H*3401 Session 107 (1987-1988)
H*3401(Rat #0538, Act #0482 of 1988) General Bill, By Boan and J.W. McLeod
Similar(S 976)
A Bill to amend Section 38-63-220, Code of Laws of South Carolina, 1976,
relating to the incontestability of individual life insurance policies and
exceptions thereto, so as to provide for the required contents of these
policies; to amend Article 1, Chapter 63, Title 38, relating to individual
life insurance policies, by adding Section 38-63-60 so as to define what
constitutes "industrial life insurance" and to provide that no policy of life
insurance delivered or issued for delivery in South Carolina may use
industrial mortality tables unless the policy is an industrial life insurance
policy, and by adding Section 38-63-90 so as to provide that a life insurer is
liable for attorney fees if he refuse to pay certain claims without reasonable
cause or in bad faith; to amend Article 3, Chapter 63, Title 38, relating to
individual life insurance, by adding Section 38-63-225 so as to regulate the
use of certain suicide and death exclusions and restrictions in these
policies; to amend Article 1, Chapter 65, Title 38, relating to group life
insurance by adding Section 38-65-120 so as to provide that when a group life
insurance policy provides for payment of its proceeds in a lump sum upon the
death of an insured and the insurer fails to pay the proceeds within thirty
days of submission of proof of death, the payment must include interest at the
legal rate of interest from the date of death of that insured until the date
the claim is paid; and to repeal Section 38-63-230 relating to limitations on
proceedings to contest life insurance policies.-amended title
12/21/87 House Prefiled
12/21/87 House Referred to Committee on Labor, Commerce and Industry
01/12/88 House Introduced and read first time HJ-275
01/12/88 House Referred to Committee on Labor, Commerce and
Industry HJ-276
01/27/88 House Committee report: Favorable with amendment Labor,
Commerce and Industry HJ-674
02/04/88 House Amended HJ-968
02/04/88 House Read second time HJ-968
02/04/88 House Unanimous consent for third reading on next
legislative day HJ-968
02/05/88 House Read third time and sent to Senate HJ-978
02/09/88 Senate Introduced and read first time SJ-10
02/09/88 Senate Referred to Committee on Banking and Insurance SJ-1
03/08/88 Senate Committee report: Favorable with amendment
Banking and Insurance SJ-19
03/09/88 Senate Amended SJ-36
03/09/88 Senate Read second time SJ-36
03/09/88 Senate Ordered to third reading with notice of
amendments SJ-36
03/24/88 Senate Amended SJ-36
03/24/88 Senate Read third time SJ-38
03/24/88 Senate Returned SJ-38
04/13/88 House Debate adjourned on Senate amendments until
4/19/88 HJ-2729
04/14/88 House Reconsider vote whereby debate adjourned until
4/19/88 HJ-2921
04/14/88 House Concurred in Senate amendment and enrolled HJ-2948
04/26/88 Ratified R 538
05/02/88 Signed By Governor
05/02/88 Effective date 01/01/89
05/02/88 Act No. 482
05/24/88 Copies available
(A482, R538, H3401)
AN ACT TO AMEND SECTION 38-63-220, CODE OF LAWS OF SOUTH CAROLINA, 1976,
RELATING TO THE INCONTESTABILITY OF INDIVIDUAL LIFE INSURANCE POLICIES AND
EXCEPTIONS THERETO, SO AS TO PROVIDE FOR THE REQUIRED CONTENTS OF THESE POLICIES;
TO AMEND ARTICLE 1, CHAPTER 63, TITLE 38, RELATING TO INDIVIDUAL LIFE INSURANCE
POLICIES, BY ADDING SECTION 38-63-60 SO AS TO DEFINE WHAT CONSTITUTES
"INDUSTRIAL LIFE INSURANCE" AND TO PROVIDE THAT NO POLICY OF LIFE
INSURANCE DELIVERED OR ISSUED FOR DELIVERY IN SOUTH CAROLINA MAY USE INDUSTRIAL
MORTALITY TABLES UNLESS THE POLICY IS AN INDUSTRIAL LIFE INSURANCE POLICY, AND
BY ADDING SECTION 38-63-90 SO AS TO PROVIDE THAT A LIFE INSURER IS LIABLE FOR
ATTORNEY FEES IF HE REFUSES TO PAY CERTAIN CLAIMS WITHOUT REASONABLE CAUSE OR IN
BAD FAITH; TO AMEND ARTICLE 3, CHAPTER 63, TITLE 38, RELATING TO INDIVIDUAL LIFE
INSURANCE, BY ADDING SECTION 38-63-225 SO AS TO REGULATE THE USE OF CERTAIN
SUICIDE AND DEATH EXCLUSIONS AND RESTRICTIONS IN THESE POLICIES; TO AMEND ARTICLE
1, CHAPTER 65, TITLE 38, RELATING TO GROUP LIFE INSURANCE BY ADDING SECTION
38-65-120 SO AS TO PROVIDE THAT WHEN A GROUP LIFE INSURANCE POLICY PROVIDES FOR
PAYMENT OF ITS PROCEEDS IN A LUMP SUM UPON THE DEATH OF AN INSURED AND THE
INSURER FAILS TO PAY THE PROCEEDS WITHIN THIRTY DAYS OF SUBMISSION OF PROOF OF
DEATH, THE PAYMENT MUST INCLUDE INTEREST AT THE LEGAL RATE OF INTEREST FROM THE
DATE OF DEATH OF THAT INSURED UNTIL THE DATE THE CLAIM IS PAID; AND TO REPEAL
SECTION 38-63-230 RELATING TO LIMITATIONS ON PROCEEDINGS TO CONTEST LIFE
INSURANCE POLICIES.
Be it enacted by the General Assembly of the State of South Carolina:
Policy Provisions
SECTION 1. Section 38-63-220, as added by Act 155 of 1987, is amended to read:
"Section 38-63-220. All individual life insurance policies must contain
in substance the following:
(a) A brief and correct description of its benefits on the lower portion of
its first page and an identifying form number on the lower left hand corner of
its first page.
(b) A provision stating clearly, understandably, and conspicuously on the
first page that the policyholder is permitted to return the policy within a
period of not less than ten days of its delivery to the policyholder. If
replacement of insurance is involved, the policyholder is permitted to return the
policy within a period of not less than twenty days of its delivery to the
policyholder. If the policy was solicited by a direct response insurer rather
than through a licensed insurance agent, the provision must state that the
policyholder is permitted to return the policy within a period of not less than
thirty-one days. The entire premium paid by the policyholder must be returned
immediately to the policyholder.
(c) A provision stating who is authorized by the insurer to waive, alter, or
change any of the terms or conditions of the policy. It may also state that no
agent has the power or authority to waive, change, or alter any of the terms or
conditions of the policy.
(d) A provision that the policy and any rider or supplemental benefits
attached to the policy are incontestable as to the truth of the application for
insurance and to the representations of the insured individual after they have
been in force during the lifetime of the insured for a period of two years from
their date of issue. Any rider or supplemental benefits subsequently attached
to the policy are incontestable as to the truth of the application for the rider
or supplemental benefits and to the representations of the insured individual
after they have been in force during the lifetime of the insured for a period of
two years from their date of issue. If an insurer institutes proceedings to
vacate a policy on the ground of the falsity of the representations contained in
the application for the policy, the proceedings must commence within the time
permitted in this subsection (d).
(e) A provision that if it is found that the age or sex of the insured, or of
any individual considered in determining the premium, has been misstated, any
amount payable or benefit accruing under the policy is that as the premium would
have purchased according to the correct age or sex.
(f) A provision that when a policy becomes a claim by the death of the
insured, settlement must be made upon receipt of proof of death. When a policy
provides for payment of its proceeds in a lump sum upon the death of the insured
and the insurer fails to pay the proceeds within thirty days of submission of
proof of death and all necessary claim papers needed in order to pay the claim
properly, the payment must include interest at the legal rate of interest from
the date of death of the insured until the date the claim is paid.
(g) A provision stating how the beneficiary is designated and how the
beneficiary may be changed.
(h) A provision stating the amount of premium and the time and manner payable.
If the death of the insured occurs during a period for which the premium has been
paid, the insurer shall add to the policy proceeds a refund of any premium paid
for any period beyond the date of death of the insured, provided such premium was
not waived under any policy provision for waiver of premium.
(i) A provision that the insured is entitled to a grace period of not less
than thirty-one days within which the payment of any premium after the first may
be made. During the grace period, the policy continues in full force. If a
claim arises under the policy during the grace period, the amount of any premium
due or overdue may be deducted from any amount payable under the policy in
settlement.
(j) A provision that the policy may be reinstated at any time within three
years after the date of default in the payment of any premium, unless the policy
has been surrendered for its cash value or unless the extended term insurance,
if any, has expired, upon evidence of insurability satisfactory to the insurer
and the payment of all overdue premiums and payment (or, within the limits
permitted by the then cash value of the policy reinstatement) of any other
indebtedness to the insurer upon the policy with interest as to both premiums and
indebtedness at a rate not exceeding eight percent a year compounded annually.
However, acceptance of all or any part of a premium more than thirty days in
arrears by the agent or company without the policy in force without any lapse of
coverage.
(k) A provision in participating policies that, beginning not later than the
end of the third policy year, the insurer shall annually ascertain and apportion
the divisible surplus, if any, that will accrue on the policy anniversary or
other dividend date specified in the policy. Except as provided in this section,
any dividend becoming payable is, at the option of the party entitled to elect
the option, either payable in cash or applied to any one of the other dividend
options as may be provided by the policy. If other dividend options are
provided, the policy must further state which option is automatically effective
if the party has not elected some other option. If a policy specifies a period
within which the other option may be elected, this period must be not less than
thirty days following the date on which the dividend is due and payable. If a
participating policy provides that the benefit under any paid-up nonforfeiture
provision is to be participating, it may provide that any divisible surplus
becoming payable or apportioned while the insurance is in force under the
nonforfeiture provision will be applied in the manner set forth in the policy.
(l) A provision that after three full years' premiums have been paid, and
after the policy has a cash surrender value, and while no premium is in default
beyond the grace period for payment, the insurer will loan on the execution of
a proper note or loan agreement by the owner of the policy, or on proper
assignment of the policy and on the sole security of the policy, at the option
of the owner of the policy, an amount not exceeding the cash value of the policy
at the end of the current policy year including any dividend additions to the
policy. The company may deduct from the loan value or from the proceeds of the
loan any existing indebtedness on or secured by the policy not already deducted
in determining the cash value, including interest due or accrued, and any unpaid
balance of the premium for the current policy year, and may collect interest in
advance of the loan through the end of the current policy year. The policy must
reserve to the insurer the right to defer the granting of a loan, other than for
the payment of any premium to the insurer, for six months after application for
the loan. The policy may also provide that if interest on any indebtedness is
not paid when due, it must then be added to the existing indebtedness and bear
interest at the same rate, and that if and when the total indebtedness on the
policy, including interest due or accrued, equals or exceeds the amount of the
loan value of the policy, then the policy terminates, but not until at least
thirty days' notice has been mailed by the insurer to the last known address of
the insured or policy owner and to that of any assignee of record on file with
the insurer. The policy, at the insurer's option, may provide for an automatic
premium loan, subject to an election of the party entitled to elect. No
condition other than as provided in this subsection may be exacted as a
prerequisite to any loan. This subsection does not apply to term insurance or
to term insurance benefits provided by rider or supplemental policy provisions.
(m) A provision that is in accordance with Sections 38-63-240 to 38-63-280.
(n) A provision that is in accordance with Article 5 of Chapter 63 of Title
38, Standard Nonforfeiture Law for Life Insurance.
The Commissioner may approve policies with provisions which vary from the
provisions required in this section if the provisions are more favorable to the
insured or if the provisions are not applicable because of the nature of the
product."
Industrial life insurance
SECTION 2. Article 1, Chapter 63 of Title 38 of the 1976 Code is amended by
adding:
"Section 38-63-60. Industrial life insurance is that form of life
insurance provided by an individual contract under which premiums are payable
weekly or monthly and having the words 'INDUSTRIAL POLICY' printed in bold print
upon the face of the policy as part of the title. No policy of life insurance
delivered or issued for delivery in South Carolina may use Industrial Mortality
tables unless the policy is an industrial life insurance policy."
Suicide and death exclusions
SECTION 3. Article 3, Chapter 63 of Title 38 of the 1976 Code is amended by
adding:
"Section 38-63-225. (A) If an individual life insurance policy contains
a suicide provision, it may not limit payment of benefits for a period more than
two years from the date of issue of the policy and it must provide for at least
the return of premiums paid on the policy.
(B) An individual life insurance policy or rider to such a policy delivered
or issued for delivery in this State may exclude or restrict liability in the
event of death occurring while the insured is a resident in a specified foreign
country or countries, but except as provided in subsection (A) may not contain
any provision excluding or restricting liability in the event of death caused in
a certain specified manner, except as a result of:
(1) death as a result of war, declared, or undeclared, or any act or hazard
of such a war;
(2) death as a result of operating, riding, or descending from an aircraft
unless the insured is a passenger and the aircraft is operated commercially to
transport passengers for hire or by a private business to transport personnel or
guests;
(3) death as a result of hazardous occupations or hazardous sports specified
in the policy or rider.
If death is caused in a manner excluded in the policy or rider, the policy must
provide for at least the return of premiums paid on the policy less any
indebtedness to the insurer on the policy.
(C) If an individual life insurance policy or rider contains any exclusions
or restrictions of liability as allowed in subsection (B), the policy or rider
must have a prominent stamp of notice of these exclusions or restrictions on the
face of it and the insurer is required to have a separate form acknowledging the
exclusions of liability signed by the owner of the policy."
Repeal
SECTION 4. Section 38-63-230 of the 1976 Code is repealed.
Attorney fees authorized
SECTION 5. Article 1, Chapter 63, Title 38 of the 1976 Code is amended by
adding:
"Section 38-63-90. When a life insurer refuses to pay a claim on a life
insurance policy within thirty days after a demand has been made by the
beneficiary of the policy or contract and a finding on suit of the contract made
by the trial judge that the refusal was without reasonable cause or in bad faith,
the insurer is liable to pay the beneficiary, in addition to any sum or any
amount otherwise recoverable, all reasonable attorneys' fees for the prosecution
of the case. The amount of reasonable attorneys' fees must be determined by the
trial judge and the amount added to the judgment. If attorney's fees are allowed
and, on appeal to the Supreme Court by the defendant, the judgment is affirmed,
the Supreme Court shall allow to the respondent an additional sum as the Court
adjudged reasonable as attorneys' fees of the respondent on the appeal."
Interest included
SECTION 6. Article 1, Chapter 65, Title 38 of the 1976 Code is amended by
adding:
"Section 38-65-120. When a group life insurance policy provides for
payment of its proceeds in a lump sum upon the death of an insured and the
insurer fails to pay the proceeds within thirty days of submission of proof of
death, the payment must include interest at the legal rate of interest from the
date of death of that insured until the date the claim is paid."
Time effective
SECTION 7. This act takes effect January 1, 1989. |