after the expiration of the notice, the premium service company may thereafter request in the name of the insured cancellation of the insurance contract by delivering to the insurer a notice of cancellation. The insurance contract must be canceled as if the notice of cancellation had been submitted by the insured himself, but without requiring the return of the insurance contract. The premium service company shall also deliver a notice of cancellation to the insured at his last address as set forth in its records by the date the notice of cancellation is delivered to the insurer. It is sufficient to give notice either by delivering it to the person or by depositing it in the United States mail, postage prepaid, addressed to the last address of the person. Notice delivered in accordance with the provisions of this statute shall be sufficient proof of delivery.

(d) All statutory, regulatory, and contractual restrictions providing that the insurance contract may not be canceled unless notice is given to a governmental agency, mortgagee, or other third party apply where cancellation is effected under this section. The insurer shall give the prescribed notice in behalf of itself or the insured to any governmental agency, mortgagee, or other third party by the second business day after the day it receives the notice of cancellation from the premium service company and shall determine the effective date of cancellation taking into consideration the number of days' notice required to complete the cancellation.

(e) Whenever an insurance contract is canceled, the insurer shall return whatever gross unearned premiums are due under the insurance contract to the premium service company which financed the premium for the account of the insured.

(f) If the crediting of return premiums to the account of the insured results in a surplus over the amount due from the insured, the premium service company shall hold the surplus in a fiduciary capacity and promptly refund the excess to the insured. No refund is required if it amounts to less than three dollars.

(g) Cancellations of insurance contracts by premium service companies must be effected exclusively by the forms, method, and timing set forth in this chapter."

Submission of reports

SECTION 4. Section 38-45-90 of the 1976 Code, as amended by Section 672 of Act 181 of 1993, is further amended to read:

"Section 38-45-90. At the request of a licensed resident broker, the director or his designee may approve certain nonadmitted insurers as eligible surplus lines insurers to write business on risks located in this State that one or more insurers licensed in this State to write that line of business in this State have declined to write. The director or his designee may require the broker to submit, on behalf of the insurer, documents necessary to satisfy him that the insurer is licensed in its home state, that it is solvent, and that its operation is not hazardous to the policyholders. The director or his designee may require the broker or the insurer to file additional documents at any given time to maintain the insurer's status as an eligible surplus lines insurer. The director or his designee may withdraw his approval at any time the insurer fails to meet any of the requirements. While the insurer maintains its status as an eligible surplus lines insurer, a duly licensed resident broker may, under the terms of this chapter, place business with the insurer. An insurance broker shall exercise due care in the placing of insurance. Each broker transacting business in the State during a calendar year shall annually file with the department within thirty days after December thirty-first a detailed report of this business. The report must be in the form the director or his designee prescribes. The broker's books, papers, and accounts must at all times be open to the inspection of the director or his designee."

Approval of insurance forms

SECTION 5. Section 38-61-20 of the 1976 Code, as last amended by Act 181 of 1993, is further amended by adding:

"(D) Nothing in this chapter precludes the issuance of a life insurance contract that includes an optional accident, health, or accident and health insurance rider. However, the optional accident, health, or accident and health insurance rider must be filed with and approved by the director pursuant to Section 38-71-310, 38-71-720, or 38-71-740, as appropriate, and comply with all applicable sections of Chapter 71 of this title and, in addition, in the case of long term care insurance, Chapter 72 of this title."

Approval of insurance forms

SECTION 6. Section 38-71-310 of the 1976 Code, as last amended by Act 181 of 1993, is amended by adding:

"(F) Nothing in this chapter precludes the issuance of an individual accident, health, or accident and health insurance policy that includes an optional life insurance rider. However, the optional life insurance rider must be filed with and approved by the director pursuant to Section 38-61-20 and comply with all applicable sections of Chapter 63 and, in addition, in the case of a life insurance rider with accelerated long term care benefits, Chapter 72 of this title."

Approval of insurance forms

SECTION 7. Section 38-71-720 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:

"Section 38-71-720. (A) A policy or contract of group accident, group health, or group accident and health insurance may not be issued or delivered in this State, nor may any application, endorsement, or rider which becomes a part of the policy be used, until a copy of the form has been filed with and approved by the director or his designee except as exempted by regulation of the department as permitted by Section 38-61-20. The director or his designee may disapprove the form if the form:

(1) does not meet the requirements of law;

(2) contains provisions which are unfair, deceptive, ambiguous, misleading, or unfairly discriminatory; or

(3) is going to be solicited by means of advertising, communication, or dissemination of information which is deceptive or misleading.

However, if no action has been taken to approve or disapprove a policy, contract, certificate, application, endorsement, or rider after the documents have been filed for ninety days, they may be issued and delivered until or unless subsequently disapproved by the director or his designee. This time period may be extended thirty days if the director or his designee gives written notice to the filer that he needs additional time to review the filing. The director or his designee, as soon as is practicable, shall notify in writing the insurer which has filed the form of his approval or disapproval. If disapproved, the notice must contain the reasons for disapproval and the insurer is entitled to a public hearing on it. At any time after having given written approval, the director or his designee, after a public hearing of which at least thirty days' written notice has been given, may withdraw approval if he finds that the forms:

(1) do not meet the requirements of law;

(2) contain provisions which are unfair, deceptive, ambiguous, misleading, or unfairly discriminatory; or

(3) are being solicited by means of advertising, communication, or dissemination of information which is deceptive or misleading.

The withdrawal of approval must be effected by written notice to the insurer and the insurer is entitled to a public hearing on it. Any action or decision of the director or his designee to withdraw approval may be appealed to the Administrative Law Judge Division in accordance with Section 38-3-210.

(B) Nothing in this chapter precludes the issuance of a policy or contract of group accident, group health, or group accident and health

insurance that includes an optional life insurance rider. However, the optional life insurance rider must be filed with and approved by the director pursuant to Section 38-61-20 and comply with all applicable sections of Chapter 65 and, in addition, in the case of a life insurance rider with accelerated long term care benefits, Chapter 72 of this title."

Board of directors

SECTION 8. Section 38-81-370 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:

"Section 38-81-370. The association is governed by a board of seven directors, one of whom is appointed by the Governor to represent the general public and three of whom are members of the South Carolina Bar appointed by the Governor. Three directors are elected by cumulative voting by members of the association, whose votes in the election must be weighed in accordance with each member's net direct premiums written during the preceding calendar year. The approved plan of operation of the association may make provision for combining insurers under common ownership or management into groups or voting, assessment, and all other purposes and may provide that not more than one of the officers or employees of such a group may serve as a director at any one time. The insurer representatives of the board of directors must be elected at a meeting of the members or their authorized representatives, which must be held at a time and place designated by the board of directors. The board shall elect a chairman and other necessary officers."

Board of directors

SECTION 9. Section 38-89-160 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:

"Section 38-89-160. The association is governed by a board of seven directors, one of whom is appointed by the Governor, with the advice and consent of the Senate, to represent the general public and three of whom are day care owners or operators appointed by the Governor. Three directors are elected by cumulative voting by members of the association, whose votes in the election must be weighed in accordance with each member's net direct premiums written during the preceding calendar year. The approved plan of operation of the association may make provision for combining insurers under common ownership or management into groups for voting, assessment, and all other purposes and may provide that not more than one of the officers or employees of the group may serve as a director at any one time. The insurer representatives of the board of directors must be elected at a meeting of the members or their authorized representatives, which must be held at a time and place designated by the board of directors. The board shall elect a chairman and other necessary officers."

Promulgation of regulations

SECTION 10. The Department of Insurance may promulgate regulations necessary to implement the provisions of this act.

Repeal

SECTION 11. Sections 38-3-70, 38-79-10, and 38-81-10 of the 1976 Code are repealed.

Time effective

SECTION 12. This act takes effect upon approval by the Governor.

Approved the 9th day of June, 1998.