Bill 3339

                    Current Status

Bill Number:               3339
Ratification Number:       357
Act Number:                338
Introducing Body:          House
Subject:                   Relating to the conduct of insurance
                           business

(A338, R357, H3339)

AN ACT TO AMEND CHAPTER 9, TITLE 38, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE CONDUCT OF INSURANCE BUSINESS, BY ADDING ARTICLE 7 SO AS TO PROVIDE STANDARDS GOVERNING CANCELLATION, NONRENEWAL, AND RENEWAL OF PROPERTY INSURANCE AND CASUALTY INSURANCE COVERAGES, INCLUDING, AMONG OTHER THINGS, THE ESTABLISHMENT OF UNLAWFUL ACTS.

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

Cancellation, nonrenewal, and renewal of

property and casualty insurance

SECTION 1. Chapter 9 of Title 38 of the 1976 Code is amended by adding:

"Article 7

Cancellation, Nonrenewal, and Renewal

of Property Insurance and Casualty

Insurance

Section 38-9-810. This article applies to all property insurance and casualty insurance, as defined in items (c) and (d) of Section 38-5-20, except for automobile insurance and any other type of property or casualty insurance as to which there are specific statutory provisions of law governing cancellation, nonrenewal, or renewal of policies. This article further applies to policies issued by licensed insurers and to policies issued by insurers which are unlicensed but approved under Section 38-47-100.

Section 38-9-820. For the purposes of this article:

(1) 'Renewal' or 'to renew' means the issuance of or the offer to issue by an insurer a policy succeeding a policy previously issued and delivered by the same insurer or an insurer within the same group of insurers, or the issuance of a certificate or notice extending the term of an existing policy for a specified period beyond its expiration date.

(2) 'Nonpayment of premium' means the failure or inability of the named insured to discharge when due any obligation in connection with the payment of premiums on a policy of insurance subject to this article, whether such payment is payable directly to the insurer or its agent or indirectly payable under a premium finance plan or extension of credit.

(3) 'Cancellation' means termination of a policy at a date other than its expiration date.

(4) 'Expiration date' means the date upon which coverage under a policy ends. It also means, for a policy written for a term longer than one year or with no fixed expiration date, each annual anniversary date of such policy.

(5) 'Nonrenewal' means termination of a policy at its expiration date.

Section 38-9-830. (a) No insurance policy or renewal thereof may be cancelled by the insurer prior to the expiration of the term stated in the policy, except for one of the following reasons:

(1) nonpayment of premium;

(2) material misrepresentation of fact which, if known to the company, would have caused the company not to issue the policy;

(3) substantial change in the risk assumed, except to the extent that the insurer should reasonably have foreseen the change or contemplated the risk in writing the policy;

(4) substantial breaches of contractual duties, conditions, or warranties; or

(5) loss of the insurer's reinsurance covering all or a significant portion of the particular policy insured, or where continuation of the policy would imperil the insurer's solvency or place that insurer in violation of

the insurance laws of this State. Prior to cancellation for reasons permitted in this item (5), the insurer must notify the Commissioner, in writing, at least sixty days prior to such cancellation and the Commissioner shall, within thirty days of such notification, approve or disapprove such action.

(b) Cancellation under item (1) of subsection (a) of this section is not effective unless written notice of cancellation has been delivered or mailed to the insured and the agent of record, if any, not less than ten days prior to the proposed effective date of cancellation. Cancellation under items (2) through (5) of subsection (a) of this section is not effective unless written notice of cancellation has been delivered or mailed to the insured and the agent of record, if any, not less than thirty days prior to the proposed effective date of cancellation. The notice must be given or mailed to the insured and the agent at their addresses shown in the policy or, if not reflected therein, at their last known addresses. Any notice of cancellation shall state the precise reason for cancellation. Proof of mailing is sufficient proof of notice.

(c) Subsections (a) and (b) of this section do not apply to any insurance policy which has been in effect for less than ninety days and is not a renewal of a previously existing policy. The policy may be cancelled for any reason by furnishing to the insured at least thirty days' written notice of cancellation, except where the reason for cancellation is nonpayment of premium, in which case not less than ten days' written notice must be furnished.

Section 38-9-840. (a) No insurance policy may be nonrenewed by an insurer except in accordance with the provisions of this section, and any nonrenewal attempted which is not in compliance with this section is ineffective.

(b) A policy written for a term of one year or less may be nonrenewed by the insurer at its expiration date by giving or mailing written notice of nonrenewal to the insured and the

agent of record, if any, not less than thirty days prior to the expiration date of the policy.

(c) Subject to subsection (c) of Section 38-9-860, a policy written for a term of more than one year or for an indefinite term may be nonrenewed by the insurer at its anniversary date by giving or mailing written notice of nonrenewal to the insured and the agent of record, if any, not less than thirty days prior to the anniversary date of the policy.

(d) The notice required by this section must be given or mailed to the insured and the agent at their addresses shown in the policy or, if not reflected therein, at their last known addresses. Proof of mailing is sufficient proof of notice.

(e) Any notice of nonrenewal shall state the precise reason for nonrenewal.

Section 38-9-850. (a) If an insurer intends to renew a policy, the insurer shall furnish renewal terms and a statement of the amount of premium or estimated premium due for the renewal policy period in the manner required by this section.

(b) If the policy being renewed (hereinafter 'original policy') is written for a term of one year or less, the renewal terms and statement of premium or estimated premium due must be furnished to the insured not less than thirty days prior to the expiration date of the original policy.

(c) If the original policy is written for a term of more than one year or for an indefinite term, the renewal terms and statement of premium or estimated premium due must be furnished to the insured not less than thirty days prior to the anniversary date of the original policy.

(d) The insurer may satisfy its obligation to furnish renewal terms and statement of premium or estimated premium due by either of the following methods:

(1) mailing or delivering renewal terms and statement to the insured at his address shown in the policy or, if not reflected therein, at his

last known address, not less than thirty days prior to expiration or anniversary; or

(2) mailing or delivering renewal terms and statement to the agent of record, if any, not less than forty-five days prior to expiration or anniversary, along with instructions that the agent furnish the renewal terms and statement to the insured not less than thirty days prior to expiration or anniversary.

(e) If the insurer fails to furnish the renewal terms and statement of premium or estimated premium due in the manner required by this section, the insured may elect to cancel the renewal policy within the thirty-day period following receipt of the renewal terms and statement of premium or estimated premium due. Earned premium for any period of coverage must be calculated pro rata based upon the premium applicable to the original policy and not the premium applicable to the renewal policy.

Section 38-9-860. (a) It is unlawful for any insurer to cancel, nonrenew, or renew a policy of insurance except in compliance with the requirements of this article.

(b) Midterm cancellation of an entire block, line, or class of business is presumed to be unfair, inequitable, and contrary to the public interest and is unlawful.

(c) If a policy has been issued for a term longer than one year and for additional premium consideration renewal of the policy or an annual premium has been guaranteed, it is unlawful for the insurer to refuse to renew the policy or to increase the annual premium during the term of that policy.

Section 38-9-870. For insurers which are unlicensed but approved under Section 38-47-100, the timely giving of all notices required by this article to the licensed broker who placed the insurance and represents the insured is considered notice to the insured.

Section 38-9-880. There is no liability on the part of and no cause of action of any nature may arise against the Commissioner, any insurer, or the authorized representatives, agents, and

employees of either or any firm, person, or corporation furnishing to the insurer information as to reasons for cancellation or refusal to write or renew, for any statement made by any of them in complying with this article, or for the providing of information pertaining thereto, unless the person asserting the cause of action establishes that the person against whom the cause of action is asserted was motivated by express malice or gross negligence."

Time effective

SECTION 2. This act shall take effect upon approval by the Governor.