H*2016 Session 107 (1987-1988)
H*2016(Rat #0097, Act #0062 of 1987) General Bill, By J.D. Bradley, Boan and
P.T. Bradley
Similar(S 111, S 401)
A Bill to provide a plan for the writing of professional liability insurance
for professionals licensed and regulated by the State through a Joint
Underwriting Association upon a finding of an emergency by the Insurance
Commission because this insurance is not available through normal means or on
a reasonable basis to professionals licensed and regulated by the State.
12/03/86 House Prefiled
12/03/86 House Referred to Committee on Labor, Commerce and Industry
01/13/87 House Introduced and read first time HJ-30
01/13/87 House Referred to Committee on Labor, Commerce and
Industry HJ-31
02/04/87 House Committee report: Favorable with amendment Labor,
Commerce and Industry HJ-371
02/05/87 House Amended HJ-424
02/10/87 House Amended HJ-460
02/10/87 House Read second time HJ-460
02/11/87 House Read third time and sent to Senate HJ-494
02/17/87 Senate Introduced and read first time SJ-546
02/17/87 Senate Referred to Committee on Banking and Insurance SJ-54
04/02/87 Senate Recalled from Committee on Banking and Insurance
SJ-1157
04/07/87 Senate Read second time SJ-1181
04/07/87 Senate Ordered to third reading with notice of
amendments SJ-1181
04/08/87 Senate Read third time and enrolled SJ-1207
04/23/87 Ratified R 97
04/28/87 Signed By Governor
04/28/87 Effective date 04/28/87
04/28/87 Act No. 62
05/12/87 Copies available
(A62, R97, H2016)
AN ACT TO PROVIDE A PLAN FOR THE WRITING OF PROFESSIONAL LIABILITY INSURANCE
FOR PROFESSIONALS LICENSED AND REGULATED BY THE STATE THROUGH A JOINT
UNDERWRITING ASSOCIATION UPON A FINDING OF AN EMERGENCY BY THE INSURANCE
COMMISSION BECAUSE THIS INSURANCE IS NOT AVAILABLE THROUGH NORMAL MEANS OR ON A
REASONABLE BASIS TO PROFESSIONALS LICENSED AND REGULATED BY THE STATE.
Be it enacted by the General Assembly of the State of South Carolina:
Findings
SECTION 1. The General Assembly declares that there exists the potential for
a professional liability insurance crisis for professionals licensed and
regulated by the State because of the high cost of liability insurance and a
failure of competition. These conditions could result in a situation in which
liability insurance would not be available to professionals licensed and
regulated by the State.
The public interest requires that a contingency program for providing
professional liability insurance be enacted and that the Insurance Commission of
South Carolina activate this program upon finding that an emergency exists
because insurance is not available through normal channels or is not available
on a reasonable basis because of lack of competition or otherwise.
Definitions
SECTION 2. As used in this act:
(1) "Association" means any joint underwriting association
established pursuant to this act.
(2) "Professional liability insurance" means insurance protection
against the legal liability of the insured and against loss, damage, or expense
incident to a claim arising out of service to or representation of any person as
the result of negligence or malpractice in rendering or failing to render a
professional service.
(3) "Net direct premiums" means gross direct premiums written on
bodily injury liability insurance, other than automobile liability insurance,
homeowners liability insurance, and farmowners liability insurance, including the
liability component of multiple peril package policies, as computed by the Chief
Insurance Commissioner less return premiums or the unused or unabsorbed portions
of premium deposits.
JUA insurers
SECTION 3. (A) A joint underwriting association is created, consisting of all
insurers authorized to write within this State, on a direct basis, bodily injury
liability insurance, other than automobile bodily injury liability insurance,
homeowners liability insurance, and farmowners liability insurance, including
insurers covering such peril in multiple peril package policies. Every such
insurer is and must remain a member of the association as a condition of its
authority to continue to transact this kind of insurance in this State.
(B) The purpose of the association is to provide professional liability
insurance on a self-supporting basis to the fullest extent possible.
(C) The association is activated when the Commission finds and declares the
existence of an emergency because of the unavailability of professional liability
insurance or the unavailability of such insurance on a reasonable basis through
normal channels.
Power
SECTION 4. The association has the power on behalf of its members to:
(1) issue, or cause to be issued, policies of insurance to applicants
including incidental coverages such as, but not limited to, premises or
operations liability coverage on the premises where services are rendered, all
subject to limits of liability as specified in the plan of operation but not to
exceed five million dollars for all claimants under one policy in any one year;
(2) underwrite professional liability insurance and to adjust and pay losses
with respect thereto or to appoint service companies to perform those functions;
(3) cede and assume reinsurance.
Creation of JUA by professional association
SECTION 5. (A) Upon application by the members of a professional association
seeking creation of a joint underwriting association, the Commissioner shall
promulgate a plan of operation consistent with this act. The plan of operation
is operative no later than thirty days after the declaration of an emergency by
the Commission.
(B) The plan of operation shall provide for economic, fair, and
nondiscriminatory administration and for the prompt and efficient provision of
professional liability insurance and may contain other provisions including, but
not limited to, preliminary assessment of all members for initial expenses
necessary to commence operations, establishment of necessary facilities,
management of the association, assessment of the members to defray losses and
expenses, commission arrangements, reasonable and objective underwriting
standards, acceptance and cession of reinsurance, appointment of servicing
carriers, and procedures for determining amounts of insurance to be provided by
the association.
(C) The plan of operation shall provide that any profit achieved by the
association must be added to the reserves of the association or returned to the
policyholders as a dividend but under no circumstances whatsoever shall any
profit be paid over to or received by an insurer either in currency or any other
benefit of any kind.
(D) Amendments to the plan of operation may be made by the directors of the
association with the approval of the Commissioner or must be made at the
direction of the Commissioner after proper notice and public hearing.
Coverage by the association
SECTION 6. Upon the activation of the plan of operation, any professional
licensed in this State is entitled to apply to the association for coverage. The
application shall be made on behalf of the applicant by a licensed agent or
broker authorized in writing by the applicant.
If the association determines that the applicant meets the underwriting
standards of the association as set forth in the approved plan of operation and
there is no unpaid, uncontested premium due from the applicant for any prior
insurance of the same kind, the association, upon receipt of the premium, or a
portion thereof as prescribed by the plan of operation, shall cause to be issued
a policy of professional liability insurance for a term of one year.
The rates, rating plans, rating rules, rating classifications, territories, and
policy forms applicable to insurance written by the association and the
statistical and experience data relating thereto are subject to this act and to
those provisions of Chapter 43, Title 38, Code of Laws of South Carolina, 1976,
which are not inconsistent with this act.
Costs of professional liability insurance
SECTION 7. The Commissioner shall obtain complete statistical data in respect
to professional liability losses and reparation costs as well as all other costs
or expenses which underlie or are related to professional liability insurance.
The Commissioner shall promulgate any statistical plan he considers necessary for
the purpose of gathering data referable to loss and loss adjustment expense
experience and other expense experience. When the statistical plan is
promulgated all members of the association shall adopt and use it. The
Commissioner also shall obtain statistical data in respect to the costs of
compensating victims of professional liability. The Commissioner may require
from any person obtaining insurance through the association loss, claim, or
expense data.
Rates
SECTION 8. In structuring rates for professional liability insurance and
determining the profit or loss of the association in respect to such insurance,
consideration must be given by the Commissioner to all investment income so that
investment income is a part of the rate-making and setting process.
Rates
SECTION 9. Within a time that the Commissioner directs, the association shall
submit, for the Commissioner's approval, an initial filing, in proper form, of
policy forms, classifications, rates, rating plans, and rating rules applicable
to professional liability insurance to be written by the association. If the
Commissioner disapproves the initial filing, in whole or in part, the association
shall amend the filing, in whole or in part, in accordance with the direction of
the Commissioner. If the Commissioner is unable to approve the filing or amended
filing, within the time specified, he shall promulgate the policy forms,
classifications, rates, rating plans, and rules to be used by the association in
making rates for and writing the insurance.
Insurance policy
SECTION 10. (A) Policy forms and rate structure must be on an occurrence basis
and coverage provided by the association only on that basis.
(B) The policy may not contain any limitation in relation to the existing law
in tort as provided by the statute of limitations of this State.
(C) The policy form shall not require as a condition precedent to settlement
or compromise of any claim the consent or acquiescence of the insured. However,
such settlement or compromise is not considered an admission of fault or
wrongdoing by the insured.
(D) The premium rate charged for coverage must be at rates established on an
actuarially sound basis, including consideration of trends in the frequency and
severity of losses and must be calculated to be self-supporting.
Rate increase
SECTION 11. The association may provide a rate increase or assessment subject
to the Commissioner's approval.
Deficit
SECTION 12. Any deficit sustained by the association in any year must be
recouped, pursuant to the plan of operation and the rating plan then in effect,
by one or both of the following procedures:
(1) an assessment upon the policyholders, which may not exceed one additional
annual premium at the then current rate;
(2) a rate increase applicable prospectively.
Rate basis
SECTION 13. After the initial year of operation, rates, rating plans, and rating
rules, and any provision for recoupment through policyholder assessment or
premium rate increase must be based upon the association's loss and expense
experience and investment income, together with any other information based upon
this experience and income as the Commissioner considers appropriate. The
resultant premium rates must be on an actuarially sound basis and must be
calculated to be self-supporting.
If sufficient funds are not available for the sound financial operation of the
association, pending recoupment as provided in Section 12 of this act, all
members, on a temporary basis, shall contribute to the financial requirements
of the association in the manner provided for in Section 14 of this act. Any
such contribution must be reimbursed to the members following recoupment as
provided in Section 12 of this act.
Insurer's participation
SECTION 14. All insurers which are members of the association shall participate
in its writings, expenses, and losses in the proportion that the net direct
premiums of each member, excluding that portion of premiums attributable to the
operation of the association, written during the preceding calendar year bear to
the aggregate net direct premiums written in this State by all members of the
association. Each insurer's participation in the association must be determined
annually on the basis of the net direct premiums written during the preceding
calendar year, as reported in the annual statements and other reports filed by
the insurer with the Commissioner. No member may be obligated in any one year
to reimburse the association because of its proportionate share in the deficit
from operations of the association in that year in excess of one percent of its
surplus to policyholders and the aggregate amount not so reimbursed must be
reallocated among the remaining members in accordance with the method of
determining participation prescribed in this section after excluding from the
computation the total net direct premiums of all members not sharing in the
excess deficit. If the deficit from operations allocated to all members of the
association in any calendar year exceeds one percent of their respective surplus
to policyholders, the amount of the deficit must be allocated to each member in
accordance with the method of determining participation prescribed in this
section.
Member bound
SECTION 15. Every member of the association is bound by the approved plan of
operation of the association and the rules of the board of directors of the
association.
Termination of an insurer, obligation
SECTION 16. (A) If the authority of an insurer to transact bodily injury
liability insurance, other than automobile, homeowners, or farmowners, in this
State terminates for any reason, its obligations as a member of the association
continue until all its obligations are fulfilled and the Commissioner has so
found and certified to the board of directors.
(B) If a member insurer merges into or consolidates with another insurer
authorized to transact insurance in this State or another insurer authorized to
transact insurance in this State has reinsured the insurer's entire general
liability business in this State, both the insurer and its successor or assuming
reinsurer, as the case may be, are liable for the insurer's obligations to the
association.
(C) Any unsatisfied net liability of any insolvent member of the association
must be assumed by and apportioned among the remaining members in the same manner
in which assessments or gain and loss are apportioned and the association shall
acquire and have all rights and remedies allowed by law in behalf of the
remaining members against the estate or funds of the insolvent insurer for funds
due the association.
JUA board
SECTION 17. Each joint underwriting association is governed by a board of seven
directors, one of whom is appointed by the Governor to represent the general
public and four of whom are appointed by the Governor and represent professionals
covered under the association. Two directors are the Chairman of the Labor,
Commerce and Industry Committee of the House of Representatives or his designee
and the Chairman of the Banking and Insurance Committee of the Senate or his
designee, both of whom shall serve ex officio. 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
such a group may serve as a director at any one time. The Commissioner is
chairman of the board of directors, ex officio, and he, or his designee, must
preside at all meetings of the board but has no vote except in the case of a tie.
Appeal from ruling
SECTION 18. Any applicant for insurance through the association, any person
insured pursuant to this act, or his representative, or any insurer adversely
affected, or claiming to be adversely affected, by any ruling, action, or
decision by or on behalf of the association, may appeal to the Commission within
thirty days after the ruling, action, or decision.
Statements filed
SECTION 19. The association shall file in the office of the Commissioner
annually by March first a statement containing information with respect to its
transactions, condition, operations, and affairs during the preceding year. The
statement shall contain information prescribed by the Commissioner and must be
in the form he directs.
The Commissioner, at any reasonable time, may require the association to
furnish additional information concerning its transactions, condition, or any
matter connected therewith considered to be material and of assistance in
evaluating the scope, operations, and experience of the association.
Examination of finances
SECTION 20. The Commissioner shall make an examination into the financial
condition and affairs of the association at least annually and shall file a
report thereon with the Commission, the Governor, and the General Assembly. The
expenses of the examination must be paid by the association.
Time effective
SECTION 21. This act takes effect upon approval by the Governor. |