Scroll to History Page
Scroll to Previous Versions Links List
Scroll to Full Text
Download This Bill in Microsoft Word format
Current Status Bill Number:View additional legislative information at the LPITS web site.3974 Ratification Number:161 Act Number:82 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:20010419 Primary Sponsor:Cato All Sponsors:Cato Drafted Document Number:l:\council\bills\nbd\11515ac01.doc Companion Bill Number:601 Date Bill Passed both Bodies:20010607 Date of Last Amendment:20010605 Governor's Action:S Date of Governor's Action:20010720 Subject:Prescription drug discount card sellers report to Consumer Affairs; Insurance; property, captive, health, motor vehicle History Body Date Action Description Com Leg Involved ______ ________ ______________________________________ _______ ____________ ------ 20010817 Act No. A82 ------ 20010720 Signed by Governor ------ 20010628 Ratified R161 ------ 20010626 Scrivener's error corrected Senate 20010607 Concurred in House amendment, enrolled for ratification Senate 20010607 Reconsidered vote whereby nonconcurred in House amendment House 20010607 Conference powers granted, 98 HCC Bales appointed Reps. to Committee of Tripp Conference Cato House 20010607 Insists upon amendment Senate 20010606 Non-concurrence in House amendment House 20010605 Senate amendments amended, returned to Senate with amendment Senate 20010605 Amended, read third time, returned to House with amendment Senate 20010515 Read second time, notice of general amendments Senate 20010509 Introduced, read first time, placed on Calendar without reference House 20010509 Read third time, sent to Senate House 20010508 Amended, read second time House 20010503 Committee report: Favorable with 26 HLCI amendment ------ 20010424 Companion Bill No. 601 House 20010419 Introduced, read first time, 26 HLCI referred to Committee Versions of This Bill Revised on May 3, 2001 - Word format Revised on May 8, 2001 - Word format Revised on May 9, 2001 - Word format Revised on June 5, 2001 - Word format Revised on June 5, 2001-A - Word format Revised on June 26, 2001 - Word format
(A82, R161, H3974)
AN ACT TO AMEND SECTION 37-1-109, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO CHANGE OF DOLLAR AMOUNTS USED IN THE CONSUMER PROTECTION CODE AND PUBLICATION OF SUCH CHANGES, SO AS TO REQUIRE THESE CHANGES TO BE PUBLISHED IN THE STATE REGISTER; TO AMEND SECTIONS 37-6-108, 37-6-111, AND 37-6-113, ALL RELATING TO ADMINISTRATION ENFORCEMENT ORDERS, INJUNCTIONS, AND CIVIL ACTIONS UNDER THE CONSUMER PROTECTION CODE, SO AS TO CLARIFY THAT, IN ADDITION TO CREDITORS, PERSONS SUBJECT TO THE CONSUMER PROTECTION CODE ARE WITHIN THE JURISDICTION OF THE ADMINISTRATOR OF THE CONSUMER PROTECTION CODE AND TO MAKE TECHNICAL CORRECTIONS; TO AMEND SECTION 37-17-10 RELATING TO THE REGULATION OF PERSONS SELLING PRESCRIPTION DRUG DISCOUNT CARDS, SO AS TO REQUIRE A PERSON AND REPRESENTATIVES OF CORPORATIONS AND BUSINESS ENTITIES SELLING SUCH CARDS TO REGISTER WITH THE DEPARTMENT OF CONSUMER AFFAIRS, RATHER THAN THE DEPARTMENT OF INSURANCE, TO DESIGNATE THE SECRETARY OF STATE AS THE AGENT FOR SERVICE IN THE ABSENCE OF PROPER REGISTRATION, AND TO EXPAND APPLICABLE PENALTIES FOR PRESCRIPTION DRUG CARD VIOLATIONS; TO AMEND SECTION 38-5-80, AS AMENDED, RELATING TO REQUIREMENTS TO OBTAIN A LICENSE TO CONDUCT INSURANCE BUSINESS, SO AS TO CLARIFY WHAT BOOKS AND RECORDS OF AN INSURER MUST BE MAINTAINED; TO AMEND SECTION 38-21-10, AS AMENDED, RELATING TO DEFINITIONS APPLICABLE TO THE INSURANCE HOLDING COMPANY REGULATORY ACT, SO AS TO REVISE THE TERM "CONTROL"; TO AMEND SECTION 38-31-20, AS AMENDED, RELATING TO DEFINITIONS IN THE PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION ACT, SO AS TO INCLUDE NEW DEFINITIONS AND REVISE CERTAIN EXISTING DEFINITIONS; TO AMEND SECTION 38-31-60, AS AMENDED, RELATING TO THE POWERS AND DUTIES OF THE PROPERTY AND CASUALTY GUARANTY ASSOCIATION, SO AS TO PROVIDE THAT THE ASSOCIATION'S OBLIGATION TO AN INSURED CEASES WHEN TEN MILLION DOLLARS HAS BEEN PAID TO OR ON BEHALF OF THE INSURED AND TO ALLOW FOR ALLOCATION OF PAYMENTS WHEN THERE IS MORE THAN ONE CLAIMANT WITH A COVERED CLAIM; TO AMEND SECTION 38-31-70, AS AMENDED, RELATING TO THE PLAN OF OPERATION FOR THE ADMINISTRATION OF THE GUARANTY ASSOCIATION, SO AS TO AUTHORIZE FILING OF CLAIMS WITH AND DELEGATING CERTAIN AUTHORITY TO AN ASSOCIATION SIMILAR TO THE GUARANTY ASSOCIATION; TO AMEND SECTION 38-31-90, AS AMENDED, RELATING TO RIGHTS OF THE GUARANTY ASSOCIATION REGARDING CLAIMANTS PAID AND ASSETS OF INSOLVENT INSURERS, SO AS TO PROVIDE THAT THE ASSOCIATION HAS THE RIGHT TO RECOVER THE AMOUNT OF A CLAIM PAID FROM CERTAIN INSUREDS AND AFFILIATES OF AN INSOLVENT INSURER; TO AMEND SECTION 38-31-100, AS AMENDED, RELATING TO PROCEDURES FOR ASSERTING CLAIMS AND TO LIMITATIONS ON CLAIMS, SO AS TO REQUIRE EXHAUSTING ALL COVERAGE AND CLAIMS AND PROVIDING CREDIT TO THE GUARANTY ASSOCIATION UNDER CERTAIN CONDITIONS; TO AMEND SECTION 38-33-80, AS AMENDED, RELATING TO APPROVAL OF HEALTH MAINTENANCE ENROLLEE INFORMATION FORMS, SO AS TO PROVIDE TIME FRAMES FOR THE APPROVAL OF SUCH FORMS; TO AMEND SECTION 38-39-90, AS AMENDED, RELATING TO CANCELLATION OF INSURANCE CONTRACTS BY PREMIUM SERVICE COMPANIES AND THE CREDITING OF RETURN PREMIUMS, SO AS TO PROVIDE THAT NO REFUND IS REQUIRED IF IT AMOUNTS TO LESS THAN FIVE DOLLARS; TO AMEND SECTION 38-43-80, AS AMENDED, RELATING TO LICENSE FEES FOR AGENTS OF INSURERS, SO AS TO PROVIDE THAT FEES MUST BE PAID AS PRESCRIBED BY THE DEPARTMENT IN REGULATION; TO AMEND SECTION 38-55-30, AS AMENDED, RELATING TO LIMITING THE AMOUNT OF RISK THAT AN INSURER OR CAPTIVE INSURER MAY EXPOSE ITSELF TO, SO AS TO REMOVE THIS LIMITATION FOR CAPTIVE INSURERS; TO ADD SECTION 38-55-75 SO AS TO REQUIRE THE DEPARTMENT OF INSURANCE TO MAINTAIN CONFIDENTIALITY ON INFORMATION FURNISHED BY THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS OR DEPARTMENTS IF KEPT CONFIDENTIAL BY THAT ENTITY; TO AMEND SECTION 38-61-20, AS AMENDED, RELATING TO APPROVAL OF INSURANCE POLICY FORMS, SO AS TO PROVIDE TIME FRAMES FOR THE APPROVAL OF SUCH FORMS; TO AMEND SECTION 38-61-40, AS AMENDED, RELATING TO INSURANCE CONTRACT READABILITY REQUIREMENTS, SO AS TO AUTHORIZE THE DEPARTMENT OF INSURANCE TO WITHDRAW APPROVAL OR CERTIFICATION ON POLICIES THAT DO NOT COMPLY WITH SUCH REQUIREMENTS; TO AMEND SECTION 38-65-60, AS AMENDED, RELATING TO OUT-OF-STATE GROUP LIFE INSURANCE POLICIES, SO AS TO REQUIRE APPROVAL OF SUCH POLICIES BEFORE THEY CAN BE OFFERED FOR SALE; SECTION 38-71-310, AS AMENDED, RELATING TO APPROVAL OF ACCIDENT AND HEALTH INSURANCE POLICIES AND RATES, SO AS TO PROVIDE TIME FRAMES FOR THE APPROVAL OF SUCH POLICIES AND RATES; TO AMEND SECTION 38-71-720, AS AMENDED, RELATING TO APPROVAL OF GROUP ACCIDENT, HEALTH, AND ACCIDENT AND HEALTH INSURANCE POLICIES, SO AS TO PROVIDE TIME FRAMES FOR THE APPROVAL OF SUCH POLICIES; TO AMEND SECTION 38-71-750, AS AMENDED, RELATING TO APPROVAL OF OUT-OF-STATE MASS-MARKETED GROUP ACCIDENT, HEALTH, AND ACCIDENT AND HEALTH INSURANCE POLICIES, SO AS TO CLARIFY REQUIREMENTS FOR APPROVAL; TO AMEND SECTION 38-71-1370, AS AMENDED, RELATING TO THE APPLICATION OF GROUP ACCIDENT AND HEALTH INSURANCE PROVISIONS TO SMALL EMPLOYER INSURERS, SO AS TO EXCLUDE COVERAGE TO LATE ENROLLEES FOR A PERIOD OF TIME; TO AMEND SECTION 38-71-1980, RELATING TO EXPEDITED EXTERNAL REVIEWS, SO AS TO CHANGE AN INTERNAL CROSS REFERENCE; TO AMEND SECTION 38-73-1300, AS AMENDED, RELATING TO DEVIATIONS FROM CLASS RATES, SCHEDULES, RATING PLANS, OR RULES BY FIRE OR INLAND MARINE INSURERS, SO AS TO PROVIDE FOR MODIFICATIONS AND LOSS COSTS RATHER THAN DEVIATIONS AND CLASS RATES; TO AMEND SECTION 38-73-1310, AS AMENDED, RELATING TO APPLICATIONS FOR UNIFORM PREMIUM DECREASES OR INCREASES, SO AS TO CLARIFY TO WHICH KINDS OF INSURANCE SUCH APPLICATIONS APPLY; TO AMEND SECTION 38-87-40, AS AMENDED, RELATING TO REQUIREMENTS FOR OUT-OF-STATE CHARTERED RISK RETENTION GROUPS TO DO BUSINESS IN SOUTH CAROLINA, SO AS TO PROVIDE THAT SUCH GROUPS ARE SUBJECT TO TAXATION AS AN ADMITTED INSURER WOULD BE, RATHER THAN AS A FOREIGN ADMITTED INSURER WOULD BE; TO AMEND SECTION 38-90-60, RELATING TO INCORPORATION OPTIONS AND REQUIREMENTS FOR CAPTIVE INSURANCE COMPANIES, SO AS TO CHANGE A CROSS REFERENCE; TO AMEND SECTION 38-90-140, RELATING TO TAX PAYMENTS BY CAPTIVE INSURANCE COMPANIES, SO AS TO PROVIDE THAT THESE TAXES MUST BE PAID TO THE DEPARTMENT OF INSURANCE RATHER THAN TO THE DIRECTOR OF THE DEPARTMENT AND TO CLARIFY A PERCENTAGE REFERENCE; TO AMEND SECTION 38-90-180, RELATING TO THE APPLICATION OF CERTAIN PROVISIONS OF THE REHABILITATION AND LIQUIDATION ACT TO CAPTIVE INSURANCE COMPANIES, SO AS TO ALSO APPLY CERTAIN PROVISIONS OF THE ADMINISTRATIVE SUPERVISION OF INSURERS ACT TO THESE COMPANIES; TO AMEND SECTION 56-10-240, AS AMENDED, RELATING TO PROCEDURES THAT MOTOR VEHICLE INSUREDS AND INSURERS MUST FOLLOW IF A MOTOR VEHICLE SUBJECT TO FINANCIAL RESPONSIBILITY REQUIREMENTS BECOMES UNINSURED, SO AS TO DELETE AN OBSOLETE PROVISION; TO AMEND SECTION 56-10-280, AS AMENDED, RELATING TO THE MINIMUM DURATION OF INSURANCE ISSUED TO MEET MOTOR VEHICLE FINANCIAL RESPONSIBILITY REQUIREMENTS, SO AS TO PROVIDE THAT, IF A CHECK TENDERED BY THE INSURED IS RETURNED FOR INSUFFICIENT FUNDS, THE CANCELLATION IS EFFECTIVE AS OF THE POLICY INCEPTION OR RENEWAL DATE; TO AMEND SECTION 38-11-40, AS AMENDED, RELATING TO INVESTMENTS REQUIRED TO BE MAINTAINED BY INSURERS, SO AS TO AUTHORIZE LIFE INSURERS TO INVEST IN OBLIGATIONS WHICH ARE NOT IN DEFAULT AND IN WHICH THE ISSUING, ASSUMING, OR GUARANTY BUSINESS ENTITY MEETS CERTAIN RECOGNIZED RATINGS AND TO INVEST IN FOREIGN INVESTMENTS; TO AMEND SECTION 38-11-50, AS AMENDED, RELATING TO LIMITATIONS ON INVESTMENTS AUTHORIZED FOR INSURERS, SO AS TO FURTHER SPECIFY LIMITATIONS ON CERTAIN BONDS, NOTES, OR DEBENTURES AND LIMITATIONS ON FOREIGN INVESTMENTS; AND TO REPEAL SECTION 38-73-1320, RELATING TO HEARINGS CONCERNING APPLICATIONS FOR DEVIATIONS FROM CERTAIN FIRE, INLAND MARINE, CASUALTY, OR AUTOMOBILE INSURER REQUIREMENTS.
Be it enacted by the General Assembly of the State of South Carolina:
Dollar changes to be published in State Register
SECTION 1. Section 37-1-109(4) of the 1976 Code is amended to read:
"(4) The administrator, as defined in Section 37-1-301, shall publish a notice in the State Register:
(a) On or before April thirtieth of each year in which dollar amounts are to change, the changes in dollar amounts required by subsection (2); and
(b) Promptly after the changes occur, changes in the index required by subsection (3) including, if applicable, the numerical equivalent of the Reference Base Index under a revised Reference Base Index and the designation or title of any index superseding the index."
Persons subject to jurisdiction of the administrator of the Consumer Protection Code
SECTION 2. Section 37-6-108(1) of the 1976 Code is amended to read:
"(1) After notice and hearing the administrator may order a creditor, a person acting in his behalf, or a person subject to this title to cease and desist from engaging in violations of this title. A respondent aggrieved by an order of the administrator may obtain judicial review of the order and the administrator may obtain an order of the court for enforcement of its order in the court of common pleas. The proceeding for review or enforcement is initiated by filing a petition in the court. Copies of the petition must be served upon all parties of record."
Persons subject to jurisdiction of the administrator of the Consumer Protection Code
SECTION 3. Section 37-6-111(1) of the 1976 Code is amended to read:
"(1) The administrator may bring a civil action to restrain a person to whom this title applies from engaging in a course of:
(a) making or enforcing unconscionable terms or provisions of consumer credit transactions;
(b) fraudulent or unconscionable conduct in inducing consumers to enter into consumer credit transactions;
(c) conduct of any of the types specified in item (a) or (b) with respect to transactions that give rise to or that lead persons to believe will give rise to consumer credit transactions; or
(d) fraudulent or unconscionable conduct in the collection of debts arising from consumer credit transactions."
Persons subject to jurisdiction of the administrator of the Consumer Protection Code
SECTION 4. Section 37-6-113(1) of the 1976 Code is amended to read:
"(1) After demand, the administrator may bring a civil action against a creditor or a person subject to this title to recover actual damages sustained and excess charges paid by one or more consumers who have a right to recover explicitly granted by this title. In a civil action under this subsection, penalties may not be recovered by the administrator. The court shall order amounts recovered under this subsection to be paid to each consumer or set off against his obligation. A consumer's action, except a class action, takes precedence over a prior or subsequent action by the administrator with respect to the claim of that consumer. A consumer's class action takes precedence over a subsequent action by the administrator with respect to claims common to both actions, but the administrator may intervene. An administrator's action on behalf of a class of consumers takes precedence over a consumer's subsequent class action with respect to claims common to both actions. Whenever an action takes precedence over another action under this subsection, the latter action may be stayed to the extent appropriate while the precedent action is pending and dismissed if the precedent action is dismissed with prejudice or results in a final judgment granting or denying the claim asserted in the precedent action. A defense available to a creditor in a civil action brought by a consumer is available to him in a civil action brought under this subsection."
Persons subject to jurisdiction of the administrator of the Consumer Protection Code
SECTION 5. Section 37-6-113(2) of the 1976 Code, as amended by Act 142 of 1991, is further amended to read:
"(2) The administrator may bring a civil action against a creditor, a person acting in his behalf, or a person subject to this title to recover a civil penalty of no more than five thousand dollars for repeatedly and intentionally violating this title. A civil penalty pursuant to this subsection may not be imposed for a violation of this title occurring more than two years before the action is brought."
Registration to sell prescription drug discount cards
SECTION 6. Section 37-17-10 of the 1976 Code, as added by Act 400 of 2000, is amended to read:
"Section 37-17-10. (A) It is unlawful for a person to sell, market, promote, advertise, or distribute a card or other purchasing mechanism or device which is not insurance that purports to offer discounts or access to discounts from pharmacies for prescription drug purchases unless:
(1) the person is registered with the Department of Consumer Affairs for this express purpose;
(2) the card or other purchasing mechanism or device expressly states in bold and prominent type, prominently placed, that the discounts are not insurance;
(3) documentation is provided to the Department of Consumer Affairs that the discounts are specifically authorized and the person has a separate contract with each pharmacy or pharmacy chain listed in conjunction with the card or other purchasing mechanism or device; and
(4) the discounts or access to discounts offered, or the range of discounts or access to the range of discounts offered, are not misleading, deceptive, or fraudulent.
(B)(1) A person who sells, markets, promotes, advertises, or distributes a card or other purchasing mechanism or device which is not insurance that purports to offer discounts or access to discounts from pharmacies for prescription drug purchases in this State shall designate a resident of this State as an agent for service of process and register the agent with the Secretary of State.
(2) In the absence of proper registration under subsection (B)(1), the Secretary of State is designated as an agent upon whom process may be served. Service of any process on the Secretary of State may be made by delivering to and leaving with the Secretary of State, or with any person designated by him to receive such service, duplicate copies of the process, notice, or demand. The Secretary of State shall forward one of the copies by registered or certified mail, return receipt requested, to the person required to register under subsection (B)(1) at the last known physical address to the party serving process. Refusal to sign the return receipt does not affect the validity of the service. Service is effective under this subsection as of the date shown on the return receipt or five days after its deposit in the mail, whichever is earlier. The Secretary of State may charge a fee of ten dollars for the service. This subsection does not affect the right to serve process in any manner otherwise provided by law.
(C)(1) A person who violates subsection (A) is guilty of a misdemeanor and, upon conviction, must be imprisoned for not more than six months or fined not more than one thousand dollars, or both; for a second or subsequent violation a person must be imprisoned for not more than two years or fined not more than five thousand dollars, or both.
(2) Notwithstanding subsection (C)(1), a person who violates this chapter is subject to all civil and administrative remedies available in this title.
(D) This section does not apply to:
(1) a pharmacy holding a permit issued pursuant to Title 40, Chapter 43;
(2) eye or vision care services or glasses or contact lenses provided by an optometrist or ophthalmologist;
(3) any benefit or program offered in conjunction with a health insurance plan administered by a health insurer, health care service contractor, or health maintenance organization regulated under Title 38; or
(4) an insured benefit administered by, or under contract with, the State of South Carolina.
(E) For purposes of this section, 'person' means an individual, corporation, partnership, or any other business entity including, but not limited to, a health maintenance organization, an insurance company, or a third party payor. Representatives of corporations, partnerships, or other business entities must be registered before they shall offer services under this section.
(F) The department may promulgate regulations as necessary to assist in administering this chapter including, but not limited to, regulations concerning assessment of registration fees and standards for corporate and individual representative registration."
Books and records that must be maintained
SECTION 7. Section 38-5-80(k) of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"(k) The insurer's principal place of business and primary executive, administrative, and home offices and all original books and records of the insurer are located and maintained in this State. The provisions of this subsection apply to domestic health maintenance organizations. For purposes of this section, original books and records mean corporate bylaws, charters, articles of incorporation, and any other records deemed to constitute original records by the director or his designee. Insurers desiring to move business records or operations outside of the State shall apply to the director or his designee for approval. Approvals or denials of request to move records or operations fall within the discretion of the director or his designee. The director may also rescind approval of a request if in his discretion it is considered to be in the best interest of the consumers and citizens of the State. Insurers must comply with the records requirements of Section 38-5-190 and the requirements for domestic insurers set forth in this chapter. The director or his designee shall outline via bulletin or order the information required in such an application. Item (k) of this section does not apply to any domestic insurer whose primary executive, administrative, and home offices were located outside this State on July 1, 1987. If subsequently the director or his designee is of the opinion that a condition exists which would have prohibited him from issuing the original certificate of authority or license to the insurer, then that condition also constitutes a ground for license revocation under Section 38-5-120."
Definition revised
SECTION 8. Section 38-21-10(2) of the 1976 Code, as amended by Act 181 of 1993, is further amended to read:
"(2) The term 'control' (including the terms 'controlling', 'controlled by', and 'under common control with') 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 made in the manner provided by Section 38-21-220 that control does not exist in fact. The director or his designee may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support his determination, that control exists in fact, notwithstanding the absence of a presumption to that effect."
Definitions revised
SECTION 9. Section 38-31-20 of the 1976 Code, as last amended by Act 97 of 1995, is further amended to read:
"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) 'Affiliate of the insolvent insurer' 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.
(4) 'Association' means the South Carolina Property and Casualty Insurance Guaranty Association created under Section 38-31-40.
(5) 'Association similar to the association' means any guaranty association, security fund, or other insolvency mechanism which affords protection similar to that of the association. The term also includes any property/casualty insolvency mechanism which obtains assessments or other contributions from insurers on a pre-insolvency basis.
(6) '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.
(7) '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.
(8) '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 claim is for first-party benefits for damage to property permanently located in this State. 'Covered claim' does not include:
(a) any amount awarded as extra-contractual damages unless awarded against the association;
(b) any amount sought as a return of premium under any retrospective rating plan;
(c) any amount due any reinsurer, insurer, insurance pool, or underwriting association as subrogation recoveries, reinsurance recoveries, contribution, indemnification, or otherwise. No such claim for any amount due any reinsurer, insurer, insurance pool, or underwriting association may be asserted against a claimant or a person insured under a policy issued by an insolvent insurer other than to the extent such a claim exceeds the association obligation limitations set forth in Section 38-31-60;
(d) any first party claim by an insured whose net worth exceeds ten million dollars on December thirty-first of the year next preceding the date the insurer becomes an insolvent insurer; provided that an insured's net worth on such date must be deemed to include the aggregate net worth of the insured and all of its subsidiaries as calculated on a consolidated basis;
(e) any first party claims by an insured which is an affiliate of the insolvent insurer;
(f) any fee or other amount relating to goods or services sought by or on behalf of any attorney or other provider of goods or services retained by the insolvent insurer or an insured prior to the date it was determined to be insolvent;
(g) any fee or other amount sought by or on behalf of any attorney or other provider of goods or services retained by any insured or claimant in connection with the assertion or prosecution of any claim, covered or otherwise, against the association; or
(h) any claims for interest.
(9) '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.
(10) 'Insured' means any named insured, any additional insured, any vendor, lessor, or any other party identified as an insured under the policy.
(11) '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. An insurer shall cease to be a member insurer effective on the day following the termination or expiration of its license to transact the kinds of insurance to which this chapter applies; however, the insurer shall remain liable as a member insurer for any and all obligations, including obligations for assessments levied prior to the termination or expiration of the insurer's license and assessments levied after the termination or expiration, which relate to any insurer which became an insolvent insurer prior to the termination or expiration of such insurer's license.
(12) '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.
(13) 'Person' means an individual, corporation, partnership, association, voluntary organization, or governmental entity."
Limitation on obligations
SECTION 10. Section 38-31-60(a) of the 1976 Code, as last amended by Act 517 of 1994, is amended by adding at the end:
"(iv) Notwithstanding any other provisions of this chapter, except in the case of a claim for benefits under worker's compensation coverage, any obligation of the association to or on behalf of an insured and its affiliates on all covered claims combined shall cease when ten million dollars shall have been paid in the aggregate by the association and any one or more associations similar to the association of any other state or states, to or on behalf of that insured, its affiliates, and additional insureds on covered claims or allowed claims arising under the policy or policies of any one insolvent insurer. If the association determines that there may be more than one claimant having a covered claim or allowed claim against the association, or any associations similar to the association in other states, under the policy or policies of any one insolvent insurer, the association may establish a plan to allocate amounts payable by the association in such manner as the association in its discretion considers equitable."
Procedures for filing claims
SECTION 11. Section 38-31-70(3)(d) of the 1976 Code, as amended by Act 181 of 1993, is further amended to read:
"(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 an association similar to the association in another state by the receiver or liquidator."
Delegation of powers and duties
SECTION 12. Section 38-31-70(4) of the 1976 Code, as amended by Act 181 of 1993, is further amended to read:
"(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, an association similar to the association, or another 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."
Recovery of claims
SECTION 13. Section 38-31-90 of the 1976 Code, as amended by Act 181 of 1993, is further amended to read:
"Section 38-31-90. (1) A 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 and except as provided in subsection (2). 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 association has the right to recover from the following persons the amount of any 'covered claim' paid on behalf of such person pursuant to this chapter:
(a) an insured whose net worth on December thirty-one of the year immediately preceding the date the insurer becomes an insolvent insurer exceeds twenty-five million dollars and whose liability obligations to other persons are satisfied in whole or in part by payments made under this chapter; and
(b) a person who is an affiliate of the insolvent insurer and whose liability obligations to other persons are satisfied in whole or in part by payments made under this chapter.
(3) The receiver, liquidator, or statutory successor of an insolvent insurer is bound by settlements of covered claims by the association or an association similar to the association 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 an association similar to the association in handling claims must be accorded the same priority as the liquidator's expenses.
(4) 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."
Exhaustion of other coverage and claims
SECTION 14. Section 38-31-100 of the 1976 Code, as last amended by Act 235 of 2000, is further amended to read:
"Section 38-31-100. (1) A person, having a claim under an insurance policy, whether or not it is a policy issued by a member insurer, and the claim under such other policy arises from the same facts, injury, or loss that gave rise to the covered claim against the association, is required to first exhaust all coverage and limits provided by any such policy. Any amount payable on a covered claim under this chapter must be reduced by the full limits of such other coverage as set forth on the declarations page and the association shall receive a full credit for such limits, or where there are no applicable limits, the claim must be reduced by the total recovery. Notwithstanding the foregoing, no person may be required to exhaust all coverage and limits under the policy of an insolvent insurer.
(a) A claim under a policy providing liability coverage to a person who may be jointly and severally liable with or a joint tortfeasor with the person covered under the policy of the insolvent insurer that gives rise to the covered claim must be considered to be a claim arising from the same facts, injury, or loss that gave rise to the covered claim against the association. Any amount payable on a covered claim under this chapter must be reduced by the full and combined policy limits of all joint tortfeasers.
(b) To the extent that the association's obligation is reduced by the application of this section, the liability of the person insured by the insolvent insurer's policy for the claim must be reduced in the same amount.
(2) A person having a claim which may be recovered under more than one insurance guaranty association or associations similar to the association must be required first to exhaust all coverage and limits in recovery 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 be required first to exhaust all coverage and limits in recovery from the association of the location of the property, and if it is a workers' compensation claim, he shall be required first to exhaust all coverage and limits in recovery from the association of the residence of the claimant. Any amount payable on a covered claim under this chapter must be reduced by the full amount of recovery from any other insurance guaranty association or associations similar to the association, and the association shall receive full credit for such recovery.
(3) A person having a claim or legal right of recovery under any governmental insurance or guaranty program which is also a covered claim shall be required first to exhaust all coverage and limits in recovery under the program. Any amount payable on a covered claim under this chapter must be reduced by the full amount of any recovery under the governmental insurance or guaranty program.
(4) No claim held by an insurer, reinsurer, insurance pool, or underwriting association based on an assignment or on rights of subrogation, or otherwise, may be recovered from a claimant or asserted in any legal action against a person insured under a policy issued by an insolvent insurer or the association except to the extent the amount of the claim exceeds the obligation of the association under this chapter.
(5) A 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, must be required first to exhaust all coverage and limits provided 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. Any amount payable on a covered claim under this chapter, whether through settlement, judgment, or otherwise, must be reduced by the full limits of such other coverage as set forth on the declarations page of the policy issued by the insolvent insurer.
(6) A person having a claim against an insolvent insurer under any provision in an insurance policy is limited to ten million dollars aggregate payout from the association.
(7) A person having a net worth of greater than twenty-five million dollars and having a claim against an insolvent insurer under any provision in an insurance policy may not make a claim against the association."
Approval of HMO forms
SECTION 15. Section 38-33-80(A)(2) and (C) of the 1976 Code, as last amended by Act 181 of 1993, are further amended to read:
"(2) Evidence of coverage, or an amendment to it, may not be issued or delivered to a person in this State until a copy of the form of the evidence of coverage, or amendment to it, has been filed with and approved by the director or his designee pursuant to Section 38-71-310(A) or 38-71-720(A).
(C) The director or his designee shall approve within thirty days any form if the requirements of subsection (A) are met. The director or his designee, in his discretion, may extend for up to an additional sixty days the period within which he shall approve or disapprove the form. The director or his designee shall approve, within a reasonable period, 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. The notice must contain the reasons for disapproval, and the filer, upon request in writing, is entitled to a public hearing on it. If action is not taken to approve or disapprove any form within thirty days of the filing of the form, if the period is not extended, or at the expiration of the extended period, if any, the filing is deemed approved. If action is not taken to approve or disapprove any schedule of charges within ninety days of the filing of the charges, the filing is deemed approved. An organization may not use a form or schedule of charges deemed approved pursuant to the default provision of this section until the organization has filed with the director or his designee a written notice of its intent to use the form or schedule of charges. The notice must be filed in the office of the director at least ten days before the organization uses the form or schedule of charges."
Limit on minimum amount to be refunded
SECTION 16. Section 38-39-90(f) of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"(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 promptly refund the excess to the insured or the agent of record. No refund is required if it amounts to less than five dollars."
Payment of fees
SECTION 17. Section 38-43-80(B) of the 1976 Code, as amended by Section 11H, Part II, Act 501 of 1992, is further amended to read:
"(B) License fees for local, state, or special agents must be paid by the insurer for whom the agent proposes to act or by which the proposed agent is vouched for in the application for license. The department shall promulgate regulations specifying the time and manner of payment of these fees."
Section not applicable to captive insurers
SECTION 18. Section 38-55-30 of the 1976 Code, as amended by Act 13 of 1991, is further amended to read:
"Section 38-55-30. Except as otherwise provided in this title, no insurer doing business in this State may expose itself to a loss on one risk in an amount exceeding ten percent of its surplus to policyholders. A risk or portion of it which has been reinsured must be deducted in determining the limitation of risk prescribed in this section. This section does not apply to captive insurers."
Confidentiality of information received
SECTION 19. The 1976 Code is amended by adding:
"Section 38-55-75. The Department of Insurance may receive and shall maintain as confidential any documents or information furnished to the department by the National Association of Insurance Commissioners or insurance departments of other states which is classified as confidential by that association or state. The Department of Insurance may share documents or information, including confidential documents or information, with the National Association of Insurance Commissioners or insurance departments of other states if the association or other state agrees to maintain the same level of confidentiality as is provided under South Carolina law. Documents or information received or exchanged pursuant to this section are not subject to subpoena or subpoena duces tecum in any civil, criminal, or administrative proceeding."
Approval of forms
SECTION 20. Section 38-61-20 of the 1976 Code, as last amended by Act 312 of 2000, is further amended to read:
"Section 38-61-20. (A) It is unlawful for an insurer doing business in this State to issue or sell in this State a policy, contract, or certificate until it has been filed with and approved by the director or his designee. The director or his designee may disapprove the form if it:
(1) does not meet the requirements of law;
(2) contains provisions which are unfair, deceptive, ambiguous, misleading, or unfairly discriminatory; or
(3) is solicited by means of advertising, communication, or dissemination of information which is deceptive or misleading.
However, this subsection does not apply to surety contracts or fidelity bonds, except as required in Section 38-15-10, or to insurance contracts, riders, or endorsements prepared to meet special, unusual, peculiar, or extraordinary conditions applying to an individual risk or exempt commercial policies.
(B) Within thirty days after the filing of a form requiring approval, the director or his designee shall notify the organization filing the form of the approval or disapproval of the form, and the reason if the form is disapproved. The director or his designee, in his discretion, may extend for up to an additional sixty days the period within which he shall approve or disapprove the form. A form received, but neither approved nor disapproved by the director or his designee, is deemed approved at the expiration of the thirty days if the period is not extended, or at the expiration of the extended period, if any. An organization may not use a form deemed approved pursuant to the default provision of this section until the organization has filed with the director or his designee a written notice of its intent to use the form. The notice must be filed in the office of the director at least ten days before the organization uses the form.
(C) At any time after having given written approval, and after an opportunity for a hearing for which at least thirty days' written notice has been given, the director or his designee may withdraw approval if he finds that the form:
(1) does not meet the requirements of law;
(2) contains provisions which are unfair, deceptive, ambiguous, misleading, or unfairly discriminatory; or
(3) is solicited by means of advertising, communication, or dissemination of information which is deceptive or misleading.
(D) The director or his designee may exempt from the requirements of subsection (A) as long as he considers proper any type of insurance policy, contract, or certificate to which in his opinion subsection (A) practically must not be applied, or the filing and approval of which, in his opinion, is not necessary for the protection of the public. However, each insurer at least annually shall list the types and form numbers of all policies it issues or sells in this State which the director or his designee has exempted from being filed and approved, and an officer of the insurer shall certify that all of these policies comply fully with the laws of this State. If a policy, contract, or certificate is certified to be in compliance with the laws of this State and the director or his designee finds it violates a law of this State, he may disqualify that insurer from certifying policies, contracts, or certificates allowed under this subsection.
(E) Nothing in this chapter precludes the issuance of a life insurance contract that includes an optional accident, health, or accident and health insurance rider. However, the optional accident, health, or accident and health insurance rider must be filed with and approved by the director or his designee pursuant to Section 38-71-310, 38-71-720, or 38-71-740, as appropriate, and comply with all applicable sections of Chapter 71 of this title and, in addition, in the case of long term care insurance, Chapter 72 of this title."
Policies may be withdrawn if not readable
SECTION 21. Section 38-61-40 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"Section 38-61-40. All insurers licensed to transact insurance business in this State shall comply with the standards prescribed by regulation of the department. The director or his designee is empowered to withdraw approval or certification on all existing policies of commonly purchased insurance that do not comply with Section 38-61-30."
Out-of-state group life insurance policies to be approved
SECTION 22. Section 38-65-60(3) of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"(3) Upon request of the director or his designee, copies of policies and certificates under a policy of group life insurance issued outside this State and covering residents of this State must be made available on an informational basis only. However, mass-marketed life insurance policies and certificates must have approval of the director or his designee pursuant to Section 38-61-20 before they can be offered for sale to residents of this State."
Approval of accident and health insurance policies and rates
SECTION 23. Section 38-71-310(A) and (F) of the 1976 Code, as last amended by Act 411 of 1998, are further amended to read:
"(A) A policy or certificate of accident, health, or accident and health insurance may not be issued or delivered in this State, nor may any application, endorsement, or rider which becomes a part of the policy be used, until a copy of its form has been filed with and approved by the director or his designee, except as exempted by the director or his designee as permitted by Section 38-61-20. The director or his designee may disapprove the form if the form:
(1) does not meet the requirements of law;
(2) contains provisions which are unfair, deceptive, ambiguous, misleading, or unfairly discriminatory; or
(3) is solicited by means of advertising, communication, or dissemination of information which is deceptive or misleading.
The director or his designee shall notify in writing, as soon as is practicable, the insurer that has filed the form of his approval or disapproval. If the form is disapproved, the notice must contain the reasons for disapproval, and the insurer is entitled to a public hearing on that decision. If action is not taken to approve or disapprove a policy or certificate, application, endorsement, or rider after the document has been filed for thirty days, it is deemed to be approved. The director or his designee, in his discretion, may extend for up to an additional sixty days the period for approval or disapproval of the form. An organization may not use a form deemed approved pursuant to the default provision of this section until the organization has filed with the director or his designee a written notice of its intent to use the form. The notice must be filed in the office of the director at least ten days before the organization uses the form.
(F) Nothing in this chapter precludes the issuance of an individual accident, health, or accident and health insurance policy that includes an optional life insurance rider. However, the optional life insurance rider must be filed with and approved by the director or his designee pursuant to Section 38-61-20 and comply with all applicable sections of Chapter 63 and, in addition, in the case of a life insurance rider with accelerated long term care benefits, Chapter 72 of this title."
Approval of group insurance policies
SECTION 24. Section 38-71-720 of the 1976 Code, as last amended by Act 411 of 1998, is further amended to read:
"Section 38-71-720. (A) A policy or contract of group accident, group health, or group accident and health insurance may not be issued or delivered in this State, nor may any application, endorsement, or rider which becomes a part of the policy be used, until a copy of the form has been filed with and approved by the director or his designee except as exempted by the director or his designee as permitted by Section 38-61-20. The director or his designee may disapprove the form if the form:
(1) does not meet the requirements of law;
(2) contains provisions which are unfair, deceptive, ambiguous, misleading, or unfairly discriminatory; or
(3) is solicited by means of advertising, communication, or dissemination of information which is deceptive or misleading.
If action is not taken to approve or disapprove a policy, contract, certificate, application, endorsement, or rider after the document has been filed for thirty days, it is deemed to be approved. The director or his designee, in his discretion, may extend for up to an additional sixty days the time period for approval or disapproval of the form. An organization may not use a form deemed approved pursuant to the default provision of this section until the organization has filed with the director or his designee a written notice of its intent to use the form. The notice must be filed in the office of the director at least ten days before the organization uses the form. The director or his designee, as soon as is practicable, shall notify in writing the insurer which has filed the form of his approval or disapproval. If the form is disapproved, the notice must contain the reasons for disapproval and the insurer is entitled to a public hearing on that decision. At any time after having given written approval, the director or his designee, after a public hearing of which at least thirty days' written notice has been given, may withdraw approval if he finds that the form:
(1) does not meet the requirements of law;
(2) contains provisions which are unfair, deceptive, ambiguous, misleading, or unfairly discriminatory; or
(3) is solicited by means of advertising, communication, or dissemination of information which is deceptive or misleading.
The withdrawal of approval must be effected by written notice to the insurer and the insurer is entitled to a public hearing on that decision. Any action or decision of the director or his designee to withdraw approval may be appealed to the Administrative Law Judge Division in accordance with Section 38-3-210.
(B) Nothing in this chapter precludes the issuance of a policy or contract of group accident, group health, or group accident and health insurance that includes an optional life insurance rider. However, the optional life insurance rider must be filed with and approved by the director or his designee pursuant to Section 38-61-20 and comply with all applicable sections of Chapter 65 and, in addition, in the case of a life insurance rider with accelerated long term care benefits, Chapter 72 of this title."
Approval of out-of-state mass-marketed group insurance policies
SECTION 25. Section 38-71-750(3) of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"(3) Upon request of the director or his designee, copies of policies and certificates under a policy of group accident, group health, or group accident and health insurance issued outside this State and covering residents of this State must be made available on an informational basis only. However, mass-marketed accident, health, or accident and health insurance policies and certificates must receive approval of the director or his designee pursuant to Section 38-71-720 before they can be offered for sale to residents of this State."
Late enrollees
SECTION 26. Section 38-71-1370 of the 1976 Code, as amended by Act 5 of 1997, is further amended to read:
"(A) Except to the extent inconsistent with specific provisions of this article, all provisions of Article 5, are applicable to any insurance plans required to be offered by small employer insurers.
(B) Late enrollees may be excluded from coverage for the greater of eighteen months or an eighteen month preexisting condition exclusion; however, if both a period of exclusion from coverage and a preexisting condition exclusion are applicable to a late enrollee, the combined period may not exceed eighteen months."
Cross reference correction
SECTION 27. Section 38-71-1980(F)(3) and (4) of the 1976 Code, as added by Act 380 of 2000, is amended to read:
"(3) If the notice provided pursuant to subsection (F)(1) was not in writing, within two days after the date of providing that notice, the independent review organization shall:
(a) provide written confirmation of the decision to the covered person or his authorized representative and the health carrier; and
(b) include the information set forth in Section 38-71-1970(H)(3).
(4) As expeditiously as reasonably possible after receipt of the notice of a decision pursuant to subsection (F)(1) reversing the adverse determination or final adverse determination, the health carrier shall approve the covered benefit that was the subject of the adverse determination or final adverse determination, subject to applicable contract exclusions, limitations, or other provisions."
Deviations
SECTION 28. Section 38-73-1300 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"Section 38-73-1300. A member of or subscriber to a rating organization to whom the provisions of Article 3 of this chapter are applicable may make written application to the director or his designee for permission to file a modification from the class loss costs, schedules, rating plans, or rules respecting any kind of insurance or class of risk within a kind of insurance or any combination of them. The application must specify the basis for the modification. A copy of the application must be sent simultaneously to the rating organization."
Uniform premium increases and decreases
SECTION 29. Section 38-73-1310 of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"Section 38-73-1310. A member of or subscriber to a rating organization to whom the provisions of Article 5 of this chapter are applicable may make written application to the department for permission to file a uniform percentage decrease or increase to be applied to the premiums produced by the rating system filed for a kind of insurance or for a class of insurance which is found by the director or his designee to be a proper rating unit for the application of such uniform percentage decrease or increase or for a subdivision of a kind of insurance. The application must specify the basis for the modification and must be accompanied by the data upon which the applicant relies. A copy of the application and data must be sent simultaneously to the rating organization."
Application of taxation
SECTION 30. Section 38-87-40(3)(a) of the 1976 Code, as amended by Act 181 of 1993, is further amended to read:
"(a) Each risk retention group is liable for the payment of premium taxes and taxes on premiums of direct business for risks resident or located within this State and shall report to the director or his designee the net premiums written for risks resident or located within this State. Such risk retention group is subject to taxation, including any applicable fines and penalties related thereto, on the same basis as an admitted insurer."
Cross reference correction
SECTION 31. Section 38-90-60(E) of the 1976 Code, as added by Act 331 of 2000, is amended to read:
"(E) The articles of incorporation, the certificate issued pursuant to subsection (D), and the organization fees required by Section 33-1-220 must be transmitted to the Secretary of State, who shall record both the articles of incorporation and the certificate."
Payment of taxes; percentage amount clarified
SECTION 32. Section 38-90-140(A) and (B) of the 1976 Code, as added by Act 331 of 2000, is amended to read:
"(A) A captive insurance company shall pay to the department by March 1 of each year, a tax at the rate of four-tenths of one percent on the first twenty million dollars and three-tenths of one percent on the next twenty million dollars and two-tenths of one percent on the next twenty million dollars and seventy-five thousandths of one percent on each dollar thereafter on the direct premiums collected or contracted for on policies or contracts of insurance written by the captive insurance company during the year ending December 31 next preceding, after deducting from the direct premiums subject to the tax the amounts paid to policyholders as return premiums which shall include dividends on unabsorbed premiums or premium deposits returned or credited to policyholders.
(B) A captive insurance company shall pay to the department by March 1 of each year, a tax at the rate of two hundred and twenty-five thousandths of one percent on the first twenty million dollars of assumed reinsurance premium, and one hundred fifty thousandths of one percent on the next twenty million dollars and fifty thousandths of one percent on the next twenty million dollars and twenty-five thousandths of one percent of each dollar thereafter. However, no reinsurance tax applies to premiums for risks or portions of risks which are subject to taxation on a direct basis pursuant to subsection (A). A premium tax is not payable in connection with the receipt of assets in exchange for the assumption of loss reserves and other liabilities of another insurer under common ownership and control if the transaction is part of a plan to discontinue the operations of the other insurer and if the intent of the parties to the transaction is to renew or maintain business with the captive insurance company."
Chapters applicable to captive insurance companies
SECTION 33. Section 38-90-180(A) of the 1976 Code, as added by Act 331 of 2000, is amended to read:
"(A) Except as otherwise provided in this section, the terms and conditions set forth in Chapters 26 and 27 pertaining to insurance reorganizations, receiverships, and injunctions apply in full to captive insurance companies formed or licensed under this chapter."
Obsolete provision deleted
SECTION 34. Section 56-10-240(A) of the 1976 Code, as amended by Act 459 of 1996, is further amended to read:
"(A) If, during the period for which it is licensed, a motor vehicle is or becomes an uninsured motor vehicle, then the vehicle owner immediately shall obtain insurance on the vehicle or within five days after the effective date of cancellation or expiration of his liability insurance policy surrender the motor vehicle license plates and registration certificates issued for the motor vehicle. If an automobile liability insurance premium is not paid within five working days after the last day to pay the premium, whether it is the premium due date or a grace period that is granted customarily or contractually, a motor vehicle is an uninsured motor vehicle, and the insurer shall give written notice, or notice by magnetic or electronic media in a manner considered satisfactory to the department, within ten days after the five-day period ends, in addition to that notice previously given in accordance with law, by delivery under United States Post Office bulk certified mail, return receipt requested, to the department of the cancellation or refusal to renew if the lapse or termination of such insurance or security occurs within three months of issuance, provided that this subsection only applies to new policies, and not renewal or replacement policies."
Effective date of insurance cancellation
SECTION 35. Section 56-10-280 of the 1976 Code, as amended by Act 181 of 1993, is further amended to read:
"Section 56-10-280. (A) Contracts or policies of insurance issued to meet the financial responsibility requirements prescribed in this chapter must be issued for not less than six months. A contract or policy of insurance remains in effect at least sixty days notwithstanding a power of attorney which may purport to give the attorney-in-fact the right to effect cancellation on behalf of the insured. However, a contract or policy may be canceled within the first sixty days only under one or more of the following circumstances:
(1) a check or bank draft tendered by the insured for payment to an agent, an insurance company, or a premium finance company is returned unpaid for insufficient funds or other reason by the insured's financial institution. If the check or draft is an initial payment made by an applicant for insurance or a payment made by an insured to renew a policy, the cancellation is effective as of the policy inception or renewal date;
(2) the insured produces satisfactory proof from the department that he has sold or otherwise disposed of the insured vehicle or surrendered its tags and registration;
(3) the insured has secured another policy that meets the financial responsibility requirements prescribed in this chapter.
(B) This section does not prohibit refunds to the insured for cancellations after sixty days resulting from causes other than nonpayment of premium. Where an insurance company or premium finance company cancels a contract or policy pursuant to this section for nonpayment of premium under the circumstances in subsection (A) which occurs within the first sixty days, the insurance company, premium finance company, or agent may charge and collect a fifteen-dollar penalty in addition to that otherwise provided by law, and the penalty charge is not a premium charge."
Investment allowed
SECTION 36. Section 38-11-40(i) of the 1976 Code, as amended by Act 181 of 1993, is further amended by adding at the end:
"(4) If a life insurer, in obligations, or in commercial paper or bankers' acceptances, or similar evidences of indebtedness customarily issued at a discount from principal value, issued, assumed, or guaranteed by any business entity created or existing under the laws of the United States, or any state, which are not in default as to principal or interest; provided, that either the obligation is or the issuing, assuming or guaranteeing business entity's or business entities' long-term obligations are rated one of the four highest grades by any of the nationally recognized statistical rating organizations recognized by the NAIC-SVO or one or two by the NAIC-SVO.
As used in this subitem, 'business entity' means a sole proprietorship, corporation, limited liability company, association, general or limited partnership, joint stock company, joint venture, mutual fund, bank, trust, real estate investment trust, joint tenancy, or other similar form of business organization, whether organized for-profit or not-for-profit.
As used in this subitem, 'obligation' means a bond, note, debenture, trust certificate including an equipment trust certificate, production payment, negotiable bank certificate of deposit, bankers' acceptance, asset-backed security, credit tenant loan, loan secured by financing a net lease or net leases, and other evidence of indebtedness for the payment of money (or participations, certificates or other evidences of an interest in any of the foregoing), whether constituting a general obligation of the issuer or payable only out of certain revenues or certain funds pledged or otherwise dedicated for payment."
Foreign investments allowed
SECTION 37. Section 38-11-40 of the 1976 Code, as amended by Act 181 of 1993 is further amended by adding at the end:
"(t) If a life insurer, foreign investments, other than Canadian investments, of substantially the same types as those that an insurer is permitted to acquire under this chapter."
Additional limitations on bond investments
SECTION 38. Section 38-11-50(A)(4) of the 1976 Code, as last amended by Act 181 of 1993, is further amended to read:
"(4) Investments in Section 38-11-40(i)(1), (2), and (3) in the aggregate may not exceed sixty-six and two-thirds percent of the insurer's policyholder obligations. However, investments in Section 38-11-40(i)(4) may exceed sixty-six and two-thirds percent of the insurer's policyholder obligations. Not more than ten percent of the insurer's policyholder obligations may be invested in one investment under Section 38-11-40(i)."
Additional limitations on foreign investments
SECTION 39. Section 38-11-50(A) of the 1976 Code, as last amended by Act 181 of 1993, is further amended by adding item (12) to read:
"(12) Investments authorized pursuant to Section 38-11-40(t) may not exceed twenty percent of the insurer's policyholder obligations, and the aggregate amount of such investments in a single foreign jurisdiction may not exceed ten percent of its policyholder obligations as to a foreign jurisdiction that has a sovereign debt rating of SVO1, or an equivalent rating by a nationally recognized statistical rating organization recognized by the SVO, or three percent of its policyholder obligations as to any other foreign jurisdiction."
Section repealed
SECTION 40. Section 38-73-1320 of the 1976 Code is repealed.
Time effective
SECTION 41. This act takes effect upon approval by the Governor.
Ratified the 28th day of June, 2001.
Approved the 20th day of July, 2001.
This web page was last updated on Tuesday, December 8, 2009 at 11:31 A.M.