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Indicates Matter Stricken
Indicates New Matter
May 4, 2000
S. Printed 5/4/00--H.
Read the first time April 13, 2000.
This bill is expected to reduce general fund revenues by an estimated $22,000 in FY 2000-01.
Under current law, the Department of Insurance regulates the services and products provided by the prepaid legal industry. According to the American Prepaid Legal Services Institute, such prepaid legal services generally include legal advice, office consultations, review of simple legal documents, preparation of simple wills, and phone calls made by lawyers to adverse parties. Other plans offer more comprehensive coverage for trials, bankruptcy, real estate matters, etc. Prepaid legal service plans are somewhat similar to HMO's in the health field. This bill would shift the regulatory authority of the prepaid legal service industry from the Department of Insurance to the Department of Consumer Affairs. Prepaid legal service plans would not be considered "insurance" and would no longer be subject to premium taxes imposed by the Department of Insurance. Based on conversations with the Department of Insurance, approximately $1.2 million in prepaid legal service premiums were sold in the state in 1999. Multiplying this amount by a 1.25 percent premium tax rate and adding an estimated $7,000 in related retaliatory taxes that would also be lost as a result of this shift reduces general fund revenue by an estimated $22,000 in FY 2000-01. According to the Department of Consumer Affairs, other costs associated with this shift would be administrative in nature and would be recouped by fees imposed by Consumer Affairs as set forth in this bill.
William C. Gillespie
Board of Economic Advisors
1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact, Section 2-7-76 for a local revenue impact, and Section 6-1-85(B) for an estimate of the shift in local property tax incidence.
TO AMEND TITLE 37, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE CONSUMER PROTECTION CODE, BY ADDING CHAPTER 16, SO AS TO ESTABLISH PROCEDURES FOR A COMPANY TO OFFER PREPAID LEGAL SERVICES INCLUDING REGISTRATION WITH THE DEPARTMENT OF CONSUMER AFFAIRS AND OBTAINING APPROVAL OF CONTRACTS OFFERING SUCH SERVICES, AND TO PROVIDE ADMINISTRATIVE PENALTIES; AND TO REPEAL SECTIONS 38-75-510 AND 38-75-520, RELATING TO INSURANCE CONTRACTS FOR LEGAL SERVICES.
Amend Title To Conform
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 37 of the 1976 Code is amended by adding:
Section 37-16-10. As used in this chapter:
(1) 'Department' means the Department of Consumer Affairs.
(2) 'Prepaid legal company' means a person or entity offering prepaid legal services to the general public or a segment of the general public.
(3) 'Prepaid legal services' means legal services or reimbursement for legal services provided by an individual licensed or admitted to practice law in the jurisdiction in which the services are to be rendered, and which are provided in return for a predetermined, specified, periodic fee.
Section 37-16-20. Before commencing business in South Carolina, regardless of the means of doing business, any prepaid legal services company must register with the department on a form prescribed by the department. The form must be accompanied by a bond or letter of credit acceptable to the department in the amount of fifty thousand dollars, which must remain in force so long as the prepaid legal services company does business in South Carolina. The amount of the bond or letter of credit may only be increased by regulation.
Section 37-16-30. Before any sales or solicitation activity commences, a person seeking to be involved in direct selling or direct in-person or electronic solicitation of the general public or segments of the general public, on behalf of a prepaid legal services company, must be appointed a representative of that prepaid legal services company by filing with the department, on a form prescribed by the department, the appointee's name, address, and telephone number. The appointment must be renewed each year no later than October first. The department may collect a fee of twenty dollars with each initial or renewal filing and may use the proceeds to offset the costs of administering and enforcing this chapter. Appointment may be refused or revoked upon a finding that a prospective representative or representative has been convicted of a crime of deceit or dishonesty within the previous ten years.
Section 37-16-40. (A)No later than March first of each year, commencing immediately after registration required by Section 37-16-30, a prepaid legal services company registered with the department must file on a form prescribed by the department an updated registration statement to include a sworn affirmation as to continuation of the bond or letter of credit required by Section 37-16-30.
(B) In connection with its annual registration, the prepaid legal services company must pay a registration fee of eight hundred dollars which the department may utilize for purposes of administering this chapter.
Section 37-16-50. Contracts offering prepaid legal services must be filed with the department for approval prior to being offered to the general public or a segment of the general public. A contract for prepaid legal services must include a provision allowing the member or beneficiary the right to select the attorney of his choice when legal services are needed. If this option is chosen, the company may adjust the amount the member or beneficiary is charged to participate in the prepaid legal services plan. However, approval must not be withheld unless the contract is false, misleading, unfair, deceptive, or is in violation of this chapter or other applicable law. Contracts filed are deemed approved if the department does not notify the prepaid legal services company of its nonapproval within forty-five days of receipt of the contract.
Section 37-16-60. A consumer aggrieved by a prepaid legal company may file a complaint with the department which shall review the complaint, investigate it as the department considers appropriate, and initiate action as authorized by law.
Section 37-16-70. A prepaid legal services company violating this chapter is subject to any combination of the following:
(1) an administrative order to cease and desist violations of this chapter;
(2) administrative fines up to five thousand dollars;
(3) revocation or denial of registration.
Section 37-16-80. For purposes of this chapter, the failure to abide by the terms of a filed contract or the use of false, misleading, unfair or deceptive acts or practices on the part of a prepaid legal services company is a violation of the Consumer Protection Code and subject to all of the remedies of Chapter 6. Repeated or systematic failure to abide by the terms of a filed contract or repeated or systematic use of false, misleading, unfair or deceptive acts or practices on the part of a prepaid legal services company are grounds for revocation or refusal to register the company or for disallowance for entering new contracts with the public or segments of the public until the violations are remedied to the satisfaction of the department.
Section 37-16-90. The department is authorized to promulgate rules and regulations for the implementation of this chapter."
SECTION 2. Sections 38-75-510 and 38-75-520 of the 1976 Code are repealed.
SECTION 3. Section 38-1-20(26) of the 1976 Code, as amended by Act 181 of 1993, is further amended to read:
'Legal insurance' means the assumption of a contractual obligation for the sole purpose of providing specified legal services or reimbursement for legal expenses in consideration of a specified payment, for an interval of time, which services are rendered by an individual duly admitted or permitted to practice law in the jurisdictions in which the services were performed. Reserved.
SECTION 4. This act takes effect July 1, 2000.
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