S*321 Session 107 (1987-1988)
S*0321(Rat #0221, Act #0155 of 1987) General Bill, By
Senate Banking and Insurance
Similar(S 110, H 2028)
A Bill to amend Title 38, Code of Laws of South Carolina, 1976, relating to
insurance, so as to, among other things, restructure the contents of the
Title, rearrange and recodify the provisions of law in this State concerning
insurance matters, and place in Title 38 various insurance provisions
heretofore codified in other Titles of the Code of Laws or uncodified; to
amend Section 15-9-280, relating to civil remedies and procedures and service
on unauthorized insurer, so as to, among other things, provide that any act of
transacting an insurance business as set forth in Section 38-25-110 by an
unauthorized insurer is equivalent to and constitutes an irrevocable
appointment by the insurer of the Secretary of State to be the true and lawful
attorney of the insurer upon whom may be served all lawful process in any
action, suit, or proceeding in any court by the Chief Insurance Commissioner
or by the State and upon whom may be served any notice, order, pleading, or
process in any proceeding before the Chief Insurance Commissioner and which
arises out of transacting an insurance business in this State by the insurer,
provide for the making of service of process, and impose duties on the
Secretary of State; to amend Article 3 of Chapter 9 of Title 15, relating to
civil remedies and procedures and personal or substitute service in the State,
by adding Section 15-9-285 so as to, among other things, provide that the
issuance and delivery of a policy of insurance or contract of insurance or
indemnity to any person in this State or the collection of a premium thereon
by an insurer not licensed in this State irrevocably constitutes the Chief
Insurance Commissioner the true and lawful attorney in fact upon whom service
of any and all processes, pleadings, actions, or suits arising out of the
policy or contract in behalf of the insured may be made, provide for the
making of service of process in the action, and impose duties upon the Chief
Insurance Commissioner; to amend Section 15-9-290, relating to civil remedies
and procedures and alternative method of service on unauthorized insurer, so
as to, among other things, provide that service of process in any action,
suit, or proceeding involving an unauthorized insurer is, in addition to that
which is provided in Section 15-9-280 and Section 15-9-285, valid under
certain conditions; to amend Chapter 9 of Title 23, relating to the State Fire
Marshal, by adding Article 3 so as to provide for a Firemen's Insurance and
Inspection Fund; to amend Title 39, relating to trade and commerce, by adding
Chapter 61 so as to enact the "Motor Club Services Act"; to amend Section
56-9-480, relating to motor vehicles, proof of financial responsibility,
satisfaction of judgments, and payments sufficient to satisfy requirements, so
as to provide that judgments referred to in Article 5 of Chapter 9 of Title 56
must, for the purpose of this Article only, be considered satisfied when
fifteen, rather than ten, thousand dollars has been credited upon any judgment
rendered in excess of that amount because of bodily injury to or death of one
person as the result of any one accident and when, subject to the limit of
fifteen, rather than ten, thousand dollars because of bodily injury to or
death of one person, the sum of thirty, rather than twenty, thousand dollars
has been credited upon any judgments rendered in excess of that amount because
of bodily injury to or death of two or more persons as the result of any one
accident; to amend Section 56-9-580, relating to motor vehicles, certificate
of deposit of cash or securities as proof of financial responsibility, amount,
and the requirement that the deposit must be held to satisfy execution on a
judgment, so as to provide that proof of financial responsibility may be
evidenced by the certificate of the State Treasurer that the person named
therein has deposited with him thirty-five, rather than thirty-six, thousand
dollars in cash or securities such as may legally be purchased by savings
banks or for trust funds of a market value of thirty-five, rather than
thirty-six, thousand dollars; to amend Title 56, relating to motor vehicles,
by adding Chapter 10 so as to provide for motor vehicle registration and
financial security, including, among other things, provisions involving
insurance requirements relating to motor vehicle registration; to amend
Section 33-31-10, relating to the authorization to incorporate nonprofit
corporations, so as to provide that mutual benevolent aid associations
organized solely for the purposes defined in Section 38-35-10, rather than
Section 38-23-10, may be incorporated under the provisions of Chapter 31 of
Title 33; to amend Section 23-9-20, relating to duties of the State Fire
Marshal, so as to delete certain language concerning the transfer to the State
Fire Marshal of powers and duties vested in the Chief Insurance Commissioner
pursuant to certain Code Sections; to amend Section 23-9-30, as amended,
relating to resident fire marshals, so as to delete a reference to Chapter 57
of Title 38; to amend Section 15-9-300, relating to civil remedies and
procedures and service on unauthorized insurer, so as to add a reference to
Section 15-9-285 and delete a reference to Section 38-53-50; to amend Section
15-9-310, relating to civil remedies and procedures and service on attorney of
reciprocal insurance subscribers, so as to delete references to certain Code
Sections and add references to other Code Sections; to amend Section 15-9-270,
relating to civil remedies and procedures and service on insurance companies,
so as to delete certain language, including references to certain Code
Sections, and add a reference to Section 38-5-70; to amend Section 56-9-30,
relating to the provision that Chapter 9 of Title 56 is inapplicable to
certain motor vehicles, so as to delete an exception related to Article 7 of
Chapter 9 of Title 56; to amend Section 56-1-110, relating to motor vehicles
and imputed liability of person signing application for damages caused by
uninsured minor, so as to add a reference to Sections 38-77-140 through
38-77-310 as a basis for exempting a parent or guardian or other responsible
adult from the liability otherwise imposed under Section 56-1-110; to amend
Section 56-9-20, as amended, relating to definitions under the Motor Vehicle
Financial Responsibility Act, so as to alter the definitions of "Insured Motor
Vehicle", "Motor Vehicle Liability Policy", "Proof of Financial
Responsibility", and "Uninsured Motor Vehicle" principally by deleting
references to certain provisions or Sections of the Code of Laws and adding
references to different Code Sections; to authorize and direct the Code
Commissioner to place appropriate provisions of Acts dealing with insurance
enacted in 1987 in the appropriate area covered by this Act, to eliminate or
delete from this Act certain provisions of law, and to amend provisions of
this Act corresponding to amendments of the insurance laws as may have been
passed by the General Assembly during 1987 in other Acts; to amend Section
42-7-200, relating to the State Workers' Compensation Insolvency Fund, so as
to delete a reference to Section 42-5-140 and replace it with a reference to
Section 38-7-50; and to repeal the following: Article 7 of Chapter 9 of Title
56 relating to motor vehicles and coverage limitations, uninsured motorist
provisions, and the like; Chapter 11 of Title 56 relating to the South
Carolina Automobile Reparation Reform Act of 1974; Chapter 13 of Title 56
relating to motor vehicle physical damage appraisers; Chapter 9 of Title 35
relating to insider trading in securities of domestic stock insurance
companies; Sections 42-5-90, 42-5-100, 42-5-110, 42-5-120, 42-5-140, 42-5-150,
42-5-160, 42-5-170, and 42-5-180 relating to various provisions on insurance
and self-insurance under Workers' Compensation; Act 306 of 1975 relating to
providing a contingency plan for the writing of medical malpractice liability
insurance through a joint underwriting association upon the finding of an
emergency by the Insurance Commission; Act 767 of 1976 relating to the writing
of medical malpractice liability insurance through a joint underwriting
association, including, among other things, placing pharmacists in the
definition of health care provider and placing per claim and aggregate limits
on the amount of insurance which may be paid to a claimant upon enactment of a
Patient Compensation Fund Act; Act 104 of 1977 relating to the writing of
medical malpractice liability insurance through a joint underwriting
association and the creation of a Board of Governors to administer the
Patients' Compensation Fund, including, among other things, increasing the
membership of the Board of Directors of the Joint Underwriting Association and
the membership of the Board of Governors to administer the Patients'
Compensation Fund; Act 258 of 1977 relating to prohibiting the Insurance
Commission, Commissioner, or Joint Underwriting Association from implementing
any assessment that may be prescribed by the Joint Resolution establishing the
Joint Underwriting Association for the purpose of writing medical malpractice
liability insurance until July 1, 1978; Act 645 of 1978 relating to the
writing of medical malpractice insurance through a Joint Underwriting
Association, the establishment of a Patients' Compensation Fund, and a
contingency plan for writing legal professional malpractice insurance through
a Joint Underwriting Association, including, among other things, providing for
an appeal from a ruling or action by the medical or legal association or the
Patients' Compensation Fund to the Insurance Commission; Act 257 of 1977, Act
662 of 1978, Act 221 of 1979, and Act 200 of 1981 relating to the writing of
medical malpractice liability insurance through a Joint Underwriting
Association and the extension of the expiration date of the Underwriting
Association; Act 199 of 1983 relating to the writing of medical malpractice
liability insurance through a Joint Underwriting Association and deletion of
the requirement that the Association expire on December 31, 1983; Act 440 of
1986 relating to the provision that no health maintenance organization may
prohibit any licensed physician, podiatrist, optometrist, or oral surgeon from
participating as a provider in the organization on the basis of his profession
and to the provision that nothing in Act 440 of 1986 may be construed to
interfere with the medical decision of the primary health care provider to use
or not use any health professional on a case-by-case basis; Act 518 of 1986
relating to the adding of a Section to the Code of Laws so as to provide for
educational requirements for applicants for insurance agents' licenses and to
make exceptions; Subsection A of Section 31 of Part II of Act 540 of 1986 (The
General Appropriations Act) relating to, among other things, the requirement
that every insurance company of any class, except certain benevolent
institutions, shall, before transacting any business in this State, pay a
license fee of four hundred dollars to the Chief Insurance Commissioner and
shall thereafter pay an annual license fee of four hundred dollars; Subsection
B of Section 31 of Part II of Act 540 of 1986 relating to the levy upon each
insurance company licensed by the Commissioner of an insurance premium tax
based upon total premiums, other than Workers' Compensation insurance
premiums, and annuity considerations, collected by the company in the State
during each calendar year; Subsection C of Section 31 of Part II of Act 540 of
1986 relating to, among other things, the requirement that, not later than
March first of each year, every insurance company licensed by the Commissioner
shall file with him a return of premiums collected by the company in the State
during the immediately preceding calendar year ending on December
thirty-first; Subsection D of Section 31 of Part II of Act 540 of 1986
relating to, among other things, the provision that one-fourth of the
insurance premium taxes collected under Subsection B of this Section 31, and
one-fourth of the retaliatory collections made under Subsection E of this
Section 31 which are attributable to the tax levied in Subsection B, are
alloted to the several counties, respectively, in proportion to the latest
official United States Census of the counties, and are appropriated to
ordinary county purposes; Subsection E of Section 31 of Part II of Act 540 of
1986 relating to, among other things, the requirement that, under certain
conditions, similar insurance companies of other states establishing or having
theretofore established an agency or agencies in South Carolina shall make a
particular deposit for a particular purpose with the Commissioner; Subsection
F of Section 31 of Part II of Act 540 of 1986 relating to an amendment of a
Section of the Code of Laws concerning a return to the Chief Insurance
Commissioner by fire insurance companies; Subsection G of Section 31 of Part
II of Act 540 of 1986 relating to, among other things, the provisions that any
insurer or rating organization affected by certain provisions of law may, at
any time up until April 1, 1987, make a filing with the Commissioner
requesting a change in rates solely to reflect changes in certain imposed tax
liabilities; Subsection H of Section 31 of Part II of Act 540 of 1986 relating
to the provision that each license issued under Article 1 of Chapter 5 of
Title 38 is for an indefinite term unless sooner revoked or suspended;
Subsection J of Section 31 of Part II of Act 540 of 1986 relating to the
provision that the quarterly payments required of insurance companies for June
1, 1986, and September 1, 1986, are due and payable to the Chief Insurance
Commissioner on or before September 1, 1986; Subsection K of Section 31 of
Part II of Act 540 of 1986 relating to an amendment of a Section of the Code
of Laws concerning the payment of an annual license fee; Subsection L of
Section 31 of Part II of Act 540 of 1986 relating to an amendment of a Section
of the Code of Laws concerning the fee for an adjuster's license under the
insurance laws; Subsection M of Section 31 of Part II of Act 540 of 1986
relating to an amendment of a Section of the Code of Laws concerning fees for
insurance agents' licenses and the issuance of semiannual licenses; and
Subsection N of Section 31 of Part II of Act 540 of 1986 relating to an
amendment of a Section of the Code of Laws concerning licenses for appraisers
for motor vehicle physical damage claims, the license fee, and regulations;
and Act 513 of 1986, relating to motor vehicle theft and motor vehicle
insurance fraud reporting immunity.
01/28/87 Senate Introduced, read first time, placed on calendar
without reference SJ-320
02/05/87 Senate Read second time SJ-460
02/05/87 Senate Unanimous consent for third reading on next
legislative day SJ-467
02/06/87 Senate Read third time and sent to House SJ-484
02/10/87 House Introduced and read first time HJ-451
02/10/87 House Referred to Committee on Labor, Commerce and
Industry HJ-458
05/06/87 House Committee report: Favorable Labor, Commerce and
Industry HJ-2446
05/14/87 House Read second time HJ-1728
05/14/87 House Unanimous consent for third reading on next
legislative day HJ-1736
05/15/87 House Read third time and enrolled HJ-2831
06/04/87 Ratified R 221
06/05/87 Signed By Governor
06/05/87 Effective date 01/01/88
06/05/87 Act No. 155
07/02/87 Copies available
(A155, R221, S321)
AN ACT TO AMEND TITLE 38, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO
INSURANCE, SO AS TO, AMONG OTHER THINGS, RESTRUCTURE THE CONTENTS OF THE TITLE,
REARRANGE AND RECODIFY THE PROVISIONS OF LAW IN THIS STATE CONCERNING INSURANCE
MATTERS, AND PLACE IN TITLE 38 VARIOUS INSURANCE PROVISIONS HERETOFORE CODIFIED
IN OTHER TITLES OF THE CODE OF LAWS OR UNCODIFIED; TO AMEND SECTION 15-9-280,
RELATING TO CIVIL REMEDIES AND PROCEDURES AND SERVICE ON UNAUTHORIZED INSURER,
SO AS TO, AMONG OTHER THINGS, PROVIDE THAT ANY ACT OF TRANSACTING AN INSURANCE
BUSINESS AS SET FORTH IN SECTION 38-25-110 BY AN UNAUTHORIZED INSURER IS
EQUIVALENT TO AND CONSTITUTES AN IRREVOCABLE APPOINTMENT BY THE INSURER OF THE
SECRETARY OF STATE TO BE THE TRUE AND LAWFUL ATTORNEY OF THE INSURER UPON WHOM
MAY BE SERVED ALL LAWFUL PROCESS IN ANY ACTION, SUIT, OR PROCEEDING IN ANY COURT
BY THE CHIEF INSURANCE COMMISSIONER OR BY THE STATE AND UPON WHOM MAY BE SERVED
ANY NOTICE, ORDER, PLEADING, OR PROCESS IN ANY PROCEEDING BEFORE THE CHIEF
INSURANCE COMMISSIONER AND WHICH ARISES OUT OF TRANSACTING AN INSURANCE BUSINESS
IN THIS STATE BY THE INSURER, PROVIDE FOR THE MAKING OF SERVICE OF PROCESS, AND
IMPOSE DUTIES ON THE SECRETARY OF STATE; TO AMEND ARTICLE 3 OF CHAPTER 9 OF TITLE
15, RELATING TO CIVIL REMEDIES AND PROCEDURES AND PERSONAL OR SUBSTITUTE SERVICE
IN THE STATE, BY ADDING SECTION 15-9-285 SO AS TO, AMONG OTHER THINGS, PROVIDE
THAT THE ISSUANCE AND DELIVERY OF A POLICY OF INSURANCE OR CONTRACT OF INSURANCE
OR INDEMNITY TO ANY PERSON IN THIS STATE OR THE COLLECTION OF A PREMIUM THEREON
BY AN INSURER NOT LICENSED IN THIS STATE IRREVOCABLY CONSTITUTES THE CHIEF
INSURANCE COMMISSIONER THE TRUE AND LAWFUL ATTORNEY IN FACT UPON WHOM SERVICE OF
ANY AND ALL PROCESSES, PLEADINGS, ACTIONS, OR SUITS ARISING OUT OF THE POLICY OR
CONTRACT IN BEHALF OF THE INSURED MAY BE MADE, PROVIDE FOR THE MAKING OF SERVICE
OF PROCESS IN THE ACTION, AND IMPOSE DUTIES UPON THE CHIEF INSURANCE
COMMISSIONER; TO AMEND SECTION 15-9-290, RELATING TO CIVIL REMEDIES AND
PROCEDURES AND ALTERNATIVE METHOD OF SERVICE ON UNAUTHORIZED INSURER, SO AS TO,
AMONG OTHER THINGS, PROVIDE THAT SERVICE OF PROCESS IN ANY ACTION, SUIT, OR
PROCEEDING INVOLVING AN UNAUTHORIZED INSURER IS, IN ADDITION TO THAT WHICH IS
PROVIDED IN SECTION 15-9-280 AND SECTION 15-9-285, VALID UNDER CERTAIN
CONDITIONS; TO AMEND CHAPTER 9 OF TITLE 23, RELATING TO THE STATE FIRE MARSHAL,
BY ADDING ARTICLE 3 SO AS TO PROVIDE FOR A FIREMEN'S INSURANCE AND INSPECTION
FUND; TO AMEND TITLE 39, RELATING TO TRADE AND COMMERCE, BY ADDING CHAPTER 61 SO
AS TO ENACT THE "MOTOR CLUB SERVICES ACT"; TO AMEND SECTION 56-9-480,
RELATING TO MOTOR VEHICLES, PROOF OF FINANCIAL RESPONSIBILITY, SATISFACTION OF
JUDGMENTS, AND PAYMENTS SUFFICIENT TO SATISFY REQUIREMENTS, SO AS TO PROVIDE THAT
JUDGMENTS REFERRED TO IN ARTICLE 5 OF CHAPTER 9 OF TITLE 56 MUST, FOR THE PURPOSE
OF THIS ARTICLE ONLY, BE CONSIDERED SATISFIED WHEN FIFTEEN, RATHER THAN TEN,
THOUSAND DOLLARS HAS BEEN CREDITED UPON ANY JUDGMENT RENDERED IN EXCESS OF THAT
AMOUNT BECAUSE OF BODILY INJURY TO OR DEATH OF ONE PERSON AS THE RESULT OF ANY
ONE ACCIDENT AND WHEN, SUBJECT TO THE LIMIT OF FIFTEEN, RATHER THAN TEN, THOUSAND
DOLLARS BECAUSE OF BODILY INJURY TO OR DEATH OF ONE PERSON, THE SUM OF THIRTY,
RATHER THAN TWENTY, THOUSAND DOLLARS HAS BEEN CREDITED UPON ANY JUDGMENTS
RENDERED IN EXCESS OF THAT AMOUNT BECAUSE OF BODILY INJURY TO OR DEATH OF TWO OR
MORE PERSONS AS THE RESULT OF ANY ONE ACCIDENT; TO AMEND SECTION 56-9-580,
RELATING TO MOTOR VEHICLES, CERTIFICATE OF DEPOSIT OF CASH OR SECURITIES AS PROOF
OF FINANCIAL RESPONSIBILITY, AMOUNT, AND THE REQUIREMENT THAT THE DEPOSIT MUST
BE HELD TO SATISFY EXECUTION ON A JUDGMENT, SO AS TO PROVIDE THAT PROOF OF
FINANCIAL RESPONSIBILITY MAY BE EVIDENCED BY THE CERTIFICATE OF THE STATE
TREASURER THAT THE PERSON NAMED THEREIN HAS DEPOSITED WITH HIM THIRTY-FIVE,
RATHER THAN THIRTY-SIX, THOUSAND DOLLARS IN CASH OR SECURITIES SUCH AS MAY
LEGALLY BE PURCHASED BY SAVINGS BANKS OR FOR TRUST FUNDS OF A MARKET VALUE OF
THIRTY-FIVE, RATHER THAN THIRTY-SIX, THOUSAND DOLLARS; TO AMEND TITLE 56,
RELATING TO MOTOR VEHICLES, BY ADDING CHAPTER 10 SO AS TO PROVIDE FOR MOTOR
VEHICLE REGISTRATION AND FINANCIAL SECURITY, INCLUDING, AMONG OTHER THINGS,
PROVISIONS INVOLVING INSURANCE REQUIREMENTS RELATING TO MOTOR VEHICLE
REGISTRATION; TO AMEND SECTION 33-31-10, RELATING TO THE AUTHORIZATION TO
INCORPORATE NONPROFIT CORPORATIONS, SO AS TO PROVIDE THAT MUTUAL BENEVOLENT AID
ASSOCIATIONS ORGANIZED SOLELY FOR THE PURPOSES DEFINED IN SECTION 38-35-10,
RATHER THAN SECTION 38-23-10, MAY BE INCORPORATED UNDER THE PROVISIONS OF CHAPTER
31 OF TITLE 33; TO AMEND SECTION 23-9-20, RELATING TO DUTIES OF THE STATE FIRE
MARSHAL, SO AS TO DELETE CERTAIN LANGUAGE CONCERNING THE TRANSFER TO THE STATE
FIRE MARSHAL OF POWERS AND DUTIES VESTED IN THE CHIEF INSURANCE COMMISSIONER
PURSUANT TO CERTAIN CODE SECTIONS; TO AMEND SECTION 23-9-30, AS AMENDED, RELATING
TO RESIDENT FIRE MARSHALS, SO AS TO DELETE A REFERENCE TO CHAPTER 57 OF TITLE 38;
TO AMEND SECTION 15-9-300, RELATING TO CIVIL REMEDIES AND PROCEDURES AND SERVICE
ON UNAUTHORIZED INSURER, SO AS TO ADD A REFERENCE TO SECTION 15-9-285 AND DELETE
A REFERENCE TO SECTION 38-53-50; TO AMEND SECTION 15-9-310, RELATING TO CIVIL
REMEDIES AND PROCEDURES AND SERVICE ON ATTORNEY OF RECIPROCAL INSURANCE
SUBSCRIBERS, SO AS TO DELETE REFERENCES TO CERTAIN CODE SECTIONS AND ADD
REFERENCES TO OTHER CODE SECTIONS; TO AMEND SECTION 15-9-270, RELATING TO CIVIL
REMEDIES AND PROCEDURES AND SERVICE ON INSURANCE COMPANIES, SO AS TO DELETE
CERTAIN LANGUAGE, INCLUDING REFERENCES TO CERTAIN CODE SECTIONS, AND ADD A
REFERENCE TO SECTION 38-5-70; TO AMEND SECTION 56-9-30, RELATING TO THE PROVISION
THAT CHAPTER 9 OF TITLE 56 IS INAPPLICABLE TO CERTAIN MOTOR VEHICLES, SO AS TO
DELETE AN EXCEPTION RELATED TO ARTICLE 7 OF CHAPTER 9 OF TITLE 56; TO AMEND
SECTION 56-1-110, RELATING TO MOTOR VEHICLES AND IMPUTED LIABILITY OF PERSON
SIGNING APPLICATION FOR DAMAGES CAUSED BY UNINSURED MINOR, SO AS TO ADD A
REFERENCE TO SECTIONS 38-77-140 THROUGH 38-77-310 AS A BASIS FOR EXEMPTING A
PARENT OR GUARDIAN OR OTHER RESPONSIBLE ADULT FROM THE LIABILITY OTHERWISE
IMPOSED UNDER SECTION 56-1-110; TO AMEND SECTION 56-9-20, AS AMENDED, RELATING
TO DEFINITIONS UNDER THE MOTOR VEHICLE FINANCIAL RESPONSIBILITY ACT, SO AS TO
ALTER THE DEFINITIONS OF "INSURED MOTOR VEHICLE", "MOTOR VEHICLE
LIABILITY POLICY", "PROOF OF FINANCIAL RESPONSIBILITY", AND
"UNINSURED MOTOR VEHICLE" PRINCIPALLY BY DELETING REFERENCES TO CERTAIN
PROVISIONS OR SECTIONS OF THE CODE OF LAWS AND ADDING REFERENCES TO DIFFERENT
CODE SECTIONS; TO AUTHORIZE AND DIRECT THE CODE COMMISSIONER TO PLACE APPROPRIATE
PROVISIONS OF ACTS DEALING WITH INSURANCE ENACTED IN 1987 IN THE APPROPRIATE AREA
COVERED BY THIS ACT, TO ELIMINATE OR DELETE FROM THIS ACT CERTAIN PROVISIONS OF
LAW, AND TO AMEND PROVISIONS OF THIS ACT CORRESPONDING TO AMENDMENTS OF THE
INSURANCE LAWS AS MAY HAVE BEEN PASSED BY THE GENERAL ASSEMBLY DURING 1987 IN
OTHER ACTS; TO AMEND SECTION 42-7-200, RELATING TO THE STATE WORKERS'
COMPENSATION INSOLVENCY FUND, SO AS TO DELETE A REFERENCE TO SECTION 42-5-140 AND
REPLACE IT WITH A REFERENCE TO SECTION 38-7-50; AND TO REPEAL THE FOLLOWING:
ARTICLE 7 OF CHAPTER 9 OF TITLE 56 RELATING TO MOTOR VEHICLES AND COVERAGE
LIMITATIONS, UNINSURED MOTORIST PROVISIONS, AND THE LIKE; CHAPTER 11 OF TITLE 56
RELATING TO THE SOUTH CAROLINA AUTOMOBILE REPARATION REFORM ACT OF 1974; CHAPTER
13 OF TITLE 56 RELATING TO MOTOR VEHICLE PHYSICAL DAMAGE APPRAISERS; CHAPTER 9
OF TITLE 35 RELATING TO INSIDER TRADING IN SECURITIES OF DOMESTIC STOCK INSURANCE
COMPANIES; SECTIONS 42-5-90, 42-5-100, 42-5-110, 42-5-120, 42-5-140, 42-5-150,
42-5-160, 42-5-170, AND 42-5-180 RELATING TO VARIOUS PROVISIONS ON INSURANCE AND
SELF-INSURANCE UNDER WORKERS' COMPENSATION; ACT 306 OF 1975 RELATING TO PROVIDING
A CONTINGENCY PLAN FOR THE WRITING OF MEDICAL MALPRACTICE LIABILITY INSURANCE
THROUGH A JOINT UNDERWRITING ASSOCIATION UPON THE FINDING OF AN EMERGENCY BY THE
INSURANCE COMMISSION; ACT 767 OF 1976 RELATING TO THE WRITING OF MEDICAL
MALPRACTICE LIABILITY INSURANCE THROUGH A JOINT UNDERWRITING ASSOCIATION,
INCLUDING, AMONG OTHER THINGS, PLACING PHARMACISTS IN THE DEFINITION OF HEALTH
CARE PROVIDER AND PLACING PER CLAIM AND AGGREGATE LIMITS ON THE AMOUNT OF
INSURANCE WHICH MAY BE PAID TO A CLAIMANT UPON ENACTMENT OF A PATIENT
COMPENSATION FUND ACT; ACT 104 OF 1977 RELATING TO THE WRITING OF MEDICAL
MALPRACTICE LIABILITY INSURANCE THROUGH A JOINT UNDERWRITING ASSOCIATION AND THE
CREATION OF A BOARD OF GOVERNORS TO ADMINISTER THE PATIENTS' COMPENSATION FUND,
INCLUDING, AMONG OTHER THINGS, INCREASING THE MEMBERSHIP OF THE BOARD OF
DIRECTORS OF THE JOINT UNDERWRITING ASSOCIATION AND THE MEMBERSHIP OF THE BOARD
OF GOVERNORS TO ADMINISTER THE PATIENTS' COMPENSATION FUND; ACT 258 OF 1977
RELATING TO PROHIBITING THE INSURANCE COMMISSION, COMMISSIONER, OR JOINT
UNDERWRITING ASSOCIATION FROM IMPLEMENTING ANY ASSESSMENT THAT MAY BE PRESCRIBED
BY THE JOINT RESOLUTION ESTABLISHING THE JOINT UNDERWRITING ASSOCIATION FOR THE
PURPOSE OF WRITING MEDICAL MALPRACTICE LIABILITY INSURANCE UNTIL JULY 1, 1978;
ACT 645 OF 1978 RELATING TO THE WRITING OF MEDICAL MALPRACTICE INSURANCE THROUGH
A JOINT UNDERWRITING ASSOCIATION, THE ESTABLISHMENT OF A PATIENTS' COMPENSATION
FUND, AND A CONTINGENCY PLAN FOR WRITING LEGAL PROFESSIONAL MALPRACTICE INSURANCE
THROUGH A JOINT UNDERWRITING ASSOCIATION, INCLUDING, AMONG OTHER THINGS,
PROVIDING FOR AN APPEAL FROM A RULING OR ACTION BY THE MEDICAL OR LEGAL
ASSOCIATION OR THE PATIENTS' COMPENSATION FUND TO THE INSURANCE COMMISSION; ACT
257 OF 1977, ACT 662 OF 1978, ACT 221 OF 1979, AND ACT 200 OF 1981 RELATING TO
THE WRITING OF MEDICAL MALPRACTICE LIABILITY INSURANCE THROUGH A JOINT
UNDERWRITING ASSOCIATION AND THE EXTENSION OF THE EXPIRATION DATE OF THE
UNDERWRITING ASSOCIATION; ACT 199 OF 1983 RELATING TO THE WRITING OF MEDICAL
MALPRACTICE LIABILITY INSURANCE THOUGH A JOINT UNDERWRITING ASSOCIATION AND
DELETION OF THE REQUIREMENT THAT THE ASSOCIATION EXPIRE ON DECEMBER 31, 1983; ACT
440 OF 1986 RELATING TO THE PROVISION THAT NO HEALTH MAINTENANCE ORGANIZATION MAY
PROHIBIT ANY LICENSED PHYSICIAN, PODIATRIST, OPTOMETRIST, OR ORAL SURGEON FROM
PARTICIPATING AS A PROVIDER IN THE ORGANIZATION ON THE BASIS OF HIS PROFESSION
AND TO THE PROVISION THAT NOTHING IN ACT 440 OF 1986 MAY BE CONSTRUED TO
INTERFERE WITH THE MEDICAL DECISION OF THE PRIMARY HEALTH CARE PROVIDER TO USE
OR NOT USE ANY HEALTH PROFESSIONAL ON A CASE-BY-CASE BASIS; ACT 518 OF 1986
RELATING TO THE ADDING OF A SECTION TO THE CODE OF LAWS SO AS TO PROVIDE FOR
EDUCATIONAL REQUIREMENTS FOR APPLICANTS FOR INSURANCE AGENTS' LICENSES AND TO
MAKE EXCEPTIONS; SUBSECTION A OF SECTION 31 OF PART II OF ACT 540 OF 1986 (THE
GENERAL APPROPRIATIONS ACT) RELATING TO, AMONG OTHER THINGS, THE REQUIREMENT THAT
EVERY INSURANCE COMPANY OF ANY CLASS, EXCEPT CERTAIN BENEVOLENT INSTITUTIONS,
SHALL, BEFORE TRANSACTING ANY BUSINESS IN THIS STATE, PAY A LICENSE FEE OF FOUR
HUNDRED DOLLARS TO THE CHIEF INSURANCE COMMISSIONER AND SHALL THEREAFTER PAY AN
ANNUAL LICENSE FEE OF FOUR HUNDRED DOLLARS; SUBSECTION B OF SECTION 31 OF PART
II OF ACT 540 OF 1986 RELATING TO THE LEVY UPON EACH INSURANCE COMPANY LICENSED
BY THE COMMISSIONER OF AN INSURANCE PREMIUM TAX BASED UPON TOTAL PREMIUMS, OTHER
THAN WORKERS' COMPENSATION INSURANCE PREMIUMS, AND ANNUITY CONSIDERATIONS,
COLLECTED BY THE COMPANY IN THE STATE DURING EACH CALENDAR YEAR; SUBSECTION C OF
SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO, AMONG OTHER THINGS, THE
REQUIREMENT THAT, NOT LATER THAN MARCH FIRST OF EACH YEAR, EVERY INSURANCE
COMPANY LICENSED BY THE COMMISSIONER SHALL FILE WITH HIM A RETURN OF PREMIUMS
COLLECTED BY THE COMPANY IN THE STATE DURING THE IMMEDIATELY PRECEDING CALENDAR
YEAR ENDING ON DECEMBER THIRTY-FIRST; SUBSECTION D OF SECTION 31 OF PART II OF
ACT 540 OF 1986 RELATING TO, AMONG OTHER THINGS, THE PROVISION THAT ONE-FOURTH
OF THE INSURANCE PREMIUM TAXES COLLECTED UNDER SUBSECTION B OF THIS SECTION 31,
AND ONE-FOURTH OF THE RETALIATORY COLLECTIONS MADE UNDER SUBSECTION E OF THIS
SECTION 31 WHICH ARE ATTRIBUTABLE TO THE TAX LEVIED IN SUBSECTION B, ARE ALLOTTED
TO THE SEVERAL COUNTIES, RESPECTIVELY, IN PROPORTION TO THE LATEST OFFICIAL
UNITED STATES CENSUS OF THE COUNTIES, AND ARE APPROPRIATED TO ORDINARY COUNTY
PURPOSES; SUBSECTION E OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO,
AMONG OTHER THINGS, THE REQUIREMENT THAT, UNDER CERTAIN CONDITIONS, SIMILAR
INSURANCE COMPANIES OF OTHER STATES ESTABLISHING OR HAVING THERETOFORE
ESTABLISHED AN AGENCY OR AGENCIES IN SOUTH CAROLINA SHALL MAKE A PARTICULAR
DEPOSIT FOR A PARTICULAR PURPOSE WITH THE COMMISSIONER; SUBSECTION F OF SECTION
31 OF PART II OF ACT 540 OF 1986 RELATING TO AN AMENDMENT OF A SECTION OF THE
CODE OF LAWS CONCERNING A RETURN TO THE CHIEF INSURANCE COMMISSIONER BY FIRE
INSURANCE COMPANIES; SUBSECTION G OF SECTION 31 OF PART II OF ACT 540 OF 1986
RELATING TO, AMONG OTHER THINGS, THE PROVISION THAT ANY INSURER OR RATING
ORGANIZATION AFFECTED BY CERTAIN PROVISIONS OF LAW MAY, AT ANY TIME UP UNTIL
APRIL 1, 1987, MAKE A FILING WITH THE COMMISSIONER REQUESTING A
CHANGE IN RATES SOLELY TO REFLECT CHANGES IN CERTAIN IMPOSED TAX LIABILITIES;
SUBSECTION H OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO THE
PROVISION THAT EACH LICENSE ISSUED UNDER ARTICLE 1 OF CHAPTER 5 OF TITLE 38 IS
FOR AN INDEFINITE TERM UNLESS SOONER REVOKED OR SUSPENDED; SUBSECTION J OF
SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO THE PROVISION THAT THE
QUARTERLY PAYMENTS REQUIRED OF INSURANCE COMPANIES FOR JUNE 1, 1986, AND
SEPTEMBER 1, 1986, ARE DUE AND PAYABLE TO THE CHIEF INSURANCE COMMISSIONER ON OR
BEFORE SEPTEMBER 1, 1986; SUBSECTION K OF SECTION 31 OF PART II OF ACT 540 OF
1986 RELATING TO AN AMENDMENT OF A SECTION OF THE CODE OF LAWS CONCERNING THE
PAYMENT OF AN ANNUAL LICENSE FEE; SUBSECTION L OF SECTION 31 OF PART II OF ACT
540 OF 1986 RELATING TO AN AMENDMENT OF A SECTION OF THE CODE OF LAWS CONCERNING
THE FEE FOR AN ADJUSTER'S LICENSE UNDER THE INSURANCE LAWS; SUBSECTION M OF
SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO AN AMENDMENT OF A SECTION
OF THE CODE OF LAWS CONCERNING FEES FOR INSURANCE AGENTS' LICENSES AND THE
ISSUANCE OF SEMIANNUAL LICENSES; SUBSECTION N OF SECTION 31 OF PART II OF ACT 540
OF 1986 RELATING TO AN AMENDMENT OF A SECTION OF THE CODE OF LAWS CONCERNING
LICENSES FOR APPRAISERS FOR MOTOR VEHICLE PHYSICAL DAMAGE CLAIMS, THE LICENSE
FEE, AND REGULATIONS; AND ACT 513 OF 1986, RELATING TO MOTOR VEHICLE THEFT AND
MOTOR VEHICLE INSURANCE FRAUD REPORTING IMMUNITY.
Be it enacted by the General Assembly of the State of South Carolina:
Insurance laws of South Carolina codified
SECTION 1. Title 38 of the 1976 Code is amended to read:
"TITLE 38
INSURANCE
CHAPTER 1
Title and Definitions
Section 38-1-10. Short title.
This title may be cited and is known as 'The Insurance Law'.
Section 38-1-20. Definitions.
In this title unless the context otherwise requires:
(1) 'Accident and health insurance' means insurance of human beings against
death or personal injury by accident, and every insurance of human beings against
sickness, ailment, and any type of physical disability resulting from accident
or disease, and prepaid dental service, but not including coverages required by
the Workers' Compensation Law of this State.
(2) 'Accommodation bondsman' means as defined in Section 38-53-10.
(3) 'Adjuster' means an individual who determines the extent of insured losses
and assists in settling or attempts to settle claims.
(4) 'Admitted assets' means assets of an insurer considered admitted under
Section 38-11-100.
(5) 'Advisory committee' means the Advisory Committee of the Insurance
Commission of South Carolina.
(6) 'Alien insurer' means an insurer incorporated or organized under the laws
of a country other than the United States of America, its states, commonwealths,
territories, or insular possessions.
(7) 'Annuity' means every contract or agreement to make periodic payments,
whether in fixed or variable dollar amounts, or both, where the making or
continuance of all or some of the series of such payments, or the amount of the
payment, is dependent upon the continuance of human life, except payments made
under a contract of life insurance.
(8) 'Bail bondsman' means as defined in Section 38-53-10.
(9) 'Casualty insurance' means every insurance against legal liability of the
insured for bodily injury to or death of other persons, including workers'
compensation insurance, and for damages to or loss or destruction of the property
of others; medical payments insurance when written in conjunction with any
insurance covering liability for the deaths or bodily injuries of others;
guaranteeing the fidelity of persons holding positions of public or private
trust; loss of or damage to property caused by burglary, theft, larceny, robbery,
fraud, or any unlawful taking or secretion of property owned by or entrusted to
the insured; loss of or damage to property of the insured resulting from the
explosion of or damage to any fired or unfired boiler or other pressure vessel,
engine, turbine, compressor, pump, wheel, any apparatus generating, transmitting,
or using electric power, and any machinery or equipment connected with any of the
foregoing; loss resulting from nonpayment of debts owed to merchants or other
persons extending credit; and legal insurance.
(10) 'Certificate of insurance' means a memorandum copy, complete or
abbreviated, of an insurance contract.
(11) 'Co-insurance' means a stipulation or requirement that the insured
undertakes to be his own insurer to the extent that he fails to maintain
insurance of a given percentage of the value of the property against loss or
damage.
(12) 'Commission' means the Insurance Commission of South Carolina.
(13) 'Commission' means the part of the premium paid to the agent as
compensation for his services.
(14) 'Commissioner' means the Chief Insurance Commissioner of South Carolina.
(15) 'Company' includes any corporation, fraternal organization, burial
association, other association, partnership, society, order, individual, or
aggregation of individuals engaging or proposing or attempting to engage as
principals in any kind of insurance or surety business, including the exchanging
of reciprocal or interinsurance contracts between individuals, partnerships, and
corporations.
(16) 'Department' means the Department of Insurance of South Carolina.
(17) 'Domestic insurer' means an insurer incorporated or organized under the
laws of this State.
(18) 'Foreign insurer' means an insurer incorporated or organized under the
laws of the United States or of any jurisdiction within the United States other
than this State.
(19) 'Insurance' means a contract whereby one undertakes to indemnify another
or pay a specified amount upon determinable contingencies. The term 'insurance'
includes annuities.
(20) 'Insurance agent' means an individual who represents an insurance company
and performs the acts listed in Section 38-43-10.
(21) 'Insurance broker' means an individual licensed by the Commissioner to
represent citizens of this State for the placing of insurance in insurers
licensed in this State or in any other state or country.
(22) 'Insurance company' includes any corporation, fraternal organization,
burial association, other association, partnership, society, order, individual,
or aggregation of individuals engaging or proposing or attempting to engage as
principals in any kind of insurance or surety business, including the exchanging
of reciprocal or interinsurance contracts between individuals, partnerships, and
corporations.
(23) 'Insurance premium service company' means a person engaged in the business
of entering into insurance premium service agreements.
(24) 'Insurance rate' means the price of insurance per unit of exposure.
(25) 'Insurer' includes any corporation, fraternal organization, burial
association, other association, partnership, society, order, individual, or
aggregation of individuals engaging or proposing or attempting to engage as
principals in any kind of insurance or surety business, including the exchanging
of reciprocal or interinsurance contracts between individuals, partnerships, and
corporations.
(26) 'Legal insurance' means the assumption of a contractual obligation for the
sole purpose of providing specified legal services or reimbursement for legal
expenses in consideration of a specified payment, for an interval of time, which
services are rendered by an individual duly admitted or permitted to practice law
in the jurisdictions in which the services were performed.
(27) 'Life insurance' means a contract of insurance upon the lives of human
beings.
(28) 'Marine insurance' means every insurance against loss or destruction of
or damage to vessels or watercraft and their cargoes; insurance covering the
risks or perils of navigation, transit, or transportation of all forms of
property, including the liability of any carrier for hire for the loss of
property of shippers delivered for transporting; marine builders risk; bridges,
tunnels, piers, wharves, docks and slips, dry docks, marine railways, and other
aids to navigation and transportation, precious stones, precious metals, and
jewelry, whether in course of transportation or otherwise; coverage of personal
property by all
risk form known as the 'Personal Property Floater'; and coverage of mobile
machinery and equipment.
(29) 'Person' means a corporation, partnership, association, voluntary
organization, individual, or any other entity, organization, or aggregation of
individuals.
(30) 'Policy' means a contract of insurance.
(31) 'Premium' means payment given in consideration of a contract of insurance.
(32) 'Premium service agreement' means an agreement by which an insured or
prospective insured promises to pay to an insurance premium service company the
amount advanced or to be advanced under the agreement to an insurer or to an
insurance agent or insurance broker in payment of premiums on an insurance
contract together with a service charge as authorized by Chapter 39 of this
title.
(33) 'Professional bondsman' means as defined in Section 38-53-10.
(34) 'Property insurance' means every insurance against direct or indirect loss
of or damage to any property resulting from fire, smoke, weather disturbances,
climatic conditions, earthquake, volcanic eruption, rising waters, insects,
blight, animals, war damage, riot, civil commotion, destruction by order of civil
authority to prevent spread of conflagration or for other reason, water damage,
vandalism, glass breakage, explosion of any water systems, collision, theft of
automobiles and personal effects therein (but no other forms of theft insurance),
loss of or damage to domestic or wild animals, and any other perils to property
which in the discretion of the Commissioner form proper subjects of property
insurance, if not specified in items (1), (7), (9), (27), (28), (37), or (39) of
this section.
(35) 'Runner' means as defined in Section 38-53-10.
(36) 'Surety bondsman' means as defined in Section 38-53-10.
(37) 'Surety insurance' means becoming surety on, or guaranteeing the
performance of, any lawful contract except an insurance contract; becoming surety
on, or guaranteeing the performance of, any bonds and undertaking required or
permitted in any judicial proceeding or required or permitted by any government
or any agency or instrumentality of any government.
(38) 'Surplus to policyholders' is the excess of total admitted assets over the
liabilities of an insurer which is the sum of all capital and surplus accounts
minus any impairment thereof.
(39) 'Title insurance' means insurance of the owners of real property and other
persons lawfully interested therein against loss by reason of defective titles
and undisclosed liens and encumbrances affecting the property.
CHAPTER 3
Insurance Commission and the Department of Insurance
Section 38-3-10. Department of Insurance and Insurance Commission established.
There is established a separate and distinct department of this State, known
as the Department of Insurance, which is the administrative arm of an Insurance
Commission.
Section 38-3-20. Members of Commission; appointment; terms; qualifications;
vacancies.
Beginning on July 1, 1980, the Insurance Commission is composed of seven
members, one being selected from each congressional district and one from the
State at large, who must be appointed by the Governor, with the advice and
consent of the Senate. Two must be appointed for a term of two years, two must
be appointed for a
term of four years, and three must be appointed for a term of six years.
Thereafter, the terms are for six years and all members of the Commission shall
serve until their successors are appointed and qualify. No member appointed may
have past or present employment in the insurance industry during the four years
immediately preceding his appointment but must be selected from the general
public based upon demonstrated objectivity, independence, and service in matters
of public concern. No members of the Commission may serve more than one term. Any
vacancy in office must be filled by the Governor by appointment.
Section 38-3-30. Bonds of Commission members.
Each member of the Commission shall, before entering upon or continuing to
discharge the duties of his office, give bond to the State in the sum of
twenty-five thousand dollars with a sufficient surety, to be approved by the
State Treasurer, for the faithful performance of all duties required of him under
the law during the term of his office. The premium of the bond must be paid by
the State.
Section 38-3-40. Compensation and expenses of Commission members.
Commission members shall receive annual compensation as may be provided by the
General Assembly and official expenses as provided by law for members of state
boards, committees, and commissions.
Section 38-3-50. Organization of Commission; meetings; quorum.
Annually the Commission shall organize itself by electing one of its number as
chairman and any other officer it considers necessary. The Commission shall meet
as often as necessary for the discharge of its business and shall meet upon the
call of the chairman or a majority of the members. The majority of the members
constitutes a quorum.
Section 38-3-60. Powers and duties of Commission and Chief Insurance
Commissioner.
The Commission shall select and employ a Chief Insurance Commissioner and shall
issue to him general policies and broad objectives regarding the operation of the
insurance industry in this State. The Commission shall review, amend, and
supplement these policies and objectives as it sees fit, shall require the Chief
Insurance Commissioner to pursue forcefully the policies and objectives but shall
leave to the Chief Insurance Commissioner the task of developing and implementing
specific plans, programs, and techniques necessary to further the Commission's
policies and objectives.
Section 38-3-70. Reports and recommendations of Commission.
The Commission shall annually submit to the General Assembly, through the
Governor, a report of its official acts and doings, together with a report of all
insurers under the Commission doing business in this State, with condensed
statements of their reports made to it, together with a statement of all
licenses, taxes, and fees received by it through insurers and paid by it to the
State Treasurer. The Commission shall report to the General Assembly any change
which in its opinion should be made in the laws relating to insurance and other
subjects pertaining to the Commission. By February first, it shall make to the
Governor the recommendations called for in this section, to be transmitted to the
General Assembly with its last annual report, including a statement of its
receipts and disbursements.
Section 38-3-80. Seal.
The Commission shall have a seal with a suitable inscription, an impression of
which must be filed with the Secretary of State.
Section 38-3-90. Advisory committee created; composition; duties and
compensation.
The Governor, with the advice and consent of the Senate, shall appoint an
advisory committee of five residents of this State to advise and consult with the
Commission concerning the policies formulated by the Commission and the operation
and administration of this title. The advisory committee consists of the
following competing segments of the insurance industry: one member from the life
insurance field; one member from the accident and health field; one member from
the property and casualty field; one member who is an agent primarily engaged in
the life and accident and health insurance field; and one member who is an agent
primarily engaged in the property and casualty field. The advisory committee may
be in attendance at each meeting of the Commission but shall have at least one
member in attendance at each meeting of the Commission. The advisory committee
members shall serve a period coterminous with the term of the Governor. The
members of the advisory committee may receive no compensation, mileage,
subsistence, or per diem for their services. Any vacancy in office must be
filled by the Governor by appointment.
Section 38-3-100. Chief Insurance Commissioner; removal; status; term of
employment, salary, and qualifications.
The Commission shall select the Commissioner and may remove or discharge him
for good cause. The Commissioner is not subject to the State Employee Grievance
Committee or any internal grievance procedure established at the Insurance
Department. His term of employment is for four years, unless earlier terminated
for good cause, and he is eligible for reemployment. He shall receive an annual
salary as provided by law. The Commissioner must be hired with special reference
to his training, experience, technical knowledge of the insurance industry, and
demonstrated administrative ability. He must be at least thirty years of age.
He may hold no other public office while serving as Commissioner but shall devote
all of his working time to the duties of his office. Before taking the oath of
office he shall sever all connections, either direct or indirect, except as a
policyholder, with any insurance company or agency and shall maintain the
severance during his tenure of office. No person who has been a Commission
member may serve as Commissioner. If he becomes a candidate for public office
or becomes a member of a political committee during tenure, his office as
Commissioner must be immediately vacated.
Section 38-3-110. Duties of Chief Insurance Commissioner.
The Chief Insurance Commissioner has the following duties:
(1) Supervise and regulate the rates and service of every insurer in this
State and fix just and reasonable standards, classifications, regulations,
practices, and measurements of service to be observed and followed by every
insurer doing business in this State. Nothing contained in this title may be
construed to authorize or require a review by the Commission of any order of the
Commissioner under the Administrative Procedures Act. This item may not be
construed to grant any additional authority to the Commissioner with regard to
insurance rates other than the rate making authority specifically granted to the
Commissioner, the Commission, or the Department of Insurance for certain kinds
of insurance in other provisions of this title.
(2) See that all laws of this State governing insurers or relating to the
business of insurance are faithfully executed and make regulations to carry out
this title and all other insurance laws of this State, the enforcement or
administration of which is not otherwise specifically provided for.
(3) Furnish to domestic insurers required by law to report to the Department
the necessary blank forms for the reports required, which forms may be changed
as necessary to secure full information as to the standing, condition, and any
other information desired by the Commissioner.
(4) Institute prosecution of criminal violations of any of the laws relative
to insurers or the business of insurance or of any of the provisions of this
title and report to the Attorney General any violation of the laws relative to
insurers or the business of insurance or the provisions of this title which he
considers necessary to report. The Attorney General shall institute civil action
for the violations, either through his office or through another attorney he may
select.
Section 38-3-120. Oath and bond of Commissioner.
The Commissioner shall take the oath of office as prescribed for all state
officers. Before entering upon or continuing the discharge of the duties of his
office, he shall give bond to the State for the benefit of any person aggrieved
by his unlawful or wrongful actions. This bond must be in the sum of fifty
thousand dollars, with sufficient surety, to be approved by the State Treasurer,
for the faithful performance of all the duties required of him under the law
during the term of his office. The premium of the bond must be paid by the
State.
Section 38-3-130. Actuaries, examiners, clerks, and employees.
The Commissioner shall appoint or employ actuaries, examiners, clerks, and
other employees necessary for the proper execution of the work of the Commission.
Section 38-3-140. Violations considered committed in part at office of
Commissioner.
The failure to do any act required by this title is considered a violation
committed in part at the office of the Commissioner in Columbia.
Section 38-3-150. Commissioner, assistants, or agents may conduct
examinations, investigations, and hearings.
All examinations or investigations provided by this title, unless otherwise
provided by any other insurance laws of this State, may be conducted by the
Commissioner or by one or more of his duly authorized assistants or agents. All
hearings must be held by the Commissioner or by one of his duly authorized
assistants or agents when authorized to do so in writing by the Commissioner.
However, in any hearing concerning the adjustment of insurance rates only the
Chief Insurance Commissioner or the Deputy Chief Insurance Commissioner may
conduct the hearing.
Section 38-3-160. Administration of oaths.
The Commissioner or his duly appointed assistants or agents shall administer
all oaths required in the discharge of his official duties.
Section 38-3-170. Notice of hearings.
All hearings, unless otherwise specifically provided, must be held at the time
and place designated in a written notice given by the Commissioner to the person
cited to appear at least thirty days before the designated date. The notice shall
state the subject of the inquiry and specific charges, if any. 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 known address of the
person and registered with return receipt requested.
Section 38-3-180. Summoning witnesses; contempt; perjury.
The Commissioner or any assistants or agents appointed to conduct examinations
may summon and compel the attendance of witnesses to testify in relation to any
matter which is, by the provisions of this title or by any other insurance laws
of this State, a subject of inquiry and investigation. The Commissioner has the
power of a circuit judge to punish for contempt any witness failing to answer any
summons or failing or refusing to testify when so required. The Commissioner or
any assistants or agents appointed to conduct examinations may also administer
oaths and affirmations to persons appearing as witnesses before them, and false
testimony in any matter or proceeding is considered perjury and must be punished
in accordance with the laws of this State.
Section 38-3-190. Mileage payments for witnesses.
Any person summoned by the Insurance Department to testify as a witness at any
hearing must be paid for his actual mileage at the same rate as provided by law
for state boards, committees, and commissions.
Section 38-3-200. Orders must be in writing and signed.
No order of the Commissioner is effective unless made in writing and signed by
the Commissioner or by his authority.
Section 38-3-210. Petition for judicial review of order or decision; effect
as stay.
Any order or decision made, issued, or executed by the Commissioner or his
assistants or agents is subject to judicial review in accordance with the
appellate procedures of Sections 1-23-380 and 1-23-390. Notwithstanding the
provisions of subsection (c) of Section 1-23-380, the circuit court may not,
under any terms, order a stay of enforcement of any order of the Commissioner to
make good an impairment of capital or surplus or a deficiency in the amount of
admitted assets.
Section 38-3-220. Certificates and papers of Commissioner as evidence.
Every certificate or other paper executed by the Commissioner in pursuance of
any authority conferred upon him by law and sealed with the seal of the
Commission and all copies of papers certified by the Commissioner and
authenticated by the Commission's seal may in all cases be used as evidence in
any suit or proceeding in any court of this State with the same force and effect
as the originals.
Section 38-3-230. Commissioner's certificate as evidence of authority to do
business.
In any case or controversy where it is necessary to determine whether any
insurance or other company, or agent thereof, is or has been licensed by the
Commissioner to do business in this State, the certificate of the Commissioner
under the seal of the Commission is admissible in evidence as proof of this
authority.
CHAPTER 5
Authority and
Requirements to Transact Business
Section 38-5-10. Insurers must be licensed and supervised; exceptions.
Every insurer doing business in this State must be licensed and supervised by
the Commissioner, with the following exceptions:
(a) Without excluding other activities which may not constitute doing
business in this State, a foreign or alien insurer is not considered to be doing
business in this State, for purposes of this chapter, or Chapter 7, 13, 25, or
27, solely by reason of carrying on in this State any one or more of the
following activities:
(1) Maintaining bank accounts.
(2) Creating or acquiring evidences of debt, mortgages, or liens on real
or personal property, and enforcing rights in connection therewith in any action
or proceeding, whether judicial, administrative, or otherwise.
(3) Owning and controlling a subsidiary corporation incorporated in or
transacting business within this State.
Section 38-5-20. Certain charitable, religious, and other corporations
authorized to issue annuities or pay lump-sum benefits without being subject to
insurance laws.
A charitable, religious, benevolent, or educational corporation, not operating
for profit and in active operation for at least five years, may receive transfers
of property conditioned upon its agreement to pay an annuity or lump-sum benefit
to the transferor or his nominee without being subject to the insurance laws of
this State. No corporation operating for profit, including nursing homes or any
other type of business, is permitted to issue
charitable or gift annuities without the Commissioner's approval.
Section 38-5-30. Kinds of insurance for which an insurer may be licensed.
The Commissioner may license insurers, subject to other requirements of
existing insurance laws, to transact the following kinds of insurance in this
State:
(a) Life insurance and annuities.
(b) Accident and health insurance.
(c) Property insurance.
(d) Casualty insurance.
(e) Surety insurance.
(f) Marine insurance.
(g) Title insurance.
(h) Multiple lines insurance, meaning any two or more of the kinds of
insurance listed in items (b), (c), (d), (e), (f), and (g) of this section.
Each license issued is for an indefinite term unless revoked or suspended.
Section 38-5-40. Kinds of insurance for which life insurer may be licensed.
No life insurer may be licensed to write any other kinds of insurance listed
in Section 38-5-30 except accident and health insurance. However, any life
insurer licensed to transact other kinds of insurance immediately prior to March
18, 1964, shall continue to be so licensed if otherwise qualified.
Section 38-5-50. Certain insurers may not be licensed to write life insurance.
No insurer licensed to write any of the kinds of insurance listed in items (c),
(d), (e), (f), (g), and (h) of Section 38-5-30 may be licensed to write life
insurance. However, any life insurer licensed to transact other kinds of
insurance immediately prior to March 18, 1964, shall continue to be so licensed
if otherwise qualified.
Section 38-5-60. Qualifications to become an approved reinsurer.
For purposes of calculating deductions for reserves, insurers not licensed in
this State may be approved as reinsurers by the Commissioner for an indefinite
term only if:
(a) Upon initial application a fee of two hundred dollars is enclosed and,
annually thereafter, a fee of two hundred dollars is paid by March first.
(b) There is filed with the Commissioner a power of attorney approved as to
form by him and authorizing him to accept service of process in behalf of the
reinsurer.
(c) There is filed with the Commissioner the reinsurer's annual statement
and the reinsurer's most recent report of examination and thereafter each annual
statement and report of examination is so filed.
(d) The reinsurer meets the capital and surplus requirements of South
Carolina law with respect to the lines to be reinsured.
Section 38-5-70. Appointment of Commissioner as attorney for service of
process.
Every insurer shall, before being licensed, appoint in writing the Commissioner
and his successors in office to be its true and lawful attorney upon whom all
legal process in any action or proceeding against it must be served and in this
writing shall agree that any lawful process against it which is served upon this
attorney is of the same legal force and validity as if served upon the insurer
and that the authority continues in force so long as any liability remains
outstanding in the State. Copies of the appointment, certified by the
Commissioner, are sufficient evidence of the appointment and must be admitted in
evidence with the same force and effect as the original might be admitted.
Section 38-5-80. Additional requirements for issuance of certificate or
license to domestic insurer; grounds for revocation or suspension of license.
Before granting the original certificate of authority or license to a domestic
insurer to do business in this State, the Commissioner must be satisfied by
proper evidence that:
(a) The insurer is duly qualified to transact business under the laws of
this State.
(b) The insurer has filed with him an affidavit of its president or other
chief officer that it has not violated this title in the past year and that it
accepts the terms and obligations of this title as part of the consideration for
license.
(c) The insurer pays all taxes and performs all duties required by law.
(d) The reserves of the insurer are adequate for the protection of
policyholders of this State.
(e) The insurer's directors and officers are competent, trustworthy, and
have a good business reputation and that none of the directors and officers have
been convicted of a crime in any jurisdiction involving fraud, dishonesty, or
like moral turpitude or convicted of violating an insurance statute of any
jurisdiction.
(f) The insurer has employed one or more persons residing in this State with
adequate experience and training to manage properly its business and affairs.
(g) The insurer has not entered into any management contract, agency
agreement, or other agreement which may materially affect its financial condition
so as to render its proceedings hazardous to the public or to its policyholders.
(h) The insurer has made adequate reinsurance arrangements if required.
(i) The insurer's proposed method of operation, when considered in light of
its financial condition and the absence of any prior operating experience, will
not likely render its proceedings hazardous to the public or to its
policyholders.
(j) The reserve basis to be used by the insurer will be adequate for the
protection of policyholders in this State.
If subsequently the Commissioner is of the opinion that a condition exists
which would have prohibited him from issuing the original certificate of
authority or license to the insurer, then that condition also constitutes a
ground for license revocation under Section 38-5-120.
Section 38-5-90. Additional requirements for issuance of certificate or
license to foreign or alien insurer; grounds for revocation or suspension of
license.
Before granting the original certificate of authority or license to a foreign
or alien insurer to do business in this State, the Commissioner must be satisfied
by proper evidence that:
(a) The insurer is duly qualified to transact business under the laws of
this State.
(b) The insurer has filed with him an affidavit of its president or other
chief officer that it has not violated this title in the past year and that it
accepts the terms and obligations of this title as part of the consideration for
license.
(c) The insurer pays all taxes and performs all duties required by law.
(d) The reserves of the insurer are adequate for the protection of
policyholders of this State.
(e) The insurer's directors and officers are competent, trustworthy, and
have a good business reputation.
(f) The insurer has employed one or more persons residing in this State with
adequate experience and training to manage properly its business and affairs
relating to its policies in South Carolina.
(g) The insurer has not entered into any management contract, agency
agreement, or other agreement which may materially affect its financial condition
so as to render its proceedings hazardous to the public or to its policyholders.
(h) The insurer has made adequate reinsurance arrangements if required.
(i) The insurer's proposed method of operation, when considered in light of
its financial condition and the absence of any prior operating experience, will
not likely render its proceedings hazardous to the public or to its
policyholders.
(j) The insurer is safe and solvent.
(k) The insurer's dealings are fair and equitable.
(l) The insurer conducts its business in a manner not contrary to the public
interest.
If subsequently the Commissioner is of the opinion that a condition exists
which would have prohibited him from issuing a certificate of authority or
license to the insurer, then that condition also constitutes a ground for license
revocation under Section 38-5-120.
Section 38-5-100. Foreign or alien insurers with names identical with or
similar to others not qualified.
No foreign or alien insurer may be licensed to do business in this State when
its name is identical with that of any active insurer previously licensed to do
business in this State which has engaged in business therein for one year or
more. No foreign or alien insurer may be licensed to do business in this State
when its name is so nearly similar to that of any active insurer previously
licensed to do business in this State which has engaged in business therein for
one year or more so as to lead to confusion and uncertainty.
Section 38-5-110. Approval of charters or amendments of charter.
It is unlawful for the Secretary of State to issue any charter or grant any
amendments of charter to any insurer or permit any foreign or alien insurer to
do business within this State without the written approval of the Commissioner.
Section 38-5-120. Revocation or suspension of license; publication of notice.
If the Commissioner is of the opinion upon examination or other evidence that:
(a) An insurer is in an unsound condition,
(b) An insurer has failed to comply with the law or with the provisions of
its charter,
(c) The insurer's condition is such as to render its proceedings hazardous
to the public or its policyholders,
(d) The true value of the insurer's assets, if it is a life insurer, is less
than its liabilities, exclusive of its capital, or
(e) The officers or agents of an insurer refuse to submit to examination or
to perform any legal obligation relative to an examination, the Commissioner
shall revoke or suspend all certificates of authority granted to the insurer, its
officers, or agents and shall cause notice thereof to be published in a newspaper
of general circulation in this State. No new business may thereafter be done by
the insurer or its agents in this State while the default or disability continues
nor until its authority to transact business is restored by the Commissioner.
Section 38-5-130. Monetary penalty in lieu of license revocation or
suspension.
The Commissioner may, in lieu of license revocation or suspension as provided
by Section 38-5-120, impose a monetary penalty not to exceed fifteen thousand
dollars for each violation or failure of compliance or refusal to submit or
perform as prescribed therein. Series of acts by an insurer which merely
implement a basic violation and are not separate and distinct violations of an
independent nature are considered to be part of the basic violation and only one
penalty may be imposed thereon.
Section 38-5-140. Opportunity for hearing.
Unless the grounds for revocation relate only to the financial condition or
soundness of the insurer or to a deficiency in its assets, the Commissioner shall
notify the insurer not less than thirty days before revoking its authority to do
business in this State and he must specify in the notice the particulars of the
alleged violation of the law or its charter or grounds for revocation and a
proper opportunity must be offered the insurer to be heard.
Section 38-5-150. Funds may not be paid during suspension without approval.
While the certificate of authority is suspended no domestic insurer or any of
its officers may pay out any funds belonging to the insurer without first
receiving the Commissioner's approval.
Section 38-5-160. Injunction, receivership.
If he considers it necessary, the Commissioner may apply to a judge of the
circuit court to issue an injunction restraining a domestic insurer whose
certificate of authority has been suspended, in whole or in part, from proceeding
further with its business. The judge may immediately issue the injunction and,
upon
notice and after a full hearing of the matter, may (a) dissolve or modify the
injunction or make it permanent, (b) make all orders and judgments necessary in
the matter, and (c) appoint agents or a receiver to take possession of the
property and effects of the insurer and to settle its affairs, subject to any
rules and orders the court prescribes.
CHAPTER 7
Fees and Taxes
Section 38-7-10. License fees for insurers.
(1) Every insurer, except mutual benevolent aid associations and fraternal
benefit associations, shall before transacting any business in this State pay a
license fee of four hundred dollars to the Commissioner and shall thereafter pay
to the Commissioner an annual license fee of four hundred dollars by March first
of each year.
(2) In addition to the license fees required in subsection (1), the
Commissioner shall collect from each insurer licensed by him to do business in
this State a license fee of two hundred dollars for each kind of insurance for
which the insurer is licensed as listed in items (a) through (g) of Section
58-5-30. Each mutual insurer doing a property business only in no more than
three counties shall pay an annual fixed license fee of fifty dollars and each
mutual insurer doing a property business only in a single county shall pay an
annual fixed license fee of twenty dollars. The license fees required in this
subsection must be paid to the Commissioner before the insurer transacts any
business in this State and shall thereafter be paid annually to the Commissioner
by March first of each year.
Section 38-7-20. Insurance premium taxes; exclusions.
In addition to all license fees and taxes otherwise provided by law, there is
levied upon each insurer licensed by the Commissioner an insurance premium tax
based upon total premiums, other than workers' compensation insurance premiums
and annuity considerations, collected by the insurer in the State during each
calendar year ending on the thirty-first day of December. For life insurance,
the insurance premium tax levied herein is equal to three-fourths of one percent
of the total premiums collected. For all other types of insurance, the insurance
premium tax levied herein is equal to one and one-fourth percent of the total
premiums collected. In computing total premiums, return premiums on risks are
excluded, but dividends paid or credited to policyholders are included.
Section 38-7-30. Tax on fire insurers to cover expenses of inspections and
investigations.
All fire insurers doing business in this State shall pay a tax of one-tenth of
one percent on the gross premium receipts less premiums returned of unabsorbed
premium deposits. The purpose of this tax is to defray any expense, including
expenses of counsel, detectives, and officers, incurred by the State Fire Marshal
or any deputy in the performance of duties imposed upon him in the inspections
of buildings and premises and by the Commissioner or any deputy in the
investigation of charges of discrimination in rates. The Commissioner shall keep
a separate account of all monies received and disbursed under this section and
shall include this account in his annual report.
Section 38-7-40. Additional premium tax on fire insurers.
Each fire insurer shall pay to the Commissioner an amount equal to one percent
of all premiums written on fire insurance required to be reported under Section
38-7-70 during the preceding year ending December thirty-first or for such
portion of that period as the insurer has done business in this State.
Section 38-7-50. Tax on workers' compensation insurers.
Every insurer insuring employers in this State against liability for personal
injuries to their employees or death caused thereby, under the provisions of
Title 42, shall pay a tax upon the premiums received whether in cash or notes in
this State, or on account of business done in this State, for such insurance in
this State at the rate of four and one-half percent of the amount of such
premiums. This tax is in lieu of all other taxes on these premiums and must be
assessed and collected as provided in this chapter. However, the insurers must
be credited with all cancelled or returned premiums actually refunded during the
year on workers' compensation insurance including any unused premiums refunded
or credited to policyholders as dividends.
If an insurer fails or refuses to make the return required by Section 38-7-60,
the Commissioner shall assess the tax against the insurer at the rate provided
for in this chapter on the amount of premiums he considers just and the
proceedings thereon must be the same as if the return had been made.
Section 38-7-60. Returns of premiums required; quarterly payment of taxes.
(1) Not later than March first of each year, every insurer licensed by the
Commissioner shall file with him a return of premiums collected by the insurer
in the State during the immediately preceding calendar year ending on December
thirty-first. The return must be made on forms prescribed by the Commissioner
and must be made under oath by the insurer's employee or representative
responsible for the preparation of fee and tax returns, as well as the insurer's
chief executive officer.
(2) The license fees imposed in Section 38-7-20 must be fully reported on the
return filed in accordance with subsection (1) of this section.
(3) The premium and other taxes imposed on insurers pursuant to Sections
38-7-20, 38-7-30, 38-7-40, 38-7-50, and 38-7-90 must be paid to the Commissioner
in quarterly installments on or before March first, June first, September first,
and December first of each calendar year. The quarterly payments must be
calculated and paid as follows:
(a) The quarterly installments paid on or before June first, September
first, and December first must each be computed based upon one-fourth of the
total premiums collected by the insurer during the immediately preceding calendar
year ending on December thirty-first. The quarterly installments for June first,
September first, and December first must be reported on forms prescribed by the
Commissioner.
(b) The quarterly installment paid on or before March first must equal the
difference between the total tax liability of the insurer for the immediately
preceding calendar year ending on December thirty-first and the sum of the
quarterly installments paid by the insurer on June first, September first, and
December first of that immediately preceding calendar year. The quarterly
installment for March first must be reported on the returns filed in accordance
with subsection (1) of this section. An insurer whose quarterly tax installments
are less than one thousand dollars per payment may elect not to pay its tax
liability on a quarterly basis and, instead, may elect to report and pay its
entire tax liability on the return filed in accordance with subsection (1) of
this section.
(4) The Commissioner may suspend or revoke the license of any insurer which
fails to make returns and pay fees and taxes as required in this section. The
Attorney General shall bring suit in the name of the State to collect any unpaid
portion of the fees or taxes required by law.
Section 38-7-70. Annual reports of premiums of fire insurers; allocation.
Each fire insurer carrying on business in this State shall annually return to
the Commissioner by March first a just and true account, verified by oath, of all
premiums received during the preceding year ending December thirty-first from all
fire insurance on all property located or that may be located in this State and
from all fire insurance business done in this State. In the report the insurer
shall allocate the premiums on this business to the county in which the property
is located, regardless of where the insurance is written or premiums collected.
Section 38-7-80. Records to be kept; fraudulent returns; failure to keep
records or reports or pay funds due.
Every foreign or alien fire insurer shall keep accurate books of account of all
business done by it on fire insurance required to be reported under the
provisions of Section 38-7-70. If it is apparent the return is fraudulent or
dishonest, the Commissioner shall investigate the return and collect the amount
he finds due.
Every foreign or alien fire insurer which neglects to keep books of account as
required by this section, neglects or fails to report or pay any of the money due
on premiums as required by Sections 38-7-40 or 38-7-70, or is found upon
examination to have made a false return of business done by it shall for each
offense forfeit three hundred dollars, to be applied to the purposes prescribed
in Section 23-9-410.
Section 38-7-90. Retaliatory taxes, penalties, interest, and fees.
Whenever the laws of any other state require of insurers chartered by this
State and having agents in the other state, or of the agents thereof, any deposit
of securities in the State for the protection of policyholders or otherwise or
any payment of taxes, penalties, interest, certificates of authority, license
fees, filing fees, or otherwise, greater than the amount required for the same
purposes from similar companies of other states by the then existing laws of this
State, all the similar companies of the states establishing or having theretofore
established an agency or agencies in this State shall make the same deposit for
a like purpose with the Commissioner and pay to the Commissioner, for taxes,
penalties, interest, certificates of authority, license fees, filing fees, or any
other fees, an amount equal to the amount of the charges imposed by the laws of
the state upon companies of this State and the agencies thereof.
Whenever the laws of any other state or the regulation or action of any public
official of the other state subject insurance companies chartered by this State
to any restrictions, obligations, conditions, or penalties for the privilege of
doing business in the other state which are greater than those required of
similar insurers organized or domiciled in the other state by or in this State
for the privilege of doing business herein, then all similar insurers organized
or domiciled in the other state must be subjected to the greater requirements
imposed by or in the other state upon similar insurers of this State.
Section 38-7-100. Distribution of taxes to counties.
One-fourth of the insurance premium taxes collected under Section 38-7-20, and
one-fourth of the retaliatory collections made under Section 38-7-90 which are
attributable to the tax levied in Section 38-7-20, are allotted to the several
counties, respectively, in proportion to the latest official United States census
of such counties and are hereby appropriated to ordinary county purposes. No
county license fee or tax may be levied on insurance companies. As soon as
possible after March first of each year, the State Treasurer, upon a warrant from
the Comptroller General, shall pay to the county treasurer of each county its
proportionate share of the insurance premium taxes and retaliatory collections
described in this section.
Section 38-7-110. Limitation on action by State for fees, taxes, penalties,
and interest; disposition of funds recovered.
The State may bring suit in court for back fees, taxes, penalties, and interest
imposed by this title at any time within ten years from the date on which they
should have been paid. On collection of the fees and taxes, they must be
distributed as provided by the statutes under which they were levied.
Section 38-7-120. Late payment of insurance fees and taxes; penalties; return
of excess payment.
(a) As soon as practicable after each tax return or other document is filed,
the Commissioner, when fees and taxes are involved, shall examine the document
and compute the fees and taxes due. If the fees and taxes found due
are greater than the amount theretofore paid, the excess must be paid to the
Commissioner within fifteen days after notice of the amount due is mailed by the
Commissioner. If the amount due is not paid within the fifteen-day period, a
penalty of five percent of the amount due may be assessed.
(b) If the additional fees and taxes found to be due upon the examination of
the document are not paid within fifteen days of notice by the Commissioner,
interest must be added to the amount of the deficiency at the rate of five
percent for each month or fraction of a month from the date the fees or taxes
were originally due until the date the deficiency is paid. The total maximum
interest to be charged may not exceed twenty-five percent.
(c) At any time up to one year after the date upon which any original tax
return or other document is required to be filed, an insurer or other person may
file an amended return to correct errors of overpayment or other errors made by
the insurer or person in the original return or document. No amended return or
document may be filed by any insurer or person or accepted by the Commissioner
after the expiration of the one-year period. No tax adjustment, deduction, or
credit may be made or taken by the insurer or person, or allowed by the
Commissioner, on any return or document filed after the expiration of the
one-year period for errors claimed to have been made by the insurer or other
person in the original return or document.
(d) If, upon examination of any original or amended return or document, it
appears to the Commissioner that the amount of fees or taxes due is less than the
amount theretofore paid, the excess must be ordered refunded by the Commissioner.
No refunds may be made with respect to any monies which are distributable to
a governmental unit after the distribution has been made.
(e) The provisions of this section do not apply to the continuation of annual
license fees for agencies, brokers, appraisers, or adjusters.
Section 38-7-130. Payment of fees, taxes, penalties, or interest under
protest; action for recovery thereof.
(a) When the State charges or levies any fees, taxes, penalties, or interest
against any insurer or other person, or any fees, taxes, penalties, or interest
are assessed by the Commissioner and the State or Commissioner claims the payment
of the fees, taxes, penalties, or interest so charged or assessed, or institutes
a proceeding to collect them, the insurer or other person against whom the fees,
taxes, penalties, or interest is charged or assessed or against whom the
proceeding is instituted, if he conceives the fees or taxes to be unjust or
illegal, may pay the fees or taxes and any penalties, or interest thereon, under
protest in writing, with the type of funds the State Treasurer or Commissioner
is authorized to receive. Upon this payment, the Commissioner shall pay the fees,
taxes, penalties, or interest collected by him into the state treasury giving
notice at the time to the State Treasurer that the payment was made under
protest.
(b) Any insurer or other person paying any fees, taxes, penalties, or interest
under protest must within thirty days after making the payment bring an action
against the Commissioner for the recovery thereof, in the Court of Common Pleas
for Richland County. If it is determined in that action that the fees, taxes,
penalties, or interest was unjustly or illegally collected, the court must so
certify of record, and the State Treasurer shall refund the fees, taxes,
penalties, or interest to the payor.
Section 38-7-140. Penalty for failure to pay money due or to supply
information required.
If any person or any officer or employee of any insurer or other person, with
intent to evade any requirement of this title or any lawful requirement of the
Commissioner, fails to pay any fees, taxes, penalties, or interest, fails to
make, sign, or verify any return, or fails to supply any information required by
this title, or with like intent makes, renders, signs, or verifies any false or
fraudulent information, that person is guilty of a misdemeanor and, upon
conviction, must be fined an amount not to exceed five thousand dollars or
imprisoned for a term not to exceed five years, or both.
Section 38-7-150. Waiver or reduction of penalties or interest.
The Commissioner may, upon making a record of his reasons therefor, waive or
reduce any of the penalties or interest imposed under the provisions of this
title pertaining to fees and taxes.
Section 38-7-160. Municipal license fees and taxes.
This title may not be construed as preventing any municipality from levying and
collecting license fees or taxes in accordance with its ordinances. However, no
municipality may charge a license fee to fire insurers or their agents licensed
by the Commissioner in any other manner than on a percentage of the premiums
collected in the municipality or realized from risks located within the limits
of the municipality, or both, the license fee not to exceed two percent of the
premiums collected in the municipality and realized from risks located in the
municipality, except in cities of fifty thousand inhabitants or more, where not
exceeding five percent may be charged.
Preference must be given hereunder to the municipality wherein the insured
property is located, and, if a license is levied against the insuring company on
such basis, that company may not be subject to a similar license from a
municipality wherein it may collect the premium for such transaction.
Section 38-7-170. Disposition of fees, taxes, penalties, and interest.
All fees, taxes, penalties, and interest collected by the Commissioner under
this title, unless specifically provided otherwise, must be deposited by the
Commissioner in the general fund of the State.
Section 38-7-180. Temporary allowance of rate increases for certain insurers
because of greater tax liability.
Notwithstanding the restrictions of Sections 38-73-920 and 38-73-1210, any
insurer or rating organization affected thereby may, at any time up until April
1, 1987, make a filing with the Commissioner requesting a change in rates solely
to reflect changes in tax liabilities imposed by Sections 38-7-10, 38-7-20,
38-7-40, 38-7-60, 38-7-90, and 38-7-100. After that date, the twelve-month
limitations set forth in Sections 38-73-920 and 38-73-1210 are fully applicable.
In addition, any insurer issuing individual accident and health insurance
policies whose rates are regulated by the Commissioner under Section 38-71-310
may, upon approval by the Commissioner, adjust the premium rates chargeable on
such policies outstanding on July 1, 1986, to reflect changes in tax liabilities
imposed by this section, provided that the policy permits the adjustment of
premium rates after the inception date of the policy and the insurer makes the
adjustment at the time and in the manner specified in the policy.
CHAPTER 9
Capital, Surplus, Reserves, and
Other Financial Matters
Section 38-9-10. Capital and surplus required of stock insurers; delinquency.
(a) Before licensing a stock insurer, the Commissioner shall require the
insurer to be possessed of capital which must be maintained at all times and
surplus, twenty-five percent of which must be maintained at all times, in amounts
not less than the following:
If Licensed to Write Capital Surplus
Life $150,000 $150,000
Accident and health 150,000 150,000
Life, accident and
health 300,000 300,000
Property 300,000 300,000
Casualty 300,000 300,000
Surety 300,000 300,000
Marine 300,000 300,000
Title 150,000 150,000
Multiple lines 375,000 375,000.
(b) If at any time the surplus of a stock insurer is less than twenty-five
percent of the surplus initially required, as set forth in subsection (a), the
insurer is considered delinquent and delinquency proceedings may be commenced by
the Commissioner as provided by Chapter 27 of this title.
(c) If at any time the capital of a stock insurer is impaired to any extent,
the insurer is delinquent and the Commissioner shall commence delinquency
proceedings.
Section 38-9-20. Surplus required of mutual insurers; delinquency.
(a) Before licensing a mutual insurer, the Commissioner shall require the
insurer to be possessed of surplus of not less than the following amounts:
Surplus which must
be possessed at
If licensed to write time of licensing
Life $300,000
Accident and health 300,000
Life, accident and health 600,000
Property 600,000
Casualty 600,000
Surety 600,000
Marine 600,000
Title 300,000
Multiple lines 750,000
(b) If at any time the surplus of a licensed mutual insurer is less than the
sum of the capital and minimum surplus required to be maintained by a stock
insurer licensed to write the same kind or kinds of business, the mutual insurer
is considered delinquent and delinquency proceedings may be commenced by the
Commissioner as provided by Chapter 27 of this title.
(c) If at any time the surplus of a licensed mutual insurer is less than the
minimum capital required to be possessed by a stock insurer licensed to write the
same kind or kinds of business, the mutual insurer is delinquent and the
Commissioner shall commence delinquency proceedings.
Section 38-9-30. Capital and surplus requirements of insurers licensed as of
May 15, 1971; delinquency.
Sections 38-9-10 and 38-9-20 do not apply to an insurer that is licensed to do
business in this State on May 15, 1971, if the insurer continues to remain
licensed in this State and continues to maintain at least the following minimum
capital and surplus amounts if a stock insurer, or minimum surplus if a mutual
insurer:
(a) An insurer, if possessed of capital and surplus amounts on December 31,
1970, that were in compliance with the law at that time, but which are less than
the minimums required to be maintained by Section 38-9-10, must maintain not less
than the amount of capital stated in its 1970 annual statement and, in addition,
must maintain surplus of not less than twenty-five percent of that amount of
capital. If at any time the surplus of the insurer is reduced to less than
twenty-five percent of this minimum amount of required capital, the insurer is
considered delinquent and delinquency proceedings may be commenced by the
Commissioner as provided by Chapter 27 of this title. If at any time the minimum
capital required to be maintained by this section by the insurer becomes impaired
to any extent, the insurer is delinquent and the Commissioner shall commence
delinquency proceedings. If at any time the capital is increased to an amount
greater than the amount possessed on December 31, 1970, the amount of surplus
that must be maintained thereafter is twenty-five percent of that greater amount
of capital and, if this amount is not maintained, delinquency proceedings may be
commenced by the Commissioner as provided by Chapter 27 of this title. This
increased amount of capital may not thereafter be reduced to an amount less than
the amount required by Section 38-9-10 and, if it should be reduced or should
become impaired to any extent, the insurer is delinquent and the Commissioner
shall commence delinquency proceedings.
(b) A mutual insurer, if possessed of surplus on December 31, 1970, that was
in compliance with the law at that time but is less than the minimum required to
be maintained by Section 38-9-20, shall maintain not less than the amount of
surplus stated in its 1970 annual statement. If at any time the surplus of the
insurer is reduced to less than eighty percent of the amount shown in its 1970
annual statement, the insurer is considered delinquent and delinquency
proceedings may be commenced by the Commissioner as provided by Chapter 27 of
this title. If at any time the surplus of the insurer is increased to an amount
greater than the amount possessed on December 31, 1970, eighty percent of that
greater amount of surplus, or the minimum amount required to be maintained by
Section 38-9-20, whichever amount is the lesser, must be maintained thereafter
and, if it is not maintained, the insurer is considered delinquent and
delinquency proceedings may be commenced by the Commissioner as provided by
Chapter 27 of this title.
Section 38-9-40. Commissioner shall notify insurers of amounts required;
annual schedule.
The Commissioner 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 to be maintained by each insurer so notified must be published in all
succeeding annual reports of the Insurance Commission that the Commission submits
to the General Assembly through the Governor, as required by Section 38-3-70.
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.
Section 38-9-50. Restrictions on kinds of insurance that insurers may write.
An insurer that fails to meet the minimum capital and surplus requirements of
this chapter, but which continues to remain licensed by virtue of Section
38-9-30, shall confine its business to the kinds of insurance for which it was
licensed on December 31, 1970. If the insurer desires to write additional kinds
of insurance, it shall comply with the capital and surplus requirements of
Section 38-9-10 or 38-9-20 as applicable.
Section 38-9-60. No limitation on certain license provisions.
Sections 38-9-30 to 38-9-50 may not be construed as a limitation of any
authority conferred elsewhere by this title upon the Commissioner to deny or
revoke or suspend a license of an insurer.
Section 38-9-70. Insurers may make deposits to do business in other states.
The Commissioner in his official capacity shall take and hold, in trust,
deposits made by domestic insurers for the purpose of complying with the laws of
any other state to enable the insurer to do business in that state. The insurer
making the deposit is entitled to the income and may with the consent of the
Commissioner and when not forbidden by the law under which the deposit is made,
change, in whole or in part, the securities which compose the deposit for other
solvent securities of equal par value approved by the Commissioner.
Section 38-9-80. Certificates of deposits or securities required; amount.
The Commissioner shall require every insurer, other than fraternal benefit
societies, transacting, or desiring to transact, business in this State to
deposit with him certificates of deposit of building and loan associations
chartered by the State of South Carolina or federal savings and loan associations
located within the State in which deposits are guaranteed by the Federal Savings
and Loan Insurance Corporation, not to exceed the amount covered by insurance,
or of national banks located within the State or banks chartered by the State of
South Carolina in which deposits are guaranteed by the Federal Deposit Insurance
Corporation, not to exceed the amount covered by insurance; or other securities
which (1) qualify as legal investments under the laws of this State for public
sinking funds; (2) are not in default as to principal or interest; and (3) have
a current market value of not less than ten thousand dollars nor more than two
hundred thousand dollars, as determined by the Commissioner pursuant to the
standards promulgated by him.
The Commissioner shall prescribe the amount, within the limits of this section,
of the securities required, and he may subsequently increase or decrease the
amount required.
Section 38-9-90. Securities or bonds must be held as security for claims.
The bonds or other securities required by Section 38-9-80 must be held as
security for the payment of claims against the insurer arising out of its failure
to meet obligations incurred in this State. Policyholders ratably and without
preference and general creditors ratably, without preference, and subordinate to
the claims of policyholders shall have a lien on the bonds or other securities
for the amount of their claim.
Section 38-9-100. Deposit of securities not necessary when made with other
states.
If a qualified insurer deposits with an officer or official body of any other
state for the protection of all its policyholders, or all its policyholders and
creditors, acceptable securities not in default as to principal or interest and
of a current market value of not less than one million dollars, and delivers to
the Commissioner a certificate to that effect, duly authenticated by the
appropriate state official holding the deposit, then the insurer is relieved of
making the deposit required by Section 38-9-80. For the purpose of this section,
a 'qualified insurer' is a licensed stock insurer possessed of at least ten
million dollars of capital and surplus or a licensed mutual, fraternal, or
reciprocal insurer possessed of at least ten million dollars of surplus,
according to its most recent annual statement filed with the Commissioner and
may, in the discretion of the Commissioner, include designated nonadmitted
insurers in these categories which meet capital and surplus requirements.
For the purpose of this section, 'acceptable securities' means bonds of the
United States or of any state of the United States, or of any municipality or
county thereof, upon which is pledged the full faith and credit of the
appropriate political division, or bonds or notes secured by mortgages or deeds
of trust on otherwise unencumbered real estate of a market value of not less than
double the amount loaned, or other securities as are approved by the
Commissioner.
Section 38-9-110. Voluntary deposits for compliance with laws of other states.
A domestic company, in order to comply with the laws of any other state or
territory of the United States, may make a voluntary deposit with the
Commissioner in excess of the amount required by Section 38-9-80. This excess
deposit is subject to all other applicable provisions of the laws of this State
relating to the deposits of insurers, except that the excess deposit must be for
the protection of all the company's policy obligations, ratably and without
preference, notwithstanding the provisions of Section 38-9-90. However, a
domestic company making this voluntary deposit is relieved of making the deposit
required by Section 38-9-80 if the company meets the definition of a qualified
insurer as defined in Section 38-9-100 and if the voluntary deposit meets the
requirements of Section 38-9-100.
Section 38-9-120. Exchange of deposited securities.
A depositing insurer may exchange for the deposited securities, or any of them,
other securities eligible for deposit under Sections 38-9-80 to 38-9-140 if, in
the opinion of the Commissioner, the aggregate value of the deposit will not be
reduced below the amount required by law.
Section 38-9-130. Interest on deposited securities.
The Commissioner at the time of receiving any bonds or other securities
deposited under Sections 38-9-80 to 38-9-140 shall give to the company authority
to collect the interest thereon for its own use. This authority continues in
force until the company fails to pay any of its liabilities for which the deposit
is security. In case of that failure the party charged with payment of the
interest must be notified that thereafter the interest is payable to the
Commissioner to be applied, if necessary, to the payment of those liabilities.
Section 38-9-140. Principal of deposited securities.
When the principal of any securities deposited under Sections 38-9-80 to
38-9-140 is paid to the Commissioner, he shall pay the money so received to the
company. However, if the securities were required to be deposited under Section
38-9-80 the payment may not be made until the company deposits an equal amount
of other securities of the character required for similar deposits. If the
company fails to deliver to the Commissioner within thirty days after receiving
notice of this requirement the securities necessary to maintain its required
deposit, he may invest the money in other securities of the required character
and hold the same as he held those which were paid.
Section 38-9-150. Return of deposited securities.
Upon request of a domestic insurer the Commissioner may return to the insurer
the whole or any portion of the securities of the insurer held by him on deposit
when he is satisfied that the securities asked to be returned are not subject to
any liability and are not required to be held any longer by any provision of law
or purpose of the original deposit.
These deposits made by a foreign insurer must be returned by the Commissioner
upon the filing with the Commissioner by the trustee or other authorized
representative of the insurer a written request and sworn affidavit stating (a)
that the insurer has no contracts of insurance in force and no unsatisfied claims
outstanding within this State or (b) that reinsurance of all outstanding
contracts and acceptance of all unsatisfied claims within this State have been
provided by an insurer or insurers authorized to transact the same kinds of
business in this State, filing with the affidavit a certified copy of the
reinsurance agreement. Release must be made upon the written order of the
Commissioner when he is satisfied that the above requirements have been met. The
Commissioner is considered the agent of the foreign insurer for acceptance of
service of any legal process in any action or proceeding against the insurer for
any claim that might arise before or after the return of its deposits. Any person
making a false affidavit as required in this section must, upon conviction, be
imprisoned for a period not exceeding five years.
Section 38-9-160. Enforcement of trust created by deposit.
An insurer which has made a deposit in this State, pursuant to this title, its
trustees or resident managers in the United States, the Commissioner, or any
creditor of the insurer may, at any time, bring an action in the circuit court
for the County of Richland against the State and other parties properly joined
to enforce, administer, or terminate the trust created by the deposit. The
process in the action must be served on the officer of the State having the
deposit, who must appear and answer in behalf of the State and perform any orders
and judgments the court may make in the action.
Section 38-9-170. Unearned premium reserve.
(1) Every insurer authorized to transact business in this State shall, except
as to risks or policies for which reserves are required under subsections (2) and
(3) of this section and Section 38-9-180 except for real estate title insurance
policies, and subject to specific provisions of this title, maintain reserves
equal to the unearned portions of the gross premiums charged on unexpired or
unterminated risks and policies.
No deduction may be made from the reserves required by this section except for
the reserves on risks reinsured:
(a) With solvent assuming insurers licensed in this State or approved
reinsurers as provided by Section 38-5-60; or
(b) With an insurer not so licensed in an amount which, together with the
amount of the credit for claim loss reserves allowed under Section 38-9-190, does
not exceed the funds withheld under a reinsurance treaty with the unlicensed
insurer as security for the payment of obligations thereunder if the funds are
held subject to withdrawal by and are under the control of the ceding insurer.
Notwithstanding any other provision of this title the Commissioner may by
official order or regulation prescribe the conditions by which a ceding insurer
may be allowed credit as an asset or as a deduction from reserves for reinsurance
ceded to a reinsurer not licensed in this State but for which reinsurer, upon the
request of the Commissioner, there is presented evidence satisfactory to him that
the reinsurer meets the standards of solvency required in this State.
(2) (a) With reference to insurance against loss or damage to property except
as provided in item (e) of this subsection, and with reference to all general
casualty insurance and surety insurance, every insurer shall maintain an unearned
premium reserve on all policies in force.
(b) The Commissioner may require that these reserves are equal to the
unearned portions of the gross premiums in force as computed on each respective
risk from the policy's date of issue. If the Commissioner does not so require,
the portions of the gross premium in force to be held as premium reserve must be
computed according to the following table:
Term for Which Reserved for
Policy was Written Unearned Premium
1 year or less 1/2
2 years 1st year 3/4
2nd year 1/4
3 years 1st year 5/6
2nd year 1/2
3rd year 1/6
4 years 1st year 7/8
2nd year 5/8
3rd year 3/8
4th year 1/8
5 years 1st year 9/10
2nd year 7/10
3rd year 1/2
4th year 3/10
5th year 1/10
Over 5 years pro rata.
(c) All of these reserves may be computed, at the option of the insurer, on
a yearly or more frequent pro rata basis.
(d) After adopting a method for computing the reserve, an insurer may not
change methods without the Commissioner's approval.
(e) With reference to marine insurance, premiums on trip risks not
terminated are considered unearned, and the Commissioner may require the insurer
to carry a reserve thereon equal to one hundred percent on trip risks written
during the month ended as of the date of statement.
(3) For all accident and health policies the insurer shall maintain an active
life reserve which places a sound value on its liabilities under these policies
and which is not less than the reserve according to standards set forth in
regulations issued by the Commissioner and, in no event, less, in the aggregate,
than the pro rata gross unearned premium reserves for these policies.
Section 38-9-180. Standard Valuation Law.
(1) The Commissioner must annually value, or cause to be valued, the reserve
liabilities, hereinafter called reserves, for all outstanding life insurance
policies and annuity and pure endowment contracts of every life insurer doing
business in this State, except that in the case of an alien insurer such
valuation shall be limited to the United States business, and may certify the
amount of any such reserves, specifying the mortality table or tables, rate or
rates of interest and methods, net level premium method or other, used in the
calculation of such reserves. In calculating such reserves, he may use group
methods and approximate averages for fractions of a year or otherwise. In lieu
of the valuation of the reserves required in this section of any foreign or alien
insurer, he may accept any valuation made, or caused to be made, by the insurance
supervisory official of any state or other jurisdiction when such valuation
complies with the minimum standard provided in this section and if the official
of any such state or jurisdiction accepts as sufficient and valid for all legal
purposes the certificate of valuation of the Commissioner when such certificate
states the valuation to have been made in a specified manner according to which
the aggregate reserves would be at least as large as if they had been computed
in the manner prescribed by the law of that state or jurisdiction.
(2) (a) Except as otherwise provided in subparagraph (c) of this subsection
and subsection (3), the minimum standard for the valuation of all such policies
and contracts issued prior to March 24, 1960, shall be that provided by the laws
in effect immediately prior to such date except that the minimum standards for
the valuation of annuities and pure endowments purchased under group annuity and
pure endowment contracts issued prior to such effective date shall be that
provided for by the laws in effect immediately prior to such date but replacing
the interest rates as specified in such laws by an interest rate of five percent
per annum.
(b) Except as otherwise provided in subparagraph (c) of this subsection and
subsection (3), the minimum standard for the valuation of all such policies and
contracts issued on or after March 24, 1960, shall be the Commissioners' reserve
valuation methods defined in subsections (4), (5), and (8) of this section, five
percent interest for group annuity and pure endowment contracts and three and
one-half percent interest for all other such policies and contracts, or in the
case of policies and contracts, other than annuity and pure endowment contracts,
issued on or after May 26, 1975, four percent interest for such policies issued
prior to January 1, 1979, five and one-half percent interest for single premium
life insurance policies, and four and one-half percent interest for all other
such policies issued on or after January 1, 1979, and the following tables:
(i) For all ordinary policies of life insurance issued on the standard
basis, excluding any disability and accidental death benefits in such policies,
the Commissioner's 1941 Standard Ordinary Mortality Table for such policies
issued prior to the operative date stated in Section 38-63-650, the
Commissioner's 1958 Standard Ordinary Mortality Table for such policies issued
on or after the operative date of Section 38-63-590 of the Standard Nonforfeiture
Law for Life Insurance and prior to the operative date of Section 38-63-590 of
the Standard Nonforfeiture Law for Life Insurance, provided, that for any
category of such policies issued on female risks, all modified net premiums and
present values referred to in this section may be calculated according to an age
not more than three years younger than the actual age of the insured; for
policies issued prior to January 1, 1979, and not more than six years younger
than the actual age of the insured for policies issued on or after January 1,
1979, and prior to the operative date of Section 38-63-600; and for such policies
issued on or after the operative date of Section 38-63-600 of the Standard
Nonforfeiture Law for Life Insurance (1) the Commissioner's 1980 Standard
Ordinary Mortality Table or (2) at the election of the company for any one or
more specified plans of life insurance, the Commissioner's 1980 Standard Ordinary
Mortality Table with Ten-Year Select Mortality Factors or (3) any ordinary
mortality table, adopted after 1980 by the National Association of Insurance
Commissioners, that is approved by regulation promulgated by the Commissioner for
use in determining the minimum standard of valuation for such policies.
(ii) For all industrial life insurance policies issued on the standard
basis, excluding any disability and accidental death benefits in such policies,
the 1941 Standard Industrial Mortality Table for such policies issued prior to
the operative date stated in Section 38-63-650; for all policies issued on or
after such operative date, either the 1941 Standard Industrial Mortality Table
or the Commissioner's 1961 Standard Industrial Mortality Table or any industrial
mortality table, adopted after 1980 by the National Association of Insurance
Commissioners, that is approved by regulation promulgated by the Commissioner for
use in determining the minimum standard of valuation for such policies, according
to which of these tables is used to calculate adjusted premiums and present
values as specified in Section 38-63-580.
(iii) For individual annuity and pure endowment contracts, excluding any
disability and accidental death benefits in such policies, the 1937 Standard
Annuity Mortality Table or, at the option of the company, the Annuity Mortality
Table for 1949, Ultimate, or any modification of either of these tables approved
by the Commissioner.
(iv) For group annuity and pure endowment contracts, excluding any
disability and accidental death benefits in such policies, the Group Annuity
Mortality Table for 1951, any modification of such table approved by the
Commissioner or, at the option of the insurer, any of the tables or modifications
of tables specified for individual annuity and pure endowment contracts.
(v) For total and permanent disability benefits in or supplementary to
ordinary policies or contracts, for policies or contracts issued on or after
January 1, 1966, the tables of Period 2 disablement rates and the 1930 to 1950
termination rates of the 1952 Disability Study of the Society of Actuaries, with
due regard to the type of benefit or any tables of disablement rates and
termination rates, adopted after 1980 by the National Association of Insurance
Commissioners, that are approved by regulation promulgated by the Commissioner
for use in determining the minimum standard of valuation for such policies; for
policies or contracts issued on or after January 1, 1961, and prior to January
1, 1966, either such tables or, at the option of the company, the Class (3)
Disability Table (1926) and for policies issued prior to January 1, 1961, the
Class (3) Disability Table (1926) or such other table as may be approved by the
Commissioner. Any such table shall, for active lives, be combined with a
mortality table permitted for calculating the reserves for life insurance
policies.
(vi) For accidental death benefits in or supplementary to policies, for
policies issued on or after January 1, 1966, the 1959 Accidental Death Benefits
Table, or any accidental death benefits table, adopted after 1980 by the National
Association of Insurance Commissioners, that is approved by regulation
promulgated by the Commissioner for use in determining the minimum standard of
valuation for such policies; for policies issued on or after January 1, 1961, and
prior to January 1, 1966, either such table or, at the option of the company, the
Inter-Company Double Indemnity Mortality Table; and for policies issued prior to
January 1, 1961, the Inter-Company Double Indemnity Mortality Table, or such
other table as may be approved by the Commissioner. Any such table shall be
combined with a mortality table permitted for calculating the reserves for life
insurance policies.
(vii) For any extra benefits provided in life or endowment contracts or
policies under which there is payable a series of coupons or guaranteed dividends
or a series of constant or variable pure endowments maturing either during the
term of the contract and the continuation of the life of the insured or maturing
as a series after the death of the insured, such table or basis of reserves as
may be approved by the Commissioner.
(viii) For group life insurance, life insurance issued on the substandard
basis and other special benefits, such tables as may be approved by the
Commissioner.
(c) Except as provided in item (3), the minimum standard for the valuation
of all individual annuity and pure endowment contracts issued on or after the
operative date of this item (c), as defined herein, and for all annuities and
pure endowments purchased on or after such operative date under group annuity and
pure endowment contracts, shall be the Commissioner's reserve valuation methods
defined in items (4) and (5) of this section and the following tables and
interest rates:
(i) For individual annuity and pure endowment contracts issued prior to
January 1, 1979, excluding any disability and accidental death benefits in such
contracts, the 1971 Individual Annuity Mortality Table, or any modification of
this table approved by the Commissioner, and six percent interest for single
premium immediate annuity contracts, and four percent interest for all other
individual annuity and pure endowment contracts.
(ii) For individual single premium immediate annuity contracts issued on
or after January 1, 1979, excluding any disability and accidental death benefits
in such contracts, the 1971 Individual Annuity Mortality Table or any individual
annuity mortality table, adopted after 1980 by the National Association of
Insurance Commissioners, that is approved by regulation promulgated by the
Commissioner for use in determining the minimum standard of valuation for such
contracts, or any modification of these tables approved by the Commissioner, and
seven and one-half percent interest.
(iii) For individual annuity and pure endowment contracts issued on or after
January 1, 1979, other than single premium immediate annuity contracts, excluding
any disability and accidental death benefits in such contracts, the 1971
Individual Annuity Mortality Table or any individual annuity mortality table,
adopted after 1980 by the National Association of Insurance Commissioners, that
is approved by regulation promulgated by the Commissioner for use in determining
the minimum standard of valuation for such contracts, or any modification of
these tables approved by the Commissioner, and five and one-half percent interest
for single premium deferred annuity and pure endowment contracts and four and
one-half percent interest for all other such individual annuity and pure
endowment contracts.
(iv) For all annuities and pure endowments purchased prior to January 1,
1979, under group annuity and pure endowment contracts, excluding any disability
and accidental death benefits purchased under such contracts, the 1971 Group
Annuity Mortality Table, or any modification of this table approved by the
Commissioner, and six percent interest.
(v) For all annuities and pure endowments purchased on or after January
1, 1979, under group annuity and pure endowment contracts, excluding any
disability and accidental death
benefits purchased under such contracts, the 1971 Group Annuity Mortality Table
or any group annuity mortality table, adopted after 1980 by the National
Association of Insurance Commissioners, that is approved by regulation
promulgated by the Commissioner for use in determining the minimum standard of
valuation for such annuities and pure endowments, or any modification of these
tables approved by the Commissioner, and seven and one-half percent interest.
After May 26, 1975, any insurer may file with the Commissioner a written notice
of its election to comply with the provisions of this item (c) after a specified
date before January 1, 1979, which shall be the operative date of this item (c)
for such insurer, provided that an insurer may elect a different effective date
for individual annuity and pure endowment contracts from that elected for group
annuity and pure endowment contracts. If an insurer makes no such election, the
effective date of this item (c) for the insurer shall be January 1, 1979.
(3)(a) The interest rates used in determining the minimum standard for the
valuation of:
(i) All life insurance policies issued in a particular calendar year, on
or after the operative date of Section 38-63-600 of the Standard Nonforfeiture
Law for Life Insurance,
(ii) All individual annuity and pure endowment contracts issued in a
particular calendar year on or after January 1, 1983,
(iii) All annuities and pure endowments purchased in a particular calendar
year on or after January 1, 1983, under group annuity and pure endowment
contracts,
(iv) The net increase, if any, in a particular calendar year after January
1, 1983, in amounts held under guaranteed interest contracts shall be the
calendar year statutory valuation interest rates as defined in this subsection
(3).
(b) The calendar year statutory valuation interest rates, I, shall be
determined as follows and the results rounded to the nearer one-quarter of one
percent:
(i) For life insurance,
W
m I = .03 + W (R1 - .03) + 2 (R2 - .09).
(ii) For single premium immediate annuities and for annuity benefits
involving life contingencies arising from other annuities with cash settlement
options and from guaranteed interest contracts with cash settlement options,
I = .03 + W (R - .03)
where R1 is the lesser of R and .09, R2 is the greater of R and .09, R is the
reference interest rate defined in this subsection (3), and W is the weighting
factor defined in this subsection (3).
(iii) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued on an issue year basis, except as
stated in (ii) above, the formula for life insurance stated in (i) above shall
apply to annuities and guaranteed interest contracts with guarantee durations in
excess of ten years and the formula for single premium immediate annuities stated
in (ii) above shall apply to annuities and guaranteed interest contracts with
guarantee duration of ten years or less,
(iv) For other annuities with no cash settlement options and for guaranteed
interest contracts with no cash settlement options, the formula for single
premium immediate annuities stated in (ii) above shall apply,
(v) For other annuities with cash settlement options and guaranteed interest
contracts with cash settlement options, valued
on a change in fund basis, the formula for single premium immediate annuities
stated in (ii) above shall apply.
However, if the calendar year statutory valuation interest rate for any life
insurance policies issued in any calendar year determined without reference to
this sentence differs from the corresponding actual rate for similar policies
issued in the immediately preceding calendar year by less than one-half of one
percent, the calendar year statutory valuation interest rate for such life
insurance policies shall be equal to the corresponding actual rate for the
immediately preceding calendar year. For purposes of applying the immediately
preceding sentence, the calendar year statutory valuation interest rate for life
insurance policies issued in a calendar year shall be determined for 1980 (using
the reference interest rate defined for 1979) and shall be determined for each
subsequent calendar year regardless of when Section 38-63-600 of the Standard
Nonforfeiture Law for Life Insurance becomes operative.
(c) The weighting factors referred to in the formulas stated above are given
in the following tables:
(i) Weighting Factors for Life Insurance:
Guarantee
Duration Weighting
(Years) Factors
10 or less .50
More than 10, but
not more than 20 .45
More than 20 .35
For life insurance, the guarantee duration is the maximum number of years the
life insurance can remain in force on a basis guaranteed in the policy or under
options to convert to plans of life insurance with premium rates or nonforfeiture
values or both which are guaranteed in the original policy;
(ii) Weighting factor for single premium immediate annuities and for
annuity benefits involving life contingencies arising from other annuities with
cash settlement options and guaranteed interest contracts with cash settlement
options:
.80
(iii) Weighting factors for other annuities and for guaranteed interest
contracts, except as stated in (ii) above, shall be as specified in tables a, b,
and c below, according to the rules and definitions in d, e, and f below:
a. For annuities and guaranteed interest contracts valued on an issue year
basis:
Guarantee Weighting Factor
Duration for Plan Type
(Years) A B C
5 or less: .80 .60 .50
More than 5, but
not more than 10: .75 .60 .50
More than 10, but
not more than 20: .65 .50 .45
More than 20: .45 .35 .35
Plan Type
A B C
b. For annuities and
guaranteed interest
contracts valued on a
change in fund basis,
the factors shown in a.
above increased by:
.15 .25 .05
Plan Type
A B C
c. For annuities
and guaranteed interest
contracts valued on an
issue year basis (other
than those with no cash
settlement options) which
do not guarantee interest
on considerations received
more than one year after
issue or purchase and for
annuities and guaranteed
interest contracts
valued on a change
in fund basis which
do not guarantee
interest rates on
considerations received
more than twelve months
beyond the valuation date,
the factors shown in a.
or derived in b. increased
by: .05 .05 .05
d. For other annuities with cash settlement options and guaranteed
interest contracts with cash settlement options, the guarantee duration is the
number of years for which the contract guarantees interest rates in excess of the
calendar year statutory valuation interest rate for life insurance policies with
guarantee duration in excess of twenty years. For other annuities with no cash
settlement options and for guaranteed interest contracts with no cash settlement
options, the guarantee duration is the number of years from the date of issue or
date of purchase to the date annuity benefits are scheduled to commence.
e. Plan type as used in the above tables is defined as:
Plan Type A: At any time policyholder may withdraw funds only (1) with an
adjustment to reflect changes in interest rates or asset values since receipt of
the funds by the insurer, or (2) without such adjustment but in installments over
five years or more, or (3) as an immediate life annuity, or (4) no withdrawal
permitted. Plan Type B: Before expiration of the interest rate guarantee,
policyholder may withdraw funds only (1) with an adjustment to reflect changes
in interest rates or asset values since receipt of the funds by the insurer, or
(2) without such adjustment but in installments over five years or more, or (3)
no withdrawal permitted. At the end of interest rate guarantee, funds may be
withdrawn without such adjustment in a single sum or installments over less than
five years.
Plan Type C: Policyholder may withdraw funds before expiration of interest rate
guarantee in a single sum or installments over less than five years either (1)
without adjustment to reflect changes in interest rates or asset values since
receipt of the funds by the insurer, or (2) subject only to a fixed surrender
charge stipulated in the contract as a percentage of the fund.
f. An insurer may elect to value guaranteed interest contracts with cash
settlement options and annuities with cash settlement options on either an issue
year basis or on a change in fund basis. Guaranteed interest contracts with no
cash settlement options and other annuities with no cash settlement options must
be valued on an issue year basis. As used in this subsection (3), an issue year
basis of valuation refers to a valuation basis under which the interest rate used
to determine the minimum valuation standard for the entire duration of the
annuity or guaranteed interest contract is the calendar year valuation interest
rate for the year of issue or year of purchase of the annuity or guaranteed
interest contract, and the change in fund basis of valuation refers to a
valuation basis under which the interest rate used to determine the minimum
valuation standard applicable to each change in the fund held under the annuity
or guaranteed interest contract is the calendar year valuation interest rate for
the year of the change in the fund.
(d) The Reference Interest Rate referred to in subitem (b) of this
subsection (3) shall be defined as:
(i) For all life insurance, the lesser of the average over a period of
thirty-six months and the average over a period of twelve months, ending on June
thirtieth of the calendar year next preceding the year of issue, of Moody's
Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's
Investors Service, Inc.
(ii) For single premium immediate annuities and for annuity benefits
involving life contingencies arising from other annuities with cash settlement
options and guaranteed interest contracts with cash settlement options, the
average over a period of twelve months, ending on June thirtieth of the calendar
year of issue or year of purchase, of Moody's Corporate Bond Yield
Average--Monthly Average Corporates, as published by Moody's Investors Service,
Inc.
(iii) For other annuities with cash settlement options and guaranteed
interest contracts with cash settlement options, valued on a year of issue basis,
except as stated in (ii) above, with guarantee duration in excess of ten years,
the lesser of the average over a period of thirty-six months and the average over
a period of twelve months, ending on June thirtieth of the calendar year of issue
or purchase, of Moody's Corporate Bond Yield Average--Monthly Average Corporates,
as published by Moody's Investors Service, Inc.
(iv) For other annuities with cash settlement options and guaranteed
interest contracts with cash settlement options, valued on a year of issue basis,
except as stated in (ii) above, with guarantee duration of ten years or less, the
average over a period of twelve months, ending on June thirtieth of the calendar
year of issue or purchase, of Moody's Corporate Bond Yield Average--Monthly
Average Corporates, as published by Moody's Investors Service, Inc.
(v) For other annuities with no cash settlement options and for guaranteed
interest contracts with no cash settlement options, the average over a period of
twelve months, ending on June thirtieth of the calendar year of issue or
purchase, of Moody's Corporate Bond Yield Average--Monthly Average Corporates,
as published by Moody's Investors Service, Inc.
(vi) For other annuities with cash settlement options and guaranteed
interest contracts with cash settlement options, valued on a change in fund
basis, except as stated in (ii) above, the average over a period of twelve
months, ending on June thirtieth of the calendar year of the change in the fund,
of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published
by Moody's Investors Service, Inc.
(e) In the event that Moody's Corporate Bond Yield Average--Monthly Average
Corporates is no longer published by Moody's Investors Service, Inc., or in the
event that the National Association of Insurance Commissioners determines that
Moody's Corporate Bond Yield Average--Monthly Average Corporates as published by
Moody's Investors Service, Inc., is no longer appropriate for the determination
of the reference interest rate, then an alternative method for determination of
the reference interest rate, which is adopted by the National Association of
Insurance Commissioners and approved by regulation promulgated by the
Commissioner, may be substituted.
(4) Except as otherwise provided in subsections (5) and (8), reserves
according to the Commissioners' reserve valuation method, for the life insurance
and endowment benefits of policies providing for a uniform amount of insurance
and requiring the payment of uniform premiums, shall be the excess, if any, of
the present value, at the date of valuation, of such future guaranteed benefits
provided for by such policies, over the then present value of any future modified
net premiums therefor. The modified net premiums for any such policy shall be
such uniform percentage of the respective contract premiums for such benefits
that the present value, at the date of issue of the policy, of all such modified
net premiums shall be equal to the sum of the then present value of such benefits
provided for by the policy and the excess of item (a) over item (b), as follows:
(a) A net level annual premium equal to the present value, at the date of
issue, of such benefits provided for after the first policy year, divided by the
present value, at the date of issue, of an annuity of one per annum payable on
the first and each subsequent anniversary of such policy on which a premium falls
due; provided, however, that such net level annual premium shall not exceed the
net level annual premium on the nineteen year premium whole life plan for
insurance of the same amount at an age one year higher than the age of issue of
such policy.
(b) A net one year term premium for such benefits provided for in the first
policy year.
For any life insurance policy issued on or after January 1, 1986, for which the
contract premium in the first policy year exceeds that of the second year and for
which no comparable additional benefit is provided in the first year for such
excess and which provides an endowment benefit or a cash surrender value or a
combination thereof in an amount greater than such excess premium, the reserve
according to the Commissioners' reserve valuation method as of any policy
anniversary occurring on or before the assumed ending date defined herein as the
first policy anniversary on which the sum of any endowment benefit and any cash
surrender value then available is greater than such excess premium shall, except
as otherwise provided in subsection (8), be the greater of the reserve as of such
policy anniversary calculated as described in the preceding paragraph and the
reserve as of such policy anniversary calculated as described in that paragraph,
but with (i) the value defined in item (a) of that paragraph being reduced by
fifteen percent of the amount of such excess first year premium, (ii) all present
values of benefits and premiums being determined without reference to premiums
or benefits provided for by the policy after the assumed ending date, (iii) the
policy being assumed to mature on such date as an endowment, and (iv) the cash
surrender value provided on such date being considered as an endowment benefit.
In making the above comparison the mortality and interest bases stated in
subsection (2)(a) and (3) shall be used.
Reserves according to the Commissioners' reserve valuation method for: (i) life
insurance policies providing for a varying amount of insurance or requiring the
payment of varying premiums, (ii) group annuity and pure endowment contracts
purchased under a retirement plan or plan of deferred compensation, established
or maintained by an employer (including a partnership or sole proprietorship) or
by an employee organization, or by both, other than a plan providing individual
retirement accounts or individual retirement annuities under Section 408 of the
Internal Revenue Code, as amended, (iii) disability and accidental death benefits
in all policies and contracts, and (iv) all other benefits, except life insurance
and endowment benefits in life insurance policies and benefits provided by all
other annuity and pure endowment contracts, shall be calculated by a method
consistent with the principles of subsection (3) of this section, except that any
extra premiums charged because of impairments or special hazards shall be
disregarded in the determination of modified net premiums.
(5) This subsection shall apply to all annuity and pure endowment contracts
other than group annuity and pure endowment contracts purchased under a
retirement plan or plan of deferred compensation, established or maintained by
an employer (including a partnership or sole proprietorship) or by an employee
organization, or by both, other than a plan providing individual retirement
accounts or individual retirement annuities under Section 408 of the Internal
Revenue Code, as amended. Reserves according to the Commissioners' annuity
reserve method for benefits under annuity or pure endowment contracts, excluding
any disability and accidental death benefits in such contracts, shall be the
greatest of the respective excesses of the present values, at the date of
valuation, of the future guaranteed benefits, including guaranteed nonforfeiture
benefits, provided for by such contracts at the end of each respective contract
year, over the present value, at the date of valuation, of any future valuation
considerations derived from future gross considerations, required by the terms
of such contract, that become payable prior to the end of such respective
contract year. The future guaranteed benefits shall be determined by using the
mortality table, if any, and the interest rate, or rates, specified in such
contracts for determining guaranteed benefits. The valuation considerations are
the portions of the respective gross considerations applied under the terms of
such contracts to determine nonforfeiture values.
(6) In no event shall an insurer's aggregate reserves for all life insurance
policies, excluding disability and accidental death benefits, issued on or after
March 24, 1960, be less than the aggregate reserves calculated in accordance with
the methods set forth in subsections (4), (5), (8), and (9) and the mortality
table or tables and rate or rates of interest used in calculating nonforfeiture
benefits for such policies.
(7) Reserves for all policies and contracts issued prior to March 24, 1960,
may be calculated, at the option of the insurer, according to any standards which
produce greater aggregate reserves for all such policies and contracts than the
minimum reserves required by the laws in effect immediately prior to such date.
Reserves for any category of policies, contracts, or benefits as established
by the Commissioner, issued on or after March 24, 1960, may be calculated, at the
option of the insurer, according to any standards which produce greater aggregate
reserves for such category than those calculated according to the minimum
standard provided in this section, but the rate or rates of interest used for
policies and contracts, other than annuity and pure endowment contracts, shall
not be higher than the corresponding rate or rates of interest used in
calculating any nonforfeiture benefits provided therein.
Any such insurer which at any time shall have adopted any standard of valuation
producing greater aggregate reserves than those calculated according to the
minimum standard provided in this section may, with the approval of the
Commissioner, adopt any lower standard of valuation, but not lower than the
minimum provided in this section.
(8) If in any contract year the gross premium charged by any life insurer on
any policy or contract is less than the valuation net premium for the policy or
contract calculated by the method used in calculating the reserve thereon but
using the minimum valuation standards of mortality and rate of interest, the
minimum reserve required for such policy or contract shall be the greater of
either the reserve calculated according to the mortality table, rate of interest,
and method actually used for such policy or contract, or the reserve calculated
by the method actually used for such policy or contract but using the minimum
valuation standards of mortality and rate of interest and replacing the valuation
net premium by the actual gross premium in each contract year for which the
valuation net premium exceeds the actual gross premium. The minimum valuation
standards of mortality and rate of interest referred to in this subsection are
those standards stated in subsections (2)(a) and (3).
For any life insurance policy issued on or after January 1, 1986, for which the
gross premium in the first policy year exceeds that of the second year and for
which no comparable additional benefit is provided in the first year for such
excess and which provides an endowment benefit or a cash surrender value or a
combination thereof in an amount greater than such excess premium, the foregoing
provisions of this subsection (8) shall be applied as if the method actually used
in calculating the reserve for such policy were the method described in
subsection (4), ignoring the second paragraph of subsection (4). The minimum
reserve at each policy anniversary of such a policy shall be the greater of the
minimum reserve calculated in accordance with subsection (4), including the
second paragraph of that subsection, and the minimum reserve calculated in
accordance with this subsection (8).
(9) In the case of any plan of life insurance which provides for future
premium determination, the amounts of which are to be determined by the insurer
based on then estimates of future experience, or in the case of any plan of life
insurance or annuity which is of such a nature that the minimum reserves cannot
be determined by the methods described in subsections (4), (5), and (8), the
reserves which are held under any such plan must:
(a) Be appropriate in relation to the benefits and the pattern of premiums
for that plan, and
(b) Be computed by a method which is consistent with the principles of this
Standard Valuation Law, as determined by regulations promulgated by the
Commissioner.
(10) This section is known as the 'Standard Valuation Law'.
Section 38-9-190. Loss and claim reserves.
Every company authorized to transact insurance in this State shall maintain
reserves in an amount estimated in the aggregate as being sufficient to provide
for the payment of all losses or claims arising by the date of any annual or
other statement, whether reported or unreported, which are unpaid as of that date
and for which the insurer may be liable, and also reserves in an amount estimated
to provide for the expenses of adjustment or settlement of these claims.
The reserves for unpaid losses and loss expenses under policies of personal
injury liability insurance, employer's liability insurance, and workers'
compensation insurance must be calculated in accordance with any regulations the
Commissioner prescribes, and every company authorized to write these kinds of
insurance shall file with its annual statement schedules of its experience
thereon in the form the Commissioner requires.
Every company may receive credit for reinsurance recoverable (a) from an
insurer licensed to transact that insurance in this State or approved as a
reinsurer by the Commissioner as provided by Section 38-5-60 in the full amount
thereof or (b) from an insurer not so licensed in an amount not exceeding the
funds withheld under a reinsurance treaty with the unlicensed company as security
for the payment of obligations thereunder if the funds are held subject to
withdrawal by and are under the control of the ceding company.
Notwithstanding any other provision of this title, the Commissioner may by
official order or regulation prescribe the conditions under which a ceding
insurer may be allowed credit as an asset or a deduction from loss reserves for
claims recoverable from a reinsurer not licensed in this State but for which
reinsurer, upon the request of the Commissioner, there is presented evidence
satisfactory to him that the reinsurer meets the standards of solvency required
in this State.
If the loss experience of an insurer shows that its loss reserves, however
estimated, are inadequate, the Commissioner shall require the insurer to maintain
loss reserves in an increased amount as is needed to make them adequate.
CHAPTER 11
Investments
Section 38-11-10. Legislative intent.
The legislative intent is that policyholder obligations and the minimum
capital, or guaranty fund, and surplus required by law, must be covered only by
assets of unquestioned integrity and stability and that assets in excess of those
required to cover policyholder obligations, minimum capital, or guaranty funds,
and surplus, may be invested by insurers at the discretion of such insurers,
except that the assets may not be invested in assets prohibited under Section
38-11-90.
Section 38-11-20. Application of chapter to domestic, foreign, and alien
insurers.
This chapter applies to all domestic insurers. Foreign insurers and United
States branches of alien insurers transacting an insurance business in this State
shall maintain investments of the same general type and character as specified
for domestic insurers, except that investments of substantially the same quality
as those specified herein, authorized by the law of the insurer's state of
domicile, or state of entry if an alien insurer, may be recognized as eligible
investments for purposes of this chapter by the Commissioner in the sound
exercise of his discretion.
Section 38-11-30. 'Policyholder obligations' defined.
As used in this chapter, unless the context requires otherwise, 'policyholder
obligations' means those liabilities of the insurer to, or for, its policyholders
arising out of its policies and to its creditors and includes the liabilities
required to be included in the insurer's annual statement, including, but not
limited to (a) the unearned premium reserve, (b) reserves required by applicable
mortality or morbidity tables, and (c) claim or loss reserves including incurred
but not reported claims. 'Policyholder obligations' does not include that
portion of the insurer's capital or guaranty fund, nor that portion of its
surplus, in excess of the minimum capital, or guaranty fund, and surplus required
by law for such insurer, nor the Mandatory Securities Valuation Reserve.
Section 38-11-40. Investments must be maintained to cover policyholder
obligations, minimum capital or guaranty fund, and surplus.
Every insurer shall have and maintain investments, of the classes described in
this section, to the extent of policyholder obligations and minimum capital, or
guaranty fund, and surplus less, with respect to insurers other than life
insurers, an amount equal to thirty percent of its surplus as regards
policyholders. In no event may insurers, other than life insurers, have and
maintain investments of the character described below less than an amount equal
to seventy percent of policyholder obligations and one hundred percent of the
minimum required capital, or guaranty fund, and surplus:
(a) Cash, cash funds, and interest accrued thereon on deposit or in savings
accounts, under certificates of deposit, or in any other form, in solvent banks
and trust companies which have qualified for the insurance protection afforded
by the Federal Deposit Insurance Corporation, but the cash or cash funds are not
limited to, or by, the amount of insurance protection.
(b) Premiums in the course of collection, including due and deferred premiums
of life insurers, other than from agencies or general agencies effectively owned
or controlled by, or owning or controlling, the insurer, not more than three
months past due, less commissions payable, and installment premiums to the extent
of the unearned premium reserve carried on the policies to which the premiums
apply, less commissions payable thereon. However, premium balances not more than
ninety days past due from agencies or general agencies effectively owned or
controlled by, or owning or controlling, the insurer are considered admitted
assets of the insurer to the extent that balances due from the agency or general
agency are represented by assets of the kinds described in this section as
limited by Section 38-11-50.
(c) Reinsurance recoverables, not more than three months past due from
solvent, authorized reinsurers, including deposits made with assuming reinsurers,
or held by ceding insurers, under reinsurance agreements, but only to the extent
that the deposits are available as offsets against liabilities assumed under the
reinsurance agreements.
(d) Bonds, notes, warrants, and other securities which are the direct
obligations of the United States or for which the faith and credit of the United
States are pledged for the payment of principal and interest.
(e) Obligations or stock, where stated, of the following agencies or
instrumentalities of the United States, whether or not such obligations are
guaranteed by the government:
(1) Commodity Credit Corporation.
(2) Federal intermediate credit banks.
(3) Federal land banks.
(4) Central Bank for Cooperatives.
(5) Federal home loan banks and their stock.
(6) Federal National Mortgage Association and its stock when acquired in
connection with sale of mortgage loans to the Federal National Mortgage
Association.
(7) Government National Mortgage Association.
(8) Other agencies or instrumentalities of the United States approved by the
Commissioner.
(f) Bonds, notes, warrants, and other securities which are the direct
obligations of any state or territory of the United States or of the District of
Columbia, or for which the full faith and credit of the state, territory, or
District of Columbia have been pledged for the payment of principal and interest.
(g) Bonds, notes, warrants, and other securities which are valid and legally
authorized obligations, issued, assumed, or guaranteed by any county, city, town,
village, municipality, or district of any state or territory of the United
States, or by any political subdivision thereof, or by any civil division or
public instrumentality of the United States, any state or territory of the United
States, or any county, city, town, or district of any state or territory, if, by
statutory or other legal requirements applicable thereto, such obligations are
payable, both as to principal and interest, from taxes levied, or required by
such law to be levied, upon all taxable property or taxable income within the
jurisdiction of the governmental unit, or from special revenues pledged or
otherwise appropriated or by law required to be appropriated for the purpose of
the payment, but not including any obligations payable solely out of special
assessments on properties benefited by local improvements. However, obligations
payable out of special revenues pledged or otherwise appropriated or required by
law to be appropriated for the purpose of the payment, are eligible for purposes
of this section only if the obligations are eligible for amortization in
accordance with regulations promulgated by the Commissioner after notice and
hearing.
(h) Bonds, notes, warrants, or other securities of Canada, or of any of its
provinces, or of any municipality in Canada, if the municipal obligations are
required or permitted to be amortized in the annual statement prescribed by law,
or any bonds fully guaranteed by Canada, or any of its provinces or
municipalities, if the bonds are payable in lawful money of the United States or
Canada.
(i) Bonds, notes, or debentures of solvent corporations existing under the
laws of the United States or any of its states or territories, the District of
Columbia, Canada, or any of its provinces, if the obligations are qualified under
any of the following:
(1) Obligations which are secured by adequate collateral security and bear
fixed interest if, during each of the last two, and one additional year, of the
five fiscal years next preceding the date of acquisition by the insurer, the net
earnings of the issuing, assuming, or guaranteeing corporation available for its
fixed charges have not been less than one and one-fourth times the total of its
fixed charges for that year. In determining the adequacy of collateral security
not more than one-third of the total value of the required collateral may consist
of stock other than preferred or guaranteed stocks. The Commissioner may approve
the collateral as adequate notwithstanding that more than one third of the total
value of the required collateral consists of stocks other than preferred or
guaranteed stocks if he finds the collateral to be adequate otherwise and states,
in writing, his reasons for so finding.
(2) Fixed interest-bearing obligations other than those described in (1)
above, if the net earnings of the issuing, assuming, or guaranteeing corporation
available for its fixed charges for a period of five fiscal years next preceding
the date of acquisition by the insurer have averaged per year not less than one
and one-half times its annual fixed charges applicable to that period and during
the last two years of the period the net earnings have been not less than one and
one-half times its fixed charges for those years. Notwithstanding the failure of
an issuing corporation to meet the test with respect to its fixed
interest-bearing obligations as provided in this item, the obligations must be
considered to be eligible hereunder if they are secured or guaranteed by leases
or other contracts as long as the guaranteeing, leasing, or contracting
corporation fulfills the requirements of this section with respect to its fixed
interest obligations.
(3) Adjustment income or other contingent interest obligations if the net
earnings of the issuing, assuming, or guaranteeing corporation available for its
fixed charges for a period of five fiscal years next preceding the date of
acquisition by the insurer have averaged per year not less than one and one-half
times the
sum of its average annual fixed charges and its average annual maximum contingent
interest applicable to that period and if during each of the last two years of
the period the net earnings have been not less than one and one-half times the
sum of its fixed charges and maximum contingent interest for those years. As used
herein, 'net earnings available for fixed charges' means net income after
deducting operating and maintenance expenses, taxes other than federal and state
income taxes, depreciation, and depletion, but excluding extraordinary
nonrecurring items of income or expenses appearing in the regular financial
statement of the corporation. 'Fixed charges' includes interest on funded and
unfunded debt and amortization of debt discount.
(j) Preferred or guaranteed stocks or shares, other than common stocks, of
solvent institutions existing under the laws of the United States or of any of
its states, districts, or territories, if all of the prior obligations and prior
preferred stocks, if any, of the institution at the date of acquisition by the
insurer are eligible as investments under this chapter and if qualified under
either of:
(1) Preferred stocks or shares are considered qualified if both of these
requirements are met:
(i) The net earnings of the institution available for its fixed charges
for a period of five fiscal years next preceding the date of acquisition by the
insurer shall have averaged per year not less than one and one-half times the sum
of its average annual fixed charges, if any, its average annual maximum
contingent interest, if any, and its average annual preferred dividend
requirements applicable to the period; and
(ii) During each of the last two years of the period the net earnings must
have been not less than one and one-half times the sum of its fixed charges,
contingent interest, and preferred dividend requirements. 'Preferred dividend
requirements' means cumulative or noncumulative dividends whether paid or not.
(2) Guaranteed stocks or shares are considered qualified if the assuming or
guaranteeing institution meets the requirements of Section 38-11-40 (j) (2)
construed to include as a fixed charge the amount of guaranteed dividends of the
issue or the rental covering the guarantee of the dividends.
(k) If a life insurer, loans to policyholders upon pledge of the policy as
collateral security, amounts not exceeding the cash surrender values of the
policies, or loans against pledge or assignment of any of its supplementary
contracts or other contracts or obligations, as long as the loan is adequately
secured by pledges or assignments.
(l) If a life insurer, bonds, or evidences of debts secured by first mortgages
or deeds of trust on improved unencumbered real property or the equity of the
seller of any of this property in the contract for a deed covering the entire
balance due on a bona fide sale of property located in the United States or any
of its states or territories or the District of Columbia; but no mortgage loan
or investment in the equity of the seller in the contract for deed may exceed at
the time of acquisition seventy-five percent of the fair market value of the
property.
Real estate is not considered to be encumbered within the meaning of this
chapter by reason of the existence of taxes or assessments which are not
delinquent, instruments creating or reserving mineral, oil, or timber rights,
rights-of-way, joint driveways, sewer rights, rights in walls, nor by reason of
building restrictions or other restrictive covenants, nor when the real estate
is subject to lease in whole or in part whereby rents or profits are reserved to
the owner if in any event the security for the loan or investment is a first lien
upon the real estate. The value of any mineral, oil, timber, or similar right
reserved may not be included in the fair market value of the property.
(m) If a life insurer, evidences of debt secured by first mortgages or deeds
of trust upon leasehold estates running for a term not less than ten years beyond
the maturity of the loan as made or as extended, in improved real property,
otherwise unencumbered, if the mortgagee is entitled to be subrogated to all
rights under the leasehold. No investment under this item may exceed seventy-five
percent of the fair market value of the leasehold estate.
(n) If a life insurer, bonds or notes secured by mortgage or trust deed
guaranteed or insured as to principal in whole or in part by the Administrator
of Veterans' Affairs pursuant to the provisions of Title III of an Act of
Congress of the United States of June 22, 1944, entitled the 'Service Men's
Readjustment Act of 1944', as amended, or bonds or notes secured by mortgage or
trust deed guaranteed or insured by the Federal Housing Administration under the
terms of an Act of Congress of the United States of June 27, 1936, entitled the
'National Housing Act', as amended.
(o) Land and buildings to the extent used and occupied for home office
purposes together with other real estate as is required for the insurer's
convenient transaction of its business at net value plus improvements less normal
depreciation.
(p) If a life insurer, improved unencumbered real estate for the production
of income or property now under lease or being constructed under a definite
agreement providing for lease to solvent institutions, individuals, or
governmental agencies for governmental, professional, commercial, residential,
or industrial purposes other than agricultural, horticultural, ranch, mining,
mineral, or oil purposes at net value plus improvements less normal depreciation;
however, upon approval by the Commissioner of South Carolina, the real estate
investment may be encumbered or need not be under lease.
(q) Loans secured by pledge of collateral determined by the Commissioner to
be adequate and appropriate for investment of policyholder obligation funds of
the insurer.
(r) Common stocks of any solvent corporation incorporated under the laws of
the United States or any state, or Canada, or any of its provinces, if the stocks
of the corporation are listed or admitted to trading on a securities exchange
located in the United States, which exchange is approved or recognized by the
Securities and Exchange Commission of the United States or if the stocks are
listed in the Manual on Valuation of Securities issued by the Committee on
Valuation of Securities of the National Association of Insurance Commissioners.
(s) Any investment not specifically included herein nor prohibited under
Section 38-11-90, if and to the extent as, the Commissioner finds the investment
appropriate for investment of policyholder obligations funds. This finding is
to be based upon the standards prescribed by Section 38-11-10.
Section 38-11-50. Limitations on investments made under Section 38-11-40.
Investments made by insurers for the purpose of covering policyholder
obligations, and their minimum capital or guaranty fund and surplus required by
law, as provided in Section 38-11-40, are subject to:
(a) None of the securities mentioned in Section 38-11-40 are eligible for the
purposes of that section if, within the five years immediately preceding, the
obligor has defaulted in the payment of principal or interest on any of its
bonds, warrants, or other securities.
(b) With respect to investments under item (g) of Section 38-11-40, not more
than twenty percent of the insurer's policyholder obligations may be invested in
the securities of any one county, city, town, village, municipality, or district
of any state or territory of the United States or of any political subdivision
thereof, or any civil division or public instrumentality of the United States.
However, the foregoing limitation does not apply with respect to an investment
which qualifies for sinking fund purposes under the laws of this State.
(c) Investments described in item (h) of Section 38-11-40 may not exceed ten
percent of the insurer's policyholder obligations.
(d) Investments described in item (i) of Section 38-11-40 may not exceed
sixty-six and two-thirds percent of the insurer's policyholder obligations, nor
may more than ten percent of the insurer's policyholder obligations be invested
in any one investment.
(e) Investments described in item (j) of Section 38-11-40 may not exceed
fifteen percent of the insurer's policyholder obligations.
(f) Investments described in items (l), (m), and (n) of Section 38-11-40 may
not exceed in the aggregate sixty-six and two-thirds percent of the insurer's
policyholder obligations, nor, with respect to investments under any of these
items, may more than ten percent of the insurer's policyholder obligations be
invested in any one investment or in any one project, subdivision, or transaction
or series of related transactions.
(g) Investments described in item (o) of Section 38-11-40 may not exceed ten
percent of the insurer's policyholder obligations.
(h) Investments described in item (p) of Section 38-11-40 may not exceed ten
percent of the insurer's policyholder obligations. Where a life insurer does not,
wholly or in part, avail itself of item (o) of Section 38-11-40, as limited by
item (f) of Section 38-11-40, the investments under item (p) of Section 38-11-40
may be increased to the extent of the unused portion but in no event may the life
insurer's investments under item (p) of Section 38-11-40 exceed fifteen percent
of the insurer's policyholder obligations. However, this limitation does not
apply to real estate acquired by bona fide mortgage foreclosure if the insurer
has had title to such real estate for less than a five-year period.
(i) Investments described in item (q) of Section 38-11-40 may not exceed ten
percent of the insurer's policyholder obligations.
(j) Investments described in item (r) of Section 38-11-40 may not exceed ten
percent of the insurer's policyholder obligations.
(k) Investments authorized under item (s) of Section 38-11-40 may not exceed
ten percent of the insurer's policyholder obligations.
(l) For the purposes of the limitations contained in this section, the
property and securities enumerated in Section 38-11-40 may be valued at cost,
less depreciation, or market, whichever is less. However, the Commissioner may,
by regulation, authorize valuation of securities in accordance with stated values
established for the securities in writing or as published by the Committee on
Valuation of Securities of the National Association of Insurance Commissioners.
However, mortgage loans may, in any event, be valued at amortized value.
Section 38-11-60. Consolidated statement by insurer owning eighty percent or
more of stock of another insurer.
An insurer owning not less than eighty percent of all classes of the
outstanding stock of one or more other insurers transacting an insurance business
may, for the purposes of complying with Section 38-11-40, so comply on the basis
of a consolidated statement. However, every subsidiary must fully comply with
the requirements of Section 38-11-40.
Section 38-11-70. Notice to Commissioner of noncompliance with chapter;
suspension or revocation of license; certain investments excepted.
An insurer not in compliance with the requirements imposed by this chapter
shall within thirty days notify the Commissioner. Upon being notified, or upon
otherwise ascertaining noncompliance, the Commissioner shall order the insurer
to make good the deficiency within thirty days, and he shall, upon failure of the
insurer to do so, revoke or suspend the license of the insurer until the
deficiency has been made good. However, if noncompliance results from the
acquisition of the property or security through foreclosure or otherwise results
from a default in a loan or other obligation and the acquisition has been
rendered necessary in order to protect the investment or avoid greater loss, the
Commissioner may further extend the period not to exceed one hundred eighty days
if the insurer establishes that the extension is necessary, that it will not
prejudice the policyholders and that the insurer has, in good faith, entered upon
a course of action calculated to terminate the noncompliance on or before the
expiration of the extended period.
Further, investments in real estate and mortgage loans on real estate already
made and recognized as admitted assets as of December 31, 1970, are not affected
by the restrictions and limitations of this chapter, and are considered as assets
covering policyholder obligations and minimum capital, or guaranty fund, and
surplus required by law.
Section 38-11-80. Authority required for making loans and investments.
No insurer may make any loan or investment, except the policy loans of a life
insurer, or any sale or exchange unless authorized, approved, or ratified by its
board of directors or other governing body or by a committee charged by the board
of directors, other governing body, or the bylaws with the duty of making the
investment, loan, sale, or exchange. The minutes of the committee must be
submitted to the board of directors or other governing body at the next meeting
of the board of directors or other governing body.
Section 38-11-90. Investments in and loans upon certain securities prohibited.
No insurer may invest any of its funds in or lend any of its funds upon the
security of:
(a) Issued shares of its own capital stock except with the written permission
of the Commissioner which may be granted, at his discretion, where the purpose
of the acquisition is in connection with a lawful plan for mutualization of the
insurer, or in furtherance of a retirement, pension, or incentive program for
officers or employees of the insurer, which plan has been approved by the
stockholders, or if otherwise the acquisition is shown to be for the benefit of
all stockholders; but in no event may shares so acquired be admissible as an
asset or shown as an asset in any financial statement of the insurer.
(b) Securities issued by a corporation which is insolvent at the time of the
proposed investment except upon the written approval of the Commissioner.
(c) Securities which will subject the insurer to any assessment other than for
taxes or wages.
(d) Any investment or security which is found by the Commissioner to be
designed to evade any prohibition of this chapter.
Section 38-11-100. Certain assets considered admitted assets; valuation.
The assets enumerated in Section 38-11-40 and other assets not prohibited under
Section 38-11-90 nor required to be scheduled as nonadmitted assets in the annual
statement, as prescribed by the Commissioner, are considered admitted assets and
all these assets must be valued in accordance with the standards prescribed in
item (l) of Section 38-11-50.
Section 38-11-110. Valuation of other investments.
All investments of insurers authorized to do business in this State, for which
no rule or method of valuation has been otherwise provided, must be valued in the
discretion of the Commissioner at their fair market value, appraised value, or
at amounts determined by the Commissioner as their fair market value. If any
valuation of an investment by an insurer appears to be an unreasonable estimate
of its true value, the Commissioner has the authority to cause the investment to
be appraised, and the appraised value must be substituted as the true value. The
appraisal must be made by two disinterested and competent persons, one to be
appointed by the Commissioner and one to be appointed by the insurer. In the
event these two persons fail to agree, they shall appoint a third disinterested
and competent person, and the estimate of the value of the investment, as arrived
at by these three persons, must be substituted as the true value.
CHAPTER 13
Examinations, Investigations,
Records, and Reports
Section 38-13-10. Examination of insurers.
The Commissioner or an examiner shall visit every domestic insurer during the
year immediately following the end of each three-year period of operation and
thoroughly inspect and examine at least those affairs conducted during each full
year of operation since the last examination, especially as to the insurer's
financial condition, ability to fulfill its obligations, and compliance with the
law. The Commissioner may also examine any domestic insurer whenever he
considers it prudent to do so. Whenever the Commissioner considers it prudent for
the protection of policyholders in this State, he may examine or have examined
any insurer applying for admission or already admitted to do business in this
State. The insurer shall pay the charges incurred in this examination, including
the expenses of the Commissioner and the expenses and compensation of his
assistants. The Commissioner may, in lieu of conducting the examination, accept
an examination conducted by the supervising official of the insurer's domiciliary
state.
Section 38-13-20. Access to books and papers; examination of directors,
officers, agents, or trustees.
For the purposes of Section 38-13-10 the Commissioner or person making the
examination shall have free access to all books and papers relevant to the
examination of an insurer, including those kept by any of its agents or
affiliated or subsidiary corporations or partnerships and may summon, administer
oaths to, and examine as witnesses the directors, officers, agents, or trustees
of any company, agents, affiliated or subsidiary companies, or any other person
in relation to matters relevant to the examination.
Section 38-13-30. Remedies for refusal to submit to examination or pay
expenses.
The refusal of any insurer to submit to examination or the refusal or failure
of an insurer to pay the expenses of an examination is grounds for the revocation
or refusal of its license. The Commissioner is authorized to make public the
revocation or refusal of license and the reasons for revocation or refusal. The
Commissioner shall promptly institute a civil action to recover the expenses of
examination against an insurer which refuses or fails to pay.
Section 38-13-40. Opportunity for hearing on report of examination; public
report.
Before, during, and after the examination of an insurer neither the
Commissioner nor any of his representatives may make public or allow to be made
public the financial statement, findings, or report of examination or any report
affecting the status or standing of the insurer examined until the insurer has
either accepted or approved the final report of examination or has been afforded
a reasonable opportunity to be heard and to answer or rebut any statements or
findings. This hearing, if requested, shall be informal and private. If, within
thirty days after the final report of examination has been submitted to it, the
insurer examined has neither notified the Commissioner of its acceptance and
approval of the report nor requested that it be heard, thereon, the report must
be filed as a public document and is open to public inspection.
Section 38-13-50. Time for hearing and filing of report.
If, within thirty days after the final report of examination has been submitted
to it, the insurer examined requests a hearing, a hearing must be held within
thirty days after receipt of the request and the report as amended, modified, or
affirmed must be filed as a public document thirty days after the hearing.
Section 38-13-60. Other powers to revoke or suspend license not affected.
Sections 38-13-40 and 38-13-50 do not prohibit the Commissioner from taking any
action provided for or from exercising any power conferred by any other provision
of this title to suspend or revoke the license of an insurer.
Section 38-13-70. Investigation of charges; liability for expenses.
Upon his own motion or upon written complaint filed by a citizen of this State
that an insurer has violated this title, the Commissioner shall investigate the
matter and, if necessary, examine under oath the president and other officers or
agents of the insurer and all books, records, and papers of the insurer. If the
Commissioner finds upon substantial evidence that a complaint against an insurer
is justified, the insurer, in addition to the penalties imposed for violation of
this title, is liable for the expenses of the investigation, and the Commissioner
shall promptly present the insurer with a statement of the expenses. If the
insurer refuses or neglects to pay, the Commissioner is authorized to revoke its
license and to bring civil action for the collection of the expenses.
Section 38-13-80. Annual statement as to business standing and financial
condition.
Every insurer shall annually file with the Commissioner by March first, in the
form and detail the Commissioner prescribes, a statement showing the business
standing and financial condition of the insurer on December thirty-first of the
preceding year, except that upon timely written request by the chief managing
agent or officer setting forth reasons why the statement cannot be filed within
the time provided, the Commissioner may, in writing, grant an extension of filing
time for a period not to exceed thirty days. The statement must be signed by the
president and attested to by the secretary or treasurer of the insurer or any
other officer prescribed by regulation promulgated by the Commissioner. All
signatures must be sworn to before the Commissioner or some other officer
authorized by law to administer oaths. The Commissioner shall furnish each
domestic insurer two blanks for their annual statement.
Section 38-13-90. Publication of assets and liabilities.
No insurer may publish a statement of its assets and liabilities unless it
shows both its assets and liabilities with equal conspicuousness. The statement
shall reflect the assets and liabilities as were shown on the last annual
statement or subsequent report of examination accepted by the Commissioner unless
the Commissioner has given prior written approval to the publishing of a
statement as of another date. Any publication purporting to show the capital of
the insurer shall exhibit only the amount of capital actually paid in. The
license of an insurer or agent violating this section may, in the discretion of
the Commissioner, be suspended or revoked.
Section 38-13-100. Items to be included as liabilities in financial
statements.
In any determination of the financial condition of an insurer, capital stock
and liabilities to be charged against its assets shall include:
(1) The amount of its capital stock outstanding, if any;
(2) The amount, estimated consistent with provisions of the law and rulings
of the Commissioner, necessary to pay all its unpaid losses and claims incurred
on or prior to the date of statement, whether reported or unreported, together
with the expenses of adjustment or settlement;
(3) With reference to life and accident and health insurance and annuity
contracts:
(a) the amount of reserves on life insurance policies and annuity contracts
in force, valued according to the tables of mortality, rates of interest, and
methods adopted pursuant to Section 38-9-180 which are applicable,
(b) reserves for disability benefits, for both active and disabled lives,
(c) reserves for accidental death benefits, and
(d) any additional reserves which may be reasonably required by the
Commissioner;
(4) With reference to insurance other than specified in the law and rulings
of the Commissioner, the amount of reserves equal to the unearned portions of the
gross premiums charged on policies in force, computed in accordance with the law
and rulings of the Commissioner; and
(5) Taxes, expenses, and other obligations due or accrued at the date of the
statement.
Section 38-13-110. Treatment of contingent debts or liabilities in financial
statements.
Contingent debts or liabilities of domestic insurers must be set forth in
financial statements in the following manner:
(1) In the event a contingent liability or surplus certificate liability is
in the form of certain borrowings provided for under Section 38-19-610 and the
borrowings are made by a domestic mutual insurer insuring properties only, then
the obligation of the corporation or association must be shown as a footnote on
any published financial statement of the corporation or association;
(2) In the event a contingent liability or surplus certificate liability of
the corporation is in connection with a domestic mutual assessment association
or other form of domestic mutual insurer having issued and in force policies
containing an assessment provision for either life insurance or property
insurance, then the liability must be set forth as a footnote on any published
financial statement of the corporation or association;
(3) In the event that a domestic mutual insurer has outstanding or is issuing
a contract that does not contain an assessment provision, then the statement of
assets and liabilities shall show as a part of the liabilities the face amount
of the liability, with a footnote explaining that payment of the liability must
be made out of the surplus earnings of the insurer and, in the event of
dissolution of the corporation or association, is a junior liability to the
claims of the policyholders but a senior liability to the distribution of any
remaining assets to policyholders; and
(4) In the event there is a contingent liability or a surplus certificate
liability outstanding in connection with any domestic capital stock insurance
corporation, the full face amount of the liability must be separately stated as
a part of the surplus of the insurer and is considered to be a junior liability
to policyholders' reserves and claimants' liabilities but is considered a senior
liability, either in the event of dissolution or for statement purposes, to that
which otherwise would be a liability to the stockholders.
Section 38-13-120. Record of business done; inspection by Commissioner.
All companies doing any kind of insurance business in this State shall make and
keep a full and correct record of the business done by them, showing the number,
date, term, amount insured, premiums, and the person to whom issued of every
policy or certificate of renewal. This information must be furnished to the
Commissioner on demand, and the original books or record must be open to the
inspection of the Commissioner on demand.
Section 38-13-130. Records of losses and claims.
Every insurer doing business in this State shall maintain a record of losses
paid under its policies and notices as provided in its policies which may
normally result in claim or loss. The records must be maintained until the next
regular examination by an insurance department or for a period of three years
from the date of payment of the loss or receipt of the notice.
Section 38-13-140. Refusal to exhibit records; false statements;
confidentiality of replies.
Any person having in his possession or control any books, accounts, or papers
of any company licensed under this title shall exhibit them to the Commissioner
or to any deputy, actuary, accountant, or person acting with or for the
Commissioner. Any person who refuses, on demand, to exhibit any books, accounts,
or
papers or knowingly or wilfully makes any false statement in regard to them is
guilty of a misdemeanor and, upon conviction, must be fined or imprisoned, or
both, at the discretion of the court. All replies are strictly confidential
except for the purposes of prosecution for any false or fraudulent statement made
to the Commissioner.
Section 38-13-150. Returns of reinsurance by insurers; effect of refusal.
Every insurer shall file a return, on a form and at times prescribed by the
Commissioner, showing all reinsurance or cessions of risk or liability contracted
for or effected by it, whether by issue of policy, entry or bordereau, general
participation agreement, excess loss reinsurance, or in any manner whatsoever,
upon property located in this State or covering, whether specified or otherwise,
any risk or liability upon property so located. The return must be certified by
the oath of its president and secretary, if a company of the United States, and,
if a company of a foreign country, by the oath of its managers in the United
States as to reinsurance or cessions effected through its branch office in the
United States and by the oath of its president and secretary or by officers
corresponding thereto, at its home office, wherever located, as to reinsurance
or cessions contracted for or effected through the foreign office. The refusal
of an insurer to file the required return is presumptive evidence that it is
guilty of violating the provisions of Section 38-9-190 and subjects it to the
penalties prescribed and imposed by Sections 38-5-120 and 38-5-130.
Section 38-13-160. Commissioner may require special reports; confidentiality
of replies.
The Commissioner may require any authorized insurer or its officers to answer
any inquiry in relation to its transactions, condition, or any connected matter
necessary to the administration of the insurance laws of the State. Every
corporation or person must reply in writing to the inquiry promptly and
truthfully, and the reply must be verified, if required by the Commissioner, by
the individual or by the officer or officers of a corporation as he designates.
These replies are strictly confidential.
Section 38-13-170. Penalties for making or aiding in making false statement.
If an insurer, in its annual or other statement required by law, wilfully
misstates the facts, the insurer and the person signing the statement and any
person aiding, abetting, or participating in the making of the statement must be
severally punished by a fine of not more than two thousand dollars or
imprisonment for not more than five years, or both, in the discretion of the
court, and the insurer, upon conviction, forfeits its right to do business in
this State.
Section 38-13-180. Insurance reserve fund defined.
For purposes of Sections 38-13-190 and 38-13-200, 'insurance reserve fund' or
'funds' means the insurance reserve funds administered by the Division of General
Services of the State Budget and Control Board to provide liability and property
insurance, as authorized under Section 1-11-140, Chapter 7 of Title 10, and the
regulations prescribed by the State Budget and Control Board.
Section 38-13-190. Commissioner to examine affairs and methods of operations
of insurance reserve fund; reports of findings.
(1) At the end of each three years of operation, and at any other time
considered prudent, the Commissioner shall examine the affairs of the insurance
reserve funds and make findings and recommendations as provided by this section.
For purposes of examination, the Commissioner or person making the examination
has free access to all relevant records, books, and papers in the possession of
any person or entity and may summon, administer oaths to, and examine as
witnesses any persons in relation to matters relevant to the examination.
(2) The Commissioner shall examine all methods of operation of the insurance
reserve funds to determine whether the funds are being administered in accordance
with sound insurance practices and in the best interest of the State. Following
the examination, the Commissioner shall prepare a report for submission to the
State Budget and Control Board, the Speaker of the House of Representatives, and
the President of the Senate containing his findings and conclusions and any
recommendations to improve the efficiency, effectiveness, and overall operation
of the funds.
Section 38-13-200. Penalty for refusal to be examined under oath.
Any person or entity having possession or control of any records, books, or
papers relevant to an insurance reserve fund examination who fails or refuses to
be examined under oath is guilty of a misdemeanor and upon conviction must be
punished by a fine of not more than ten thousand dollars or imprisonment for not
more than one year and is subject to suspension or revocation of any insurance
licenses issued by the Commissioner.
CHAPTER 15
Surety Insurers
Section 38-15-10. Special authority required for writing certain bonds; forms
of the bonds.
No surety insurer authorized to transact business in this State may execute a
fidelity or surety bond for an officer or employee of this State or of a county,
municipality, or other subdivision of this State or for an officer or employee
of a bank, trust company, or other fiduciary corporation organized under the laws
of this State except upon the assumption of risk and upon the forms prescribed
by law or approved by the Governor, the Commissioner, and the Attorney General,
or by any two of these officials. The insurer shall also procure special
authority from the Governor, the Commissioner, and the Attorney General, or any
two of them, for the writing of the fidelity or surety bonds.
Section 38-15-20. Withdrawal of special authority for writing certain bonds.
The Governor, the Commissioner, and the Attorney General shall remove from the
list of surety insurers whose bonds are acceptable under Section 38-15-10 the
names of insurers who in their judgment fail or refuse to carry out promptly
their obligations in good faith.
Section 38-15-30. Deposit of securities required.
Insurers doing business in this State who offer or undertake to become surety
upon any bond or other surety contract must in addition to any other deposit
required by the laws of this State deposit with the the Commissioner bonds of the
United States or of any state of the United States in the market value of one
hundred thousand dollars which are receipted for by the Commissioner and held by
him. The securities must be held to pay any final judgment entered against the
insurer in a court of competent jurisdiction in this State requiring it to pay
any loss or liability arising during the term of the bond or while the securities
are held. Any judgment obtained is a lien upon the securities. When the insurer
ceases to do business in this State, has settled all claims against it, and has
been released from all bonds upon which it has been taken as surety, the
securities deposited are delivered to the proper party on presentation of the
Commissioner's receipt for the securities. While the securities are deposited
with the Commissioner, the owner is entitled to collect the interest on them. The
faith of the State is pledged for the return of the deposited securities to the
person entitled to receive them.
An insurer which has complied with the provisions required of qualified
insurers in Section 38-9-100 is relieved of making the deposit required by this
section and, subject to the provisions of Section 38-7-90, is entitled to the
return of the deposit filed or deposited by it under this section.
A domestic insurer making a voluntary deposit provided by Section 38-9-110 is
relieved of making this deposit if the insurer meets the definition of a
qualified insurer as defined in Section 38-9-100 and if the voluntary deposit
meets the requirements of that section.
Section 38-15-40. Effect of reduction in value of bonds deposited by surety.
When the bonds required to be deposited by an insurer in Section 38-15-30 are
reduced below the value of fifty thousand dollars, except by unexpected
fluctuation in value, the right of that insurer to do business in this State may
be revoked or suspended.
Section 38-15-50. Deposit of cash in trust in lieu of giving bond or
depositing securities.
In lieu of depositing bonds with a market value of fifty thousand dollars, an
insurer may satisfy Section 38-15-30 by depositing fifty thousand dollars in cash
in the name of the Commissioner with the trust department of a national or state
bank of this State approved by the Commissioner. The Commissioner shall give the
insurer a receipt for the deposit. When the insurer ceases to do business in
this State, has settled all claims against it, and has been released from all the
bonds upon which it has been taken as surety, the cash deposit must be delivered
to the proper party upon presentation of the Commissioner's receipt. While the
cash is deposited, its owner is entitled to collect the interest. The cash
deposit is liable to the same extent as securities deposited with the
Commissioner and subject to like procedure in case of default or insolvency.
Section 38-15-60. Power to become surety; release; rights and liabilities.
A surety insurer having an unrevoked certificate of authority may, upon
production of the certificate, be accepted as surety on the bond of any person
required by the laws of this State to give bond and may be the only surety
necessary to render this bond valid. However, other surety may, in the
discretion of the official authorized to approve the bond, be required and the
surety may be released from its liability on the same terms and conditions as are
by law prescribed for the release of individuals. Corporations becoming this
surety have and are subject to all the rights and liabilities of natural persons.
Section 38-15-70. Estoppel to deny power to execute bond or assume liability.
An insurer which executes any bond or undertaking of surety under this chapter
is estopped, in any proceeding to enforce the liability which it has assumed to
incur, from denying its corporate power to execute the bond or assume the
liability.
Section 38-15-80. Persons considered agents of surety insurers.
A person is considered as acting agent for a surety insurer established in
another state when he represents the insurer by:
(a) receiving or transmitting applications for suretyship,
(b) receiving for delivery bonds founded on applications forwarded from this
State, or
(c) procuring suretyship to be effected by the insurer upon the bonds of
this State or upon bonds given to persons in this State.
Section 38-15-90. Approval of public officer's books and accounts does not
release his surety; remedy in case of default.
No insurer is relieved of its liability upon any bond of a city, county, or
state officer because the books and accounts of the principal have been examined
and approved as correct by the proper authorities when in fact there has been a
breach of the bond of the officer and a loss accruing from this breach. In case
of default upon the bond, the city, county, or state authorities have all the
remedies against the principal and sureties upon the bonds as are provided by
law.
Section 38-15-100. Venue for suit on bonds or obligations.
If a fidelity insurer or other corporation or company doing a fidelity
insurance business in this State becomes surety on bonds or obligations mentioned
in this chapter, it is subject to being sued on these bonds or obligations in the
county of the residence of the principal of the bond or obligation.
CHAPTER 17
Reciprocal Insurance
Section 38-17-10. Subscribers authorized to exchange reciprocal or
interinsurance contracts.
Individuals, partnerships, and corporations of this State, designated as
'subscribers', may exchange reciprocal or interinsurance contracts with each
other or with individuals, partnerships, and corporations of other states and
countries, providing indemnity among themselves from any loss which may be
insured against under other provisions of law, excepting life insurance.
Section 38-17-20. Contracts may be executed by attorney in fact.
The reciprocal or interinsurance contracts may be executed by an attorney in
fact herein designated 'attorney', duly authorized and acting for the
subscribers. The attorney may be a corporation. The office or offices of the
attorney, herein defined as an 'exchange', may be maintained at the place or
places as designated by the subscribers in the power of attorney.
Section 38-17-30. Verified declaration to be filed with Commissioner.
The subscribers shall, through their attorney, file with the Commissioner a
declaration verified by the oath of the attorney setting forth:
(1) The name of the office at which the subscribers propose to exchange the
indemnity contracts. This name may not be so similar to any name previously
adopted by a similar organization or by any insurance corporation or association
that in the opinion of the Commissioner is calculated to result in confusion or
deception.
(2) The kind of insurance to be effected or exchanged.
(3) A copy of the form of policy contract or agreement under or by which the
insurance is to be effected or exchanged.
(4) A copy of the form of power of attorney or other authority of the attorney
under which the insurance is to be effected or exchanged.
(5) The location of the office or offices from which the contracts or
agreements are to be issued.
(6) That applications have been made for indemnity upon at least one hundred
separate risks aggregating not less than one and one-half million dollars
represented by executed contracts or bona fide applications to become
concurrently effective. In the case of automobile insurance, applications must
have been made for indemnity upon at least one thousand motor vehicles or for
insurance aggregating not less than one and one-half million dollars represented
by executed contracts or bona fide applications to become concurrently effective
on any or all classes of automobile insurance effected by the subscribers through
the attorney.
(7) That there are assets conforming to the requirements of Section 38-17-100
in the possession of the attorney and available for the payment of losses.
Section 38-17-40. Maximum liability of subscribers.
The maximum liability of any subscriber for losses and expenses must be fixed
and determined by the power of attorney.
Section 38-17-50. Deposit of securities.
The Commissioner shall require every reciprocal exchange to provide security
deposits pursuant to Sections 38-9-80 to 38-9-140 as required for other insurers
doing business in this State.
Section 38-17-60. Commissioner shall be appointed agent for service of process
on exchanges.
When filing the declaration provided for in Section 38-17-30, the attorney
shall also file with the Commissioner a written instrument executed by him for
the subscribers stipulating that upon the issuance of a certificate of authority
provided for in Section 38-17-70 service of process may be had upon the
Commissioner in all suits in this State arising out of the policies, contracts,
or agreements and that this service is valid and binding upon all subscribers
exchanging at any time reciprocal or interinsurance contracts through the
attorney.
Section 38-17-70. Annual certificate of authority.
Each attorney by or through whom are issued any policies of or contracts for
indemnity referred to in this chapter shall annually procure from the
Commissioner a certificate of authority, stating that all of the requirements of
this chapter have been complied with and, upon compliance and the payment of the
fees required by this chapter, the Commissioner shall issue the certificate of
authority. The Commissioner may revoke or suspend the certificate of authority
upon breach of any condition imposed by this chapter after reasonable written
notice has been given to the attorney so that he may appear and show cause why
action should not be taken. Any attorney who may have procured a certificate of
authority under this section may renew it annually.
Section 38-17-80. Domestic corporations may exchange reciprocal or
interinsurance contracts.
Any domestic corporation may, in addition to the rights, powers, and franchises
specified in its articles of incorporation, exchange reciprocal or interinsurance
insurance contracts. The right to exchange these contracts is incidental to the
purposes for which domestic corporations are organized and is granted the same
as rights and powers expressly conferred.
Section 38-17-90. Maximum indemnity on fire risk; statement required.
The attorney shall file a sworn statement with the Commissioner showing the
maximum amount of indemnity upon any single fire insurance risk. The attorney
shall also file, whenever required, a sworn statement with the Commissioner that
he has examined the commercial rating of the subscribers as shown by the
reference book of a commercial agency having at least one hundred thousand
subscribers and that from this examination or other information in his possession
it appears that no subscriber has assumed more than ten percent of its net worth
on any single fire insurance risk.
Section 38-17-100. Maintenance of assets and guaranty fund.
There must at all times be maintained as a reserve assets in cash or securities
equal to fifty percent of the net annual advance premiums or deposits collected
and credited to the accounts of subscribers on policies having one year or less
to run and prorata on those for longer periods or, in lieu thereof, one hundred
percent of the net unearned premiums or deposits collected and credited to the
accounts of subscribers. There must also be maintained as a guaranty fund or
surplus an additional sum in cash or securities in the amount required of mutual
insurers by Section 38-9-20 or 38-9-30. In addition to the foregoing
requirements, in the case of liability insurance there must be maintained as a
claim or loss reserve in cash or securities assets sufficient to discharge all
liabilities on all outstanding losses arising under policies issued, these losses
to be calculated in accordance with the law of the state relating to similar
reserve companies insuring similar risks. The securities referred to in this
section must be securities authorized by the laws of the state in which the
principal office of the attorney is located for the investments of similar funds
of insurers doing the same kind of business. If at any time the amounts on hand
are less than the foregoing requirements, the subscribers or their attorney shall
make up the deficiency.
Section 38-17-110. 'Net annual advance premiums or deposits' defined.
'Net annual advance premiums or deposits', as used in this chapter, means the
advance premiums or deposits made by subscribers after deducting the amounts
specifically provided in the subscribers' agreements for expenses.
Section 38-17-120. Disposition of funds advanced to make up deficiencies.
When funds other than those which have accrued from premiums or deposits of
subscribers are supplied to make up a deficiency as provided in Section
38-17-100, they must be deposited and held for the benefit of subscribers under
any terms and conditions the Commissioner may require as long as a deficiency
exists and thereafter returned to the depositors.
Section 38-17-130. Exchanges may sue and be sued.
A reciprocal exchange transacting business in this State may sue or be sued in
the name in which its contracts are authorized to be exchanged.
Section 38-17-140. Exchanges subject to examinations.
The business affairs and assets of reciprocal or interinsurance exchanges, as
shown at the office of its attorney, are subject to examination by the
Commissioner as often as he sees fit. The cost of the examination must be paid
by the exchange examined.
Section 38-17-150. Annual report of business.
Each attorney shall annually make and file by March first with the Commissioner
a sworn statement, upon a form to be prescribed and furnished by the
Commissioner, showing that the financial condition of affairs at the office where
the reciprocal or interinsurance contracts are issued is in accordance with the
standard of solvency provided for in this chapter and stating:
(1) The amount of all premiums or deposits collected from subscribers in this
State during the previous calendar year;
(2) The amounts actually paid subscribers on losses;
(3) The total amounts returned to subscribers as savings and the amounts
retained for expenses;
(4) The amount of insurance reinsured in other insurers licensed in this
State, naming them and the amount of premiums paid;
(5) The amount of insurance reinsured in insurers not licensed in this State,
naming them and the amount of premiums paid; and
(6) The amount of reinsurance accepted from admitted companies and the
premiums received for that reinsurance on risks located in this State, with the
names of the insurers so reinsured.
However, the attorney may not be required to furnish the names and addresses
of any subscribers.
Section 38-17-160. Fees, taxes, and bond of attorney.
Each attorney shall pay a license fee of two hundred dollars annually for the
issuance of the certificate of authority or its renewal. In addition to the
license fee, each attorney shall pay all of the taxes provided by law on
companies doing a like business in this State and shall file the bond required
of other companies doing a like class of business.
Section 38-17-170. Violations of chapter; conditional permit to organize.
Any attorney who exchanges any contract for indemnity specified in this chapter
or directly or indirectly solicits or negotiates any applications for this
contract without first complying with this chapter is guilty of a misdemeanor
and, upon conviction, is subject to a fine of not more than one thousand dollars.
However, the Commissioner may, in his discretion and on terms he may prescribe,
issue a permit for organization purposes which must continue in force or be
cancelled at his pleasure.
CHAPTER 19
Domestic Mutual Insurers
Article 1
Members and Meetings
Section 38-19-10. Membership in mutual insurer.
Any person, government or governmental agency, state or political subdivision
of a state, public or private corporation, board, association, estate, trustee,
or fiduciary may be a member of a mutual insurer.
Section 38-19-20. Contract shall stipulate membership of contract holder.
Each holder of one or more insurance contracts issued by a domestic mutual
insurer, other than a contract of reinsurance, is a member of the insurer, with
the rights and obligations of membership. Each insurance contract so issued
shall effectively so stipulate.
Section 38-19-30. General rights of members.
A domestic mutual insurer is owned by and must be operated in the interest of
its members. Each member is entitled to one vote in the election of directors
and on matters coming before corporate meetings of members, subject to reasonable
minimum requirements as to duration of membership and amount of insurance held
as may be made in the insurer's bylaws. With respect to the management, records,
and affairs of the insurer a member has the same character of rights and
relationship as a stockholder has toward a domestic stock insurer.
Section 38-19-40. Notice of annual meetings.
Notice of the time and place of the annual meeting of members of a domestic
mutual insurer must be given by imprinting the notice plainly on the policies
issued by the insurer. Any change of the date or place of the annual meeting may
be made only by an annual meeting of members. Notice of the change may be given:
(1) by imprinting the new date or place on all policies which will be in
effect as of the date of the changed meeting; or
(2) unless the Commissioner otherwise orders, only through policies issued
after the date of the annual meeting at which the change was made and in premium
notices and renewal certificates issued during the twenty-four months immediately
following the meeting.
Section 38-19-50. Use of proxies.
A member of a domestic mutual insurer may vote in person or by proxy given
another member on any matter coming before a corporate meeting of members. An
officer of the insurer may not hold or vote the proxy of any member. The proxy
is not valid beyond the earlier of the following dates:
(1) The date of expiration set forth in the proxy;
(2) The date of termination of membership; or
(3) One year from the date of execution of the proxy.
No member's vote upon any proposal to divest the insurer of its business and
assets, or the major part thereof, may be registered or taken except in person
or by a proxy newly executed and specific as to the matter to be voted upon.
Section 38-19-60. Quorum for conduct of business at annual meeting; form and
approval of voting proxies.
At any annual meeting of a domestic mutual insurer all business including the
election of directors must be conducted pursuant to majority vote of those
members present and voting either in person or by proxy of nonpresent members as
provided for in Section 38-19-50. No other quorum requirements may limit the
conduct of this business. No proxy may be utilized by a domestic mutual insurer
subject to the provisions of this chapter unless:
(1) it is printed in ballot form;
(2) it includes in the case of elections for members of boards of directors
adequate provisions for the voting by write-in for persons other than those
nominees appearing on the proxy for each office;
(3) it includes adequate notice that votes for directors where more than one
office of director is subject to election may be cast cumulatively;
(4) it includes in the case of issues or matters for consideration adequate
provisions for affirmative or negative votes individually on each issue or
matter;
(5) the Commissioner has given prior approval to it.
Article 3
Operations Generally
Section 38-19-210. Bylaws.
A domestic mutual insurer shall adopt bylaws for the conduct of its affairs.
These bylaws, or any modification of them, must be immediately filed with the
Commissioner. The Commissioner shall disapprove any bylaw or modification if he
finds after a hearing that it is not in compliance with the laws of this State.
He shall immediately notify the insurer of disapproval. No disapproved bylaw or
modification is effective during the existence of the disapproval.
Section 38-19-220. Directors.
No individual may be a director of a domestic mutual insurer by reason of his
holding public office. Adjudication as a bankrupt, taking the benefit of any
insolvency law, or making a general assignment for the benefit of creditors
disqualifies an individual from being or acting as a director.
Section 38-19-230. Limitation of expenses for property and casualty insurance.
For any calendar year after its first two full calendar years of operation no
domestic mutual insurer may incur any expense in the writing or administration
of property and casualty insurances, other than boiler and machinery or elevator,
transacted by it which, exclusive of losses paid, loss adjustment expenses,
investment expenses, dividends, and taxes, exceeds the sum of:
(1) Forty percent of the net premium income during that year after deducting
net earned reinsurance premiums for the year; plus
(2) All reinsurance commissions received on reinsurance ceded by it.
Section 38-19-240. Limitation of expenses of certain companies.
The bylaws of domestic mutual property insurers on the assessment premium plan
shall impose a reasonable limitation upon its expenses.
Section 38-19-250. Violation of expense limitations.
The officers and directors of an insurer violating Section 38-19-230 or
38-19-240 are jointly and severally liable to the insurer for any excess of
expenses incurred. If the insurer fails to exercise reasonable diligence or
refuses to enforce the liability, the Commissioner may prosecute action thereon
for the benefit of the insurer. Failure or refusal to enforce this liability
constitutes grounds for revocation of the insurer's certificate of authority.
Section 38-19-260. Limitation of actions on officers' and directors' salaries.
No action to recover, or on account of, any salary or other compensation due
or claimed to be due any officer or director of a domestic mutual insurer or on
any note or agreement relative thereto may be brought against the insurer more
than one year after the date on which the salary or compensation, or any
installment thereof, first accrued.
Section 38-19-270. Dividends.
The directors of a domestic mutual insurer may apportion and pay dividends to
its members as entitled thereto, but only out of that part of its surplus funds
which is in excess of its required minimum surplus and which represents net
realized savings and net realized earnings from its business. Any classification
of its participating policies and of risks assumed thereunder which the insurer
may make must be reasonable. No dividend may be paid which is inequitable or
which unfairly discriminates as between the classifications or as between
policies within the same classification. No dividend, otherwise earned, may be
made contingent upon the payment of a renewal premium on any policy.
Article 5
Liability of Members and Nonassessable Policies
Section 38-19-410. Contingent liability of members.
Each member of a domestic mutual insurer, except as otherwise provided in this
chapter, has a contingent liability, prorata and not one for another, for the
discharge of its obligations. The contingent liability is, at a maximum, the
amount stated in the insurer's articles of incorporation but may not be less than
one nor more than five additional premiums for the member's policy at the annual
premium rate. Every policy issued by the insurer shall contain a statement of
the contingent liability. Cancellation of the policy of a member does not
relieve the member of contingent liability for his proportion of the obligations
of the insurer which accrued while the policy was in force.
Section 38-19-420. Contingent liability is not an asset of the insurer.
The contingent liability of members of a domestic mutual insurer to assessment
does not constitute an asset of the insurer in the determination of its financial
condition.
Section 38-19-430. Validity of guaranty against liability.
No person may insure against or agree or promise any member of a domestic
mutual insurer holding a policy which provides for contingent liability to save
him harmless from the contingent liability or any assessment under the policy.
Any insurance, agreement, or promise attempted of this nature is void.
Section 38-19-440. Assessments for deficiencies.
If at any time the surplus of a domestic mutual insurer is less than the amount
required by this title and the deficiency is not cured from other sources, its
directors may with the Commissioner's approval make an assessment on its members
who, at any time within the twelve months immediately preceding the date the
assessment was authorized by the directors, held policies providing for
contingent liability. The Commissioner may refuse to approve the assessment if
in his judgment refusal will best promote the interests of the insurer's members
and creditors and of the insuring public.
Section 38-19-450. Computation of individual assessments.
A member's proportionate part of any deficiency is computed by applying to the
premium earned within the twelve-month period on his contingently liable policy
or policies the ratio of the total deficiency to the total premium earned during
the period on all contingently liable policies. In computing the earned premiums
for the purposes of this section the gross premium received by the insurer for
the policy must be used as a base, deducting charges not recurring upon the
renewal or extension of the policy.
No member may have an offset against any assessment for which he is liable on
account of any claim for unearned premium or losses payable.
Section 38-19-460. Enforcement of contingent liability on assessment premium
plan.
The contingent liability of members of a domestic mutual insurer doing business
on the assessment premium plan must be called upon and enforced by its directors
as provided in its bylaws.
Section 38-19-470. Nonassessable policies.
A domestic mutual insurer, after it has established a surplus not less than the
minimum capital and surplus required of a stock insurer to transact like kinds
of insurance and for so long as it maintains this surplus, may extinguish the
contingent liability of its members to assessment and omit provisions imposing
contingent liability in all policies currently issued. Any deposit made with the
Commissioner as a prerequisite to the insurer's certificate of authority may be
included as part of the surplus referred to in this section. When the surplus has
been established and the Commissioner has so ascertained, he shall issue to the
insurer, at its request, his certificate authorizing the extinguishment of the
contingent liability of its members and the issuance of policies free from
contingent liability.
Section 38-19-480. Nonassessable plan applies to all policies.
The Commissioner may not authorize a domestic mutual insurer to extinguish the
contingent liability of any of its members or in any of its policies to be issued
unless it qualifies to and does extinguish the liability of all its members and
in all policies for all kinds of insurance transacted by it.
Section 38-19-490. Revocation of authority to issue nonassessable policies.
The Commissioner shall revoke the authority of a domestic mutual insurer to
extinguish the contingent liability of its members if:
(1) at any time the insurer's surplus is less than the minimum capital and
surplus required of a stock insurer to transact similar kinds of business; or
(2) the insurer, by resolution of its directors approved by its members,
requests that the authority be revoked.
Upon revocation of this authority for any cause the insurer may not thereafter
issue any policies without contingent liability nor renew any policies then in
force without written endorsement thereon providing for contingent liability.
Article 7
Borrowing
Section 38-19-610. Borrowed surplus.
A domestic mutual insurer may, with the Commissioner's advance approval and
without the pledge of any of its assets, borrow money to defray the expenses of
its organization or for any purpose required by its business upon an agreement
that the money and the interest as may be agreed upon, but not exceeding eight
percent per annum, must be repaid only out of the insurer's earned surplus in
excess of its required minimum surplus. If the money is to be borrowed upon
multiple agreements, the agreements must be serially numbered. No loan agreement
or series of agreements may have or be given any preferential rights over any
other such loan agreement or series. No commission or promotional expense may be
paid to a director, officer, or employee of the insurer on account of this loan.
The Commissioner's approval of the loan, if granted, shall specify the amount
to be borrowed, the purpose for which the money is to be used, the terms and
forms of the loan agreement, the date by which the loan must be completed, and
other related matters the Commissioner considers proper.
This article does not apply to loans obtained by the insurer in the ordinary
course of business from banks and other financial institutions nor to loans
secured by pledge or mortgage of assets.
Section 38-19-620. Loans may not be part of legal liabilities but must be
reflected in financial statements.
Any money so borrowed may not form a part of the insurer's legal liabilities
or be the basis of any setoff but, until it is repaid, financial statements filed
or published by the insurer shall show as a footnote the amount of the loan then
unpaid together with interest accrued but unpaid.
Section 38-19-630. Repayment of loans.
The insurer may repay the loan only out of its realized net earned surplus in
excess of the minimum surplus required for the kinds of insurance transacted.
This loan may not be repaid out of borrowed money. The insurer shall repay the
loan or a part of it when its realized net earned surplus has become adequate to
repay without impairing the insurer's operations.
Section 38-19-640. Repayment of more than one loan or by multiple agreement.
If there is more than one such loan or if any such loan is represented by
multiple agreements, the loan agreement shall provide, in addition to any other
time of repayment specified in it, that any part of the loan may be repaid at any
time by selection by lot, under supervision of the Commissioner, of those loan
agreements, out of all similar agreements then outstanding, to be then repaid in
part or in whole.
Section 38-19-650. Commissioner's approval required for repayment.
No repayment of the loan may be made unless approved by the Commissioner. The
insurer shall notify the Commissioner in writing not less than sixty days in
advance of its intention to repay the loan or any part of it. The Commissioner
shall immediately ascertain whether the insurer's financial condition is such
that the repayment can properly be made.
Section 38-19-660. Rights of holders of loan upon dissolution.
Upon dissolution and liquidation of the insurer the holders of such loan
agreements remaining unpaid after the retirement of all the insurer's other
outstanding obligations are entitled to payment before any distribution may be
made to the insurer's members.
Article 9
Conversion or Reinsurance, Liquidation, and Merger
Section 38-19-810. Conversion into stock insurer or reinsurance.
No domestic mutual insurer may be converted, changed, or reorganized as a stock
corporation, except that:
(1) a domestic mutual insurer may be wholly reinsured in and its assets
transferred to and its liabilities assumed by another mutual or stock insurer
under terms and conditions approved by the Commissioner in advance of the
reinsurance. The Commissioner may not approve the reinsurance agreement if it
does not determine the amount of and make adequate provision for paying to
policyholders of the mutual insurer reasonable compensation for their equities
as owners of the insurer. This compensation must be apportioned to policyholders
as identified and in the manner prescribed in Section 38-19-820; or
(2) a domestic mutual insurer, after having given notice once a week for six
weeks of its intention to do so in a newspaper published in each county in which
the domestic mutual insurer does business, may, with written consent of all of
its policyholders and members and all of its officers, directors, and guarantors,
become a stock insurer as long as it also complies fully with the provisions of
this title pertaining to stock insurers.
Section 38-19-820. Members' share of assets on liquidation.
Upon the liquidation of a domestic mutual insurer its assets remaining after
discharge of its indebtedness and policy obligations must be distributed to its
members who were members within the five years prior to the termination of its
certificate of authority. The distributive share of each of these members must
be in the proportion that the aggregate premiums earned by the insurer on the
policies of the members during the combined periods of his membership bear to the
aggregate of all premiums so earned on the policies of all such members.
Section 38-19-830. Merger.
Two or more domestic mutual insurers may merge into a single mutual insurer
under the conditions prescribed by Sections 38-19-840 to 38-19-890.
Section 38-19-840. Merger plan.
A merger plan, setting forth the following, must be approved by the boards of
directors of the insurers proposing to merge:
(1) The name of the merged insurer.
(2) Its principal office.
(3) Its number of directors.
(4) The date for its annual meeting.
(5) Its proposed bylaws to govern the conduct of its business.
(6) The tentative date on which the merger is to be submitted to the
policyholders of the merging insurers and at which meeting directors of the
merged insurer will be elected if the plan receives approval.
(7) A pro forma statement of the merged insurer as of any date within ninety
days preceding the date of the adoption of the plan.
(8) A brief statement showing what provision will be made for creditors of
the merging insurers.
(9) A statement as to whether policyholder equities of the merging insurers
will be similar or dissimilar.
Section 38-19-850. Submission of merger plan to Commissioner; notice of
hearing.
The merger plan must be submitted to the Commissioner on behalf of the merging
insurers. The Commissioner shall then publish notice in a newspaper of general
circulation in each city where the principal office of a merging insurer is
located that a hearing on the merger plan will be held in his office no sooner
than ten days from the date the notice is published, at which hearing any
policyholder, creditor, or other affected person of any of the merging insurers
may appear in person or by attorney and present objections to the plan.
Section 38-19-860. Approval or disapproval by Commissioner.
Following the hearing held pursuant to Section 38-19-850 the Commissioner shall
signify in writing his approval or disapproval of the proposed merger. If the
Commissioner approves the merger, he shall set the time and place of a meeting
of the policyholders of the merging insurers, which may be the same as that
tentatively proposed in the merger plan.
Section 38-19-870. Submission of approved plan to policyholders; election of
directors.
At the meeting held pursuant to Section 38-19-860 the plan must be submitted
separately to the policyholders of each merging insurer and, if it is approved
by resolution adopted by a majority of the policyholders present at that meeting
in person or by proxy, the merger plan is declared effective. Whereupon the
policyholders must meet in a joint meeting and elect a board of directors of the
merged insurer.
Section 38-19-880. Filing certificate of merger; issuance of certificate by
Secretary of State.
As soon as convenient after being elected, the board of directors of the merged
insurer shall sign and send a certificate reflecting adoption of the merger plan
and stating the results of the meetings held to approve the merger plan and to
elect the board of directors of the merged insurer to the Secretary of State.
The Secretary of State shall file this certificate and shall issue a certificate
stating that a merger has been effected and that the merged insurer must
thereafter be known by the name selected in the merger plan.
Section 38-19-890. Transfer of assets and liabilities to merged insurer.
Upon completion of the merger, the merged insurer succeeds, without further
deed or formality, to all property of whatsoever kind or nature of each merging
insurer and likewise completely assumes all liabilities of each merging insurer.
CHAPTER 21
Insurance Holding Company Regulatory Act
Section 38-21-10. Definitions.
In this chapter, unless the context otherwise requires:
(1) An 'affiliate' of, or person 'affiliated' with, a specific person means
a person who directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with the person specified.
(2) The term 'control' (including the terms 'controlling,' 'controlled by',
and 'under common control with' ) means the possession, direct or indirect, of
the management and policies of a person, whether through the ownership of voting
securities, by contract other than a commercial contract for goods or
nonmanagement services, or otherwise, unless the power is the result of an
official position with or corporate office held by the person. Control is
presumed to exist if any person, directly or indirectly, owns, controls, holds
with the power to vote, or holds proxies representing ten percent or more of the
voting securities of any other person. This presumption may be rebutted by a
showing made in the manner provided by Section 38-21-210 that control does not
exist in fact. The Commissioner may determine, after furnishing all persons in
interest notice and opportunity to be heard and making specific findings of fact
to support his determination, that control exists in fact, notwithstanding the
absence of a presumption to that effect.
(3) An 'insurance holding company system' consists of two or more affiliated
persons, one or more of which is an insurer.
(4) The term 'insurer' has the same meaning as set forth in Section 38-1-20
except that it does not include (a) agencies, authorities, or instrumentalities
of the United States, its possessions and territories, the Commonwealth of Puerto
Rico, the District of Columbia, or a state or political subdivision of a state,
(b) fraternal benefit societies, or (c) nonprofit medical and hospital service
associations.
(5) A 'person' means an individual, a corporation, a partnership, an
association, a joint stock company, a trust, an unincorporated organization, any
similar entity, or any combination of the foregoing acting in concert.
(6) A 'securityholder' of a specified person is one who owns any security of
that person, including common stock, preferred stock, debt obligations, and any
other security convertible
into or evidencing the right to acquire any of the foregoing.
(7) A 'subsidiary' of a specified person is an affiliate controlled by that
person directly or indirectly through one or more intermediaries.
(8) The term 'voting security' includes any security convertible into or
evidencing a right to acquire a voting security.
Section 38-21-20. Authority of insurers to organize or acquire subsidiaries.
A domestic insurer, either by itself or in cooperation with one or more
persons, may organize or acquire one or more subsidiaries engaged in the
following kinds of business:
(1) Any kind of insurance business authorized by the jurisdiction in which it
is incorporated;
(2) Acting as an insurance broker or as an insurance agent for its parent or
for any of its parent's insurer subsidiaries;
(3) Investing, reinvesting, or trading in securities for its own account, that
of its parent, any subsidiary of its parent, or any affiliate or subsidiary;
(4) Management of an investment company subject to or registered pursuant to
the Investment Company Act of 1940, as amended, including related sales and
services;
(5) Acting as a broker-dealer subject to or registered pursuant to the
Securities Exchange Act of 1934, as amended;
(6) Rendering investment advice to governments, government agencies,
corporations, or other organizations or groups;
(7) Rendering other services related to the operations of an insurance
business, including, but not limited to, actuarial, loss prevention, safety
engineering, data processing, accounting, claims, appraisal, and collection
services;
(8) Ownership and management of assets which the parent corporation could
itself own or manage;
(9) Acting as administrative agent for a governmental instrumentality which
is performing an insurance function;
(10) Financing of insurance premiums, agents, and other forms of consumer
financing;
(11) Any other business activity determined by the Commissioner to be
reasonably ancillary to an insurance business; or
(12) Owning a corporation or corporations engaged or organized to engage
exclusively in one or more of the businesses specified in this section.
Section 38-21-30. Authority of insurers to invest in securities of
subsidiaries.
In addition to investment in common stock, preferred stock, debt obligations,
and other securities permitted under this title, a domestic insurer may also:
(1) Invest, in common stock, preferred stock, debt obligations, and other
securities of one or more subsidiaries, amounts which do not exceed the lesser
of ten percent of the insurer's assets or fifty percent of the insurer's surplus
as regards policyholders if, after these investments, the insurer's surplus as
regards policyholders must be reasonable in relation to the insurer's outstanding
liabilities and adequate to meet its financial needs. In calculating the amount
of the investments, investments in domestic or foreign insurance subsidiaries
must be excluded, and there must be included (a) total net monies or other
consideration expended and obligations assumed in the acquisition or formation
of a subsidiary, including all organizational expenses and contributions to
capital and surplus of the subsidiary whether or not represented by the purchase
of capital stock or issuance of other securities, and (b) all amounts expended
in acquiring additional common stock, preferred stock, debt obligations, and
other securities and all contributions to the capital or surplus of a subsidiary
after its acquisition or formation;
(2) Invest any amount in common stock, preferred stock, debt obligations, and
other securities of one or more subsidiaries engaged or organized to engage
exclusively in the ownership and management of assets authorized as investments
for the insurer if each subsidiary agrees to limit its investments in any asset
so that the investments will not cause the total investment of the insurer to
exceed any of the investment limitations specified in item (1) or in the
investment laws or regulations of this State. For the purpose of this item, 'the
total investment of the insurer' includes (a) any direct investment by the
insurer in an asset, and (b) the insurer's proportionate share of any investment
in an asset by a subsidiary of the insurer, which must be calculated by
multiplying the amount of the subsidiary's investment by the percentage of the
ownership of the subsidiary;
(3) With the approval of the Commissioner, invest any greater amount in common
stock, preferred stock, debt obligations, or other securities of one or more
subsidiaries if after such investment the insurer's surplus as regards
policyholders will be reasonable in relation to the insurer's outstanding
liabilities and adequate to its financial needs.
Section 38-21-40. Investments in securities of subsidiaries are not subject
to other restrictions.
Investments in common stock, preferred stock, debt obligations, or other
securities of subsidiaries made pursuant to Section 38-21-30 are not subject to
any other investment restrictions or prohibitions contained in this title.
Section 38-21-50. Determining compliance with provision authorizing
investments in securities of subsidiaries; disposition of investments upon
ceasing to control subsidiary.
Whether an investment meets the applicable requirements of Section 38-21-30 is
to be determined before the investment is made by calculating the applicable
investment limitations as though the investment had already been made, taking
into account the then outstanding principal balance on all previous investments
in debt obligations, and the value of all previous investments in equity
securities as of the day they were made, net of any return of capital invested,
not including dividends.
If an insurer ceases to control a subsidiary, it must dispose of any investment
made pursuant to Section 38-21-30 within three years from the time of the
cessation of control or within such further time that the Commissioner may
prescribe unless, at any time after the investment has been made, the investment
has met the requirements for investment under any other section of this title and
the insurer has notified the Commissioner.
Section 38-21-60. Statement required by person seeking to acquire control of
insurer.
No person other than the issuer may make a tender offer for or a request or
invitation for tenders of, or enter into any agreement to exchange securities
for, seek to acquire or acquire, in the open market or otherwise, any voting
security of a domestic insurer if, after the consummation thereof, the person
would, directly or indirectly, or by conversion or by exercise of any right to
acquire, be in control of the insurer, and no person may enter into an agreement
to merge with or otherwise to acquire control of a domestic insurer unless, at
the time the offer, request, or invitation is made or the agreement is entered
into, or prior to
the acquisition of the securities if no offer or agreement is involved, the
person has filed with the Commissioner a statement containing the information
required by this section and the offer, request, invitation, agreement, or
acquisition has been approved by the Commissioner in the manner hereinafter
prescribed.
For purposes of this section, a domestic insurer includes any other person
controlling a domestic insurer unless the other person as determined by the
Commissioner is either directly or through its affiliates primarily engaged in
business other than the business of insurance. As used in this section, 'person'
does not include any securities broker holding, in the usual and customary
brokers' function, less than twenty percent of the voting securities of an
insurance company or of any person which controls an insurance company.
Section 38-21-70. Contents of statement; amendment.
The statement to be filed with the Commissioner, as prescribed in Section
38-21-60, must be made under oath or affirmation and shall contain the following
information:
(1) The name and address of each person by whom or on whose behalf the merger
or other acquisition of control referred to in Section 38-21-60 is to be
effected, hereinafter called 'acquiring party', and
(a) If the acquiring party is an individual, his principal occupation and
all offices and positions held during the past five years and any conviction of
crimes other than minor traffic violations during the past ten years;
(b) If the acquiring party is not an individual, a report of the nature of
its business operations during the past five years or for any lesser period as
the acquiring party and any predecessors have been in existence; an informative
description of the business intended to be done by the acquiring party and its
subsidiaries; and a list of all individuals who are or who have been selected to
become directors or executive officers of the acquiring party or who perform or
will perform functions appropriate to these positions. The list shall include for
each of these individuals the information required by subitem (a) of this
section.
(2) The source, nature, and amount of the consideration used or to be used in
effecting the merger or other acquisition of control, a description of any
transaction in which funds were or are to be obtained for this purpose, and the
identity of persons furnishing the consideration. Where a source of the
consideration is a loan made in the lender's ordinary course of business, the
identity of the lender must remain confidential, if the person filing the
statement so requests.
(3) Fully audited financial information as to the earnings and financial
condition for the preceding five fiscal years of each acquiring party or for any
lesser period as the acquiring party and any of its predecessors have been in
existence.
(4) Unaudited financial information of the earnings and financial condition
of each acquiring party as of a date within ninety days prior to filing the
statement.
(5) Any plans or proposals which each acquiring party may have to liquidate
the insurer, to sell its assets or merge or consolidate it with any person, or
to make any other material change in its business or corporate structure or
management.
(6) The number of shares of any security referred to in Section 38-21-60 which
each acquiring party proposes to acquire and the terms of the offer, request,
invitation, agreement, or acquisition referred to in Section 38-21-60 and a
statement as to the method by which the fairness of the proposal was arrived.
(7) The amount of each class of any security referred to in Section 38-21-60
which is beneficially owned or concerning which there is a right to acquire
beneficial ownership by each acquiring party.
(8) A full description of any contracts, arrangements, or understandings with
respect to any security referred to in Section 38-21-60 in which an acquiring
party is involved, including, but not limited to, transfer of any of the
securities, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or guarantees of division of losses
or profits, or the giving or withholding of proxies. The description shall
identify the persons with whom the contracts, arrangements, or understandings
have been entered into.
(9) A description of the purchase of any security referred to in Section
38-21-60 during the twelve calendar months preceding the filing of the statement,
by any acquiring party, including the dates of purchase, names of the purchasers,
and consideration paid or agreed to be paid.
(10) A description of any recommendations to purchase any security referred
to in Section 38-21-60 made during the twelve calendar months preceding the
filing of the statement by any acquiring party, or by anyone based upon
interviews or at the suggestion of the acquiring party.
(11) Copies of all tender offers for, requests or invitations for tenders of,
exchange offers for, and agreements to acquire or exchange any securities
referred to in Section 38-21-60, if distributed, of additional soliciting
material relating thereto.
(12) The terms of any agreement, contract, or understanding made with any
broker-dealer as to solicitation of securities referred to in Section 38-21-60
for tender, and the amount of any fees, commissions, or other compensation to be
paid the broker-dealers.
(13) Any additional information the Commissioner may by regulation prescribe
as necessary or appropriate for the protection of policyholders of the insurer
or in the public interest.
If the person required to file the statement referred to in Section 38-21-60
is a partnership, limited partnership, syndicate, or other group, the
Commissioner may require that the information called for by this section be given
with respect to each partner of the partnership or limited partnership, each
member of the syndicate or group, and each person who controls the partner or
member. If this partner, member, or person is a corporation or the person
required to file the statement referred to in Section 38-21-60 is a corporation,
the Commissioner may require that the information called for by this section be
given with respect to the corporation, each officer and director of the
corporation, and each person who is directly or indirectly the beneficial owner
of more than ten percent of the outstanding voting securities of the corporation.
If any material change occurs in the facts set forth in the statement filed
with the Commissioner and sent to the insurer pursuant to this section, an
amendment setting forth the change, together with copies of all documents and
other material relevant to the change, must be filed with the Commissioner and
sent to the insurer within two business days after the person learns of the
change.
Section 38-21-80. Use of certain documents required by other laws in
furnishing information called for in statement.
If any offer, request, invitation, agreement, or acquisition referred to in
Section 38-21-60 is proposed to be made by means of a registration statement
under the Securities Act of 1933 or in circumstances requiring the disclosure of
similar information under the Securities Exchange Act of 1934, or under a state
law requiring similar registration or disclosure, the person required to file the
statement referred to in Section 38-21-60 may utilize these documents in
furnishing the information called for by that statement.
Section 38-21-90. Approval of Commissioner of acquisition of control; hearing.
(1) The Commissioner shall approve any merger or other acquisition of control
referred to in Section 38-21-60 unless, after a public hearing, he finds that:
(a) After the change of control the domestic insurer referred to in Section
38-21-60 is not able to satisfy the requirements for the issuance of a license
to write the line or lines of insurance for which it is presently licensed;
(b) The effect of the merger or other acquisition of control would
substantially lessen competition in insurance in this State or tend to create a
monopoly therein;
(c) The financial condition of the acquiring party might jeopardize the
financial stability of the insurer or prejudice the interest of its
policyholders;
(d) The plans or proposals which the acquiring party has to liquidate the
insurer, sell its assets, or consolidate or merge it with any person, or to make
any other material change in its business or corporate structure or management,
are unfair and unreasonable to policyholders of the insurer and not in the public
interest;
(e) The competence, experience, and integrity of those persons who would
control the operation of the insurer are such that it is not in the interest of
policyholders of the insurer and of the public to permit the merger or other
acquisition of control;
(f) The acquisition is likely to be hazardous or prejudicial to the
insurance-buying public.
(2) The public hearing referred to in subsection (1) must be held within
thirty days after the statement required by Section 38-21-60 is filed and at
least twenty days' notice must be given by the Commissioner to the person filing
the statement, to the insurer, and to other persons designated by the
Commissioner. The Commissioner shall make a determination within thirty days
after the conclusion of the hearing. At the hearing, the person filing the
statement, the insurer, any person to whom notice of hearing was sent, and any
other person whose interest is affected has the right to present evidence,
examine and cross-examine witnesses, and offer oral and written arguments and is
entitled to conduct discovery proceedings in the same manner as is allowed in the
circuit courts of this State. All discovery proceedings must be concluded not
later than three days before the commencement of the public hearing.
(3) The Commissioner may retain at the acquiring person's expense any
attorneys, actuaries, accountants, and other experts not otherwise a part of the
Commissioner's staff as may be reasonably necessary to assist the Commissioner
in reviewing the proposed acquisition of control.
Section 38-21-100. Certain transactions exempt from Sections 38-21-60 to
38-21-120.
The provisions of Sections 38-21-60 to 38-21-120 do not apply to:
(1) Any transaction which is subject to the provisions of Sections 38-19-830
through 38-19-890 dealing with the merger or consolidation of two or more
insurers.
(2) Any offer, request, invitation, agreement, or acquisition which the
Commissioner by order exempts as (a) not having been made or entered into for the
purpose and not having the effect of changing or influencing the control of a
domestic insurer, or (b) as otherwise not comprehended within the purposes of
Sections 38-21-60 through 38-21-120.
Section 38-21-110. Violations of Sections 38-21-60 to 38-21-120.
The following are violations of Sections 38-21-60 to 38-21-120:
(1) The failure to file any statement, amendment, or other material required
to be filed pursuant to Section 38-21-60 or 38-21-70; or
(2) The effectuation or any attempt to effectuate an acquisition or control
of, or merger with, a domestic insurer unless the Commissioner has given his
approval.
Section 38-21-120. Jurisdiction of courts; service of process.
The courts of this State are vested with jurisdiction over each person not
resident, domiciled, or authorized to do business in this State who files a
statement with the Commissioner under this chapter and over all actions involving
the person arising out of violations of Sections 38-21-60 through 38-21-120.
This person must be considered to have performed acts equivalent to and
constituting an appointment by him of the Commissioner to be his true and lawful
attorney upon whom all lawful process may be served in any action, suit, or
proceeding arising out of violations of Sections 38-21-60 through 38-21-120.
Copies of all lawful process must be served on the Commissioner and transmitted
by registered or certified mail by the Commissioner to the person at his last
known address.
Section 38-21-130. Registration of members of insurance holding company
systems.
An insurer authorized to do business in this State and which is a member of an
insurance holding company system must register with the Commissioner, unless it
is a foreign insurer subject to registration requirements and standards adopted
by statute or regulation in the jurisdiction of its domicile which are
substantially similar to those contained in this chapter. The insurer shall file
a copy of the registration statement and summary of its registration statement
as required by Sections 38-21-140 and 38-21-150 with the National Association of
Insurance Commissioners.
The insurer shall also file a copy of the summary of its registration as
required by Section 38-21-150 in each state in which that insurer is authorized
to do business if requested by the Commissioner of that state. Any insurer which
is subject to registration under this chapter must register within fifteen days
after it becomes subject to registration, and annually thereafter by March first
of each year for the previous calendar year, unless the Commissioner for good
cause shown extends the time for registration and then within the extended time.
The Commissioner may require an authorized insurer which is a member of a holding
company system which is not subject to registration under this section to furnish
a copy of the registration statement or other information filed by the insurer
with the insurance regulatory authority of its domiciliary jurisdiction.
Section 38-21-140. Registration statement.
An insurer subject to registration shall file the registration statement on a
form prescribed by the National Association of Insurance Commissioners, which
shall contain the following current information about:
(1) The capital structure, general financial condition, ownership, and
management of the insurer and any person controlling the insurer.
(2) The identity and relationship of every member of the insurance holding
company system.
(3) The following agreements in force, and transactions currently
outstanding or which have occurred during the last calendar year between the
insurer and its affiliates:
(a) Loans, other investments, or purchases, sales, or exchanges of
securities of the affiliates by the insurer or of the insurer by its affiliates;
(b) Purchases, sales, or exchanges of assets;
(c) Transactions not in the ordinary course of business;
(d) Guarantees or undertakings for the benefit of an affiliate which
result in an actual contingent exposure of the insurer's assets to liability,
other than insurance contracts entered into in the ordinary course of the
insurer's business;
(e) All management agreements, service contracts, and all cost-sharing
arrangements;
(f) Reinsurance agreements;
(g) Dividends and distributions to shareholders; and
(h) Consolidated tax allocation agreements.
(4) Other matters concerning transactions between registered insurers and
affiliates as may be included in registration forms adopted or approved by the
Commissioner.
Section 38-21-150. Summary outlining changes since previous registration
statement required.
All registration statements shall contain a summary outlining all items in the
current registration statement representing changes from the prior registration
statement.
Section 38-21-160. Information which need not be disclosed in registration
statement.
No information need be disclosed on the registration statement filed pursuant
to Section 38-21-140 if the information is not material for the purposes of this
chapter. Unless the Commissioner by regulation or order provides otherwise,
sales, purchases, exchanges, loans or extension of credit, or investments
involving one-half of one percent or less of an insurer's admitted assets as of
the previous December thirty-first are not considered material for purposes of
Sections 38-21-140 through 38-21-240.
Section 38-21-170. Dividends and distributions must be reported.
Subject to Section 38-21-270, each registered insurer shall report to the
Commissioner all dividends and other distributions to shareholders within fifteen
business days following the declaration thereof.
Section 38-21-180. Information from persons within insurance holding company.
Any persons within an insurance holding company subject to registration are
required to provide complete and accurate information to an insurer, where such
information is reasonably necessary to enable the insurer to comply with the
provisions of this chapter.
Section 38-21-190. Termination of registration.
The Commissioner shall terminate the registration of an insurer that is no
longer a member of an insurance holding company system.
Section 38-21-200. Filing of consolidated or individual registration
statements by affiliated insurers.
The Commissioner may require or allow two or more affiliated insurers subject
to registration to file a consolidated registration statement.
Section 38-21-210. Filing of registration statement on behalf of affiliated
insurer.
The Commissioner may allow an insurer which is authorized to do business in
this State and which is part of an insurance holding company system to register
on behalf of an affiliated insurer which is required to register under Section
38-21-130 and to file all information and material required to be filed under
Sections 38-21-130 through 38-21-240.
Section 38-21-220. Disclaimer of affiliation.
A person may file with the Commissioner a disclaimer of affiliation with an
authorized insurer or a disclaimer may be filed by an insurer or a member of an
insurance holding company system. The disclaimer shall fully disclose all
material relationships and bases for affiliation between the person and the
insurer as well as the basis for disclaiming this affiliation. After a
disclaimer has been filed, the insurer is relieved of any duty to register or
report under Sections 38-21-130 through 38-21-240 which may arise out of the
insurer's relationship with that person unless and until the Commissioner
disallows the disclaimer. The Commissioner may disallow the disclaimer only
after furnishing all parties in interest with notice and an opportunity to be
heard and after making specific findings of fact to support the disallowance.
Section 38-21-230. Failure to file registration statement or amendment.
The failure to file a registration statement or any summary of such
registration as required by this chapter within the time specified for filing
constitutes a violation of these sections.
Section 38-21-240. Exemptions from registration statement provisions.
The provisions of Sections 38-21-130 to 38-21-240 do not apply to any insurer,
information, or transaction if and to the extent that the Commissioner by
regulation or order exempts it from these sections.
Section 38-21-250. Transactions between registered insurers and their
affiliates.
(1) Transactions within a holding company system to which an insurer subject
to registration is a party are subject to the following standards:
(i) The terms must be fair and reasonable;
(ii) Charges or fees for services performed must be reasonable;
(iii) Expenses incurred and payment received must be allocated to the insurer
in conformity with customary insurance accounting practices consistently applied;
(iv) The books, accounts, and records of each party to all transactions must
be so maintained as to clearly and accurately disclose the nature and details of
the transactions including such accounting information as is necessary to support
the reasonableness of the charges or fees to the respective parties; and
(v) The insurer's surplus as regards policyholders following any dividends
or distributions to shareholder affiliates must be reasonable in relation to the
insurer's outstanding liabilities and adequate to its financial needs.
(2) The following transactions involving a domestic insurer and any person in
its holding company system may not be entered into unless the insurer has
notified the Commissioner in writing of its intention to enter into the
transaction at least thirty days prior thereto, or such shorter period as the
Commissioner may permit, and the Commissioner has not disapproved it within such
period:
(i) sales, purchases, exchanges, loans, or extensions of credit, guarantees,
or investments if the transactions are equal to or exceed:
(a) with respect to nonlife insurers, the lesser of three percent of the
insurer's admitted assets or twenty-five percent of surplus as regards
policyholders;
(b) with respect to life insurers, three percent of the insurer's admitted
assets, each as of the thirty-first day of December next preceding;
(ii) loans or extensions of credit to any person who is not an affiliate,
where the insurer makes the loans or extensions of credit with the agreement or
understanding that the proceeds of the transactions, in whole or in substantial
part, are to be used to make loans or extensions of credit to, to purchase assets
of, or to make investments in, any affiliate of the insurer making the loans or
extensions of credit as long as such transactions are equal to or exceed:
(a) with respect to nonlife insurers, the lesser of three percent of the
insurer's admitted assets or twenty-five percent of surplus as regards
policyholders;
(b) with respect to life insurers, three percent of the insurer's admitted
assets, each as of the thirty-first day of December next preceding;
(iii) reinsurance agreements or modifications thereto in which the reinsurance
premium or a change in the insurer's liabilities equals or exceeds five percent
of the insurer's surplus as regards policyholders, as of the thirty-first day of
December next preceding, including those agreements which may require as
consideration the transfer of assets from an insurer to a nonaffiliate, if an
agreement or understanding exists between the insurer and nonaffiliate that any
portion of such assets will be transferred to one or more affiliates of the
insurer;
(iv) all management agreements, service contracts, and all cost-sharing
arrangements; and
(v) any material transactions, specified by regulation, which the
Commissioner determines may adversely affect the interests of the insurer's
policyholders.
Nothing herein authorizes or permits any transactions which, in the case of an
insurer, not a member of the same holding company system, would be otherwise
contrary to law.
(3) A domestic insurer may not enter into transactions, which are part of a
plan or series of like transactions with persons within the holding company
system, if the purpose of those separate transactions is to avoid the statutory
threshold amount and thus avoid the review that would occur otherwise. If the
Commissioner determines that such separate transactions were entered into over
any twelve-month period for such purpose, he may exercise his authority under
Section 38-21-340.
(4) The Commissioner, in reviewing transactions pursuant to subsection (2),
shall consider whether the transactions comply with the standards set forth in
subsection (1) and whether they may adversely affect the interests of
policyholders.
(5) The Commissioner must be notified within thirty days of any investment of
the domestic insurer in any one corporation if the total investment in the
corporation by the insurance holding company system exceeds ten percent of the
corporation's voting securities.
Section 38-21-260. Determining adequacy of insurer's surplus.
For purposes of this chapter, in determining whether an insurer's surplus as
regards policyholders is reasonable in relation to the insurer's outstanding
liabilities and adequate to its financial needs, the following factors, among
others, are considered:
(1) The size of the insurer as measured by its assets, capital and surplus,
reserves, premium writings, insurance in force, and other appropriate criteria;
(2) The extent to which the insurer's business is diversified among the
several lines of insurance;
(3) The number and size of risks insured in each line of business;
(4) The extent of the geographical dispersion of the insured risks;
(5) The nature and extent of the reinsurance program;
(6) The quality, diversification, and liquidity of the investment portfolio;
(7) The recent past and projected future trend in the size of the insurer's
investment portfolio;
(8) The surplus as regards policyholders maintained by other comparable
insurers;
(9) The adequacy of the reserves; and
(10) The quality and liquidity of investments in affiliates. The Commissioner
may treat any such investment as a disallowed asset for purposes of determining
the adequacy of surplus as regards policyholders whenever in his judgment the
investment so warrants.
Section 38-21-270. Notice and approval of extraordinary dividends or
distributions required.
No domestic insurer shall pay any extraordinary dividend or make any other
extraordinary distribution to its shareholders until (i) the Commissioner has
approved the payment or (ii) the Commissioner has not disapproved the payment
within thirty days after receiving notice of the declaration.
For purposes of this section, an extraordinary dividend or distribution
includes any dividend or distribution of cash or other property, whose fair
market value together with that of other dividends or distributions made within
the preceding twelve months exceeds (a) ten percent of the insurer's surplus as
regards policyholders as of the previous December thirty-first, or (b) the net
gain from operations of the insurer, if the insurer is a life insurer, or the net
investment income, if the insurer is not a life insurer not including realized
capital gains, for the year ending the previous December thirty-first but does
not include pro rata distributions of any class of the insurer's own securities.
In determining whether a dividend or distribution is extraordinary, an insurer
may carry forward income from the previous two calendar years that has not
already been paid as dividends.
An insurer may declare an extraordinary dividend or distribution which is
conditional upon the Commissioner's approval. The declaration confers no rights
upon shareholders until (1) the Commissioner has approved the payment of the
dividend or distribution or (2) the Commissioner has not disapproved the payment
within thirty days after receiving notice of the declaration.
Section 38-21-280. Power of Commissioner to compel production of information.
(a) In addition to his powers relating to examinations or investigations of
insurers, the Commissioner has the power to order an insurer registered under
Sections 38-21-130 through 38-21-240 to produce records, books, or other
information papers in the possession of the insurer or its affiliates as
considered necessary to ascertain the insurer's financial condition or legality
of its conduct. If the insurer fails to comply with the order, the Commissioner
has, in addition to powers prescribed in Section 38-21-340, the power to examine
the affiliates to obtain this information.
(b) The Commissioner may retain at the registered insurer's expense attorneys,
actuaries, accountants, and other experts not otherwise a part of the
Commissioner's staff reasonably necessary to assist in the conduct of the
examination under subsection (a). Any persons so retained are under the
direction and control of the Commissioner and must act in a purely advisory
capacity.
(c) Each registered insurer producing for examination records, books, and
papers pursuant to subsection (a) is liable for and must pay the expense of the
examination.
Section 38-21-290. Information must be kept confidential.
All information, documents, and copies thereof obtained by or disclosed to the
Commissioner or any other person in the course of an examination or investigation
made pursuant to Section 38-21-280 and all information reported pursuant to
Sections 38-21-130 through 38-21-240 must be given confidential treatment and is
not subject to subpoena and may not be made public by the Commissioner, the
National Association of Insurance Commissioners, or any other persons, except to
insurance departments of other states, without the prior written consent of the
insurer to which it pertains unless the Commissioner, after giving the insurer
and its affiliates who would be affected thereby notice and opportunity to be
heard, determines that the interests of policyholders, shareholders, or the
public will be served by the publication thereof, in which event he may publish
all or any part thereof in the manner he considers appropriate.
Section 38-21-300. Regulations and orders of Commissioner.
The Commissioner may, upon notice and opportunity for all interested persons
to be heard, issue regulations and orders necessary to carry out the provisions
of this chapter.
Section 38-21-310. Enjoining violations of chapter, regulations, or orders.
Whenever it appears to the Commissioner that an insurer or a director, officer,
employee, or agent of it has committed or is about to commit a violation of this
chapter or of any regulation or order issued by the Commissioner hereunder, the
Commissioner may apply to the circuit court for the county in which the principal
office of the insurer is located or if the insurer has no such office in this
State then to the circuit court for Richland County for an order enjoining the
insurer or its director, officer, employee, or agent from violating or continuing
to violate this chapter or any regulation or order and for any other equitable
relief which the nature of the case and the interests of the insurer's
policyholders, creditors, and shareholders or the public may require.
Section 38-21-320. Voting of securities acquired in violation of chapter,
regulations, or orders may be enjoined.
No security which is the subject of an agreement or arrangement regarding
acquisition, or which is acquired or to be acquired, in contravention of this
chapter or of any regulation or order issued by the Commissioner hereunder may
be voted at any shareholders' meetings or may be counted for quorum purposes, and
any action of shareholders requiring the affirmative vote of a percentage of
shares may be taken as though these securities were not issued and outstanding.
No action taken at a shareholders' meeting may be invalidated by the voting of
these securities, unless the action would materially affect control of the
insurer or unless the courts of this State have so ordered. If an insurer or the
Commissioner has reason to believe that any security of the insurer has been or
is about to be acquired in contravention of this chapter or of any regulation or
order issued by the Commissioner hereunder, the insurer or the Commissioner may
apply to the circuit court for Richland County or to the circuit court for the
county in which the insurer has its principal place of business to enjoin any
offer, request, invitation, agreement, or acquisition made in contravention of
Sections 38-21-60 through 38-21-120 or any regulation or order issued by the
Commissioner thereunder, to enjoin the voting of any security so acquired, to
void any vote of the security already cast at any meeting of shareholders, and
for any other equitable relief which the nature of the case and the interests of
the insurer's policyholders, creditors, and shareholders or the public may
require.
Section 38-21-330. Seizure or sequestration of securities acquired in
violation of chapter, regulations, or order.
In a case where a person has acquired or is proposing to acquire voting
securities in violation of this chapter, or any regulation or order issued by the
Commissioner hereunder, the circuit court for Richland County or the circuit
court for the county in which the insurer has its principal place of business
may, on notice which the court considers appropriate, upon the application of the
insurer or the Commissioner, seize or sequester any voting securities of the
insurer owned directly or indirectly by this person and issue orders appropriate
to effectuate this chapter. Notwithstanding any other provision of law, for the
purposes of this chapter the situs of the ownership of the securities of domestic
insurers is considered to be in this State.
Section 38-21-340. Criminal prosecutions; penalties.
(a) Any insurer failing, without just cause, to file any registration
statement or summary thereof as required in this chapter is required, after
notice and hearing, to pay a penalty of one thousand dollars for each day's
delay, to be recovered by the Commissioner, and the penalty so recovered must be
paid into the general fund of the State. The maximum penalty under this section
is thirty thousand dollars. The Commissioner may reduce the penalty if the
insurer demonstrates to the Commissioner that the imposition of the penalty would
constitute a financial hardship to the insurer.
(b) Every director or officer of an insurance holding company system who
knowingly violates, participates in, or assents to, or who knowingly permits any
of the officers or agents of the insurer to engage in transactions or make
investments which have not been properly reported or submitted pursuant to this
chapter or which violate this chapter, shall pay, in their individual capacity,
a civil forfeiture of not more than ten thousand dollars per violation, after
notice and hearing before the Commissioner. In determining the amount of the
civil forfeiture, the Commissioner shall take into account the appropriateness
of the forfeiture with respect to the gravity of the violation, the history of
previous violations, and other matters as justice may require.
(c) Whenever it appears to the Commissioner that any insurer subject to this
chapter or any director, officer, employee, or agent thereof has engaged in any
transaction or entered into a contract which is subject to Sections 38-21-250
through 38-21-270 and which would not have been approved had such approval been
requested, the Commissioner may order the insurer to cease and desist immediately
any further activity under that transaction or contract. After notice and
hearing the Commissioner may also order the insurer to void any such contracts
and restore the status quo if such action is in the best interest of the
policyholders, creditors, or the public.
(d) Whenever it appears to the Commissioner that an insurer or a director,
officer, employee, or agent of it has committed a willful violation of this
chapter, the Commissioner may, in addition to other powers prescribed in this
section, cause criminal proceedings to be instituted in the circuit court for the
county in which the principal office of the insurer is located or, if the insurer
has no such office in the State, then in the Circuit Court for Richland County
against the insurer or the responsible director, officer, employee, or agent of
it. An insurer which willfully violates this chapter may be fined not more than
fifty thousand dollars. An individual who willfully violates this chapter is
guilty of a misdemeanor and, upon conviction, must be fined an amount not to
exceed ten thousand dollars or be imprisoned for a term not to exceed two years,
or both.
(e) Any officer, director, or employee of an insurance holding company system
who willfully and knowingly subscribes to or makes or causes to be made any false
statements or false reports or false filings with the intent to deceive the
Commissioner in the performance of his duties under this chapter is guilty of a
misdemeanor and, upon conviction, must be imprisoned for not more than two years
or fined ten thousand dollars, or both. Any fines imposed must be paid by the
officer, director, or employee in his individual capacity.
(f) Whenever it appears to the Commissioner that any insurer has committed a
violation of this chapter, or that any person has committed a violation of this
chapter which makes continued operation of the insurer contrary to the interests
of policyholders or the public, the Commissioner may, after giving notice and an
opportunity to be heard, determine to suspend, revoke, or refuse to renew such
insurer's license or authority to do business in this State for such period as
he finds is required for the protection of policyholders or the public. Any such
determination must be accompanied by specific findings of fact and conclusions
of law.
Section 38-21-350. Commissioner may take possession of property and conduct
business of insurer.
Whenever it appears to the Commissioner that a person has committed a violation
of this chapter which so impairs the financial condition of a domestic insurer
as to threaten insolvency or make the further transaction of business by it
hazardous to its policyholders, creditors, or the public, then the Commissioner
may proceed as provided in Chapter 27 of this title to take possession of the
property of the insurer and to conduct its business.
Section 38-21-360. Authority of receiver to recover certain distributions and
payments.
(a) If an order for liquidation or rehabilitation of a domestic insurer has
been entered, the receiver appointed under the order has a right to recover on
behalf of the insurer (i) from any parent corporation or holding company or
person or affiliate who otherwise controlled the insurer, the amount of
distributions (other than distributions of shares of the same class of stock)
paid by the insurer on its capital stock, or (ii) any payment in the form of a
bonus, termination settlement, or extraordinary lump sum salary adjustment made
by the insurer or its subsidiary to a director, officer, or employee, where the
distribution or payment pursuant to (i) or (ii) is made at any time during the
one year preceding the petition for liquidation, conservation, or rehabilitation,
as the case may be, subject to the limitations of subsections (b), (c), and (d).
(b) No such distribution may be recoverable if the parent or affiliate shows
that when paid the distribution was lawful and reasonable and that the insurer
did not know and could not reasonably have known that the distribution might
adversely affect the ability of the insurer to fulfill its contractual
obligations.
(c) Any person who was a parent corporation or holding company or a person who
otherwise controlled the insurer or affiliate at the time the distributions were
paid is liable up to the amount of distributions or payments under subsection
(a). Any person who otherwise controlled the insurer at the time the
distributions were declared is liable up to the amount of distributions he would
have received if they had been paid immediately. If two or more persons are
liable with respect to the same distributions, they are jointly and severally
liable.
(d) The maximum amount recoverable under this section is the amount needed in
excess of all other available assets of the impaired or insolvent insurer to pay
the contractual obligations of the impaired or insolvent insurer and to reimburse
any guaranty funds.
(e) To the extent that any person liable under subsection (c) is insolvent or
otherwise fails to pay claims due from it pursuant to such subsection, its parent
corporation or holding company or person who otherwise controlled it at the time
the distribution was paid is jointly and severally liable for any resulting
deficiency in the amount recovered from the parent corporation or holding company
or person who otherwise controlled it.
Section 38-21-370. Mandamus.
A person aggrieved by the failure of the Commissioner to act or make a
determination required by this chapter may petition the circuit court for
Richland County for a writ in the nature of a mandamus or a peremptory mandamus
directing the Commissioner to act or make the determination immediately.
Section 38-21-380. Inconsistent laws superseded.
All laws and parts of laws of this State inconsistent with this chapter are
superseded.
Section 38-21-390. Severability.
If any provision of this chapter or the application thereof to any person or
circumstance is held invalid, the invalidity does not affect other provisions or
applications of this chapter which can be given effect without the invalid
provision or application, and for this purpose the provisions of this chapter are
separable.
CHAPTER 23
Insider Trading In Securities of
Domestic Stock Insurers
Section 38-23-10. Short title.
This chapter is known and may be cited as the 'Insider Trading Statute'.
Section 38-23-20. 'Equity security' defined.
'Equity security', when used in this chapter, means any stock or similar
security; or any security convertible, with or without consideration, into such
a security, or carrying any warrant or right to subscribe to or purchase such a
security; or any such warrant or right; or any other security which the
Commissioner considers to be of similar nature and considers necessary or
appropriate, by any regulation he may prescribe in the public interest or for the
protection of investors, to treat as an equity security.
Section 38-23-30. 'Beneficial owner' defined.
'Beneficial owner', when used in this chapter, means a person who directly or
indirectly beneficially owns more than ten percent of any class of any equity
security of a domestic stock insurer.
Section 38-23-40. Beneficial owners, directors, and officers of domestic stock
insurers shall file statements with Commissioner.
Every beneficial owner, director, or officer of a domestic stock insurer shall
file in the office of the Commissioner within ten days after he becomes a
beneficial owner, director, or officer a statement, in a form the Commissioner
may prescribe, of the amount of all equity securities of the insurer which he
beneficially owns. Within ten days after the close of each calendar month
thereafter, if there has been a change in his ownership during the month, he
shall file in the office of the Commissioner a statement, in a form the
Commissioner may prescribe, indicating his ownership at the close of the calendar
month and the changes in his ownership which have occurred during the calendar
month.
Section 38-23-50. Profits realized from certain transactions by beneficial
owners, directors, or officers inure to insurer; suit to recover these profits.
For the purpose of preventing the unfair use of information which may have been
obtained by a beneficial owner, director, or officer by reason of his
relationship to the insurer, any profit realized by him from any purchase and
sale, or any sale and purchase, of any equity security of the insurer within any
period of less than six months, unless the security was acquired in good faith
in connection with a debt previously contracted, inures to and is recoverable by
the insurer, irrespective of any intention on the part of the beneficial owner,
director, or officer in entering into the transaction of holding the security
purchased or of not repurchasing the security sold for a period exceeding six
months. Suit to recover this profit may be instituted at law or in equity in any
court of competent jurisdiction by the insurer or by the owner of any security
of the insurer in the name and in behalf of the insurer if the insurer fails or
refuses to bring the suit within sixty days after request or fails diligently to
prosecute it thereafter. This suit may not be brought more than two years after
the date the profit was realized. This section may not be construed to cover any
transaction where the beneficial owner was not a beneficial owner both at the
time of the purchase and sale, or the sale and purchase, of the security
involved, or any transaction or transactions which the Commissioner, by
regulation, may exempt as not comprehended within the purpose of this section.
Section 38-23-60. Certain sales of equity securities by beneficial owners,
directors, or officers are unlawful.
It is unlawful for a beneficial owner, director, or officer, directly or
indirectly, to sell any equity security of the insurer if the person selling the
security or his principal (a) does not own the security sold, or (b) if owning
the security, does not deliver it against the sale within twenty days thereafter,
or does not within five days after the sale deposit it in the mails or other
usual channels of transportation. A person is not considered to have violated
this section if he proves that, notwithstanding the exercise of good faith, he
was unable to make the delivery or deposit within this time or that to do so
would cause undue inconvenience or expense.
Section 38-23-70. Sales by dealers in ordinary course of business excepted.
Section 38-23-50 does not apply to any purchase and sale, or sale and purchase,
and Section 38-23-60 does not apply to any sale of an equity security of a
domestic stock insurer, not then or theretofore held by him in an investment
account, by a dealer in the ordinary course of his business and incident to the
establishment or maintenance by him of a primary or secondary market, otherwise
than on an exchange as defined in the Securities Exchange Act of l934, for the
security. The Commissioner may, by any regulation he considers necessary or
appropriate in the public interest, define and prescribe terms and conditions
with respect to securities held in an investment account and transactions made
in the ordinary course of business and incident to the establishment or
maintenance of a primary or secondary market.
Section 38-23-80. Foreign or domestic arbitrage transactions excepted.
Sections 38-23-40 to 38-23-60 do not apply to foreign or domestic arbitrage
transactions unless made in contravention of regulations the Commissioner may
adopt in order to carry out the purposes of this chapter.
Section 38-23-90. Transactions in registered securities and securities held
by fewer than one hundred persons excepted.
Sections 38-23-40 to 38-23-60 do not apply to equity securities of a domestic
stock insurer if (a) the securities are registered or are required to be
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, or (b) the domestic stock insurer does not have any class of its equity
securities held of record by one hundred or more persons on the last business day
of the previous year in which equity securities of the insurer would be subject
to Sections 38-23-40 to 38-23-60 except for this section.
Section 38-23-100. Regulations of Commissioner.
The Commissioner has the power to make and promulgate regulations necessary for
the execution of the functions vested in him by Sections 38-23-20 through
38-23-90 including, but without limitation, regulations pertaining to and
governing the solicitation of proxies, including financial reporting in
connection therewith, with respect to the capital stock or other equity
securities of any domestic stock insurer; he may, for these purposes, classify
domestic insurers, securities, and other persons or matters within his
jurisdiction. No provision of Sections 38-23-40 to 38-23-60 imposing any
liability applies to any act done or omitted in good faith in conforming with any
regulation of the Commissioner, notwithstanding that the regulation may, after
the act or omission, be amended, rescinded, or determined by judicial or other
authority to be invalid for any reason.
CHAPTER 25
Unauthorized Transaction of Insurance Business
Article 1
Declarations
Section 38-25-10. Declaration.
(a) The General Assembly declares that it is concerned with the protection of
residents of this State against acts by insurers not authorized to conduct an
insurance business in this State, by the maintenance of fair and honest insurance
markets, by protecting authorized insurers which are subject to regulation from
unfair competition by unauthorized insurers, and by protecting against the
evasion of the insurance regulatory laws of this State. In furtherance of this
state interest, the General Assembly herein provides methods for substituted
service of process upon such insurers in any proceeding, suit, or action in any
court and substituted service of any notice, order, pleading, or process upon
such insurers in any proceeding by the Commissioner to enforce or effect full
compliance with the insurance laws of this State. In so doing, the State
exercises its powers to protect residents of this State and to define what
constitutes transacting an insurance business in this State and also exercises
powers and privileges available to this State by virtue of Public Law 79-15, 79th
Congress of the United States, Chapter 20, 1st Session, S. 340, 59 Stat. 33; 15
U.S.C., Sections 1011 to 1015, inclusive, as amended, which declares that the
business of insurance and every person engaged therein are subject to the laws
of the several states.
(b) The remedies and proceedings provided in this chapter are in addition to,
and not in substitution for, any other remedies or proceedings provided by law.
Article 3
Unauthorized Insurance Transactions
Section 38-25-110. Prohibition on transaction of insurance business in State
without certificate of authority.
It is unlawful for an insurer to transact insurance business in this State
without a certificate of authority from the Commissioner. Any of the acts listed
in items (1) through (8) in this State effected by mail or otherwise by or on
behalf of an unauthorized insurer is considered to constitute the transaction of
an insurance business in this State. The venue of an act committed by mail is
at the point where the matter transmitted by mail is delivered and takes effect.
Unless otherwise indicated, the term 'insurer' as used in this section includes
all corporations, associations, partnerships, and individuals engaged as
principals in the business of insurance and also includes interinsurance
exchanges and mutual benefit societies.
(1) The making of or proposing to make, as an insurer, an insurance
contract.
(2) The making of or proposing to make, as guarantor or surety, any contract
of guaranty or suretyship as a vocation and not merely incidental to any other
legitimate business or activity of the guarantor or surety.
(3) The taking or receiving of any application for insurance.
(4) The receiving or collection of any premium, commission, membership fees,
assessments, dues, or other consideration for any insurance or any part thereof.
(5) The issuance or delivery of contracts of insurance to residents of this
State or to persons authorized to do business in this State.
(6) Directly or indirectly acting as an agent for or otherwise representing
or aiding on behalf of another any person or insurer in the solicitation,
negotiation, procurement, or effectuation of insurance or renewals thereof or in
the dissemination of information as to coverage or rates, or forwarding of
applications, or delivery of policies or contracts, or inspection of risks, a
fixing of rates or investigation or adjustment of claims or losses or in the
transaction of matters after effectuation of the contract and arising out of it,
or in any other manner representing or assisting a person or insurer in the
transaction of insurance with respect to subjects of insurance resident, located,
or to be performed in this State. This section does not prohibit full-time
salaried employees of a corporate insured from acting in the capacity of an
insurance manager or buyer in placing insurance in behalf of their employer.
(7) The transaction of any kind of insurance business specifically
recognized as transacting an insurance business within the meaning of the
statutes relating to insurance.
(8) The transacting or proposing to transact any insurance business in
substance equivalent to any of the foregoing in a manner designed to evade the
insurance laws of this State.
Section 38-25-120. Acting as agent for unauthorized insurer prohibited.
No person may in this State act as agent for an insurer not authorized to
transact business in this State or negotiate for or place or aid in placing
insurance coverage in this State for another with an unauthorized insurer.
Section 38-25-130. Aiding unauthorized insurer prohibited.
No person may in this State aid an unauthorized insurer in effecting insurance
or in transacting insurance business in this State, either by fixing a rate, or
by adjusting or investigating losses, by inspecting or examining risks, by acting
as attorney in fact or as attorney for service of process or otherwise, except
as provided in Sections 38-25-510 and 38-25-520.
Section 38-25-140. Insurance on out-of-state property by insurer not locally
authorized.
No person may make, negotiate for or place, or aid in negotiating or placing
an insurance contract in this State for another who is an applicant for insurance
covering any property or risk in another state, territory, or district of the
United States with an insurer not authorized to transact insurance business in
the state, territory, or district where the property or risk or any part thereof
is located.
Section 38-25-150. Exemptions from article.
This article does not apply to:
(1) The lawful transaction of surplus lines insurance.
(2) The lawful transaction of reinsurance by insurers.
(3) Transactions in this State involving a policy lawfully solicited,
written, and delivered outside this State covering only subjects of insurance not
resident, located, or expressly to be performed in this State at the time of
issuance, and which transactions are subsequent to the issuance of the policy.
(4) Attorneys acting in the ordinary relation of attorney and client in the
adjustment of claims or losses.
(5) Except for mass-marketed insurance, transactions in this State involving
group life and group accident and health or blanket accident and health insurance
or group annuities where (i) the master policy was lawfully issued and delivered
in and pursuant to the laws of a state in which the insurer was authorized to do
an insurance business and in which the policyholder was domiciled or otherwise
had a bona fide situs and (ii) except for group annuities, the insurer complies
with Sections 38-65-50, 38-65-60, 38-71-740, and 38-71-750.
(6) Transactions in this State involving any policy of insurance or annuity
contract issued before April 30, 1975.
(7) Contracts of insurance covering risks of transportation and navigation
and transactions in this State relative to a policy issued or to be issued
outside this State involving insurance on vessels, craft or hulls, cargoes,
marine builder's risk, marine protection and indemnity, or other risk, including
strikes and war risks commonly insured under ocean or wet marine forms of policy.
(8) Transactions in this State involving contracts of insurance other than
contracts of life, accident, or accident and health insurance issued to one or
more industrial insureds. An 'industrial insured' means an insured:
(i) Which procures insurance by use of the services of a full-time
employee acting as a risk manager or insurance manager or utilizing the services
of a regularly and continuously qualified insurance consultant;
(ii) Whose aggregate annual premiums for insurance on all risks total at
least twenty-five thousand dollars; and
(iii) Which has at least twenty-five full-time employees.
Section 38-25-160. Commissioner may exempt insurer or other organization from
provisions of chapter; certain requirements; discontinuance of exemption.
The Commissioner may, by regulation or order, exempt from all or any provisions
of this chapter an insurer or other organization not formed or operating for
profit which affords life insurance or annuities to nonprofit educational and
scientific institutions and their staff members in this State. However, in
affording this exemption the Commissioner shall require the insurer or other
organization to appoint him as agent for service of process. The Commissioner
may require the insurer or other organization to file with him, as information,
policy forms, annual statements, and financial and other similar material. The
Commissioner may, after due notice and hearing, discontinue the exemption for any
reason which would have, if then existing or known, justified his refusal to
afford the exemption when it was granted.
Article 5
Remedies and Penalties
Section 38-25-310. Commissioner authorized to seek restraining order.
Whenever the Commissioner believes, from evidence satisfactory to him, that an
insurer is violating or about to violate Section 38-25-110 the Commissioner may,
through the Attorney General, cause a complaint to be filed in the Court of
Common Pleas of Richland County to enjoin and restrain the insurer from
continuing the violation, engaging in the violation, or doing any act in
furtherance of the violation. The court has jurisdiction of the proceeding and
has the power to make and enter an order or judgment awarding preliminary or
final injunctive relief as in its judgment is proper.
Section 38-25-320. Penalty for unauthorized insurers.
An unauthorized insurer who transacts any unauthorized act of an insurance
business as set forth in Article 3 of this chapter may be fined not more than ten
thousand dollars.
Section 38-25-330. Criminal penalty for violation of chapter.
Any person violating this chapter is guilty of a misdemeanor and, upon
conviction, must be fined not more than five hundred dollars or imprisoned for
not more than two years, or both.
Section 38-25-340. Civil penalty for violation of chapter.
An insurer which willfully violates or fails to observe and comply with this
chapter is subject to and liable to pay a penalty of five hundred dollars for
each violation. This penalty may be collected and recovered in an action brought
in the name of the State in any court having jurisdiction.
Section 38-25-350. Revocation of license for failure to pay civil penalty.
An insurer which neglects or refuses for thirty days after final judgment in
an action under Section 38-25-340 to pay and discharge the judgment shall have
its authority to transact business in this State revoked by the Commissioner.
The revocation must continue for at least one year from the date of revocation.
Before the insurer may be authorized or permitted to transact business in this
State, it shall pay the amount of the judgment and shall file in the office of
the Commissioner a certificate, signed by its president or other chief officer,
to the effect that the terms and
obligations of this chapter and Section 38-43-60 are accepted by it as part of
the conditions of its rights and authority to transact business in this State.
Section 38-25-360. Personal liability on contracts of unauthorized insurers.
In the event of failure of an unauthorized insurer to pay any claim or loss
within the provisions of the insurance contract, a person who assisted or in any
manner aided directly or indirectly in the procurement of the insurance contract
is liable to the insured for the full amount of the claim or loss in the manner
provided by the insurance contract.
Article 7
General Provisions
Section 38-25-510. Service of process on an unauthorized insurer in actions
brought by the Commissioner or the State or in actions before the Commissioner.
(a) Any act of transacting an insurance business as set forth in Section
38-25-110 by an unauthorized insurer is equivalent to and constitutes an
irrevocable appointment by the insurer, binding upon him, his executor or
administrator, or successor in interest if a corporation, of the Secretary of
State or his successor in office to be the true and lawful attorney of the
insurer upon whom may be served all lawful process in any action, suit, or
proceeding in any court by the Commissioner or by the State and upon whom may be
served any notice, order, pleading, or process in any proceeding before the
Commissioner and which arises out of transacting an insurance business in this
State by the insurer. Any act of transacting an insurance business in this State
by an unauthorized insurer is signification of its agreement that any lawful
process in the court action, suit, or proceeding and any notice, order, pleading,
or process in the administrative proceeding before the Commissioner so served is
of the same legal force and validity as personal service of process in this State
upon the insurer.
(b) Service of process in the action must be made by delivering to and leaving
with the Secretary of State, or some person in apparent charge of his office, two
copies thereof and by payment to the Secretary of State of the fee prescribed by
law. Service upon the Secretary of State as attorney is service upon the
principal.
(c) The Secretary of State shall immediately forward by certified mail one of
the copies of the process or the notice, order, pleading, or process in
proceedings before the Commissioner to the defendant in the court proceeding or
to whom the notice, order, pleading, or process in the administrative proceeding
is addressed or directed at its last known principal place of business and shall
keep a record of all process so served on him which shall show the day and hour
of service. The service is sufficient if:
(1) Notice of the service and a copy of the court process or the notice,
order, pleading, or process in the administrative proceeding are sent within ten
days thereafter by certified mail by the plaintiff or the plaintiff's attorney
in the court proceeding or by the Commissioner in the administrative proceeding
to the defendant in the court proceeding or to whom the notice, order, pleading,
or process in the administrative proceeding is addressed or directed at the last
known principal place of business of the defendant in the court or administrative
proceeding.
(2) The defendant's receipt or receipts issued by the post office with which
the letter is registered, showing the name of the sender of the letter and the
name and address of the person or insurer to whom the letter is addressed, and
an affidavit of the plaintiff or the plaintiff's attorney in a court proceeding
or of the Commissioner in an administrative proceeding, showing compliance
therewith, are filed with the clerk of court in which the action, suit, or
proceeding is pending or with the Commissioner in administrative proceedings, by
the date the defendant in the court or administrative proceeding is required to
appear or respond thereto, or within any further time as the court or
Commissioner may allow.
(d) No plaintiff is entitled to a judgment by default, a judgment with leave
to prove damages, or a judgment pro confesso in any court or administrative
proceeding in which court process or notice, order, pleading, or process in
proceedings before the Commissioner is served under this section until the
expiration of thirty days from the date of filing of the affidavit of compliance.
(e) Nothing in this section limits or affects the right to serve any process,
notice, order, or demand upon any person or insurer in any other manner permitted
by law.
Section 38-25-520. Commissioner agent for service of process on unauthorized
insurers.
(a) The issuance and delivery of a policy of insurance or contract of
insurance or indemnity to any person in this State or the collection of a premium
thereon by an insurer not licensed in this State, as herein required, irrevocably
constitutes the Commissioner and any successor of his in office the true and
lawful attorney in fact upon whom service of any and all processes, pleadings,
actions, or suits arising out of the policy or contract in behalf of the insured
may be made.
(b) Service of process in this action is made by delivering to and leaving
with the Commissioner or some person in apparent charge of his office two copies
thereof and by payment to the Commissioner of a fee of four dollars.
(c) The Commissioner shall immediately mail by registered mail one of the
copies of the process to the defendant at its last known principal place of
business and shall keep a record of all process served upon him. The service of
process is sufficient if:
(1) notice of the service and a copy of the process are sent within ten days
thereafter by registered mail by the plaintiff's attorney to the defendant at its
last known principal place of business, and
(2) the defendant's receipt or a receipt issued by the post office with
which the letter is registered, showing the name of the sender of the letter and
the name and address of the person to whom the letter is addressed, and the
affidavit of the plaintiff's attorney showing compliance herewith are filed with
the clerk of court in which the action is pending by the date the defendant is
required to appear or within any further time which the court may allow.
(d) No plaintiff is entitled to a judgment by default, a judgment with leave
to prove damages, or a judgment pro confesso under this section until the
expiration of thirty days from the date of filing of the affidavit of compliance.
(e) Nothing in this section limits or abridges the right to serve any process,
notice, order, or demand upon any person or insurer in any other manner permitted
by law.
Section 38-25-530. Alternative method for service on unauthorized insurer.
Service of process in any action, suit, or proceeding involving an unauthorized
insurer is, in addition to that provided in Sections 38-25-510 and 38-25-520,
valid if served upon
any person within this State who, in this State on behalf of the insurer, is:
(1) soliciting insurance,
(2) making any contract of insurance or issuing or delivering any policies
or written contracts of insurance, or
(3) collecting or receiving any premium for the insurer, or adjusting any
loss or claim for the insurance, and if counsel, within ten days after service
upon the person, causes to be sent by registered mail to the last known address
of the insurer a copy of the process with proper postage affixed to the envelope
containing it and files an affidavit, with the clerk of court or magistrate in
whose court the cause is pending, of compliance herewith, with leave to the court
to extend the time for the mailing of process and filing of affidavit.
Section 38-25-540. Actions by unauthorized insurers.
An unauthorized insurer is not permitted to maintain any action, suit, or
proceeding in this State to enforce a right, claim, or demand arising out of the
transaction of insurance business until the insurer has obtained a certificate
of authority to transact insurance business in this State. The unauthorized
insurer may maintain an action, suit, or proceeding in connection with its
investments in this State or in connection with a contract issued by it at a time
when it was authorized to do business in the state where the contract was issued.
This section does not prevent the insurer from defending an action in the courts
of this State. The failure of an insurer transacting insurance business in this
State to obtain a certificate of authority does not impair the validity of any
act or contract of the insurer.
Section 38-25-550. Prerequisites to pleading by unauthorized insurer.
(a) Before an unauthorized insurer files or causes to be filed any pleading
in any court action, suit, or proceeding or any notice, order, pleading, or
process in an administrative proceeding before the Commissioner instituted
against the person or insurer, the insurer shall either:
(1) Deposit with the clerk of court in which the action, suit, or proceeding
is pending, or with the Commissioner in administrative proceedings before the
Commissioner, cash or securities, or file with the clerk of court or Commissioner
a bond with good and sufficient sureties, to be approved by the clerk or
Commissioner, in an amount to be fixed by the court or Commissioner sufficient
to secure the payment of any final judgment which may be rendered in the action
or administrative proceeding.
(2) Procure a certificate of authority to transact the business of insurance
in this State. In considering the application of an insurer for a certificate of
authority, for the purposes of this paragraph, the Commissioner need not assert
the provisions of Section 38-7-90 against the insurer with respect to its
application if he determines that the insurer would otherwise comply with the
requirements for a certificate of authority.
(b) The Commissioner, in an administrative proceeding in which service is made
as provided in Section 38-25-510, may in his discretion order a postponement as
may be necessary to afford the defendant reasonable opportunity to comply with
subsection (a) and to defend the action.
Section 38-25-560. Filing of certain motions.
Nothing in this article may be construed to prevent an unauthorized insurer
from filing a motion to quash a writ or to set aside service thereof made in the
manner provided in Section 38-25-510, 38-25-520, or 38-25-530 on the ground that
(a) no policy or contract of insurance has been issued or delivered to a citizen
or resident of this State or to a corporation authorized to do business in this
State, (b) the insurer has not been transacting business in this State, or (c)
the person on whom service was made pursuant to Section 38-25-530 was not doing
any of the acts listed in that section.
Section 38-25-570. Enforcement of foreign decrees.
(a) The Attorney General upon request of the Commissioner may proceed in the
courts of this State or any reciprocal state to enforce an order or decision in
any court proceeding or in any administrative proceeding before the Commissioner.
(b) As used in this section:
(1) 'Reciprocal state' means any state or territory of the United States the
laws of which contain procedures substantially similar to those specified in this
section for the enforcement of decrees or orders in equity issued by courts
located in other states or territories of the United States against an insurer
incorporated or authorized to do business in that state or territory.
(2) 'Foreign decree' means any decree or order in equity of a court located
in a reciprocal state, including a court of the United States located therein,
against any insurer incorporated or authorized to do business in this State.
(3) 'Qualified party' means a state regulatory agency acting in its capacity
to enforce the insurance laws of its state.
(c) The Commissioner shall determine which states and territories qualify as
reciprocal states and shall maintain an up-to-date list of these states.
(d) A copy of any foreign decree authenticated in accordance with the law of
this State may be filed in the office of the clerk of court of any circuit court
of this State. The clerk, upon verifying with the Commissioner that the decree
or order qualifies as a foreign decree, shall treat the foreign decree in the
same manner as a decree of a circuit court of this State. A foreign decree so
filed has the same effect as a decree of a circuit court of this State and is
subject to the same procedures, defenses, and proceedings for reopening,
vacating, or staying as a decree of a circuit court of this State and may be
enforced or satisfied in like manner.
(e) (1) At the time of the filing of the foreign decree, the Attorney General
shall make and file with the clerk of court an affidavit setting forth the name
and last known post office address of the defendant.
(2) Promptly upon the filing of the foreign decree and the affidavit, the
clerk shall mail notice of the filing of the foreign decree to the defendant at
the address given and to the Commissioner and shall make a note of the mailing
in the docket. In addition, the Attorney General may mail a notice of the filing
of the foreign decree to the defendant and to the Commissioner and may file proof
of mailing with the clerk. Failure to mail notice of the filing by the clerk
does not affect the enforcement proceedings if proof of mailing by the Attorney
General has been filed.
(3) No execution or other process for enforcement of a foreign decree filed
hereunder may issue for thirty days after the date the decree is filed.
(f) (1) If the defendant shows the circuit court that an appeal from the
foreign decree is pending or will be taken, or that a stay of execution has been
granted, the court shall stay enforcement of the foreign decree until the appeal
is concluded, the time for appeal expires, or the stay of execution expires or
is vacated, upon proof that the defendant has furnished the security for the
satisfaction of the decree required by the state in which it was rendered.
(2) If the defendant shows the circuit court any ground upon which
enforcement of a decree of any circuit court of this State would be stayed, the
court shall stay enforcement of the foreign decree for an appropriate period,
upon requiring the same security for satisfaction of the decree which is required
in this State.
(g) Any person filing a foreign decree shall pay to the clerk of court fifteen
dollars. Fees for docketing, transcription, or other enforcement proceedings are
as provided for decrees of the circuit court.
CHAPTER 27
Insurers' Supervision, Rehabilitation,
and Liquidation
Article 1
General Provisions
Section 38-27-10. Title.
This chapter is known and may be cited as the 'Insurers' Supervision,
Rehabilitation, and Liquidation Act'.
Section 38-27-20. Construction.
This chapter does not limit the powers granted the Commissioner by other
provisions of law and must be liberally construed to effect the purpose stated
in Section 38-27-30.
Section 38-27-30. Purpose.
The purpose of this chapter is the protection of the interests of insureds,
claimants, creditors, and the public generally, with minimum interference with
the normal prerogatives of the owners and managers of insurers, through:
(1) Early detection of any potentially dangerous condition in an insurer and
prompt application of appropriate corrective measures.
(2) Improved methods for rehabilitating insurers, involving the cooperation
and management expertise of the insurance industry.
(3) Enhanced efficiency and economy of liquidation, through clarification of
the law, to minimize legal uncertainty and litigation.
(4) Equitable apportionment of any unavoidable loss.
(5) Lessening the problems of interstate rehabilitation and liquidation by
facilitating cooperation between states in the liquidation process and by
extending the scope of personal jurisdiction over debtors of the insurer outside
this State.
(6) Regulation of the insurance business by the impact of the law relating to
delinquency procedures and substantive rules on the entire insurance business.
Section 39-27-40. Persons covered.
The proceedings authorized by this chapter may be applied to:
(1) All insurers who are doing, or have done, an insurance business in this
State and against whom claims arising from that business may exist now or in the
future.
(2) All insurers who purport to do an insurance business in this State.
(3) All insurers who have insureds resident in this State.
(4) All other persons organized or in the process of organizing with the
intent to do an insurance business in this State.
(5) All nonprofit service plans and all fraternal benefit societies and
beneficial societies.
(6) All title insurance companies.
(7) All surety companies subject to Chapter 15 of Title 38.
(8) Multiple employer self-insured health plans as defined in Chapter 41 of
Title 38.
Section 38-27-50. Definitions.
For the purposes of this chapter:
(1) 'Ancillary state' means any state other than a domiciliary state.
(2) 'Creditor' is a person having any claim, whether matured or unmatured,
liquidated or unliquidated, secured or unsecured, absolute, fixed, or contingent.
(3) 'Delinquency proceeding' means any proceeding instituted against an
insurer for the purpose of liquidating, rehabilitating, reorganizing, or
conserving the insurer, and any summary proceeding under Section 38-27-210 or
38-27-220. 'Formal delinquency proceeding' means any liquidation or
rehabilitation proceeding.
(4) 'Doing business' includes any of the following acts, whether effected by
mail or otherwise:
(a) the issuance or delivery of contracts of insurance to persons resident
in this State;
(b) the solicitation of applications for such contracts or other
negotiations preliminary to the execution of such contracts;
(c) the collection of premiums, membership fees, assessments, or other
consideration for such contracts;
(d) the transaction of matters subsequent to execution of such contracts and
arising out of them; or
(e) operating under a license or certificate
of authority, as an insurer, issued by the Commissioner.
(5) 'Domiciliary state' means the state in which an insurer is incorporated
or organized, or, in the case of an alien insurer, its state of entry.
(6) 'Fair consideration' is given for property or obligation:
(a) when in exchange for the property or obligation, as a fair equivalent
therefor and in good faith, property is conveyed or services are rendered or an
obligation is incurred or an antecedent debt is satisfied; or
(b) when the property or obligation is received in good faith to secure a
present advance or antecedent debt in amount not disproportionately small as
compared to the value of the property or obligation obtained.
(7) 'Foreign country' means any other jurisdiction not in any state.
(8) 'General assets' means all property, real, personal, or otherwise, not
specifically mortgaged, pledged, deposited, or otherwise encumbered for the
security or benefit of specified persons or classes of persons. As to
specifically encumbered property, 'general assets' includes all such property or
its proceeds in excess of the amount necessary to discharge the sum or sums
secured thereby. Assets held in trust and on deposit for the security or benefit
of all policyholders or all policyholders and creditors, in more than a single
state, are treated as general assets.
(9) 'Guaranty association' means the South Carolina Property and Casualty
Insurance Guaranty Association, the South Carolina Life and Accident and Health
Insurance Guaranty Association, and any other similar entity created by the
legislature of this State for the payment of claims of insolvent insurers.
'Foreign guaranty association' means any similar entity created by the
legislature of any other state.
(10) 'Insolvency' or 'insolvent' means:
(a) For an insurer issuing only assessable fire insurance policies:
(i) the inability to pay any obligation within thirty days after it
becomes payable, or
(ii) if an assessment is made within thirty days after that date, the
inability to pay the obligation thirty days following the date specified in the
first assessment notice issued after the date of loss.
(b) For any other insurer, that it is unable to pay its obligations when
they are due, or when its admitted assets do not exceed its liabilities plus the
greater of:
(i) any capital and surplus required by law for its organization, or
(ii) the total par or stated value of its authorized and issued capital
stock.
(c) For purposes of this item (10) 'liabilities' includes, but is not
limited to, reserves required by statute, regulations, or specific requirements
imposed by the Commissioner upon a subject company at the time of admission or
subsequent thereto.
(11) 'Insurer' means any person who has done, purports to do, is doing, or is
licensed to do an insurance business and is or has been subject to the authority
of, or to liquidation, rehabilitation, reorganization, supervision, or
conservation by, the commissioner of insurance, or similar entity, of any state.
For purposes of this chapter, any other persons included under Section 38-27-40
are considered insurers.
(12) 'Person' means natural persons, corporations, partnerships, trusts,
associations, societies, orders, or any other organizations or entities.
(13) 'Preferred claim' means any claim with respect to which the terms of this
chapter accord priority of payment from the general assets of the insurer.
(14) 'Receiver' means receiver, liquidator, rehabilitator, or conservator as
the context requires.
(15) 'Reciprocal state' means any state other than this State in which in
substance and effect subsection (a) of Section 38-27-370, Section 38-27-930,
Section 38-27-940, and Sections 38-27-960 through 38-27-980 are in force, and in
which provisions are in force requiring that the Commissioner or equivalent
official be the receiver of a delinquent insurer, and in which some provision
exists for the avoidance of fraudulent conveyances and preferential transfers.
(16) 'Secured claim' means any claim secured by mortgage, trust deed, pledge,
deposit as security, escrow, or otherwise, but not including special deposit
claims or claims against general assets. The term also includes claims which have
become liens upon specific assets by reason of judicial process.
(17) 'Special deposit claim' means any claim secured by a deposit made
pursuant to statute for the security or benefit of a limited class or classes of
persons, but not including any claim secured by general assets.
(18) 'State' means any state, district, or territory of the United States and
the Panama Canal Zone.
(19) 'Transfer' includes the sale and every other and different mode, direct
or indirect, of disposing of or of parting with property or with an interest
therein or with the possession thereof or of fixing a lien upon property or upon
an interest therein, absolutely or conditionally, voluntarily, by or without
judicial proceedings. The retention of a security title to property delivered to
a debtor is considered a transfer suffered by the debtor.
Section 38-27-60. Jurisdiction and venue.
(a) Except as provided in this subsection, no delinquency proceeding may be
commenced under this chapter by anyone other than the Commissioner and no court
has jurisdiction to entertain, hear, or determine any proceeding commenced by any
other person. However, the court may consider the application for receivership
of a person other than the Commissioner if the applicant for receivership has
proceeded as follows:
(1) The applicant for receivership, before presenting his complaint or
petition to the court for action thereon, presents a copy thereof to the
Commissioner for action thereon, as hereinafter set forth, and gives reasonable
notice to the insurance company to be affected that a copy has been lodged with
the Commissioner.
(2) The insurance company affected thereby has ten days after the service
of the notice within which to lodge with the Commissioner a copy of the answer
which it proposes to file, and thereupon the Commissioner shall proceed to
investigate and within a reasonable time determine the merits of the application
for receivership and shall fix a time for the hearing of the investigation of the
matters involved in the petition or complaint.
(3) The Commissioner, after completing the investigation, shall recommend
to the court that the receiver be or not be appointed. The court shall then
consider the application for a receiver.
(b) No court of this State has jurisdiction to entertain, hear, or determine
any complaint praying for the dissolution, liquidation, rehabilitation,
sequestration, conservation, or receivership of an insurer or praying for an
injunction or restraining order or other relief preliminary to, incidental to,
or relating to the proceedings other than in accordance with this chapter.
(c) Whenever the Commissioner finds that any of the grounds for rehabilitation
or liquidation of a domestic or alien insurance company as set forth in Sections
38-27-310 and 38-27-360 exists, he may apply to the circuit court for an order
directing the company to show cause by a designated date why a receiver should
not be appointed for the company or why an order should not be entered
authorizing the Commissioner to proceed with the delinquency proceedings of the
company or to take any other appropriate steps authorized in this chapter. The
application and order may include any other relief the nature of the case and the
interests of the policyholders, creditors, stockholders, and members of the
company and of the public may require. A copy of the application and the order
to show cause must be served upon the company by registered or certified mail and
constitutes legal process in lieu of any summons or process otherwise provided
by law.
(d) In addition to other grounds for jurisdiction provided by the law of this
State, a court of this State having jurisdiction of the subject matter in an
action brought by the receiver of a domestic insurer or an alien insurer
domiciled in this State has jurisdiction over a person served with process by
registered or certified mail:
(1) if the person served is obligated to the insurer in any way as an
incident to any agency or brokerage arrangement that may exist or has existed
between the insurer and the agent or broker, in any action on or incident to the
obligation;
(2) if the person served is a reinsurer who has at any time written a policy
of reinsurance for an insurer against which a rehabilitation or liquidation order
is in effect when the action is commenced, or is an agent or broker of or for the
reinsurer, in any action on or incident to the reinsurance contract; or
(3) if the person served is or has been an officer, manager, trustee,
organizer, promoter, or person in a position of comparable authority or influence
in an insurer against which a rehabilitation or liquidation order is in effect
when the action is commenced, in any action resulting from such a relationship
with the insurer.
(e) If the court on motion of any party finds that any action should as a
matter of substantial justice be tried in a forum outside this State, the court
may enter an appropriate order to stay further proceedings on the action in this
State.
(f) All actions herein authorized shall be brought in the Court of Common
Pleas for Richland County.
Section 38-27-70. Injunctions and orders.
(a) Any receiver appointed in a proceeding under this chapter may at any time
apply for, and any court of general jurisdiction may grant, restraining orders,
preliminary and permanent injunctions, and other orders considered necessary and
proper to prevent:
(1) the transaction of further business;
(2) the transfer of property;
(3) interference with the receiver or with a proceeding under this chapter;
(4) waste of the insurer's assets;
(5) dissipation and transfer of bank accounts;
(6) the institution or further prosecution of any actions or proceedings;
(7) the obtaining of preferences, judgments, attachments, garnishments, or
liens against the insurer, its assets, or its policyholders;
(8) the levying of execution against the insurer, its assets, or its
policyholders;
(9) the making of any sale or deed for nonpayment of taxes or assessments
that would lessen the value of the assets of the insurer;
(10) the withholding from the receiver of books, accounts, documents, or
other records relating to the business of the insurer; or
(11) any other threatened or contemplated action that might lessen the value
of the insurer's assets or prejudice the rights of policyholders, creditors, or
shareholders, or the administration of any proceeding under this chapter.
(b) The receiver may apply to any court outside of the State for the relief
described in subsection (a).
Section 38-27-80. Cooperation of officers, owners, and employees.
(a) Any officer, manager, director, trustee, owner, employee, or agent of any
insurer or any other person with authority over or in charge of any segment of
the insurer's affairs must cooperate with the Commissioner in any proceeding
under this chapter or any investigation preliminary to the proceeding. The term
'person' as used in this section includes any person who exercises control
directly or indirectly over activities of the insurer through any holding company
or other affiliate of the insurer. 'To cooperate' includes, but is not limited
to:
(1) To reply promptly in writing to any inquiry from the Commissioner
requesting a reply.
(2) To make available to the Commissioner any books, accounts, documents,
or other records or information or property of or pertaining to the insurer and
in his possession, custody, or control.
(b) No person may obstruct or interfere with the Commissioner in the conduct
of any delinquency proceeding or any investigation preliminary or incidental
thereto.
(c) This section may not be construed to abridge otherwise existing legal
rights, including the right to resist a petition for liquidation or other
delinquency proceedings, or other orders.
(d) Any person included within subsection (a) who fails to cooperate with the
Commissioner, or any person who obstructs or interferes with the Commissioner in
the conduct of any delinquency proceeding or any investigation preliminary or
incidental thereto, or who violates any valid order the Commissioner issues under
this chapter may:
(1) upon conviction, be sentenced to pay a fine not exceeding ten thousand
dollars or to undergo imprisonment for a term of not more than one year, or both,
or
(2) after a hearing, be subject to the imposition by the Commissioner of a
civil penalty not to exceed ten thousand dollars and be subject further to the
revocation or suspension of any insurance licenses issued by the Commissioner.
Section 38-27-90. Bonds.
In any proceeding under this chapter, the Commissioner and his deputies are
responsible on their official bonds for the faithful performance of their duties.
If the court considers it desirable for the protection of the assets, it may at
any time require an additional bond from the Commissioner or his deputies. These
bonds must be paid for out of the assets of the insurer as a cost of
administration.
Article 3
Summary Provisions
Section 38-27-210. Commissioner's summary orders and supervision proceedings.
(a) Whenever the Commissioner has reasonable cause to believe, and determines,
after a hearing held under subsection (e), that any domestic insurer has
committed or engaged in, or is about to commit or engage in, any act, practice,
or transaction that would subject it to delinquency proceedings under this
chapter, he may make and serve upon the insurer and any other persons involved
any orders reasonably necessary to correct, eliminate, or remedy the conduct,
condition, or ground.
(b) If upon examination or at any other time the Commissioner has reasonable
cause to believe that a domestic insurer is in a condition that renders the
continuance of its business hazardous to the public or to holders of its policies
or certificates of insurance, or if the domestic insurer gives its consent, then
the Commissioner shall upon his determination:
(1) Notify the insurer of his determination; and
(2) Furnish to the insurer a written list of the Commissioner's requirements
to abate his determination.
(c) If the Commissioner makes a determination to supervise an insurer subject
to an order under subsection (a) or (b), he shall notify the insurer that it is
under the supervision of the Commissioner. During the period of supervision, the
Commissioner may appoint a supervisor to supervise the insurer. The order
appointing a supervisor shall direct the supervisor to enforce orders issued
under subsections (a) and (b) and may also require that the insurer may not do
any of the following things, during the period of supervision, without the prior
approval of the Commissioner or his supervisor:
(1) Dispose of, convey, or encumber any of its assets or its business in
force;
(2) Withdraw from any of its bank accounts;
(3) Lend any of its funds;
(4) Invest any of its funds;
(5) Transfer any of its property;
(6) Incur any debt, obligation, or liability;
(7) Merge or consolidate with another company; or
(8) Enter into any new reinsurance contract or treaty.
(d) Any insurer subject to an order under this section shall comply with the
lawful requirements of the Commissioner and, if placed under supervision, has
sixty days from the date the supervision order is served within which to comply
with the Commissioner's requirements. In the event the insurer fails to comply
within time, the Commissioner may institute proceedings under Section 38-27-310
or 38-27-360 to have a rehabilitator or liquidator appointed, or extend the
period of supervision.
(e) The notice of hearing under subsection (a) and any order issued pursuant
to that subsection must conform with and be served upon the insurer pursuant to
Article II of Act 176 of 1977 (the Administrative Procedure Act) and the
regulations of the Department. The notice of hearing shall state the time and
place of hearing and the conduct, condition, or ground upon which the
Commissioner would base his order. Unless mutually agreed between the
Commissioner and the insurer, the hearing may not occur less than thirty days
after notice is served and must be held in Richland County at the offices of the
South Carolina Department of Insurance. The Commissioner shall hold all hearings
under subsection (a) privately unless the insurer requests a public hearing, in
which case the hearing must be public.
(f) (1) Any insurer subject to an order under subsection (b) may request a
hearing to review that order. The hearing must be held as provided in subsection
(e), but the request for a hearing does not stay the effect of the order.
(2) If the Commissioner issues an order under subsection (b), the insurer
may, at any time, waive a Commissioner's hearing and apply for immediate judicial
relief by means of any remedy afforded by law without first exhausting
administrative remedies. After a hearing, any party to the proceedings whose
interests are substantially affected is entitled to judicial review of any order
issued by the Commissioner. An application for judicial relief or judicial review
as provided in this section does not automatically stay the effect of any order
of the Commissioner.
(g) During the period of supervision the insurer may request the Commissioner
to review an action taken or proposed to be taken by the supervisor, specifying
wherein the action complained of is believed not to be in the best interest of
the insurer.
(h) If any person has violated any supervision order issued under this section
which as to him was then still in effect, he is liable to pay a civil penalty
imposed by the circuit court not to exceed ten thousand dollars.
(i) The Commissioner may apply for, and any court of general jurisdiction may
grant, restraining orders, preliminary and permanent injunctions, and other
orders considered necessary and proper to enforce a supervision order.
(j) If any person, subject to the provisions of this chapter, including those
persons described in subsection (a) of Section 38-27-80, knowingly violates any
valid order of the Commissioner issued under this section and, as a result of the
violation, the net worth of the insurer is reduced or the insurer suffers loss
it would not otherwise have suffered, that person becomes personally liable to
the insurer for the amount of the reduction or loss. The Commissioner or
supervisor is authorized to bring an action on behalf of the insurer in the
circuit court to recover the amount of the reduction or loss together with any
costs.
Section 38-27-220. Court's seizure order.
(a) The Commissioner may file in the circuit court a petition alleging, with
respect to a domestic insurer:
(1) that grounds exist that would justify a court order for a formal
delinquency proceeding against an insurer under this chapter;
(2) that the interests of policyholders, creditors, or the public will be
endangered by delay; and
(3) the contents of an order considered necessary by the Commissioner.
(b) Upon a filing under subsection (a), the court may issue forthwith, ex
parte and without a hearing, the requested order which shall direct the
Commissioner to take possession and control of all or a part of the property,
books, accounts, documents, and other records of an insurer and of the premises
occupied by it for transaction of its business and, until further order of the
court, shall enjoin the insurer and its officers, managers, agents, and employees
from disposition of its property and from transaction of its business except with
the Commissioner's written consent.
(c) The court shall specify in the order what its duration is, which must be
the time the court considers necessary for the Commissioner to ascertain the
condition of the insurer. On motion of either party or on its own motion, the
court may hold any hearings it considers desirable after notice it considers
appropriate and may extend, shorten, or modify the terms of the seizure order.
The court shall vacate the seizure order if the Commissioner fails to commence
a formal proceeding under this chapter after having had a reasonable opportunity
to do so. An order of the court pursuant to a formal proceeding under this
chapter ipso facto vacates the seizure order.
(d) Entry of a seizure order under this section does not constitute an
anticipatory breach of any contract of the insurer.
(e) An insurer subject to an ex parte order under this section may petition
the court at any time after the issuance of the order for a hearing and review
of the order. The court shall hold the hearing and review not more than fifteen
days after the request. A hearing under this subsection may be held privately in
chambers and it must be so held if the insurer proceeded against so requests.
(f) If, at any time after the issuance of a seizure order, it appears to the
court that any person whose interest is or will be substantially affected by the
order did not appear at the hearing and has not been served, the court may order
that notice be given. An order that notice be given does not stay the effect of
any order previously issued by the court.
Section 38-27-230. Confidentiality of hearings.
In all proceedings and judicial reviews thereof under Sections 38-27-210 and
38-27-220, all records of the insurer, other documents, and all insurance
department files and court records and papers, so far as they pertain to or are
a part of the record of the proceedings, are and must remain confidential except
as is necessary to obtain compliance therewith, unless and until the circuit
court, after hearing arguments from the parties in chambers, orders otherwise,
or unless the insurer requests that the matter be made public. Until a court
order, all papers
filed with the clerk of the circuit court must be held by him in a confidential
file.
Article 5
Formal Proceedings
Section 38-27-310. Grounds for rehabilitation.
The Commissioner may apply by petition to the circuit court for an order
authorizing him to rehabilitate a domestic insurer or an alien insurer domiciled
in this State on any one or more of the following grounds:
(1) The insurer is in a condition in which the further transaction of business
would be hazardous, financially, to its policyholders, creditors, or the public.
(2) There is reasonable cause to believe that there has been embezzlement from
the insurer, wrongful sequestration or diversion of the insurer's assets, forgery
or fraud affecting the insurer, or other illegal conduct in, by, or with respect
to the insurer that if established would endanger assets in an amount threatening
the solvency of the insurer.
(3) The insurer has failed to remove any person who in fact has executive
authority in the insurer, whether an officer, manager, general agent, employee,
or other person, if the person has been found after notice and hearing by the
Commissioner to be dishonest or untrustworthy in a way affecting the insurer's
business.
(4) Control of the insurer, whether by stock ownership or otherwise, and
whether direct or indirect, is in a person or persons found after notice and
hearing to be untrustworthy.
(5) Any person who in fact has executive authority in the insurer, whether an
officer, manager, general agent, director or trustee, employee, or other person,
has refused to be examined under oath by the Commissioner concerning its affairs,
whether in this State or elsewhere, and, after reasonable notice of the fact, the
insurer has failed promptly and effectively to terminate the employment and
status of the person and all his influence on management.
(6) After demand by the Commissioner under Section 38-13-20 or 38-13-120 or
under this chapter, the insurer has failed to make available promptly for
examination any of its own property, books, accounts, documents, or other
records, or those of any subsidiary or related company within the control of the
insurer, or those of any person having executive authority in the insurer so far
as they pertain to the insurer.
(7) Without first obtaining the Commissioner's written consent, the insurer
has transferred, or attempted to transfer, substantially its entire property or
business or has entered into any transaction the effect of which is to merge,
consolidate, or reinsure substantially its entire property or business in or with
the property or business of any other person.
(8) The insurer or its property has been or is the subject of an application
for the appointment of a receiver, trustee, custodian, conservator, or
sequestrator or similar fiduciary of the insurer or its property otherwise than
as authorized under the insurance laws of this State and the appointment has been
made or is imminent and the appointment might oust the courts of this State of
jurisdiction or might prejudice orderly delinquency proceedings under this
chapter.
(9) Within the previous three years the insurer has willfully violated its
charter or articles of incorporation, its bylaws, any insurance law of this
State, or any valid order of the Commissioner under Section 38-27-210.
(10) The insurer has failed to pay within sixty days after due date any
obligation to any state or any subdivision thereof or any judgment entered in any
state, if the court in which the judgment was entered had jurisdiction over the
subject matter, except that the nonpayment may not be a ground until sixty days
after any good faith effort by the insurer to contest the obligation has been
terminated, whether it is before the Commissioner or in the courts, or the
insurer has systematically attempted to compromise or renegotiate previously
agreed settlements with its creditors on the ground that it is financially unable
to pay its obligations in full.
(11) The insurer has failed to file its annual report or other financial
report required by statute within the time allowed by law and, after written
demand by the Commissioner, has failed to give an adequate explanation
immediately.
(12) The board of directors or the holders of a majority of the shares
entitled to vote request or consent to rehabilitation under this chapter.
Section 38-27-320. Rehabilitation orders.
(a) An order to rehabilitate the business of a domestic insurer or an alien
insurer domiciled in this State shall appoint the Commissioner, and his
successors in office, the rehabilitator and shall direct the rehabilitator to
take possession immediately of the assets of the insurer and to administer them
under the general supervision of the court. The filing or recording of the order
with the clerk of court or register of mesne conveyances of the county in which
the principal business of the company is conducted or the county in which its
principal office or place of business is located imparts the same notice which
a deed, bill of sale, or other evidence of title duly filed or recorded with that
office would have imparted. The order to rehabilitate the insurer shall by
operation of law vest title to all assets of the insurer in the rehabilitator.
(b) Any order issued under this section shall require accounting to the court
by the rehabilitator. Accountings must be at intervals as the court specifies in
its order.
(c) Entry of an order of rehabilitation does not constitute an anticipatory
breach of any contracts of the insurer.
Section 38-27-330. Powers and duties of rehabilitator.
(a) The Commissioner as rehabilitator may appoint one or more special deputies
who have all the powers and responsibilities of the rehabilitator granted under
this section, and the Commissioner may employ any counsel, clerks, and assistants
considered necessary. The compensation of the special deputy, counsel, clerks,
and assistants and all expenses of taking possession of the insurer and of
conducting the proceedings must be fixed by the Commissioner with the court's
approval and must be paid out of the funds or assets of the insurer. The persons
appointed under this section shall serve at the Commissioner's pleasure. In the
event that the property of the insurer does not contain sufficient cash or liquid
assets to defray the costs incurred, the Commissioner may advance the costs so
incurred out of any appropriation for the maintenance of the Insurance
Department. Any amounts so advanced for expenses of administration must be repaid
to the Commissioner for the use of the Insurance Department out of the first
available monies of the insurer.
(b) The rehabilitator may take any action he considers necessary or
appropriate to reform and revitalize the insurer. He has all the powers of the
directors, officers, and managers, whose authority is suspended, except as they
are redelegated by the rehabilitator. He has full power to direct and manage, to
hire and discharge employees subject to any contract rights they may have, and
to deal with the property and business of the insurer.
(c) If it appears to the rehabilitator that there has been criminal or
tortious conduct or breach of any contractual or fiduciary obligation detrimental
to the insurer by any officer, manager, agent, broker, employee, or other person,
he may pursue all appropriate legal remedies on behalf of the insurer.
(d) If the rehabilitator determines that reorganization, consolidation,
conversion, reinsurance, merger, or other transformation of the insurer is
appropriate, he shall prepare a plan to effect the changes. Upon application of
the rehabilitator for approval of the plan, and after any notice and hearings the
court may prescribe, the court may either approve or disapprove the proposed
plan, or may modify it and approve it as modified. Any plan approved under this
section must be, in the judgment of the court, fair and equitable to all parties
concerned. If the plan is approved, the rehabilitator shall carry out the plan.
In the case of a life insurer, the plan proposed may include the imposition of
liens upon the policies of the company, if all rights of shareholders are first
relinquished. A plan for a life insurer may also propose imposition of a
moratorium upon loan and cash surrender rights under policies, for the period and
to the extent necessary.
(e) The rehabilitator has the power under Sections 38-27-450 and 38-27-460 to
avoid fraudulent transfers.
Section 38-27-340. Actions by and against rehabilitator.
(a) Any court in this State before which any action or proceeding in which the
insurer is a party or is obligated to defend a party is pending when a
rehabilitation order against the insurer is entered shall stay the action or
proceeding for ninety days and any additional time necessary for the
rehabilitator to obtain proper representation and prepare for further
proceedings. The rehabilitator shall take any action respecting the pending
litigation he considers necessary in the interests of justice and for the
protection of creditors, policyholders, and the public. The rehabilitator shall
immediately consider all litigation pending outside this State and shall petition
the courts having jurisdiction over that litigation for stays whenever necessary
to protect the estate of the insurer.
(b) No statute of limitations or defense of laches runs with respect to any
action by or against an insurer between the filing of a petition for appointment
of a rehabilitator for that insurer and the order granting or denying that
petition. Any action by or against the insurer that might have been commenced
when the petition was filed may be commenced for at least sixty days after the
order of rehabilitation is entered or the petition is denied.
(c) Any guaranty association or foreign guaranty association covering life or
health insurance or annuities has standing to appear in any court proceeding
concerning the rehabilitation of a life or health insurer if the association is
or may become liable to act as a result of the rehabilitation.
Section 38-27-350. Termination of rehabilitation.
(a) Whenever the Commissioner believes further attempts to rehabilitate an
insurer would substantially increase the risk of loss to creditors,
policyholders, or the public or would be futile, the Commissioner may petition
the circuit court for an order of liquidation. A petition under this subsection
has the same effect as a petition under Section 38-27-360. The circuit court
shall permit the directors of the insurer to take actions reasonably necessary
to defend against the petition and may order payment from the estate of the
insurer of costs and other expenses of defense as justice requires.
(b) The rehabilitator may at any time petition the circuit court for an order
terminating rehabilitation of an insurer. The court shall also permit the
directors of the insurer to petition the court for an order terminating
rehabilitation of the insurer and may order payment from the estate of the
insurer of costs and other expenses of the petition as justice requires. If the
circuit court finds that rehabilitation has been accomplished and that grounds
for rehabilitation under Section 38-27-310 no longer exist, it shall order that
the insurer be restored to possession of its property and the control of its
business. The circuit court may also make that finding and issue that order at
any time upon its own motion.
Section 38-27-360. Grounds for liquidation.
The Commissioner may petition the circuit court for an order directing him to
liquidate a domestic insurer or an alien insurer domiciled in this State on the
basis:
(1) of any ground for an order of rehabilitation as specified in Section
38-27-310, whether or not there has been a prior order directing the
rehabilitation of the insurer;
(2) that the insurer is insolvent; or
(3) that the insurer is in such a condition that the further transaction of
business would be hazardous, financially or otherwise, to its policyholders, its
creditors, or the public.
Section 38-27-370. Liquidation orders.
(a) An order to liquidate the business of a domestic insurer shall appoint the
Commissioner, and his successors in office, as liquidator and shall direct the
liquidator immediately to take possession of the assets of the insurer and to
administer them under the general supervision of the court. The liquidator is
vested by operation of law with the title to all of the property, contracts, and
rights of action and all of the books and records of the insurer ordered
liquidated, wherever located, as of the entry of the final order of liquidation.
The filing or recording of the order with the clerk of court or the register of
mesne conveyances of the county in which its principal office or place of
business is located or, in the case of real estate, with the clerk of court and
the register of mesne conveyances of the county where the property is located
imparts the same notice which a deed, bill of sale, or other evidence of title
duly filed or recorded with that office would have imparted.
(b) Upon issuance of the order, the rights and liabilities of the insurer and
of its creditors, policyholders, shareholders, members, and all other persons
interested in its estate become fixed as of the date of entry of the order of
liquidation, except as provided in Sections 38-27-380 and 38-27-560.
(c) An order to liquidate the business of an alien insurer domiciled in this
State must be in the same terms and has the same legal effect as an order to
liquidate a domestic insurer, except that the assets and the business in the
United States are the only assets and business included therein.
(d) At the time of petitioning for an order of liquidation, or at any time
thereafter, the Commissioner, after making appropriate findings of an insurer's
insolvency, may petition the court for a judicial declaration of insolvency.
After providing notice and hearing it considers proper the court may make the
declaration.
(e) Any order issued under this section shall require accounting to the court
by the liquidator. Accountings must be at intervals the court specifies in its
order.
Section 38-27-380. Continuance of coverage.
(a) All policies, other than life or health insurance or annuities, in effect
at the time of issuance of an order of liquidation continue in force only for the
lesser of:
(1) a period of thirty days from the date of entry of the liquidation order;
(2) the expiration of the policy coverage;
(3) the date when the insured has replaced the insurance coverage with
equivalent insurance in another insurer or otherwise terminated the policy; or
(4) the liquidator has effected a transfer of the policy obligation pursuant
to item (8) of subsection (a) of Section 38-27-400.
(b) An order of liquidation under Section 38-27-370 terminates coverages at
the time specified in subsection (a) of this section for purposes of any other
statute.
(c) Policies of life or health insurance or annuities continue in force for
the period and under the terms as provided for by any applicable guaranty
association or foreign guaranty association.
(d) Policies of life or health insurance or annuities or any period or
coverage of the policies not covered by a guaranty association or foreign
guaranty association terminates under subsections (a) and (b) of this section.
Section 38-27-390. Dissolution of insurer.
The Commissioner may petition for an order dissolving the corporate existence
of a domestic insurer or the United States branch of an alien insurer domiciled
in this State at the time he
applies for a liquidation order. The court shall order dissolution of the
corporation upon petition by the Commissioner upon or after the granting of a
liquidation order. If the dissolution has not previously been ordered, it must
be effected by operation of law upon the discharge of the liquidator if the
insurer is insolvent but may be ordered by the court upon the discharge of the
liquidator if the insurer is under a liquidation order for some other reason.
Section 38-27-400. Powers of liquidator.
(a) The liquidator has the power:
(1) To appoint a special deputy to act for him under this chapter and to
determine the special deputy's reasonable compensation. The special deputy has
all powers of the liquidator granted by this section. The special deputy serves
at the pleasure of the liquidator.
(2) To employ employees and agents, legal counsel, actuaries, accountants,
appraisers, consultants, and other personnel he considers necessary to assist in
the liquidation.
(3) To fix the reasonable compensation of employees and agents, legal
counsel, actuaries, accountants, appraisers, and consultants with the court's
approval.
(4) To pay reasonable compensation to persons appointed and to defray from
the funds or assets of the insurer all expenses of taking possession of,
conserving, conducting, liquidating, disposing of, or otherwise dealing with the
business and property of the insurer. In the event that the property of the
insurer does not contain sufficient cash or liquid assets to defray the costs
incurred, the Commissioner may advance the costs so incurred out of any
appropriation for the maintenance of the Insurance Department. Any amounts so
advanced for expenses of administration must be repaid to the Commissioner for
the use of the Insurance Department out of the first available monies of the
insurer.
(5) To hold hearings, to subpoena witnesses to compel their attendance, to
administer oaths, to examine any person under oath, and to compel any person to
subscribe to his testimony after it has been correctly reduced to writing and,
in connection therewith, to require the production of any books, papers, records,
or other documents which he considers relevant to the inquiry.
(6) To collect all debts and monies due and claims belonging to the insurer,
wherever located, and, for this purpose:
(i) To institute timely action in other jurisdictions in order to
forestall garnishment and attachment proceedings against the debts.
(ii) To do other acts necessary or expedient to collect, conserve, or
protect its assets or property, including the power to sell, compound,
compromise, or assign debts for purposes of collection upon terms and conditions
he considers best.
(iii) To pursue any creditor's remedies available to enforce his claims.
(7) To conduct public and private sales of the property of the insurer.
(8) To use assets of the estate of an insurer under a liquidation order to
transfer policy obligations to a solvent assuming insurer, if the transfer can
be arranged without prejudice to applicable priorities under Section 38-27-610.
(9) To acquire, hypothecate, encumber, lease, improve, sell, transfer,
abandon, or otherwise dispose of or deal with any property of the insurer at its
market value or upon terms and conditions that are fair and reasonable. He also
has power to execute, acknowledge, and deliver any and all deeds, assignments,
releases, and other instruments necessary or proper to effectuate any sale of
property or other transaction in connection with the liquidation.
(10) To borrow money on the security of the insurer's assets or without
security and to execute and deliver all documents necessary to that transaction
for the purpose of facilitating the liquidation.
(11) To enter into contracts necessary to carry out the order to liquidate,
and to affirm or disavow any contracts to which the insurer is a party.
(12) To continue to prosecute and to institute in the name of the insurer
or in his own name any and all suits and other legal proceedings, in this State
or elsewhere, and to abandon the prosecution of claims he considers unprofitable
to pursue further. If the insurer is dissolved under Section 38-27-390, he has
the power to apply to any court in this State or elsewhere for leave to
substitute himself for the insurer as plaintiff.
(13) To prosecute any action which may exist in behalf of the creditors,
members, policyholders, or shareholders of the insurer against any officer of the
insurer or any other person.
(14) To remove any or all records and property of the insurer to the offices
of the Commissioner or to any other place convenient for the purposes of
efficient and orderly execution of the liquidation. Guaranty associations and
foreign guaranty associations shall have such reasonable access to the records
of the insurer as is necessary for them to carry out their statutory obligations.
(15) To deposit in one or more banks in this State sums required for meeting
current administration expenses and dividend distributions.
(16) To invest all sums not currently needed, unless the court orders
otherwise.
(17) To file any necessary documents for recording in the office of any
recorder of deeds or record office in this State or elsewhere where property of
the insurer is located.
(18) To assert all defenses available to the insurer as against third
persons, including statutes of limitation, statutes of fraud, and the defense of
usury. A waiver of any defense by the insurer after a petition in liquidation has
been filed does not bind the liquidator. Whenever a guaranty association or
foreign guaranty association has an obligation to defend any suit, the liquidator
shall give precedence to that obligation and may defend only in the absence of
a defense by the guaranty associations.
(19) To exercise and enforce all the rights, remedies, and powers of any
creditor, shareholder, policyholder, or member, including any power to avoid any
transfer or lien that may be given by the general law and that is not included
with Sections 38-27-450 through 38-27-470.
(20) To intervene in any proceeding wherever instituted that might lead to
the appointment of a receiver or trustee and to act as the receiver or trustee
whenever the appointment is offered.
(21) To enter into agreements with any receiver or commissioner of any other
state relating to the rehabilitation, liquidation, conservation, or dissolution
of an insurer doing business in both states.
(22) To exercise all powers now held or hereafter conferred upon receivers
by the laws of this State not inconsistent with this chapter.
(b) The enumeration, in this section, of the powers and authority of the
liquidator may not be construed as a limitation upon him; nor shall it exclude
in any manner his right to do other acts not herein specifically enumerated, or
otherwise provided for, that may be necessary or
appropriate for the accomplishment of or in aid of the purpose of liquidation.
Section 38-27-410. Notice to creditors and others.
(a) Unless the court otherwise directs, the liquidator shall give or cause to
be given notice of the liquidation order as soon as possible:
(1) By first class mail and either by telegram or telephone to the insurance
commissioner of each jurisdiction in which the insurer is doing business.
(2) By first class mail to any guaranty association or foreign guaranty
association which is or may become obligated as a result of the liquidation.
(3) By first class mail to all insurance agents of the insurer.
(4) By first class mail to all persons known or reasonably expected to have
claims against the insurer, including all policyholders, at their last known
addresses as indicated by the records of the insurer.
(5) By publication in a newspaper of general circulation in the county in
which the insurer has its principal place of business and in any other locations
the liquidator considers appropriate.
(b) Notice to potential claimants under subsection (a) requires claimants to
file with the liquidator their claims together with proper proofs thereof under
Section 38-27-550 by a date the liquidator specifies in the notice. The
liquidator need not require persons claiming cash surrender values or other
investment values in life insurance and annuities to file a claim. All claimants
have a duty to keep the liquidator informed of any changes of address.
(c) If notice is given in accordance with this section, the distribution of
assets of the insurer under this chapter is conclusive with respect to all
claimants, whether or not they received notice.
Section 38-27-420. Duties of agents.
(a) Every person who receives notice in the form prescribed in Section
38-27-410 that an insurer which he represents as an agent is the subject of a
liquidation order shall within fifteen days of the notice give notice of the
liquidation order. The notice must be sent by first class mail to the last
address contained in the agent's records to each policyholder or other person
named in any policy issued through the agent by the insurer, if he has a record
of the address of the policyholder or other person. A policy is considered issued
through an agent if the agent has a property interest in the expiration of the
policy, or if the agent has had in his possession a copy of the declarations of
the policy at any time during the life of the policy, except where the ownership
of the expiration of the policy has been transferred to another. The written
notice shall include the name and address of the insurer, the name and address
of the agent, identification of the policy impaired, and the nature of the
impairment including termination of coverage, as described in Section 38-27-380.
Notice by a general agent satisfies the notice requirement for any agents under
contract to him. Each agent obligated to give notice under this section shall
file a report of compliance with the liquidator.
(b) Any agent failing to give notice or file a report of compliance as
required in subsection (a) of this section may be subject to payment of a penalty
of not more than one thousand dollars and may have his license suspended. The
penalty must be imposed after a hearing held by the Commissioner.
(c) The liquidator may waive the duties imposed by this section if he
determines that
other notice to the policyholders of the insurer under liquidation is adequate.
Section 38-27-430. Actions by and against liquidator.
(a) Upon issuance of an order appointing a liquidator of a domestic insurer
or of an alien insurer domiciled in this State, no action at law or equity may
be brought against the insurer or liquidator, whether in this State or elsewhere;
nor may any existing actions be maintained or further presented after issuance
of the order. The courts of this State shall give full faith and credit to
injunctions against the liquidator or the company or the continuation of existing
actions against the liquidator or the company, when the injunctions are included
in an order to liquidate an insurer issued pursuant to corresponding provisions
in other states. Whenever, in the liquidator's judgment, protection of the estate
of the insurer necessitates intervention in an action against the insurer that
is pending outside this State, he may intervene in the action. The liquidator may
defend any action in which he intervenes under this section at the expense of the
estate of the insurer.
(b) The liquidator may, upon or after an order for liquidation, within two
years or such time in addition to two years as applicable law may permit,
institute an action or proceeding on behalf of the estate of the insurer upon any
cause of action against which the period of limitation fixed by applicable law
has not expired at the time of the filing of the petition upon which the order
is entered. Where, by any agreement, a period of limitation is fixed for
instituting a suit or proceeding upon any claim, or for filing any claim, proof
of claim, proof of loss, demand, notice, or the like, or where in any proceeding,
judicial or otherwise, a period of limitation is fixed, either in the proceeding
or by applicable law, for taking any action, filing any claim or pleading, or
doing any act, and where in the case the period had not expired at the date of
the filing of the petition, the liquidator may, for the benefit of the estate,
take any action or do any act, required of or permitted to the insurer, within
a period of one hundred eighty days after the entry of an order for liquidation,
or within a further period that is shown to the satisfaction of the court not to
be unfairly prejudicial to the other party.
(c) No statute of limitations or defense of laches runs with respect to any
action against an insurer between the filing of a petition for liquidation
against an insurer and the denial of the petition. Any action against the insurer
that might have been commenced when the petition was filed may be commenced for
at least sixty days after the petition is denied.
(d) Any guaranty association or foreign guaranty association has standing to
appear in any court proceeding concerning the liquidation of an insurer if the
association is or may become liable to act as a result of the liquidation.
Section 38-27-440. Collection and list of assets.
(a) As soon as practicable after the liquidation order but not later than one
hundred twenty days thereafter, the liquidator shall prepare in duplicate a list
of the insurer's assets. The list must be amended or supplemented from time to
time as the liquidator may determine. One copy must be filed in the office of the
clerk of the circuit court and one copy must be retained for the liquidator's
files. All amendments and supplements must be similarly filed.
(b) The liquidator shall reduce the assets to a degree of liquidity that is
consistent with the effective execution of the liquidation.
(c) A submission to the court for disbursement of assets in accordance with
Section 38-27-530 fulfills the requirements of subsection (a) of this Section
38-27-440.
Section 38-27-450. Fraudulent transfers prior to petition.
(a) Every transfer made or suffered and every obligation incurred by an
insurer within one year prior to the filing of a successful petition for
rehabilitation or liquidation under this chapter is fraudulent as to then
existing and future creditors if made or incurred without fair consideration or
with actual intent to hinder, delay, or defraud either existing or future
creditors. A transfer made or an obligation incurred by an insurer ordered to be
rehabilitated or liquidated under this chapter, which is fraudulent under this
section, may be avoided by the receiver, except as to a person who in good faith
is a purchaser, lienor, or obligee for a present fair equivalent value and except
that any purchaser, lienor, or obligee, who in good faith has given a
consideration less than fair for the transfer, lien, or obligation, may retain
the property, lien, or obligation as security for repayment. The court may, on
due notice, order the transfer or obligation to be preserved for the benefit of
the estate, and, in that event, the receiver succeeds to and may enforce the
rights of the purchaser, lienor, or obligee.
(b)(1) A transfer of property other than real property is considered made or
suffered when it becomes so far perfected that no later lien obtainable by legal
or equitable proceedings on a simple contract could become superior to the rights
of the transferee under Section 38-27-470.
(2) A transfer of real property is considered made or suffered when it
becomes so far perfected that no subsequent bona fide purchaser from the insurer
could obtain rights superior to the rights of the transferee.
(3) A transfer which creates an equitable lien is not considered perfected
if there are available means by which a legal lien could be created.
(4) Any transfer not perfected prior to the filing of a petition for
liquidation is considered made immediately before the filing of the successful
petition.
(5) This subsection (b) applies whether or not there are or were creditors
who might have obtained any liens or persons who might have become bona fide
purchasers.
(c) Any transaction of the insurer with a reinsurer is considered fraudulent
and may be avoided by the receiver under subsection (a) if:
(1) The transaction consists of the termination, adjustment, or settlement
of a reinsurance contract in which the reinsurer is released from any part of its
duty to pay the originally specified share of losses that had occurred prior to
the time of the transaction, unless the reinsurer gives a present fair equivalent
value for the release.
(2) Any part of the transaction took place within one year prior to the date
of filing of the petition through which the receivership was commenced.
Section 38-27-460. Fraudulent transfer after petition.
(a) After petition for rehabilitation or liquidation has been filed a transfer
of any of the real property of the insurer made to a person acting in good faith
is valid against the receiver if made for a present fair equivalent value or, if
not made for a present fair equivalent value, then to the extent of the present
consideration actually paid therefor, for which amount the transferee shall have
a lien on the property so transferred. The commencement of a proceeding in
rehabilitation or liquidation is constructive notice upon the recording of a copy
of the petition for or order of rehabilitation or liquidation with the register
of mesne conveyances in the county where any real property in question is
located. The exercise by a court of the United States or any state or
jurisdiction to authorize or effect a judicial sale of real property of the
insurer within any county in any state is not impaired by the pendency of the
proceeding unless the copy is recorded in the county prior to the consummation
of the judicial sale.
(b) After a petition for rehabilitation or liquidation has been filed and
before either the receiver takes possession of the property of the insurer or an
order of rehabilitation or liquidation is granted:
(1) A transfer of any of the property of the insurer, other than real
property, made to a person acting in good faith is valid against the receiver if
made for a present fair equivalent value or, if not made for a present fair
equivalent value, then to the extent of the present consideration actually paid
therefor, for which amount the transferee shall have a lien on the property so
transferred.
(2) A person indebted to the insurer or holding property of the insurer may,
if acting in good faith, pay the indebtedness or deliver the property, or any
part thereof, to the insurer or upon his order, with the same effect as if the
petition were not pending.
(3) A person having actual knowledge of the pending rehabilitation or
liquidation is considered not to act in good faith.
(4) A person asserting the validity of a transfer under this section has the
burden of proof. Except as elsewhere provided in this section, no transfer by or
on behalf of the insurer after the date of the petition for liquidation by any
person other than the liquidator is valid against the liquidator.
(c) Nothing in this chapter impairs the negotiability of currency or
negotiable instruments.
Section 38-27-470. Voidable preferences and liens.
(a) (1) A preference is a transfer of any of the property of an insurer to
or for the benefit of a creditor, for or on account of an antecedent debt, made
or suffered by the insurer within one year before the filing of a successful
petition for liquidation under this chapter, the effect of which transfer may be
to enable the creditor to obtain a greater percentage of this debt than another
creditor of the same class would receive. If a liquidation order is entered while
the insurer is already subject to a rehabilitation order, then the transfers are
considered preferences if made or suffered within one year before the filing of
the successful petition for rehabilitation or within two years before the filing
of the successful petition for liquidation, whichever time is shorter.
(2) Any preference may be avoided by the liquidator if:
(i) the insurer was insolvent at the time of the transfer;
(ii) the transfer was made within four months before the filing of the
petition;
(iii) the creditor receiving it or to be benefited thereby or his agent
acting with reference thereto had, at the time when the transfer was made,
reasonable cause to believe that the insurer was insolvent or was about to become
insolvent; or
(iv) the creditor receiving it was an officer, employee, attorney, or other
person who was in fact in a position of comparable influence in the insurer to
an officer, whether or not he held such position, or any shareholder holding
directly or indirectly more than five percent of any class of any equity
security, as defined in Section 38-23-20, issued by the insurer, or any other
person, firm, corporation, association, or aggregation of persons with whom the
insurer did not deal at arm's length.
(3) Where the preference is voidable, the liquidator may recover the
property or, if it has been converted, its value from any person who has received
or converted the property, except where a bona fide purchaser or lienor has given
less than fair equivalent value, he shall have a lien upon the property to the
extent of the consideration actually given by him. Where a preference by way of
lien or security title is voidable, the court may on due notice order the lien
or title to be preserved for the benefit of the estate, in which event the lien
or title passes to the liquidator.
(b) (1) A transfer of property other than real property is considered made
or suffered when it becomes so far perfected that no subsequent lien obtainable
by legal or equitable proceedings on a simple contract could become superior to
the rights of the transferee.
(2) A transfer of real property is considered made or suffered when it
becomes so far perfected that no subsequent bona fide purchaser from the insurer
could obtain rights superior to the rights of the transferee.
(3) A transfer which creates an equitable lien is not considered to be
perfected if there are available means by which a legal lien could be created.
(4) A transfer not perfected prior to the filing of a petition for
liquidation is considered made immediately before the filing of the successful
petition.
(5) This subsection (b) applies whether or not there are or were creditors
who might have obtained liens or persons who might have become bona fide
purchasers.
(c) (1) A lien obtainable by legal or equitable proceedings upon a simple
contract is one arising in the ordinary course of the proceedings upon the entry
or docketing of a judgment or decree, or upon attachment, execution, or like
process, whether before or upon levy. It does not include liens which under
applicable law are given a special priority over other liens which are prior in
time.
(2) A lien obtainable by legal or equitable proceedings could become
superior to the rights of a transferee, or a purchaser could obtain rights
superior to the rights of a transferee within the meaning of subsection (b) of
this section, if such consequences would follow only from the lien or purchase
itself, or from the lien or purchase followed by any step wholly within the
control of the respective lienholder or purchaser, with or without the aid of
ministerial action by public officials. The lien could not, however, become
superior and the purchase could not create superior rights for the purpose of
subsection (b) of this section through any acts subsequent to the obtaining of
the lien or subsequent to the purchase which require the agreement or concurrence
of any third party or which require any further judicial action or ruling.
(d) A transfer of property for or on account of a new and contemporaneous
consideration which is considered under subsection (b) of this section made or
suffered after the transfer because of delay in perfecting it does not thereby
become a transfer for or on account of an antecedent debt if any acts required
by applicable law to be performed in order to perfect the transfer as against
liens or bona fide purchasers' rights are performed within twenty-one days or any
period expressly allowed by law, whichever is less. A transfer to secure a future
loan, if the loan is actually made, or a transfer which becomes security for a
future loan has the same effect as a transfer for or on account of a new and
contemporaneous consideration.
(e) If any lien considered voidable under paragraph (2) of subsection (a) of
this section has been dissolved by the furnishing of a bond or other obligation,
the surety on which has been indemnified directly or indirectly by the transfer
of or the creation of a lien upon any property of an insurer before the filing
of a petition under this chapter which results in a liquidation order, the
indemnifying transfer or lien is also considered voidable.
(f) The property affected by any lien considered voidable under subsections
(a) and (e) of this section is discharged from the lien, and that property and
any of the indemnifying property transferred to or for the benefit of a surety
pass to the liquidator, except that the court may on due notice order the lien
to be preserved for the benefit of the estate and the court may direct that the
conveyance be executed as may be proper or adequate to evidence the title of the
liquidator.
(g) The circuit court has summary jurisdiction of any proceeding by the
liquidator to hear and determine the rights of any parties under this section.
Reasonable notice of any hearing in the proceeding must be given to all parties
in interest, including the obligee of a releasing bond or other like obligation.
Where an order is entered for the recovery of indemnifying property in kind or
for the avoidance of an indemnifying lien, the court, upon application of any
party in interest, shall in the same proceeding ascertain the value of the
property or lien, and, if the value is less than the amount for which the
property is indemnified or than the amount of the lien, the transferee or
lienholder may elect to retain the property or lien upon payment of its value,
as ascertained by the court, to the liquidator, within a reasonable time the
court shall fix.
(h) The liability of a surety under a releasing bond or other like obligation
is discharged to the extent of the value of the indemnifying property recovered
or the indemnifying lien nullified and voided by the liquidator, or, where the
property is retained under subsection (g), to the extent of the amount paid to
the liquidator.
(i) If a creditor has been preferred and afterward in good faith gives the
insurer further credit without security of any kind for property which becomes
a part of the insurer's estate, the amount of the new credit remaining unpaid at
the time of the petition may be set off against the preference which would
otherwise be recoverable from him.
(j) If an insurer, directly or indirectly, within four months before the
filing of a successful petition for liquidation under this chapter or at any time
in contemplation of a proceeding to liquidate it pays money or transfers property
to an attorney-at-law for services rendered or to be rendered, the transaction
may be examined by the court on its own motion or must be examined by the court
on petition of the liquidator and may be held valid only to the extent of a
reasonable amount to be determined by the court. The excess may be recovered by
the liquidator for the benefit of the estate; however, where the attorney is in
a position of influence in the insurer or an affiliate thereof, payment of any
money or the transfer of any property to the attorney-at-law for services
rendered or to be rendered is governed by item (iv) of paragraph (2) of
subsection (a) of this section.
(k) (1) Every officer, manager, employee, shareholder, member, subscriber,
attorney, or any other person acting on behalf of the insurer who knowingly
participates in giving any preference when he has reasonable cause to believe the
insurer is or is about to become insolvent at the time of the preference is
personally liable to the liquidator for the amount of the preference. It is
permissible to infer that there is reasonable cause to so believe if the transfer
was made within four months before the date of filing of the successful petition
for liquidation.
(2) Every person receiving any property from the insurer or the benefit
thereof as a preference voidable under subsection (a) is personally liable
therefor and is bound to account to the liquidator.
(3) Nothing in this subsection (k) prejudices any other claim by the
liquidator against any person.
Section 38-27-480. Claims of holders of voidable rights.
(a) No claim of a creditor who has received or acquired a preference, lien,
conveyance, transfer, assignment, or encumbrance voidable under this chapter is
allowed unless he surrenders the preference, lien, conveyance, transfer,
assignment, or encumbrance. If the avoidance is effected by a proceeding in which
a final judgment has been entered, the claim may not be allowed unless the money
is paid or the property is delivered to the liquidator within thirty days from
the date of the entering of the final judgment, except that the court having
jurisdiction over the liquidation may allow further time if there is an appeal
or other continuation of the proceeding.
(b) A claim allowable under subsection (a) of this section by reason of the
avoidance, whether voluntary or involuntary, or a preference, a lien, conveyance,
transfer, assignment, or encumbrance, may be filed as an excused late filing
under Section 38-27-540 if filed within thirty days from the date of the
avoidance or within the further time allowed by the court under subsection (a)
of this section.
Section 38-27-490. Setoffs and counterclaims.
(a) Mutual debts or mutual credits between the insurer and another person in
connection with any action or proceeding under this chapter must be set off and
the balance only may be allowed or paid, except as provided in subsection (b) of
this section and Section 38-27-520.
(b) No setoff or counterclaim is allowed in favor of any person where:
(1) the obligation of the insurer to the person would not at the date of the
filing of a petition for liquidation entitle the person to share as a claimant
in the assets of the insurer;
(2) the obligation of the insurer to the person was purchased by or
transferred to the person with a view to its being used as a setoff;
(3) the obligation of the person is to pay an assessment levied against the
members or subscribers of the insurer or is to pay a balance upon a subscription
to the capital stock of the insurer or is in any other way in the nature of a
capital contribution; or
(4) the obligation of the person is to pay premiums whether earned or
unearned to the insurer.
Section 38-27-500. Assessments.
(a) As soon as practicable but not more than two years from the date of an
order of liquidation under Section 38-27-370 of an insurer issuing assessable
policies, the liquidator shall make a report to the court setting forth:
(1) The reasonable value of the assets of the insurer.
(2) The insurer's probable total liabilities.
(3) The probable aggregate amount of the assessment necessary to pay all
claims of creditors and expenses in full, including expenses of administration
and costs of collecting the assessment.
(4) A recommendation as to whether or not an assessment should be made and
in what amount.
(b) (1) Upon the basis of the report provided in subsection (a), including
any supplements and amendments thereto, the circuit court may levy one or more
assessments against all members of the insurer who are subject to assessment.
(2) Subject to any applicable legal limits on assessability, the aggregate
assessment must be for the amount that the sum of the probable liabilities, the
expenses of administration, and the estimated cost of collection of the
assessment exceeds the value of existing assets, with due regard being given to
assessments that cannot be collected economically.
(c) After levy of assessment under subsection (b) the liquidator shall issue
an order directing each member who has not paid the assessment pursuant to the
order to show cause why the liquidator should not pursue a judgment therefor.
(d) The liquidator shall give notice of the order to show cause by publication
and by first class mail to each member liable thereunder mailed to his last known
address as it appears on the insurer's records, at least twenty days before the
return day of the order to show cause.
(e) (1) If a member does not appear and serve duly verified objections upon
the liquidator by the return day of the order to show cause under subsection (c),
the court shall make an order adjudging the member liable for the amount of the
assessment against him, pursuant to subsection (c), together with costs, and the
liquidator shall have a judgment against the member therefor.
(2) If by the return day the member appears and serves duly verified
objections upon the liquidator, the Commissioner may hear and determine the
matter or may appoint a referee to hear it and make an order as the facts
warrant. In the event that the Commissioner determines that the objections do not
warrant relief from assessment, the member may request the court to review the
matter and vacate the order to show cause.
(f) The liquidator may enforce any order or collect any judgment under
subsection (e) by any lawful means.
Section 38-27-510. Reinsurer's liability.
The amount recoverable by the liquidator from reinsurers may not be reduced as
a result of delinquency proceedings, regardless of any provision in the
reinsurance contract or other agreement. Payment made directly to an insured or
other creditor does not diminish the reinsurer's obligation to the insurer's
estate except when the reinsurance contract provided for direct coverage of a
named insured and the payment was made in discharge of that obligation.
Section 38-27-520. Recovery of premiums owed.
(a) (1) An agent, broker, premium finance company, or any other person, other
than the insured, responsible for the payment of a premium is obligated to pay
any unpaid premium for the full policy term due the insurer at the time of the
declaration of insolvency, whether earned or unearned, as shown on the records
of the insurer. The liquidator has the right to recover from that person any part
of an unearned premium that represents that person's commission. Credits or
setoffs or both are not allowed to an agent, broker, or premium finance company
for any amounts advanced to the insurer by the agent, broker, or premium finance
company on behalf of, but in the absence of a payment by, the insured.
(2) An insured is obligated to pay any unpaid earned premium due the insurer
at the time of the declaration of insolvency, as shown on the records of the
insurer.
(b) Upon satisfactory evidence of a violation of this section, the
Commissioner may pursue either one or both of the following courses of action:
(1) Suspend or revoke or refuse to renew the licenses of the offending party
or parties.
(2) Impose a penalty of not more than one thousand dollars for each and
every act in violation of this section by the party or parties.
(c) Before the Commissioner takes any action as set forth in subsection (b),
he shall give written notice to the person, company, association, or exchange
accused of violating the law, stating specifically the nature of the alleged
violation and advising of an opportunity of hearing to be held at least ten days
thereafter. After the hearing, upon failure of the accused to appear at the
hearing, or upon failure to request the hearing, the Commissioner, if he finds
a violation, shall impose the penalties under subsection (b) he considers
advisable.
(d) When the Commissioner takes action in any or all of the ways set out in
subsection (b), the party aggrieved may appeal from the action to the circuit
court.
Section 38-27-530. Domiciliary liquidator's proposal to distribute assets.
(a) Within one hundred twenty days of a final determination of insolvency of
an insurer by a court of competent jurisdiction of this State, the liquidator
shall make application to the court for approval of a proposal to disburse assets
out of marshaled assets, as the assets become available, to a guaranty
association or foreign guaranty association having obligations because of the
insolvency. If the liquidator determines that there are insufficient assets to
disburse, the application required by this section is considered satisfied by a
filing by the liquidator stating the reasons for this determination.
(b) The proposal shall at least include provisions for:
(1) Reserving amounts for the payment of expenses of administration and the
payment of claims of secured creditors, to the extent of the value of the
security held, and claims falling within the priorities established in Section
38-27-610, Classes 1 and 2.
(2) Disbursement of the assets marshaled to date and subsequent disbursement
of assets as they become available.
(3) Equitable allocation of disbursements to each of the guaranty
associations and foreign guaranty associations entitled thereto.
(4) The securing by the liquidator from each of the associations entitled
to disbursements pursuant to this section of an agreement to return to the
liquidator the assets, together with income earned on assets previously
disbursed, as may be required to pay claims of secured creditors and claims
falling within the priorities established in Section 38-27-610 in accordance with
such priorities. No bond is required of the associations.
(5) A full report to be made by each association to the liquidator
accounting for all assets so disbursed to the association, all disbursements made
therefrom, any interest earned by the association on the assets, and any other
matter as the court may direct.
(c) The liquidator's proposal shall provide for disbursements to the
associations in amounts estimated at least equal to the claim payments made or
to be made thereby for which the
associations could assert a claim against the liquidator and shall further
provide that if the assets available for disbursement do not equal or exceed the
amount of the claim payments made or to be made by the association then
disbursements must be in the amount of available assets.
(d) The liquidator's proposal shall, with respect to an insolvent insurer
writing life or health insurance or annuities, provide for disbursements of
assets to any guaranty association or any foreign guaranty association covering
life or health insurance or annuities or to any other entity or organization
reinsuring, assuming, or guaranteeing policies or contracts of insurance under
the acts creating the associations.
(e) Notice of the application must be given to the association and to the
commissioners of insurance of each of the states. The notice is considered to
have been given when deposited in the United States certified mails, first class
postage prepaid, at least thirty days prior to submission of the application to
the court. Action on the application may be taken by the court if the above
required notice has been given and if the liquidator's proposal complies with
items (1) and (2) of subsection (b) of this section.
Section 38-27-540. Filing of claims.
(a) Proof of all claims must be filed with the liquidator in the form required
by Section 38-27-550 by the last day for filing specified in the notice required
under Section 38-27-410, except that proof of claims for cash surrender values
or other investment values in life insurance and annuities need not be filed
unless the liquidator expressly so requires.
(b) The liquidator may permit a claimant making a late filing to share in
distributions, whether past or future, as if he were not late, to the extent that
the payment will not prejudice the orderly administration of the liquidation,
under the following circumstances:
(1) The existence of the claim was not known to the claimant and he filed
his claim as promptly thereafter as reasonably possible after learning of it.
(2) A transfer to a creditor was avoided under Sections 38-27-450 through
38-27-470, or was voluntarily surrendered under Section 38-27-480 and the filing
satisfies the conditions of Section 38-27-480.
(3) The valuation under Section 38-27-600, of security held by a secured
creditor, shows a deficiency, which is filed within thirty days after the
valuation.
(c) The liquidator shall permit late filing claims to share in distributions,
whether past or future, as if they were not late, if the claims are claims of a
guaranty association or foreign guaranty association for reimbursement of covered
claims paid or expenses incurred, or both, after the last day for filing where
the payments were made and expenses incurred as provided by law.
(d) The liquidator may consider any claim filed late which is not covered by
subsection (b) of this section and permit it to receive distributions which are
subsequently declared on any claims of the same or lower priority if the payment
does not prejudice the orderly administration of the liquidation. The late-filing
claimant shall receive, at each distribution, the same percentage of the amount
allowed on his claim as is then being paid to claimants of any lower priority.
This must continue until his claim has been paid in full.
Section 38-27-550. Proof of claim.
(a) Proof of claim consists of a statement signed by the claimant that
includes all of the following that are applicable:
(1) The particulars of the claim, including the consideration given for it.
(2) The identity and amount of the security on the claim.
(3) The payments made on the debt, if any.
(4) That the sum claimed is justly owing and that there is no setoff,
counterclaim, or defense to the claim.
(5) Any right of priority of payment or other specific right asserted by the
claimants.
(6) A copy of the written instrument which is the foundation of the claim.
(7) The name and address of the claimant and the attorney who represents
him, if any.
(b) No claim need be considered or allowed if it does not contain all the
information in subsection (a) which may be applicable. The liquidator may require
that a prescribed form be used and may require that other information and
documents be included.
(c) At any time the liquidator may request the claimant to present information
or evidence supplementary to that required under subsection (a) and may take
testimony under oath, require production of affidavits or depositions, or
otherwise obtain additional information or evidence.
(d) No judgment or order against an insured or the insurer entered after the
date of filing of a successful petition for liquidation and no judgment or order
against an insured or the insurer entered at any time by default or by collusion
need be considered as evidence of liability or of quantum of damages. No judgment
or order against an insured or the insurer entered within four months before the
filing of the petition need be considered as evidence of liability or of the
quantum of damages.
(e) All claims of a guaranty association or foreign guaranty association must
be in the form and shall contain the substantiation as agreed to by the
association and the liquidator.
Section 38-27-560. Special claims.
(a) The claim of a third party which is contingent only on his first obtaining
a judgment against the insured must be considered and allowed as if there were
no contingency.
(b) A claim may be allowed even if contingent, if it is filed in accordance
with Section 38-27-540. It may be allowed and may participate in all
distributions declared after it is filed to the extent that it does not prejudice
the orderly administration of the liquidation.
(c) Claims that are due except for the passage of time must be treated as
absolute claims are treated, except that the claims may be discounted at the
legal rate of interest.
(d) Claims made under employment contracts by directors, principal officers,
or persons in fact performing similar functions or having similar powers are
limited to payment for services rendered prior to the issuance of any order of
rehabilitation or liquidation under Section 38-27-320 or 38-27-370.
Section 38-27-570. Special provisions for third party and insureds' claims.
(a) Whenever any third party asserts a cause of action against an insured of
an insurer in liquidation, the third party may file a claim with the liquidator.
(b) Whether or not the third party files a claim, the insured may file a claim
on his own behalf in the liquidation. If the insured fails to file a claim by the
date for filing claims specified in the order of liquidation or within sixty days
after mailing of the notice required by Section 38-27-410, whichever is later,
he is an unexcused late-filer.
(c) The liquidator shall make his recommendations to the court under Section
38-27-610 for the allowance of an insured's claim under subsection (b) of this
section after consideration of the probable outcome of any pending action against
the insured on which the claim is based, the probable damages recoverable in the
action, and the probable costs and expenses of defense. After allowance by the
court, the liquidator shall withhold any dividends payable on the claim, pending
the outcome of litigation and negotiation with the insured. Whenever it seems
appropriate, he shall reconsider the claim on the basis of additional information
and amend his recommendations to the court. The insured must be afforded the same
notice and opportunity to be heard on all changes in the recommendations as in
their initial determination. The court may amend its allowance as it thinks
appropriate. As claims against the insured are settled or barred, the insured
must be paid from the amount withheld the same percentage dividend as was paid
on other claims of like property, based on the lesser of (1) the amount actually
recovered from the insured by action or paid by agreement, plus the reasonable
costs and expenses of defense, or (2) the amount allowed on the claims by the
court. After all claims are settled or barred, any sum remaining from the amount
withheld reverts to the undistributed assets of the insurer. Delay in final
payment under this subsection (c) is not a reason for unreasonable delay of final
distribution and discharge of the liquidator.
(d) If several claims founded upon one policy are filed, whether by third
parties or as claims by the insured under this section, and the aggregate allowed
amount of the claims to which the same limit of liability in the policy is
applicable exceeds that limit, each claim as allowed must be reduced in the same
proportion so that the total equals the policy limit. Claims by the insured must
be evaluated as in subsection (c). If any insured's claim is subsequently
reduced under subsection (c), the amount thus freed must be apportioned ratably
among the claims which have been reduced under this subsection (d).
(e) No claim may be presented under this section if it is or may be covered
by any guaranty association or foreign guaranty association.
Section 38-27-580. Disputed claims.
(a) When a claim is denied in whole or in part by the liquidator, written
notice of the determination must be given to the claimant or his attorney by
first class mail at the address shown in the proof of claim. Within sixty days
from the mailing of the notice, the claimant may file his objections with the
liquidator. If no filing is made, the claimant may not further object to the
determination.
(b) Whenever objections are filed with the liquidator and the liquidator does
not alter his denial of the claim as a result of the objections, the liquidator
shall ask the court for a hearing as soon as practicable and give notice of the
hearing by first class mail to the claimant or his attorney and to any other
persons directly affected, not less than ten nor more than thirty days before the
date of the hearing. The matter may be heard by the court or by a court-appointed
referee who shall submit findings of fact along with his recommendation.
Section 38-27-590. Claims of surety.
Whenever a creditor whose claim against an insurer is secured, in whole or in
part, by the undertaking of another person fails to prove and file that claim,
the other person may do so in the creditor's name and is subrogated to the rights
of the creditor, whether the claim has been filed by the creditor or by the other
person in the creditor's name, to the extent that he discharges the undertaking.
In the absence of an agreement with the creditor to the contrary, however, the
other person is not entitled to any distribution until the amount paid to the
creditor on the undertaking, plus the distributions paid on the claim from the
insurer's estate to the creditor, equals the amount of the entire claim of the
creditor. Any excess received by the creditor must be held by him in trust for
the other person. The term 'other person' as used in this section is not intended
to apply to a guaranty association or foreign guaranty association.
Section 38-27-600. Secured creditor's claims.
(a) The value of any security held by a secured creditor must be determined
in one of the following ways, as the court may direct:
(1) by converting the same into money according to the terms of the
agreement pursuant to which the security was delivered to the creditor; or
(2) by agreement, arbitration, compromise, or litigation between the
creditor and the liquidator.
(b) The determination must be under the supervision and control of the court
with due regard for the recommendation of the liquidator. The amount so
determined must be credited upon the secured claim, and any deficiency is treated
as an unsecured claim. If the claimant surrenders his security to the liquidator,
the entire claim is allowed as if unsecured.
Section 38-27-610. Priority of distribution.
The priority of distribution of claims from the insurer's estate must be in
accordance with the order in which each class of claims is herein set forth.
Every claim in each class must be paid in full or adequate funds retained for
such payment before the members of the next class receive any payment. No
subclasses may be established within any class. The order of distribution of
claims is the following:
(1) Class 1. The costs and expenses of administration, including, but not
limited to, the following:
(a) The actual and necessary costs of preserving or recovering the assets
of the insurer.
(b) Compensation for services rendered by the receiver in the amount of five
percent of the total assets of the insurer coming into the possession of the
receiver.
(c) Any necessary filing fees.
(d) The fees and mileage payable to witnesses.
(e) Compensation of the special deputies, attorneys, and other persons as
may be appointed by the receiver for the efficient conduct of the receivership,
rehabilitation, or liquidation.
(f) The reasonable expenses of a guaranty association or foreign guaranty
association in handling claims.
(2) Class 2. Debts due to employees for services performed to the extent that
they do not exceed one thousand dollars and represent payment for services
performed within one year before the filing of the petition for liquidation.
Officers and directors are not entitled to the benefit of this priority. This
priority is in lieu of any other similar priority which may be authorized by law
as to wages or compensation of employees.
(3) Class 3. All claims under policies for losses incurred, including third
party claims, all claims against the insurer for liability for bodily injury or
for injury to or destruction of tangible property which are not under policies,
and all claims of a guaranty association or foreign guaranty association. All
claims under life insurance and annuity policies, whether for death proceeds,
annuity proceeds, or investment values, must be treated as loss claims. That
portion of any loss, indemnification for which is provided by other benefits or
advantages recovered by the claimant, may not be included in this class, other
than benefits or advantages recovered or recoverable in discharge of familial
obligations of support or by way of succession at death or as proceeds of life
insurance or as gratuities. No payment by an employer to his employee may be
treated as a gratuity.
(4) Class 4. Claims under nonassessable policies for unearned premium or
other premium refunds and claims of general creditors.
(5) Class 5. Claims of the federal or any state or local government. Claims,
including those of any governmental body for a penalty or forfeiture, are allowed
in this class only to the extent of the pecuniary loss sustained from the act,
transaction, or proceeding out of which the penalty or forfeiture arose, with
reasonable and actual costs occasioned thereby. The remainder of the claims are
postponed to the class of claims under item (8) of this section.
(6) Class 6. Claims filed late or any other claims other than claims under
items (7) and (8) of this section.
(7) Class 7. Surplus or contribution notes, or similar obligations, and
premium refunds on assessable policies. Payments to members of domestic mutual
insurance companies are limited in accordance with law.
(8) Class 8. The claims of shareholders or other owners.
Section 38-27-620. Liquidator's recommendations to court.
(a) The liquidator shall review all claims duly filed in the liquidation and
shall make any further investigation he considers necessary. He may compound,
compromise, or in any other manner
negotiate the amount for which claims will be recommended to the court except
where the liquidator is required by law to accept claims as settled by any person
or organization, including any guaranty association or foreign guaranty
association. Unresolved disputes are determined under Section 38-27-580. As soon
as practicable, he shall present to the court a report of the claims against the
insurer with his recommendations. The report shall include the name and address
of each claimant and the amount of the claim finally recommended, if any. If the
insurer has issued annuities or life insurance policies, the liquidator shall
report the persons to whom, according to the records of the insurer, amounts are
owed as cash surrender values or other investment value and the amounts owed.
(b) The court may approve, disapprove, or modify the report on claims by the
liquidator. The reports not modified by the court within a period of sixty days
following submission by the liquidator must be treated by the liquidator as
allowed claims, subject thereafter to later modification or to rulings made by
the court pursuant to Section 38-27-580. No claim under a policy of insurance may
be allowed for an amount in excess of the applicable policy limits.
Section 38-27-630. Distribution of assets.
Under the direction of the court, the liquidator shall pay distributions in a
manner that will assure the proper recognition of priorities and a reasonable
balance between the expeditious completion of the liquidation and the protection
of unliquidated and undetermined claims, including third party claims.
Distribution of assets in kind may be made at valuations set by agreement between
the liquidator and the creditor and approved by the court.
Section 38-27-640. Unclaimed and withheld funds.
(a) All unclaimed funds subject to distribution remaining in the liquidator's
hands when he is ready to apply to the court for discharge, including the amount
distributable to any creditor, shareholder, member, or other person who is
unknown or cannot be found, must be deposited with the State Treasurer and must
be paid without interest except in accordance with Section 38-27-610 to the
person entitled thereto or his legal representative upon proof satisfactory to
the State Treasurer of his right thereto. Unclaimed funds deposited with the
State Treasurer in accordance with this section must be advertised and disposed
of in accordance with the provisions of Section 27-19-220.
(b) All funds withheld under Section 38-27-560 and not distributed must, upon
discharge of the liquidator, be deposited with the State Treasurer and paid by
him in accordance with Section 38-27-610. Any sums remaining which under Section
38-27-610 would revert to the undistributed assets of the insurer must be
transferred to the State Treasurer and become the property of the State under
subsection (a) of this section unless the Commissioner in his discretion
petitions the court to reopen the liquidation under Section 38-27-660.
Section 38-27-650. Termination of proceedings.
(a) When all assets justifying the expense of collection and distribution have
been collected and distributed under this chapter the liquidator shall apply to
the court for discharge. The court may grant the discharge and make any other
orders, including an order to transfer any remaining funds that are uneconomic
to distribute, as may be considered appropriate.
(b) Any other person may apply to the court at any time for an order under
subsection (a) of this section. If the application is denied, the
applicant shall pay the costs and expenses of the liquidator in resisting the
application, including a reasonable attorney's fee.
Section 38-27-660. Reopening liquidation.
After the liquidation proceeding has been terminated and the liquidator
discharged, the Commissioner or other interested party may at any time petition
the circuit court to reopen the proceedings for good cause, including the
discovery of additional assets. If the court is satisfied that there is
justification for reopening, it must so order.
Section 38-27-670. Disposition of records during and after termination of
liquidation.
Whenever it appears to the Commissioner that the records of any insurer in
process of liquidation or completely liquidated are no longer useful, he may
recommend to the court, and the court shall direct, what records should be
retained for future reference and what should be destroyed.
Section 38-27-680. External audit of receiver's books.
The circuit court may, as it considers desirable, cause audits to be made of
the books of the Commissioner relating to any receivership established under this
chapter, and a report of each audit must be filed with the Commissioner and with
the court. The books, records, and other documents of the receivership must be
made available to the auditor at any time without notice. The expense of each
audit is considered a cost of administration of the receivership.
Article 7
Interstate Relations
Section 38-27-910. Conservation of property of foreign or alien insurers found
in South Carolina.
(a) If a domiciliary liquidator has not been appointed, the Commissioner may
apply to the circuit court by verified petition for an order directing him to act
as conservator to conserve the property of an alien insurer not domiciled in this
State or a foreign insurer on any one or more of the following grounds:
(1) Any of the grounds in Section 38-27-310.
(2) That any of its property has been sequestered by official action in its
domiciliary state or in any other state.
(3) That enough of its property has been sequestered in a foreign country
to give reasonable cause to fear that the insurer is or may become insolvent.
(4) (i) That its certificate of authority to do business in this State has
been revoked or that none was ever issued; and
(ii) That there are residents of this State with outstanding claims or
outstanding policies.
(b) When an order is sought under subsection (a) of this section, the court
shall cause the insurer to be given reasonable notice and time to respond.
(c) The court may issue the order in whatever terms it considers appropriate.
The filing or recording of the order with the clerk of court or the register of
mesne conveyances of the county in which the principal business of the company
is located or the county in which its principal office or place of business is
located imparts the same notice which a deed, bill of sale, or other evidence of
title duly filed or recorded with that office would have imparted.
(d) The conservator may at any time petition for, and the court may grant, an
order under Section 38-27-920 to liquidate assets of a foreign or alien insurer
under conservation or, if appropriate, for an order under Section 38-27-940, to
be appointed ancillary receiver.
(e) The conservator may at any time petition the court for an order
terminating conservation of an insurer. If the court finds that the conservation
is no longer necessary, it shall order that the insurer be restored to possession
of its property and the control of its business. The court may also make that
finding and issue the order at any time upon motion of any interested party, but,
if the motion is denied, all costs must be assessed against the interested party.
Section 38-27-920. Liquidation of property of foreign or alien insurers found
in South Carolina.
(a) If no domiciliary receiver has been appointed, the Commissioner may apply
to the circuit court by verified petition for an order directing him to liquidate
the assets found in this State of a foreign insurer or an alien insurer not
domiciled in this State, on any of the following grounds:
(1) any of the grounds in Section 38-27-310 or 38-27-360; or
(2) any of the grounds specified in items (2) through (4) of subsection (a)
of Section 38-27-910.
(b) When an order is sought under subsection (a) of this section, the court
shall cause the insurer to be given reasonable notice and time to respond.
(c) If it appears to the court that the best interests of creditors,
policyholders, and the public require, the court may issue an order to liquidate
in whatever terms it considers appropriate. The filing or recording of the order
with the clerk of court or the register of mesne conveyances of the county in
which the principal business of the company is located or the county in which its
principal office or place of business is located imparts the same notice which
a deed, bill of sale, or other evidence of title duly filed or recorded with that
office would have imparted.
(d) If a domiciliary liquidator is appointed in a reciprocal state while a
liquidation is proceeding under this section, the liquidator under this section
must thereafter act as ancillary receiver under Section 38-27-940. If a
domiciliary liquidator is appointed in a nonreciprocal state while a liquidation
is proceeding under this section, the liquidator under this section may petition
the court for permission to act as ancillary receiver under Section 38-27-940.
(e) On the same grounds as are specified in subsection (a) of this section,
the Commissioner may petition any appropriate federal district court to be
appointed receiver to liquidate that portion of the insurer's assets and business
over which the court will exercise jurisdiction or any lesser part thereof that
the Commissioner considers desirable for the protection of the policyholders and
creditors in this State.
(f) The court may order the Commissioner, when he has liquidated the assets
of a foreign or alien insurer under this section, to pay claims of residents of
this State against the insurer under such rules as to the liquidation of insurers
under this chapter as are otherwise compatible with the provisions of this
section.
Section 38-27-930. Domiciliary liquidators in other states.
(a) The domiciliary liquidator of an insurer domiciled in a reciprocal state
is, except as to special deposits and security on secured claims under subsection
(c) of Section 38-27-940, vested by operation of law with the title to all of the
assets, property, contracts and rights of action, agents' balances, and all of
the books, accounts, and other records of the insurer located in this State. The
date of vesting is the date of the filing of the petition, if that date is
specified by the domiciliary law for the vesting of property in the domiciliary
state. Otherwise, the date of vesting is the date of entry of the order directing
possession to be taken. The domiciliary liquidator has the immediate right to
recover balances due from agents and to obtain possession of the books, accounts,
and other records of the insurer located in this State. He also has the right to
recover all other assets of the insurer located in this State, subject to Section
38-27-940.
(b) If a domiciliary liquidator is appointed for an insurer not domiciled in
a reciprocal state, the Commissioner of this State is vested by operation of law
with the title to all of the property, contracts and rights of action, and all
of the books, accounts, and other records of the insurer located in this State,
at the same time that the domiciliary liquidator is vested with title in the
domicile. The Commissioner of this State may petition for a conservation or
liquidation order under Section 38-27-910 or 38-27-920, or for an ancillary
receivership under Section 38-27-940 or, after approval by the circuit court, may
transfer title to the domiciliary liquidator, as the interests of justice and the
equitable distribution of the assets require.
(c) Claimants residing in this State may file claims with the liquidator or
ancillary receiver, if any, in this State or with the domiciliary liquidator, if
the domiciliary law permits. The claims must be filed by the last date fixed for
the filing of claims in the domiciliary liquidation proceedings.
Section 38-27-940. Ancillary formal proceedings.
(a) If a domiciliary liquidator has been appointed for an insurer not
domiciled in this State, the Commissioner may file a petition with the circuit
court requesting appointment as ancillary receiver in this State:
(1) If he finds that there are sufficient assets of the insurer located in
this State to justify the appointment of an ancillary receiver.
(2) If the protection of creditors or policyholders in this State so
requires.
(b) The court may issue an order appointing an ancillary receiver in whatever
terms it considers appropriate. The filing or recording of the order with a
register of mesne conveyances in this State imparts the same notice which a deed,
bill of sale, or other evidence of title duly filed or recorded with that office
would impart.
(c) When a domiciliary liquidator has been appointed in a reciprocal state,
then the ancillary receiver appointed in this State may, whenever necessary, aid
and assist the domiciliary liquidator in recovering assets of the insurer located
in this State. The ancillary receiver shall, as soon as practicable, liquidate
from their respective securities those special deposit claims and secured claims
which are proved and allowed in the ancillary proceedings in this State and shall
pay the necessary expenses of the proceedings. He shall promptly transfer all
remaining assets, books, accounts, and records to the domiciliary liquidator.
Subject to this section, the ancillary receiver and his deputies have the same
powers and are subject to the same duties with respect to the administration of
assets as a liquidator of an insurer domiciled in this State.
(d) When a domiciliary liquidator has been appointed in this State, ancillary
receivers appointed in reciprocal states have, as to assets and books, accounts,
and other records in their respective states, corresponding rights, duties, and
powers to those provided in subsection (c) of this section for ancillary
receivers appointed in this State.
Section 38-27-950. Ancillary summary proceedings.
The Commissioner in his sole discretion may institute proceedings under
Sections 38-27-210 through 38-27-230 at the request of the commissioner or other
appropriate insurance official of the domiciliary state of any foreign or alien
insurer having property located in this State.
Section 38-27-960. Claims of nonresidents against insurers domiciled in South
Carolina.
(a) In a liquidation proceeding begun in this State against an insurer
domiciled in this State, claimants residing in foreign countries or in states not
reciprocal states shall file claims in this State and claimants residing in
reciprocal states may file claims either with the ancillary receivers, if any,
in their respective states or with the domiciliary liquidator. Claims must be
filed by the last date fixed for the filing of claims in the domiciliary
liquidation proceeding.
(b) Claims belonging to claimants residing in reciprocal states may be proved
either in the liquidation proceeding in this State as provided in this chapter
or in ancillary proceedings, if any, in the reciprocal states. If notice of the
claims and opportunity to appear and be heard are afforded the domiciliary
liquidator of this State as provided in subsection (b) of Section 38-27-970 with
respect to ancillary proceedings, the final allowance of claims by the courts in
ancillary proceedings in reciprocal states is conclusive as to amount and as to
priority against special deposits or other security located in the ancillary
states but is not conclusive with respect to priorities against general assets
under Section 38-27-610.
Section 38-27-970. Claims of residents against insurers domiciled in
reciprocal states.
(a) In a liquidation proceeding in a reciprocal state against an insurer
domiciled in that state, claimants against the insurer who reside within this
State may file claims either with the ancillary receiver, if any, in this State
or with the domiciliary liquidator. Claims must be filed by the last dates fixed
for the filing of claims in the domiciliary liquidation proceeding.
(b) Claims belonging to claimants residing in this State may be proved either
in the domiciliary state under the law of that state or in ancillary proceedings,
if any, in this State. If a claimant elects to prove his claim in this State, he
shall file his claim with the liquidator in the manner provided in Sections
38-27-540 and 38-27-550. The ancillary receiver shall make his recommendation to
the court as under Section 38-27-620. He shall also arrange a date for hearing
if necessary under Section 38-27-580 and shall give notice to the liquidator in
the domiciliary state, either by certified mail or by personal service, at least
forty days prior to the date set for hearing. If the domiciliary liquidator,
within thirty days after the giving of the notice, gives notice in writing to the
ancillary receiver and to the claimant, either by certified mail or by personal
service, of his intention to contest the claim, he is entitled to appear or to
be represented in any proceeding in this State involving the adjudication of the
claim.
(c) The final allowance of the claim by the courts of this State is conclusive
as to the amount and as to priority against special deposits or other security
located in this State.
Section 38-27-980. Attachment, garnishment, and levy of execution.
During the pendency in this State or any other state of a liquidation
proceeding, whether called by that name or not, no action or proceeding in the
nature of an attachment, garnishment, or levy of execution may be commenced or
maintained in this State against the delinquent insurer or its assets.
Section 38-27-990. Interstate priorities.
(a) In a liquidation proceeding in this State involving one or more reciprocal
states, the order of distribution of the domiciliary state controls as to all
claims of residents of this State and reciprocal states. All claims of residents
of reciprocal states are given equal priority of payment from general assets
regardless of where the assets are located.
(b) The owner of a secured claim against an insurer for which a liquidator has
been appointed in this State or any other state may surrender his security and
file his claim as a general creditor, or the claim may be discharged by resort
to the security in accordance with Section 38-27-600, in which case the
deficiency, if any, is treated as a claim against the general assets of the
insurer on the same basis as claims of unsecured creditors.
Section 38-27-1000. Subordination of claims for noncooperation.
If an ancillary receiver in another state or foreign country, whether called
by that name or not, fails to transfer to the domiciliary liquidator in this
State any assets within his control other than special deposits, diminished only
by the expenses of the ancillary receivership, if any, the claims filed in the
ancillary receivership, other than special deposit claims or secured claims, must
be placed in the class of claims under item (7) of Section 38-27-610.
CHAPTER 29
South Carolina Life and Accident
and Health Insurance Guaranty Association
Section 38-29-10. Short title.
This chapter is known and may be cited as the 'South Carolina Life and Accident
and Health Insurance Guaranty Association Act'.
Section 38-29-20. Definitions.
As used in this chapter:
(1) 'Account' means any of the three accounts created under Section 38-29-50.
(2) 'Association' means the South Carolina Life and Accident and Health
Insurance Guaranty Association created under Section 38-29-50.
(3) 'Contractual obligation' means any obligation under covered policies.
(4) 'Covered policy' means any policy or contract within the scope of Section
38-29-40.
(5) 'Impaired insurer' means:
(a) an insurer which becomes insolvent and is placed under a final order of
liquidation, rehabilitation, or conservation by a court of competent
jurisdiction, or
(b) an insurer considered by the Commissioner to be unable or potentially
unable to fulfill its contractual obligations.
(6) 'Member insurer' means any person authorized to transact in this State any
kind of insurance to which this chapter applies under Section 38-29-40.
(7) 'Premiums' means direct gross insurance premiums and annuity
considerations collected or written on covered policies, less return premiums and
considerations thereon and dividends paid or credited to policyholders on the
direct business. 'Premiums' does not include premiums and considerations on
contracts between insurers and reinsurers. As used in Section 38-29-80,
'premiums' means those for the calendar year preceding the determination of
impairment.
(8) 'Resident' means any person who resides in this State at the time the
impairment is determined and to whom contractual obligations are owed.
Section 38-29-30. Declaration of purpose.
The purpose of this chapter is to maintain public confidence in the promises
of insurers by providing a mechanism for protecting policy owners, insureds,
beneficiaries, annuitants, payees, and assignees of life insurance policies,
accident and health insurance policies, annuity contracts, and supplemental
contracts against failure in the performance of contractual obligations due to
the impairment of the insurer issuing these policies or contracts. To provide
this protection:
(1) an Association of insurers is created to enable the guaranty of payment
of benefits and of continuation of coverages;
(2) members of the Association are subject to assessment to provide funds to
carry out the purpose of this chapter; and
(3) the Association is authorized to assist the Commissioner, in the
prescribed manner, in the detection and prevention of insurer impairments.
Section 38-29-40. Application of chapter.
(1) This chapter applies to direct life insurance policies, accident and
health insurance policies, annuity contracts, and contracts supplemental to life
and accident and health insurance policies and annuity contracts issued by
persons authorized to transact insurance in this State at any time.
(2) This chapter does not apply to:
(a) Any policy or contract or part thereof under which the risk is borne by
the policyholder.
(b) Any policy or contract or part thereof assumed by the impaired insurer
under a contract of reinsurance, other than reinsurance for which assumption
certificates have been issued.
(c) Any policy or contract issued by assessment mutuals, fraternals, and
nonprofit hospital and medical service plans.
Section 38-29-50. Association created; membership as a condition of authority
to transact insurance; accounts; supervision.
(1) There is created a nonprofit legal entity to be known as the South
Carolina Life and Accident and Health Insurance Guaranty Association. All member
insurers are and must remain members of the Association as a condition of their
authority to transact insurance in this State. The Association shall perform its
functions under the plan of operation established and approved under Section
38-29-90 and shall exercise its powers through a board of directors established
under Section 38-29-60. For purposes of administration and assessment, the
Association shall maintain three accounts:
(a) the accident and health insurance account;
(b) the life insurance account; and
(c) the annuity account.
(2) The Association is under the immediate supervision of the Commissioner and
is subject to the applicable insurance laws of this State.
Section 38-29-60. Board of directors.
(1) The board of directors of the Association shall consist of not less than
five nor more than nine members serving terms as established in the plan of
operation. Member insurers shall select the members of the board subject to the
Commissioner's approval. Any vacancies on the board must be filled for the
remaining period of the term in the manner described in the plan of operation.
(2) In approving selections or in appointing members to the board, the
Commissioner shall consider, among other things, whether all member insurers are
fairly represented.
(3) Members of the board may be reimbursed from the assets of the Association
for expenses incurred by them as members of the board of directors, but members
of the board may not otherwise be compensated by the Association for their
services.
Section 38-29-70. Powers and duties of Association.
In addition to the powers and duties enumerated in other sections of this
chapter:
(1) If a domestic insurer is an impaired insurer, the Association may, prior
to an order of liquidation or rehabilitation and subject to any conditions
imposed by the Association other than those which impair the contractual
obligations of the impaired insurer and approved by the impaired insurer and the
Commissioner:
(a) Guarantee or reinsure, or cause to be guaranteed, assumed, or reinsured,
all the covered policies of the impaired insurer.
(b) Provide monies, pledges, notes, guarantees, or other means as are proper
to effectuate paragraph (a) of this item (1) and assure payment of the impaired
insurer's contractual obligations pending action under paragraph (a) of this item
(1).
(c) Loan money to the impaired insurer.
(2) If a foreign or alien insurer is an impaired insurer, the Association may
prior to an order of liquidation, rehabilitation, or conservation, with respect
to the covered policies of residents and subject to any conditions imposed by the
Association other than those which impair the contractual obligations of the
impaired insurer and approved by the impaired insurer and the Commissioner:
(a) Guarantee or reinsure, or cause to be guaranteed, assumed, or reinsured,
the impaired insurer's covered policies of residents.
(b) Provide monies, pledges, notes, guarantees, or other means as are proper
to effectuate paragraph (a) of this item (2) and assure payment of the impaired
insurer's contractual obligations to residents pending action under paragraph (a)
of this item (2).
(c) Loan money to the impaired insurer.
(3) If a domestic insurer is an impaired insurer under an order of liquidation
or rehabilitation, the Association shall, subject to the approval of the
Commissioner:
(a) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or
reinsured, the impaired insurer's covered policies.
(b) Assure payment of the impaired insurer's contractual obligations.
(c) Provide money, pledges, notes, guarantees, or other means as are
reasonably necessary to discharge its duties. If the Association fails to act
within a reasonable period of time, the Commissioner has the powers and duties
of the Association under this chapter with respect to the domestic impaired
insurer.
(4) If a foreign or alien insurer is an impaired insurer under an order of
liquidation, rehabilitation, or conservation, the Association shall, subject to
the approval of the Commissioner:
(a) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or
reinsured, the covered policies of residents.
(b) Assure payment of the impaired insurer's contractual obligations to
residents.
(c) Provide monies, pledges, notes, guarantees, or other means as are
reasonably necessary to discharge its duties. If the Association fails to act
within a reasonable period of time, the Commissioner has the powers and duties
of the Association under this chapter with respect to the foreign or alien
impaired insurer.
(5) Liens may be imposed as long as the Association:
(a) In carrying out its duties under items (3) and (4) of this section,
requests that there be imposed policy liens, contract liens, moratoriums on
payments, or other similar means. These liens, moratoriums, or similar means may
be imposed if the Commissioner finds that the amounts which can be assessed under
this chapter are less than the amounts needed to assure full and prompt
performance of the impaired insurer's contractual obligations or that the
economic or financial conditions as they affect member insurers are sufficiently
adverse to render the imposition of policy or contract liens, moratoriums, or
similar means to be in the public interest and approves the specific policy
liens, contract liens, moratoriums, or similar means to be used.
(b) Before being obligated under items (3) and (4) of this section,
requests, subject to the Commissioner's approval, that there be imposed temporary
moratoriums or liens on payments of cash values and policy loans.
(6) The Association has no liability under this section for any covered policy
of a foreign or alien insurer whose domiciliary jurisdiction or state of entry
provides by statute or regulation for residents of this State protection
substantially similar to that provided by this chapter for residents of other
states.
(7) The Association may render assistance and advice to the Commissioner, upon
his request, concerning rehabilitation, payment of claims, continuations of
coverage, or the performance of other contractual obligations of an impaired
insurer.
(8) The Association has the authority to appear before any court in this State
with jurisdiction over an impaired insurer concerning which the Association is
or may become obligated under this chapter. This authority extends to all
matters germane to the powers and duties of the Association, including, but not
limited to, proposals for reinsuring or guaranteeing the covered policies of the
impaired insurer and the determination of the covered policies and contractual
obligations.
(9) Any person receiving benefits under this chapter is considered to have
assigned his rights under the covered policy to the Association to the extent of
the benefits received because of this chapter whether the benefits are payments
of contractual obligations or continuation of coverage. The Association may
require an assignment to it of these rights by any payee, policy or contract
owner, beneficiary, insured, or annuitant as a condition precedent to the receipt
of any rights or benefits conferred by this chapter upon that person. The
Association is subrogated to these rights against the assets of any impaired
insurer, and the subrogation rights of the Association have the same priority
against the assets as that possessed by the person entitled to receive benefits
under this chapter.
(10) The contractual obligations of the impaired insurer for which the
Association becomes or may become liable are the same as the contractual
obligations of the impaired insurer would have been in the absence of an
impairment, but the Association has no liability with respect to any portion of
a covered policy to the extent that the policy's benefits to any one person
exceed an aggregate of three hundred thousand dollars.
(11) The Association may:
(a) Enter into contracts that are necessary or proper to carry out the
provisions and purposes of this chapter.
(b) Sue or be sued, including taking any legal actions necessary or proper
for recovery of any unpaid assessments under Section 38-29-80.
(c) Borrow money to effect the purposes of this chapter. Any notes or other
evidence of indebtedness of the Association not in default shall be legal
investments for domestic insurers and may be carried as admitted assets.
(d) Employ or retain persons necessary to handle the financial transactions
of the Association and to perform other functions as become necessary or proper
under this chapter.
(e) Negotiate and contract with any liquidator, rehabilitator, conservator,
or ancillary receiver to carry out the powers and duties of the Association.
(f) Take legal action necessary to avoid payment of improper claims.
(g) Exercise, for the purposes of this chapter and to the extent approved
by the Commissioner, the powers of a domestic life or accident and health
insurer, but in no case may the Association issue insurance policies or annuity
contracts other than those issued to perform the contractual obligations of the
impaired insurer.
Section 38-29-80. Assessments.
(1) For the purpose of providing the funds necessary to carry out the powers
and duties of the Association, the board of directors shall assess the member
insurers, separately for each account, at times and for amounts as the board
finds necessary. Payment is due thirty days after written notice to the member
insurers.
(2) There are three classes of assessments, as follows:
(a) Class A assessments are made for the purpose of meeting administrative
costs and other general expenses not related to a particular impaired insurer.
(b) Class B assessments are made to the extent necessary to carry out the
powers and duties of the Association under Section 38-29-70 with regard to a
domestic impaired insurer.
(c) Class C assessments are made to the extent necessary to carry out the
powers and duties of the Association under Section 38-29-70 with regard to a
foreign or alien impaired insurer.
(3) Assessments must be determined as follows:
(a) The amount of any Class A, Class B, or Class C assessment for each
account must be determined by the board based on the amounts necessary to satisfy
the obligation of the Association under this chapter.
(b) Class A assessments must be divided equally among all members not to
exceed one hundred dollars per assessment. Class C assessments against member
insurers for each account must be in the proportion that the premiums received
on business in this State by each assessed member insurer on policies covered by
each account bear to the premiums received on business in this State by all
assessed member insurers.
(c) Class B assessments for each account must be made separately for each
state in which the domestic impaired insurer was authorized to transact insurance
at any time, in the proportion that the premiums received on business in that
state by the impaired insurer on policies covered by that account bear to those
premiums received in all of those states by the impaired insurer. The assessments
against member insurers must be in the proportion that the premiums received on
business in each of these states by each assessed member insurer on policies
covered by each account bear to those premiums received on business in each state
by all assessed member insurers.
(d) Assessments for funds to meet the requirements of the Association with
respect to an impaired insurer may not be made until necessary to implement the
purposes of this chapter. Classification of assessments under subsection (2) of
this section and computation of assessments under subsection (3) of this section
must be made with a reasonable degree of accuracy, recognizing that exact
determinations may not always be possible.
(4) The Association may abate or defer, in whole or in part, the assessment
of a member insurer if, in the opinion of the board, payment of the assessment
would endanger the ability of the member insurer to fulfill its contractual
obligations. The total of all assessments upon a member insurer for each account
may not in any one calendar year exceed four percent of the insurer's premiums
in this State on the policies covered by the account.
(5) In the event an assessment against a member insurer is abated or deferred,
in whole or in part, because of the limitations set forth in subsection (4) of
this section, the amount by which the assessment is abated or deferred must be
assessed against the other member insurers in a manner consistent with the basis
for assessments set forth in this section. If the maximum assessment, together
with the other assets of the Association in either account, does not provide in
any one year in either account an amount sufficient to carry out the
responsibilities of the Association, the necessary additional funds must be
assessed as soon thereafter as permitted by this chapter.
(6) The board may, by an equitable method as established in the plan of
operation, refund to member insurers the amount by which the assets of the
account exceed the amount the board finds is necessary to carry out during the
coming year the obligations of the Association with regard to that account,
including assets accruing from net realized gains and income from investments.
Refunds to member insurers must be in proportion to the contribution of the
insurer to that account. A reasonable amount may be retained in any account to
provide funds for the continuing expenses of the Association and for future
losses if refunds are impractical.
(7) It is proper for any member insurer, in determining its premium rates and
policy owner dividends as to any kind of insurance within the scope of this
chapter, to consider the amount reasonably necessary to meet its assessment
obligations under this chapter.
(8) The Association shall issue to each insurer paying an assessment under
this chapter a certificate of contribution, in a form prescribed by the
Commissioner, for the amount so paid. All outstanding certificates are of equal
dignity and priority without reference to amounts or dates of issue. A
certificate of contribution may be shown by the insurer in its financial
statement as an asset in the form and for the amount, if any, and period of time
as the Commissioner may approve.
Section 38-29-90. Plan of operation.
(1) The Association shall submit to the Commissioner a plan of operation and
any amendments necessary or suitable to assure the fair, reasonable, and
equitable administration of the Association. The plan of operation and any
amendments become effective upon the Commissioner's written approval. If the
Association fails to submit suitable amendments to the plan, the Commissioner
shall, after notice and hearing, adopt and promulgate reasonable amendments
necessary or advisable to effectuate the provisions of this chapter.
These amendments must continue in force until modified by the Commissioner or
superseded by amendments submitted by the Association and approved by the
Commissioner.
(2) All member insurers shall comply with the plan of operation.
(3) The plan of operation shall, in addition to requirements enumerated
elsewhere in this chapter:
(a) Establish procedures for handling the assets of the Association.
(b) Establish the amount and method of reimbursing members of the board of
directors under Section 38-29-60.
(c) Establish regular places and times for meetings of the board of
directors.
(d) Establish procedures for records to be kept of all financial
transactions of the Association, its agents, and the board of directors.
(e) Establish the procedure whereby selections for the board of directors
must be made and submitted to the Commissioner.
(f) Establish any additional procedures for assessments under Section
38-29-80.
(g) Contain additional provisions necessary or proper for the execution of
the powers and duties of the Association.
(4) The plan of operation may provide that any or all powers and duties of the
Association, except those under subitem (c) of item (11) of Section 38-29-70 and
Section 38-29-80, are delegated to a corporation, association, or other
organization which performs or will perform functions similar to those of this
Association, or its equivalent, in two or more states. Such a corporation,
association, or organization must be reimbursed for any payments made on behalf
of the Association and must be paid for its performance of any function of this
Association. A delegation under this subsection takes effect only with the
approval of both the board of directors and the Commissioner and may be made only
to a corporation, association, or organization which extends protection not
substantially less favorable and effective than that provided by this chapter.
Section 38-29-100. Duties and powers of Commissioner; suspension or revocation
of certificate of authority; appeals from board of directors; notice to
interested persons of effect of chapter.
In addition to the duties and powers enumerated elsewhere in this chapter:
(1) The Commissioner:
(a) Shall notify the board of directors of the existence of an impaired
insurer not later than three days after a determination of impairment is made or
he receives notice of impairment.
(b) Shall, upon request of the board of directors, provide the Association
with a statement of the premiums in the appropriate states for each member
insurer.
(c) Shall, when an impairment is declared and the amount of the impairment
is determined, serve a demand upon the impaired insurer to make good the
impairment within a reasonable time. Notice to the impaired insurer constitutes
notice to its shareholders, if any. The failure of the insurer to comply
promptly with the demand does not excuse the Association from the performance of
its powers and duties under this chapter.
(d) Must, in any liquidation or rehabilitation proceeding involving a
domestic insurer, be appointed as the liquidator or rehabilitator. If a foreign
or alien member insurer is subject to a liquidation proceeding in its domiciliary
jurisdiction or state of entry, the Commissioner must be appointed conservator.
(2) The Commissioner may suspend or revoke, after notice and hearing, the
certificate of authority to transact insurance in this State of any member
insurer which fails to pay an assessment when due or fails to comply with the
plan of operation. As an alternative, the Commissioner may levy a forfeiture on
any member insurer which fails to pay an assessment when due. This forfeiture
may not exceed five percent of the unpaid assessment a month, but no forfeiture
may be less than one hundred dollars a month.
(3) Any action of the board of directors or the Association may be appealed
to the Commissioner by any member insurer if the appeal is taken within thirty
days of the action being appealed.
(4) The liquidator, rehabilitator, or conservator of an impaired insurer may
notify all interested persons of the effect of this chapter.
Section 38-29-110. Detection and prevention of insurer impairments.
To aid in the detection and prevention of insurer impairments:
(1) The board of directors shall, upon majority vote, notify the Commissioner
of any information indicating a member insurer may be unable or potentially
unable to fulfill its contractual obligations.
(2) The board of directors may, upon majority vote, request that the
Commissioner order an examination of a member insurer which the board in good
faith believes may be unable or potentially unable to fulfill its contractual
obligations. The examination may be conducted as a National Association of
Insurance Commissioners examination or may be conducted by the Commissioner. The
cost of the examination must be paid by the Association and the examination
report must be treated as are other examination reports. In no event may the
examination report be released to the board of directors of the Association prior
to its release to the public, but this does not excuse the Commissioner from his
obligation to comply with item (3) of this section. The Commissioner shall notify
the board of directors when the examination is completed. The request for an
examination must be kept on file by the Commissioner, but it is not open to
public inspection prior to the release of the examination report to the public.
It must be released at that time only if the examination discloses that the
examined insurer is unable or potentially unable to meet its contractual
obligations.
(3) The Commissioner shall report to the board of directors when he has
reasonable cause to believe that a member or licensed insurer may be unable or
potentially unable to fulfill its contractual obligations.
(4) The board of directors may, upon majority vote, make reports and
recommendations to the Commissioner upon any matter germane to the solvency,
liquidation, rehabilitation, or conservation of a member insurer. These reports
and recommendations are not open to public inspection.
(5) The board of directors may, upon majority vote, make recommendations to
the Commissioner for the detection and prevention of insurer impairments.
(6) The board of directors shall, at the conclusion of an insurer impairment
in which the Association carried out its duties under this chapter or exercised
any of its powers under this chapter, prepare a report on the history and causes
of the impairment, based on the information available to the Association, and
submit the report to the Commissioner.
Section 38-29-120. Appointment of special deputy for Commissioner.
The Association may recommend the appointment of a person to serve as a special
deputy to act for the Commissioner and under his supervision in the liquidation,
rehabilitation, or conservation of a member insurer.
Section 38-29-130. Assessment liability of insureds not reduced; records of
Association; Association considered creditor of impaired insurer; distribution
of assets of impaired insurer; unfair trade practice; recovery procedure.
(1) Nothing in this chapter may be construed to reduce the liability for
unpaid assessments of the insureds of an impaired insurer operating under a plan
with assessment liability.
(2) Records must be kept of all negotiations and meetings in which the
Association or its representatives are involved to discuss the activities of the
Association in carrying out its powers and duties under Section 38-29-70. Records
of these negotiations or meetings must be made public only upon the termination
of a liquidation, rehabilitation, or conservation proceeding involving the
impaired insurer, upon the termination of the impairment of the insurer, or upon
the order of a court of competent jurisdiction. Nothing in this subsection (2)
limits the duty of the Association to render a report of its activities under
Section 38-29-140.
(3) For the purpose of carrying out its obligations under this chapter, the
Association is considered to be a creditor of the impaired insurer to the extent
of assets attributable to covered policies reduced by any amounts to which the
Association is entitled as subrogee pursuant to item (9) of Section 38-29-70. All
assets of the impaired insurer attributable to covered policies must be used to
continue all covered policies and pay all contractual obligations of the impaired
insurer as required by this chapter. Assets attributable to covered policies, as
used in this subsection (3), are that proportion of the assets which the reserves
that should have been established for those policies bear to the reserve that
should have been established for all policies of insurance written by the
impaired insurer.
(4) With respect to distributing assets:
(a) Prior to the termination of any liquidation, rehabilitation, or
conservation proceeding, the court may take into consideration the contributions
of the respective parties, including the Association, the shareholders, policy
owners of the impaired insurer, and any other party with a bona fide interest,
in making an equitable distribution of the ownership rights of the impaired
insurer. In this determination, consideration must be given to the welfare of the
policyholders of the continuing or successor insurer.
(b) No distribution to stockholders, if any, of an impaired insurer may be
made until and unless the total amount of assessments levied by the Association
with respect to the insurer has been fully recovered by the Association.
(5) It is a prohibited unfair trade practice for any person to make use in any
manner of the protection afforded by this chapter in the sale of insurance.
(6) The recovery procedure shall provide that:
(a) If an order for liquidation or rehabilitation of a domestic insurer has
been entered, the receiver appointed under the order has a right to recover on
behalf of the insurer, from any affiliate that controlled it, the amount of
distributions, other than stock dividends paid by the insurer on its capital
stock, made at any time during the five years preceding the petition for
liquidation or rehabilitation subject to the limitations of items (b), (c), and
(d) of this subsection (6).
(b) No such dividend is recoverable if the insurer shows that when paid the
distribution was lawful and reasonable and that the insurer did not know and
could not reasonably have known that the distribution might adversely affect the
ability of the insurer to fulfill its contractual obligations.
(c) Any person who was an affiliate that controlled the insurer at the time
the distributions were paid is liable up to the amount of distributions he
received. Any person who was an affiliate that controlled the insurer at the time
the distributions were declared is liable up to the amount of distributions he
would have received if they had been paid immediately. If two persons are liable
with respect to the same distributions, they are jointly and severally liable.
(d) The maximum amount recoverable under this section is the amount needed in
excess of all other available assets of the impaired insurer to pay the
contractual obligations of the impaired insurer.
(e) If any person liable under item (c) of this subsection (6) is insolvent,
all its affiliates that controlled it at the time the dividend was paid are
jointly and severally liable for any resulting deficiency in the amount recovered
from the insolvent affiliate.
Section 38-29-140. Examination and regulation of Association; annual reports.
The Association is subject to examination and regulation by the Commissioner.
The board of directors shall annually submit to the Commissioner, by May first,
a financial report for the preceding calendar year in a form approved by the
Commissioner and a report of its activities during the preceding calendar year.
Section 38-29-150. Exemption of Association from fees and taxes.
The Association is exempt from payment of all fees and all state, county, and
municipal taxes.
Section 38-29-160. Showing certificate of contribution as asset; offset of
write-off against tax liability; payment of certain refunds to State.
(1) Unless a longer period has been allowed by the Commissioner, a member
insurer, at its option, has the right to show a certificate of contribution as
an asset in the form approved by the Commissioner pursuant to subsection (8) of
Section 38-29-80, at percentages of the original face amount approved by the
Commissioner, for calendar years as follows:
one hundred percent for the calendar year of issuance;
eighty percent for the first calendar year after the year of issuance;
sixty percent for the second calendar year after the year of issuance;
forty percent for the third calendar year after the year of issuance;
twenty percent for the fourth calendar year after the year of issuance;
zero percent for the fifth calendar year after the year of issuance and
thereafter.
(2) The insurer may offset the amount written off by it in a calendar year
under subsection (1) against its premium (or income) tax liability to this State
accrued with respect to business transacted in that year.
(3) Any sums acquired by refund, pursuant to subsection (6) of Section
38-29-80, from the Association which have previously been written off by
contributing insurers and offset against premium (or income) taxes as provided
in subsection (2) of this section and are not then needed for purposes of this
chapter must be paid by the Association to the Commissioner and by him deposited
with the State Treasurer for credit to the general fund of this State.
Section 38-29-170. Immunity from liability for action taken under chapter.
There is no liability on the part of, and no cause of action of any nature may
arise against, any member insurer or its agents or employees, the Association or
its agents or employees, members of the board of directors, or the Commissioner
or his representatives for any action taken by them in the authorized performance
of their powers and duties under this chapter.
Section 38-29-180. Stay of proceedings involving impaired insurer; setting
aside default judgment.
All proceedings in which the impaired insurer is a party in any court in this
State must be stayed sixty days from the date an order of liquidation,
rehabilitation, or conservation is final to permit proper legal action by the
Association on any matters germane to its powers or duties. As to a judgment
under any decision, order, verdict, or finding based on default the Association
may apply to have the judgment set aside by the same court that made the judgment
and must be permitted to defend against the suit on the merits.
Section 38-29-190. Final date for filing claims.
The court shall fix a date, not less than four months from the date of the
order, as the last day for the filing of claims, together with proper proofs
thereof, with the Association and shall prescribe the notice that must be given
to insureds and claimants of the date. Prior to the date fixed the court may
extend the time for the filing of claims.
Section 38-29-200. Construction.
This chapter must be liberally construed to effect the purpose under Section
38-29-30 which constitutes an aid and guide to interpretation.
CHAPTER 31
South Carolina Property and Casualty
Insurance Guaranty Association
Section 38-31-10. Short title.
This chapter is known and may be cited as the 'South Carolina Property and
Casualty Insurance Guaranty Association Act'.
Section 38-31-20. Definitions.
As used in this chapter:
(1) 'Account' means any one of the three accounts created by Section 38-31-40.
(2) 'Association' means the South Carolina Property and Casualty Insurance
Guaranty Association created under Section 38-31-40.
(3) 'Covered claim' means an unpaid claim, including one of unearned premiums,
which arises out of and is within the coverage and not in excess of the
applicable limits of an insurance policy to which this chapter applies issued by
an insurer, if the insurer is an insolvent insurer and (a) the claimant or
insured is a resident of this State at the time of the insured event, or (b) the
property from which the claim arises is permanently located in this State. It
does not include any amount due any reinsurer, insurer, insurance pool, or
underwriting association, as subrogation recoveries or otherwise.
(4) 'Insolvent insurer' means an insurer (a) authorized to transact insurance
in this State either at the time the policy was issued or when the insured event
occurred and (b) determined to be insolvent by a court of competent jurisdiction.
(5) 'Member insurer' means any person who (a) writes any kind of insurance to
which this chapter applies under Section 38-31-30, including the exchange of
reciprocal or interinsurance contracts, and (b) is licensed to transact insurance
in this State.
(6) 'Net direct written premiums' means direct gross premiums written in this
State on insurance policies to which this chapter applies, less return premiums
thereon and dividends paid or credited to policyholders on such direct business.
It does not include premiums on contracts between insurers or reinsurers.
Section 38-31-30. Application of chapter.
This chapter applies to all kinds of direct insurance except life, title,
surety, accident and health, credit, mortgage guaranty, and ocean marine
insurance.
Section 38-31-40. Association created; membership as condition of authority
to transact insurance; accounts.
There is created a nonprofit unincorporated legal entity to be known as the
South Carolina Property and Casualty Insurance Guaranty Association. All
insurers defined as member insurers in item (5) of Section 38-31-20 are members
of the Association as a condition of their authority to transact insurance in
this State. The Association shall perform its functions under a plan of
operation established and approved under Section 38-31-70 and shall exercise its
powers through a board of directors established under Section 38-31-50. For
purposes of administration and assessment, the Association is divided into three
separate accounts:
(a) the workers' compensation insurance account;
(b) the automobile insurance account; and
(c) the account for all other insurance to which this chapter applies.
Section 38-31-50. Board of directors.
(1) The board of directors of the Association shall consist of not less than
five nor more than nine persons who shall serve terms as established in the plan
of operation. Member insurers shall select the members of the board subject to
the Commissioner's approval. Any vacancy on the board must be filled for the
unexpired portion of the term in the same manner as any initial appointment.
(2) In approving selections to the board, the Commissioner shall consider,
among other things, whether all member insurers are fairly represented.
(3) Members of the board may be reimbursed from the assets of the Association
for expenses incurred by them as members of the board of directors.
Section 38-31-60. Powers and duties of Association.
The Association:
(a) Is obligated to the extent of claims existing prior to the determination
of insolvency and claims arising up to the earliest of the following dates:
(i) thirty days after the determination of insolvency;
(ii) the policy expiration date; or
(iii) the date the insured replaces or cancels the policy.
This obligation includes only the amount each covered claim is in excess of one
hundred dollars and is less than three hundred thousand dollars. However, the
Association shall pay the full amount of any covered workers' compensation claim.
In no event is the Association obligated to a policyholder or claimant in an
amount in excess of the obligation of the insolvent insurer under the policy from
which the claim arises.
(b) Is considered the insurer to the extent of its obligation on the covered
claims and, to this extent, has all rights, duties, and obligations of the
insolvent insurer as if the insurer had not become insolvent.
(c) Shall allocate claims paid and expenses incurred among the three accounts
separately and assess member insurers separately for each account amounts
necessary to pay:
(i) the obligation of the Association under item (a) of this section;
(ii) the expenses of handling covered claims;
(iii) the cost of examinations under Section 38-31-110; and
(iv) other expenses authorized by this chapter.
The assessments of each member insurer must be in the proportion that the net
direct written premiums of the member insurer for the calendar year preceding the
insolvency on the kinds of insurance in the account bear to the net direct
written premiums of all member insurers for the calendar year preceding the
insolvency on the kinds of insurance in the account. Each member insurer must be
notified of the assessment not later than thirty days before it is due. No member
insurer may be assessed in any year on any account an amount greater than one
percent of that member insurer's net direct written premiums for the calendar
year preceding the insolvency on the kinds of insurance in the account. If the
maximum assessment, together with the other assets of the Association in any
account, does not provide in any year an amount sufficient to make all necessary
payments from that account, the funds available must be prorated and the unpaid
portion must be paid as soon thereafter as funds become available. The
Association may exempt or defer, in whole or in part, the assessment of any
member insurer, if the assessment would cause the member insurer's financial
statement to reflect amounts of capital or surplus less than the minimum amounts
required for a certificate of authority by any jurisdiction in which the member
insurer is authorized to transact insurance. Any member insurer serving in the
capacity of a servicing carrier for the South Carolina Reinsurance Facility, the
South Carolina Windstorm and Hail Underwriting Association, the Medical
Malpractice Joint Underwriting Association, or any other involuntary association
may not be assessed for the premiums so written, but the assessment must be made
directly against the facility, pool, joint underwriting association, or other
association. Each member insurer serving as a servicing facility on behalf of the
Association may set off against any assessment authorized payments made on
covered claims and expenses incurred in the payment of such claims by the member
insurer.
(d) Shall investigate claims brought against the Association and adjust,
compromise, settle, and pay covered claims to the extent of the Association's
obligation and deny all other claims and may review settlements, releases, and
judgments to which the insolvent insurer or its insureds were parties to
determine the extent to which these settlements, releases, and judgments may be
properly contested;
(e) Shall notify any person the Commissioner directs under item (a) of
subsection (2) of Section 38-31-80.
(f) Shall handle claims through its employees or through one or more insurers
or other persons designated as servicing facilities. Designation of a servicing
facility is subject to the Commissioner's approval, but designation may be
declined by a member insurer.
(g) Shall reimburse each servicing facility for obligations of the Association
paid by the facility and for expenses incurred by the facility while handling
claims on behalf of the Association and pay the other expenses of the Association
authorized by this chapter.
(h) May employ or retain persons necessary to handle claims and perform other
duties of the Association.
(i) May borrow funds necessary to effect the purpose of this chapter in accord
with the plan of operation.
(j) May sue or be sued.
(k) May negotiate and become a party to contracts necessary to carry out the
purpose of this chapter.
(l) May perform any other acts necessary or proper to effectuate the purpose
of this chapter.
(m) May refund to the member insurers in proportion to the contribution of
each member insurer to that account that amount by which the assets of the
account exceed the liabilities, if, at the end of any calendar year, the board
of directors finds that the assets of the Association in any account exceed the
liabilities of that account as estimated by the board of directors for the coming
year.
Section 38-31-70. Plan of operation.
(1) The Association shall submit to the Commissioner a plan of operation and
any amendments necessary or suitable to assure the fair, reasonable, and
equitable administration of the Association. The plan of operation and any
amendments become effective upon the Commissioner's written approval. If the
Association fails to submit suitable amendments to the plan, the Commissioner
shall, after notice and hearing, adopt and promulgate reasonable amendments
necessary or advisable to effectuate the provisions of this chapter. These
amendments continue in force until modified by the Commissioner or superseded by
amendments submitted by the Association and approved by the Commissioner.
(2) All member insurers shall comply with the plan of operation.
(3) The plan of operation shall:
(a) Establish the procedures whereby all the powers and duties of the
Association under Section 38-31-60 will be performed.
(b) Establish procedures for handling assets of the Association.
(c) Establish the amount and method of reimbursing members of the board of
directors under Section 38-31-50.
(d) Establish procedures by which claims may be filed with the Association
and establish acceptable forms of proof of covered claims. Notice of claims to
the receiver or liquidator of the insolvent insurer is considered notice to the
Association or its agent and a list of these claims must be periodically
submitted to the Association or similar organization in another state by the
receiver or liquidator.
(e) Establish regular places and times for meetings of the board of
directors.
(f) Establish procedures for records to be kept of all financial
transactions of the Association, its agents, and the board of directors.
(g) Provide that any member insurer aggrieved by any final action or
decision of the Association may appeal to the Commissioner within thirty days
after the action or decision.
(h) Establish the procedures whereby selections for the board of directors
will be submitted to the Commissioner.
(i) Contain additional provisions necessary or proper for the execution of
the powers and duties of the Association.
(4) The plan of operation may provide that any or all powers and duties of the
Association, except those under items (c) and (i) of Section 38-31-60, are
delegated to a corporation, association, or other organization which performs or
will perform functions similar to those of this Association, or its equivalent,
in two or more states. This corporation, association, or organization must be
reimbursed as a servicing facility would be reimbursed and must be paid for its
performance of any other functions of the Association. A delegation under this
subsection (4) takes effect only with the approval of both the board of directors
and the Commissioner and may be made only to a corporation, association, or
organization which extends protection not substantially less favorable and
effective than that provided by this chapter.
Section 38-31-80. Powers and duties of Commissioner.
(1) The Commissioner shall:
(a) Notify the Association of the existence of an insolvent insurer not
later than three days after he receives notice of the determination of the
insolvency.
(b) Upon request of the board of directors, provide the Association with a
statement of the net direct written premiums of each member insurer.
(2) The Commissioner may:
(a) Require that the Association notify the insureds of the insolvent
insurer and any other interested parties of the determination of insolvency and
of their rights under this chapter. The notification must be by mail at their
last known address, where available, but if sufficient information for
notification by mail is not available, notice by publication in a newspaper of
general circulation is sufficient.
(b) Suspend or revoke, after notice and hearing, the certificate of
authority to transact insurance in this State of any member insurer which fails
to pay an assessment when due or which fails to comply with the plan of
operation. As an alternative, the Commissioner may levy a fine on any member
insurer which fails to pay an assessment when due. This fine may not exceed five
percent of the unpaid assessment per month, except that no fine may be less than
one hundred dollars per month.
(c) Revoke the designation of any servicing facility if he finds claims are
being handled unsatisfactorily.
Section 38-31-90. Effect of payment of claim under chapter; rights of
Association against assets of insolvent insurer.
(1) Any person recovering under this chapter is considered to have assigned
his rights under the policy to the Association to the extent of his recovery from
the Association. Every insured or claimant seeking the protection of this chapter
shall cooperate with the Association to the same extent as he would have been
required to cooperate with the insolvent insurer. The Association has no cause
of action against the insured of the insolvent insurer for any sums it has paid
out except the causes of action the insolvent insurer would have had if the sums
had been paid by the insolvent insurer. In the case of an insolvent insurer
operating on a plan with assessment liability, payments of claims of the
Association do not operate to reduce the liability of insureds to the receiver,
liquidator, or statutory successor for unpaid assessments.
(2) The receiver, liquidator, or statutory successor of an insolvent insurer
is bound by settlements of covered claims by the Association or a similar
organization in another state. The court having jurisdiction shall grant these
claims priority equal to that to which the claimant would have been entitled in
the absence of this chapter against the assets of the insolvent insurer. The
expenses of the Association or similar organization in handling claims must be
accorded the same priority as the liquidator's expenses.
(3) The Association shall periodically file with the receiver or liquidator
of the insolvent insurer statements of the covered claims paid by the Association
and estimates of anticipated claims on the Association which shall preserve the
rights of the Association against the assets of the insolvent insurer.
Section 38-31-100. Claimants required to exhaust rights under other policies;
claims recoverable from more than one association.
(1) Any person, having a claim against an insurer under any provision in an
insurance policy other than a policy of an insolvent insurer which is also a
covered claim, is required to exhaust first his right under that policy. Any
amount payable on a covered claim under this chapter must be reduced by the
amount of any recovery under that insurance policy.
(2) Any person having a claim which may be recovered under more than one
insurance guaranty association or its equivalent shall seek recovery first from
the association of the place of residence of the insured except that, if it is
a first-party claim for damage to property with a permanent location, he shall
seek recovery first from the association of the location of the property, and,
if it is a workers' compensation claim, he shall seek recovery first from the
association of the residence of the claimant. Any recovery under this chapter
must be reduced by the amount of recovery from any other insurance guaranty
association or its equivalent.
Section 38-31-110. Detection and prevention of insurer insolvencies.
To aid in the detection and prevention of insurer insolvencies:
(1) It is the duty of the board of directors, upon majority vote, to notify
the Commissioner of any information indicating any member insurer may be
insolvent or in a financial condition hazardous to the policyholders or the
public.
(2) The board of directors may, upon majority vote, request that the
Commissioner order an examination of any member insurer which the board in good
faith believes may be in a financial condition hazardous to the policyholders or
the public. Within thirty days of the receipt of this request, the Commissioner
shall begin the examination. The examination may be conducted as a National
Association of Insurance Commissioners examination or by the Commissioner. The
cost of the examination must be paid by the Association and the examination
report must be treated as are other examination reports. In no event may the
examination report be released to the board of directors prior to its release to
the public, but this does not excuse the Commissioner from complying with item
(3) of this section. The Commissioner shall notify the board of directors when
the examination is completed. The request for an examination must be kept on file
by the Commissioner, but it is not open to public inspection prior to the release
of the examination report to the public.
(3) The Commissioner shall report to the board of directors when he has
reasonable cause to believe that any member insurer examined or being examined
at the request of the board of directors may be insolvent or in a financial
condition hazardous to the policyholders or the public.
(4) The board of directors may, upon majority vote, make reports and
recommendations to the Commissioner upon any matter germane to the solvency,
liquidation, rehabilitation, or conservation of a member insurer. These reports
and recommendations are not considered public documents.
(5) The board of directors may, upon majority vote, make recommendations to
the Commissioner for the detection and prevention of insurer insolvencies.
(6) The board of directors shall, at the conclusion of any insurer insolvency
in which the Association was obligated to pay covered claims, prepare a report
on the history and causes of the insolvency, based on the information available
to the Association, and submit the report to the Commissioner.
Section 38-31-120. Examination and regulation of Association; financial
reports.
The Association is subject to examination and regulation by the Commissioner.
The board of directors shall annually submit by March thirtieth a financial
report for the preceding calendar year in a form approved by the Commissioner.
Section 38-31-130. Exemption of Association from fees and taxes.
The Association is exempt from payment of all fees and all taxes levied by this
State or any of its political subdivisions, except taxes levied on real or
personal property.
Section 38-31-140. Rates.
The rates and premiums charged for insurance policies to which this chapter
applies shall include amounts sufficient to recoup a sum equal to the amounts
paid to the Association by the member insurer less any amounts returned to the
member insurer by the Association. These rates may not be considered excessive
because they contain an amount reasonably calculated to recoup assessments paid
by the member insurer.
Section 38-31-150. Immunity from liability for action taken under chapter.
There is no liability on the part of, and no cause of action of any nature may
arise against, any member insurer, the Association or its agents or employees,
the board of directors, or the Commissioner or his representatives for any action
taken by any of them in the performance of their powers and duties under this
chapter.
Section 38-31-160. Stay of proceedings involving insolvent insurers; rights
of Association in these proceedings.
All proceedings involving covered claims in which the insolvent insurer is a
party or is obligated to defend a party in any court in this State must be stayed
sixty days from the date insolvency is determined to permit proper defense by the
Association. As to any judgment, decision, order, verdict, or finding based on
the insurer's default or failure to defend the insured, the Association may apply
to have the judgment, decision, order, verdict, or finding set aside by the same
court or administrator which made it and must be permitted to defend against the
claim on its merits.
Section 38-31-170. Termination of Association by Commissioner.
(1) The Commissioner shall by order terminate the operation of the Association
as to any kind of insurance covered by this chapter with respect to which he has
found, after hearing, that there is in effect a statutory or voluntary plan
which:
(a) is a permanent plan which is adequately funded or for which adequate
funding is provided; and
(b) extends, or will extend, to the South Carolina policyholders and
residents protection and benefits with respect to insolvent insurers not
substantially less favorable and effective to such policyholders and residents
than the protection and benefits provided with respect to such kinds of insurance
under this chapter.
(2) The Commissioner shall by the same order authorize discontinuance of
future payments by insurers to the Association with respect to the same kinds of
insurance. However, the assessments and payments must continue, as necessary,
to liquidate covered claims of insurers adjudged insolvent prior to the order and
the related expenses not covered by such other plan.
(3) In the event the operation of the Association is terminated as to all
kinds of insurance within its scope, the Association shall as soon as possible
thereafter distribute the balance of remaining money and assets, after first
discharging the Association's duties with respect to prior insurer insolvencies
and related expenses not covered by such other plan. The distribution must be
to the insurers which are then writing in this State policies of the kinds of
insurance covered by this chapter and which had made payments to this
Association, pro rata upon the basis of the aggregate of the payments made by the
respective insurers during the period of five years next preceding the date of
the order. Upon completion of the distribution with respect to all of the kinds
of insurance covered by this chapter, this chapter is considered to have expired.
Section 38-31-180. Construction.
This chapter must be so construed as to effectuate its general purpose to make
uniform the law of those states which enact it.
CHAPTER 33
Health Maintenance Organizations
Section 38-33-10. 'Health maintenance organization' defined.
A health maintenance organization is an organization which, as a minimum:
(a) Provides directly, or through agreement with others, general health
services to persons enrolled with the organization on a per capita prepaid basis,
which may include dependents of enrollees.
(b) Provides for enrollees comprehensive health maintenance and treatment
services as defined by regulations of the State Department of Health and
Environmental Control promulgated under this chapter, including at least: primary
personal physician care, emergency medical care, acute inpatient hospital care,
inpatient and outpatient medical care, and general preventive health services.
The organization may provide, with the approval of the Commissioner of Health and
Environmental Control, all other health care and services, including clinical and
institutional care of mentally ill, infirm, disabled, and aged persons, dental
care, physical and mental rehabilitation programs, podiatry, drugs, appliances,
medical equipment, and all other health-related services as recognized and
permitted by law.
(c) Provides professional health services which may include services of
physicians, dentists, nurses, pharmacists, optometrists, and other health
professionals and also hospital and clinical or other institutional services, as
necessary to the operation of an effective health maintenance program for
enrollees. These services are to be provided under contracts or agreements
between the organization and the health professionals or hospitals and
institutions concerned. The contracts must be in accord with the laws and codes
of professional ethics governing these professions, institutions, and hospitals.
(d) Demonstrates to the satisfaction of the Chief Insurance Commissioner proof
of financial capability to provide the services which it proposes to furnish to
its enrollees, establishes and maintains proper and sound bookkeeping and
actuarial practices approved by the Chief Insurance Commissioner, annually files
with the Chief Insurance Commissioner the enrollee contract forms and table of
rates for its services, and is subject to annual or other regular audit
requirements as the Chief Insurance Commissioner prescribes.
(e) Develops contracts or agreements with physicians, hospitals, and other
health professionals and institutions licensed and in good standing under the
laws of this State which satisfy the Commissioner of Health and Environmental
Control of the organization's capability to provide health maintenance and
treatment services to the group of enrollees intended to be served. The
organization may provide only health services approved by the Commissioner of
Health and Environmental Control and shall maintain quality standards approved
by him.
Section 38-33-20. Licensing of organizations; regulation of functions.
Upon compliance with this chapter, any organization, association, or
corporation, public or private, may be licensed by the State Department of Health
and Environmental Control and the State Department of Insurance to organize,
operate, and maintain a health maintenance organization for its duly enrolled
members and their dependents in this State. However, the Chief Insurance
Commissioner may, after notice and hearing, promulgate reasonable regulations
with respect to the filing and approval of contractual forms and may disapprove
the rates or premium charges for contracts upon his finding that the rates or
premium charges are not reasonable in relation to the benefits provided or to be
provided. The Chief Insurance Commissioner may also, after notice and hearing,
promulgate reasonable regulations necessary to provide for the licensing of
agents. For the purposes of this chapter, an 'agent' means a person directly or
indirectly associated with a health maintenance organization who engages in
solicitation. The Department of Insurance shall annually certify to the
Department of Health and Environmental Control that all requirements set forth
in this chapter and in regulations promulgated pursuant to it have been fully
complied with. The Department of Health and Environmental Control may not renew
the license of any health maintenance organization until the certification
concerning it has been received from the Department of Insurance. A health
maintenance organization may be annually relicensed if it complies with this
chapter and regulations promulgated pursuant to it and if enrollment in the
organization is entirely voluntary.
Section 38-33-30. Services.
Health maintenance organizations may provide directly or by contract or
agreement with other persons, corporations, institutions, associations,
foundations, or other legal entities, public or private, the services required
of it in accordance with this chapter and the laws governing these professions
and services. The organization may contract or agree with others, including an
authorized insurer, for these others to provide actuarial, underwriting,
marketing, billing, fiscal, and other services as may be required for operation
of a health maintenance organization. Nothing herein may be construed to
authorize any health maintenance organization, insurer, or any other person to
engage in the practice of medicine or any other profession except as provided by
law.
Section 38-33-40. Services in federal programs.
Health maintenance organizations may provide any services included in federal
health care programs such as 'Medicare', 'Medicaid', 'Champus', and veterans
administrations and other health programs provided in whole or in part by federal
funds, in accordance with the laws governing these programs if approval is
granted as provided for in items (d) and (e) of Section 38-33-10.
Section 38-33-50. Services to enrollees outside State.
Health maintenance services may be furnished to enrollees outside this State
only in accordance with the laws of the state or of the United States which
govern the provision of these services in the state or place concerned. However,
an enrollee may be reimbursed directly for emergency health care expenses
incurred by him while temporarily outside this State, when these expenses would
have been provided under the enrollee's program had he been within this State.
The reimbursement may not be construed as an indemnity. No health maintenance
organization may be an insurer or make any contract of insurance.
Section 38-33-60. License fees; enforcement of chapter.
The State Department of Health and Environmental Control and the State
Department of Insurance shall set and collect license fees for the operation of
health maintenance organizations, enforce the provisions of this chapter, and
promulgate regulations necessary to effectuate the purposes of this chapter, to
protect the public, and to ensure the sound, proper, and efficient operation of
health maintenance organizations in this State. License fees collected must be
utilized for the administration and enforcement of this chapter.
Section 38-33-70. Transfer of license or certificate; fee.
Any license or certificate required by law for the operation and maintenance
of a health maintenance organization may be transferred from one entity to
another with existing certificate qualifications upon payment of a transfer fee
of one thousand dollars each to the State Department of Health and Environmental
Control and the State Department of Insurance. The entity to which the licenses
and certificates are to be transferred shall meet all requirements contained in
Section 38-33-10 and must be authorized to do business in this State.
Section 38-33-80. Licensed physicians, podiatrists, optometrists, and oral
surgeons may not be prohibited from participating as provider on basis of
profession.
No health maintenance organization may prohibit any licensed physician,
podiatrist, optometrist, or oral surgeon from participating as a provider in the
organization on the basis of his profession. Nothing in this section may be
construed to interfere in any way with the medical decision of the primary health
care provider to use or not use any health professional on a case-by-case basis.
CHAPTER 35
Mutual Benevolent Aid Associations
Section 38-35-10. Formation of mutual associations.
Members of religious denominations, local lodges, or fraternal orders under the
control and supervision of a representative governing body within this State or
of local labor organizations with a national or international charter or any
number of persons, not less than twenty, a majority of whom must be bona fide
residents of this State may, when investigated and approved by the Commissioner,
form mutual associations, incorporated or unincorporated, for the purpose of
aiding their members or their beneficiaries in times of sickness and death by
levying equitable assessments for the payment of sick relief or death benefits
upon compliance with this chapter.
Section 38-35-20. Conduct of associations.
A mutual association may not have paid agents for the soliciting of business
or members and must be conducted without profit.
Section 38-35-30. Assessments.
Assessments must be made by a mutual association at the time an individual
becomes a member or at the time of death or sickness of a member and for the
purpose of paying benefits due the member because of death or sickness.
Section 38-35-40. Annual report; certificate of compliance.
Mutual associations shall file an annual report with the Commissioner. If,
after examination of the report, the Commissioner determines that the mutual
association has complied with the insurance laws, he may issue it a certificate
showing compliance.
Section 38-35-50. Examinations.
A mutual association is subject to any examination by the Commissioner which
will enable him to determine that it has complied with the state insurance laws.
Section 38-35-60. Exemption from license fees.
Mutual associations shall not pay a license fee.
CHAPTER 37
Fraternal Benefit Associations
Article 1
General Provisions
Section 38-37-10. 'Fraternal benefit association' defined.
A corporation, society, order, or voluntary association without capital stock,
organized and carried on solely for the mutual benefit of its members and their
beneficiaries and not for profit by a lodge system with ritualistic form of work
and a representative form of government and which may make provision for the
payment of benefits, in accordance with Section 38-37-730, is a 'fraternal
benefit association'.
Section 38-37-20. Associations considered operating under lodge system.
An association having a supreme governing or legislative body and subordinate
lodges or branches, by whatever name known, into which members are elected and
initiated in accordance with its constitution and bylaws, rules, regulations, and
prescribed ritualistic ceremonies, when the supreme or governing body meets at
least every fourth year, and the subordinate lodge or branches are required by
the constitution and bylaws of the association to hold regular or stated meetings
at least once each month, is considered to be operating on the lodge system.
Section 38-37-30. Associations considered to have representative form of
government.
An association is considered to have a representative form of government if it
requires in its constitution and bylaws that there be a supreme legislative or
governing body composed of representatives elected either (a) by the members or
(b) by delegates elected directly or indirectly by the members, together with any
members as may be prescribed by its constitution and bylaws. However, the
electing members must constitute a majority in number and may not have less than
a majority of the votes nor less than the votes required to amend the
constitution and bylaws of the association. Provision must be made for the
election of at least one representative to the supreme governing body from the
membership in this State.
Section 38-37-40. Standards prerequisite to incorporation or qualification.
No fraternal benefit association may be incorporated which does not provide for
stated periodic contributions sufficient to provide for meeting the mortuary
obligations contracted when valued upon the basis of the American Men Ultimate
Table of Mortality, three and one-half percent Illinois Standard, or any higher
standard with interest assumption not more than three and one-half percent per
annum. No fraternal benefit association may be admitted to transact business in
this State which does not provide for stated periodic contributions sufficient
to provide for meeting the mortuary obligations contracted when valued upon one
of the bases named in Article 11 of this chapter and applicable thereunder to the
association. No fraternal benefit association may hereafter be incorporated or
admitted to write or accept members for permanent disability benefits except upon
tables based upon reliable experience with an interest assumption not higher than
three and one-half percent.
Section 38-37-50. Applicability of chapter to certain associations.
A fraternal benefit association organized and incorporated and operating prior
to March 13, 1919, within the definition set forth in Section 38-37-10, providing
for benefits in case of death or disability resulting solely from accidents, but
which does not obligate itself to pay death or sick benefits, may be licensed
under this chapter. It shall have all the privileges and is subject to all the
provisions and regulations of this chapter, except the provisions of this chapter
requiring medical examinations, valuations of benefit certificates, and that the
certificates specify the amount of benefits.
Section 38-37-60. Chapter not applicable to certain associations.
This chapter does not apply to the following:
(1) Associations which limit their membership to one hazardous occupation.
(2) Similar societies which do not issue insurance certificates.
(3) An association of local lodges of an association.
(4) The ladies' societies or ladies' auxiliaries to such societies or
associations, doing business in this State on May 12, 1947, which provide death
benefits not exceeding five hundred dollars to any person or disability benefits
not exceeding three hundred dollars in any one year to any one person or both.
(5) Any contracts or reinsurance business on such plans in this State.
(6) Domestic associations which limit their membership to the employees of
a particular city or town or designated firm, business house, or corporation.
(7) Domestic lodges, orders, or associations of a purely religious,
charitable, and benevolent description which do not provide for a death benefit
of more than one hundred dollars or for disability benefits of more than one
hundred fifty dollars to any one person in any one year.
The Commissioner may require from an association any information that will
enable him to determine whether it is exempt from this chapter.
Section 38-37-70. General insurance laws inapplicable.
Fraternal benefit associations are governed by this chapter. The general
insurance laws of this State do not apply to fraternal benefit associations
unless express provision is made in the law for them.
Article 3
Incorporation, Powers, and Closing
of Domestic Associations
Section 38-37-210. Articles of incorporation.
Seven or more persons, citizens of the United States and a majority of whom are
citizens of this State, who desire to form a fraternal benefit association may
make, sign, giving their address, and acknowledge before some officer competent
to take acknowledgments of deeds articles of incorporation in which must be
stated:
(1) The proposed corporate name of the association, which may not so closely
resemble the name of a fraternal benefit association or insurer already
transacting business in this State as to mislead the public or to lead to
confusion;
(2) The purpose for which it is formed, which may not include more liberal
powers than are granted by this chapter, but any lawful social, intellectual,
educational, charitable, benevolent, moral, or religious advantages may be set
forth among the purposes of the society, as well as the mode in which its
corporate powers are to be exercised; and
(3) The names, residences, and official titles of all the officers,
trustees, directors, or other persons who are to have and exercise the general
control and management of the affairs and funds of the association for the first
year or until the ensuing election at which all the officers are elected by the
supreme legislative or governing body. This election must be held not later than
one year from the date of the issuance of a permanent certificate pursuant to
Section 38-37-260.
Section 38-37-220. Filing articles and other papers with Commissioner.
Articles of incorporation, duly certified copies of the constitution, and
bylaws, rules, and regulations, copies of all proposed forms of benefit
certificates, applications for benefit certificates, circulars to be issued by
the association, and a bond in the sum of five thousand dollars, with sureties
approved by the Commissioner, conditioned upon the return of the advanced
payments, as provided in Section 38-37-230, to applicants if the organization is
not completed within one year, must be filed with the Commissioner. The
Commissioner may require further information.
Section 38-37-230. Preliminary certificate and operations thereunder.
If the purposes of the association conform to the requirements of this chapter
and all laws have been complied with, the Commissioner shall so certify and
retain and record, or file, the articles of incorporation and furnish the
incorporators a preliminary certificate authorizing the association to solicit
members as herein provided. Upon receipt of the certificate from the
Commissioner, the association may solicit members for the purpose of completing
its organization and shall collect from each applicant the amount of not less
than one regular monthly payment, in accordance with its table of rates as
provided by its constitution and bylaws and shall issue to each applicant a
receipt for the amount so collected. The advanced payments must be credited to
the mortuary or disability fund on account of the applicants. No part of the
advanced payments may be used for expenses. The payments must, during the period
of organization, be held in trust, and, if the organization is not completed
within one year as herein provided, they must be returned to the applicants.
Section 38-37-240. Expiration of preliminary certificate.
No preliminary certificate granted under Section 38-37-230 is valid one year
after its date or after a further period, not exceeding one year, as may be
authorized by the Commissioner, upon cause shown, unless the five hundred
applicants required under Section 38-37-250 have been secured and the
organization has been completed as provided. The articles of incorporation and
all proceedings thereunder become null and void one year from the date of the
preliminary certificate or at the expiration of the extended period, unless the
society has completed its organization and obtained the required commercial
business.
Section 38-37-250. Prerequisites to doing other business.
No fraternal benefit association may incur any liability other than for the
advanced payments or issue any benefit certificate or pay or allow, or offer or
promise to pay or allow, to any person any death or disability benefit until:
(1) Actual bona fide applications for death benefit certificates have been
secured upon at least five hundred lives for at least one thousand dollars each,
all applicants for death benefits have been regularly examined by licensed
physicians, and certificates of examinations have been duly filed and approved
by the chief medical examiner of the association;
(2) There have been established ten subordinate lodges or branches into which
the five hundred or more applicants have been initiated;
(3) There has been submitted to the Commissioner, under oath of the president
and secretary or corresponding officers of the association, a list of the
applicants, stating their names, addresses, dates examined, dates approved, dates
initiated, names and numbers of the subordinate branch of which each applicant
is a member, amounts of benefits to be granted, and rates of stated periodic
contributions, which must be sufficient to provide for (a) meeting the mortuary
obligation contracted when valued for death benefits upon the basis of the
National Fraternal Congress Table of Mortality, as adopted by The National
Fraternal Congress, August 23, 1899, or by the American Men Ultimate Table of
Mortality, with interest assumption not more than three and one-half percent per
annum, or any higher standard at the option of the association, (b) disability
benefits by tables based upon reliable experience, and (c) combined death and
permanent total disability benefits by tables based upon reliable experience,
with an interest assumption not higher than three and one-half percent per annum;
and
(4) It has been shown to the Commissioner by the sworn statement of the
treasurer or corresponding officer of the society that at
least five hundred applicants have each paid in cash at least one regular monthly
payment as herein provided per one thousand dollars of indemnity to be effected,
which payments in the aggregate amount to at least two thousand five hundred
dollars.
Section 38-37-260. Issuance of permanent certificate.
The Commissioner may make an examination and require any further information
of a fraternal benefit association he considers advisable. Upon presentation of
satisfactory evidence that the association has complied with the law, he shall
issue to the association a certificate to that effect. The certificate is prima
facie evidence of the existence of the association at the date of the
certificate. The Commissioner shall cause a record of the certificate to be made.
A certified copy of the record may be given in evidence with like effect as the
original certificate.
Section 38-37-270. Making and altering constitution and bylaws; incidental
powers.
Every fraternal benefit association may make a constitution and bylaws for the
government of the association, the admission of its members, the management of
its affairs, and the fixing and readjusting of the rates of contribution of its
members. The association may change, alter, add to, or amend the constitution
and bylaws and has any other power necessary and incidental to carrying into
effect its objects and purposes.
Section 38-37-280. Meetings; principal office.
A domestic fraternal benefit association may provide that the meetings of its
legislative or governing body may be held in any state, district, province, or
territory where the association has subordinate branches. All business
transacted at these meetings is as valid in all respects as if the meeting had
been held in this State. However, its principal office must be located in this
State.
Section 38-37-290. Discontinuance of business as voiding charter.
When a domestic fraternal benefit association has discontinued business for the
period of one year or has less than four hundred members, its charter becomes
null and void.
Section 38-37-300. Proceedings to close associations.
If after examination the Commissioner is satisfied that a domestic fraternal
benefit association (a) has failed to comply with this chapter, (b) is exceeding
its powers, (c) is not carrying out its contracts in good faith, (d) is
transacting business fraudulently, or (e) after being in existence for one year
or more has less than four hundred members or has determined to discontinue
business, the Commissioner may present the relevant facts to the Attorney
General. If he considers the circumstances warrant, the Attorney General may
commence an action in quo warranto in a court of competent jurisdiction. The
court shall thereupon notify the officers of the association of a hearing. If it
appears at the hearing that the association should be closed, the association
must be enjoined from carrying on any further business, and the Commissioner must
be appointed receiver of the association. The Commissioner must then immediately
proceed to take possession of the books, papers, monies, and other assets of the
association and, under the direction of the court, must immediately proceed to
close the affairs of the association and to distribute its funds to those
entitled to them. These proceedings may not be commenced by the Attorney General
against an association until after notice has been duly served on the chief
executive officers of the association and a reasonable opportunity has been given
to it, on a date to be named in the notice, to show cause why the proceedings
should not be commenced.
Section 38-37-310. No application or proceeding for injunction, dissolution,
or appointment of receiver except by Attorney General.
No application or proceeding for an injunction against or for the dissolution
of or for the appointment of a receiver for a domestic fraternal benefit
association or any branch of it may be entertained by any court in this State
unless the application or proceeding is made or instituted by the Attorney
General.
Article 5
Licenses of Foreign Associations
Section 38-37-510. Requirements for licensing of foreign associations.
No foreign fraternal benefit association may transact any business in this
State without a license from the Commissioner. On seeking admission to do
business in this State a foreign association shall file with the Commissioner:
(1) A duly certified copy of its charter or articles of incorporation;
(2) A copy of its constitution and bylaws certified by its secretary or
corresponding officer;
(3) A power of attorney to the Commissioner as hereinafter provided;
(4) A statement under oath by its president and secretary or corresponding
officers in the form herein prescribed of its business for the preceding year;
(5) A copy of its application form, certificate of membership form, and all
circulars in use by it;
(6) A certificate from the proper official in its home state, territory,
district, province, or country that the association is legally organized, that
it is authorized to transact business therein, and that it has the further
qualifications required of domestic associations organized under this chapter and
has its assets invested as required by the laws of the state, territory,
district, province, or country in which it is organized; and
(7) Any other information the Commissioner may require.
Section 38-37-520. Additional requirements for admission to do business.
No foreign association not now licensed to do business in this State may be
admitted hereafter to do business in this State unless its methods and plans are
in accord with the standards recognized as applying to fraternal benefit
associations and the Commissioner is satisfied that reasonable provision has been
made to fulfill its contracts. However, the Commissioner may grant a license if
he is otherwise satisfied that a license should be granted.
Section 38-37-530. Refusal of license.
When the Commissioner refuses to license a foreign association, he shall reduce
his ruling, order, or decision to writing and file it in his office. The
Commissioner shall furnish a copy of his ruling, order, or decision, together
with a statement of his reasons, to the officers of the association.
Section 38-37-540. Revocation of licenses of foreign associations.
When the Commissioner, on investigation, is satisfied that a foreign fraternal
benefit association transacting business under this chapter (a) has exceeded its
powers, (b) has failed to comply with this chapter, (c) is conducting business
fraudulently, or (d) is not carrying out its contracts in good faith, he shall
notify the association of his findings and state in writing the grounds of his
dissatisfaction and after reasonable notice require the association, on a date
named, to show cause why its license should not be revoked. If on the date named
in the notice the objections have not been removed to the satisfaction of the
Commissioner or the association does not present good and sufficient reasons why
its authority to transact business in this State should not at that time be
revoked, the Commissioner may revoke the authority of the association to continue
business in this State.
Section 38-37-550. Continuance of contracts of association whose license is
revoked.
Nothing contained in this chapter may be taken or construed as preventing a
foreign association whose license to do business in this State has been revoked
from continuing in good faith all contracts made in this State during the time
the association was legally authorized to transact business in the State.
Article 7
General Regulations
Section 38-37-710. Annual renewal of licenses; fee.
The authority of a fraternal benefit association authorized to transact
business in this State which complies with this chapter must be renewed annually
by the Commissioner and in all cases terminates on April first. However, a
license continues in full force and effect until a new license is issued or
specifically refused. For each license or renewal the association shall pay the
Commissioner five hundred dollars. However, if the association has less than two
hundred members, it shall pay the Commissioner a fee of fifty dollars for its
license or renewal. A duly certified copy or duplicate of the license is prima
facie evidence that the licensee is a fraternal benefit association within the
meaning of this chapter.
Section 38-37-720. Amendments of or additions to constitution and bylaws must
be filed.
Every fraternal benefit association transacting business under this chapter
shall file with the Commissioner a duly certified copy of all amendments of or
additions to its constitution and bylaws within ninety days after the enactment
of the amendments or additions. Printed copies of the constitution and bylaws and
of amendments of or additions thereto, certified by the secretary or
corresponding officer of the association, are prima facie evidence of the legal
adoption of the amendments or additions to the constitution or bylaws.
Section 38-37-730. Benefits which association must and may provide.
Every fraternal benefit association transacting business under this chapter
shall provide for the payment of natural or accidental death benefits and may
provide for the payment of benefits in case of temporary or permanent physical
disability as the result of disease, accident, or old age, for the placing of and
payment for monuments or tombstones to the memory of its deceased members, and
for the payment of funeral benefits. However, the period of life at which the
payment of benefits for disability on account of old age commence may not be
under seventy years. The association may also give a member, when permanently
disabled or on attaining the age of seventy, all or that portion of the face
value of his certificate as the constitution and bylaws of the association may
provide.
Section 38-37-740. Surrender values.
Fraternal benefit associations may grant surrender values, not to exceed the
net value of the certificates, less any surrender charges as specified by the
constitution and bylaws of the association.
Section 38-37-750. Certificates payable upon death within terms of years.
Nothing contained in this chapter may be construed to prevent the issuing by
a fraternal benefit association of benefit certificates for a term of years less
than the whole of life which are payable upon the death or disability of the
member occurring within the term for which the benefit certificate may be issued.
Section 38-37-760. Beneficiaries.
The payment of death benefits must be made to the beneficiary designated by the
insured if the beneficiary has an insurable interest in the life of the insured.
Section 38-37-770. Qualifications for membership; medical examinations.
An association may admit to beneficial membership any person sixteen years of
age or over who has been examined by a competent physician and whose examination
has been supervised and approved as provided by the bylaws of the association or
who has made a declaration of insurability acceptable to the society. This
declaration is unimpeachable as evidence of insurability except upon proof of
willful misstatement. However, any beneficial member of the society who applies
for a certificate providing for disability benefits need not be required to pass
an additional
medical examination or make an additional declaration of insurability therefor.
Nothing contained in this section prevents the association from accepting
general or social members.
Section 38-37-780. Binding effect of constitution and bylaws of association.
No subordinate body or any officer or member of a subordinate body may waive
any of the provisions of the constitution and bylaws of any fraternal benefit
association. The constitution and bylaws are binding upon the association and
each and every member and his beneficiaries.
Section 38-37-790. Conditions must be specified in certificates; changes in
charter, constitution, or bylaws are binding.
Every certificate issued by a fraternal benefit association shall specify the
maximum amount of benefits provided and shall provide that the certificate, the
charter or articles of the association, the constitution and bylaws of the
association, and the application for membership and medical examination, signed
by the applicant, constitute the agreement between the association and the
member. However, any changes, additions, or amendments to the charter or
articles of the association or the constitution and bylaws duly made or enacted
after the issuance of the benefit certificate bind the member and his
beneficiaries and govern and control the contract in all respects the same as
though the changes, additions, or amendments had been made prior thereto and were
in force at the time of the application for membership.
Section 38-37-800. Surplus, emergency, and other funds; funds for benefits and
expenses.
An association may create, maintain, invest, disburse, and apply an emergency,
surplus, or other similar fund in accordance with its constitution and bylaws.
Unless otherwise provided in the contract the funds must be held, invested, and
disbursed for the use and benefit of the association. No member or beneficiary
has or may acquire individual rights or may become entitled to any apportionment
or the surrender of any part of the funds except as provided in Section
38-37-730. The funds from which benefits must be paid and the funds from which
the expenses of the association are defrayed must be derived from periodic or
other payments by the members of the society and accretions of such funds.
Section 38-37-810. Payment of expenses.
Each fraternal benefit association shall keep a separate fund for expenses.
No part of any other fund may be used for expenses or in collecting, disbursing,
or investing the reserve or disability funds. All expenses must be paid out of
the expense fund of the association.
Section 38-37-820. Division of payments; use of funds for expenses.
Every provision for payment by members of a fraternal benefit association, in
whatever form made, shall distinctly state the purpose of the payment and the
proportion of it which may be used for expenses. No part of the money collected
for mortuary or disability purposes and no part of the reserve, emergency, or
surplus funds or the net accretions of either or of any of these funds may be
used for expenses.
Section 38-37-830. Investment of funds.
A domestic fraternal benefit association may invest its funds in accordance
with the statutes regulating investments of life insurers.
Section 38-37-840. Exemption of funds from taxation.
Every fraternal benefit association organized or licensed under this chapter
is declared to be a charitable and benevolent institution, and all of its funds
are exempt from every state, county, district, municipal, and school tax, other
than taxes on real estate and office equipment and other than agents' license
fees.
Section 38-37-850. Fixed liabilities; reserve fund.
Deferred payments or installments of claims must be considered as fixed
liabilities on the happening of the contingency upon which the payments or
installments are to be paid. This liability is the present value of the future
payments or installments upon the rate of interest and mortality assumed by the
association for valuation. Every fraternal benefit association shall maintain a
fund sufficient to meet this liability regardless of proposed future collections
to meet any of these liabilities.
Section 38-37-860. Maximum interest on assessments.
No assessment levied against any certificate holder and charged against the
policy may bear interest at a greater rate than three and one-half percent per
annum compounded annually. The interest may in no event exceed the amount of the
original assessment, and no amount in excess thereof may be a charge against the
certificate.
Section 38-37-870. Benefits in associations are not subject to attachment or
like process.
No money or other benefit, charity, relief, or aid to be paid, provided, or
rendered by a fraternal benefit association is liable to attachment, garnishment,
or other process or to be seized, taken, appropriated, or applied by any legal
or equitable process or operation of law to pay any debt or liability of a member
or beneficiary or of any person who may have a right thereunder, either before
or after payment.
Section 38-37-880. No personal liability of officers or members.
Officers and members of the supreme, grand, or any subordinate body of a
fraternal benefit association are not individually liable for the payment of any
disability or death benefit provided for in the constitution and bylaws and
agreements of the association. This payment is payable only out of the funds of
the association and in the manner provided by its constitution and bylaws.
Section 38-37-890. Certain collectors considered agents of fraternal or
beneficiary associations.
When the members of a fraternal insurance or beneficiary society, order, or
association of this State or of any other state, province, or territory,
operating within this State and having lodges, councils, chapters, branches, or
subordinate or branch offices duly established and organized in this State, are,
under the laws, rules, or regulations of the society, order, or association,
required to pay or customarily and with the knowledge and consent of the society,
order, or association do pay premiums, dues, assessments, fines, or other
payments to any other member or person for the purpose of transmitting or
delivering them to the general office or to any division or subordinate or branch
office of the society, order, or association, then such member or person, by
whatever name or title known and called, so collecting the premiums, dues,
assessments, fines, and other payments is considered the agent of the fraternal
insurance or beneficiary society, order, or association.
Section 38-37-900. Annual reports and other statements.
Every fraternal benefit association transacting business in this State shall
annually file with the Commissioner by March first, in the form he requires, a
statement, under oath of its president and secretary or corresponding officers,
of its condition and standing on the previous December thirty-first and of its
transactions for the year ending on that date. It shall also furnish any other
information the Commissioner considers necessary for a proper exhibit of its
business and plan of working. The Commissioner may at other times require any
further statement he may consider necessary to be made relating to the society.
Section 38-37-910. Examination of associations by the Commissioner.
The Commissioner or any person he may appoint has the power of visitation and
examination into the affairs of any domestic fraternal benefit association. The
examiner shall have free access to all the books, papers, and documents that
relate to the business of the association and may summon and qualify as witnesses
under oath and examine its officers, agents, and employees or other persons in
relation to the affairs, transactions, and condition of the association. The
expense of the examination must be paid by the association examined upon
statement furnished by the Commissioner. The examination must be made at least
once in three years.
Section 38-37-920. Associations shall have opportunity to reply before
findings are made public.
Pending, during, or after an examination or investigation of a fraternal
benefit association, either domestic or foreign, the Commissioner may not make
public any financial statement, report, or finding, nor may he permit to become
public any financial statement, report, or finding affecting the status,
standing, or rights of the association, until a copy has been served upon the
association, at its home office, nor until the association has been afforded a
reasonable opportunity to answer any financial statement, report, or finding and
to make any showing in connection therewith as it may desire.
Section 38-37-930. False representations punishable.
Any person, officer, member, or examining physician of a fraternal benefit
association who knowingly or willfully makes any false or fraudulent statement
or representation in or with reference to any application for membership or for
the purpose of obtaining money from or benefit in any association transacting
business under this chapter is guilty of a misdemeanor and, upon conviction, must
be punished by a fine of not more than five hundred dollars or imprisonment for
not more than one year, or both, in the discretion of the court.
Section 38-37-940. Certain false statements are perjury.
Any person who (a) willfully makes a false statement of any material fact or
thing in a sworn statement as to the death or disability of a certificate holder
in a fraternal benefit association for the purpose of procuring payment of a
benefit named in the certificate of the holder or (b) willfully makes any false
statement in any verified report or declaration under oath required or authorized
by this chapter is guilty of perjury and must be proceeded against and punished
as provided by the statutes of this State in relation to the crime of perjury.
Section 38-37-950. Soliciting membership in unauthorized associations.
Any person who solicits membership for, or in any manner assists in procuring
membership in, any fraternal benefit association not authorized to do business
in this State must be punished by a fine of not more than two hundred dollars.
Section 38-37-960. General penalty.
An association or any of its officers, agents, or employees neglecting or
refusing to comply with or violating this chapter, the penalty for which neglect,
refusal, or violation is not specified in this chapter, must be fined not
exceeding two hundred dollars upon conviction.
Article 9
Death Benefits for Children
Section 38-37-1110. Death benefits authorized.
A fraternal benefit society authorized to do business in this State may provide
in its constitution and bylaws, in addition to other benefits provided for
therein, for the payment of death, endowment, and annuity benefits upon the lives
of children under twenty-one years of age at the time of application therefor,
upon the application of some adult person, and may grant withdrawal equities and
nonforfeiture options as its bylaws, rules, or regulations may provide. Every
fraternal benefit society may, at its option, organize and operate branches for
such children. Membership and initiation in local lodges are not required of the
children, nor may they have a voice in the management of the society.
(2) the Attorney General of this State, any circuit solicitor of this State,
any prosecuting attorney for a county, circuit, or district of another state or
of the United States;
(3) the South Carolina Department of Insurance, the South Carolina
Department of Highways and Public Transportation, and the South Carolina
Department of Consumer Affairs.
(b) 'Relevant' means having any tendency to make the existence of any fact
that is of consequence to the investigation or determination of the issue more
probable or less probable than it would be without the evidence.
(c) 'Action' means affirmative acts and the failure to take action.
(d) 'Immune' means that neither a civil action nor a criminal prosecution may
arise from any action taken pursuant to this article unless actual malice on the
part of the insurance company or authorized agency against the insured or gross
negligence or reckless disregard for his rights is present.
Section 38-77-1130. Provision to authorized agencies, by insurance companies,
of information regarding motor vehicle theft or motor vehicle insurance fraud;
release of information by authorized agencies; immunity from liability.
(a) Any authorized agency may require, in writing, the insurance company at
interest to release to the requesting agency any or all relevant information or
evidence considered important to the authorized agency which the company may have
in its possession, relating to any specific motor vehicle theft or motor vehicle
insurance fraud. Relevant information includes:
(1) pertinent insurance policy information relevant to theft or fraud under
investigation and any application for a policy;
(2) policy premium payment records which are available;
(3) history of previous claims made by the insured;
(4) material relating to the investigation of the loss including statements
of any person, proof of loss, and any other evidence relevant to the
investigation.
(b) When an insurance company has reason to believe that a motor vehicle loss
in which it has an interest may involve theft or a fraudulent claim, the company
may notify, in writing, an authorized agency and provide it with any or all
material developed from the company's inquiry into the loss; however, when this
information includes possible evidence of motor vehicle theft or motor vehicle
insurance fraud involving specifically named persons, the information in all
cases may be furnished to the solicitor in the circuit where the loss occurred
and he shall furnish the information to other authorized agencies if he considers
the action appropriate. When an insurance company provides any one of the
authorized agencies with notice of a theft or fraud, it is sufficient notice for
the purpose of this article.
(c) The authorized agency provided with information may release or provide the
information to any agency asked to participate in the investigation.
(d) Any insurance company providing information to an authorized agency has
the right to be informed, upon written request, as to the status of the case by
the agency within a reasonable time, as determined by the authorized agency.
(e) Any insurance company or authorized agency which releases information,
whether oral or written, and any person acting in their behalf, pursuant to this
article, is immune from any liability arising out of the release.
Section 38-77-1140. Requirement that information be held in confidence until
release is required; obligation of authorized agency, and its agents and
employees, to testify.
(a) Any authorized agency or insurance company which receives any information
furnished pursuant to this article shall hold the information in confidence until
its release is required pursuant to a criminal or civil action or proceeding.
(b) Any authorized agency, its agents, or employees, may be required to
testify in any litigation in which the insurance company at interest is named as
a party.
Section 38-77-1150. Prohibitions relative to disclosure or nondisclosure of
information.
(a) No person may intentionally or knowingly refuse to release any information
requested pursuant to this article.
(b) No person may fail to hold in confidence information required to be held
in confidence by this article.
Section 38-77-1160. Violations and penalties.
Any person who violates the provisions of this article is guilty of a
misdemeanor and upon conviction must be fined not more than three thousand
dollars or imprisoned for not more than two years, or both.
CHAPTER 79
Medical Malpractice Insurance
Article 1
General Provisions
Section 38-79-10. Medical malpractice claims to be filed by insurers with
Commissioner.
All medical malpractice insurance claims filed in the State with any insurer
must be reported to the Commissioner by the insurer in the form and under the
terms and conditions that the Commissioner prescribes. The Commissioner shall
maintain complete and accurate records on all medical malpractice claims,
including the causes of the complaints, the disposition of each claim, and any
other information which he considers important in observing and reporting on
professional liability trends in this State, including, but not limited to, the
reserves set aside for each claim, the amounts paid in settlement or awarded by
jury, and the names of the claimant and defendant. The Commissioner may release
to appropriate disciplinary and licensing agencies any such data or information
which may assist the agencies in improving the quality of health care. The
Commissioner may promulgate regulations necessary to carry out the provisions of
this section.
Article 3
South Carolina Medical Malpractice Liability
Joint Underwriting Association
Section 38-79-110. Definitions.
As used in this article:
(1) 'Association' means any joint underwriting association established
pursuant to the provisions of this article.
(2) 'Licensed health care providers' means physicians and surgeons, nurses,
oral surgeons, dentists, pharmacists, chiropractors, podiatrists, hospitals,
nursing homes, or any similar major category of licensed health care providers.
(3) 'Medical malpractice insurance' means medical professional liability
insurance or insurance protection against the legal liability of the insured and
against loss, damage, or expense incident to a claim arising out of the death or
injury of any person as the result of negligence or malpractice in rendering or
failing to render professional service by any licensed physician, licensed health
care provider, or hospital.
(4) 'Net direct premiums' means gross direct premiums written on bodily injury
liability insurance, other than automobile liability insurance, including the
liability component of multiple peril package policies, as computed by the
Commissioner, less return premiums or the unused or unabsorbed portions of
premium deposits.
Section 38-79-120. Association created; membership as a condition of authority
to transact insurance; purpose; calling Association into operation.
(1) A joint underwriting association (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, 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 such kind of insurance in
this State.
(2) The purpose of the Association is to provide medical malpractice insurance
on a self-supporting basis to the fullest extent possible.
(3) The Association must be called into operation at any time that the
Commission finds and declares the existence of an emergency because of the
unavailability of medical malpractice liability insurance, or the unavailability
of medical malpractice liability insurance on a reasonable basis through normal
channels, in respect to all or any one or more of the major categories of
licensed health care providers listed in item (2) of Section 38-79-110.
Section 38-79-130. Powers of Association.
The Association, pursuant to the provisions of this article and the approved
plan of operation in respect to medical malpractice insurance, has the power on
behalf of its members:
(1) To 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 one hundred thousand dollars for each claimant under one policy and three
hundred thousand dollars for all claimants under one policy in any one year.
(2) To underwrite medical malpractice insurance and to adjust and pay losses
with respect thereto or to appoint service companies to perform those functions.
(3) To cede and assume reinsurance.
Section 38-79-140. Plan of operation.
(1) The Association must operate pursuant to a plan of operation which shall
provide for economic, fair, and nondiscriminatory administration and for the
prompt and efficient provision of medical malpractice 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, commissions 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.
(2) 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.
(3) The plan of operation becomes effective and operative no later than thirty
days after the declaration of any emergency by the Commission.
(4) 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 due notice and public hearing.
Section 38-79-150. Application for coverage.
Any licensed health care provider in a category in which the Commission has
declared an emergency exists is entitled to apply to the Association for
coverage. The application may 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 medical
malpractice 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 article and
to those provisions of Chapter 73 of this title which are not inconsistent with
the purposes and provisions of this article.
Section 38-79-160. Statistical data and plan.
The Commissioner shall obtain complete statistical data in respect to medical
malpractice losses and reparation costs as well as all other costs or expenses
which underlie or are related to medical malpractice liability insurance. He
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 a statistical plan is promulgated all members of the
Association shall adopt and use it. The Commissioner shall also obtain
statistical data in respect to the costs of compensating or rehabilitating
victims of medical malpractice without respect to insurance for purposes of
studying the feasibility or desirability of alternative medical malpractice
compensation systems and estimating the impact of medical malpractice loss and
insurance costs upon other compensation and insurance systems such as workers'
compensation and accident and health insurance. He may require from any person
obtaining insurance through the Association loss, claim, or expense data. This
information or data is confidential and the physician-patient privilege must be
preserved.
Section 38-79-170. Investment income considered in rates and determination of
profit or loss of Association.
In respect to the structuring of rates for medical malpractice liability
insurance and the determination of the profit or loss of the Association in
respect to that insurance, due consideration must be given by the Commissioner
to all investment income.
Section 38-79-180. Initial filings of policy forms, rates, etc.
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 medical
malpractice liability insurance to be written by the Association. In the event
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.
Section 38-79-190. Policy forms; forbidden provisions; rates.
(1) The Commissioner shall specify whether policy forms and the rate structure
must be on a 'claims-made' or 'occurrence' basis and coverage may be provided by
the Association only on the basis specified by the Commissioner. The Commissioner
shall specify the 'claims-made' basis only if the contract makes provision for
residual 'occurrence' coverage upon the retirement, death, disability, or removal
from the State of the insured. Provision may be made for a premium charge
allocable to any such residual 'occurrence' coverage and the premium charges for
the residual coverage must be segregated and separately maintained for such
purpose which may include the reinsurance of all or a part of that portion of the
risk.
(2) The policy may not contain any limitation in relation to the existing law
in tort as provided by the statute of limitations of the State of South Carolina.
(3) The policy form whether on a 'claims-made' or 'occurrence' basis may 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
may never be held or considered to be an admission of fault or wrongdoing by the
insured.
(4) The premium rate charged for either or both 'claims-made' or 'occurrence'
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.
Section 38-79-200. Rate increase or assessment authorized.
The Association is authorized to provide a rate increase or assessment which
is subject to the Commissioner's approval.
Section 38-79-210. Deficits to be recouped.
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.
Section 38-79-220. Recoupment.
Effective 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
such 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.
In the event that sufficient funds are not available for the sound financial
operation of the Association, pending recoupment as provided in Section
38-79-210, all members shall, on a temporary basis, contribute to the financial
requirements of the Association in the manner provided for in Section 38-79-230.
Any such contribution must be reimbursed to the members following recoupment as
provided in Section 38-79-210.
Section 38-79-230. Insurer participation in the Association.
All insurers which are members of the Association shall participate in its
writings, expenses, profits, 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 on account 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 such
excess deficit. In the event 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.
Section 38-79-240. Plans to be binding on members of Association.
Every member of the Association is bound by the approved plan of operation of
the Association and by any other rules the board of directors of the Association
lawfully prescribes.
Section 38-79-250. Obligations of terminated members.
(1) If the authority of an insurer to transact bodily injury liability
insurance, other than automobile, in this State terminates for any reason its
obligations as a member of the Association nevertheless continue until all its
obligations have been fulfilled and the Commissioner has so found and certified
to the board of directors.
(2) If a member insurer merges into or consolidates with another insurer
authorized to transact such insurance in this State or another insurer authorized
to transact such 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
in respect to the Association.
(3) 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
thereupon 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.
Section 38-79-260. Board of directors.
The Association is governed by a board of twenty-one directors, nine of whom
are appointed by the Governor, one of whom represents consumers, two of whom
represent licensed insurance agents or brokers, three of whom are members of the
South Carolina Medical Association, two of whom are members of the South Carolina
Hospital Association, and one of whom is a member of the South Carolina Dental
Association. Twelve members 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 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 Commissioner. 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.
Section 38-79-270. Appealing actions of Association.
Any person aggrieved 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.
Section 38-79-280. Annual statement required.
The Association shall file in the office of the Commissioner 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 Commissioner
and must be in the form he directs. The Commissioner 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 38-79-290. Examination of Association.
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.
Article 5
Patients' Compensation Fund for Benefit
of Licensed Health Care Providers
Section 38-79-410. 'Licensed health care providers' defined.
As used in this article, 'licensed health care providers' means physicians and
surgeons; directors, officers, and trustees of hospitals; nurses; oral surgeons;
dentists; pharmacists; chiropractors; hospitals; nursing homes; or any similar
category of licensed health care providers.
Section 38-79-420. Creation of Patients' Compensation Fund; purpose.
There is created the South Carolina Patients' Compensation Fund (Fund) for the
purpose of paying that portion of any medical malpractice claim, settlement, or
judgment which is in excess of one hundred thousand dollars per incident or in
excess of three hundred thousand dollars in the aggregate for one year. The Fund
is liable only for payment of claims against licensed health care providers
(providers) in compliance with the provisions of this article and includes
reasonable and necessary expenses incurred in payment of claims and the Fund's
administrative expense.
Section 38-79-430. Creation of Board of Governors; members; terms; meetings.
The Board of Governors (Board) is created to manage and operate the Fund. The
Board is composed of the Chief Insurance Commissioner, three physicians to be
appointed by the Governor after consultation with the South Carolina Medical
Association, two dentists to be appointed by the Governor after consultation with
the South Carolina Dental Association, two hospital representatives to be
appointed by the Governor after consultation with the South Carolina Hospital
Association, two insurance representatives to be appointed by the Governor after
consultation with the insurance industry, one attorney to be appointed by the
Governor after consultation with the South Carolina Bar, one attorney to be
appointed by the Governor after consultation with the South Carolina Trial
Lawyers Association, and two representatives of the general public appointed by
the Governor who are unaffiliated with insurance or health care industries or the
medical or legal professions. The appointed members shall serve for a term of six
years. However, of those first appointed, one physician, one dentist, one
hospital representative, and one insurance representative must be appointed for
a term of two years and one representative of the general public, one attorney,
one insurance representative, and one hospital representative must be appointed
for a term of four years. The Board must meet at the call of the chairman or a
majority of the members but in any event it must meet at least once a year. A
majority of the Board members shall constitute a quorum for the transaction of
any business of the Board. The affirmative vote by a majority of the quorum
present at a duly called meeting after notice is required to exercise any
function of the Board. The Board may promulgate any regulations necessary to
carry out the provisions of this article. The Chief Insurance Commissioner must
act in an advisory capacity and as chairman of the Board but has no vote. He may
designate a deputy or other officer of his agency to serve in his behalf on the
Board.
Section 38-79-440. Participation in Fund.
All South Carolina licensed health care providers may participate in the Fund
and maintain the participation by remitting to the Board the appropriate
membership fees and deficit assessments as are required by the Board on or before
the provider's membership anniversary date.
Section 38-79-450. Membership fees and deficit assessments.
All Fund members shall pay annual membership fees set by the Board. In
addition to the annual membership fees, the Board may make deficit assessments
upon the determination by the Board that insufficient money is available to meet
the Fund's liabilities.
Membership in the Fund is contingent upon the Fund member making timely payment
of all membership fees and deficit assessments.
Self-insureds are eligible for membership in the Fund upon compliance with the
requirements of the Board of Governors and shall pay the same membership fees and
deficit assessments as the members.
Section 38-79-460. Fund to be held in trust; investments and expenses.
The Fund, and any income from it, must be held in trust, deposited in the
office of the State Treasurer and kept in a segregated account entitled
'Patients' Compensation Fund', invested and reinvested by the State Treasurer in
the same manner as provided by law for the investment of other state funds in
interest-bearing investments and may not become a part of the general fund of the
State. All expenses of collecting, protecting, and administering the Fund must
be paid from the Fund.
Section 38-79-470. Method of withdrawing funds; audit of Fund; public
inspection.
(1) Monies may be withdrawn from the Fund only upon the signature of the
chairman of the Board of Governors or his designee upon written warrants of the
Comptroller General, drawn on the State Treasurer to the payee designated in the
requisition.
(2) All books, records, and audits of the Fund are open for reasonable
inspection to the general public.
(3) On or before December thirty-first of each year the State Auditor shall
audit the records of the Fund and shall furnish an audited financial report to
all Fund participants, the Department of Insurance, the Legislative Audit
Council, and the Budget and Control Board.
(4) A licensed health care provider participating in the Fund may withdraw
upon written notice of thirty days prior to the date of withdrawal. However, the
provider remains subject to any assessment pertaining to any year in which he
participated in the Fund. A member who withdraws during any year is entitled to
a pro rata return of the annual membership fee.
Section 38-79-480. Actions for damages.
(1) In an action for damages arising out of the rendering of medical services
against a licensed health care provider covered under the Fund, the provider
shall within five days of receipt of summons and complaint, excluding the first
day and holidays, give notice to the Board of the action. If after reviewing the
facts upon which the action is based it appears that the claim will exceed one
hundred thousand dollars, the Board in its discretion may appear and actively
defend the Fund. In so defending, the Board may retain counsel and pay out of the
Fund attorney's fees and expenses including court costs incurred in defending the
Fund. Any judgment affecting the Fund may be appealed.
(2) It is the responsibility of the insurer providing insurance for a licensed
health care provider who is also covered by the Fund or for the self-insured
provider covered by the Fund to provide an adequate defense on any claim filed
that potentially affects the Fund with respect to such insurance contracts or
self-insured's liability. The insurers or self-insured providers must act in a
fiduciary relationship with respect to any claim affecting the Fund. No
settlement exceeding one hundred thousand dollars per incident, or three hundred
thousand dollars in the aggregate for one year, may be agreed to unless approved
by the Board.
(3) A person who has recovered a final judgment or a settlement approved by
the Board against a provider covered by the Fund may file a claim with the Board
to recover that portion of the judgment or settlement which is in excess of one
hundred thousand dollars or three hundred thousand dollars in the aggregate for
one year. In the event the Fund incurs liability exceeding one hundred thousand
dollars to any person under a single occurrence the fund may not pay more than
one hundred thousand dollars per year until the claim has been paid in full.
However, in its discretion the Board may pay an amount in excess of one hundred
thousand dollars so as to avoid the payment of interest.
(4) Claims filed against the Fund must be paid in the order received within
ninety days after filing unless the judgment is appealed. If the Fund does not
have enough money to pay all of the claims, claims received after the funds are
exhausted are immediately payable the following year in the order in which they
were received.
Section 38-79-490. Judicial review.
Any ruling, action, or decision by or on behalf of the Fund is subject to
judicial review as provided in Section 1-23-380.
CHAPTER 81
Legal Malpractice Insurance
Section 38-81-10. Legal professional malpractice claims to be filed by insurer
with Commissioner.
All legal professional malpractice insurance claims filed in the State with any
insurer must be reported to the Commissioner by the insurer in the form and under
the terms and conditions that he prescribes. The Commissioner shall maintain
complete and accurate records on all the claims including the causes of the
complaints, the disposition of each claim, and any other information which he
considers important in observing and reporting on professional liability trends
in this State, including, but not limited to, the reserves set aside for each
claim, the amounts paid in settlement or awarded by jury, and the names of the
claimant and defendant. The Commissioner may release to appropriate disciplinary
and licensing agencies any data or information which may assist the agencies in
improving the quality of legal professional service. The Commissioner may
promulgate regulations necessary to carry out the provisions of this chapter.
Section 38-81-20. Exemption from liability for action taken in performance of
powers and duties in reporting legal professional malpractice claims.
There is no liability on the part of, and no cause of action of any nature may
arise against, any insurer, its officers, its agents, or employees or the
Commissioner or his representatives for any action taken by them in performance
of their powers and duties under this chapter."
Secretary of State and service of process
SECTION 2. Section 15-9-280 of the 1976 Code is amended to read:
"Section 15-9-280. (a) Any act of transacting an insurance business as
set forth in Section 38-25-110 by an unauthorized insurer is equivalent to and
constitutes an irrevocable appointment by the insurer, binding upon him, his
executor or administrator, or successor in interest if a corporation, of the
Secretary of State or his successor in office to be the true and lawful attorney
of the insurer upon whom may be served all lawful process in any action, suit,
or proceeding in any court by the Chief Insurance Commissioner or by the State
and upon whom may be served any notice, order, pleading, or process in any
proceeding before the Chief Insurance Commissioner and which arises out of
transacting an insurance business in this State by the insurer. Any act of
transacting an insurance business in this State by an unauthorized insurer is
signification of its agreement that any such lawful process in such court action,
suit, or proceeding and any such notice, order, pleading, or process in such
administrative proceeding before the Chief Insurance Commissioner so served are
of the same legal force and validity as personal service of process in this State
upon the insurer.
(b) Service of process in such action is made by delivering to and leaving
with the Secretary of State, or some person in apparent charge of his office, two
copies thereof and by payment to the Secretary of State of the fee prescribed by
law. Service upon the Secretary of State as attorney is service upon the
principal.
(c) The Secretary of State shall immediately forward by certified mail one of
the copies of the process or the notice, order, pleading, or process in
proceedings before the Chief Insurance Commissioner to the defendant in the court
proceeding or to whom the notice, order, pleading, or process in the
administrative proceeding is addressed or directed at its last known principal
place of business and shall keep a record of all process so served on him which
shall show the day and hour of service. The service is sufficient if:
(1) Notice of the service and a copy of the court process or the notice,
order, pleading, or process in the administrative proceeding are sent within ten
days thereafter by certified mail by the plaintiff or the plaintiff's attorney
in the court proceeding or by the Chief Insurance Commissioner in the
administrative proceeding to the defendant in the court proceeding or to whom the
notice, order, pleading, or process in the administrative proceeding is addressed
or directed at the last known principal place of business of the defendant in the
court or administrative proceeding; and
(2) The defendant's receipt or receipts issued by the post office with which
the letter is registered, showing the name of the sender of the letter and the
name and address of the person or insurer to whom the letter is addressed, and
an affidavit of the plaintiff or the plaintiff's attorney in a court proceeding
or of the Chief Insurance Commissioner in an administrative proceeding, showing
compliance therewith, are filed with the clerk of court in which the action,
suit, or proceeding is pending or with the Chief Insurance Commissioner in
administrative proceedings, by the date the defendant in the court or
administrative proceeding is required to appear or respond thereto, or within any
further time as the court or Chief Insurance Commissioner may allow.
(d) No plaintiff is entitled to a judgment by default, a judgment with leave
to prove damages, or a judgment pro confesso in any court or administrative
proceeding in which court process or notice, order, pleading, or process in
proceedings before the Chief Insurance Commissioner is served under this section
until the expiration of thirty days from the date of filing of the affidavit of
compliance.
(e) Nothing in this section limits or affects the right to serve any process,
notice, order, or demand upon any person or insurer in any other manner permitted
by law."
Chief Insurance Commissioner and service of process
SECTION 3. Article 3 of Chapter 9 of Title 15 of the 1976 Code is amended by
adding:
"Section 15-9-285. (a) The issuance and delivery of a policy of
insurance or contract of insurance or indemnity to any person in this State or
the collection of a premium thereon by an insurer not licensed in this State, as
required, irrevocably constitutes the Chief Insurance Commissioner, and his
successors in office, the true and lawful attorney in fact upon whom service of
any and all processes, pleadings, actions, or suits arising out of the policy or
contract in behalf of the insured may be made.
(b) Service of process in such action is made by delivering to and leaving
with the Chief Insurance Commissioner or some person in apparent charge of his
office two copies thereof and by payment to the Chief Insurance Commissioner of
a fee of four dollars.
(c) The Chief Insurance Commissioner shall immediately mail by registered mail
one of the copies of the process to the defendant at its last known principal
place of business and shall keep a record of all process serviced upon him. The
service of process is sufficient if:
(1) Notice of the service and a copy of the process are sent within ten days
thereafter by registered mail by the plaintiff's attorney to the defendant at its
last known principal place of business; and
(2) The defendant's receipt or a receipt issued by the post office with
which the letter is registered, showing the name of the sender of the letter and
the name and address of the person to whom the letter is addressed, and the
affidavit of the plaintiff's attorney showing compliance herewith are filed with
the clerk of court in which the action is pending by the date the defendant is
required to appear or within such further time as the court may allow.
(d) No plaintiff is entitled to a judgment by default, a judgment with leave
to prove damages, or a judgment pro confesso under this section until the
expiration of thirty days from the date of filing of the affidavit of compliance.
(e) Nothing in this section limits or abridges the right to serve any process,
notice, order, or demand upon any person or insurer in any other manner permitted
by law."
Service of process; unauthorized insurer
SECTION 4. Section 15-9-290 of the 1976 Code is amended to read:
"Section 15-9-290. Service of process in any action, suit, or proceeding
involving an unauthorized insurer is, in addition to the manners provided in
Section 15-9-280 and Section 15-9-285, valid if served upon any person within
this State who, in this State on behalf of the insurer, is:
(1) soliciting insurance,
(2) making any contract of insurance or issuing or delivering any policies or
written contracts of insurance, or
(3) collecting or receiving any premium for any such insurer, or adjusting any
loss or claim for such insurance, and if counsel, within ten days after service
upon such person, causes to be sent by registered mail to the last known address
of the insurer a copy of the process with proper postage affixed to the envelope
containing it and files an affidavit with the clerk of court or magistrate in
whose court the cause is pending, of compliance herewith, with leave to the court
to extend the time for the mailing of process and filing of affidavit."
Firemen's insurance and inspection fund
SECTION 5. Chapter 9 of Title 23 of the 1976 Code is amended by adding:
"Article 3
Firemen's Insurance and Inspection Fund
Section 23-9-310. In each city or town which has a regularly organized fire
department under the control of the mayor and council or intendant and council
of that city or town and in each unincorporated community having a population of
two hundred fifty persons within an area of one mile radius in this State which
has a regularly organized fire department under the control of a responsible
authority or representative group of citizens in the community having in
serviceable condition for fire duty fire apparatus and necessary equipment
belonging thereto to the value of ten thousand dollars and upwards and having a
total personnel of not less than ten men, including paid and volunteer members,
deriving benefits from the provisions of this article, there must be appointed
a local board of trustees, to be known as the trustees of the firemen's insurance
and inspection fund, to be composed of three or five members.
Section 23-9-320. The board of trustees of the firemen's insurance and
inspection fund in cities and towns, if composed of three, consists of the mayor,
the councilman in charge of the fire department or the chairman of the fire
committee, and the chief of the fire department. The board in cities and towns,
if composed of five, consists of the chairman of the board of fire masters or the
chairman of the fire committee, the chief of the fire department, the city or
town treasurer, and two citizens, one to be appointed by the mayor and one to be
appointed by the chief of the fire department, both to be confirmed by the
governing body of the city or town. The term of office of the last two named
members of the board is four years and until their successors are appointed and
confirmed and qualify for office.
Section 23-9-330. The board of trustees of the firemen's insurance and
inspection fund in unincorporated communities is composed of the treasurer of the
county in which the greater part of the community is located and any residents
of the community as may be appointed by the treasurer, on a recommendation by a
majority of the legislative delegation or delegations of the county or counties
in which the community is located. The term of office of the members, other than
the county treasurer, is four years, and they shall serve until their successors
are appointed and qualify for office.
Section 23-9-340. All members of the board of trustees of each firemen's
insurance and inspection fund shall serve without compensation. The board shall
elect from its number a chairman and secretary who shall likewise serve without
compensation. The treasurer of the city or town, or, for a fund for an
unincorporated community, the county treasurer, shall act as the treasurer of the
board and is custodian of all funds received as a result of the provisions of
this article.
Section 23-9-350. No city or town may enjoy any benefits under this article
unless it has passed a suitable ordinance approved by the State Fire Marshal
providing a building and inspection code for the proper erection and inspection
of all buildings in the city or town so as to eliminate, as far as may be
possible, the danger of fires arising from defective construction or the presence
and existence of inflammable and combustible material and conditions.
Section 23-9-360. Every incorporated city or town and every county in which
is located any unincorporated community accepting the benefits of this article
shall annually, by February first, designate some person as the fire inspector
for the city, town, or county and this person shall quarterly, by the first day
of April, July, October, and January, make an inspection of every public building
and business establishment located within the city, town, or county. Whenever the
fire inspector finds in any building or establishment any combustible material
or inflammatory conditions dangerous to the safety of the building or premises,
he shall order the material or conditions removed. Quarterly reports must be
filed with the State Fire Marshal, and one of these quarterly reports is
considered an annual report and shall show in detail any hazardous or inflammable
condition in connection with the condition of every public building, business
establishment, or residence in the city, town, or county. If the requirements of
this section are not complied with, the city, town, or county fire department is
considered to have waived its rights for that year to the benefits to be derived
under this article, and the treasurer of each county is directed not to
distribute any benefits under this article to any city, town, or county fire
department which has waived its rights to the benefits.
Section 23-9-370. For the purpose of supervision and inspection and as a
guaranty that the provisions of this article are administered as herein set
forth, every fire department enjoying the benefits of this article must be a
member of the South Carolina State Firemen's Association. The association may
supervise and inspect the operation of the ordinance required in this article
to be passed in each of the several towns and cities enjoying the benefits of
this article.
Section 23-9-380. The clerk of any incorporated city or town and the treasurer
of the county in which is located the greater part of any unincorporated
community accepting the benefits of this article as required herein shall
annually, by October thirty-first, make and file with the State Fire Marshal on
a blank to be furnished by the State Fire Marshal his certificate stating the
existence of the department, the number of steam, hand, or other engines, hook
and ladder trucks, and hose carts in actual use, the number of organized
companies, and the system of water supply in use for the department, together
with any other facts the State Fire Marshal requires. If the certificate required
by this section is not filed with the State Fire Marshal by October thirty-first
in any year, the city, town, or community failing to file the certificate is
considered to have waived and relinquished its rights for that year to any
benefits distributed under this article by the county treasurer.
Section 23-9-390. Any volunteer fire department having a headquarters station
within or without a municipality, which is duly organized and has the officers
which normally comprise the membership of a regular, organized fire department,
with ten or more active members, is designated a regular, organized fire
department.
The chief of the department shall annually certify to the governing body of the
municipality or the county, dependent upon where the headquarters station is
located, the names of all officers and active members. The clerk of the governing
body shall in turn certify the names of the active members and the officers to
the State Fire Marshal.
Section 23-9-400. Any benefits accruing to an area serviced by a volunteer
fire department which qualifies as a regular, organized fire department must be
transmitted to the treasurer of the governing body of the area and distributed
according to the provisions of this article.
Section 23-9-410. The State Treasurer shall pay over the amount collected upon
the premiums of the insurance business required to be reported under the
provisions of Section 38-7-70 to the treasurers of the counties to which the
premiums are allocated under the provisions of Section 38-7-70 in the respective
portions resulting from the allocations. All monies so collected must be set
apart and equitably used by each of the treasurers solely and entirely for the
betterment and maintenance of skilled and efficient fire departments within the
county.
Section 23-9-420. All monies or other benefits received and distributed under
the provisions of this article by a city, town, or county treasurer or other
financial officer must be distributed to the trustees of the local fire
department designated by the county treasurer or other financial officer to
receive the benefits within forty-five days after the receipt of the monies or
other benefits in the initial year and within thirty days each year thereafter.
Each designated fire department shall receive an amount of the tax computed on
the basis of the assessed value of improvements to real estate within the service
areas of the fire department, and all monies must be administered by the trustees
under the regulations adopted by them.
Section 23-9-430. For the purposes of Section 23-9-370 and to defray the
expenses thereof, each county treasurer shall pay over to the treasurer of the
South Carolina State Firemen's Association the sum of five percent of the gross
proceeds received annually by each county, town, or unincorporated community from
the one percent tax on fire insurance allocated to the city, town, or community.
The sums so paid must be expended for the sole purpose of the betterment and
maintenance of skillful and efficient fire departments within the county.
Section 23-9-440. In cities which have adopted the provisions of Article 4 of
Chapter 7 of Title 61 of the 1962 Code of Laws of South Carolina, the provisions
of Sections 23-9-410 to 23-9-430 are subject to the provisions of Section 61-424
of the 1962 Code and in particular item (5) thereof.
Section 23-9-450. Before any disbursements exceeding one hundred dollars of
the funds of any firemen's insurance and inspection fund are made by the
treasurers of the counties, they shall first submit to the supervising trustees
of the South Carolina State Firemen's Association a statement of how the funds
are to be expended and shall receive from the trustees their written approval of
the manner and method by which the funds are to be disbursed, so that the South
Carolina Firemen's Association shall know that the funds are being expended
solely for the benefit of the firemen of each particular fire department in the
State. If a proposed disbursement is to be expended legally and in accordance
with the law, it is mandatory upon the supervising trustees to give their
approval. Failure upon the part of any treasurer to comply with the foregoing
makes him liable on his official bond.
Section 23-9-460. No funds of firemen's insurance and inspection fund may be
divided among the firemen of any fire department in cash. When any fire
department by a majority provides for the expenditure of any funds for the
collective benefit and enjoyment of the entire department, it is mandatory for
the local trustees and the state trustees of the South Carolina State Firemen's
Association to approve the expenditure. None of the funds may be expended in any
manner for any purpose for which any city, town, unincorporated community, or
county may be legally liable.
Section 23-9-470. No funds from the firemen's insurance and inspection fund
may be withheld or used for any purpose except as prescribed in this article, and
no agency of the State, including the Budget and Control Board, has the authority
to reduce the amounts required to be distributed to counties and municipalities
under the provisions of this article."
Motor club services
SECTION 6. Title 39 of the 1976 Code is amended by adding:
"CHAPTER 61
Motor Club Services Act
Section 39-61-10. Short title.
This chapter is known and may be cited as the 'Motor Club Services Act'.
Section 39-61-20. Definitions.
As used in this chapter:
(a) 'Administrator' means the Administrator of the Department of Consumer
Affairs.
(b) 'Club' means any person presently or hereafter engaged in selling,
furnishing, or making available to members, either as principal or agent, motor
club services.
(c) 'Club representative' means any individual in this State designated by the
club who acts or aids in any manner in the solicitation, negotiation, or renewal
of service contracts. This definition does not include any individual performing
only work of a clerical nature in the office of a club or providing an
application to a potential club member.
(d) 'Insurance service' means any act by a club to sell or furnish to a member
insurance benefits, including, but not limited to, accidental injury and death
benefits when the insurance is issued only by an insurance company duly
authorized to do business in this State.
(e) 'Motor club service' means the rendering, furnishing, or procuring of, or
reimbursement for, any of the following: towing service, bail and arrest bond
service, emergency road service, claim adjustment service, legal service, theft
service, map service, emergency travel expense service, community traffic safety
service, license service, merchandise and discount service, travel, touring, and
travel information service, guaranteed hotel/motel rates service, new car pricing
service, financial service, check cashing service, personal property registration
service, credit card service, insurance service, and buying and selling service
to any member of the club.
(f) 'Service contract' means any written agreement whereby any club, for a
consideration, promises to render, furnish, or procure for any member a motor
club service.
Section 39-61-30. Deposit of cash, securities, or bonds.
A club may not render or agree to render a motor club service without first
depositing and thereafter continuously maintaining the amount of fifty thousand
dollars in cash or securities approved by the Administrator or, in lieu thereof,
a bond in the amount of fifty thousand dollars executed by a surety company
authorized by the laws of this State to transact business within this State. The
bond must be executed to the State of South Carolina and must be for the use of
the State and for any members who may have a cause of action against the club.
Section 39-61-40. Security; required assurances.
The security:
(a) Must be for the protection, use, and benefit of all persons whose
applications for membership in a motor club have been accepted by the club or its
representatives.
(b) Shall assure that the club faithfully furnishes and renders to members any
and all of the motor club services furnished, sold, or offered for sale by it.
(c) Shall assure that the club complies with and abides by all the provisions
of this chapter and all the regulations of the Administrator prescribed,
published, adopted, and promulgated under authority of this chapter.
(d) Shall assure that the club pays all fines and penalties that may become
due to the State from the club and by virtue of the provisions of this chapter.
Section 39-61-50. Suits by aggrieved members; aggregate liability.
If any member is defrauded or aggrieved by any misconduct, wrongful act,
misrepresentation, or failure of the club to render its services or fulfill its
contractual obligations, the member may bring suit on the security in his own
name, but the aggregate liability of the surety for all suits may, in no event,
exceed the amount of the bond.
Section 39-61-60. Submission and approval of club name.
The name of the club must be submitted to the Administrator with its
application for a certificate of authority, and the Administrator shall approve
any name so submitted unless the proposed name is deceptively similar to that of
any other club licensed or qualified to do business in this State or unless the
name is likely to confuse or mislead the public.
Section 39-61-70. Application for, and issuance of, certificate of authority;
fee.
(a) No club may offer, issue, or renew a motor club service contract in this
State without first obtaining from the Administrator a certificate of authority
so to act. A certificate of authority must be issued by the Administrator to the
club upon submission of items (1) through (6) of this subsection (a) in a form
satisfactory to the Administrator. The applicant shall submit:
(1) A formal application for the certificate in the form and detail the
Administrator requires, executed under oath by its president and secretary or two
other principal officers of the club or other persons the Administrator may
require.
(2) A certified copy of its charter or articles of incorporation and its
bylaws, if any.
(3) If a corporation, a certified copy of the certificate of authority or
good standing certificate from the Secretary of State.
(4) A copy of its most recent financial statement prepared in accordance
with generally accepted accounting principles and certified by two principal
officers of the applicant or, in the event the applicant is not a corporation,
other persons as the Administrator may require.
(5) An explanation of its plan of doing business and copies of the
following:
(i) Its application for membership.
(ii) The proposed membership certificate or identification card and any
proposed addendum thereto.
(iii) Any individual insurance policy or group certificate to be offered.
(iv) Any service contract to be issued.
(6) Any other relevant information requested by the Administrator.
(b) No certificate of authority may be issued by the Administrator until the
club has paid an initial certificate of authority fee of five hundred dollars.
Section 39-61-80. Certificates of authority permanent unless suspended or
revoked; renewal requirements.
Certificates of authority issued hereunder are permanent unless revoked or
suspended as provided in this chapter. No certificate of authority may be renewed
by the Administrator until the club has:
(a) Paid an annual certificate of authority renewal fee of five hundred
dollars by October thirty-first.
(b) Filed a copy of its most recent financial statement prepared in accordance
with generally accepted accounting principles and certified by two principal
officers of the club or, in the
event the applicant is not a corporation, other persons as the Administrator may
require.
Section 39-61-90. Service of process.
(a) Serving of process in any action, rule, order, or legal proceeding may be
made on any club not domiciled in this State having a certificate of authority
to transact business in this State by mailing two copies of the process to the
Administrator by registered or certified mail. One copy, certified by the
Administrator or his deputy as having been served upon him, is considered
sufficient evidence, and service upon the Administrator or his deputy as attorney
is considered valid service upon the club.
(b) When legal process is served upon the Administrator as attorney for a club
not domiciled in this State, he shall forthwith forward one of the duplicate
copies of the process served on him to the club. The Administrator shall give
immediate notice of process to the club by telephone. As a condition of valid and
effective service and of the duty of the Administrator in the premises, the
plaintiff in each process shall pay to the Administrator at the time of service
the sum of ten dollars, which the plaintiff may recover as taxable costs in the
case if he prevails in the suit. The Administrator shall keep a record of all
processes, which shall show the day and hour of service and where and by whom
served.
Section 39-61-100. Cease and desist orders; revocation or suspension of
certificate of authority.
The Administrator may order the club to cease and desist, or may revoke,
suspend, or refuse to continue the certificate of authority of a club, whenever,
after a hearing and for cause shown, he determines that the club:
(a) Has violated or failed to comply with any provisions of this chapter or
regulations promulgated under authority of this chapter.
(b) Has obtained a certificate of authority through willful misrepresentation
or fraud.
(c) Has engaged in fraudulent or deceptive practices.
(d) Has willfully, orally or in writing, misrepresented the terms, benefits,
privileges, and provisions of any service contract issued or to be issued by it
or any other club.
(e) Is unable to meet its obligations as determined by generally accepted
accounting principles.
(f) Has, after notice to the club of an alleged occurrence of any of items (a)
through (e) of this section, refused without just cause to submit relevant
information to the Administrator with respect to the motor club services within
this State.
Section 39-61-110. Requirements of service contracts.
No service contract may be issued or delivered in this State unless it
contains:
(a) The exact corporation or other name of the club.
(b) The exact location of its home office or any business office to which
inquiries may be made.
(c) The motor club services contracted for.
(d) The territory wherein motor club services contracted for are to be
rendered.
(e) The duration of the service contract.
Section 39-61-120. Registration of club representatives; termination of
representative's authority; fee.
(a) No individual may act as a club representative in this State without the
club having registered the individual with the Administrator within thirty days
of the date of designation as a club representative. Registration as a club
representative must be made to the Administrator upon forms prescribed and
furnished by him. The registration is permanent, subject to revocation or
suspension as provided in this chapter.
(b) The club representative shall furnish information concerning his identity,
business address, personal history, business experience, and other information
that the Administrator considers pertinent and germane. A club representative:
(1) Must be at least eighteen years of age.
(2) Must be a trustworthy person of good repute.
(3) Shall have received training from the club or must have otherwise
qualified by experience in the business of clubs rendering motor club services.
(c) Any willful misrepresentation of any information required to be disclosed
in any registration is subject to the sanctions provided for in this chapter.
(d) Upon termination of any club representative's authority to act on behalf
of the club, the club shall notify the Administrator in writing within thirty
days of termination.
(e) The fee to be paid to the Administrator at the time registration is made,
and annually by April thirtieth for the renewal, is ten dollars.
Section 39-61-130. Sanctions for noncompliance by club representative.
Upon satisfactory evidence that a club representative has violated or failed
to comply with any provision of this chapter or regulation promulgated under
authority of this chapter, the Administrator may issue an order requiring the
club representative to cease and desist from engaging in the violation or may
revoke or suspend the club representative's authority.
Section 39-61-140. Restrictions on advertising.
No club may make reference to its certificate of authority or approval from the
Administrator or the State in advertising, circular, contract, or a membership
card nor may it advertise or describe its services in a manner which would lead
the public to believe that it is an insurance company, association, or exchange.
Section 39-61-150. Services subject exclusively to this chapter.
The offering of motor club services is subject solely and exclusively to the
provisions of this chapter and the offering of services by any authorized club
is not considered transacting business as an insurance company, association, or
exchange, except as otherwise provided herein.
Section 39-61-160. Authority of Administrator.
The Administrator shall administer this chapter and may promulgate regulations,
subject to Act 176 of 1977 (the Administrative Procedures Act) necessary to carry
out its provisions.
Section 39-61-170. Violations; penalties.
Any person who violates the provisions of this chapter is guilty of a
misdemeanor and, upon conviction, must be punished by a fine of not more than
five hundred dollars or imprisonment for not more than three months, or both.
Section 39-61-180. Sale of insurance by club representatives; license
requirements.
A club representative is not required to be a licensed insurance agent in
connection with the sale of accidental injury and death benefits or other
insurance covering a motor club service, which is issued in conjunction with and
as a part of a motor club service contract but must be licensed to sell any other
type of insurance.
Section 39-61-190. Incidental services.
Nothing contained in this chapter prohibits a club from offering services which
augment or are incidental to any service offered by the club or any other
services which are of assistance and are beneficial to members and are feasible
for the club to render.
Section 39-61-200. Attorney's fees.
Any person who brings a civil suit for damages suffered because of any
violation of any provision of this chapter, or any regulation promulgated by its
authority, and who prevails in the suit, may be awarded reasonable attorney's
fees."
Motor vehicles; satisfaction of judgments
SECTION 7. Section 56-9-480 of the 1976 Code is amended to read:
"Section 56-9-480. Judgments referred to in this article must, for the
purpose of this article only, be considered satisfied:
(1) When fifteen thousand dollars has been credited upon any judgment rendered
in excess of that amount because of bodily injury to or death of one person as
the result of any one accident;
(2) When, subject to the limit of fifteen thousand dollars because of bodily
injury to or death of one person, the sum of thirty thousand dollars has been
credited upon any judgments rendered in excess of that amount because of bodily
injury to or death of two or more persons as the result of any one accident; or
(3) When five thousand dollars has been credited upon any judgments rendered
in excess of that amount because of injury to or destruction of property of
others as a result of any one accident.
Payments made in settlement of any claims because of bodily injury, death, or
property damage arising from a motor vehicle accident must be credited in
reduction of the amounts provided for in this section."
Motor vehicles; proof of financial responsibility
SECTION 8. Section 56-9-580 of the 1976 Code, as last amended by Act 80 of 1977,
is further amended to read:
"Section 56-9-580. Proof of financial responsibility may be evidenced by
the certificate of the State Treasurer that the person named therein has
deposited with him thirty-five thousand dollars in cash or securities such as may
legally be purchased by savings banks or for trust funds of a market value of
thirty-five thousand dollars. The State Treasurer may not accept the deposit and
issue a certificate therefor and the Department may not accept the certificate
unless accompanied by evidence that there are no unsatisfied judgments of any
character against the depositor in the county where the depositor resides.
The deposit must be held by the State Treasurer to satisfy, in accordance with
the provisions of this chapter, any execution on a judgment issued against the
person making the deposit for damages, including damage for care and loss of
service, because of bodily injury to or death of any person or for damages
because of injury to or destruction of property, including the loss of use
thereof, resulting from the ownership, maintenance, use, or operation of a motor
vehicle after the deposit was made. Money or securities deposited are not
subject to attachment or execution unless the attachment or execution arises out
of a suit for damages which this chapter covers."
Motor vehicle registration; financial security; insurance
SECTION 9. Title 56 of the 1976 Code is amended by adding:
"CHAPTER 10
Motor Vehicle Registration and
Financial Security
Article 1
Vehicle Financial Security
and Other Matters
Section 56-10-10. Every owner of a motor vehicle required to be registered in
this State shall maintain the security required by Section 56-10-20 with respect
to each such motor vehicle owned by him throughout the period the registration
is in effect. No certificate of registration may be issued or transferred to an
owner by the Chief Commissioner of the Department of Highways and Public
Transportation unless the owner or prospective owner produces satisfactory
evidence that such security is in effect.
Section 56-10-20. The security required under this chapter is a policy or
policies written by insurers authorized to write such policies in South Carolina
providing for at least (1) the minimum coverages specified in Sections 38-77-140
through 38-77-230 and (2) the benefits required under Sections 38-77-240,
38-77-250, and 38-77-260. However, the Chief Commissioner of the Department of
Highways and Public Transportation may approve and accept another form of
security in lieu of such a liability insurance policy if he finds that such other
form of security is adequate to provide and does in fact provide the benefits
required by this chapter.
Section 56-10-30. If at any time the security required of any person under
Section 56-10-20 lapses or terminates, the certificate of registration of the
motor vehicle for which the security was in effect is, as of the date the
security lapses or terminates, automatically suspended and must remain suspended
until the security is replaced.
Section 56-10-40. Every insurer writing automobile liability insurance in this
State and every provider of other security approved and accepted by the Chief
Commissioner of the Department of Highways and Public Transportation in lieu of
such insurance shall immediately notify the Chief Commissioner of the Department
of Highways and Public Transportation of the lapse or termination of any such
insurance or security issued to or provided for a resident of this State. Upon
receipt of any such notice the Chief Commissioner of the Department of Highways
and Public Transportation shall make a reasonable effort to notify the person
that his certificate of registration has been suspended and shall recover the
certificate from such person and the motor vehicle registration plates from the
vehicles concerned.
Section 56-10-50. No suspension of a certificate of registration hereunder
affects the status of title to the motor vehicle or any property rights in such
motor vehicle, but the provisions of Section 56-3-110 are applicable with respect
to the operation of such motor vehicle.
Section 56-10-60. Notwithstanding the definition of 'insured', the insurer and
any named insured may, by the terms of a written
amendatory endorsement, the form of which has been approved by the Chief
Insurance Commissioner, agree that coverage under a policy of liability insurance
does not apply while the motor vehicle is being operated by a natural person
designated by name. The agreement, when signed by the named insured and the
person to be excluded, or by someone acting in the excluded person's behalf, is
binding upon every insured to whom the policy applies. However, no natural
person may be excluded unless (1) his driver's license has been turned in to the
South Carolina Department of Highways and Public Transportation or (2) an
appropriate policy of liability insurance or other security as may be authorized
by law has been properly executed in the name of the person to be excluded. The
agent of the insurer writing the policy of insurance excluding a named driver
shall determine that the necessary driver's license has been delivered to the
Department of Highways and Public Transportation or that a policy of insurance
or security described in item (2) of this section is in effect before submitting
the application for exclusion of a named driver.
The Department of Highways and Public Transportation shall furnish to the agent
an affidavit either stating that the necessary driver's license has been
delivered to it or certifying that a policy of insurance or security described
in item (2) of this section is in effect.
Article 3
Insurance Requirements Relating to
Motor Vehicle Registration
Section 56-10-210. As used in this article:
(1) The term 'insured motor vehicle' means a motor vehicle as to which there
is maintained the security required by Section 56-10-20.
(2) The term 'operator' means every person who drives or is in actual physical
control of a motor vehicle or who is exercising control over or steering a
vehicle being towed by a motor vehicle.
(3) The term 'Department' means the South Carolina Department of Highways and
Public Transportation.
Section 56-10-220. Every person applying for registration for a motor vehicle
shall at the time of such registration and licensing declare the vehicle to be
an insured motor vehicle under the penalty set forth in Section 56-10-260 and
shall execute and furnish to the Department his certificate that such motor
vehicle is an insured motor vehicle and that he will maintain insurance thereon
during the registration period. The certificate must be in the form prescribed
by the Department. The Department may require any registered owner or any
applicant for registration and licensing of a motor vehicle declared to be an
insured motor vehicle to submit a certificate of insurance executed by an
authorized agent or representative of an insurance company authorized to do
business in this State. Such certificate must also be in a form prescribed by
the Department.
Section 56-10-230. Prior to the termination of insurance by cancellation or
refusal to renew by the insurer notice thereof must be given as required by
Sections 38-77-110 and 38-77-120.
Section 56-10-240. If, during the period for which it is licensed, a motor
vehicle is or becomes an uninsured motor vehicle, then the vehicle owner shall
immediately obtain insurance on the vehicle or within five days after the
effective date of cancellation or expiration of his liability insurance policy
surrender the motor vehicle license plates and registration certificates issued
for the motor vehicle. When a motor vehicle is or becomes an uninsured motor
vehicle, the insurer shall give written notice within ten days, in addition to
that notice previously given in accordance with law, by delivery under United
States Post Office Certificate of Mailing to the Department of the cancellation
or refusal to renew. The Department may not thereafter reissue registration
certificates and license plates for the vehicle until such time as satisfactory
evidence has been filed by the owner that the vehicle is insured. Upon receiving
information to the effect that a policy is cancelled or otherwise terminated on
any motor vehicle registered in South Carolina, then the Department shall suspend
the license plates and registration certificate and shall initiate such action
as may be required within fifteen days of such notice of cancellation to pick up
the license plates and registration certificate. Any person who has had his
license plates and registration certificate suspended by the Department, but who
at the time of such suspension does possess liability insurance coverage
sufficient to meet the financial responsibility requirements as set forth in this
chapter, has the right to appeal immediately such suspension to the Chief
Insurance Commissioner. If the Chief Insurance Commissioner determines that such
person does have sufficient liability insurance coverage, the Chief Insurance
Commissioner shall notify the Department and the suspension must be immediately
voided. The Department shall give notice by first class mail of such cancellation
or suspension of registration privileges to the vehicle owner at his last known
address. However, when license plates are surrendered pursuant to this section,
they must be held at the Department of Highways and Public Transportation office
in the county where the person who surrenders such plates resides.
In the event the vehicle owner refuses to surrender the suspended items as
required in this article, the Department may through its duly designated agents
or by request to any county or municipal law enforcement agency take possession
of the suspended license plates and registration certificate and may not
thereafter reissue the registration until proper proof of liability insurance
coverage is provided and until the owner has paid a reinstatement fee in the
amount of twenty-five dollars.
Any person wilfully failing to return his motor vehicle license plates and
registration certificates as required in this section is guilty of a misdemeanor
and, upon conviction, must be fined one hundred dollars or imprisoned for thirty
days.
Section 56-10-250. It is unlawful for any vehicle owner to sell or otherwise
dispose of any motor vehicle, for which the registration and license plates have
been suspended, to any member of his family residing in the same household. Any
person violating the provisions of this section is guilty of a misdemeanor and,
upon conviction, must be fined one hundred dollars or imprisoned for thirty days.
Section 56-10-260. Any person knowingly making a false certificate as to
whether a motor vehicle is an insured motor vehicle or presenting to the
Department false evidence that any motor vehicle sought to be registered is
insured is guilty of a misdemeanor and, upon conviction, must be fined not less
than fifty dollars nor more than one hundred dollars or imprisoned for not less
than ten days nor more than thirty days. The Department shall deny, for a period
of six months, registration of any motor vehicle for which a false certificate
or false evidence is presented that the vehicle is insured and shall revoke, and
may not thereafter reissue for a period of six months, the driver's license of
any person making such false certificate or offering such false evidence, and
then only when all other provisions of law have been complied with by such
person.
Section 56-10-270. (a) Any person knowingly operating an uninsured motor
vehicle subject to registration in this State or any person knowingly allowing
the operation of an uninsured motor vehicle subject to registration in this State
is guilty of a misdemeanor and, upon conviction, must be fined not more than one
hundred dollars or imprisoned for not more than thirty days. An uninsured motor
vehicle includes an insured vehicle with respect to which the operator has been
excluded from coverage pursuant to the provisions of Section 56-10-60.
(b) The Department upon receipt of information to the effect that any person
has been duly convicted of violating subsection (a) of this section shall suspend
the driving privilege and all license plates and registration certificates issued
in such person's name for a period of thirty days and may not reinstate such
person's privileges until such time as proof of financial responsibility has been
filed.
Section 56-10-280. All contracts or policies of insurance issued to meet the
financial responsibility requirements prescribed in this chapter must be issued
for a period of not less than six months notwithstanding any power of attorney
which may purport to give the attorney-in-fact the right to effect cancellation
on behalf of the insured. The provisions of this section do not prohibit refunds
to the insured for cancellations resulting from causes other than nonpayment of
premium.
Section 56-10-290. The administration and enforcement of this article must be
by the State Department of Highways and Public Transportation, and law
enforcement officers generally shall also enforce this article within their
respective jurisdictions.
Section 56-10-300. The Department has the power to prescribe, adopt,
promulgate, rescind, and enforce regulations necessary to carry out the
provisions and intent of this article."
Incorporation of nonprofit corporations
SECTION 10. Section 33-31-10 of the 1976 Code is amended to read:
"Section 33-31-10. The Secretary of State may issue certificates of
incorporation to any nonprofit corporations having no capital stock and organized
under this article for any lawful purposes, including, but not limited to,
religious, educational, social, fraternal, charitable, or eleemosynary purposes
other than for the insurance of life, health, accident, or property. However,
mutual benevolent aid associations organized solely for the purposes defined in
Section 38-35-10 may be incorporated under the provisions of this chapter."
State Fire Marshal; duties
SECTION 11. Section 23-9-20 of the 1976 Code, as last amended by Act 190 of
1979, is further amended to read:
"Section 23-9-20. The State Fire Marshal shall supervise enforcement of
the laws and regulations of the Liquefied Petroleum Gas Board and shall employ
and supervise personnel necessary to carry out the duties of his office."
Resident fire marshal
SECTION 12. Subsection (a) of Section 23-9-30 of the 1976 Code, as last amended
by Act 347 of 1986, is further amended to read:
"(a) The chief of any organized fire department or county fire marshal
is ex officio resident fire marshal; however, this chapter does not repeal,
amend, or otherwise affect Chapter 25 of Title 5."
Service on unauthorized insurer
SECTION 13. Section 15-9-300 of the 1976 Code is amended to read:
"Section 15-9-300. Nothing contained in Section 15-9-280, Section
15-9-285, or Section 15-9-290 limits or abridges the right to serve any process,
notice, or demand upon any insurer in any other manner permitted by law."
Service; reciprocal insurance subscribers
SECTION 14. Section 15-9-310 of the 1976 Code is amended to read:
"Section 15-9-310. Service of process on the attorney, as defined in
Section 38-17-20, for subscribers, as defined in Section 38-17-10, to reciprocal
or interinsurance contracts must be made by serving three copies thereof upon the
Chief Insurance Commissioner as the agent of such attorney pursuant to the
provisions of Section 38-17-60. The Commissioner shall file one copy, forward
one copy to the attorney, and return one copy with the acceptance of
service."
Service on insurance companies
SECTION 15. Section 15-9-270 of the 1976 Code, as last amended by Act 15 of
1979, is further amended to read:
"Section 15-9-270. The summons and any other legal process in any action
or proceeding against it must be served on an insurance company as defined in
Section 38-1-20, including fraternal benefit associations, which shall have
appointed the Chief Insurance Commissioner as its attorney pursuant to the
provisions of Section 38-5-70 only by delivering two copies thereof to the Chief
Insurance Commissioner, as such attorney of such company with a fee of four
dollars, and such service is considered sufficient service upon such company.
When legal process against any such company with the fee herein provided is
served upon the Chief Insurance Commissioner, he shall forthwith forward by
registered or certified mail one of the duplicate copies prepaid directed toward
the company at its home office or, in the case of a fraternal benefit
association, to its secretary or corresponding officer at the head of the
association."
Inapplicability of provisions of law to certain vehicles
SECTION 16. Section 56-9-30 of the 1976 Code, as last amended by Act 80 of 1977,
is further amended to read:
"Section 56-9-30. This chapter does not apply with respect to any motor
vehicle owned by the United States, this State, or any political subdivision of
this State or any municipality therein, nor, except for Section 56-9-590, does
it apply with respect to any motor vehicle which is subject to other laws of this
State which require their owners to carry insurance or to place security in a
manner which would make those owners carry insurance or place security in
addition to the amounts required by this chapter."
Imputed liability; damages; uninsured minor; motor vehicles
SECTION 17. Section 56-1-110 of the 1976 Code is amended to read:
"Section 56-1-110. Any negligence or wilful misconduct of a minor when
driving a motor vehicle upon a highway must be imputed to the person who has
signed the application of such minor for a beginner's permit, instruction permit,
or driver's license, which person is jointly and severally liable with such minor
for any damage caused by such negligence or wilful misconduct, except that if
such minor is protected by a policy of liability insurance in the form and in the
amounts as required under Chapter 9 of this title and Sections 38-77-140 through
38-77-310, then such parent or guardian or other responsible adult is not subject
to the liability otherwise imposed under this section."
Definition; insured motor vehicle
SECTION 18. Item (3) of Section 56-9-20 of the 1976 Code is amended to read:
"(3) 'Insured motor vehicle': A motor vehicle as to which there is
bodily injury liability insurance and property damage liability insurance,
meeting all of the requirements of item (7) of this section, or as to which a
bond has been given or cash or securities delivered in lieu of such insurance or
as to which the owner has qualified as a self-insurer in accordance with the
provisions of Section 56-9-60;".
Definition; motor vehicle liability policy
SECTION 19. Item (7) of Section 56-9-20 of the 1976 Code is amended to read:
"(7) 'Motor vehicle liability policy': An owner's or an operator's policy
of liability insurance that fulfills all the requirements of Sections 38-77-140
through 38-77-230, certified as provided in Section 56-9-550 or 56-9-560 as proof
of financial responsibility and issued, except as otherwise provided in Section
56-9-560, by an insurance carrier duly authorized to transact business in this
State, to or for the benefit of the person or persons named therein as insured,
and any other person, as insured, using the vehicle described therein with the
express or implied permission of the named insured, and subject to the following
special conditions:
(a) Contents of motor vehicle liability policy. The motor vehicle liability
policy shall state the name and address of the named insured, the coverage
afforded by the policy, the premium charged therefor, the policy period, and the
limits of liability and shall contain an agreement or be endorsed that insurance
is provided thereunder in accordance with the coverage defined in this chapter
as respects bodily injury and death or property damage, or both, and is subject
to all of the provisions of this chapter.
(b) Provisions deemed incorporated in such policy. Every motor vehicle
liability policy is subject to the following provisions, which need not be
contained therein:
(1) The liability of the insurance carrier with respect to the insurance
required by this chapter shall become absolute whenever injury or damage covered
by the motor vehicle liability policy occurs;
(2) The policy may not be cancelled or annulled as to the liability by any
agreement between the insurance carrier and the insured after the occurrence of
the injury or damage;
(3) No statement made by the insured or on his behalf and no violation of
the policy shall defeat or void the policy;
(4) The satisfaction by the insured of a judgment for the injury or damage
shall not be a condition precedent to the right or duty of the insurance carrier
to make payment on account of the injury or damage;
(5) The insurance carrier shall have the right to settle any claim covered
by the policy, and if the settlement is made in good faith, the amount thereof
shall be deductible from the limits of liability specified in Section 38-77-140;
and
(6) The policy, written application therefor, if any, and any rider or
endorsement which does not conflict with the provisions of this chapter shall
constitute the entire contract between the parties.
(c) What policy need not cover. The motor vehicle liability policy need not
insure any liability under the Workers' Compensation Law nor any liability on
account of bodily injury to or death of an employee of the insured while engaged
in the employment, other than domestic, of the insured, or while engaged in the
operation, maintenance, or repair of the motor vehicle, nor any liability for
damage to property owned by, rented to, in charge of, or transported by the
insured.
(d) Additional coverage permitted. Any policy which grants the coverage
required for a motor vehicle liability policy may also grant any lawful coverage
in excess of or in addition to the coverage specified for a motor vehicle
liability policy and the excess or additional coverage shall not be subject to
the provisions of this chapter. With respect to a policy which grants this
excess or additional coverage, the term 'motor vehicle liability policy' shall
apply only to that part of the coverage which is required by this article.
(e) Additional permissible provisions. Any motor vehicle liability policy
may provide:
(1) That the insured shall reimburse the insurance carrier for any payment
the insurance carrier would not have been obligated to make under the terms of
the policy except for the provisions of this chapter; and
(2) For the prorating of the insurance thereunder with other valid and
collectible insurance.
(f) Requirements may be met by several policies. The requirements for a
motor vehicle liability policy may be fulfilled by the policies of one or more
insurance carriers which policies together meet such requirements.
(g) Legal binder deemed to meet requirements. Any legal binder issued
pending the issuance of a motor vehicle liability policy shall be considered as
fulfilling the requirements for such policy.
(h) Notice required to cancel certified policy; cancellation by subsequent
policy. When an insurance carrier has certified a motor vehicle liability policy
under Sections 56-9-550 or 56-9-560, the insurance so certified shall not be
cancelled or terminated until at least ten days after a notice of cancellation
or termination of the insurance certified shall be filed with the Department,
except that a policy subsequently procured and certified shall at 12:01 A. M.,
on the effective date of its certification, terminate the insurance previously
certified with respect to any motor vehicle designated in both certificates.
(i) Other required policies unaffected. This chapter shall not be held to
apply to or affect policies of automobile insurance against liability insuring
public carriers or policies which may be required by any other law of this State,
any law or ordinance of any municipality or any law or regulation of the United
States or any of its agencies, and those policies, if they contain an agreement
or are endorsed to conform with the requirements of this chapter, may be
certified as proof of financial responsibility under this chapter.
(j) Chapter inapplicable to policies covering use by employees, etc., of
vehicles not owned by insured. This chapter shall not be held to apply to or
affect policies insuring solely the insured named in the policy against liability
resulting from the maintenance or use by the persons in the insured's employ or
on his behalf of motor vehicles not owned by the insured;".
Definition; proof of financial responsibility
SECTION 20. Item (13) of Section 56-9-20 of the 1976 Code, as last amended by
Act 80 of 1977, is further amended to read:
"(13) 'Proof of financial responsibility': Proof of ability to respond
to damages for liability, as provided in Section 38-77-150, or, on account of
accidents occurring after the effective date of such proof, arising out of the
ownership, maintenance, or use of a motor vehicle in the amount of fifteen
thousand dollars because of bodily injury to or death of one person in any one
accident and, subject to such limit for one person, in the amount of thirty
thousand dollars because of bodily injury to or death of two or more persons in
any one accident and in the amount of five thousand dollars because of injury to
or destruction of property of others in any one accident;".
Definition; uninsured motor vehicle
SECTION 21. Item (16) of Section 56-9-20 of the 1976 Code is amended to read:
"(16) 'Uninsured motor vehicle':
Any motor vehicle which is not an insured motor vehicle as defined in item (3)
of this section."
Workers' Compensation Insolvency Fund
SECTION 22. Section 42-7-200 of the 1976 Code is amended to read:
"Section 42-7-200. (a) There is established within the office of the
State Workers' Compensation Fund the State Workers' Compensation Insolvency Fund
to insure payment of awards of workers' compensation benefits which are unpaid
because of the insolvency of employers who fail to acquire necessary coverage for
employees. The fund shall be administered by the director of the state fund.
When any award is made by the State Workers' Compensation Commission for
workers' compensation benefits and such claim or any part thereof is not paid
because of the insolvency of an employer who has not secured coverage, payments
must be made from the insolvency fund upon certified approval of the State
Workers' Compensation Commission. The director of the state fund shall establish
procedures for the implementation of this section.
When any claimant is paid benefits from the insolvency fund the insolvency fund
shall be subrogated to all rights of the claimant to the amount paid from the
fund and the administrator of the fund shall institute proceedings for the
collection of such funds against the party legally obligated for such payments.
(b) To establish and maintain the State Workers' Compensation Insolvency Fund
there shall be earmarked from the collections of the tax on insurance carriers
and self-insured persons provided for in Sections 38-7-50 and 42-5-190 an amount
sufficient to establish and annually maintain the insolvency fund at a level of
not less than two hundred thousand dollars."
Analysis lines for identification
SECTION 23. Any analysis lines following Code sections in any section of this
act do not constitute a part of the Code sections but are intended only for the
purpose of identification.
Insurance provisions enacted in 1987
SECTION 24. The Code Commissioner is authorized and directed to place all
appropriate provisions of acts dealing with insurance enacted during the 1987
session of the General Assembly in the appropriate area covered by this act. He
is further authorized and directed to eliminate or delete from this act any
provision of law contained herein whose subject matter was repealed or eliminated
by the General Assembly in any other act passed during the 1987 session. He is
further authorized and directed to amend provisions of this act corresponding to
amendments of the insurance laws of this State as may have been passed by the
General Assembly during the 1987 session in other acts.
Repeal
SECTION 25. The following are repealed:
(a) Article 7 of Chapter 9 of Title 56 of the 1976 Code.
(b) Chapter 11 of Title 56 of the 1976 Code.
(c) Chapter 13 of Title 56 of the 1976 Code.
(d) Chapter 9 of Title 35 of the 1976 Code.
(e) Sections 42-5-90, 42-5-100, 42-5-110, 42-5-120, 42-5-140, 42-5-150,
42-5-160, 42-5-170, and 42-5-180 of the 1976 Code.
(f) Act 306 of 1975, Act 767 of 1976, Act 104 of 1977, Act 257 of 1977, Act
258 of 1977, Act 645 of 1978, Act 662 of 1978, Act 221 of 1979, Act 200 of 1981,
Act 199 of 1983, Act 440 of 1986, and Act 518 of 1986.
(g) Subsections A, B, C, D, E, F, G, H, J, K, L, M, and N of Section 31 of
Part II of Act 540 of 1986.
(h) Act 513 of 1986.
Time effective
SECTION 26. This act takes effect January 1, 1988. |