Name changed
SECTION 573. Section 38-21-140 of the 1976 Code is amended to read:
"Section 38-21-140. Every insurer subject to registration shall file the registration statement on a form prescribed by the director or his designee which must contain the following current information: (1) capital structure, general financial condition, ownership, and management of the insurer and a person controlling the insurer; (2) 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) management agreements, service contracts, and cost-sharing arrangements; (f) reinsurance agreements; (g) dividends and other distributions to shareholders; (h) consolidated tax allocation agreements. (4) pledge of the insurer's stock, including stock of a subsidiary or controlling affiliate, for a loan made to a member of the insurance holding company system; (5) other matters concerning transactions between registered insurers and affiliates included in registration forms adopted or approved by the director or his designee."
Name changed
SECTION 574. Section 38-21-160 of the 1976 Code is amended to read:
"Section 38-21-160. 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 department by regulation or by order of the director or his designee 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."
Name changed
SECTION 575. Section 38-21-170 of the 1976 Code is amended to read:
"Section 38-21-170. Subject to Section 38-21-270, each registered insurer shall report to the department all dividends and other distributions to shareholders within fifteen business days following the declaration thereof."
Name changed
SECTION 576. Section 38-21-190 of the 1976 Code is amended to read:
"Section 38-21-190. The director or his designee shall terminate the registration of an insurer that is no longer a member of an insurance holding company system."
Name changed
SECTION 577. Section 38-21-200 of the 1976 Code is amended to read:
"Section 38-21-200. The director or his designee may require or allow two or more affiliated insurers subject to registration to file a consolidated registration statement."
Name changed
SECTION 578. Section 38-21-210 of the 1976 Code is amended to read:
"Section 38-21-210. The director or his designee 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."
Name changed
SECTION 579. Section 38-21-220 of the 1976 Code is amended to read:
"Section 38-21-220. A person may file with the department 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 director or his designee disallows the disclaimer. The director or his designee 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."
Name changed
SECTION 580. Section 38-21-240 of the 1976 Code is amended to read:
"Section 38-21-240. 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 department by regulation or the director or his designee by order exempts it from these sections."
Name changed
SECTION 581. Section 38-21-250 of the 1976 Code is amended to read:
"Section 38-21-250. (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. (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 department in writing of its intention to enter into the transaction at least thirty days prior thereto, or such shorter period as the director or his designee may permit, and the director or his designee 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 of the department, which the director or his designee 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 director or his designee 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 director or his designee, 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 department 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."
Name changed
SECTION 582. Section 38-21-260 of the 1976 Code is amended to read:
"Section 38-21-260. 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 director or his designee 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."
Name changed
SECTION 583. Section 38-21-270 of the 1976 Code is amended to read:
"Section 38-21-270. (A) No domestic insurer may pay an extraordinary dividend or make another extraordinary distribution to its shareholders until the director or his designee: (1) has approved the payment; or (2) has not disapproved the payment within thirty days after receiving notice of the declaration. (B) (1) For purposes of this section, an extraordinary dividend or distribution includes a 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 the greater of: (a) ten percent of the insurer's surplus as regards policyholders as reflected in the insurers most recent annual statement; (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 as reflected in the insurers most recent annual statement. (2) It does not include pro rata distributions of a class of the insurer's own securities. (C) An insurer may declare an extraordinary dividend or distribution which is conditional upon the approval of the director or his designee. The declaration confers no rights upon shareholders until the director or his designee: (1) has approved the payment of the dividend or distribution; or (2) has not disapproved the payment within thirty days after receiving notice of the declaration."
Name changed
SECTION 584. Section 38-21-280 of the 1976 Code is amended to read:
"Section 38-21-280. (a) In addition to his powers relating to examinations or investigations of insurers, the director or his designee 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 director or his designee has, in addition to powers prescribed in Section 38-21-340, the power to examine the affiliates to obtain this information. (b) The director may retain at the registered insurer's expense attorneys, actuaries, accountants, and other experts not otherwise a part of the department'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 director or his designee 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."
Name changed
SECTION 585. Section 38-21-290 of the 1976 Code is amended to read:
"Section 38-21-290. All information, documents, and copies thereof obtained by or disclosed to the director 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 director, 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 director or his designee, 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."
Name changed, etc.
SECTION 586. Section 38-21-300 of the 1976 Code is amended to read:
"Section 38-21-300. The department or the director, as appropriate, 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."
Name changed; etc.
SECTION 587. Section 38-21-310 of the 1976 Code is amended to read:
"Section 38-21-310. Whenever it appears to the director or his designee 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 by the department or order issued by the director or his designee hereunder, the director or his designee 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."
Name changed; issuance of regulations
SECTION 588. Section 38-21-320 of the 1976 Code is amended to read:
"Section 38-21-320. 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 issued by the department or order issued by the director or his designee 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 director or his designee 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 issued by the department or order issued by the director or his designee hereunder, the insurer or the director or his designee 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 issued by the department or order issued by the director or his designee 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."
Name changed; issuance of regulations
SECTION 589. Section 38-21-330 of the 1976 Code is amended to read:
"Section 38-21-330. In a case where a person has acquired or is proposing to acquire voting securities in violation of this chapter, or any regulation issued by the department or order issued by the director or his designee 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 director or his designee, 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."
Name changed
SECTION 590. Section 38-21-340 of the 1976 Code is amended to read:
"Section 38-21-340. (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 director or his designee, 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 director or his designee may reduce the penalty if the insurer demonstrates to the director or his designee 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 director or his designee. In determining the amount of the civil forfeiture, the director or his designee 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 director or his designee 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 director or his designee may order the insurer to cease and desist immediately any further activity under that transaction or contract. After notice and hearing the director or his designee 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 director or his designee that an insurer or a director, officer, employee, or agent of it has committed a willful violation of this chapter, the director or his designee 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 director or his designee 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 director or his designee 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 director or his designee 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."
Name changed
SECTION 591. Section 38-21-350 of the 1976 Code is amended to read:
"Section 38-21-350. Whenever it appears to the director or his designee 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 director or his designee may proceed as provided in Chapter 27 of this title to take possession of the property of the insurer and to conduct its business."
Name changed; language deleted; reference added to Administrative Law Judge Division
SECTION 592. Section 38-21-370 of the 1976 Code is amended to read:
"Section 38-21-370. Any action, order, or decision of the director or his designee pursuant to this chapter is subject to judicial review by the Administrative Law Judge Division as provided by law."
Name changed
SECTION 593. Section 38-23-20 of the 1976 Code is amended to read:
"Section 38-23-20. `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 director or his designee considers to be of similar nature and considers necessary or appropriate, by any regulation the department may prescribe in the public interest or for the protection of investors, to treat as an equity security."
Name changed
SECTION 594. Section 38-23-40 of the 1976 Code is amended to read:
"Section 38-23-40. Every beneficial owner, director, or officer of a domestic stock insurer shall file in the office of the department within ten days after he becomes a beneficial owner, director, or officer a statement, in a form the director or his designee 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 department a statement, in a form the director or his designee 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."
Name changed
SECTION 595. Section 38-23-50 of the 1976 Code is amended to read:
"Section 38-23-50. 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 department, by regulation, may exempt as not comprehended within the purpose of this section."
Name changed
SECTION 596. Section 38-23-70 of the 1976 Code is amended to read:
"Section 38-23-70. 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 1934, for the security. The department may, by any regulation it 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."
Name changed
SECTION 597. Section 38-23-80 of the 1976 Code is amended to read:
"Section 38-23-80. Sections 38-23-40 to 38-23-60 do not apply to foreign or domestic arbitrage transactions unless made in contravention of regulations the department may adopt in order to carry out the purposes of this chapter."
Name changed
SECTION 598. Section 38-23-100 of the 1976 Code is amended to read:
"Section 38-23-100. The director 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 department, 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."
Name changed; reference to Administrative Law Judge Division
SECTION 599. Section 38-25-10 of the 1976 Code is amended to read:
"Section 38-25-10. (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, including the Administrative Law Judge Division as provided by law, and substituted service of any notice, order, pleading, or process upon such insurers in any proceeding by the director or his designee 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."
Name changed
SECTION 600. Section 38-25-110 of the 1976 Code is amended to read:
"Section 38-25-110. It is unlawful for an insurer to transact insurance business in this State without a certificate of authority from the director or his designee. 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."
Name changed; etc.
SECTION 601. Section 38-25-160 of the 1976 Code is amended to read:
"Section 38-25-160. The director or his designee may, by regulation of the department or by his 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 director or his designee shall require the insurer or other organization to appoint the director as agent for service of process. The director or his designee may require the insurer or other organization to file with the department, as information, policy forms, annual statements, and financial and other similar material. The director or his designee 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."
Name changed
SECTION 602. Section 38-25-310 of the 1976 Code is amended to read:
"Section 38-25-310. Whenever the director or his designee believes, from evidence satisfactory to him, that an insurer is violating or about to violate Section 38-25-110 the director or his designee 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."
Name changed
SECTION 603. Section 38-25-510 of the 1976 Code is amended to read:
"Section 38-25-510. (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 director or his designee or by the state and upon whom may be served any notice, order, pleading, or process in any proceeding before the director or his designee 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 director or his designee 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 director or his designee 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 director or his designee 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 director or his designee 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 director or his designee 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 director or his designee 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 director or his designee 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."
Name changed
SECTION 604. Section 38-25-520 of the 1976 Code is amended to read:
"Section 38-25-520. (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 director 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 director or some person in apparent charge of his office two copies of it and by payment to the director of a fee of ten dollars, of which five dollars must be retained by the director to offset the costs he incurs in service of process and of which five dollars must be deposited to the credit of the general fund of the state. (c) The director or his designee 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."
Name changed
SECTION 605. Section 38-25-540 of the 1976 Code is amended to read:
"Section 38-25-540. 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. This section does not apply to an eligible surplus lines insurer which maintains the deposit required by Section 38-9-80 or which has on file with the department a surety bond issued by an admitted insurer in an amount determined by the director or his designee to be sufficient to meet the security requirements of Section 38-9-80. Before an eligible surplus lines insurer files or causes to be filed any action, suit, or proceeding in this State to enforce a right, claim, or demand arising out of the transaction of insurance, it shall produce evidence that the security deposit is presently on file or that the required surety bond is then in force and effect."
Name changed
SECTION 606. Section 38-25-550 of the 1976 Code is amended to read:
"Section 38-25-550. (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 director or his designee 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 director or his designee in administrative proceedings before the director or his designee, cash or securities, or file with the clerk of court or the director or his designee a bond with good and sufficient sureties, to be approved by the clerk or director or his designee, in an amount to be fixed by the court or director or his designee 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 director or his designee 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 director or his designee, 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. (c) This section does not apply to an eligible surplus lines insurer which maintains the deposit required by Section 38-9-80 or which has on file with the department a surety bond issued by an admitted insurer in an amount determined by the director or his designee to be sufficient to meet the security requirements of Section 38-9-80. Before an eligible surplus lines insurer files or causes to be filed any action, suit, or proceeding in this State to enforce a right, claim, or demand arising out of the transaction of insurance, it shall produce evidence that the security deposit is presently on file or that the required surety bond is then in force and effect."
Name changed
SECTION 607. Section 38-25-570 of the 1976 Code is amended to read:
"Section 38-25-570. (a) The Attorney General upon request of the director or his designee 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 director or his designee. (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 director or his designee 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 department 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 department 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 department 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."
Name changed; etc.
SECTION 608. Chapter 26, Title 38 of the 1976 Code is amended to read:
"CHAPTER 26
Administrative Supervision of Insurers Act
Section 38-26-10. This chapter may be cited as the `Administrative Supervision of Insurers Act".
Section 38-26-20. As used in this chapter: (1) `Insurer' means a person who has done, purports to do, is going to do, 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 department, or similar entity, of a state. For purposes of this chapter, other persons included under Section 38-27-40 are considered insurers. (2) `Exceed its powers' means the following conditions: (a) The insurer has refused to permit examination of its books, papers, accounts, records, or affairs by the director or his deputies, designees, employees, or commissioned examiners. (b) A domestic insurer unlawfully has removed from this State books, papers, accounts, or records necessary for an examination of the insurer. (c) The insurer has failed to comply promptly with the applicable financial reporting statutes or regulations and related departmental requests. (d) The insurer has neglected or refused to observe an order of the director or his designee to make good, within the time prescribed by law, prohibited deficiency in its capital, capital stock, or surplus. (e) The insurer is continuing to transact insurance or write business after its license has been revoked or suspended by the director or his designee. (f) The insurer, by contract or otherwise, unlawfully, in violation of an order of the director or his designee, or without first having obtained written approval of the director or his designee if approval is required by law has: (i) totally reinsured its entire outstanding business; or (ii) merged or consolidated substantially its entire property or business with another insurer. (g) The insurer engaged in a transaction in which it is not authorized to engage under the laws of this State. (h) The insurer refused to comply with a lawful order of the director or his designee. (3) `Consent' means agreement to administrative supervision by the insurer.
Section 38-26-30.The provisions of this chapter apply to: (1) domestic insurers; (2) an insurer doing business in this State whose state of domicile has asked the director or his designee to apply the provisions of this chapter as regards the insurer.
Section 38-26-40. (A) An insurer may be subject to administrative supervision by the department if upon examination or at another time it appears in the discretion of the director or his designee that one or more of the following circumstances exist: (1) The insurer's condition renders the continuance of its business hazardous to the public or to its insureds. (2) The insurer has exceeded its powers granted under its certificate of authority and applicable law. (3) The insurer has failed to comply with a provision of the insurance laws of this State. (4) The business of the insurer is being conducted fraudulently. (5) The insurer gives its consent. (B) If the director or his designee determines that one or more of the conditions set forth in subsection (A) exist, he shall: (1) notify the insurer of his determination; (2) furnish to the insurer a written list of the requirements to abate this determination; (3) notify the insurer that it is under the supervision of the department and that the director or his designee is applying the provisions of the chapter. Action by the director or his designee is subject to review pursuant to related regulations and the Administrative Procedures Act. (C) If placed under administrative supervision, the insurer has sixty days or another period of time designated by the director or his designee to comply with the requirements of the department subject to the provisions of this chapter. (D) If it is determined after notice and hearing that the conditions giving rise to the supervision still exist at the end of the supervision period, the director or his designee may extend the period or may initiate proceedings under Chapter 27 of this title. (E) If it is determined that none of the conditions giving rise to the supervision exist, the director or his designee shall release the insurer from supervision.
Section 38-26-50. (A) Proceedings, hearings, notices, correspondence, reports, records, and other information in the possession of the director, his designee, or the Department of Insurance relating to the supervision of an insurer are confidential except as provided by this section. (B) Department personnel have access to the proceedings, hearings, notices, correspondence, reports, records, and other information permitted by the director or his designee. (C) The director or his designee may open the proceedings or hearings or disclose notices, correspondence, reports, records, or other information to a department, agency, or instrumentality of this or another state or of the United States if the director or his designee determines that the disclosure is necessary or proper for the enforcement of the laws of this or another state or the United States. (D) The director or his designee may open the proceedings or hearings or make public notices, correspondence, reports, records, or other information if the director or his designee determines that it is in the best interest of the public or in the best interest of the insurer, its insureds, its creditors, or the general public. (E) This section does not apply to hearings, notices, correspondence, reports, records, or other information obtained after the appointment of a receiver for the insurer by a court of competent jurisdiction.
Section 38-26-60. During the period of supervision, the director or his designated appointee shall serve as the administrative supervisor. The director or his designee may provide, after notice to the insurer, that the insurer may not do any of the following things during supervision without the prior approval of the director or his appointed supervisor: (1) dispose of, convey, or encumber its assets or its business in force; (2) withdraw its bank accounts; (3) lend its funds; (4) invest its funds; (5) transfer its property; (6) incur debt, obligation, or liability; (7) merge or consolidate with another company; (8) approve new premiums or renew policies; (9) enter into a new reinsurance contract or treaty; (10) terminate, surrender, forfeit, convert, or lapse an insurance policy, a certificate, or a contract, except for nonpayment of premiums due; (11) release, pay, or refund premium deposits, accrued cash or loan values, unearned premiums, or other reserves on an insurance policy, certificate, or contract; (12) make a material change in management; (13) 20.31 increase salaries and benefits of officers or directors or the preferential payment of bonuses, dividends, or other preferential payments.
Section 38-26-70. During supervision the insurer may contest an action taken or proposed to be taken by the supervisor specifying the manner in which the action being complained of would not result in improving the condition of the insurer. Denial of the insurer's request upon reconsideration entitles the insurer to review under related regulation and the Administrative Procedures Act.
Section 38-26-80. Nothing in this chapter precludes the director or his designee from initiating judicial proceedings to place an insurer in conservation, rehabilitation, or liquidation or other delinquency proceedings, however designated under the laws of this State, regardless of whether the director or his designee previously has initiated administrative supervision proceedings under this chapter against the insurer.
Section 38-26-90. The director or his designee may meet with a supervisor appointed under this chapter and with his attorney or other representative without the presence of another person at the time of or during a proceeding held under authority of this chapter to carry out the duties of the director or his designee or for the supervisor to carry out his duties under this chapter.
Section 38-26-100. There is no liability on the part of, and no cause of action may arise against, the director, his designee, or the Department of Insurance or its employees or agents for action taken by them in the performance of their powers and duties under this chapter.
Section 38-26-110. The department may promulgate regulations necessary for the implementation of this chapter."
Name changed; etc.
SECTION 609. Article 1, Chapter 27, Title 38 of the 1976 Code is amended to read:
"CHAPTER 27
Insurers' Rehabilitation and Liquidation Act
Article 1
General Provisions
Section 38-27-10. This chapter may be cited as the `Insurers Rehabilitation and Liquidation Act'.
Section 38-27-20. This chapter does not limit the powers granted the director or his designee by other provisions of law and must be liberally construed to effect the purpose stated in Section 38-27-30.
Section 38-27-30. 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 38-27-40. The proceedings authorized by this chapter may be applied to: (1) 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) insurers who purport to do an insurance business in this State; (3) insurers who have insureds resident in this State; (4) other persons organized or in the process of organizing with the intent to do an insurance business in this State; (5) nonprofit service plans, fraternal benefit societies, and beneficial societies; (6) title insurance companies; (7) surety companies subject to Chapter 15 of Title 38; (8) multiple employer self-insured health plans defined in Chapter 41 of Title 38; (9) prepaid health care delivery plans.
Section 38-27-50. For 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 a proceeding instituted against an insurer to liquidate, rehabilitate, reorganize, or conserve the insurer and a summary proceeding under Section 38-27-220. `Formal delinquency proceeding' means a 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 director or his designee. (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 director or his designee 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 director, his designee, 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. (a) Except as provided in this subsection, no delinquency proceeding may be commenced under this chapter by anyone other than the director or his designee 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 director or his designee 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 department 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 department. (2) The insurance company affected thereby has ten days after the service of the notice within which to lodge with the department a copy of the answer which it proposes to file, and thereupon the director or his designee 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 director or his designee, 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 director or his designee 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 department 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. (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. (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 director or his designee 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 director or his designee requesting a reply. (2) To make available to the director or his designee 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 director or his designee 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 director or his designee, or any person who obstructs or interferes with the director or his designee in the conduct of any delinquency proceeding or any investigation preliminary or incidental thereto, or who violates any valid order the director or his designee 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 director or his designee 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 director or his designee.
Section 38-27-90. In any proceeding under this chapter, the director and his designee(s) 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 director or his designee(s). These bonds must be paid for out of the assets of the insurer as a cost of administration.
Section 38-27-100. An insurance proceeding under this chapter begun before the effective date of the `Insurers Rehabilitation and Liquidation Act' is deemed to have begun after that date for the purpose of conducting the proceeding. However, in the discretion of the director or his designee, the proceeding may be continued, in whole or in part, as it would have been if this act was not in effect.
Section 38-27-110. Until payments of or on account of an insurer's contractual obligations by a guaranty association, including expenses and interest, are repaid to the guaranty association or a plan of repayment by the insurer is approved by the guaranty association, no insurer that is subject to a delinquency proceeding, whether formal or informal, administrative or judicial, may: (1) be released from the proceeding unless it is converted into a judicial rehabilitation or liquidation proceeding; (2) be permitted to solicit or accept new business or request or accept the restoration of a suspended or revoked license or certificate of authority; (3) be returned to the control of its shareholders or private management; or (4) have its assets returned to the control of its shareholders or private management."
Name changed; etc.
SECTION 610. Article 3, Chapter 27, Title 38 of the 1976 Code is amended to read:
"Article 3
Summary Provisions
Section 38-27-220. (a) The director or his designee 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 director or his designee. (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 department 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 written consent of the director or his designee. (c) The court shall specify in the order what its duration is, which must be the time the court considers necessary for the department 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 department 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. In proceedings and judicial reviews under Section 38-27-220, records of the insurer, other documents, 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, unless 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, papers filed with the clerk of the Circuit Court must be held by him in a confidential file."
Name changed; etc.
SECTION 611. Section 38-27-310 of the 1976 Code is amended to read: "Section 38-27-310. The director or his designee 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 director or his designee 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 director or his designee 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 director or his designee 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 written consent of the director or his designee, 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 wilfully has violated its charter, articles of incorporation, or bylaws, an insurance law of this State, or an order of the director or his designee. (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 director or his designee 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 director or his designee, 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."
Name changed; etc.
SECTION 612. Section 38-27-320 of the 1976 Code is amended to read:
"Section 38-27-320. (a) An order to rehabilitate the business of a domestic insurer or an alien insurer domiciled in this State shall appoint the director, and his successors in office, or his designee 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."
Name changed; language deleted; etc.
SECTION 613. Section 38-27-330(a) of the 1976 Code is amended to read:
"(a) The director may appoint one or more special deputies who have all the powers and responsibilities of the rehabilitator granted under this section to assist the director or his designee as rehabilitator, and the director 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 director 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 director'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 director 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 director for the use of the insurance department out of the first available monies of the insurer."
Name changed
SECTION 614. Section 38-27-350 of the 1976 Code is amended to read:
"Section 38-27-350. (a) Whenever the director or his designee 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 director or his designee 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."
Name changed
SECTION 615. Section 38-27-360 of the 1976 Code is amended to read:
"Section 38-27-360. The director or his designee may petition the Circuit Court as provided by law 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."
Name changed; etc.
SECTION 616. Section 38-27-370 of the 1976 Code is amended to read:
"Section 38-27-370. (A) An order to liquidate the business of a domestic insurer must appoint the director and his successors in office, or his designee, as liquidator and 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 the property, contracts, and rights of action and 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, for 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 filed or recorded with that office would have imparted. (B) Upon issuance of the order, the rights and liabilities of the insurer and its creditors, policyholders, shareholders, members, and 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. (D) At the time of petitioning for an order of liquidation, or after that time, the director or his designee, 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) An order issued under this section must require accounting to the court by the liquidator. Accountings must be at intervals the court specifies in its order. (F) (1) Within five days of the effective date of this subsection or within five days after the initiation of an appeal of an order of liquidation, which order has not been stayed, the director or his designee shall present for the court's approval a plan for the continued performance of the defendant company's policy claims obligations, including the duty to defend insureds under liability insurance policies during the pendency of an appeal. The plan must provide for the continued performance and payment of policy claims obligations in the normal course of events notwithstanding the grounds alleged in support of the order of liquidation including the ground of insolvency. If the defendant company's financial condition, in the judgment of the director or his designee, does not support the full performance of policy claims obligations during the appeal pendency period, the plan may prefer the claims of certain policyholders and claimants over creditors and interested parties as well as other policyholders and claimants as the director or his designee finds to be fair and equitable considering the relative circumstances of the policyholders and claimants. The court shall examine the plan submitted by the director or his designee and if it finds the plan to be in the best interests of the parties, the court shall approve the plan. No action may lie against the director, or his deputies, designees, agents, clerks, assistants, or attorneys based on preference in an appeal pendency plan approved by the court. (2) The appeal pendency plan may not supersede or affect the obligations of an insurance guaranty association. An appeal pendency plan must provide for equitable adjustments to be made by the liquidator to distributions of assets to guaranty associations, if the liquidator pays claims from assets of the estate, which otherwise would be the obligations of a guaranty association but for the appeal of the order of liquidation, so that guaranty associations equally benefit on a pro rata basis from the assets of the estate. If an order of liquidation is set aside upon appeal, the company must not be released from delinquency proceedings unless funds advanced by a guaranty association, including reasonable administrative expenses relating to obligations of the company, are repaid in full, together with interest at the judgment rate of interest or unless an arrangement for repayment has been made with the consent of applicable guaranty associations."
Name changed
SECTION 617. Section 38-27-390 of the 1976 Code is amended to read:
"Section 38-27-390. The director or his designee 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 as provided by law shall order dissolution of the corporation upon petition by the director or his designee 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."
Name changed
SECTION 618. Section 38-27-400 of the 1976 Code is amended to read:
"Section 38-27-400. (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 director 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 director 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 department 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. (23) To audit the books and records of agents of the insurer insofar as those records relate to the business activities of the insurer. (24) Notwithstanding the powers of the liquidator in subsections (a) and (b), the liquidator is not obligated to defend claims or to continue to defend claims after the entry of a liquidation order. (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."
Name changed
SECTION 619. Section 38-27-410 of the 1976 Code is amended to read:
"Section 38-27-410. (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 director of the department of insurance 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."
Name changed
SECTION 620. Section 38-27-500(e) of the 1976 Code is amended to read:
"(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 director or his designee 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 director or his designee 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."
Name changed; language deleted; reference to Administrative Law Judge Division
SECTION 621. Section 38-27-520 of the 1976 Code is amended to read:
"Section 38-27-520. (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 director or his designee 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 director or his designee 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 director or his designee, if he finds a violation, shall impose the penalties under subsection (b) he considers advisable. (d) When the director or his designee takes action in any or all of the ways set out in subsection (b), the party aggrieved may appeal from the action to the Administrative Law Judge Division as provided by law."
Name changed
SECTION 622. Section 38-27-640 of the 1976 Code is amended to read:
"Section 38-27-640. (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 director or his designee in his discretion petitions the court to reopen the liquidation under Section 38-27-660."
Name changed
SECTION 623. Section 38-27-660 of the 1976 Code is amended to read:
"Section 38-27-660. After the liquidation proceeding has been terminated and the liquidator discharged, the director or his designee 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."
Name changed
SECTION 624. Section 38-27-670 of the 1976 Code is amended to read:
"Section 38-27-670. Whenever it appears to the director or his designee 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."
Name changed
SECTION 625. Section 38-27-680 of the 1976 Code is amended to read:
"Section 38-27-680. The Circuit Court may, as it considers desirable, cause audits to be made of the books of the director or his designee relating to any receivership established under this chapter, and a report of each audit must be filed with the department 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."
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SECTION 626. Section 38-27-910(a) of the 1976 Code is amended to read:
"(a) If a domiciliary liquidator has not been appointed, the director or his designee 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."
Name changed
SECTION 627. Section 38-27-920 of the 1976 Code is amended to read:
"Section 38-27-920. (a) If no domiciliary receiver has been appointed, the director or his designee 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 director or his designee 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 director or his designee considers desirable for the protection of the policyholders and creditors in this State. (f) The court may order the director or his designee, 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."
Name changed; etc.
SECTION 628. Section 38-27-930(b) of the 1976 Code is amended to read:
"(b) If a domiciliary liquidator is appointed for an insurer not domiciled in a reciprocal state, the director of this State or his designee 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 director of this State or his designee 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."
Name changed
SECTION 629. Section 38-27-940(a) of the 1976 Code is amended to read:
"(a) If a domiciliary liquidator has been appointed for an insurer not domiciled in this State, the director or his designee 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."
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SECTION 630. Section 38-27-950 of the 1976 Code is amended to read:
"Section 38-27-950. The director or his designee in his sole discretion may institute proceedings under Sections 38-27-220 and 38-27-230 at the request of the commissioner or other appropriate insurance official of the domiciliary state of a foreign or an alien insurer having property located in this State."
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SECTION 631. Chapter 29, Title 38 of the 1976 Code is amended to read:
"CHAPTER 29
South Carolina Life and Accident and Health Insurance Guaranty Association
Section 38-29-10. 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. 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 director or his designee 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. 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 director, his designee, and the department, in the prescribed manner, in the detection and prevention of insurer impairments.
Section 38-29-40. (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. (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 department and is subject to the applicable insurance laws of this State.
Section 38-29-60. (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 director'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 director 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. 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 director or his designee: (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 director or his designee: (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 director or his designee: (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 director or his designee 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 director or his designee: (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 director or his designee 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 director or his designee 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 approval of the director or his designee, 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. In addition, the association has no liability under this chapter for covered policies of a domestic insurer for residents of another state unless the other state has a guaranty association that provides protection to South Carolina residents substantially similar to that provided by this chapter for residents of other states. (7) The association may render assistance and advice to the director or his designee, 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 director or his designee, 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. (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 may 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 director or his designee, 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 director or his designee may approve.
Section 38-29-90. (1) The association shall submit to the department 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 written approval of the director or his designee. If the association fails to submit suitable amendments to the plan, the director or his designee 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 director or his designee or superseded by amendments submitted by the association and approved by the director or his designee. (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 department director. (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 department director or his designee 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. In addition to the duties and powers enumerated elsewhere in this chapter: (1) The director or his designee: (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 director or his designee must be appointed conservator. (2) The director or his designee 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 director or his designee may impose the penalties provided in Section 38-2-10. (3) Any action of the board of directors or the association may be appealed to the Administrative Law Judge Division as provided by law 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. To aid in the detection and prevention of insurer impairments: (1) The board of directors shall, upon majority vote, notify the director or his designee 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 director or his designee 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 director or his designee. 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 director or his designee from his obligation to comply with item (3) of this section. The director or his designee shall notify the board of directors when the examination is completed. The request for an examination must be kept on file by the department, 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 director or his designee 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 director, his designee, and the department 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 director, his designee, and the department 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 department.
Section 38-29-120. The association may recommend the appointment of a person to serve as a special deputy to act for the director or his designee and under his supervision in the liquidation, rehabilitation, or conservation of a member insurer.
Section 38-29-130. (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. The association is subject to examination and regulation by the department. The board of directors shall annually submit to the department, by May first, a financial report for the preceding calendar year in a form approved by the director or his designee and a report of its activities during the preceding calendar year.
Section 38-29-150. The association is exempt from payment of all fees and all state, county, and municipal taxes.
Section 38-29-160. (1) Unless a longer period has been allowed by the director or his designee, a member insurer, at its option, has the right to show a certificate of contribution as an asset in the form approved by the director or his designee pursuant to subsection (8) of Section 38-29-80, at percentages of the original face amount approved by the director or his designee, 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 department and by him deposited with the State Treasurer for credit to the general fund of this State.
Section 38-29-170. 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's agents or employees, members of the board of directors, or the director or his representatives for any action taken by them in the authorized performance of their powers and duties under this chapter. This section does not relieve the association of any of its liability.
Section 38-29-180. 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. 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. This chapter must be liberally construed to effect the purpose under Section 38-29-30 which constitutes an aid and guide to interpretation."
Name changed; etc.
SECTION 632. Chapter 31, Title 38 of the 1976 Code is amended to read:
"CHAPTER 31
South Carolina Property and Casualty Insurance Guaranty Association
Section 38-31-10. This chapter is known and may be cited as the `South Carolina Property and Casualty Insurance Guaranty Association Act'.
Section 38-31-20. As used in this chapter: (1) `Account' means any one of the four accounts created by Section 38-31-40. (2) `Affiliate' means a person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with an insolvent insurer on December thirty-first of the year next preceding the date the insurer becomes an insolvent insurer. (3) `Association' means the South Carolina Property and Casualty Insurance Guaranty Association created under Section 38-31-40. (4) `Claimant' means any insured making a first party claim or any person instituting a liability claim. However, no person who is an affiliate of the insolvent insurer may be a claimant. (5) `Control' means the possession, direct or indirect, of the power to direct or cause the direction 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 that control does not exist in fact. (6) `Covered claim' means an unpaid claim, including one of unearned premiums, which arises out of and is within the coverage and is subject to 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, if for entities other than an individual, the residence of a claimant or insured is the state in which its principal place of business is located at the time of the insured event or (b) the property from which the claim arises is permanently located in this State. `Covered claim' does not include any amount awarded as extra-contractual damages unless awarded against the association; sought as a return of premium under any retrospective rating plan; or due any reinsurer, insurer, insurance pool, or underwriting association as subrogation recoveries or otherwise. (7) `Insolvent insurer' means an insurer (a) licensed 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 in the insurer's state of domicile or of this State and which the director or his designee has found fails to meet its obligation to policyholders in this State. (8) `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. (9) `Net direct written premiums' means direct gross premiums written in this State on insurance policies to which this chapter applies, less return premiums on the policies and dividends paid or credited to policyholders on the direct business. It does not include premiums on contracts between insurers or reinsurers.
Section 38-31-30. This chapter applies to all kinds of direct insurance but does not apply to the following: (1) life, annuity, health, or accident insurance; (2) mortgage guaranty, financial guaranty, or other forms of insurance offering protection against investment risks; (3) fidelity or surety bonds, or any other bonding obligations; (4) credit insurance, vendors' single interest insurance, collateral protection insurance, or any similar insurance protecting the interests of a creditor arising out of a creditor-debtor transaction; (5) insurance of warranties or service contracts; (6) insurance written on a retroactive basis to cover known losses which have resulted from an event with respect to which a claim has already been made, and the claim is known to the insurer at the time the insurance is bound; (7) title insurance; (8) ocean marine insurance; (9) any transaction or combination of transactions between a person, including affiliates of the person, and an insurer, including affiliates of the insurer, which does not effect a transfer of risk from the person, including affiliates of the person, to the insurer, including affiliates of the insurer, to the extent there is not a transfer of risk.
Section 38-31-40. 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 Section 38-31-20(8) 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 four separate accounts: (a) the workers' compensation insurance account; (b) the automobile insurance account; (c) the homeowners multiple peril and farmowners multiple peril insurance account; (d) the account for all other insurance to which this chapter applies.
Section 38-31-50. (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 approval of the director. 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 director 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. The association: (a) is obligated to the extent of claims existing before 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 two hundred fifty dollars and is less than three hundred thousand dollars. However, the association shall pay the full amount of any covered workers' compensation claim. The association has no obligation to pay a claimant's covered claim, except a workers' compensation claim, if: (1) the insured had primary coverage at the time of the loss with a solvent insurer equal to or in excess of three hundred thousand dollars and applicable to the claimant's loss; or (2) the insured's coverage is written subject to a self-insured retention equal to or in excess of three hundred thousand dollars. If the primary coverage and self-insured retention is less than three hundred thousand dollars, the association's obligation to the claimant is reduced by the coverage or retention. The Guaranty Association shall pay the full amount of a covered workers' compensation claim to a claimant notwithstanding any self-insured retention but the Guaranty Association has the right to recover the amount of the self-insured retention from the employer. The association is not obligated to pay a claimant an amount in excess of the obligation of the insolvent insurer under the policy or coverage from which the claim arises. A covered claim does not include any claim filed with the association after the final date set by a court for the filing of claims against the liquidator or receiver of an insolvent insurer. The association shall pay only that amount of each unearned premium which is in excess of one hundred dollars; (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. However, the association has the right but not the obligation to defend an insured who is not a resident of this State at the time of the insured event unless the property from which the claim arises is permanently located in this State in which instance the association does have the obligation to defend the insured; (c) shall allocate claims paid and expenses incurred among the four 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) 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 after proration as funds become available. The association may exempt or defer, in whole or in part, the payment of an assessment of any member insurer, if the payment 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 must 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 the 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 director or his designee directs under Section 38-31-80(2)(a); (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 approval of the director or his designee, 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. (1) The association shall submit to the department 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 written approval of the director or his designee. If the association fails to submit suitable amendments to the plan, the director or his designee 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 director or his designee or superseded by amendments submitted by the association and approved by the director or his designee. (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 Administrative Law Judge Division as provided by law within thirty days after the action or decision. (h) Establish the procedures whereby selections for the board of directors will be submitted to the department director. (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 director or his designee 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. (A) The director or his designee shall: (1) 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; (2) upon request of the board of directors, provide the association with a statement of the net direct written premiums of each member insurer. (B) The director or his designee may: (1) require that the association notify the insureds of the insolvent insurer and 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; (2) suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this State of a member insurer who fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the director or his designee may impose the penalties provided in Section 38-2-10; (3) revoke the designation of a servicing facility if he finds claims are being handled unsatisfactorily; (4) upon request of the board of directors, notwithstanding the limitation on assessments contained in Section 38-31-60(c)(iii), increase the maximum assessment in a year in an account in order for that assessment to provide an amount sufficient to make all necessary payments by the association from that account. However, no member insurer may be assessed in a year on an account under this provision an amount greater than two percent of the member insurer's net direct written premiums for the calendar year preceding the insolvency on the kinds of insurance in the account; (5) after determining that an insurance emergency or catastrophe exists in this State pursuant to Insurance Department Regulation 69-1(2), direct the association to pay the first one hundred dollars of each unearned premium claim and the first two hundred fifty dollars of each covered claim, notwithstanding the provisions of Section 38-31-60(a).
Section 38-31-90. (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. (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. (3) Any person having a claim or legal right of recovery under any governmental insurance or guaranty program which is also a covered claim is required to exhaust first his right under the program. Any amount payable on a covered claim under this chapter must be reduced by the amount of any recovery under the program. (4) No claim held by an insurer, reinsurer, insurance pool, or underwriting association, based on an assignment or on rights of subrogation, may be asserted in any legal action against a person insured under a policy issued by an insolvent insurer except to the extent the amount of the claim exceeds the obligation of the association under this chapter. (5) Any person who has liquidated by settlement or judgment a claim against an insured under a policy issued by an insolvent insurer, and the claim is a covered claim and is also a claim within the coverage of any policy issued by a solvent insurer, is required to exhaust first his rights under the policy issued by the solvent insurer before execution, levy, or any other proceedings are begun to enforce any judgment obtained against or the settlement with the insured of the insolvent insurer.
Section 38-31-110. (A) The board of directors, upon majority vote, may make recommendations to the director, his designee, and the department for the detection and prevention of insurer insolvencies. (B) The board of directors, at the conclusion of any insurer insolvency in which the association was obligated to pay covered claims, may 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 department. (C) The board of directors, upon majority vote, may respond to requests by the director or his designee to discuss and make recommendations regarding the status of any member insurer whose financial condition may be hazardous to policyholders or the public. These recommendations are not considered public documents.
Section 38-31-120. The association is subject to examination and regulation by the department. The board of directors shall annually submit, to the department, by March thirtieth a financial report for the preceding calendar year in a form approved by the director or his designee.
Section 38-31-130. 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. 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. There is no liability on the part of, and no cause of action of any nature may arise against, any member insurer, the association's agents or employees, the board of directors, or the director or his representatives for any act or omission in the performance of their powers and duties under this chapter. This section does not relieve the association of any of its liability.
Section 38-31-160. 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 ninety days from the date insolvency is determined to permit proper defense by the association. The court may stay the proceedings for a longer period of time if the court finds the additional time is necessary 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. (1) The director or his designee 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 director or his designee 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."
Name changed; terms defined, etc.
SECTION 633. Chapter 33, Title 38 of the 1976 Code is amended to read:
"CHAPTER 33
Health Maintenance Organizations
Section 38-33-10. This chapter may be cited as the Health Maintenance Organization Act of 1987.
Section 38-33-20. As used in this chapter: (1) `Basic health care services' means emergency care, inpatient hospital and physician care, and outpatient medical services. It does not include dental services, mental health services, or services for alcohol or drug abuse, although a health maintenance organization at its option may elect to provide these services in its coverage. (2) `Director' means the person who is appointed by the Governor upon the advice and consent of the Senate and who is responsible for the operation and management of the Department of Insurance, including all of its divisions. The director may appoint or designate the person or persons who shall serve at the pleasure of the director to carry out the objectives or duties of the department as provided by law. Furthermore, the director may bestow upon his designee or deputy director any duty or function required of him by law in managing or supervising the insurance department. (3) `Copayment' or `deductible' means the amount specified in the evidence of coverage that the enrollee shall pay directly to the provider for covered health care services, which may be stated in either specific dollar amounts or as a percentage of the provider's usual or customary charge. (4) `Enrollee' means an individual who is enrolled in a health maintenance organization. (5) `Evidence of coverage' means a certificate, an agreement, or a contract issued to an enrollee setting out the coverage to which he is entitled. (6) `Health care services' means services included in furnishing an individual medical or dental care or hospitalization or incident to the furnishing of care or hospitalization, and other services to prevent, alleviate, cure, or heal human illness, injury, or physical disability. (7) `Health maintenance organization' means a person who undertakes to provide or arrange for basic health care services to enrollees for a fixed prepaid premium. (8) `Person' means a natural or an artificial person including, but not limited to, individuals, partnerships, associations, trusts, or corporations. (9) `Provider' means a physician, dentist, hospital, or other person properly licensed, where required, to furnish health care services. (10) `Designee or Deputy Director' means the person or person appointed by director, serving at his will and pleasure as his designee, to supervise and carry out the functions and duties of the department as provided by law. Any duty or function of the director to manage and supervise the insurance department may be conferred by the director's authority upon his designee or deputy director.
Section 38-33-30. (A) No person may establish or operate a health maintenance organization in this State without first obtaining a certificate of authority from the director or his designee. A foreign corporation, upon compliance with the provisions of this chapter, may be issued a certificate of authority upon further conditions that: (1) the applicant is registered as a foreign corporation to do business in this State; (2) the applicant is subject to regulation of its financial condition by authorities in its state of domicile, including regular financial examination not less frequently than once every three years; and (3) the applicant complies with such conditions as the director or his designee may prescribe with respect to the maintenance of books, records, accounts, and facilities in this State. (B) Each application for a certificate of authority must be verified by an officer or authorized representative of the applicant, must be filed in triplicate in a form prescribed by the director or his designee, and must set forth the following: (1) a copy of the organizational documents of the applicant, such as the articles of incorporation, articles of association, partnership agreement, trust agreement, or other applicable documents, and all amendments; (2) a copy of the bylaws and regulations, or similar document, if any, regulating the conduct of the internal affairs of the applicant; (3) a list of the names, addresses, and official positions of the persons who are to be responsible for the management and conduct of the affairs of the applicant, including, but not limited to, all members of the board of directors, board of trustees, executive committee, or other governing board or committee, the principal offices in the case of a corporation, and the partners or members in the case of a partnership or association; (4) a copy of any contract made or to be made between any providers or persons listed in item (3) and the applicant; (5) a copy of the form of evidence of coverage to be issued to the enrollees; (6) a copy of the form or group contract, if any, which is to be issued to employers, unions, trustees, or other organizations; (7) financial statements showing the applicant's assets, liabilities, and sources of financial support. If the applicant's financial affairs are audited by independent certified public accountants, a copy of the applicant's most recent certified financial statements satisfies this requirement unless the director or his designee directs that additional or more recent financial information is required for the proper administration of this chapter; (8) a description of the proposed method of marketing, a financial plan which includes a projection of operating results anticipated until the organization has had net income for at least one year, and a statement as to the sources of working capital as well as any other sources of funding; (9) a power of attorney duly executed by the applicant appointing the director and his authorized deputies or designees, as the lawful attorney of the applicant in this State upon whom all lawful process in any legal action or proceeding against the health maintenance organization on a cause of action arising in this State may be served; (10) a statement reasonably describing the geographic area to be served; (11) a description of the complaint procedures to be utilized as required under Section 38-33-110; (12) a description of the procedures and programs to be implemented to meet the quality of health care requirements in Section 38-33-40; (13) a description of the mechanism by which enrollees have an opportunity to participate in matters of policy and operation under Section 38-33-60(2); (14) any other information as the director or his designee may require to make the determination required in Section 38-33-40. (C)(1) An applicant or a health maintenance organization holding a certificate of authority granted hereunder shall, unless otherwise provided for in this chapter, file a notice describing any material modification of the operation set out in the information required by subsection (B). The notice must be filed with the director or his designee prior to the modification. If the director or his designee does not disapprove within thirty days of filing, the modification is considered approved. (2) The department may promulgate regulations exempting from the filing requirements of item (1) those items he considers unnecessary. (D) An applicant or a health maintenance organization holding a certificate of authority shall file all contracts of reinsurance or a summary of the plan of self-insurance. Any agreement between the organization and an insurer is subject to the laws of this State regarding reinsurance. All reinsurance agreements or summaries of plans of self-insurance and any modifications thereto must be filed and approved. Reinsurance agreements shall remain in full force and effect for at least thirty days following written notice by registered mail of cancellation by either party to the director or his designee.
Section 38-33-40. (A) The director or his designee shall issue a certificate of authority to a person filing an application pursuant to Section 38-33-30 if, upon payment of the application fee prescribed in Section 38-33-220, the director or his designee is satisfied that: (1) The persons responsible for the conduct of the affairs of the applicant are competent, trustworthy, and possess good reputations. (2) The health maintenance organization's proposed plan of operation has arrangements for an on-going quality assurance program. (3) The health maintenance organization effectively provides or arranges for the provision of basic health care services for a fixed prepaid premium, except to the extent of reasonable requirements for deductibles or co-payments. (4) The health maintenance organization is financially responsible, is able to meet its obligations to enrollees and prospective enrollees, and otherwise meets the requirements of this chapter. In making this determination, considerations by the director or his designee may include, but are not limited to: (a) the financial soundness of the arrangements for health care services and the schedule of charges used in connection with them; (b) the adequacy of working capital; (c) an agreement with an insurer, a government, or other organization for insuring the payment of the cost of health care services or the provision for automatic applicability of an alternative coverage if the health maintenance organization is discontinued; (d) an agreement with providers for the provision of health care services; (e) a deposit of cash or securities submitted in accordance with Section 38-33-130. (5) The enrollees are afforded an opportunity to participate in matters of policy and operation pursuant to Section 38-33-60. (6) Nothing in the proposed method of operation, pursuant to Section 38-33-30 or by independent investigation, is contrary to the public interest. (B) No health maintenance organization may be licensed unless it has employed or contracted with or made arrangements satisfactory to the director or his designee with both physicians and hospitals to participate as providers in each geographic area to be served, as identified by the health maintenance organization under Section 38-33-30.
Section 38-33-50. (A) The powers of a health maintenance organization include, but are not limited to, the following: (1) the purchase, lease, construction, renovation, operation, or maintenance of hospitals, medical facilities, or both, and their ancillary equipment, and such property as may reasonably be required for its principal office or for such purposes as may be necessary in the transaction of the business of the organization; (2) the making of loans to a medical group under contract with it in furtherance of its program or the making of loans to a corporation under its control for the purpose of acquiring or constructing medical facilities and hospitals or in furtherance of a program providing health care services to enrollees; (3) the furnishing of health care services through providers which are under contract with or employed by the health maintenance organization; (4) the contracting with any person for the performance on its behalf of certain functions such as marketing, enrollment, and administration; (5) the contracting with an insurance company licensed in this State for the provision of insurance, indemnity, or reimbursement against the cost of health care services provided by the health maintenance organization; (6) the offering of other health care services, in addition to basic health care services; (7) providing services included in federal health care programs such as `Medicare', `Medicaid', `Champus', and veterans administration and other health programs funded in whole or in part by federal funds, in accordance with the laws governing these programs. (B)(1) A health maintenance organization shall file notice, with adequate supporting information, with the director or his designee prior to the exercise of any power granted in subsection (A)(1), (2), (4), or (7). The director or his designee may disapprove such exercise of power if in his opinion it would adversely affect the financial soundness of the health maintenance organization and endanger its ability to meet its obligations. If the director or his designee does not disapprove within thirty days of the filing, it is considered approved. (2) The department may promulgate regulations exempting from the filing requirement of item (1) those activities having a de minimis effect.
Section 38-33-60. (A) The governing body of any health maintenance organization may include providers, or other individuals, or both. (B) The governing body shall establish a mechanism to afford the enrollees an opportunity to participate in matters of policy and operation through the establishment of advisory panels, by the use of advisory referenda on major policy decisions, or through the use of other mechanisms.
Section 38-33-70. Any director, officer, employee, or partner of a health maintenance organization who receives, collects, disburses, or invests funds in connection with the activities of an organization is responsible for the funds in a fiduciary relationship to the organization.
Section 38-33-80. (A)(1) Every enrollee is entitled to an evidence of coverage issued by the health maintenance organization. If any of the enrollee's benefits are provided through an insurance policy, the insurer shall issue a separate evidence of coverage for those benefits provided. (2) No evidence of coverage, or amendment thereto, may be issued or delivered to any person in this State until a copy of the form of the evidence of coverage, or amendment thereto, has been filed with and approved by the director or his designee. (3) No evidence of coverage may contain provisions or statements which are unjust, unfair, inequitable, misleading, deceptive, which encourage misrepresentation, or which are untrue, misleading, or deceptive as defined in Section 38-33-140; and (4) An evidence of coverage must contain a clear and concise statement, if a contract, a summary, or a certificate, of: (a) the health care services and the insurance or other benefits, if any, to which the enrollee is entitled; (b) any limitations on the services, kind of services, benefits, or kind of benefits, to be provided, including any deductible or co-payment feature; (c) where and in what manner information is available as to how services may be obtained; (d) the total amount of payment for health care services and the indemnity or service benefits, if any, which the enrollee is obligated to pay with respect to individual contracts; (e) clear and understandable description of the health maintenance organization's method for resolving enrollee complaints; and (f) the contract period during which the enrollee is entitled to health care services and benefits, the applicable charges for coverage during that contract period, and the time and manner in which charges and benefits under the contract or certificate can be changed. Any subsequent change may be evidenced in a separate document issued to the enrollee. (5) The director or his designee may require additional provisions in the evidence of coverage as may be necessary to the fair, just, and equitable treatment of enrollees. The additional provisions may include, but are not limited to, any of the provisions required of health insurance policies in Chapter 71 of Title 38 and regulations promulgated thereunder, if in the opinion of the director or his designee, the provisions are appropriate for the coverages provided under the health maintenance organization's evidence of coverage. (6) The provisions of Section 38-71-760 governing discontinuance and replacement of coverage are applicable to group health maintenance organization contracts, except to the extent that the director or his designee determines the provisions to be inappropriate to the coverage provided. (B)(1) No schedule of charges for enrollee coverage for health care services may be used until a copy of the schedule has been filed with and approved by the director or his designee. (2) The charges may be established in accordance with actuarial principles for various categories of enrollees, provided that charges applicable to an enrollee may not be individually determined based on the status of his health. However, the charges may not be excessive, inadequate, or unfairly discriminatory. A certification, by a qualified actuary or other qualified person acceptable to the director or his designee to the appropriateness of the use of the charges, based on reasonable assumptions, shall accompany the filing along with adequate supporting information. (3) Nothing herein may be construed to require individual approval of rates for each contract issued in conformity with a schedule of charges filed with and approved by the director or his designee. (C) The director or his designee shall within a reasonable period approve any form if the requirements of subsection (A) are met and any schedule of charges if the requirements of subsection (B) are met. It is unlawful to issue a form or to use a schedule of charges until approved. If the director or his designee disapproves the filing, he shall notify the filer. In the notice, the director or his designee shall specify the reasons for his disapproval. A hearing must be granted within forty-five days after a request in writing by the person filing. If the director or his designee does not approve any form or schedule of charges within ninety days of the filing of the forms or charges, they are considered approved. (D) The director or his designee may require the submission of such relevant information as he considers necessary in determining whether to approve or disapprove a filing made pursuant to this section.
Section 38-33-90. (A) Every health maintenance organization annually before March second shall file a report verified by at least two principal officers with the director or his designee covering the preceding calendar year. The report must be on forms prescribed by the director or his designee. (B) The director or his designee may require quarterly reports and additional information considered necessary to enable him to carry out his duties under this chapter. The reports and information must be furnished in the time and manner prescribed by the director or his designee. (C) Upon timely written request by a principal officer setting forth reasons why the statements, reports, or information in subsections (A) and (B) cannot be filed within the time required, the director or his designee, in writing, may grant an extension of filing time not to exceed thirty days.
Section 38-33-100. (A) No health maintenance organization may be issued a certificate of authority unless it is possessed of net worth of at least one million, two hundred thousand dollars, six hundred thousand dollars of which must be capital if it is a stock health maintenance organization. After the issuance, the health maintenance organization shall maintain a net worth of not less than six hundred thousand dollars. Net worth means total assets less total liabilities. Instruments acceptable to the director or his designee may be utilized in determining net worth. If the director or his designee determines that the number of enrollees in the health maintenance organization is excessive or may become excessive in relation to the organization's net worth, the director or his designee may require that future enrollment be limited until it is no longer necessary. (B) The director or his designee may require a health maintenance organization to meet greater initial net worth requirements based on the health maintenance organization's plan of operation. In making a determination to require greater initial net worth, the director or his designee may consider, among other factors, the health maintenance organization's projected enrollment, rates, and expenses.
Section 38-33-110. (A)(1) Every health maintenance organization shall establish and maintain a complaint system which is approved by the director or his designee to provide reasonable procedures for the resolution of written complaints initiated by enrollees. (2) Each health maintenance organization, with the annual report required in Section 38-33-90, shall submit to the department an annual report in a form the director prescribes which must include: (a) a summary of written complaints handled through the health maintenance organization's approved complaint system. The summary must include the total number of complaints organized by the nature of the complaint and the average time taken to resolve the complaint; (b) the number, amount, and disposition of malpractice claims made by enrollees of the health maintenance organization that it settled during the year. (B) The director or his designee at any time may examine the complaint system. Information concerning complaints and malpractice claims filed pursuant to this section must be held in confidence and are not subject to disclosure under the Freedom of Information Act.
Section 38-33-120. With the exception of investments made in accordance with Section 38-33-50 (A)(1) and (2) and (B), the funds of a health maintenance organization must be invested only in securities or other investments permitted by the laws of this State for the investment of assets which qualify to cover policyholder obligations of life insurance companies or such other securities or investments as the director or his designee may permit.
Section 38-33-130. (A) Each health maintenance organization shall deposit and maintain with the department cash or securities which qualify as legal investments under the laws of this State for public sinking funds in the amount of three hundred thousand dollars. The director or his designee may require a health maintenance organization to make deposits in excess of the amount specified in this section if in his opinion the additional deposits are necessary for the protection of enrollees and the public. All income from deposits must belong to the depositing organization and must be paid to it as it becomes available. A health maintenance organization that has made a security deposit may withdraw that deposit or part of it after making a substitute deposit of cash, securities, or a combination of these of equal amount and value. Securities must be approved by the director or his designee before being substituted. The return of cash or securities deposited with the department by a health maintenance organization pursuant to this section is governed by Section 38-9-150. (B) Each health maintenance organization shall require every provider who participates in the health maintenance organization and furnishes health care services to the health maintenance organization's enrollees to execute an agreement not to bill the enrollee or otherwise hold the enrollee financially responsible for services rendered. The provider's agreement must be given on forms prescribed or approved by the director or his designee, shall extend to all services furnished to the enrollee during the time he was enrolled in the health maintenance organization, and shall apply even where the provider has not been paid by the health maintenance organization. (C) Each health maintenance organization shall procure and maintain a policy of individual excess stop-loss coverage provided by an insurance company licensed by the state. The policy must also include provisions to cover all incurred, unpaid claim liability in the event of the health maintenance organization's termination due to insolvency or otherwise. In addition, the director or his designee may require that the policy provide that the insurer will issue an individual conversion policy to any enrollee upon termination of the health maintenance organization or the enrollee's ineligibility for further coverage in the health maintenance organization. Any such conversion policy must meet at least the minimum requirements of Section 38-71-770.
Section 38-33-140. (A) No health maintenance organization, or representative thereof, may cause or knowingly permit the use of advertising which is untrue or misleading, solicitation which is untrue or misleading, or any form of evidence of coverage which is deceptive. For purposes of this chapter: (1) A statement or item of information is considered to be untrue if it does not conform to fact in any respect which is significant to a reasonable person enrolled in, or considering enrollment with, a health maintenance organization. (2) A statement or item of information is considered to be misleading, whether or not it may be literally untrue, if, in the total context in which the statement is made or the item of information is communicated, the statement or item of information may be reasonably understood by a reasonable person, not possessing special knowledge regarding health care coverage, as indicating any benefit or advantage or the absence of any exclusion, limitation, or disadvantage of possible significance to an enrollee of, or person considering enrollment in a health maintenance organization if the benefit or advantage or absence of limitation, exclusion, or disadvantage does not in fact exist. (3) An evidence of coverage is considered to be deceptive if the evidence of coverage taken as a whole, and with consideration given to typography and format, as well as language, causes a reasonable person, not possessing special knowledge regarding health maintenance organizations and evidences of coverage therefor, to expect benefits, services, charges, or other advantages which the evidence of coverage does not provide or which the health maintenance organization issuing the evidence of coverage does not regularly make available for enrollees covered under such evidence of coverage. (B) Chapter 57 of Title 38 is construed to apply to health maintenance organizations and evidences of coverage except to the extent that the director or his designee determines that the nature of health maintenance organizations and evidences of coverage render such sections clearly inappropriate. (C) A health maintenance organization may not cancel or refuse to renew an enrollee, except for reasons stated in the organization's regulations applicable to all enrollees, or for the failure to pay the charge for such coverage, or for such other reasons as may be promulgated by the department. (D) No health maintenance organization may refer to itself as an insurer or use a name deceptively similar to the name or description of any insurance or surety corporation doing business in the state. (E) Any person not in possession of a valid certificate of authority issued pursuant to this chapter may not use the phrase `health maintenance organization' or `HMO' in the course of operation.
Section 38-33-150. (A) An agent means a person who is appointed or employed by a health maintenance organization and who engages in solicitation of membership in the organization. This definition does not include a person enrolling members on behalf of an employer, union, or other organization to whom a master subscriber contract has been issued. (B) The department may by regulation exempt certain classes of persons from the requirement of obtaining a license: (1) if the functions they perform do not require special competence, trustworthiness, or the regulatory surveillance made possible by licensing; or (2) if other existing safeguards make regulation unnecessary.
Section 38-33-160. (A) An insurance company licensed in this State may through a subsidiary or affiliate organize and operate a health maintenance organization under the provisions of this chapter. Any two or more such insurance companies or subsidiaries or affiliates thereof may jointly organize and operate a health maintenance organization. (B) An insurer may contract with a health maintenance organization to provide insurance or similar protection against the cost of care provided through health maintenance organizations and to provide coverage in the event of the failure of the health maintenance organization to meet its obligations. Among other things, under such contracts, the insurer may make benefit payments to health maintenance organizations for health care services rendered by providers.
Section 38-33-170. (A) The director or his designee may make an examination of the affairs of a health maintenance organization and providers with whom the organization has contracts, agreements, or other arrangements as often as is reasonably necessary for the protection of the interests of the people of this State but not less frequently than once every three years. The director or his designee may accept the report of an examination made by the state where the health maintenance organization is domiciled. (B) The director or his designee may make an examination concerning the quality of health care service of a health maintenance organization and providers with whom the organization has contracts, agreements, or other arrangements as often as is reasonably necessary for the protection of the interests of the people of this State but not less frequently than once every three years. (C) Every health maintenance organization and provider shall submit its relevant books and records for the examinations and facilitate them. For the purpose of examinations, the director or his designee and the department may administer oaths to and examine the officers and agents of the health maintenance organization and the principals of the providers concerning their business. (D) The expenses of examinations under this section are assessed against the organization being examined and remitted to the director or his designee for whom the examination is being conducted.
Section 38-33-180. (A) The director or his designee may suspend or revoke a certificate of authority issued to a health maintenance organization if he finds that one or more of the following conditions exist: (1) The health maintenance organization is operating significantly in contravention of its basic organizational document or in a manner contrary to that described in other information submitted under Section 38-33-30, unless amendments to the submissions have been filed with and approved by the director or his designee. (2) The health maintenance organization issues evidence of coverage or uses a schedule of charges for health care services which do not comply with the requirements of Section 38-33-80. (3) The health maintenance organization does not provide or arrange for basic health care services. (4) The health maintenance organization does not meet the requirements of Section 38-33-40 or is unable to fulfill its obligations to furnish health care services. (5) The health maintenance organization is financially unsound or reasonably may be expected to be unable to meet its obligations to enrollees or prospective enrollees. (6) The health maintenance organization has failed to implement a mechanism affording the enrollees an opportunity to participate in matters of policy and operation under Section 38-33-60. (7) The health maintenance organization has failed to implement the complaint system required by Section 38-33-110 in a reasonable manner to resolve valid complaints. (8) The health maintenance organization, or a person on its behalf, advertised or merchandised its services in an untrue, misrepresentative, misleading, deceptive, or unfair manner. (9) The continued operation of the health maintenance organization is hazardous to its enrollees. (10) The health maintenance organization otherwise has failed to comply with this chapter or regulations promulgated under it by the department. (B) A certificate of authority is suspended or revoked only after compliance with the requirements of Section 38-33-210. (C) When the certificate of authority of a health maintenance organization is suspended, the health maintenance organization, during the suspension, may not enroll additional enrollees except newborn children or other newly acquired dependents of existing enrollees and may not engage in advertising or solicitation. (D) When the certificate of authority of a health maintenance organization is revoked, the organization shall proceed, immediately following the effective date of the order of revocation, to wind up its affairs and may conduct no further business except as may be essential to the orderly conclusion of the affairs of the organization. It may not engage in further advertising or solicitation. The director or his designee, by written order, may permit further operation of the organization he finds to be in the best interest of enrollees, to the end that enrollees are afforded the greatest practical opportunity to obtain continuing health care coverage.
Section 38-33-190. Any rehabilitation, liquidation, or conservation of a health maintenance organization is considered to be the rehabilitation, liquidation, or conservation of an insurance company and must be conducted under the supervision of the director or his designee pursuant to the law governing the rehabilitation, liquidation, or conservation of insurance companies. The director or his designee may apply for an order directing him to rehabilitate, liquidate, or conserve a health maintenance organization upon any one or more grounds set out in Sections 38-27-310 and 38-27-370, or when in his opinion the continued operation of the health maintenance organization would be hazardous either to the enrollees or to the people of this State. Enrollees shall have the same priority in the event of liquidation or rehabilitation as the law provides to policyholders of an insurer.
Section 38-33-200. The department may, after notice and hearing, promulgate regulations to carry out the provisions of this chapter.
Section 38-33-210. (A) When the director or his designee has cause to believe that grounds for the denial of an application for a certificate of authority exist, or that grounds for the suspension or revocation of a certificate of authority exist, he shall notify the health maintenance organization in writing specifically stating the grounds for denial, suspension, or revocation and fixing a time of at least thirty days thereafter for a hearing on the matter. However, if the ground for suspension or revocation relates solely to financial condition, the director or his designee may immediately and without hearing suspend the certificate of authority of the health maintenance organization. (B) The provisions of Article 3, Chapter 23, Title 1, apply to administrative proceedings under this section. Whenever the director or his designee issues an order of suspension without an administrative hearing before the director or his designee based upon a health maintenance organization's financial condition, as authorized under subsection (A), the health maintenance organization has a right to judicial review before the Administrative Law Judge Division in accordance with law.
Section 38-33-220. (A) Every health maintenance organization subject to this chapter shall pay to the department the following fees: (1) for filing an application for a certificate of authority, two thousand dollars; (2) for filing an amendment to the organization documents that requires approval, one hundred dollars; (3) for filing each annual report, one thousand dollars; (4) for transferring a certificate of authority from one entity to another which qualifies for such a certificate of authority, two thousand dollars. (B) Fees charged under this section must be deposited in the general fund of the state. Fees required in this section must be fully earned when paid and are not refundable, proratable, nor transferable.
Section 38-33-230. (A) The director or his designee may, in lieu of revocation or suspension of a certificate of authority under Section 38-33-180, levy an administrative penalty of not more than fifteen thousand dollars for each violation or ground as prescribed therein. A series of acts by an organization 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. A monetary penalty may be imposed under this paragraph only after notice and an opportunity to be heard have been afforded in accordance with Section 38-33-210. (B) Whenever the director or his designee has reason to believe that any person has transacted the business of, or is about to transact the business of, a health maintenance organization without a certificate of authority, he may cause a complaint to be filed in the court of common pleas of Richland County to enjoin and restrain the unauthorized transaction of business. The court has power to make and enter an order or judgment awarding such preliminary or final injunctive relief as may be necessary and proper. In addition, the court may impose a civil penalty of not more than ten thousand dollars upon such person for each unauthorized act of business so transacted.
Section 38-33-240. (A) Except as otherwise specifically provided, the provisions of the insurance law do not apply to any health maintenance organization granted a certificate of authority under this chapter. (B) Solicitation of enrollees by a health maintenance organization granted a certificate of authority, or its representatives, are not construed to violate any provision of law relating to solicitation or advertising by health professionals. (C) No health maintenance organization authorized under this chapter is considered to be practicing medicine, dentistry, or other healing professions.
Section 38-33-250. All applications and filings required under Section 38-33-30 and any annual and quarterly financial reports required under Section 38-33-90 must be treated as public documents. Nothing herein may be construed to require disclosure of trade secrets, privileged or confidential commercial information, or replies to a specific request for information made by the director or his designee.
Section 38-33-260. Any data or information pertaining to the diagnosis, treatment, or health of any enrollee or applicant obtained from such person or from any provider by any health maintenance organization is confidential and may not be disclosed to any person except to the extent that it may be necessary to carry out the purposes of this chapter, or upon the express consent of the enrollee or applicant, or pursuant to statute or court order for the production of evidence or the discovery thereof, or in the event of claim or litigation between such person and the health maintenance organization wherein the data or information is pertinent. A health maintenance organization is entitled to claim any statutory privileges against such disclosure which the provider who furnished the information to the health maintenance organization is entitled to claim.
Section 38-33-270. (A) The director or his designee, in carrying out the obligations under Sections 38-33-40, 38-33-170(B), and 38-33-180(A), may contract with qualified persons to make recommendations concerning the determinations required to be made by him. The recommendations may be accepted in full or in part by the director or his designee. (B) The director or his designee may assess the health maintenance organization directly for consulting expenses incurred pursuant to subsection (A) and require the organization to remit payment directly to the consultant. These expenses must be reasonable. The director or his designee is not required to but may consider the results of a quality assurance examination made at an appropriate time by a person with whom the health maintenance organization has a contract to provide health care services or by a person who has a legitimate interest in the quality of care provided by the organization.
Section 38-33-280. No person may make a tender for or a request or invitation for tenders of, or enter into an agreement to exchange securities for or acquire in the open market or otherwise, any voting security of a health maintenance organization or enter into any other agreement if, after the consummation thereof, that person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of the health maintenance organization, and no person may enter into an agreement to merge or consolidate with or otherwise to acquire control of a health maintenance organization, unless, at the time any offer, request, or invitation is made or any 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 department and has sent to the health maintenance organization, information required by Section 38-21-70 and the offer, request, invitation, agreement, or acquisition has been approved by the director or his designee. Approval by the director or his designee is governed by Section 38-21-90.
Section 38-33-290. 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.
Section 38-33-300. There may be no monetary liability on the part of, and no cause of action may arise against, any person who participates in quality of care or utilization reviews by a peer review committee established in accordance with regulations of the department under Section 38-33-40(A)(2) for any act performed during such reviews, provided such person acts in good faith and without malice, has made a reasonable effort to obtain the facts of the matter, and reasonably believes that the action taken is warranted by the facts."
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SECTION 634. Section 38-35-10 of the 1976 Code is amended to read:
"Section 38-35-10. 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 director or his designee, 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."
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SECTION 635. Section 38-35-40 of the 1976 Code is amended to read:
"Section 38-35-40. Mutual associations shall file an annual report with the department. If, after examination of the report, the director or his designee determines that the mutual association has complied with the insurance laws, he may issue it a certificate showing compliance."
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SECTION 636. Section 38-35-50 of the 1976 Code is amended to read:
"Section 38-35-50. A mutual association is subject to any examination by the director or his designee which will enable him to determine that it has complied with the state insurance laws."
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SECTION 637. Section 38-37-60 of the 1976 Code is amended to read:
"Section 38-37-60. 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 director or his designee may require from an association any information that will enable him to determine whether it is exempt from this chapter."
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SECTION 638. Section 38-37-220 of the 1976 Code is amended to read:
"Section 38-37-220. 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 director or his designee, 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 department. The director or his designee may require further information."
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SECTION 639. Section 38-37-230 of the 1976 Code is amended to read:
"Section 38-37-230. If the purposes of the association conform to the requirements of this chapter and all laws have been complied with, the director or his designee 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 director or his designee, 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."
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SECTION 640. Section 38-37-240 of the 1976 Code is amended to read:
"Section 38-37-240. 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 director or his designee, 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."
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SECTION 641. Section 38-37-250 of the 1976 Code is amended to read:
"Section 38-37-250. 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 department, 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 director or his designee 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."
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SECTION 642. Section 38-37-260 of the 1976 Code is amended to read:
"Section 38-37-260. The director or his designee 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 director or his designee 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."
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SECTION 643. Section 38-37-300 of the 1976 Code is amended to read:
"Section 38-37-300. If after examination the director or his designee 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 director or his designee 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 director or his designee must be appointed receiver of the association. The director or his designee 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."
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SECTION 644. Article 5, Chapter 37, Title 38 of the 1976 Code is amended to read:
"Article 5
Licenses of Foreign Associations
Section 38-37-510. No foreign fraternal benefit association may transact any business in this State without a license from the director or his designee. On seeking admission to do business in this State a foreign association shall file with the department: (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 director 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 director or his designee may require.
Section 38-37-520. 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 director or his designee is satisfied that reasonable provision has been made to fulfill its contracts. However, the director or his designee may grant a license if he is otherwise satisfied that a license should be granted.
Section 38-37-530. When the director or his designee refuses to license a foreign association, he shall reduce his ruling, order, or decision to writing and file it in his office. The director or his designee 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. When the director or his designee, 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 director or his designee 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 director or his designee may revoke the authority of the association to continue business in this State.
Section 38-37-550. 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."
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SECTION 645. Section 38-37-710 of the 1976 Code is amended to read:
"Section 38-37-710. The authority of a fraternal benefit association authorized to transact business in this State which complies with this chapter terminates April first. However, a license continues in effect until a new license is issued or specifically refused. For each license or renewal the association shall pay the department one thousand dollars every two years. However, if the association has less than two hundred members, it shall pay the department a fee of one hundred dollars every two years for its license or renewal. A 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."
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SECTION 646. Section 38-37-720 of the 1976 Code is amended to read:
"Section 38-37-720. Every fraternal benefit association transacting business under this chapter shall file with the department 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."
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SECTION 647. Section 38-37-900 of the 1976 Code is amended to read:
"Section 38-37-900. Every fraternal benefit association transacting business in this State shall annually file with the department by March first, in the form the director or his designee 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 director or his designee considers necessary for a proper exhibit of its business and plan of working. The director or his designee may at other times require any further statement he may consider necessary to be made relating to the society."
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SECTION 648. Section 38-37-910 of the 1976 Code is amended to read:
"Section 38-37-910. The director or his designee 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 director or his designee. The examination must be made at least once in three years."
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SECTION 649. Section 38-37-920 of the 1976 Code is amended to read:
"Section 38-37-920. Pending, during, or after an examination or investigation of a fraternal benefit association, either domestic or foreign, the director or his designee 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."
Name changed
SECTION 650. Section 38-37-1310 of the 1976 Code is amended to read:
"Section 38-37-1310. In addition to the required annual report, each association shall annually report to the department a valuation of its certificates in force on the previous December thirty-first, excluding those issued within the year for which the report is filed, when the contributions for the first year in whole or in part are used for current mortality and expenses. This valuation report shall show as contingent liabilities the present midyear value of the promised benefits provided in the constitution and bylaws of the association under certificates then subject to valuation and as contingent assets the present midyear value of the future net contributions provided in the constitution and bylaws as they are in practice actually collected. At the option of the association, in lieu of the above, the valuation may show the net value of the certificates subject to valuation hereinbefore provided and such net value, when computed in the case of monthly contributions, may be the mean of the terminal values for the end of the preceding and of the current insurance years. This valuation must be certified by a competent accountant or actuary or, at the request and the expense of the association, verified by the actuary of the department of insurance of the home state of the association and must be filed with the department within ninety days after the submission of the annual report. Each valuation report shall set forth clearly and fully the mortality and interest basis and the method of valuation."
Name changed
SECTION 651. Section 38-37-1360 of the 1976 Code is amended to read:
"Section 38-37-1360. If the valuation of the certificates of a fraternal benefit association, on December 31, 1946, showed that the then present value of future net contributions, together with the admitted assets, was less than the then present value of the promised benefits and accrued liabilities, the association shall maintain this financial condition at each succeeding triennial valuation at a degree of deficiency not higher than shown in the valuation as of December 31, 1946. If at any succeeding triennial valuation the association does not show at least the same condition, the director or his designee shall direct that it thereafter comply with the requirements. If the next succeeding triennial valuation after the receipt of this notice shows that the association has failed to maintain the required condition, the director or his designee may, in the absence of good cause shown for the failure, institute proceedings for the dissolution of the association, in accordance with Section 38-37-300, or, in case of a foreign association, its license may be canceled in the manner provided in this chapter. An association shown by a triennial valuation after December 31, 1946, not to have maintained the required condition shall, within two years thereafter, make an improvement so as to show a percentage of deficiency not greater than as of December 31, 1946, or, thereafter, as to all new members admitted, the association is subject, so far as stated rates of contributors are concerned, to the provisions of Article 3 of this chapter applicable in the organization of new associations, in which event the net mortuary or beneficiary contributions and funds of the new members must be kept separate and apart from the other funds of the association. If the required improvement is not shown by the succeeding triennial valuation, then these new members may be placed in a separate class and their certificates valued as an independent association in respect of contributions and funds."
Name changed; etc.
SECTION 652. Article 13, Chapter 37, Title 38 of the 1976 Code is amended to read:
"Article 13
Consolidation, Merger, and Reinsurance
Section 38-37-1610. No fraternal benefit association organized under the laws of this State to do the business of life, accident, or health insurance may consolidate or merge with any other fraternal benefit association, reinsure its insurance risks or any part of its risks with any other fraternal benefit association, or assume or reinsure the whole or any portion of the risks of any other fraternal benefit association except as herein provided. No fraternal benefit association or subordinate body may merge or consolidate with, or be reinsured by, any company or association not licensed to transact business as a fraternal benefit association, nor with any company or association so licensed except with the director's or his designee's written approval.
Section 38-37-1620. When a fraternal benefit association proposes to consolidate or merge its business, to enter into any contract of reinsurance, or to assume or reinsure the whole or any portion of the risks of another fraternal benefit association, the proposed contract, in writing, setting forth the terms and conditions of the proposed consolidation, merger, or reinsurance must be submitted to the legislative or governing bodies of each of the parties to the contract after due notice. If approved, the contract as approved must be submitted to the director or his designee for his approval. The parties to the contract shall at the same time submit a sworn statement showing the financial condition of each association as of the thirty-first day of December preceding the date of the contract unless the director or his designee requires the financial statement to be submitted as of the last day of the month preceding the date of the contract. In case the parties to the contract have been incorporated in separate states or territories, the contract must be submitted to the official of each of the incorporating states or territories whose duties correspond most nearly to those of the director or his designee, to be considered and approved separately by each of these officials and the director or his designee.
Section 38-37-1630. The director or his designee shall thereupon consider the contract of consolidation, merger, or reinsurance. If the director or his designee is satisfied that the interests of the certificate holders of the fraternal association are properly protected, that the contract is just and equitable to the members of each of the associations, and that no reasonable objection exists, he shall approve the contract as submitted. When the contract of consolidation, merger, or reinsurance has been approved by the director or his designee and the officials of other states, if any, to whom it has been submitted pursuant to Section 38-37-1620, the director or his designee or the director or his designee and the other officials, as the case may be, shall issue a certificate to that effect, and thereupon the contract of consolidation, merger, or reinsurance is in full force and effect. If the contract is not approved, the fact of its submission and its contents may not be disclosed by the director or his designee.
Section 38-37-1640. All necessary and actual expenses and compensation incident to the proceedings provided by this article must be paid as provided by the contract of consolidation, merger, or reinsurance. However, no broker's fee or commission may be included in the expenses and compensation or may be paid to any person by any of the parties to the contract in connection with the negotiation or execution of it, nor may any compensation be paid to an officer or employee of any of the parties to the contract for directly or indirectly aiding in effecting the contract of consolidation, merger, or reinsurance. An itemized statement of all expenses must be filed with the department and any other official to whom the contract has been submitted pursuant to Section 38-37-1620, subject to approval, and when approved is binding on the parties thereto. Except as fully expressed in the contract of consolidation, merger, or reinsurance or in the itemized statement of expenses, as approved, no compensation may be paid to any person, and no officer or employee of the state may receive any compensation, directly or indirectly, for in any manner aiding, promoting, or assisting any consolidation, merger, or reinsurance.
Section 38-37-1650. Any person violating this article is guilty of a misdemeanor and, upon conviction, shall pay a fine of not more than five thousand dollars or must be imprisoned for not more than five years, or both."
Name changed; appeals, etc.
SECTION 653. Chapter 39, Title 38 of the 1976 Code is amended to read:
"CHAPTER 39
Insurance Premium Service Companies
Section 38-39-10. This chapter does not apply to: (a) an insurer authorized to do business in this State; (b) a banking institution, savings and loan association, cooperative credit union, or consumer finance company provided for in Sections 34-29-10 to 34-29-260 authorized to do business in this State; (c) the inclusion of a charge for insurance in connection with an installment sale of goods or services; (d) the advancing of premiums by insurance agents and producers of record under Article 3 of Chapter 43 of this title.
Section 38-39-20. (a) No person may engage in the business of servicing insurance premiums in this State without first obtaining a license from the director or his designee. Any person who engages in the business of servicing insurance premiums in this State without obtaining a license is guilty of a misdemeanor. Each transaction constitutes a separate offense. (b) The annual license fee is five hundred dollars payable by March first to the department, to be deposited by the department in the state treasury. (c) The person to whom the license is issued shall file sworn answers, subject to the penalties of perjury, to any interrogatories the director or his designee may require. The director or his designee has authority to require the applicant to disclose the identity of all stockholders, partners, officers, and employees. He may refuse to issue or renew a license in the name of any firm, partnership, or corporation if he is not satisfied that any officer, employee, stockholder, or partner of it who may materially influence the applicant's conduct meets the standards of this chapter.
Section 38-39-30. (a) Upon the filing of an application and the payment of the license fee the director or his designee shall make an investigation of the applicant and shall issue a license if the applicant is qualified. If the director or his designee does not find the applicant qualified, he shall, within thirty days after he has received the application, at the request of the applicant, give the applicant a full hearing. (b) The director or his designee shall issue a license when he is satisfied that the person to be licensed: (1) is competent and trustworthy and intends to act in good faith in the capacity involved by the license applied for; (2) has a good business reputation and has had experience, training, or education so as to be qualified in the business for which the license is applied for; (3) if a corporation, is a corporation incorporated under the laws of this State or a foreign corporation authorized to transact business in this State; (4) has on deposit with the department a surety bond of fifty thousand dollars or has proven financial responsibility by depositing with the department acceptable securities of fifty thousand dollars. The bond or the deposit of securities must be held for the reimbursement of parties damaged through the acts, neglects, defaults, or insolvency of the premium service company; (5) if directly or indirectly owned or controlled by, or affiliated with, an insurer, will not use the license to restrain trade or to secure an unfair competitive advantage or to falsify the insurer's financial condition or to render deceptive or misleading a financial statement of the insurer or, in any other way, to aid or assist the insurer in evading insurance laws or regulations; (6) if a foreign corporation is regulated and examined by the appropriate department in its state of domicile. (c) Each license is for an indefinite term, unless sooner revoked or suspended, if the annual license fee is paid by March first.
Section 38-39-40. (a) The director or his designee may revoke or suspend the license of an insurance premium service company after investigation if it appears to the director or his designee that: (1) The license issued to the company was obtained by fraud; (2) There was any misrepresentation in the application for the license; (3) The holder of the license has otherwise shown himself untrustworthy or incompetent to act as a premium service company; (4) The company has violated this chapter; or (5) The company has been rebating directly or indirectly part of the service charge to an insurance agent or insurance broker or to an employee of an insurance agent or insurance broker or to any other person as an inducement to the financing of an insurance policy with the premium service company. (b) Before the director or his designee revokes, suspends, or refuses to renew the license of a premium service company, he shall give the person an opportunity to be fully heard and to introduce evidence in his behalf. In lieu of revoking or suspending the license for any of the causes enumerated in this section, after a hearing, the director or his designee may subject the company to a monetary penalty as provided for in Section 38-2-10 for each offense when in his judgment he finds that the public interest would not be harmed by the continued operation of the company. The penalty must be paid to the department and must be deposited by the department in the state treasury. Any action by the director or his designee pursuant to this section may be appealed by the premium service company before the Administrative Law Judge Division.
Section 38-39-50. (a) Every licensed premium service company shall maintain records of its premium service transactions and the records must be open to examination and investigation by the director or his designee. The director or his designee may at any time require the company to bring any records he directs to his office for examination. (b) Every licensed premium service company shall preserve its records, including cards used in a card system, for at least three years after making the final entry in respect to any premium service agreement. The preservation of records in photographic form constitutes compliance with this requirement.
Section 38-39-60. The department, after a public hearing, has authority to make and enforce any regulations necessary to carry out this chapter, but these regulations may not be contrary to nor inconsistent with this chapter.
Section 38-39-70. (a) A premium service agreement: (1) Must be at least eight-point type for the printed portion; (2) Must be dated and signed by the insured; (3) Shall contain the name and place of business of the insurance agent or insurance broker negotiating the related insurance contract, the name and residence or the place of business of the insured as specified, the name and place of business of the premium service company to which payments are to be made, a description of the insurance contracts involved, and the amount of the premium; and (4) Shall set forth the following, where applicable: (A) The total amount of the premiums; (B) The amount of the down payment; (C) The principal balance [the difference between subitems (A) and (B)]; (D) The amount of the service charge; (E) The balance payable by the insured [sum of subitems (C) and (D)]; and (F) The number of installments required, the amount of each installment expressed in dollars, and the due date or period thereof. (b) The subitems set out in item (4) of subsection (a) need not be stated in the sequence or order in which they appear, and additional subitems may be included to explain the computations made in determining the amount to be paid by the insured. (c) The minimum down payment for a premium service insurance contract may not be less than ten percent.
Section 38-39-80. (a) A premium service company may not write any insurance or sell any other service or commodity in connection with any premium service contract. (b) A premium service company may not charge, contract for, receive, or collect a service charge other than as permitted by this chapter. (c) The service charge must be computed on the balance of the premiums due (after subtracting the down payment made by the insured in accordance with the premium service agreement) from the effective date of the insurance coverage, for which the premiums are being advanced, to and including the date when the final installment of the premium service agreement is payable. (d) An initial charge of fifteen dollars per premium service contract is permitted which may not be refunded upon cancellation or prepayment. (e) The service charge is at the rate of one percent per month computed on the remainder of the outstanding balance. However, in the event of cancellation by the borrower prior to maturity of the contract, the unearned service charge must be refunded on a short rate basis as determined by the department. With respect to the service charge for a premium service agreement which is for other than personal, family, or household purposes, the parties may contract for the payment by the debtor of a service charge at any rate, but no rate charged hereunder may be unconscionable. `Unconscionable' is defined as a rate substantially exceeding the usual and customary charge for financing insurance premiums. (f) No premium service company may induce an insured to become obligated under more than one premium service agreement for the purpose of obtaining more than one nonrefundable fifteen-dollar charge, and no premium service company may intentionally cancel an insurance contract for the purpose of obtaining an additional fifteen-dollar nonrefundable charge on a new premium service agreement accepted within sixty days of the cancellation on the prior agreement. (g) A premium service agreement may provide for the payment by the insured of a delinquency charge on each installment in default for a period of not less than five days of one dollar to a maximum of five percent of the installment; however, if the loan is primarily for personal family and household purposes the maximum amount of the delinquency charge may not exceed five dollars. Only one delinquency charge may be collected on an installment regardless of the period during which it remains in default.
Section 38-39-90. (a) When a premium service agreement contains a power of attorney enabling the company to cancel any insurance contract listed in the agreement, the insurance contract may not be canceled by the premium service company unless the cancellation is effectuated in accordance with this section. (b) The premium service company shall mail the insured at least ten days' written notice of its intent to cancel the insurance contract unless the default is cured within the ten-day period. (c) Not less than five days after the expiration of the notice, the premium service company may thereafter request in the name of the insured cancellation of the insurance contract by mailing to the insurer a notice of cancellation. The insurance contract must be canceled as if the notice of cancellation had been submitted by the insured himself, but without requiring the return of the insurance contract. The premium service company shall also mail a notice of cancellation to the insured at his last address as set forth in its records by the date the notice of cancellation is mailed to the insurer. This mailing constitutes sufficient proof of delivery. (d) All statutory, regulatory, and contractual restrictions providing that the insurance contract may not be canceled unless notice is given to a governmental agency, mortgagee, or other third party apply where cancellation is effected under this section. The insurer shall give the prescribed notice in behalf of itself or the insured to any governmental agency, mortgagee, or other third party by the second business day after the day it receives the notice of cancellation from the premium service company and shall determine the effective date of cancellation taking into consideration the number of days' notice required to complete the cancellation. (e) Whenever an insurance contract is canceled the insurer shall return whatever gross unearned premiums are due under the insurance contract to the premium service company which financed the premium for the account of the insured. (f) If the crediting of return premiums to the account of the insured results in a surplus over the amount due from the insured, the premium service company shall hold the surplus in a fiduciary capacity and promptly refund the excess to the insured. No refund is required if it amounts to less than three dollars. (g) Cancellations of insurance contracts by premium service companies must be effected exclusively by the forms, method, and timing set forth in this chapter.
Section 38-39-100. Filing of the premium service agreement is not necessary to perfect the validity of the agreement as a secured transaction as against creditors, subsequent purchasers, pledgees, encumbrances, successors, or assigns.
Section 38-39-110. The director or his designee shall approve all forms and rate charges of premium service companies in accordance with the standards prescribed in this chapter."
Name changed
SECTION 654. Chapter 41, Title 38 of the 1976 Code is amended to read:
"CHAPTER 41
Multiple Employer Self-Insured Health Plan
Section 38-41-10. As used in this chapter, `multiple employer self-insured health plan' means any plan or arrangement which is established or maintained for the purpose of offering or providing health, dental, or short-term disability benefits to employees of two or more employers but which is not fully insured. A plan or arrangement is considered `fully insured' only if all benefits payable are guaranteed under a contract or policy of insurance issued by an insurer authorized to transact business in this State.
Section 38-41-20. It is unlawful for any multiple employer self-insured health plan to transact business in this State without a license issued by the director or his designee. Any of the acts described in items (1) through (8) of Section 38-25-110, effected by mail or otherwise by or on behalf of a multiple employer self-insured health plan, constitutes the transaction of business in this State. Any multiple employer self-insured health plan which transacts business in this State without the license required by this chapter is considered to be an unauthorized insurer within the meaning of Chapter 25 of this title and all remedies and penalties prescribed therein are fully applicable. This Chapter 41 does not apply to any plan or arrangement established or maintained by municipalities, counties, or other political subdivisions of the state or any multiple employer self-insured health plan which is not subject to the application of state insurance laws under the provisions of the Employee Retirement Income Security Act of 1974 (29 U.S.C., Sections 1001, et seq.). A multiple employer self-insured health plan which was in existence prior to July 1, 1985, and which is associated with or organized or sponsored by a homogenous association exempt from taxation under United States Code, Title 26, Section 501(c)(6), and controlled by a board of directors a majority of whom are members of the association, is exempt from the requirements of this chapter and the insurance laws of this State. To prove exemption from taxation under 26 U.S.C., Section 501(c)(6), the association shall provide to the director or his designee a certificate issued by the United States Internal Revenue Service demonstrating the association's tax-exempt status.
Section 38-41-30. Application for a license must be made on forms prescribed by the director or his designee. No multiple employer self-insured health plan may be licensed unless it has and maintains a minimum of two hundred fifty covered employees. Not later than March first of each year every multiple employer self-insured health plan shall pay to the department a license fee equal to two percent of the claims paid by the plan during the immediately preceding calendar year. All the funds collected by the department must be deposited in the general fund of the state.
Section 38-41-40. At the time application for a license is made, the multiple employer self-insured health plan shall file with the department a copy of the plan's bylaws, all schedules of benefits, and all management, administration, and trust agreements which the plan has made or proposes to make for the conduct of its business and affairs. Any proposed changes or amendments to the foregoing must also be filed with the department.
Section 38-41-50. A multiple employer self-insured health plan shall include aggregate excess stop-loss coverage and individual excess stop-loss coverage provided by an insurer licensed by the state. Aggregate excess stop-loss coverage shall include provisions to cover incurred, unpaid claim liability in the event of plan termination. The excess or stop-loss insurer shall bear the risk of coverage for any member of the pool that becomes insolvent with outstanding contributions due. In addition, the plan shall have a participating employer's fund in an amount at least equal to the point at which the excess or stop-loss insurer shall assume one hundred percent of additional liability. A plan shall submit its proposed excess or stop-loss insurance contract to the director or his designee at least thirty days prior to the proposed plan's effective date and at least thirty days subsequent to any renewal date. The director or his designee shall review the contract to determine whether it meets the standards established by this chapter and respond within a thirty-day period. Any excess or stop-loss insurance plan must be noncancellable for a minimum term of two years.
Section 38-41-60. Funds collected from the participating employers under multiple employer self-insured health plans must be held in trust subject to the following requirements: (a) A board of trustees elected by participating employers must serve as fund managers on behalf of participants. Trustees must be plan participants. No participating employer may be represented by more than one trustee. A minimum of three and a maximum of seven trustees may be elected. Trustees may not receive remuneration but they may be reimbursed for actual and reasonable expenses incurred in connection with duties as trustee. (b) Trustees must be bonded in an amount not less than one hundred fifty thousand dollars from a licensed surety company. (c) Investment of plan funds is subject to the same restrictions which are applicable to insurers pursuant to Sections 38-11-40 and 38-11-50. All investments must be managed by a bank or other investment organization licensed to operate in South Carolina. (d) Trustees, on behalf of the plan, shall file an annual report with the department by March first showing the condition and affairs of the plan as of the preceding thirty-first day of December. The report must be made on forms prescribed by the director or his designee. The report shall summarize the financial condition of the fund, itemize collections from participating employers, detail all fund expenditures, and provide any additional information which the director or his designee requires.
Section 38-41-70. A plan shall establish loss reserves for all incurred losses, both reported and unreported, and for unearned premiums, in the same manner required for health insurers under Sections 38-9-170 and 38-9-190. A plan also shall establish a surplus account equal to the greater of: (a) three times the average paid monthly premium during the plan's most recent fund year; (b) for plans which do not yet have one fund year's experience, three times estimated monthly premium; or (c) one hundred thousand dollars.
Section 38-41-80. Every multiple employer self-insured health plan shall make and keep a full and correct record of its business and affairs and the director or his representative shall inspect these records at least every three years. The information from these records must be furnished to the director or his representatives on demand and the original books or records must be open to examination by the director or his representatives when demanded.
Section 38-41-90. A plan that desires to cease existence shall apply to the director or his designee for authority to dissolve. Applications to dissolve must be on forms prescribed by the director or his designee and must be approved or disapproved by the director or his designee within sixty days of receipt. Dissolution without authorization is prohibited and does not absolve a plan or its participants from fulfilling the plan's continuing obligations. An application to dissolve must be granted if either of the following conditions is met: (1) The plan demonstrates that it has no outstanding liabilities, including incurred but not reported liabilities. (2) The plan has obtained an irrevocable commitment from a licensed insurer which provides for payment of all outstanding liabilities and for providing all related services, including payment of claims, preparation of reports, and administration of transactions associated with the period when the plan provided coverage. Upon dissolution, after payment of all outstanding liabilities and indebtedness, the assets of the plan must be distributed to all employers participating in the plan during the last five years immediately preceding dissolution. The distributive share of each employer must be in the proportion that all contributions made by the employer during such five-year period bear to the total contributions made by all participating employers during such five-year period.
Section 38-41-100. The department may promulgate regulations which are necessary to implement the provisions of this chapter and to ensure the safe and proper operation of multiple employer self-insured health plans in this State.
Section 38-41-110. If the director or his designee is of the opinion that a multiple employer self-insured health plan is in an unsound condition, that it has failed to comply with the law or any applicable regulations or orders issued by the director or his designee, or that it is in a condition which renders its proceedings hazardous to the public or to persons covered under the plan, the director or his designee may, after a hearing, revoke or suspend the license of the plan or, in lieu thereof, impose a monetary penalty not to exceed five thousand dollars for each violation or ground. If the director or his designee is of the opinion that any of the grounds set forth in the first paragraph of this section exists, he may commence delinquency proceedings against the plan and supervise, rehabilitate, or liquidate the plan in accordance with the procedures set forth in Chapter 27 of this title."
Name changed
SECTION 655. Section 38-43-20 of the 1976 Code is amended to read:
"Section 38-43-20. No person may act as agent for an insurer or for a fraternal benefit association unless an agent's license has been issued to him by the director or his designee, except for the following persons: (a) an officer, employee, or secretary of a fraternal benefit association, as defined in Chapter 37 of this title, or any of its subordinate lodges or branches, who devotes substantially all of his services to activities other than the collection of premiums for fraternal insurance contracts and who receives for the solicitation of these contracts no commission or other compensation directly dependent upon the number or amount of contracts solicited or procured; (b) a member representative of a fraternal benefit association which insures its members against death, dismemberment, and disability resulting from accident only and which pays no commission or other consideration for the collection of premiums for these contracts; (c) a school teacher or school official who, without compensation, acts as agent for or performs any service in connection with the delivery or collection of insurance policies or premiums for accident and health insurance for children in the school system of the state where he is employed; (d) a group insurance policyholder or employee of a group policyholder who acts as an agent or performs any service in connection with the collection of premiums or the delivery of insurance policies or certificates to the group insurance policyholder or his employees; (e) an employee of a licensed agent who is under the agent's direct supervision or an employee of a licensed insurer, who performs solely clerical duties, and who is paid on an hourly or salary basis and not on a commission basis; or an agency office employee acting within the confines of the agent's office, under the direction and supervision of the licensed agent and within the scope of the agent's license, in the acceptance of request for insurance and payment of premiums and the performance of clerical, stenographic, and similar office duties; or (f) an agent qualified to transact a life, health, or group insurance business may present a proposal for life, health, or group insurance to a prospective policyholder on behalf of an insurer for which the agent is not specifically licensed, and may also transmit an application for insurance to that insurer, if the insurer has previously furnished the proposal and application materials to the agent. By furnishing the proposal and application materials to the agent, the insurer is considered to have authorized the agent to act on its behalf, and the insurer is responsible for all actions of the agent as if the agent had been duly licensed for the insurer. Not more than fourteen days after the agent submits an application for insurance to the insurer, the insurer shall forward to the director or his designee its request that the agent be licensed as the insurer's agent in accordance with the requirements of this chapter."
Name changed
SECTION 656. Section 38-43-30 of the 1976 Code is amended to read:
"Section 38-43-30. Every agency, whether corporation, partnership, association, or other aggregation of individuals, transacting or purporting to transact the business of an insurance agent under a corporate or trade name must be licensed by the director or his designee. The term `agent' as used in this title is considered to include an agency, unless the context requires otherwise. Every stockholder, officer, director, member, employee, or associate of an agency, performing any act of an agent as enumerated in Section 38-43-10, shall possess a current agent's license giving authority to transact that particular business."
Name changed
SECTION 657. Section 38-43-40 of the 1976 Code is amended to read:
"Section 38-43-40. A license issued by the director or his designee pursuant to Chapter 5 of this title gives to the insurer obtaining it the right to appoint any number of agents to take risks or transact any business of insurance in the state. However, the director or his designee must be notified of the appointment before the agent takes any risk or transacts any business. The notification shall give the post office address and residence of the agent."
Name changed
SECTION 658. Section 38-43-70 of the 1976 Code is amended to read:
"Section 38-43-70. (A) A nonresident of the state must not be licensed as an agent to do business in this State, except the director or his designee may enter into reciprocal agreements with the insurance commissioners of other states in regard to licensing of nonresident agents if in his judgment the arrangements or agreements are in the best interest of the state and if the applicant for the license meets the minimum statutory requirements of this State for the issuance of the license. However, the director or his designee may not enter into or continue a reciprocal agreement unless the other state is just as liberal as this State in licensing nonresident agents. (B) The director or his designee may issue nonresident licenses to agents residing in a community comprised of two or more incorporated municipalities located partly within and partly without the state, or residing within twelve miles of the municipal limits of the municipalities, and permit the agents to write insurance in the state on the same basis as a resident licensed agent if the laws of the adjacent state are just as liberal in the licensing of residents of this State. All business so written is considered to have been transacted in accordance with the requirements of Section 38-43-60. (C) A nonresident of this State who is a regular salaried officer or employee of a licensed insurer, except an insurer licensed to transact life or life and accident and health insurance, and who travels for his insurer in this State is not required to be licensed if all of the following apply: (1) He has duties other than soliciting insurance. (2) Policies of insurance written by him are countersigned by a licensed insurance agent who is a bona fide resident of this State. (3) He receives no commission or other compensation directly dependent upon the amount of business obtained. (4) His insurer-employer biennially registers with the department his name, business address, residence address, description of duties to be performed, and other information required by the director or his designee to be contained in the registration."
Name changed
SECTION 659. Section 38-43-100 of the 1976 Code is amended to read:
"Section 38-43-100. Before being issued a license to do business as an agent in this State for an insurer, each applicant shall make written application for the license upon forms to be furnished by the department, and all information on the forms required by the director or his designee must be subscribed to by the applicant under oath. No business may be done by the applicant except following issuance of an agent's license, and the license may not be issued until the director or his designee has determined that the applicant is qualified as an insurance agent, generally, and is particularly qualified for the line of business in which the applicant proposes to engage. The department shall promulgate regulations setting forth qualifying standards of agents as to all lines of business and shall require the local agent applicant to stand a written examination. The director or his designee may waive the examination with respect to applicants who have achieved the designations of Chartered Property and Casualty Underwriter (CPCU) or Chartered Life Underwriter (CLU). The director or his designee may also, at his discretion, waive the examination and issue temporary licenses for a period not to exceed ninety days, upon demonstrated need. An agent of a common carrier who sells only trip transportation ticket policies of accident and health insurance or baggage insurance on personal effects is not required to stand a written examination. No person who is a salaried employee and acts as an agent for a bank, savings and loan association, savings bank, finance company, trust company, credit union, automobile dealer, or other company handling credit transactions operating in this State, who writes credit life, credit accident and health insurance, credit property, or any combination of these in connection with a loan or other credit transaction, is required to stand a written examination. Any bank, finance company, or other company handling credit transactions operating in this State and utilizing one or more credit life or accident and health or credit property agents in a particular geographical area who are licensed without having taken the written examination is required to have readily available at least one credit life or accident and health or credit property agent to answer customers' questions concerning credit life, credit accident and health insurance, or credit property, or any combination of these. The director or his designee, subject to item (d) of this section if he is assured of the honesty and trustworthiness of the applicant by the insurer which the applicant will represent, shall issue a nonrenewable temporary life insurance agent's license valid for ninety days without requiring the applicant to pass a written examination, as follows: (a) A temporary life insurance agent's license to the executor or administrator of the estate of a deceased person who at the time of his death was a licensed life insurance agent. (b) A temporary life insurance agent's license to a surviving next of kin of a deceased life insurance agent, if no administrator or executor has been appointed and qualified, but any license issued under this item must be revoked upon issuance of a license to an executor or administrator under item (a). (c) A temporary life insurance agent's license to an applicant who has filed a written application for a license on forms furnished by the department where the applicant will actually collect the premiums on debit life and health insurance contracts during the period of the temporary license. The license shall, with respect to the applicant's solicitation and sales activities during the license period, authorize only the solicitation and sale of debit life and health insurance contracts. If the temporary license is not received from the director or his designee within fifteen days from the date the application was mailed to the department, by certified or registered mail, the insurer may assume that the temporary license will be issued in due course. For the purpose of this item (c) a debit life and health insurance contract means a contract for which the premiums are payable at monthly or more frequent intervals directly by the owner, or by a person representing the owner, to a representative of the company. (d) If more than twenty-five percent of the temporary licensees of an insurer fail to receive a permanent license, not counting those who fail the written examination twice, in any twelve-month period it is prima facie evidence that the insurer is abusing the privilege of obtaining temporary licenses. Upon a determination by the director or his designee of abuse being made, following a public hearing, no temporary license may be issued for twenty-four months following the month of the determination of abuse on behalf of the insurer."
Name changed
SECTION 660. Section 38-43-105 of the 1976 Code is amended to read:
"Section 38-43-105. (a) No applicant may be licensed as a local or general agent unless, within two years immediately preceding the date of his licensing, he has: (1) Successfully completed classroom courses, or the equivalent thereof, in insurance approved by the director or his designee consisting of no less than forty classroom hours, or the equivalent thereof; or (2) Had at least one year of insurance underwriting or marketing experience as an employee of an agent, insurer, or their managers or general agents in all lines of insurance for which he is making application to be licensed. (b) Certification of qualification of the applicant must be made by an official of the school, college, insurance company, association, or other body conducting the course of study, or by the former employer for qualification under item (2) of subsection (a) of this section. The certification must be in a format approved by the director or his designee and submitted with the sponsoring company's appointment of the agent and the agent's application for an agent's license, except where a temporary license is requested pursuant to Section 38-43-100, in which event the temporary license may be issued without such certification, if the sponsoring company furnishes certification prior to the applicant's being granted permission to take the examination. The certification of qualification of the applicant must be made within thirty days from the date of receipt of the request to provide the certification. (c) Any course or program of instruction or seminar developed or sponsored, or developed and sponsored, by any authorized insurer, recognized agents, association, or insurance trade association or any independent program of instruction shall, subject to the approval of the director or his designee, qualify for the equivalency of the number of classroom hours assigned thereto by the director or his designee. (d) Any correspondence course approved by the director or his designee shall qualify for the equivalency of the number of classroom hours assigned thereto by the director or his designee. (e) This section applies to residents applying for a license to engage in the sale of insurance except those persons who have previously been licensed for a period of five years or more and those persons applying for a license limited to the following types of insurance only or a combination thereof: (1) credit life or credit accident and health; (2) credit property; (3) crop hail; (4) automobile physical damage; (5) mortgage guaranty or mortgage redemption, or both; (6) title; (7) travel accident and baggage (8) Federal Crop Insurance Program."
Name changed; advisory committee provisions deleted; etc.
SECTION 661. Section 38-43-106 of the 1976 Code is amended to read:
"Section 38-43-106. (A) In addition to the requirements contained in Section 38-43-105, any applicant or agent licensed to sell property and casualty insurance or to sell life, accident and health insurance, or both, or qualified for this licensure, must complete biennially a minimum of twenty-four hours of continuing insurance education in order to be eligible for licensure for the following two years. However, if an agent is licensed in both property and casualty and life, accident and health, the agent must complete at least one-third of the twenty-four required biennial continuing insurance education hours in courses related to each of these types of licenses or qualification for licensure. (B) The forty-hour prelicensing educational requirement contained in Section 38-43-105 is sufficient to fulfill the requirements of this section for up to the first two years. Any waiver of this forty-hour requirement, as provided in Section 38-43-105(a)(2), is sufficient to meet the continuing insurance education requirements of this section. (C) The director or his designee shall administer these continuing education requirements and shall approve courses of instruction which qualify for these purposes. In administering this program, the department, in its discretion, may promulgate regulations whereby agents provide to a continuing education administrator established within the Department of Insurance proof of compliance with continuing education requirements as a condition of license renewal or, in the alternative, contract with an outside service provider to provide record-keeping services as the continuing education administrator. The costs of the continuing education administrator must be paid from the continuing insurance education fees paid by agents in the manner provided by this section, except that course approval responsibilities may not be designated to the continuing education administrator. The continuing education administrator shall compile and maintain, in conjunction with insurers and agents, records reflecting the continuing insurance education status of all licensed or qualified agents subject to the requirements of this section. The continuing education administrator shall furnish to the insurer, within ninety days of the agent's renewal date, as specified by regulation, a report of the continuing insurance education status of all of its agents. All licensed agents shall provide evidence of their continuing insurance education status to the continuing education administrator at least one hundred twenty days before the annual renewal date. Any continuing insurance education approved courses taken subsequent to one hundred twenty days before the renewal date must be applied to the following biennial continuing insurance education required period. The department shall promulgate regulations prescribing the overall parameters of continuing education requirements, and these regulations shall expressly authorize the director or his designee to recognize product-specific training offered by insurers, subject to those parameters and guidelines as are promulgated by the regulations. The director of the department may appoint an advisory committee to make recommendations with respect to courses offered for approval, but the director or his designee shall retain authority with respect to course approvals, subject to those regulations as are promulgated by the department. (D) The license of any agent may not be renewed for any license year unless the agent has completed the mandated continuing insurance education requirements during the previous two-year accreditation period. Each insurer is responsible, annually at renewal, for furnishing to the department certification that its agents meet the continuing insurance education requirements. Insurers appointing individuals who are qualified but not currently licensed for any insurer are also required, in connection with the appointment of such an agent, to certify to the department that the agent meets the continuing insurance education requirements. Each agent is responsible for payment to the continuing education administrator of a reasonable annual fee for operation of the continuing insurance education program. These fees must be used to administer the provisions of this section. (E) This section also applies to nonresident agents unless otherwise provided herein. However, any nonresident agent who successfully satisfies continuing insurance education requirements of his resident state and certifies this information to the continuing education administrator as specified in subsection (C) is deemed to have satisfied the requirements of this section regardless of the requirements of that other state. (F) Insurance agents licensed solely for credit life or credit accident and health insurance, credit property insurance, crop hail insurance, automobile physical damage insurance, mortgage guaranty, or mortgage, title, travel accident and baggage, or the federal crop insurance are exempt from the provisions of this section. Insurance agents licensed solely for domestic insurance companies which have less than one million dollars in written premiums in any calendar year are exempt from the provisions of this section. Licensed special agents, or any or all of them, that the department by regulation shall specify are exempt from the provisions of this section. (G) The department is authorized to promulgate regulations to implement the provisions of this section. (H) A licensed agent reaching the age of fifty-five, with a minimum of twenty years of continuous licensure, is exempted from the requirements of this section as to the line or lines which are otherwise subject to the provisions of this section. (I) All information received by the advisory committee in the course and scope of its duties must be treated as confidential and proprietary and not used or disclosed outside the requirements of the duties imposed on it by law."
Name changed
SECTION 662. Section 38-43-110 of the 1976 Code is amended to read:
"Section 38-43-110. An agent's license is for an indefinite term unless revoked, suspended, or terminated. If the biennial license fee for an agent is not paid at the time and in the manner the department provides by regulation, the license must be canceled. If the license is to be reinstated, an original application must be filed and a reinstatement fee equal to the biennial license fee unpaid must be paid in addition to the regular biennial license fee."
Name changed; references to Administrative Law Judge Division
SECTION 663. Section 38-43-130 of the 1976 Code is amended to read:
"Section 38-43-130. The director or his designee may revoke or suspend an agent's license after ten days' notice or refuse to reissue a license when it appears that an agent has been convicted of a crime involving moral turpitude, has violated this title or any regulation promulgated by the department, or has wilfully deceived or dealt unjustly with the citizens of this State. For purposes of this section, `convicted' includes a plea of guilty or a plea of nolo contendere, and the record of conviction, or a copy of it, certified by the clerk of court or by the judge in whose court the conviction occurred is conclusive evidence of the conviction. The words `deceived or dealt unjustly with the citizens of this State' include, but are not limited to, action or inaction by the agent as follows: (1) misstating the facts in an application for insurance or aiding in the misstatement of the facts; (2) failing to inform promptly the customer or insured of the correct premium or informing him of an incorrect premium based on the information furnished the agent by the customer or insured; (3) failing to transmit promptly or pay all or a portion of the amount of an insurance premium when the agent or one of his employees has received payment from a customer or insured or someone on his behalf or when it has been financed by the agent; (4) issuing his check covering all or a portion of an insurance premium which is not accepted by the bank on which it is written when it is initially submitted to the bank; (5) failing to deliver promptly a policy, endorsement, or rider to any insured; (6) failing to notify promptly the customer or insured if the agent has been unable to obtain the requested insurance for him; (7) failing to maintain adequate records regarding insurance sought or obtained from or through the agent which can be examined by the director or his designee or one of his representatives for and on behalf of a citizen of this State. When upon investigation the director or his designee finds that an agent has obtained a license by fraud or misrepresentation, he may suspend immediately the license. The director or his designee, in an order suspending a license, shall specify the period during which the suspension is to be in effect. The period may not exceed two years. No licensee whose license has been revoked or an applicant who has been refused a license by the director or his designee has the right to apply for another license within two years from the effective date of the revocation or refusal or, if judicial review before the Administrative Law Judge Division of the revocation or refusal is sought, within two years from the date of a final court order or decree affirming the revocation or suspension. If, after notice of a hearing before the Administrative Law Judge Division or notice of an opportunity for hearing before the Administrative Law Judge Division, the director or his designee finds that one or more grounds exist for the revocation or suspension of, or the refusal to issue or reissue a license, the director or his designee, in his discretion, in lieu of revocation, suspension, or refusal, may impose upon the agent or applicant an administrative penalty as provided in Section 38-2-10 for each offense or ground. The director or his designee may allow the agent or applicant a reasonable period, not to exceed thirty days, within which to pay to the director or his designee the amount of the penalty imposed. If the agent or applicant fails to pay the penalty in its entirety to the director or his designee at his office in Columbia within the period allowed, the license or application stands revoked, suspended, or renewal refused, as the case may be, upon expiration of the period and without any further proceedings."
Name changed; reference to Securities Commissioner
SECTION 664. Section 38-43-230 of the 1976 Code is amended to read:
"Section 38-43-230. Any person violating Section 38-43-210 or 38-43-220 may, in the discretion of the director or his designee or the Securities Commissioner, as the case may be, be suspended as a licensed insurance agent or licensed stockbroker for the period of time he considers proper, or either the director, his designee, or the Securities Commissioner may revoke the license immediately if he considers the violation merits this action."
Name changed
SECTION 665. Section 38-43-250 of the 1976 Code is amended to read:
"Section 38-43-250. All agents 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. The information from these records must be furnished to the director or his designee on demand and the original books or records are open to the inspection of the director or his designee on demand. These records must be kept for a minimum of five years."
Name changed
SECTION 666. Section 38-43-260 of the 1976 Code is amended to read:
"Section 38-43-260. Except as provided in this section, no agent may sign any blank contract or policy of insurance. Trip, travel, or transportation ticket policies of insurance covering accidental personal or property injury, loss, or damage may be countersigned in blank, or facsimile impression or stamp, for issuance only through coin-operated machines, subject to regulations prescribed by the department. Any agent guilty of violating this section must, upon conviction, be fined for each offense not more than two hundred dollars."
Name changed
SECTION 667. Section 38-44-30 of the 1976 Code is amended to read:
"Section 38-44-30. (A) No person may act in the capacity of a MGA with respect to risks located in this State for an insurer licensed in South Carolina unless the person is licensed as an agent for that insurer in this State. (B) No person may act in the capacity of a MGA representing an insurer domiciled in this State with respect to risks located outside South Carolina unless the person is licensed properly as an agent or broker in that state and licensed as an insurance agent in this State for that insurer. The license may be a nonresident license. (C) For the protection of the insurer, the director or his designee shall require the MGA to obtain a bond of fifty thousand dollars for each insurer represented."
Name changed
SECTION 668. Section 38-44-40(4) of the 1976 Code is amended to read:
"(4) Separate records of business written by the MGA must be maintained. The insurer must have access to and the right to copy all accounts and records related to its business in a form usable by the insurer. The director or his designee must have access to all books, bank accounts, and records of the MGA in a form usable to the director or his designee. The records must be retained according to Section 38-43-250."
Name changed
SECTION 669. Section 38-44-50 of the 1976 Code is amended to read:
"Section 38-44-50. (A) The insurer shall file annually with the department not later than March 1 an annual independent financial examination of each MGA with which it has done business, prepared by a certified public accountant in a form acceptable to the director or his designee. (B) If a MGA establishes loss reserves, the insurer annually shall obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the MGA. The opinion must be filed not later than March 1. This is in addition to other required loss reserve certification. (C) The insurer at least semi-annually by July 31 and December 31 shall conduct an on-site review of the underwriting and claims processing operations of the MGA. (D) Binding authority for all assumed reinsurance contracts or participation in insurance or reinsurance syndicates rests with an officer of the insurer who must not be affiliated with the MGA. (E) Within thirty days of entering into or termination of a contract with a MGA the insurer shall provide written notification of the appointment or termination to the department. Notices of appointment of a MGA must include a statement of duties which the applicant is expected to perform on behalf of the insurer, the lines of insurance for which the applicant is to be authorized to act, and other information the director or his designee may request. If the contract is terminated, notification must be given by the insurer within thirty days of the action to agents or brokers who have placed business with the MGA within the last twelve months. (F) An insurer shall review its books and records each quarter to determine if an agent, as defined by Section 38-44-20(3), has become, by operation of that section, a MGA. If the insurer determines that an agent has become a MGA, the insurer promptly shall notify the agent and the department of the determination, and the insurer and agent shall comply fully with this chapter within thirty days. (G) An insurer may not appoint to its board of directors an officer, a director, an employee, an agent, or a broker or a controlling shareholder of its MGA's. This subsection does not apply to relationships governed by the Insurance Holding Company Regulatory Act or, if applicable, the Broker Controlled Insurer Act."
Name changed; reference to Administrative Law Judge Division
SECTION 670. Section 38-44-70 of the 1976 Code is amended to read:
"Section 38-44-70. (A) If the director or his designee finds after a hearing conducted in accordance with Insurance Department Regulation 69-31 that a person has violated this chapter, the director or his designee may order: (1) for each separate violation, a penalty as provided in Section 38-2-10; (2) revocation or suspension of the agent's license of the MGA; (3) the MGA to reimburse the insurer, the rehabilitator, or liquidator of the insurer for losses incurred by the insurer caused by a violation of this chapter committed by the MGA. (B) The decision, determination, or order of the director or his designee pursuant to subsection (A) is subject to judicial review pursuant to Section 38-3-210, and the Administrative Procedures Act before the Administrative Law Judge Division. (C) Nothing contained in this section affects the right of the director or his designee to impose other penalties in Title 38. (D) Nothing contained in this chapter limits or restricts the rights of policyholders, claimants, and auditors."
Name changed
SECTION 671. Section 38-44-80 of the 1976 Code is amended to read:
"Section 38-44-80. The department may promulgate reasonable regulations for the implementation and administration of this chapter."
Name changed; submission of report
SECTION 672. Chapter 45, Title 38 of the 1976 Code is amended to read:
"CHAPTER 45
Insurance Brokers and Surplus Lines Insurance
Section 38-45-10. `Insurance broker' as used in this chapter means an individual licensed by the director or his designee to represent citizens of this State in placing their insurance. An insurance broker may place that insurance either with an eligible surplus lines insurer or with a licensed insurance agent in an insurance carrier licensed in this State.
Section 38-45-20. A resident may be licensed as an insurance broker by the director or his designee if the following requirements are met: (1) licensure of the resident as an insurance agent for the same lines of insurance for which he proposes to apply as a broker of this State for at least two years; (2) payment of a biennial license fee of two hundred dollars which is earned fully when received, not refundable; (3) filing of a bond with the department in a form approved by the Attorney General in favor of South Carolina of ten thousand dollars executed by a corporate surety licensed to transact surety insurance in this State and personally countersigned by a licensed resident agent of the surety. The bond must be conditioned to pay a person insured or seeking insurance through the broker who sustains loss as a result of: (a) the broker's violation of or failure to comply with an insurance law or regulation of this State; (b) the broker's failure to transmit properly a payment received by him, cash or credit, for transmission to an insurer or an insured; or (c) an act of fraud committed by the broker in connection with an insurance transaction. In lieu of a bond, the broker may file with the department certificates of deposit of ten thousand dollars of building and loan associations 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 of insurance, or of banks located within the state in which deposits are guaranteed by the Federal Deposit Insurance Corporation, not to exceed the amount of insurance. An aggrieved person may institute an action in the county of his residence against the broker or his surety, or both, to recover on the bond or against the broker to recover from the certificates of deposit, and a copy of the summons and complaint in the action must be served on the director, who is not required to be made a party to the action; (4) payment to the department, within thirty days after March thirty-first, June thirtieth, September thirtieth, and December thirty-first each year, of a broker's premium tax of four percent upon the premiums approved for policies of insurers not licensed in this State. Credit may be given for tax on policies canceled flat within forty-five days of the date of approval as long as the broker certifies to the director or his designee that the business was placed in good faith and the policy was canceled at the request of the insured.
Section 38-45-30. A nonresident may be licensed as an insurance broker by the director or his designee if the following requirements are met: (1) filing an application on a form prescribed by the director or his designee; (2) filing an affidavit stating he will not during the period of the license place, directly or indirectly, insurance on a risk located in this State except through licensed agents of insurers licensed to do business in this State; (3) filing an affidavit stating he is a licensed broker in another state; (4) paying a biennial license fee of two hundred dollars fully earned when received, not refundable; (5) filing of a bond with the department in a form approved by the Attorney General in favor of South Carolina of ten thousand dollars executed by a corporate surety licensed to transact surety insurance in this State and personally countersigned by a licensed resident agent of the surety. The bond must be conditioned to pay a person insured or seeking insurance through the broker who sustains loss as a result of: (a) the broker's violation of or failure to comply with an insurance law or regulation of this State; (b) the broker's failure to transmit properly a payment received by him, cash or credit, for transmission to an insurer or an insured; or (c) an act of fraud committed by the broker in connection with an insurance transaction. In lieu of a bond, the broker may file with the department certificates of deposit of ten thousand dollars of building and loan associations 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 of insurance, or of banks located within the state in which deposits are guaranteed by the Federal Deposit Insurance Corporation, not to exceed the amount of insurance. An aggrieved person may institute an action in the county of his residence against the broker or his surety or both to recover on the bond or against the broker to recover from the certificates of deposit, and a copy of the summons and complaint in the action must be served on the director, who is not required to be made a party to the action; (6) paying the department, within thirty days after March thirty-first, June thirtieth, September thirtieth, and December thirty-first each year, a broker's premium tax of four percent upon the premiums approved for policies of insurers not licensed in this State. Credit may be given for tax on policies canceled flat within forty-five days of the date of approval as long as the broker certifies to the director or his designee that the business was placed in good faith and the policy was canceled at the request of the insured.
Section 38-45-35. When an individual applies for an insurance broker's license he shall supply the department his business and residence address. The broker shall notify the department within thirty days of any change in these addresses.
Section 38-45-40. The director or his designee may enter into reciprocal agreements with the insurance commissioners of other states in regard to licensing of nonresident brokers if in his judgment the arrangements or agreements are in the best interest of the state and if the applicant for the license meets the minimum statutory requirements of this State for the issuance of a broker's license. However, the director or his designee may not enter into or continue any reciprocal agreement unless the other state is as liberal as this State in licensing nonresident brokers. Section 38-45-50. Each license issued is for an indefinite term unless revoked or suspended. If the biennial license fee of a broker is not paid at the time and in the manner the department provides by regulation, the license must be canceled. If the license is to be reinstated, an original application must be filed and a reinstatement fee equal to the biennial license fee unpaid must be paid in addition to the regular biennial license fee.
Section 38-45-60. As soon after December thirty-first of each year as may be convenient, the director or his designee shall render an accounting to the state Treasurer of the broker's premium tax collected showing the counties in which the risk covered by the insurance is located and shall furnish a duplicate of the accounting to the Comptroller General. The Comptroller General shall draw his warrant on the State Treasurer for one-fourth of the broker's premium tax collected on property insurance, payable to the county treasurer of the county in which the property is located. The county treasurer shall distribute the broker's premium tax collected on property insurance in accordance with the requirements of Sections 23-9-360 and 23-9-470 and Sections 38-7-70 and 38-7-80.
Section 38-45-70. A broker's license entitles the holder to solicit insurance in any county of this State. However, municipalities may impose license fees in accordance with their ordinances.
Section 38-45-80. All brokers 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. The information from these records must be furnished to the director or his designee on demand and the original books or records are open to the inspection of the director or his designee on demand. These records must be kept for a minimum of five years.
Section 38-45-90. At the request of a licensed resident broker, the director or his designee may approve certain nonadmitted insurers as eligible surplus lines insurers to write business on risks located in this State that one or more insurers licensed in this State to write that line of business in this State have declined to write. The director or his designee may require the broker to submit, on behalf of the insurer, documents necessary to satisfy him that the insurer is licensed in its home state, that it is solvent, and that its operation is not hazardous to the policyholders. The director or his designee may require the broker or the insurer to file additional documents at any given time to maintain the insurer's status as an eligible surplus lines insurer. The director or his designee may withdraw his approval at any time the insurer fails to meet any of the requirements. The department shall list all eligible surplus lines insurers in its annual report to the Director of the Department of Insurance who shall submit this report to the General Assembly. While the insurer maintains its status as an eligible surplus lines insurer, a duly licensed resident broker may, under the terms of this chapter, place business with the insurer. An insurance broker shall exercise due care in the placing of insurance. Each broker shall annually file with the department within thirty days after December thirty-first a detailed report of this business. The report must be in the form the director or his designee prescribes. The broker's books, papers, and accounts must at all times be open to the inspection of the director or his appointee.
Section 38-45-100. A licensed insurance broker may divide commissions with agents or brokers in other states or with an agent licensed in this State for an insurer doing the particular class of insurance desired to be placed through the broker.
Section 38-45-110. Within twenty days after placing of insurance with an eligible surplus lines insurer, or the effective date of the policy, whichever comes first, a broker shall file with the department a written request for approval of the placement. The request must be filed on forms furnished by the department. The broker shall write or stamp upon the face of each policy and application of an eligible surplus lines insurer the words `This company not licensed to do business in this State and not afforded guaranty fund protection'. If for any reason the director or his designee disapproves the placement, the broker shall refund the full premium to the policyholder. In the event the broker fails to file the request for approval in the time required, the director or his designee may impose a penalty not to exceed five percent of the total premium.
Section 38-45-120. Every insurance broker who sells an insurance policy written or issued by an insurer not licensed to do business in this State is personally liable for the limits of the coverage provided for in the policy if the broker fails to comply with the provisions of this title relating to policies issued by insurers not licensed to do business in this State.
Section 38-45-130. All losses occurring under policies placed through an insurance broker may be adjusted by a licensed agent or adjuster in this State. All inspections of property and endorsements on policies may be made by a licensed broker or any other licensed insurance agent in this State authorized to do so.
Section 38-45-140. When the director or his designee determines after investigation that a broker has violated this title, he may, upon ten days' notice, impose the penalties provided in Section 38-2-10.
Section 38-45-150. Any person violating this chapter is guilty of a misdemeanor. Each risk written in violation of this chapter is considered a separate offense.
Section 38-45-160. No policy fee may be charged by a broker unless it is a reasonable fee, it is made part of the contract, and the four percent broker's premium tax is paid upon the policy fee. If for any reason the director or his designee disapproves the placement or the insurer ultimately refuses to write the risk, the broker shall immediately refund the full policy fee to the policyholder.
Section 38-45-170. Before the director or his designee approves a nonadmitted insurer as an eligible surplus lines insurer, the insurer shall appoint in writing the director 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 director, are sufficient evidence of the appointment and must be admitted in evidence with the same force and effect as the original might be admitted."
Name changed
SECTION 673. Section 38-46-20(10)(c) of the 1976 Code is amended to read:
"(c) has been determined by either the director or his designee or the Securities Valuation Office of the National Association of Insurance Commissioners to meet the standards of financial condition and standing considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit are acceptable to the director or his designee."
Name changed
SECTION 674. Section 38-46-30 of the 1976 Code is amended to read:
"Section 38-46-30. (A) No person may act as a reinsurance intermediary-broker in this State if he maintains an office directly or as a member or an employee of a firm or an association or as an officer, a director, or an employee of a corporation in: (1) this State unless the reinsurance intermediary-broker is a licensed producer in this State; or (2) another state unless the reinsurance intermediary-broker is a licensed producer in that state and is licensed in this State as a reinsurance intermediary. The license may be a nonresident license. (B) No person may act as a reinsurance intermediary-manager: (1) for a reinsurer domiciled in this State, unless the reinsurance intermediary-manager is a licensed producer in this State; (2) in this State if the reinsurance intermediary-manager maintains an office directly or as a member or an employee of a firm or an association or an officer, a director, or an employee of a corporation in this State unless the reinsurance intermediary-manager is a licensed producer in this State; (3) in another state for a foreign insurer, unless the reinsurance intermediary-manager is a licensed producer in that state and is licensed in this State as a reinsurance intermediary. The license may be a nonresident license. (C) For the protection of the reinsurer, the director or his designee shall require a reinsurance intermediary-manager subject to subsection (B) to file a fifty thousand dollar bond for each reinsurer represented. The bond must be issued by an insurer acceptable to the director or his designee. (D)(1) The director or his designee may issue a reinsurance intermediary license to a person who has: (a) demonstrated compliance with the requirements of this chapter; (b) completed satisfactorily an application for a license on forms prepared by the director or his designee; (c) paid a licensing fee of one hundred dollars in connection with the issuance or annual renewal of the license. (2) If the applicant for a reinsurance intermediary license is a nonresident, the applicant, as a condition precedent to receiving or holding a license, shall designate a resident of this State upon whom notices or orders of the director or his designee or process affecting the nonresident reinsurance intermediary may be served. The licensee shall notify the department in writing within thirty days of every change in its designated agent for service of process, and the change does not become effective until acknowledged by the director or his designee. (E) The director or his designee may refuse to issue a reinsurance intermediary license if, in his judgment, the applicant, a person named on the application, or a member, a principal, an officer, or a director of the applicant is not trustworthy or a controlling person of the applicant is not trustworthy to act as a reinsurance intermediary or if one or more of the foregoing has given cause for revocation or suspension of the license or has failed to comply with a prerequisite for the issuance of the license. Upon written request the director or his designee shall furnish a summary of the basis for refusal to issue a license. No reinsurance intermediary license may be refused except on reasonable notice and opportunity to be heard afforded the applicant. An applicant whose application has been denied may appeal as provided in Section 38-3-210. (F) Licensed attorneys of this State when acting in their professional capacity are exempt from this section."
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SECTION 675. Section 38-46-60 of the 1976 Code is amended to read:
"Section 38-46-60. (A) An insurer may not engage the services of a person, a firm, an association, or a corporation to act as a reinsurance intermediary-broker on its behalf unless the person is licensed as required by Section 38-46-30. (B) An insurer may not employ an individual who is employed by a reinsurance intermediary-broker with which it transacts business unless the reinsurance intermediary-broker is under common control with the insurer and subject to the Insurance Holding Company Regulatory Act. (C) The insurer annually shall file with the department not later than March first a copy of the statements of the financial condition of each reinsurance intermediary-broker which the insurer has engaged. The statements must be prepared by an independent certified accountant in a form acceptable to the director or his designee."
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SECTION 676. Section 38-46-70 of the 1976 Code is amended to read:
"Section 38-46-70. Transactions between a reinsurance intermediary-manager and the reinsurer it represents in that capacity only may be entered into pursuant to a written contract specifying the responsibilities of each party, which must be approved by the reinsurer's board of directors. No contract by which a reinsurer assumes or cedes business through a reinsurance intermediary-manager may be entered into unless the insurer has notified the department in writing at least thirty days in advance of its intention to enter into the contract, has furnished a true copy of the contract to the director or his designee, and the director or his designee has not disapproved it within the thirty days. The contract, at a minimum, must provide: (1) The reinsurer may terminate the contract for cause upon written notice to the reinsurance-intermediary manager. The reinsurer immediately may suspend the authority of the reinsurance intermediary-manager to assume or cede business during the pendency of a dispute regarding the cause for termination. (2) The reinsurance intermediary-manager shall render accounts to the reinsurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by or owing to the reinsurance intermediary-manager and remit all funds due under the contract to the reinsurer within thirty days. (3) All funds collected for the reinsurer's account must be held by the reinsurance intermediary-manager in a fiduciary capacity in a bank which is a qualified United States financial institution. The reinsurance intermediary-manager may retain no more than ninety days estimated claims payments and allocated loss adjustment expenses. The reinsurance intermediary-manager shall maintain a separate bank account for each reinsurer that it represents. (4) For at least ten years after expiration of each contract of reinsurance transacted by the reinsurance intermediary-manager, he shall keep a complete record for each transaction showing: (a) the type of contract, limits, underwriting restrictions, classes or risks, and territory; (b) the period of coverage, including effective and expiration dates, cancellation provisions, notice required of cancellation, and disposition of outstanding reserves on covered risks; (c) reporting and settlement requirements of balances; (d) the rate used to compute the reinsurance premium; (e) the names and addresses of reinsurers; (f) the rates of all reinsurance commissions, including the commissions on retrocessions handled by the reinsurance intermediary-manager; (g) related correspondence and memoranda; (h) proof of placement; (i) the details regarding retrocessions handled by the reinsurance intermediary-manager, as permitted by Section 38-46-90(D), including the identity of retrocessionaires and percentage of each contract assumed or ceded; (j) financial records, including, but not limited to, premium and loss accounts; (k) when the reinsurance intermediary-manager places a reinsurance contract on behalf of a ceding insurer: (i) directly from an assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or (ii) if placed through a representative of the assuming reinsurer other than an employee, written evidence that the reinsurer has delegated binding authority to the representative. (5) The reinsurer must have access and the right to copy all accounts and records maintained by the reinsurance intermediary-manager related to its business in a form usable by the reinsurer. (6) The contract must not be assigned in whole or in part by the reinsurance intermediary-manager. (7) The reinsurance intermediary-manager shall comply with the written underwriting and rating standards established by the insurer for the acceptance, rejection, or cession of all risks. (8) The rates, terms, and purposes of commissions, charges, and other fees which the reinsurance intermediary-manager may levy against the reinsurer must be set forth. (9) If the contract permits the reinsurance intermediary-manager to settle claims on behalf of the reinsurer: (a) All claims must be reported to the reinsurer in a timely manner. (b) A copy of the claim file must be sent to the reinsurer at its request or as soon as it becomes known that the claim: (i) has the potential to exceed fifty thousand dollars or the limit set by the reinsurer, whichever is less; (ii) involves a coverage dispute; (iii) may exceed the reinsurance intermediary-manager's claims settlement authority; (iv) is open for more than six months; or (v) is closed by payment of fifty thousand dollars or an amount set by the reinsurer, whichever is less; (c) All claim files must be the joint property of the reinsurer and reinsurance intermediary-manager. However, upon an order of liquidation of the reinsurer the files become the sole property of the reinsurer or its estate. The reinsurance intermediary-manager must have reasonable access to and the right to copy the files on a timely basis. (d) Settlement authority granted to the reinsurance intermediary-manager may be terminated for cause upon the reinsurer's written notice to the reinsurance intermediary-manager or upon the termination of the contract. The reinsurer may suspend the settlement authority during the pendency of the dispute regarding the cause of termination. (10) If the contract provides for a sharing of interim profits by the reinsurance intermediary-manager, interim profits must not be paid until one year after the end of each underwriting period for property business and five years after the end of each underwriting period for casualty business, or a later period set by the director or his designee for specified lines of insurance, and not until the adequacy of reserves on remaining claims has been verified pursuant to Section 38-46-90(C). (11) The reinsurance intermediary-manager annually shall provide the reinsurer with a statement of its financial condition prepared by an independent certified accountant. (12) The reinsurer at least semi-annually shall conduct an on-site review of the underwriting and claims processing operations of the reinsurance intermediary-manager. (13) The reinsurance intermediary-manager shall disclose to the reinsurer relationships it has with an insurer before ceding or assuming business with the insurer pursuant to this contract. (14) Within the scope of its actual or apparent authority the acts of the reinsurance intermediary-manager are considered to be the acts of the reinsurer on whose behalf it is acting."
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SECTION 677. Section 38-46-90 of the 1976 Code is amended to read:
"Section 38-46-90. (A) A reinsurer may not engage the services of a person, a firm, an association, or a corporation to act as a reinsurance intermediary-manager on its behalf unless the person is licensed as required by Section 38-46-30. (B) The reinsurer annually shall file with the department not later than March first a copy of statements of the financial condition of each reinsurance intermediary-manager, which the reinsurer has engaged, prepared by an independent certified accountant in a form acceptable to the director or his designee. (C) If a reinsurance intermediary-manager establishes loss reserves, the reinsurer annually shall obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the reinsurance intermediary-manager. The opinion must be filed not later than March first. This opinion is in addition to other required loss reserve certification. (D) Binding authority for all retrocessional contracts or participation in reinsurance syndicates rests with an officer of the reinsurer who must not be affiliated with the reinsurance intermediary-manager. (E) Within thirty days of termination of a contract with a reinsurance intermediary-manager, the reinsurer shall provide written notification of termination to the department. (F) A reinsurer may not appoint to its board of directors an officer, a director, an employee, a controlling shareholder, or a subproducer of its reinsurance intermediary-manager. This subsection does not apply to relationships governed by the Insurance Holding Company Regulatory Act or, if applicable, the Broker Controlled Insurer Act."
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SECTION 678. Section 38-46-100 of the 1976 Code is amended to read:
"Section 38-46-100. (A) A reinsurance intermediary is subject to examination by the director or his designee. The director or his designee must have access to all books, bank accounts, and records of the reinsurance intermediary in a form usable to the director or his designee. (B) A reinsurance intermediary-manager may be examined as if he were the reinsurer."
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SECTION 679. Section 38-46-110 of the 1976 Code is amended to read:
"Section 38-46-110. (A) A reinsurance intermediary, insurer, or reinsurer found by the director or his designee after a hearing conducted in accordance with Insurance Department Regulation 69-31 to be in violation of this chapter: (1) for each separate violation, shall pay a penalty of not more than fifteen thousand dollars and thirty thousand dollars if the violation is wilful; (2) is subject to revocation or suspension of its license; (3) for a violation committed by the reinsurance intermediary, make restitution to the insurer, reinsurer, rehabilitator, or liquidator of the insurer or reinsurer for the net losses incurred by the insurer or reinsurer attributable to the violation. (B) The decision, determination, or order of the director or his designee pursuant to subsection (A) is subject to judicial review pursuant to Section 38-3-210. (C) This section does not affect the right of the director or his designee to impose other penalties provided by Title 38. (D) This chapter does not limit or restrict the rights of policyholders, claimants, creditors, or other third parties or confer rights to those persons."
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SECTION 680. Section 38-46-120 of the 1976 Code is amended to read:
"Section 38-46-120. The department may promulgate reasonable regulations for the implementation and administration of this chapter."
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SECTION 681. Chapter 47, Title 38 of the 1976 Code is amended to read:
"CHAPTER 47
Insurance Adjusters
Section 38-47-10. Every individual commonly called an adjuster, adjusting losses for an insurer licensed to do business in this State, must be licensed by the director or his designee. These individuals shall apply for a license on a form prescribed by the director or his designee. The director or his designee shall satisfy himself that each applicant for an adjuster's license is an individual of good moral character, has sufficient knowledge of the insurance business and his duties as an adjuster, has not violated the insurance laws of the state, and is a fit and proper individual for the position. No license may be issued to a nonresident adjuster who resides in a state refusing to license South Carolina adjusters. Agents licensed under Chapter 43 are not required to comply with this section.
Section 38-47-15. When an individual applies for an adjuster's license he shall supply the department his business and residence address. The adjuster shall notify the department within thirty days of any change in these addresses.
Section 38-47-20. The director or his designee may enter into reciprocal agreements with the insurance commissioners of other states in regard to licensing of nonresident adjusters if in his judgment such arrangements or agreements are in the best interest of the state and if the applicant for an adjuster's license meets the minimum statutory requirements of this State for the issuance of a license. However, the director or his designee may not enter into or continue any reciprocal agreement unless the other state is just as liberal as this State in licensing nonresident adjusters.
Section 38-47-30. The fee for an adjuster's license is eighty dollars payable in advance and fully earned when received, not refundable, transferable, nor proratable. However, when the laws of another state of the United States require South Carolina adjusters to pay a license fee greater than the fee required in this State of nonresident adjusters, the nonresident adjuster shall pay an amount equal to the amount of charges imposed by the laws of his state upon adjusters of this State.
Section 38-47-40. An adjuster's license is for an indefinite term unless sooner revoked or suspended if the biennial license fee is paid at the time and in the manner which the department provides by regulation. If the license fee for an adjuster is not received when due, the license must be canceled. If the license is to be reinstated, an original application must be filed and a reinstatement fee equal to the biennial license fee unpaid must be paid in addition to the regular biennial license fee.
Section 38-47-50. Adjusters are declared to be acting as the agents for the company or companies represented by them in the adjustment of any loss.
Section 38-47-60. If any person acts as adjuster on a contract made otherwise than as authorized by the laws of this State or by an insurer or other person not regularly licensed to do business in the state or adjusts or aids in the adjustment, either directly or indirectly, of a claim arising under a contract of insurance not authorized by the laws of the state, he is guilty of a misdemeanor.
Section 38-47-70. When the director or his designee determines after investigation that there has been a violation of this title by an adjuster, upon ten days' notice, he may impose the penalties provided in Section 38-2-10.
Section 38-47-80. Every property or casualty insurance company transacting business in this State shall at all times maintain in the state at least one resident adjuster for the purpose of investigation and settlement of claims. The name, current address, and current telephone number of the adjuster so employed must be maintained on file with the department by the company which information must be available to the public. Any change in the name, address, or telephone number of the adjuster must be reported to the department by the insurance company within thirty days. Failure to maintain the adjuster on file as required herein is grounds for the director or his designee to revoke the company's authorization to do business in this State."
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SECTION 682. Section 38-49-20 of the 1976 Code is amended to read:
"Section 38-49-20. No person may act as an appraiser for motor vehicle physical damage claims on behalf of an insurer or firm or corporation engaged in the adjustment or appraisal of motor vehicle claims unless he has secured first a license from the director or his designee and has paid a biennial license fee of eighty dollars fully earned when received, not refundable, transferable, nor proratable. The department may prescribe reasonable regulations concerning standards for qualification, suspension, or revocation of licenses and the methods by which licensees shall conduct their business."
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SECTION 683. Section 38-51-20 of the 1976 Code is amended to read:
"Section 38-51-20. No person may act as an administrator in this State without first being licensed by the director or his designee. Any person who acts as an administrator without a license is guilty of a misdemeanor and upon conviction must be fined not more than ten thousand dollars or imprisoned for not more than two years, or both, and is subject to revocation of any insurance licenses issued by the director or his designee. Application for a license must be upon forms prescribed by the director or his designee and must be accompanied by an initial license fee of one hundred dollars. Thereafter, the administrator shall pay to the department a license renewal fee of one hundred dollars by March first of each year. Before granting any license, the director or his designee must be satisfied that the administrator is competent, trustworthy, financially responsible, has a good personal and business reputation, has not had an insurance license revoked, suspended, or denied in any jurisdiction within the preceding five years, and has not been convicted of a crime involving fraud, dishonesty, or moral turpitude in any jurisdiction. For purposes of this section, `convicted' includes a plea of guilty or a plea of nolo contendere. The director or his designee may revoke or suspend any license issued to an administrator when he finds that any condition exists which would have prohibited issuance of the original license, that the administrator has violated any provision of this chapter, or that the administrator has deceived or dealt unjustly with the citizens of this State. In lieu of revocation or suspension of license, the director or his designee may impose an administrative monetary penalty not to exceed one thousand dollars for each offense."
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SECTION 684. Section 38-51-30 of the 1976 Code is amended to read:
"Section 38-51-30. Every administrator shall file and maintain with the department a surety bond in favor of the state executed by a surety company authorized to transact business in this State. In lieu of bond, the administrator may file with the department letters of credit, certificates of deposit of building and loan associations 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 of insurance, or of banks located within the state in which deposits are guaranteed by the Federal Deposit Insurance Corporation, not to exceed the amount covered by insurance or any other financial instrument that the director or his designee deems appropriate. The director or his designee may also in his sole discretion accept in lieu of a bond or certificates of deposit or letter of credit a corporate guaranty by an insurer licensed to transact business in this State. The corporate guaranty must meet any requirements the director or his designee requires. The director or his designee may withdraw his acceptance of a corporate guaranty in lieu of bonds or certificates of deposit at any time. The amount of the bond, certificates of deposit, corporate guaranty letter of credit, or any other instrument the director or his designee deems appropriate, filed with the department must be in the amount of seventy-five thousand dollars. The bond must be on a form approved by the director or his designee. Any of the above-described financial instruments must be conditioned to pay any person who sustains a loss as a result of (a) the administrator's violation of or failure to comply with any requirement of this chapter; (b) the administrator's failure to transmit properly any payment received by it for transmission to an insurer or other person; (c) the administrator's misapplication or misappropriation of funds received by it; or (d) any act of fraud or dishonesty committed by the administrator in the administration of an insurance benefit plan. Any aggrieved person may institute an action in the county of his residence against the administrator or his surety, or both, to recover on the bond or to recover from the certificates of deposit or corporate guaranty or letters of credit. Nothing in this section may be construed to prohibit agreements between administrators and insurers providing for additional bonds. The director or his designee may waive the bonding requirements of this section in whole or in part to the extent that funds handled by the administrator are handled on behalf of a licensed insurance company, if the administrator has furnished a bond or other security to the insurance company which meets the purposes of this section. Under no circumstances may the director or his designee waive the bonding requirements of this section with respect to funds handled by the administrator on behalf of self-insured persons, groups, or entities."
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SECTION 685. Section 38-51-60 of the 1976 Code is amended to read:
"Section 38-51-60. Every administrator shall maintain at its principal administrative office for the duration of the written agreement referred to in Section 38-51-40 and five years thereafter adequate books and records of all transactions among the administrator, insurers, and insured persons. The books and records must be maintained in accordance with prudent standards of insurance record keeping. The director or his designee shall have access to the books and records for the purpose of examination, audit, and inspection, and information from the records must be furnished to the director or his designee on demand. Any trade secrets contained therein, including, but not limited to, the identity and addresses of policyholders and certificate holders, are confidential, except that the director or his designee may use the information in any proceedings instituted against the administrator. The insurer shall retain the right to continuing access to the books and records of the administrator sufficient to permit the insurer to fulfill all of its contractual obligations to insured persons, subject to any restrictions in the written agreement between the insurer and administrator on the proprietary rights of the parties in such books and records."
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SECTION 686. Section 38-53-10(11) of the 1976 Code is amended to read:
"(11) `Surety bondsman' means any person who is approved by and licensed by the director or his designee as an insurance agent, appointed by an insurer by power of attorney to execute or countersign bail bonds for the insurer in connection with judicial proceedings, and receives or is promised money or other things of value for the execution or countersignature."
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SECTION 687. Section 38-53-20 of the 1976 Code is amended to read:
"Section 38-53-20. The director or his designee, clerks of court, and the State Law Enforcement Division have full power and authority to administer those provisions of this chapter for which they are charged with implementing. The department shall promulgate regulations to enforce the purposes and provisions of this chapter. The director may hire employees, examiners, investigators, and other assistants as he considers necessary and shall prescribe their duties."
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SECTION 688. Section 38-53-80 of the 1976 Code is amended to read:
"Section 38-53-80. No person may act in the capacity of a bail bondsman or runner or perform any of the functions, duties, or powers prescribed for bail bondsmen or runners under the provisions of this chapter unless that person is qualified and, except as regards an accommodation bondsman, licensed in accordance with the provisions of this chapter. No license may be issued to a professional bondsman or runner except as provided in this chapter. The applicant shall apply for a license or renewal of a license on forms prepared and supplied by the director or his designee. The director or his designee may ask the applicant any questions, written or otherwise, relating to his qualifications, residence, prospective place of business, and any other inquiries which, in the opinion of the director or his designee, are necessary in order to protect the public and ascertain the qualifications of the applicant. The director or his designee shall request that the State Law Enforcement Division conduct any reasonable investigation relative to the determination of the applicant's fitness to be licensed or to continue to be licensed. The failure of the applicant to secure approval of the director or his designee does not preclude him from applying as many times as he desires, but no application may be considered by the director or his designee within one year subsequent to the date upon which the director or his designee denied the last application."
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SECTION 689. Section 38-53-90 of the 1976 Code is amended to read:
"Section 38-53-90. Before a license is issued to an applicant permitting him to act as a professional bondsman or runner, the applicant shall furnish the director or his designee a complete set of his fingerprints and a recent passport size full-face photograph of himself. The applicant's fingerprints must be certified by an authorized law enforcement officer. Before being issued the license, every applicant for a license as a professional bondsman or runner shall satisfy the director or his designee that he: (a) is eighteen years of age or older; (b) is a resident of this State; (c) is a person of good moral character and has not been convicted of a felony or any crime involving moral turpitude within the last ten years; (d) has knowledge, training, or experience of sufficient duration and extent to satisfy reasonably the director or his designee that he possesses the competence necessary to fulfill the responsibilities of a licensee."
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SECTION 690. Section 38-53-100 of the 1976 Code is amended to read:
"Section 38-53-100. (a) A license fee of four hundred dollars must be paid to the director or his designee with each application for license as a professional bondsman. The first year after enactment the director or his designee shall forward four hundred dollars to the State Treasurer to be placed in the general fund; however, of the four hundred dollars, the amount of two hundred dollars must be paid over to the director or his designee to offset those costs he incurs under the provisions of this chapter, and two hundred dollars must be paid over to the State Law Enforcement Division to offset those costs it may incur under the provisions of this chapter. Any applicant paying the initial license fee required by this section prior to July 1, 1987, is not required to pay any license renewal fee prior to July 1, 1987. (b) A license fee of two hundred dollars must be paid to the director or his designee with each application for a license as a runner. The first year after enactment, the director or his designee shall forward two hundred dollars to the State Treasurer to be placed in the general fund; however, of the two hundred dollars, the amount of one hundred dollars must be paid over to the director or his designee to offset those costs he incurs under the provisions of this chapter, and one hundred dollars must be paid over to the State Law Enforcement Division to offset those costs it incurs under the provisions of this chapter. Any applicant paying the initial license fee required by this section prior to July 1, 1987, is not required to pay any license renewal fee prior to July 1, 1987. (c) Beginning the second year after enactment, the director or his designee shall forward forty percent of all fees collected under subsections (a) and (b) of this section to the clerk of court of the county where the principal place of business of the bondsman or runner is located. The remaining sixty percent of collected fees must be forwarded to the State Treasurer to be placed in the general fund of which one-third must be paid to the State Law Enforcement Division and two-thirds paid to the director or his designee to offset expenses incurred under the provisions of this chapter. (d) In addition to the fees herein provided, a bondsman shall pay to the clerk of court of any county where he is doing business other than the county of his principal place of business the sum of one hundred dollars annually to be paid directly to and retained by the clerk. Any applicant paying the initial license fee required by this section prior to July 1, 1987, is not required to pay any license renewal fee prior to July 1, 1987."
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SECTION 691. Section 38-53-110 of the 1976 Code is amended to read:
"Section 38-53-110. In addition to the other requirements of this chapter, an applicant for a professional bondsman's license shall furnish annually a detailed financial statement under oath and in a form as the director or his designee may require. The statement is subject to the same examination as is prescribed by law for domestic insurance companies."
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SECTION 692. Section 38-53-130 of the 1976 Code is amended to read:
"Section 38-53-130. Except as provided in this chapter, an applicant for a license to be a professional bondsman or runner is required to take a written examination testing his ability and qualifications. The examination may be prepared and administered by the director or his designee, or the director or his designee may, in his discretion, enter into an arrangement with a competent outside testing authority for the administration of the examinations. In the event that the director or his designee enters into an arrangement with an outside testing authority to administer examinations, the scope, content, and subject matter of the examination administered, as well as all registration, fee, and test procedure requirements of the outside testing authority, at all times, are subject to the approval of and modification by the director or his designee. The failure of an applicant to pass an examination does not preclude him from taking subsequent examinations; however, at least six months must elapse between such examinations."
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SECTION 693. Section 38-53-140 of the 1976 Code is amended to read:
"Section 38-53-140. All licenses issued pursuant to the provisions of this chapter expire annually on June thirtieth unless revoked or suspended prior to that time by the director or his designee or upon notice served upon the director or his designee that the employer of any runner has canceled the licensee's authority to act for the employer. A renewal license must be issued by the director or his designee to a licensee who has continually maintained his license in effect without further examination upon the payment of a renewal fee of two hundred dollars in the case of runners and four hundred dollars in the case of professional bondsmen, but the licensees are required in all other respects to comply with the provisions of this chapter. After the receipt of the licensee's application for renewal, the current license continues in effect until the renewal license is issued or denied for cause."
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