Current Status Bill Number:3410 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:19970206 Primary Sponsor:Cato All Sponsors:Cato Drafted Document Number:bbm\9116jm.97 Companion Bill Number:380 Residing Body:House Current Committee:Labor, Commerce and Industry Committee 26 HLCI Subject:Insurance business, unauthorized transaction of within state; penalties, emergency cease and desist orders
Body Date Action Description Com Leg Involved
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House 19970206 Introduced, read first time, 26 HLCI
referred to Committee
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TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 38-25-315 SO AS TO PROVIDE FOR EMERGENCY CEASE AND DESIST ORDERS TO PREVENT THE UNAUTHORIZED TRANSACTION OF INSURANCE BUSINESS WITHIN THIS STATE AND PROVIDE FOR RELATED MATTERS; TO AMEND SECTION 38-2-10, AS AMENDED, RELATING TO INSURANCE AND ADMINISTRATIVE PENALTIES, SO AS TO PROVIDE THAT TEN PERCENT OF THE AMOUNT COLLECTED AS PENALTIES MUST BE RETAINED BY THE DEPARTMENT OF INSURANCE AND CONSIDERED "OTHER FUNDS", REQUIRE THE DEPARTMENT TO SUBMIT AN ANNUAL REPORT FOR CERTAIN PURPOSES, AND ALLOW THESE COLLECTED FUNDS TO BE CARRIED FORWARD INTO SUCCEEDING FISCAL YEARS; AND TO AMEND SECTION 38-25-330, AS AMENDED, RELATING TO THE PENALTY FOR VIOLATING CHAPTER 25, TITLE 38, ON THE UNAUTHORIZED TRANSACTION OF INSURANCE BUSINESS, SO AS TO REQUIRE A WILFUL VIOLATION BEFORE A CONVICTION MAY BE HAD OR A PENALTY IMPOSED, AND CHANGE THE OFFENSE FROM A MISDEMEANOR TO A FELONY.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. The 1976 Code is amended by adding:
"Section 38-25-315. (A) As an alternative to the procedural remedy detailed within Section 38-25-310, whenever the director, from evidence which is satisfactory to him, has reasonable grounds to believe that a person has engaged in, or is about to engage in, the transaction of insurance business in violation of this chapter and that that transaction will adversely impact upon public health, public safety, or public welfare, he may reduce his findings of fact and his conclusions of law to writing and he may issue an emergency cease and desist order. That order must be served upon the person either by certified mail, return receipt requested, at that person's last known address, or in any other manner permitted by law.
(B) An emergency cease and desist order issued by the director must, within its provisions, give notice that the person may contest that order by petitioning for an immediate public hearing before an administrative law judge. The filing of the petition does not itself stay enforcement of the director's decision. The administrative law judge may order a stay upon appropriate terms, and if a stay is granted, the administrative law judge must specifically consider in his order the appropriateness of the posting of a bond by the petitioner. At the public hearing the person must be given the opportunity to be heard upon the findings and conclusions within the emergency cease and desist order. If no request for a public hearing is received within ten days from the person's receipt of service of the emergency cease and desist order then, upon application by the director and without a public hearing, the administrative law judge must make that emergency order a permanent cease and desist order.
(C) If an administrative law judge determines that the person charged with transacting insurance business in violation of this chapter knew or should have known that his actions were in violation of this chapter, then in addition to declaring the cease and desist order to be permanent the administrative law judge may impose a penalty of up to fifty thousand dollars for each violation. The penalty may be imposed following a public hearing requested by the person pursuant to subsection (B) or following a public hearing requested by the director following an administrative law judge's default permanent cease and desist order.
(D) In addition to any other penalties or remedies available, including Sections 38-25-320, 38-25-330, and 38-25-360, if the director believes that a person has violated a permanent cease and desist order issued by an administrative law judge, then the director may certify the relevant facts to the circuit court in any county of this State where that person has transacted business in violation of the permanent cease and desist order. The circuit court, upon its finding that the permanent cease and desist order has been violated, may order the violator to pay an additional penalty of up to twenty-five thousand dollars for each violation.
(E) Any penalties ordered pursuant either to subsection (C) or (D) may be entered immediately by the director upon the judgment rolls in any county where that person resides or where that person has transacted business. Collection proceedings may be initiated immediately by the director. Any funds collected by the director must be retained for use by the Department of Insurance and considered 'other funds' for the purpose of providing consumer education and assistance programs. The department must submit an annual report not later than the end of the first quarter of each fiscal year to the Governor, the Speaker of the House of Representatives, and the President of the Senate accounting for the expenditure of the funds retained under this section during the preceding year. These collected funds may be carried forward into succeeding fiscal years."
SECTION 2. Section 38-2-10 of the 1976 Code, as amended by Section 531 of Act 181 of 1993, is further amended by adding:
"Ten percent of the amount collected as penalties must be retained by the department and considered 'other funds' for the purpose of providing consumer education and assistance programs. The department must submit an annual report no later than the end of the first quarter of each fiscal year to the Governor, the Speaker of the House of Representatives, and the President of the Senate accounting for the expenditure of the funds retained under this section during the preceding year. These collected funds may be carried forward into succeeding fiscal years."
SECTION 3. Section 38-25-330 of the 1976 Code, as amended by Section 211 of Act 184 of 1993, is further amended to read:
"Section 38-25-330. A person wilfully violating any provisions of this chapter is guilty of a misdemeanor felony and, upon conviction, must be fined in the discretion of the court or imprisoned not more than three years, or both."
SECTION 4. This act takes effect upon approval by the Governor.