1987-1988 Bill 1091: Insurance; definitions - South Carolina Legislature Online

South Carolina General Assembly
107th Session, 1987-1988

Bill 1091

                    Current Status

Bill Number:               1091
Ratification Number:       325
Act Number                 314
Introducing Body:          Senate
Subject:                   Insurance; definitions

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(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

(A314, R325, S1091)

AN ACT TO AMEND SECTIONS 38-1-20, 38-9-100, 38-25-540, 38-25-550, 38-45-20, 38-45-30, 38-45-90, 38-45-110, 38-75-710, AND 38-75-770, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO INSURANCE, SO AS TO DEFINE "ADMITTED INSURER", "ELIGIBLE SURPLUS LINES INSURER", "NONADMITTED INSURER", AND "SURPLUS LINES INSURANCE" AND TO REGULATE THEIR USE AND ACTIVITIES, AND TO CHANGE PROVISIONS RELATING TO SECURITY DEPOSITS; AND TO AMEND THE 1976 CODE BY ADDING SECTIONS 38-45-160 AND 38-45-170 SO AS TO REGULATE POLICY FEES CHARGED BY BROKERS AND TO PROVIDE FOR THE APPOINTMENT OF THE CHIEF INSURANCE COMMISSIONER AS TRUE AND LAWFUL ATTORNEY FOR SERVICE OF PROCESS FOR ELIGIBLE SURPLUS LINES INSURERS.

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

Definitions

SECTION 1. Section 38-1-20 of the 1976 Code is amended by adding:

"(4.5) 'Admitted insurer' means an insurer licensed to do business in this State.

(17.5) 'Eligible surplus lines insurer' means a nonadmitted insurer with which a resident broker may place surplus lines insurance.

(28.5) 'Nonadmitted insurer' means an insurer not licensed to do an insurance business in this State.

(37.5) 'Surplus lines insurance' means any insurance in this State of risks located or to be performed in this State, permitted to be placed through a resident broker with a nonadmitted insurer eligible to accept such insurance, other than reinsurance, wet marine and transportation insurance, insurance independently procured, and life and health insurance and annuities."

Deposit of securities not necessary in certain cases

SECTION 2. Section 38-9-100 of the 1976 Code is amended to read:

"Section 38-9-100. If a qualified insurer deposits with an officer or official body of any other state for the protection of all its policyholders, or all its policyholders and creditors, acceptable securities not in default as to principal or interest and of a current market value of not less than one million dollars, and delivers to the Commissioner a certificate to that effect, duly authenticated by the appropriate state official holding the deposit, then the insurer is relieved of making the deposit required by Section 38-9-80. For the purpose of this section a 'qualified insurer' is a licensed stock insurer possessed of at least ten million dollars of capital and surplus or a licensed mutual, fraternal, or reciprocal insurer possessed of at least ten million dollars of surplus, according to its most recent annual statement filed with the Commissioner and, in the discretion of the Commissioner, may include eligible surplus lines insurers which meet these capital and surplus requirements.

For the purpose of this section, 'acceptable securities' means bonds of the United States or of any state of the United States, or of any municipality or county thereof, upon which is pledged the full faith and credit of the appropriate political division, or bonds or notes secured by mortgages or deeds of trust on otherwise unencumbered real estate of a market value of not less than double the amount loaned, or other securities as are approved by the Commissioner."

Actions by unauthorized insurers

SECTION 3. 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 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 Commissioner a surety bond issued by an admitted insurer in an amount determined by the Commissioner 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."

Exemptions of eligible surplus lines insurer from pleading prerequisites

SECTION 4. Section 38-25-550 of the 1976 Code is amended by adding at the end:

"(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 Commissioner a surety bond issued by an admitted insurer in an amount determined by the Commissioner 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."

Requirements for resident to be licensed as broker

SECTION 5. Section 38-45-20 of the 1976 Code is amended to read:

"Section 38-45-20. A resident may be licensed as an insurance broker by the Commissioner upon the following requirements being met:

(1) the resident has been a licensed 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) the payment of an annual license fee of one hundred dollars which is fully earned when received, not refundable;

(3) the filing of a bond with the Commissioner in form approved by the Attorney General in favor of the State of South Carolina in the sum of fifty thousand dollars which has been 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 any 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 any insurance law or regulation of this State;

(b) the broker's failure to transmit properly any payment received by him, cash or credit, for transmission to an insurer or an insured; or

(c) any act of fraud committed by the broker in connection with an insurance transaction. In lieu of a bond, the broker may file with the Commissioner certificates of deposit in the sum of fifty 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 Commissioner, who is not required to be made a party to the action;

(4) the payment to the Commissioner, within thirty days after March thirty-first, June thirtieth, September thirtieth, and December thirty-first of 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 Commissioner that the business was placed in good faith and the policy was canceled at the request of the insured."

Requirements for nonresident to be licensed as broker

SECTION 6. Section 38-45-30 of the 1976 Code is amended to read-

"Section 38-45-30. A nonresident may be licensed as an insurance broker by the Commissioner upon the following requirements being met:

(1) filing an application on a form prescribed by the Commissioner;

(2) filing an affidavit stating that 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 that he is a licensed broker in another state;

(4) the payment of an annual license fee of one hundred dollars which is fully earned when received, not refundable;

(5) the filing of a bond with the Commissioner in form approved by the Attorney General in favor of the State of South Carolina in the sum of fifty thousand dollars which has been 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 any 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 any insurance law or regulation of this State;

(b) the broker's failure to transmit properly any payment received by him, cash or credit, for transmission to an insurer or an insured; or

(6) the payment to the Commissioner, within thirty days after March thirty-first, June thirtieth, September thirtieth, and December thirty-first of 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 Commissioner that the business was placed in good faith and the policy was canceled at the request of the insured"

Duties of broker dealing with nonlicensed insurers

SECTION 7. Section 38-45-90 of the 1976 Code is amended to read:

"Section 38-45-90. At the request of a licensed resident broker, the Commissioner 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 Commissioner 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 Commissioner 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 Commissioner may withdraw his approval at any time the insurer fails to meet any of the requirements. The Commission shall list in its annual report to the General Assembly all eligible surplus lines insurers. 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 Commissioner within thirty days after December thirty-first a detailed report of this business. The report must be in the form the Commissioner prescribes. The broker's books, papers, and accounts must at all times be open to the inspection of the Commissioner or his appointee."

Placing business with unlicensed insurer

SECTION 8. Section 38-45-110 of the 1976 Code is amended to read:

"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 Commissioner a written request for approval of the placement. The request must be filed on forms furnished by the Commissioner. 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 Commissioner 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 Commissioner may impose a penalty not to exceed five Percent of the total premium."

Brokers policy fees

SECTION 9. Chapter 45 of Title 38 of the 1976 Code is amended by adding:

"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' 9 premium tax is paid upon the policy fee. If for any reason the Commissioner disapproves the placement or the insurer ultimately refuses to write the risk, the broker shall immediately refund the full policy fee to the policyholder."

Chief Insurance Commissioner lawful attorney for eligible surplus lines insurers

SECTION 10. Chapter 45 of Title 38 of the 1976 Code is amended by adding:

"Section 38-45-170. Before the Commissioner approves a nonadmitted insurer as an eligible surplus lines insurer, the insurer shall appoint in writing the Commissioner 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 Commissioner, are sufficient evidence of the appointment and must be admitted in evidence with the same force and effect as the original might be admitted."

Scope of article

SECTION 11. Section 38-75-710 of the 1976 Code is amended to read:

"Section 38-75-710. This article applies to all property insurance and casualty insurance, as defined in Section 38-1-20, except for automobile insurance and any other type of property or casualty insurance as to which there are specific statutory provisions of law governing cancellation, nonrenewal, or renewal of policies. This article further applies to policies issued by licensed insurers and to policies issued by eligible surplus lines insurers."

Notice requirements for eligible surplus lines insurers

SECTION 12. Section 38-75-770 of the 1976 Code is amended to read:

"Section 38-75-770. For eligible surplus lines insurers, the timely giving of all notices required by this article to the licensed broker who placed the insurance and represents the insured is considered notice to the insured."

Time effective

SECTION 13. This act takes effect ninety days after approval by the Governor.