H 3996 Session 111 (1995-1996)
H 3996 General Bill, By Richardson and Cato
A Bill to amend Section 38-77-590, as amended, Code of Laws of South Carolina,
1976, relating to automobile insurance, the South Carolina Reinsurance
Facility and designated producers, so as to delete certain provisions, and
provide, among other things, that every designated producer shall provide a
written report to the Facility governing board every two years, on the
anniversary date of their designations, outlining all efforts made to attract
a voluntary market in order to reduce the placement of automobile insurance in
the Facility; and to amend the 1976 Code by adding Section 38-77-596 so as to
provide, among other things, that upon notification to the governing board of
the Reinsurance Facility, designated producers may contract with a voluntary
market outlet for any type of automobile insurance cedeable to the Facility.
04/12/95 House Introduced and read first time HJ-13
04/12/95 House Referred to Committee on Labor, Commerce and
Industry HJ-14
05/03/95 House Committee report: Favorable Labor, Commerce and
Industry HJ-52
05/09/95 House Objection by Rep. Richardson HJ-25
05/09/95 House Recommitted to Committee on Labor, Commerce and
Industry HJ-27
Indicates Matter Stricken
Indicates New Matter
COMMITTEE REPORT
May 3, 1995
H. 3996
Introduced by REPS. Richardson and Cato
S. Printed 5/3/95--H.
Read the first time April 12, 1995.
THE COMMITTEE ON
LABOR, COMMERCE AND INDUSTRY
To whom was referred a Bill (H. 3996), to amend Section
38-77-590, as amended, Code of Laws of South Carolina, 1976,
relating to automobile insurance, etc., respectfully
REPORT:
That they have duly and carefully considered the same, and
recommend that the same do pass:
HARRY F. CATO, for Committee.
A BILL
TO AMEND SECTION 38-77-590, AS AMENDED, CODE OF
LAWS OF SOUTH CAROLINA, 1976, RELATING TO
AUTOMOBILE INSURANCE, THE SOUTH CAROLINA
REINSURANCE FACILITY, AND DESIGNATED PRODUCERS,
SO AS TO DELETE CERTAIN PROVISIONS, AND PROVIDE,
AMONG OTHER THINGS, THAT EVERY DESIGNATED
PRODUCER SHALL PROVIDE A WRITTEN REPORT TO THE
FACILITY GOVERNING BOARD EVERY TWO YEARS, ON
THE ANNIVERSARY DATE OF THEIR DESIGNATIONS,
OUTLINING ALL EFFORTS MADE TO ATTRACT A
VOLUNTARY MARKET IN ORDER TO REDUCE THE
PLACEMENT OF AUTOMOBILE INSURANCE IN THE
FACILITY; AND TO AMEND THE 1976 CODE BY ADDING
SECTION 38-77-596 SO AS TO PROVIDE, AMONG OTHER
THINGS, THAT UPON NOTIFICATION TO THE GOVERNING
BOARD OF THE REINSURANCE FACILITY, DESIGNATED
PRODUCERS MAY CONTRACT WITH A VOLUNTARY
MARKET OUTLET FOR ANY TYPE OF AUTOMOBILE
INSURANCE CEDEABLE TO THE FACILITY.
Be it enacted by the General Assembly of the State of South
Carolina:
SECTION 1. Section 38-77-590 of the 1976 Code, as last
amended by Sections 821-825 of Act 181 of 1993, is further
amended to read:
"Section 38-77-590. (a) Not more than six months after
July 9, 1974, or at an earlier time as the director or his designee
considers necessary by reason of complaints regarding want of
access to automobile insurance in particular areas or want of outlets
for producers, the director or his designee shall survey the various
areas of the State to ascertain if sufficient marketing outlets exist in
all areas or are available to all producers. Upon a finding by the
director or his designee that insufficient marketing outlets exist in
particular areas or that certain producers have been deprived of a
market for risks previously serviced by them, the director or his
designee may, after consultation with the facility, designate one or
more insurers to service the areas through agents appointed by them
or may designate the producers as the agents of any insurer.
However, it is not the intention of the State of South Carolina,
through the Reinsurance Facility, to guarantee employment or
guarantee the viability of any particular business entity and all such
designations shall be monitored every two years. Every designated
producer shall provide a written report to the facility board every
two years, on the anniversary of their designations, outlining all
efforts made to attract a voluntary market in order to reduce the
placement of automobile insurance in the facility. The report must
contain documented evidence from insurance companies stating the
reasons for their refusal to place an agency contract with the
designated producer. In addition, designated producer status may
not be granted for more than five successive years unless there is no
other insurance agent or carrier writing private passenger
automobile coverage within a five mile radius of the designated
producer. However, upon contracting with a voluntary carrier a
designated producer shall have three years to transfer all business
written under their designated contract. The arrangements shall
include provision for one hundred percent quota share reinsurance
through the facility of any automobile insurance policy marketed
through the arrangements, at the option of the insurer, and the
reinsurance is not subject to the statutory provisions or regulations
regarding excessive utilization of the facility.
(b) After the effective date of this section, those producers
previously designated by the director or his designee may continue
to serve in that capacity under the jurisdiction and control of the
governing board of the facility, except that any change in the rate
of commissions allowed designated producers is subject to the
approval of the director or his designee.
(c) A producer may be designated by the governing board of
the facility upon application for designation and is eligible for
designation upon a finding by the governing board that the
applicant meets the following qualifications:
(1) The applicant has been, for ten continuous years, a
licensed resident property and casualty insurance agent and agency
owner or principal with authority from one or more licensed
insurers to write liability and physical damage insurance on private
passenger automobiles. However, if the person has previously
relinquished designated status after being connected with a
voluntary market and again meets all other qualifications for
application as a designated producer, the applicant is exempt from
complying with the ten continuous years requirement of this
item;
(2) At the time of application the applicant is servicing and
owns the renewals on private passenger and commercial automobile
insurance business, the net premiums on which exceeded
seventy-five thousand dollars of potential cedeable automobile
insurance during any one of the previous five calendar years
preceding the application;
(3) Neither the applicant, nor any employee of the applicant
or the applicant's corporate agency, nor any partner or shareholder
in any related insurance agency, related premium service company,
or related other business, has any direct or indirect connection with
any voluntary market outlet for the purpose of writing any type of
automobile insurance in this State except for motorcycle insurance
and types not cedeable to the facility;
(4) The applicant has not contributed to his termination as
agent by any insurer because of any illegal breach of agency
agreement or other related, improper, or unethical conduct; and
(5) The books, records, and accounts of the insurance
business of the applicant have been audited at the expense of the
applicant and found by the governing board to be indicative of a
financially sound operation.
(d) Prior to Before designation as a producer,
the applicant shall furnish at his expense a bond in an amount of
not less than fifty thousand dollars for the faithful performance of
the duties as a producer, executed by the applicant as principal and
a corporate surety licensed to do business in this State as surety,
and shall also have effective errors and omissions insurance by an
insurer licensed to do business in this State, with the bond and
errors and omissions insurance being subject to approval by the
governing board.
(e) The governing board shall assign a specific location to each
producer designated. The governing board shall determine from the
director or his designee the locations assigned by him to those
producers whom the director or his designee has designated.
Designated producers may not open or maintain any other locations
without the written authorization of the governing board; provided,
however, that an applicant maintaining multiple offices on June 4,
1987, is entitled to maintain two locations as a designated agent
which he owned and operated at that time and through which
premiums in at least the amount of seventy-five thousand dollars
were written. The governing board shall terminate the designation,
and the director or his designee shall revoke all agents' licenses of
any producer who does not comply with this requirement upon
demand by the governing board. Upon termination, the producer's
expirations on designated business become the property of the
facility.
(f) The designation of a producer by the director or his
designee or the governing board is transferable to a spouse, child,
parent, brother, or sister of the producer upon the designated
producer's retirement, incapacity, or death. The duties of a
designated producer may be performed by one or more qualified
employees of the producer or the producer's corporate agency.
(g) Neither a designated producer, nor any employee of a
designated producer or the producer's corporate agency, nor any
partner or shareholder in any related insurance agency, related
premium service company, or related other business, may have any
direct or indirect connection with any voluntary market outlet for
the purpose of writing any type of automobile insurance in this
State except for motorcycle insurance and types not cedable to the
facility. The governing board shall terminate the designation of any
producer, and the director or his designee shall revoke all licenses
of the producer and of any other insurance agent and premium
service company knowingly involved in this connection. Upon
termination, the producer's expirations on designated business
become the property of the facility.
(h) A designated carrier who fails a claims audit shall
have no new designated producer assignments until the time it
passes a re-audit within a reasonable time prescribed by the
governing board. If this carrier fails two claims audits, including a
re-audit, within any three-year period that carrier is disqualified for
renewal of its contract with the facility upon expiration of its
existing contract."
SECTION 2. The 1976 Code is amended by adding:
"Section 38-77-596. Notwithstanding Section 38-77-590,
upon notification to the governing board, designated producers may
contract with a voluntary market outlet for any type of automobile
insurance cedeable to the facility. Upon the effective date of such a
contract, the designated producer may no longer write new business
with a designated carrier. The producer is permitted to retain all
existing policies in the facility until such time as these policies
lapse, cancel, nonrenew, or cease to remain in effect for any reason.
For the purposes of this section, vehicles written as an addition to a
multi-car policy in the facility do not constitute `new
business'."
SECTION 3. This act takes effect upon approval by the
Governor.
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