H 3897 General Bill, By Kirsh
 TO AMEND SECTION 38-27-510, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO
 REHABILITATION AND LIQUIDATION OF INSURERS, FORMAL PROCEEDINGS, AND LIABILITY
 OF THE REINSURER, SO AS TO PROVIDE, AMONG OTHER THINGS, THAT THE ORIGINAL
 INSURED OR POLICYHOLDER SHALL NOT HAVE ANY RIGHTS AGAINST THE REINSURER WHICH
 ARE NOT SPECIFICALLY SET FORTH IN THE REINSURANCE CONTRACT OR OTHER AGREEMENT
 BETWEEN THE REINSURER AND THE ORIGINAL INSURED OR POLICYHOLDER.

   04/10/97  House  Introduced and read first time HJ-59
   04/10/97  House  Referred to Committee on Labor, Commerce and
                     Industry HJ-60
   03/18/98  House  Committee report: Favorable with amendment Labor,
                     Commerce and Industry HJ-9
   03/19/98  House  Amended HJ-23
   03/19/98  House  Read second time HJ-24
   03/19/98  House  Unanimous consent for third reading on next
                     legislative day HJ-25
   03/20/98  House  Read third time and sent to Senate HJ-4
   03/24/98  Senate Introduced and read first time SJ-7
   03/24/98  Senate Referred to Committee on Banking and Insurance SJ-7
   05/13/98  Senate Recalled from Committee on Banking and Insurance SJ-17
   05/27/98  Senate Read second time SJ-110
   05/28/98  Senate Read third time and enrolled
   06/03/98  Senate Recalled from Legislative Council
   06/03/98  Senate Reconsidered
   06/03/98  Senate Recommitted to Committee on Banking and Insurance

RECALLED

May 13, 1998

H. 3897

S. Printed 5/13/98--S.

Read the first time March 24, 1998.

A BILL

TO AMEND SECTION 38-27-510, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO REHABILITATION AND LIQUIDATION OF INSURERS, FORMAL PROCEEDINGS, AND LIABILITY OF THE REINSURER, SO AS TO PROVIDE, AMONG OTHER THINGS, THAT THE ORIGINAL INSURED OR POLICYHOLDER SHALL NOT HAVE ANY RIGHTS AGAINST THE REINSURER WHICH ARE NOT SPECIFICALLY SET FORTH IN THE REINSURANCE CONTRACT OR OTHER AGREEMENT BETWEEN THE REINSURER AND THE ORIGINAL INSURED OR POLICYHOLDER.

Amend Title To Conform

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

SECTION 1. Section 38-27-510 of the 1976 Code is amended to read:

"Section 38-27-510. 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.

(1) where the contract or other written agreement specifically provides another payee of the reinsurance in the event of the insolvency of the ceding insurer; or

(2) where the assuming insurer, with the consent of the direct insured, has assumed the policy obligations of the ceding insurer as direct obligations of the assuming insurer to the payees under the policies and in substitution for the obligations of the ceding insurer to the payees.

The reinsurance is payable under contracts reinsured by the assuming insurer on the basis of reported claims allowed in the liquidation proceedings, subject to court approval, without diminution because of the insolvency of the ceding insurer.

The domiciliary liquidator of an insolvent ceding insurer shall give written notice to the assuming insurer of the pendency of a claim against the ceding insurer on the contract reinsured within a reasonable time after the claim is filed in the liquidation proceeding. During the pendency of the claim, an assuming insurer may investigate the claim and interpose, at its own expense in the proceeding where the claim is to be adjudicated, any defenses which it considers available to the ceding insurer or its liquidator. This expense is chargeable, subject to court approval, against the insolvent ceding insurer as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the ceding insurer solely as a result of the defense undertaken by the assuming insurer. Where two or more assuming insurers are involved in the same claim and a majority in interest elect to interpose a defense to the claim, the expense must be apportioned in accordance with the terms of the reinsurance agreement as though the expense had been incurred by the ceding insurer."

SECTION 2. This act takes effect upon approval by the Governor.