1987-1988 Bill 321: 38 various insurance provisions heretofore codified in other titles

South Carolina General Assembly
107th Session, 1987-1988

Bill 321

                    Current Status

Bill Number:               321
Ratification Number:       221
Act Number                 155
Introducing Body:          Senate
Subject:                   38 various insurance provisions
                           heretofore codified in other titles

View additional legislative information at the LPITS web site.

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

(A155, R221, S321)

AN ACT TO AMEND TITLE 38, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO INSURANCE, SO AS TO, AMONG OTHER THINGS, RESTRUCTURE THE CONTENTS OF THE TITLE, REARRANGE AND RECODIFY THE PROVISIONS OF LAW IN THIS STATE CONCERNING INSURANCE MATTERS, AND PLACE IN TITLE 38 VARIOUS INSURANCE PROVISIONS HERETOFORE CODIFIED IN OTHER TITLES OF THE CODE OF LAWS OR UNCODIFIED; TO AMEND SECTION 15-9-280, RELATING TO CIVIL REMEDIES AND PROCEDURES AND SERVICE ON UNAUTHORIZED INSURER, SO AS TO, AMONG OTHER THINGS, PROVIDE THAT ANY ACT OF TRANSACTING AN INSURANCE BUSINESS AS SET FORTH IN SECTION 38-25-110 BY AN UNAUTHORIZED INSURER IS EQUIVALENT TO AND CONSTITUTES AN IRREVOCABLE APPOINTMENT BY THE INSURER OF THE SECRETARY OF STATE TO BE THE TRUE AND LAWFUL ATTORNEY OF THE INSURER UPON WHOM MAY BE SERVED ALL LAWFUL PROCESS IN ANY ACTION, SUIT, OR PROCEEDING IN ANY COURT BY THE CHIEF INSURANCE COMMISSIONER OR BY THE STATE AND UPON WHOM MAY BE SERVED ANY NOTICE, ORDER, PLEADING, OR PROCESS IN ANY PROCEEDING BEFORE THE CHIEF INSURANCE COMMISSIONER AND WHICH ARISES OUT OF TRANSACTING AN INSURANCE BUSINESS IN THIS STATE BY THE INSURER, PROVIDE FOR THE MAKING OF SERVICE OF PROCESS, AND IMPOSE DUTIES ON THE SECRETARY OF STATE; TO AMEND ARTICLE 3 OF CHAPTER 9 OF TITLE 15, RELATING TO CIVIL REMEDIES AND PROCEDURES AND PERSONAL OR SUBSTITUTE SERVICE IN THE STATE, BY ADDING SECTION 15-9-285 SO AS TO, AMONG OTHER THINGS, PROVIDE THAT THE ISSUANCE AND DELIVERY OF A POLICY OF INSURANCE OR CONTRACT OF INSURANCE OR INDEMNITY TO ANY PERSON IN THIS STATE OR THE COLLECTION OF A PREMIUM THEREON BY AN INSURER NOT LICENSED IN THIS STATE IRREVOCABLY CONSTITUTES THE CHIEF INSURANCE COMMISSIONER THE TRUE AND LAWFUL ATTORNEY IN FACT UPON WHOM SERVICE OF ANY AND ALL PROCESSES, PLEADINGS, ACTIONS, OR SUITS ARISING OUT OF THE POLICY OR CONTRACT IN BEHALF OF THE INSURED MAY BE MADE, PROVIDE FOR THE MAKING OF SERVICE OF PROCESS IN THE ACTION, AND IMPOSE DUTIES UPON THE CHIEF INSURANCE COMMISSIONER; TO AMEND SECTION 15-9-290, RELATING TO CIVIL REMEDIES AND PROCEDURES AND ALTERNATIVE METHOD OF SERVICE ON UNAUTHORIZED INSURER, SO AS TO, AMONG OTHER THINGS, PROVIDE THAT SERVICE OF PROCESS IN ANY ACTION, SUIT, OR PROCEEDING INVOLVING AN UNAUTHORIZED INSURER IS, IN ADDITION TO THAT WHICH IS PROVIDED IN SECTION 15-9-280 AND SECTION 15-9-285, VALID UNDER CERTAIN CONDITIONS; TO AMEND CHAPTER 9 OF TITLE 23, RELATING TO THE STATE FIRE MARSHAL, BY ADDING ARTICLE 3 SO AS TO PROVIDE FOR A FIREMEN'S INSURANCE AND INSPECTION FUND; TO AMEND TITLE 39, RELATING TO TRADE AND COMMERCE, BY ADDING CHAPTER 61 SO AS TO ENACT THE "MOTOR CLUB SERVICES ACT"; TO AMEND SECTION 56-9-480, RELATING TO MOTOR VEHICLES, PROOF OF FINANCIAL RESPONSIBILITY, SATISFACTION OF JUDGMENTS, AND PAYMENTS SUFFICIENT TO SATISFY REQUIREMENTS, SO AS TO PROVIDE THAT JUDGMENTS REFERRED TO IN ARTICLE 5 OF CHAPTER 9 OF TITLE 56 MUST, FOR THE PURPOSE OF THIS ARTICLE ONLY, BE CONSIDERED SATISFIED WHEN FIFTEEN, RATHER THAN TEN, THOUSAND DOLLARS HAS BEEN CREDITED UPON ANY JUDGMENT RENDERED IN EXCESS OF THAT AMOUNT BECAUSE OF BODILY INJURY TO OR DEATH OF ONE PERSON AS THE RESULT OF ANY ONE ACCIDENT AND WHEN, SUBJECT TO THE LIMIT OF FIFTEEN, RATHER THAN TEN, THOUSAND DOLLARS BECAUSE OF BODILY INJURY TO OR DEATH OF ONE PERSON, THE SUM OF THIRTY, RATHER THAN TWENTY, THOUSAND DOLLARS HAS BEEN CREDITED UPON ANY JUDGMENTS RENDERED IN EXCESS OF THAT AMOUNT BECAUSE OF BODILY INJURY TO OR DEATH OF TWO OR MORE PERSONS AS THE RESULT OF ANY ONE ACCIDENT; TO AMEND SECTION 56-9-580, RELATING TO MOTOR VEHICLES, CERTIFICATE OF DEPOSIT OF CASH OR SECURITIES AS PROOF OF FINANCIAL RESPONSIBILITY, AMOUNT, AND THE REQUIREMENT THAT THE DEPOSIT MUST BE HELD TO SATISFY EXECUTION ON A JUDGMENT, SO AS TO PROVIDE THAT PROOF OF FINANCIAL RESPONSIBILITY MAY BE EVIDENCED BY THE CERTIFICATE OF THE STATE TREASURER THAT THE PERSON NAMED THEREIN HAS DEPOSITED WITH HIM THIRTY-FIVE, RATHER THAN THIRTY-SIX, THOUSAND DOLLARS IN CASH OR SECURITIES SUCH AS MAY LEGALLY BE PURCHASED BY SAVINGS BANKS OR FOR TRUST FUNDS OF A MARKET VALUE OF THIRTY-FIVE, RATHER THAN THIRTY-SIX, THOUSAND DOLLARS; TO AMEND TITLE 56, RELATING TO MOTOR VEHICLES, BY ADDING CHAPTER 10 SO AS TO PROVIDE FOR MOTOR VEHICLE REGISTRATION AND FINANCIAL SECURITY, INCLUDING, AMONG OTHER THINGS, PROVISIONS INVOLVING INSURANCE REQUIREMENTS RELATING TO MOTOR VEHICLE REGISTRATION; TO AMEND SECTION 33-31-10, RELATING TO THE AUTHORIZATION TO INCORPORATE NONPROFIT CORPORATIONS, SO AS TO PROVIDE THAT MUTUAL BENEVOLENT AID ASSOCIATIONS ORGANIZED SOLELY FOR THE PURPOSES DEFINED IN SECTION 38-35-10, RATHER THAN SECTION 38-23-10, MAY BE INCORPORATED UNDER THE PROVISIONS OF CHAPTER 31 OF TITLE 33; TO AMEND SECTION 23-9-20, RELATING TO DUTIES OF THE STATE FIRE MARSHAL, SO AS TO DELETE CERTAIN LANGUAGE CONCERNING THE TRANSFER TO THE STATE FIRE MARSHAL OF POWERS AND DUTIES VESTED IN THE CHIEF INSURANCE COMMISSIONER PURSUANT TO CERTAIN CODE SECTIONS; TO AMEND SECTION 23-9-30, AS AMENDED, RELATING TO RESIDENT FIRE MARSHALS, SO AS TO DELETE A REFERENCE TO CHAPTER 57 OF TITLE 38; TO AMEND SECTION 15-9-300, RELATING TO CIVIL REMEDIES AND PROCEDURES AND SERVICE ON UNAUTHORIZED INSURER, SO AS TO ADD A REFERENCE TO SECTION 15-9-285 AND DELETE A REFERENCE TO SECTION 38-53-50; TO AMEND SECTION 15-9-310, RELATING TO CIVIL REMEDIES AND PROCEDURES AND SERVICE ON ATTORNEY OF RECIPROCAL INSURANCE SUBSCRIBERS, SO AS TO DELETE REFERENCES TO CERTAIN CODE SECTIONS AND ADD REFERENCES TO OTHER CODE SECTIONS; TO AMEND SECTION 15-9-270, RELATING TO CIVIL REMEDIES AND PROCEDURES AND SERVICE ON INSURANCE COMPANIES, SO AS TO DELETE CERTAIN LANGUAGE, INCLUDING REFERENCES TO CERTAIN CODE SECTIONS, AND ADD A REFERENCE TO SECTION 38-5-70; TO AMEND SECTION 56-9-30, RELATING TO THE PROVISION THAT CHAPTER 9 OF TITLE 56 IS INAPPLICABLE TO CERTAIN MOTOR VEHICLES, SO AS TO DELETE AN EXCEPTION RELATED TO ARTICLE 7 OF CHAPTER 9 OF TITLE 56; TO AMEND SECTION 56-1-110, RELATING TO MOTOR VEHICLES AND IMPUTED LIABILITY OF PERSON SIGNING APPLICATION FOR DAMAGES CAUSED BY UNINSURED MINOR, SO AS TO ADD A REFERENCE TO SECTIONS 38-77-140 THROUGH 38-77-310 AS A BASIS FOR EXEMPTING A PARENT OR GUARDIAN OR OTHER RESPONSIBLE ADULT FROM THE LIABILITY OTHERWISE IMPOSED UNDER SECTION 56-1-110; TO AMEND SECTION 56-9-20, AS AMENDED, RELATING TO DEFINITIONS UNDER THE MOTOR VEHICLE FINANCIAL RESPONSIBILITY ACT, SO AS TO ALTER THE DEFINITIONS OF "INSURED MOTOR VEHICLE", "MOTOR VEHICLE LIABILITY POLICY", "PROOF OF FINANCIAL RESPONSIBILITY", AND "UNINSURED MOTOR VEHICLE" PRINCIPALLY BY DELETING REFERENCES TO CERTAIN PROVISIONS OR SECTIONS OF THE CODE OF LAWS AND ADDING REFERENCES TO DIFFERENT CODE SECTIONS; TO AUTHORIZE AND DIRECT THE CODE COMMISSIONER TO PLACE APPROPRIATE PROVISIONS OF ACTS DEALING WITH INSURANCE ENACTED IN 1987 IN THE APPROPRIATE AREA COVERED BY THIS ACT, TO ELIMINATE OR DELETE FROM THIS ACT CERTAIN PROVISIONS OF LAW, AND TO AMEND PROVISIONS OF THIS ACT CORRESPONDING TO AMENDMENTS OF THE INSURANCE LAWS AS MAY HAVE BEEN PASSED BY THE GENERAL ASSEMBLY DURING 1987 IN OTHER ACTS; TO AMEND SECTION 42-7-200, RELATING TO THE STATE WORKERS' COMPENSATION INSOLVENCY FUND, SO AS TO DELETE A REFERENCE TO SECTION 42-5-140 AND REPLACE IT WITH A REFERENCE TO SECTION 38-7-50; AND TO REPEAL THE FOLLOWING: ARTICLE 7 OF CHAPTER 9 OF TITLE 56 RELATING TO MOTOR VEHICLES AND COVERAGE LIMITATIONS, UNINSURED MOTORIST PROVISIONS, AND THE LIKE; CHAPTER 11 OF TITLE 56 RELATING TO THE SOUTH CAROLINA AUTOMOBILE REPARATION REFORM ACT OF 1974; CHAPTER 13 OF TITLE 56 RELATING TO MOTOR VEHICLE PHYSICAL DAMAGE APPRAISERS; CHAPTER 9 OF TITLE 35 RELATING TO INSIDER TRADING IN SECURITIES OF DOMESTIC STOCK INSURANCE COMPANIES; SECTIONS 42-5-90, 42-5-100, 42-5-110, 42-5-120, 42-5-140, 42-5-150, 42-5-160, 42-5-170, AND 42-5-180 RELATING TO VARIOUS PROVISIONS ON INSURANCE AND SELF-INSURANCE UNDER WORKERS' COMPENSATION; ACT 306 OF 1975 RELATING TO PROVIDING A CONTINGENCY PLAN FOR THE WRITING OF MEDICAL MALPRACTICE LIABILITY INSURANCE THROUGH A JOINT UNDERWRITING ASSOCIATION UPON THE FINDING OF AN EMERGENCY BY THE INSURANCE COMMISSION; ACT 767 OF 1976 RELATING TO THE WRITING OF MEDICAL MALPRACTICE LIABILITY INSURANCE THROUGH A JOINT UNDERWRITING ASSOCIATION, INCLUDING, AMONG OTHER THINGS, PLACING PHARMACISTS IN THE DEFINITION OF HEALTH CARE PROVIDER AND PLACING PER CLAIM AND AGGREGATE LIMITS ON THE AMOUNT OF INSURANCE WHICH MAY BE PAID TO A CLAIMANT UPON ENACTMENT OF A PATIENT COMPENSATION FUND ACT; ACT 104 OF 1977 RELATING TO THE WRITING OF MEDICAL MALPRACTICE LIABILITY INSURANCE THROUGH A JOINT UNDERWRITING ASSOCIATION AND THE CREATION OF A BOARD OF GOVERNORS TO ADMINISTER THE PATIENTS' COMPENSATION FUND, INCLUDING, AMONG OTHER THINGS, INCREASING THE MEMBERSHIP OF THE BOARD OF DIRECTORS OF THE JOINT UNDERWRITING ASSOCIATION AND THE MEMBERSHIP OF THE BOARD OF GOVERNORS TO ADMINISTER THE PATIENTS' COMPENSATION FUND; ACT 258 OF 1977 RELATING TO PROHIBITING THE INSURANCE COMMISSION, COMMISSIONER, OR JOINT UNDERWRITING ASSOCIATION FROM IMPLEMENTING ANY ASSESSMENT THAT MAY BE PRESCRIBED BY THE JOINT RESOLUTION ESTABLISHING THE JOINT UNDERWRITING ASSOCIATION FOR THE PURPOSE OF WRITING MEDICAL MALPRACTICE LIABILITY INSURANCE UNTIL JULY 1, 1978; ACT 645 OF 1978 RELATING TO THE WRITING OF MEDICAL MALPRACTICE INSURANCE THROUGH A JOINT UNDERWRITING ASSOCIATION, THE ESTABLISHMENT OF A PATIENTS' COMPENSATION FUND, AND A CONTINGENCY PLAN FOR WRITING LEGAL PROFESSIONAL MALPRACTICE INSURANCE THROUGH A JOINT UNDERWRITING ASSOCIATION, INCLUDING, AMONG OTHER THINGS, PROVIDING FOR AN APPEAL FROM A RULING OR ACTION BY THE MEDICAL OR LEGAL ASSOCIATION OR THE PATIENTS' COMPENSATION FUND TO THE INSURANCE COMMISSION; ACT 257 OF 1977, ACT 662 OF 1978, ACT 221 OF 1979, AND ACT 200 OF 1981 RELATING TO THE WRITING OF MEDICAL MALPRACTICE LIABILITY INSURANCE THROUGH A JOINT UNDERWRITING ASSOCIATION AND THE EXTENSION OF THE EXPIRATION DATE OF THE UNDERWRITING ASSOCIATION; ACT 199 OF 1983 RELATING TO THE WRITING OF MEDICAL MALPRACTICE LIABILITY INSURANCE THOUGH A JOINT UNDERWRITING ASSOCIATION AND DELETION OF THE REQUIREMENT THAT THE ASSOCIATION EXPIRE ON DECEMBER 31, 1983; ACT 440 OF 1986 RELATING TO THE PROVISION THAT NO HEALTH MAINTENANCE ORGANIZATION MAY PROHIBIT ANY LICENSED PHYSICIAN, PODIATRIST, OPTOMETRIST, OR ORAL SURGEON FROM PARTICIPATING AS A PROVIDER IN THE ORGANIZATION ON THE BASIS OF HIS PROFESSION AND TO THE PROVISION THAT NOTHING IN ACT 440 OF 1986 MAY BE CONSTRUED TO INTERFERE WITH THE MEDICAL DECISION OF THE PRIMARY HEALTH CARE PROVIDER TO USE OR NOT USE ANY HEALTH PROFESSIONAL ON A CASE-BY-CASE BASIS; ACT 518 OF 1986 RELATING TO THE ADDING OF A SECTION TO THE CODE OF LAWS SO AS TO PROVIDE FOR EDUCATIONAL REQUIREMENTS FOR APPLICANTS FOR INSURANCE AGENTS' LICENSES AND TO MAKE EXCEPTIONS; SUBSECTION A OF SECTION 31 OF PART II OF ACT 540 OF 1986 (THE GENERAL APPROPRIATIONS ACT) RELATING TO, AMONG OTHER THINGS, THE REQUIREMENT THAT EVERY INSURANCE COMPANY OF ANY CLASS, EXCEPT CERTAIN BENEVOLENT INSTITUTIONS, SHALL, BEFORE TRANSACTING ANY BUSINESS IN THIS STATE, PAY A LICENSE FEE OF FOUR HUNDRED DOLLARS TO THE CHIEF INSURANCE COMMISSIONER AND SHALL THEREAFTER PAY AN ANNUAL LICENSE FEE OF FOUR HUNDRED DOLLARS; SUBSECTION B OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO THE LEVY UPON EACH INSURANCE COMPANY LICENSED BY THE COMMISSIONER OF AN INSURANCE PREMIUM TAX BASED UPON TOTAL PREMIUMS, OTHER THAN WORKERS' COMPENSATION INSURANCE PREMIUMS, AND ANNUITY CONSIDERATIONS, COLLECTED BY THE COMPANY IN THE STATE DURING EACH CALENDAR YEAR; SUBSECTION C OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO, AMONG OTHER THINGS, THE REQUIREMENT THAT, NOT LATER THAN MARCH FIRST OF EACH YEAR, EVERY INSURANCE COMPANY LICENSED BY THE COMMISSIONER SHALL FILE WITH HIM A RETURN OF PREMIUMS COLLECTED BY THE COMPANY IN THE STATE DURING THE IMMEDIATELY PRECEDING CALENDAR YEAR ENDING ON DECEMBER THIRTY-FIRST; SUBSECTION D OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO, AMONG OTHER THINGS, THE PROVISION THAT ONE-FOURTH OF THE INSURANCE PREMIUM TAXES COLLECTED UNDER SUBSECTION B OF THIS SECTION 31, AND ONE-FOURTH OF THE RETALIATORY COLLECTIONS MADE UNDER SUBSECTION E OF THIS SECTION 31 WHICH ARE ATTRIBUTABLE TO THE TAX LEVIED IN SUBSECTION B, ARE ALLOTTED TO THE SEVERAL COUNTIES, RESPECTIVELY, IN PROPORTION TO THE LATEST OFFICIAL UNITED STATES CENSUS OF THE COUNTIES, AND ARE APPROPRIATED TO ORDINARY COUNTY PURPOSES; SUBSECTION E OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO, AMONG OTHER THINGS, THE REQUIREMENT THAT, UNDER CERTAIN CONDITIONS, SIMILAR INSURANCE COMPANIES OF OTHER STATES ESTABLISHING OR HAVING THERETOFORE ESTABLISHED AN AGENCY OR AGENCIES IN SOUTH CAROLINA SHALL MAKE A PARTICULAR DEPOSIT FOR A PARTICULAR PURPOSE WITH THE COMMISSIONER; SUBSECTION F OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO AN AMENDMENT OF A SECTION OF THE CODE OF LAWS CONCERNING A RETURN TO THE CHIEF INSURANCE COMMISSIONER BY FIRE INSURANCE COMPANIES; SUBSECTION G OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO, AMONG OTHER THINGS, THE PROVISION THAT ANY INSURER OR RATING ORGANIZATION AFFECTED BY CERTAIN PROVISIONS OF LAW MAY, AT ANY TIME UP UNTIL APRIL 1, 1987, MAKE A FILING WITH THE COMMISSIONER REQUESTING A

CHANGE IN RATES SOLELY TO REFLECT CHANGES IN CERTAIN IMPOSED TAX LIABILITIES; SUBSECTION H OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO THE PROVISION THAT EACH LICENSE ISSUED UNDER ARTICLE 1 OF CHAPTER 5 OF TITLE 38 IS FOR AN INDEFINITE TERM UNLESS SOONER REVOKED OR SUSPENDED; SUBSECTION J OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO THE PROVISION THAT THE QUARTERLY PAYMENTS REQUIRED OF INSURANCE COMPANIES FOR JUNE 1, 1986, AND SEPTEMBER 1, 1986, ARE DUE AND PAYABLE TO THE CHIEF INSURANCE COMMISSIONER ON OR BEFORE SEPTEMBER 1, 1986; SUBSECTION K OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO AN AMENDMENT OF A SECTION OF THE CODE OF LAWS CONCERNING THE PAYMENT OF AN ANNUAL LICENSE FEE; SUBSECTION L OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO AN AMENDMENT OF A SECTION OF THE CODE OF LAWS CONCERNING THE FEE FOR AN ADJUSTER'S LICENSE UNDER THE INSURANCE LAWS; SUBSECTION M OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO AN AMENDMENT OF A SECTION OF THE CODE OF LAWS CONCERNING FEES FOR INSURANCE AGENTS' LICENSES AND THE ISSUANCE OF SEMIANNUAL LICENSES; SUBSECTION N OF SECTION 31 OF PART II OF ACT 540 OF 1986 RELATING TO AN AMENDMENT OF A SECTION OF THE CODE OF LAWS CONCERNING LICENSES FOR APPRAISERS FOR MOTOR VEHICLE PHYSICAL DAMAGE CLAIMS, THE LICENSE FEE, AND REGULATIONS; AND ACT 513 OF 1986, RELATING TO MOTOR VEHICLE THEFT AND MOTOR VEHICLE INSURANCE FRAUD REPORTING IMMUNITY.

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

Insurance laws of South Carolina codified

SECTION 1. Title 38 of the 1976 Code is amended to read:

"TITLE 38

INSURANCE

CHAPTER 1

Title and Definitions

Section 38-1-10. Short title.

This title may be cited and is known as 'The Insurance Law'.

Section 38-1-20. Definitions.

In this title unless the context otherwise requires:

(1) 'Accident and health insurance' means insurance of human beings against death or personal injury by accident, and every insurance of human beings against sickness, ailment, and any type of physical disability resulting from accident or disease, and prepaid dental service, but not including coverages required by the Workers' Compensation Law of this State.

(2) 'Accommodation bondsman' means as defined in Section 38-53-10.

(3) 'Adjuster' means an individual who determines the extent of insured losses and assists in settling or attempts to settle claims.

(4) 'Admitted assets' means assets of an insurer considered admitted under Section 38-11-100.

(5) 'Advisory committee' means the Advisory Committee of the Insurance Commission of South Carolina.

(6) 'Alien insurer' means an insurer incorporated or organized under the laws of a country other than the United States of America, its states, commonwealths, territories, or insular possessions.

(7) 'Annuity' means every contract or agreement to make periodic payments, whether in fixed or variable dollar amounts, or both, where the making or continuance of all or some of the series of such payments, or the amount of the payment, is dependent upon the continuance of human life, except payments made under a contract of life insurance.

(8) 'Bail bondsman' means as defined in Section 38-53-10.

(9) 'Casualty insurance' means every insurance against legal liability of the insured for bodily injury to or death of other persons, including workers' compensation insurance, and for damages to or loss or destruction of the property of others; medical payments insurance when written in conjunction with any insurance covering liability for the deaths or bodily injuries of others; guaranteeing the fidelity of persons holding positions of public or private trust; loss of or damage to property caused by burglary, theft, larceny, robbery, fraud, or any unlawful taking or secretion of property owned by or entrusted to the insured; loss of or damage to property of the insured resulting from the explosion of or damage to any fired or unfired boiler or other pressure vessel, engine, turbine, compressor, pump, wheel, any apparatus generating, transmitting, or using electric power, and any machinery or equipment connected with any of the foregoing; loss resulting from nonpayment of debts owed to merchants or other persons extending credit; and legal insurance.

(10) 'Certificate of insurance' means a memorandum copy, complete or abbreviated, of an insurance contract.

(11) 'Co-insurance' means a stipulation or requirement that the insured undertakes to be his own insurer to the extent that he fails to maintain insurance of a given percentage of the value of the property against loss or damage.

(12) 'Commission' means the Insurance Commission of South Carolina.

(13) 'Commission' means the part of the premium paid to the agent as compensation for his services.

(14) 'Commissioner' means the Chief Insurance Commissioner of South Carolina.

(15) 'Company' includes any corporation, fraternal organization, burial association, other association, partnership, society, order, individual, or aggregation of individuals engaging or proposing or attempting to engage as principals in any kind of insurance or surety business, including the exchanging of reciprocal or interinsurance contracts between individuals, partnerships, and corporations.

(16) 'Department' means the Department of Insurance of South Carolina.

(17) 'Domestic insurer' means an insurer incorporated or organized under the laws of this State.

(18) 'Foreign insurer' means an insurer incorporated or organized under the laws of the United States or of any jurisdiction within the United States other than this State.

(19) 'Insurance' means a contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies. The term 'insurance' includes annuities.

(20) 'Insurance agent' means an individual who represents an insurance company and performs the acts listed in Section 38-43-10.

(21) 'Insurance broker' means an individual licensed by the Commissioner to represent citizens of this State for the placing of insurance in insurers licensed in this State or in any other state or country.

(22) 'Insurance company' includes any corporation, fraternal organization, burial association, other association, partnership, society, order, individual, or aggregation of individuals engaging or proposing or attempting to engage as principals in any kind of insurance or surety business, including the exchanging of reciprocal or interinsurance contracts between individuals, partnerships, and corporations.

(23) 'Insurance premium service company' means a person engaged in the business of entering into insurance premium service agreements.

(24) 'Insurance rate' means the price of insurance per unit of exposure.

(25) 'Insurer' includes any corporation, fraternal organization, burial association, other association, partnership, society, order, individual, or aggregation of individuals engaging or proposing or attempting to engage as principals in any kind of insurance or surety business, including the exchanging of reciprocal or interinsurance contracts between individuals, partnerships, and corporations.

(26) '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.

(27) 'Life insurance' means a contract of insurance upon the lives of human beings.

(28) 'Marine insurance' means every insurance against loss or destruction of or damage to vessels or watercraft and their cargoes; insurance covering the risks or perils of navigation, transit, or transportation of all forms of property, including the liability of any carrier for hire for the loss of property of shippers delivered for transporting; marine builders risk; bridges, tunnels, piers, wharves, docks and slips, dry docks, marine railways, and other aids to navigation and transportation, precious stones, precious metals, and jewelry, whether in course of transportation or otherwise; coverage of personal property by all

risk form known as the 'Personal Property Floater'; and coverage of mobile machinery and equipment.

(29) 'Person' means a corporation, partnership, association, voluntary organization, individual, or any other entity, organization, or aggregation of individuals.

(30) 'Policy' means a contract of insurance.

(31) 'Premium' means payment given in consideration of a contract of insurance.

(32) 'Premium service agreement' means an agreement by which an insured or prospective insured promises to pay to an insurance premium service company the amount advanced or to be advanced under the agreement to an insurer or to an insurance agent or insurance broker in payment of premiums on an insurance contract together with a service charge as authorized by Chapter 39 of this title.

(33) 'Professional bondsman' means as defined in Section 38-53-10.

(34) 'Property insurance' means every insurance against direct or indirect loss of or damage to any property resulting from fire, smoke, weather disturbances, climatic conditions, earthquake, volcanic eruption, rising waters, insects, blight, animals, war damage, riot, civil commotion, destruction by order of civil authority to prevent spread of conflagration or for other reason, water damage, vandalism, glass breakage, explosion of any water systems, collision, theft of automobiles and personal effects therein (but no other forms of theft insurance), loss of or damage to domestic or wild animals, and any other perils to property which in the discretion of the Commissioner form proper subjects of property insurance, if not specified in items (1), (7), (9), (27), (28), (37), or (39) of this section.

(35) 'Runner' means as defined in Section 38-53-10.

(36) 'Surety bondsman' means as defined in Section 38-53-10.

(37) 'Surety insurance' means becoming surety on, or guaranteeing the performance of, any lawful contract except an insurance contract; becoming surety on, or guaranteeing the performance of, any bonds and undertaking required or permitted in any judicial proceeding or required or permitted by any government or any agency or instrumentality of any government.

(38) 'Surplus to policyholders' is the excess of total admitted assets over the liabilities of an insurer which is the sum of all capital and surplus accounts minus any impairment thereof.

(39) 'Title insurance' means insurance of the owners of real property and other persons lawfully interested therein against loss by reason of defective titles and undisclosed liens and encumbrances affecting the property.

CHAPTER 3

Insurance Commission and the Department of Insurance

Section 38-3-10. Department of Insurance and Insurance Commission established.

There is established a separate and distinct department of this State, known as the Department of Insurance, which is the administrative arm of an Insurance Commission.

Section 38-3-20. Members of Commission; appointment; terms; qualifications; vacancies.

Beginning on July 1, 1980, the Insurance Commission is composed of seven members, one being selected from each congressional district and one from the State at large, who must be appointed by the Governor, with the advice and consent of the Senate. Two must be appointed for a term of two years, two must be appointed for a

term of four years, and three must be appointed for a term of six years. Thereafter, the terms are for six years and all members of the Commission shall serve until their successors are appointed and qualify. No member appointed may have past or present employment in the insurance industry during the four years immediately preceding his appointment but must be selected from the general public based upon demonstrated objectivity, independence, and service in matters of public concern. No members of the Commission may serve more than one term. Any vacancy in office must be filled by the Governor by appointment.

Section 38-3-30. Bonds of Commission members.

Each member of the Commission shall, before entering upon or continuing to discharge the duties of his office, give bond to the State in the sum of twenty-five thousand dollars with a sufficient surety, to be approved by the State Treasurer, for the faithful performance of all duties required of him under the law during the term of his office. The premium of the bond must be paid by the State.

Section 38-3-40. Compensation and expenses of Commission members.

Commission members shall receive annual compensation as may be provided by the General Assembly and official expenses as provided by law for members of state boards, committees, and commissions.

Section 38-3-50. Organization of Commission; meetings; quorum.

Annually the Commission shall organize itself by electing one of its number as chairman and any other officer it considers necessary. The Commission shall meet as often as necessary for the discharge of its business and shall meet upon the call of the chairman or a majority of the members. The majority of the members constitutes a quorum.

Section 38-3-60. Powers and duties of Commission and Chief Insurance Commissioner.

The Commission shall select and employ a Chief Insurance Commissioner and shall issue to him general policies and broad objectives regarding the operation of the insurance industry in this State. The Commission shall review, amend, and supplement these policies and objectives as it sees fit, shall require the Chief Insurance Commissioner to pursue forcefully the policies and objectives but shall leave to the Chief Insurance Commissioner the task of developing and implementing specific plans, programs, and techniques necessary to further the Commission's policies and objectives.

Section 38-3-70. Reports and recommendations of Commission.

The Commission shall annually submit to the General Assembly, through the Governor, a report of its official acts and doings, together with a report of all insurers under the Commission doing business in this State, with condensed statements of their reports made to it, together with a statement of all licenses, taxes, and fees received by it through insurers and paid by it to the State Treasurer. The Commission shall report to the General Assembly any change which in its opinion should be made in the laws relating to insurance and other subjects pertaining to the Commission. By February first, it shall make to the Governor the recommendations called for in this section, to be transmitted to the General Assembly with its last annual report, including a statement of its receipts and disbursements.

Section 38-3-80. Seal.

The Commission shall have a seal with a suitable inscription, an impression of which must be filed with the Secretary of State.

Section 38-3-90. Advisory committee created; composition; duties and compensation.

The Governor, with the advice and consent of the Senate, shall appoint an advisory committee of five residents of this State to advise and consult with the Commission concerning the policies formulated by the Commission and the operation and administration of this title. The advisory committee consists of the following competing segments of the insurance industry: one member from the life insurance field; one member from the accident and health field; one member from the property and casualty field; one member who is an agent primarily engaged in the life and accident and health insurance field; and one member who is an agent primarily engaged in the property and casualty field. The advisory committee may be in attendance at each meeting of the Commission but shall have at least one member in attendance at each meeting of the Commission. The advisory committee members shall serve a period coterminous with the term of the Governor. The members of the advisory committee may receive no compensation, mileage, subsistence, or per diem for their services. Any vacancy in office must be filled by the Governor by appointment.

Section 38-3-100. Chief Insurance Commissioner; removal; status; term of employment, salary, and qualifications.

The Commission shall select the Commissioner and may remove or discharge him for good cause. The Commissioner is not subject to the State Employee Grievance Committee or any internal grievance procedure established at the Insurance Department. His term of employment is for four years, unless earlier terminated for good cause, and he is eligible for reemployment. He shall receive an annual salary as provided by law. The Commissioner must be hired with special reference to his training, experience, technical knowledge of the insurance industry, and demonstrated administrative ability. He must be at least thirty years of age. He may hold no other public office while serving as Commissioner but shall devote all of his working time to the duties of his office. Before taking the oath of office he shall sever all connections, either direct or indirect, except as a policyholder, with any insurance company or agency and shall maintain the severance during his tenure of office. No person who has been a Commission member may serve as Commissioner. If he becomes a candidate for public office or becomes a member of a political committee during tenure, his office as Commissioner must be immediately vacated.

Section 38-3-110. Duties of Chief Insurance Commissioner.

The Chief Insurance Commissioner has the following duties:

(1) Supervise and regulate the rates and service of every insurer in this State and fix just and reasonable standards, classifications, regulations, practices, and measurements of service to be observed and followed by every insurer doing business in this State. Nothing contained in this title may be construed to authorize or require a review by the Commission of any order of the Commissioner under the Administrative Procedures Act. This item may not be construed to grant any additional authority to the Commissioner with regard to insurance rates other than the rate making authority specifically granted to the Commissioner, the Commission, or the Department of Insurance for certain kinds of insurance in other provisions of this title.

(2) See that all laws of this State governing insurers or relating to the business of insurance are faithfully executed and make regulations to carry out this title and all other insurance laws of this State, the enforcement or administration of which is not otherwise specifically provided for.

(3) Furnish to domestic insurers required by law to report to the Department the necessary blank forms for the reports required, which forms may be changed as necessary to secure full information as to the standing, condition, and any other information desired by the Commissioner.

(4) Institute prosecution of criminal violations of any of the laws relative to insurers or the business of insurance or of any of the provisions of this title and report to the Attorney General any violation of the laws relative to insurers or the business of insurance or the provisions of this title which he considers necessary to report. The Attorney General shall institute civil action for the violations, either through his office or through another attorney he may select.

Section 38-3-120. Oath and bond of Commissioner.

The Commissioner shall take the oath of office as prescribed for all state officers. Before entering upon or continuing the discharge of the duties of his office, he shall give bond to the State for the benefit of any person aggrieved by his unlawful or wrongful actions. This bond must be in the sum of fifty thousand dollars, with sufficient surety, to be approved by the State Treasurer, for the faithful performance of all the duties required of him under the law during the term of his office. The premium of the bond must be paid by the State.

Section 38-3-130. Actuaries, examiners, clerks, and employees.

The Commissioner shall appoint or employ actuaries, examiners, clerks, and other employees necessary for the proper execution of the work of the Commission.

Section 38-3-140. Violations considered committed in part at office of Commissioner.

The failure to do any act required by this title is considered a violation committed in part at the office of the Commissioner in Columbia.

Section 38-3-150. Commissioner, assistants, or agents may conduct examinations, investigations, and hearings.

All examinations or investigations provided by this title, unless otherwise provided by any other insurance laws of this State, may be conducted by the Commissioner or by one or more of his duly authorized assistants or agents. All hearings must be held by the Commissioner or by one of his duly authorized assistants or agents when authorized to do so in writing by the Commissioner. However, in any hearing concerning the adjustment of insurance rates only the Chief Insurance Commissioner or the Deputy Chief Insurance Commissioner may conduct the hearing.

Section 38-3-160. Administration of oaths.

The Commissioner or his duly appointed assistants or agents shall administer all oaths required in the discharge of his official duties.

Section 38-3-170. Notice of hearings.

All hearings, unless otherwise specifically provided, must be held at the time and place designated in a written notice given by the Commissioner to the person cited to appear at least thirty days before the designated date. The notice shall state the subject of the inquiry and specific charges, if any. It is sufficient to give notice either by delivering it to the person or by depositing it in the United States mail, postage prepaid, addressed to the last known address of the person and registered with return receipt requested.

Section 38-3-180. Summoning witnesses; contempt; perjury.

The Commissioner or any assistants or agents appointed to conduct examinations may summon and compel the attendance of witnesses to testify in relation to any matter which is, by the provisions of this title or by any other insurance laws of this State, a subject of inquiry and investigation. The Commissioner has the power of a circuit judge to punish for contempt any witness failing to answer any summons or failing or refusing to testify when so required. The Commissioner or any assistants or agents appointed to conduct examinations may also administer oaths and affirmations to persons appearing as witnesses before them, and false testimony in any matter or proceeding is considered perjury and must be punished in accordance with the laws of this State.

Section 38-3-190. Mileage payments for witnesses.

Any person summoned by the Insurance Department to testify as a witness at any hearing must be paid for his actual mileage at the same rate as provided by law for state boards, committees, and commissions.

Section 38-3-200. Orders must be in writing and signed.

No order of the Commissioner is effective unless made in writing and signed by the Commissioner or by his authority.

Section 38-3-210. Petition for judicial review of order or decision; effect as stay.

Any order or decision made, issued, or executed by the Commissioner or his assistants or agents is subject to judicial review in accordance with the appellate procedures of Sections 1-23-380 and 1-23-390. Notwithstanding the provisions of subsection (c) of Section 1-23-380, the circuit court may not, under any terms, order a stay of enforcement of any order of the Commissioner to make good an impairment of capital or surplus or a deficiency in the amount of admitted assets.

Section 38-3-220. Certificates and papers of Commissioner as evidence.

Every certificate or other paper executed by the Commissioner in pursuance of any authority conferred upon him by law and sealed with the seal of the Commission and all copies of papers certified by the Commissioner and authenticated by the Commission's seal may in all cases be used as evidence in any suit or proceeding in any court of this State with the same force and effect as the originals.

Section 38-3-230. Commissioner's certificate as evidence of authority to do business.

In any case or controversy where it is necessary to determine whether any insurance or other company, or agent thereof, is or has been licensed by the Commissioner to do business in this State, the certificate of the Commissioner under the seal of the Commission is admissible in evidence as proof of this authority.

CHAPTER 5

Authority and

Requirements to Transact Business

Section 38-5-10. Insurers must be licensed and supervised; exceptions.

Every insurer doing business in this State must be licensed and supervised by the Commissioner, with the following exceptions:

(a) Without excluding other activities which may not constitute doing business in this State, a foreign or alien insurer is not considered to be doing business in this State, for purposes of this chapter, or Chapter 7, 13, 25, or 27, solely by reason of carrying on in this State any one or more of the following activities:

(1) Maintaining bank accounts.

(2) Creating or acquiring evidences of debt, mortgages, or liens on real or personal property, and enforcing rights in connection therewith in any action or proceeding, whether judicial, administrative, or otherwise.

(3) Owning and controlling a subsidiary corporation incorporated in or transacting business within this State.

Section 38-5-20. Certain charitable, religious, and other corporations authorized to issue annuities or pay lump-sum benefits without being subject to insurance laws.

A charitable, religious, benevolent, or educational corporation, not operating for profit and in active operation for at least five years, may receive transfers of property conditioned upon its agreement to pay an annuity or lump-sum benefit to the transferor or his nominee without being subject to the insurance laws of this State. No corporation operating for profit, including nursing homes or any other type of business, is permitted to issue

charitable or gift annuities without the Commissioner's approval.

Section 38-5-30. Kinds of insurance for which an insurer may be licensed.

The Commissioner may license insurers, subject to other requirements of existing insurance laws, to transact the following kinds of insurance in this State:

(a) Life insurance and annuities.

(b) Accident and health insurance.

(d) Casualty insurance.

(e) Surety insurance.

(f) Marine insurance.

(g) Title insurance.

(h) Multiple lines insurance, meaning any two or more of the kinds of insurance listed in items (b), (c), (d), (e), (f), and (g) of this section.

Each license issued is for an indefinite term unless revoked or suspended.

Section 38-5-40. Kinds of insurance for which life insurer may be licensed.

No life insurer may be licensed to write any other kinds of insurance listed in Section 38-5-30 except accident and health insurance. However, any life insurer licensed to transact other kinds of insurance immediately prior to March 18, 1964, shall continue to be so licensed if otherwise qualified.

Section 38-5-50. Certain insurers may not be licensed to write life insurance.

No insurer licensed to write any of the kinds of insurance listed in items (c), (d), (e), (f), (g), and (h) of Section 38-5-30 may be licensed to write life insurance. However, any life insurer licensed to transact other kinds of insurance immediately prior to March 18, 1964, shall continue to be so licensed if otherwise qualified.

Section 38-5-60. Qualifications to become an approved reinsurer.

For purposes of calculating deductions for reserves, insurers not licensed in this State may be approved as reinsurers by the Commissioner for an indefinite term only if:

(a) Upon initial application a fee of two hundred dollars is enclosed and, annually thereafter, a fee of two hundred dollars is paid by March first.

(b) There is filed with the Commissioner a power of attorney approved as to form by him and authorizing him to accept service of process in behalf of the reinsurer.

(c) There is filed with the Commissioner the reinsurer's annual statement and the reinsurer's most recent report of examination and thereafter each annual statement and report of examination is so filed.

(d) The reinsurer meets the capital and surplus requirements of South Carolina law with respect to the lines to be reinsured.

Section 38-5-70. Appointment of Commissioner as attorney for service of process.

Every insurer shall, before being licensed, 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.

Section 38-5-80. Additional requirements for issuance of certificate or license to domestic insurer; grounds for revocation or suspension of license.

Before granting the original certificate of authority or license to a domestic insurer to do business in this State, the Commissioner must be satisfied by proper evidence that:

(a) The insurer is duly qualified to transact business under the laws of this State.

(b) The insurer has filed with him an affidavit of its president or other chief officer that it has not violated this title in the past year and that it accepts the terms and obligations of this title as part of the consideration for license.

(d) The reserves of the insurer are adequate for the protection of policyholders of this State.

(e) The insurer's directors and officers are competent, trustworthy, and have a good business reputation and that none of the directors and officers have been convicted of a crime in any jurisdiction involving fraud, dishonesty, or like moral turpitude or convicted of violating an insurance statute of any jurisdiction.

(f) The insurer has employed one or more persons residing in this State with adequate experience and training to manage properly its business and affairs.

(g) The insurer has not entered into any management contract, agency agreement, or other agreement which may materially affect its financial condition so as to render its proceedings hazardous to the public or to its policyholders.

(h) The insurer has made adequate reinsurance arrangements if required.

(i) The insurer's proposed method of operation, when considered in light of its financial condition and the absence of any prior operating experience, will not likely render its proceedings hazardous to the public or to its policyholders.

(j) The reserve basis to be used by the insurer will be adequate for the protection of policyholders in this State.

If subsequently the Commissioner 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.

Section 38-5-90. Additional requirements for issuance of certificate or license to foreign or alien insurer; grounds for revocation or suspension of license.

Before granting the original certificate of authority or license to a foreign or alien insurer to do business in this State, the Commissioner must be satisfied by proper evidence that:

(a) The insurer is duly qualified to transact business under the laws of this State.

(d) The reserves of the insurer are adequate for the protection of policyholders of this State.

(e) The insurer's directors and officers are competent, trustworthy, and have a good business reputation.

(f) The insurer has employed one or more persons residing in this State with adequate experience and training to manage properly its business and affairs relating to its policies in South Carolina.

(h) The insurer has made adequate reinsurance arrangements if required.

(j) The insurer is safe and solvent.

(k) The insurer's dealings are fair and equitable.

(l) The insurer conducts its business in a manner not contrary to the public interest.

If subsequently the Commissioner is of the opinion that a condition exists which would have prohibited him from issuing a certificate of authority or license to the insurer, then that condition also constitutes a ground for license revocation under Section 38-5-120.

Section 38-5-100. Foreign or alien insurers with names identical with or similar to others not qualified.

No foreign or alien insurer may be licensed to do business in this State when its name is identical with that of any active insurer previously licensed to do business in this State which has engaged in business therein for one year or more. No foreign or alien insurer may be licensed to do business in this State when its name is so nearly similar to that of any active insurer previously licensed to do business in this State which has engaged in business therein for one year or more so as to lead to confusion and uncertainty.

Section 38-5-110. Approval of charters or amendments of charter.

It is unlawful for the Secretary of State to issue any charter or grant any amendments of charter to any insurer or permit any foreign or alien insurer to do business within this State without the written approval of the Commissioner.

Section 38-5-120. Revocation or suspension of license; publication of notice.

If the Commissioner is of the opinion upon examination or other evidence that:

(a) An insurer is in an unsound condition,

(b) An insurer has failed to comply with the law or with the provisions of its charter,

(d) The true value of the insurer's assets, if it is a life insurer, is less than its liabilities, exclusive of its capital, or

(e) The officers or agents of an insurer refuse to submit to examination or to perform any legal obligation relative to an examination, the Commissioner shall revoke or suspend all certificates of authority granted to the insurer, its officers, or agents and shall cause notice thereof to be published in a newspaper of general circulation in this State. No new business may thereafter be done by the insurer or its agents in this State while the default or disability continues nor until its authority to transact business is restored by the Commissioner.

Section 38-5-130. Monetary penalty in lieu of license revocation or suspension.

The Commissioner may, in lieu of license revocation or suspension as provided by Section 38-5-120, impose a monetary penalty not to exceed fifteen thousand dollars for each violation or failure of compliance or refusal to submit or perform as prescribed therein. Series of acts by an insurer which merely implement a basic violation and are not separate and distinct violations of an independent nature are considered to be part of the basic violation and only one penalty may be imposed thereon.

Section 38-5-140. Opportunity for hearing.

Unless the grounds for revocation relate only to the financial condition or soundness of the insurer or to a deficiency in its assets, the Commissioner shall notify the insurer not less than thirty days before revoking its authority to do business in this State and he must specify in the notice the particulars of the alleged violation of the law or its charter or grounds for revocation and a proper opportunity must be offered the insurer to be heard.

Section 38-5-150. Funds may not be paid during suspension without approval.

While the certificate of authority is suspended no domestic insurer or any of its officers may pay out any funds belonging to the insurer without first receiving the Commissioner's approval.

Section 38-5-160. Injunction, receivership.

If he considers it necessary, the Commissioner may apply to a judge of the circuit court to issue an injunction restraining a domestic insurer whose certificate of authority has been suspended, in whole or in part, from proceeding further with its business. The judge may immediately issue the injunction and, upon

notice and after a full hearing of the matter, may (a) dissolve or modify the injunction or make it permanent, (b) make all orders and judgments necessary in the matter, and (c) appoint agents or a receiver to take possession of the property and effects of the insurer and to settle its affairs, subject to any rules and orders the court prescribes.

CHAPTER 7

Fees and Taxes

Section 38-7-10. License fees for insurers.

(1) Every insurer, except mutual benevolent aid associations and fraternal benefit associations, shall before transacting any business in this State pay a license fee of four hundred dollars to the Commissioner and shall thereafter pay to the Commissioner an annual license fee of four hundred dollars by March first of each year.

(2) In addition to the license fees required in subsection (1), the Commissioner shall collect from each insurer licensed by him to do business in this State a license fee of two hundred dollars for each kind of insurance for which the insurer is licensed as listed in items (a) through (g) of Section 58-5-30. Each mutual insurer doing a property business only in no more than three counties shall pay an annual fixed license fee of fifty dollars and each mutual insurer doing a property business only in a single county shall pay an annual fixed license fee of twenty dollars. The license fees required in this subsection must be paid to the Commissioner before the insurer transacts any business in this State and shall thereafter be paid annually to the Commissioner by March first of each year.

Section 38-7-20. Insurance premium taxes; exclusions.

In addition to all license fees and taxes otherwise provided by law, there is levied upon each insurer licensed by the Commissioner an insurance premium tax based upon total premiums, other than workers' compensation insurance premiums and annuity considerations, collected by the insurer in the State during each calendar year ending on the thirty-first day of December. For life insurance, the insurance premium tax levied herein is equal to three-fourths of one percent of the total premiums collected. For all other types of insurance, the insurance premium tax levied herein is equal to one and one-fourth percent of the total premiums collected. In computing total premiums, return premiums on risks are excluded, but dividends paid or credited to policyholders are included.

Section 38-7-30. Tax on fire insurers to cover expenses of inspections and investigations.

All fire insurers doing business in this State shall pay a tax of one-tenth of one percent on the gross premium receipts less premiums returned of unabsorbed premium deposits. The purpose of this tax is to defray any expense, including expenses of counsel, detectives, and officers, incurred by the State Fire Marshal or any deputy in the performance of duties imposed upon him in the inspections of buildings and premises and by the Commissioner or any deputy in the investigation of charges of discrimination in rates. The Commissioner shall keep a separate account of all monies received and disbursed under this section and shall include this account in his annual report.

Section 38-7-40. Additional premium tax on fire insurers.

Each fire insurer shall pay to the Commissioner an amount equal to one percent of all premiums written on fire insurance required to be reported under Section 38-7-70 during the preceding year ending December thirty-first or for such portion of that period as the insurer has done business in this State.

Section 38-7-50. Tax on workers' compensation insurers.

Every insurer insuring employers in this State against liability for personal injuries to their employees or death caused thereby, under the provisions of Title 42, shall pay a tax upon the premiums received whether in cash or notes in this State, or on account of business done in this State, for such insurance in this State at the rate of four and one-half percent of the amount of such premiums. This tax is in lieu of all other taxes on these premiums and must be assessed and collected as provided in this chapter. However, the insurers must be credited with all cancelled or returned premiums actually refunded during the year on workers' compensation insurance including any unused premiums refunded or credited to policyholders as dividends.

If an insurer fails or refuses to make the return required by Section 38-7-60, the Commissioner shall assess the tax against the insurer at the rate provided for in this chapter on the amount of premiums he considers just and the proceedings thereon must be the same as if the return had been made.

Section 38-7-60. Returns of premiums required; quarterly payment of taxes.

(1) Not later than March first of each year, every insurer licensed by the Commissioner shall file with him a return of premiums collected by the insurer in the State during the immediately preceding calendar year ending on December thirty-first. The return must be made on forms prescribed by the Commissioner and must be made under oath by the insurer's employee or representative responsible for the preparation of fee and tax returns, as well as the insurer's chief executive officer.

(2) The license fees imposed in Section 38-7-20 must be fully reported on the return filed in accordance with subsection (1) of this section.

(3) The premium and other taxes imposed on insurers pursuant to Sections 38-7-20, 38-7-30, 38-7-40, 38-7-50, and 38-7-90 must be paid to the Commissioner in quarterly installments on or before March first, June first, September first, and December first of each calendar year. The quarterly payments must be calculated and paid as follows:

(a) The quarterly installments paid on or before June first, September first, and December first must each be computed based upon one-fourth of the total premiums collected by the insurer during the immediately preceding calendar year ending on December thirty-first. The quarterly installments for June first, September first, and December first must be reported on forms prescribed by the Commissioner.

(b) The quarterly installment paid on or before March first must equal the difference between the total tax liability of the insurer for the immediately preceding calendar year ending on December thirty-first and the sum of the quarterly installments paid by the insurer on June first, September first, and December first of that immediately preceding calendar year. The quarterly installment for March first must be reported on the returns filed in accordance with subsection (1) of this section. An insurer whose quarterly tax installments are less than one thousand dollars per payment may elect not to pay its tax liability on a quarterly basis and, instead, may elect to report and pay its entire tax liability on the return filed in accordance with subsection (1) of this section.

(4) The Commissioner may suspend or revoke the license of any insurer which fails to make returns and pay fees and taxes as required in this section. The Attorney General shall bring suit in the name of the State to collect any unpaid portion of the fees or taxes required by law.

Section 38-7-70. Annual reports of premiums of fire insurers; allocation.

Each fire insurer carrying on business in this State shall annually return to the Commissioner by March first a just and true account, verified by oath, of all premiums received during the preceding year ending December thirty-first from all fire insurance on all property located or that may be located in this State and from all fire insurance business done in this State. In the report the insurer shall allocate the premiums on this business to the county in which the property is located, regardless of where the insurance is written or premiums collected.

Section 38-7-80. Records to be kept; fraudulent returns; failure to keep records or reports or pay funds due.

Every foreign or alien fire insurer shall keep accurate books of account of all business done by it on fire insurance required to be reported under the provisions of Section 38-7-70. If it is apparent the return is fraudulent or dishonest, the Commissioner shall investigate the return and collect the amount he finds due.

Every foreign or alien fire insurer which neglects to keep books of account as required by this section, neglects or fails to report or pay any of the money due on premiums as required by Sections 38-7-40 or 38-7-70, or is found upon examination to have made a false return of business done by it shall for each offense forfeit three hundred dollars, to be applied to the purposes prescribed in Section 23-9-410.

Section 38-7-90. Retaliatory taxes, penalties, interest, and fees.

Whenever the laws of any other state require of insurers chartered by this State and having agents in the other state, or of the agents thereof, any deposit of securities in the State for the protection of policyholders or otherwise or any payment of taxes, penalties, interest, certificates of authority, license fees, filing fees, or otherwise, greater than the amount required for the same purposes from similar companies of other states by the then existing laws of this State, all the similar companies of the states establishing or having theretofore established an agency or agencies in this State shall make the same deposit for a like purpose with the Commissioner and pay to the Commissioner, for taxes, penalties, interest, certificates of authority, license fees, filing fees, or any other fees, an amount equal to the amount of the charges imposed by the laws of the state upon companies of this State and the agencies thereof.

Whenever the laws of any other state or the regulation or action of any public official of the other state subject insurance companies chartered by this State to any restrictions, obligations, conditions, or penalties for the privilege of doing business in the other state which are greater than those required of similar insurers organized or domiciled in the other state by or in this State for the privilege of doing business herein, then all similar insurers organized or domiciled in the other state must be subjected to the greater requirements imposed by or in the other state upon similar insurers of this State.

Section 38-7-100. Distribution of taxes to counties.

One-fourth of the insurance premium taxes collected under Section 38-7-20, and one-fourth of the retaliatory collections made under Section 38-7-90 which are attributable to the tax levied in Section 38-7-20, are allotted to the several counties, respectively, in proportion to the latest official United States census of such counties and are hereby appropriated to ordinary county purposes. No county license fee or tax may be levied on insurance companies. As soon as possible after March first of each year, the State Treasurer, upon a warrant from the Comptroller General, shall pay to the county treasurer of each county its proportionate share of the insurance premium taxes and retaliatory collections described in this section.

Section 38-7-110. Limitation on action by State for fees, taxes, penalties, and interest; disposition of funds recovered.

The State may bring suit in court for back fees, taxes, penalties, and interest imposed by this title at any time within ten years from the date on which they should have been paid. On collection of the fees and taxes, they must be distributed as provided by the statutes under which they were levied.

Section 38-7-120. Late payment of insurance fees and taxes; penalties; return of excess payment.

(a) As soon as practicable after each tax return or other document is filed, the Commissioner, when fees and taxes are involved, shall examine the document and compute the fees and taxes due. If the fees and taxes found due

are greater than the amount theretofore paid, the excess must be paid to the Commissioner within fifteen days after notice of the amount due is mailed by the Commissioner. If the amount due is not paid within the fifteen-day period, a penalty of five percent of the amount due may be assessed.

(b) If the additional fees and taxes found to be due upon the examination of the document are not paid within fifteen days of notice by the Commissioner, interest must be added to the amount of the deficiency at the rate of five percent for each month or fraction of a month from the date the fees or taxes were originally due until the date the deficiency is paid. The total maximum interest to be charged may not exceed twenty-five percent.

(c) At any time up to one year after the date upon which any original tax return or other document is required to be filed, an insurer or other person may file an amended return to correct errors of overpayment or other errors made by the insurer or person in the original return or document. No amended return or document may be filed by any insurer or person or accepted by the Commissioner after the expiration of the one-year period. No tax adjustment, deduction, or credit may be made or taken by the insurer or person, or allowed by the Commissioner, on any return or document filed after the expiration of the one-year period for errors claimed to have been made by the insurer or other person in the original return or document.

(d) If, upon examination of any original or amended return or document, it appears to the Commissioner that the amount of fees or taxes due is less than the amount theretofore paid, the excess must be ordered refunded by the Commissioner. No refunds may be made with respect to any monies which are distributable to

a governmental unit after the distribution has been made.

(e) The provisions of this section do not apply to the continuation of annual license fees for agencies, brokers, appraisers, or adjusters.

Section 38-7-130. Payment of fees, taxes, penalties, or interest under protest; action for recovery thereof.

(a) When the State charges or levies any fees, taxes, penalties, or interest against any insurer or other person, or any fees, taxes, penalties, or interest are assessed by the Commissioner and the State or Commissioner claims the payment of the fees, taxes, penalties, or interest so charged or assessed, or institutes a proceeding to collect them, the insurer or other person against whom the fees, taxes, penalties, or interest is charged or assessed or against whom the proceeding is instituted, if he conceives the fees or taxes to be unjust or illegal, may pay the fees or taxes and any penalties, or interest thereon, under protest in writing, with the type of funds the State Treasurer or Commissioner is authorized to receive. Upon this payment, the Commissioner shall pay the fees, taxes, penalties, or interest collected by him into the state treasury giving notice at the time to the State Treasurer that the payment was made under protest.

(b) Any insurer or other person paying any fees, taxes, penalties, or interest under protest must within thirty days after making the payment bring an action against the Commissioner for the recovery thereof, in the Court of Common Pleas for Richland County. If it is determined in that action that the fees, taxes, penalties, or interest was unjustly or illegally collected, the court must so certify of record, and the State Treasurer shall refund the fees, taxes, penalties, or interest to the payor.

Section 38-7-140. Penalty for failure to pay money due or to supply information required.

If any person or any officer or employee of any insurer or other person, with intent to evade any requirement of this title or any lawful requirement of the Commissioner, fails to pay any fees, taxes, penalties, or interest, fails to make, sign, or verify any return, or fails to supply any information required by this title, or with like intent makes, renders, signs, or verifies any false or fraudulent information, that person is guilty of a misdemeanor and, upon conviction, must be fined an amount not to exceed five thousand dollars or imprisoned for a term not to exceed five years, or both.

Section 38-7-150. Waiver or reduction of penalties or interest.

The Commissioner may, upon making a record of his reasons therefor, waive or reduce any of the penalties or interest imposed under the provisions of this title pertaining to fees and taxes.

Section 38-7-160. Municipal license fees and taxes.

This title may not be construed as preventing any municipality from levying and collecting license fees or taxes in accordance with its ordinances. However, no municipality may charge a license fee to fire insurers or their agents licensed by the Commissioner in any other manner than on a percentage of the premiums collected in the municipality or realized from risks located within the limits of the municipality, or both, the license fee not to exceed two percent of the premiums collected in the municipality and realized from risks located in the municipality, except in cities of fifty thousand inhabitants or more, where not exceeding five percent may be charged.

Preference must be given hereunder to the municipality wherein the insured property is located, and, if a license is levied against the insuring company on such basis, that company may not be subject to a similar license from a municipality wherein it may collect the premium for such transaction.

Section 38-7-170. Disposition of fees, taxes, penalties, and interest.

All fees, taxes, penalties, and interest collected by the Commissioner under this title, unless specifically provided otherwise, must be deposited by the Commissioner in the general fund of the State.

Section 38-7-180. Temporary allowance of rate increases for certain insurers because of greater tax liability.

Notwithstanding the restrictions of Sections 38-73-920 and 38-73-1210, any insurer or rating organization affected thereby may, at any time up until April 1, 1987, make a filing with the Commissioner requesting a change in rates solely to reflect changes in tax liabilities imposed by Sections 38-7-10, 38-7-20, 38-7-40, 38-7-60, 38-7-90, and 38-7-100. After that date, the twelve-month limitations set forth in Sections 38-73-920 and 38-73-1210 are fully applicable.

In addition, any insurer issuing individual accident and health insurance policies whose rates are regulated by the Commissioner under Section 38-71-310 may, upon approval by the Commissioner, adjust the premium rates chargeable on such policies outstanding on July 1, 1986, to reflect changes in tax liabilities imposed by this section, provided that the policy permits the adjustment of premium rates after the inception date of the policy and the insurer makes the adjustment at the time and in the manner specified in the policy.

CHAPTER 9

Capital, Surplus, Reserves, and

Other Financial Matters

Section 38-9-10. Capital and surplus required of stock insurers; delinquency.

(a) Before licensing a stock insurer, the Commissioner shall require the insurer to be possessed of capital which must be maintained at all times and surplus, twenty-five percent of which must be maintained at all times, in amounts not less than the following:

If Licensed to Write Capital Surplus

Life $150,000 $150,000

Accident and health 150,000 150,000

Life, accident and

health 300,000 300,000

Property 300,000 300,000

Casualty 300,000 300,000

Surety 300,000 300,000

Marine 300,000 300,000

Title 150,000 150,000

Multiple lines 375,000 375,000.

(b) If at any time the surplus of a stock insurer is less than twenty-five percent of the surplus initially required, as set forth in subsection (a), the insurer is considered delinquent and delinquency proceedings may be commenced by the Commissioner as provided by Chapter 27 of this title.

(c) If at any time the capital of a stock insurer is impaired to any extent, the insurer is delinquent and the Commissioner shall commence delinquency proceedings.

Section 38-9-20. Surplus required of mutual insurers; delinquency.

(a) Before licensing a mutual insurer, the Commissioner shall require the insurer to be possessed of surplus of not less than the following amounts:

Surplus which must

be possessed at

If licensed to write time of licensing

Life $300,000

Accident and health 300,000

Life, accident and health 600,000

Property 600,000

Casualty 600,000

Surety 600,000

Marine 600,000

Title 300,000

Multiple lines 750,000

(b) If at any time the surplus of a licensed mutual insurer is less than the sum of the capital and minimum surplus required to be maintained by a stock insurer licensed to write the same kind or kinds of business, the mutual insurer is considered delinquent and delinquency proceedings may be commenced by the Commissioner as provided by Chapter 27 of this title.

(c) If at any time the surplus of a licensed mutual insurer is less than the minimum capital required to be possessed by a stock insurer licensed to write the same kind or kinds of business, the mutual insurer is delinquent and the Commissioner shall commence delinquency proceedings.

Section 38-9-30. Capital and surplus requirements of insurers licensed as of May 15, 1971; delinquency.

Sections 38-9-10 and 38-9-20 do not apply to an insurer that is licensed to do business in this State on May 15, 1971, if the insurer continues to remain licensed in this State and continues to maintain at least the following minimum capital and surplus amounts if a stock insurer, or minimum surplus if a mutual insurer:

(a) An insurer, if possessed of capital and surplus amounts on December 31, 1970, that were in compliance with the law at that time, but which are less than the minimums required to be maintained by Section 38-9-10, must maintain not less than the amount of capital stated in its 1970 annual statement and, in addition, must maintain surplus of not less than twenty-five percent of that amount of capital. If at any time the surplus of the insurer is reduced to less than twenty-five percent of this minimum amount of required capital, the insurer is considered delinquent and delinquency proceedings may be commenced by the Commissioner as provided by Chapter 27 of this title. If at any time the minimum capital required to be maintained by this section by the insurer becomes impaired to any extent, the insurer is delinquent and the Commissioner shall commence delinquency proceedings. If at any time the capital is increased to an amount greater than the amount possessed on December 31, 1970, the amount of surplus that must be maintained thereafter is twenty-five percent of that greater amount of capital and, if this amount is not maintained, delinquency proceedings may be commenced by the Commissioner as provided by Chapter 27 of this title. This increased amount of capital may not thereafter be reduced to an amount less than the amount required by Section 38-9-10 and, if it should be reduced or should become impaired to any extent, the insurer is delinquent and the Commissioner shall commence delinquency proceedings.

(b) A mutual insurer, if possessed of surplus on December 31, 1970, that was in compliance with the law at that time but is less than the minimum required to be maintained by Section 38-9-20, shall maintain not less than the amount of surplus stated in its 1970 annual statement. If at any time the surplus of the insurer is reduced to less than eighty percent of the amount shown in its 1970 annual statement, the insurer is considered delinquent and delinquency proceedings may be commenced by the Commissioner as provided by Chapter 27 of this title. If at any time the surplus of the insurer is increased to an amount greater than the amount possessed on December 31, 1970, eighty percent of that greater amount of surplus, or the minimum amount required to be maintained by Section 38-9-20, whichever amount is the lesser, must be maintained thereafter and, if it is not maintained, the insurer is considered delinquent and delinquency proceedings may be commenced by the Commissioner as provided by Chapter 27 of this title.

Section 38-9-40. Commissioner shall notify insurers of amounts required; annual schedule.

The Commissioner shall notify each licensed insurer that does not comply with Section 38-9-10 or 38-9-20 of the amounts of capital and surplus if a stock insurer, or the amount of surplus if a mutual insurer, the insurer shall maintain in order to continue to remain licensed in this State. A schedule of the amounts required to be maintained by each insurer so notified must be published in all succeeding annual reports of the Insurance Commission that the Commission submits to the General Assembly through the Governor, as required by Section 38-3-70. This schedule must be revised annually as to those insurers whose minimum capital and surplus requirements are increased periodically as required by Section 38-9-30.

Section 38-9-50. Restrictions on kinds of insurance that insurers may write.

An insurer that fails to meet the minimum capital and surplus requirements of this chapter, but which continues to remain licensed by virtue of Section 38-9-30, shall confine its business to the kinds of insurance for which it was licensed on December 31, 1970. If the insurer desires to write additional kinds of insurance, it shall comply with the capital and surplus requirements of Section 38-9-10 or 38-9-20 as applicable.

Section 38-9-60. No limitation on certain license provisions.

Sections 38-9-30 to 38-9-50 may not be construed as a limitation of any authority conferred elsewhere by this title upon the Commissioner to deny or revoke or suspend a license of an insurer.

Section 38-9-70. Insurers may make deposits to do business in other states.

The Commissioner in his official capacity shall take and hold, in trust, deposits made by domestic insurers for the purpose of complying with the laws of any other state to enable the insurer to do business in that state. The insurer making the deposit is entitled to the income and may with the consent of the Commissioner and when not forbidden by the law under which the deposit is made, change, in whole or in part, the securities which compose the deposit for other solvent securities of equal par value approved by the Commissioner.

Section 38-9-80. Certificates of deposits or securities required; amount.

The Commissioner shall require every insurer, other than fraternal benefit societies, transacting, or desiring to transact, business in this State to deposit with him certificates of deposit of building and loan associations chartered by the State of South Carolina 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 covered by insurance, or of national banks located within the State or banks chartered by the State of South Carolina in which deposits are guaranteed by the Federal Deposit Insurance Corporation, not to exceed the amount covered by insurance; or other securities which (1) qualify as legal investments under the laws of this State for public sinking funds; (2) are not in default as to principal or interest; and (3) have a current market value of not less than ten thousand dollars nor more than two hundred thousand dollars, as determined by the Commissioner pursuant to the standards promulgated by him.

The Commissioner shall prescribe the amount, within the limits of this section, of the securities required, and he may subsequently increase or decrease the amount required.

Section 38-9-90. Securities or bonds must be held as security for claims.

The bonds or other securities required by Section 38-9-80 must be held as security for the payment of claims against the insurer arising out of its failure to meet obligations incurred in this State. Policyholders ratably and without preference and general creditors ratably, without preference, and subordinate to the claims of policyholders shall have a lien on the bonds or other securities for the amount of their claim.

Section 38-9-100. Deposit of securities not necessary when made with other states.

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 may, in the discretion of the Commissioner, include designated nonadmitted insurers in these categories which meet 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.

Section 38-9-110. Voluntary deposits for compliance with laws of other states.

A domestic company, in order to comply with the laws of any other state or territory of the United States, may make a voluntary deposit with the Commissioner in excess of the amount required by Section 38-9-80. This excess deposit is subject to all other applicable provisions of the laws of this State relating to the deposits of insurers, except that the excess deposit must be for the protection of all the company's policy obligations, ratably and without preference, notwithstanding the provisions of Section 38-9-90. However, a domestic company making this voluntary deposit is relieved of making the deposit required by Section 38-9-80 if the company meets the definition of a qualified insurer as defined in Section 38-9-100 and if the voluntary deposit meets the requirements of Section 38-9-100.

Section 38-9-120. Exchange of deposited securities.

A depositing insurer may exchange for the deposited securities, or any of them, other securities eligible for deposit under Sections 38-9-80 to 38-9-140 if, in the opinion of the Commissioner, the aggregate value of the deposit will not be reduced below the amount required by law.

Section 38-9-130. Interest on deposited securities.

The Commissioner at the time of receiving any bonds or other securities deposited under Sections 38-9-80 to 38-9-140 shall give to the company authority to collect the interest thereon for its own use. This authority continues in force until the company fails to pay any of its liabilities for which the deposit is security. In case of that failure the party charged with payment of the interest must be notified that thereafter the interest is payable to the Commissioner to be applied, if necessary, to the payment of those liabilities.

Section 38-9-140. Principal of deposited securities.

When the principal of any securities deposited under Sections 38-9-80 to 38-9-140 is paid to the Commissioner, he shall pay the money so received to the company. However, if the securities were required to be deposited under Section 38-9-80 the payment may not be made until the company deposits an equal amount of other securities of the character required for similar deposits. If the company fails to deliver to the Commissioner within thirty days after receiving notice of this requirement the securities necessary to maintain its required deposit, he may invest the money in other securities of the required character and hold the same as he held those which were paid.

Section 38-9-150. Return of deposited securities.

Upon request of a domestic insurer the Commissioner may return to the insurer the whole or any portion of the securities of the insurer held by him on deposit when he is satisfied that the securities asked to be returned are not subject to any liability and are not required to be held any longer by any provision of law or purpose of the original deposit.

These deposits made by a foreign insurer must be returned by the Commissioner upon the filing with the Commissioner by the trustee or other authorized representative of the insurer a written request and sworn affidavit stating (a) that the insurer has no contracts of insurance in force and no unsatisfied claims outstanding within this State or (b) that reinsurance of all outstanding contracts and acceptance of all unsatisfied claims within this State have been provided by an insurer or insurers authorized to transact the same kinds of business in this State, filing with the affidavit a certified copy of the reinsurance agreement. Release must be made upon the written order of the Commissioner when he is satisfied that the above requirements have been met. The Commissioner is considered the agent of the foreign insurer for acceptance of service of any legal process in any action or proceeding against the insurer for any claim that might arise before or after the return of its deposits. Any person making a false affidavit as required in this section must, upon conviction, be imprisoned for a period not exceeding five years.

Section 38-9-160. Enforcement of trust created by deposit.

An insurer which has made a deposit in this State, pursuant to this title, its trustees or resident managers in the United States, the Commissioner, or any creditor of the insurer may, at any time, bring an action in the circuit court for the County of Richland against the State and other parties properly joined to enforce, administer, or terminate the trust created by the deposit. The process in the action must be served on the officer of the State having the deposit, who must appear and answer in behalf of the State and perform any orders and judgments the court may make in the action.

Section 38-9-170. Unearned premium reserve.

(1) Every insurer authorized to transact business in this State shall, except as to risks or policies for which reserves are required under subsections (2) and (3) of this section and Section 38-9-180 except for real estate title insurance policies, and subject to specific provisions of this title, maintain reserves equal to the unearned portions of the gross premiums charged on unexpired or unterminated risks and policies.

No deduction may be made from the reserves required by this section except for the reserves on risks reinsured:

(a) With solvent assuming insurers licensed in this State or approved reinsurers as provided by Section 38-5-60; or

(b) With an insurer not so licensed in an amount which, together with the amount of the credit for claim loss reserves allowed under Section 38-9-190, does not exceed the funds withheld under a reinsurance treaty with the unlicensed insurer as security for the payment of obligations thereunder if the funds are held subject to withdrawal by and are under the control of the ceding insurer. Notwithstanding any other provision of this title the Commissioner may by official order or regulation prescribe the conditions by which a ceding insurer may be allowed credit as an asset or as a deduction from reserves for reinsurance ceded to a reinsurer not licensed in this State but for which reinsurer, upon the request of the Commissioner, there is presented evidence satisfactory to him that the reinsurer meets the standards of solvency required in this State.

(2) (a) With reference to insurance against loss or damage to property except as provided in item (e) of this subsection, and with reference to all general casualty insurance and surety insurance, every insurer shall maintain an unearned premium reserve on all policies in force.

(b) The Commissioner may require that these reserves are equal to the unearned portions of the gross premiums in force as computed on each respective risk from the policy's date of issue. If the Commissioner does not so require, the portions of the gross premium in force to be held as premium reserve must be computed according to the following table:

Term for Which Reserved for

Policy was Written Unearned Premium

1 year or less 1/2

2 years 1st year 3/4

2nd year 1/4

3 years 1st year 5/6

2nd year 1/2

3rd year 1/6

4 years 1st year 7/8

2nd year 5/8

3rd year 3/8

4th year 1/8

5 years 1st year 9/10

2nd year 7/10

3rd year 1/2

4th year 3/10

5th year 1/10

Over 5 years pro rata.

(d) After adopting a method for computing the reserve, an insurer may not change methods without the Commissioner's approval.

(e) With reference to marine insurance, premiums on trip risks not terminated are considered unearned, and the Commissioner may require the insurer to carry a reserve thereon equal to one hundred percent on trip risks written during the month ended as of the date of statement.

(3) For all accident and health policies the insurer shall maintain an active life reserve which places a sound value on its liabilities under these policies and which is not less than the reserve according to standards set forth in regulations issued by the Commissioner and, in no event, less, in the aggregate, than the pro rata gross unearned premium reserves for these policies.

Section 38-9-180. Standard Valuation Law.

(1) The Commissioner must annually value, or cause to be valued, the reserve liabilities, hereinafter called reserves, for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurer doing business in this State, except that in the case of an alien insurer such valuation shall be limited to the United States business, and may certify the amount of any such reserves, specifying the mortality table or tables, rate or rates of interest and methods, net level premium method or other, used in the calculation of such reserves. In calculating such reserves, he may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves required in this section of any foreign or alien insurer, he may accept any valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when such valuation complies with the minimum standard provided in this section and if the official of any such state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the Commissioner when such certificate states the valuation to have been made in a specified manner according to which the aggregate reserves would be at least as large as if they had been computed in the manner prescribed by the law of that state or jurisdiction.

(2) (a) Except as otherwise provided in subparagraph (c) of this subsection and subsection (3), the minimum standard for the valuation of all such policies and contracts issued prior to March 24, 1960, shall be that provided by the laws in effect immediately prior to such date except that the minimum standards for the valuation of annuities and pure endowments purchased under group annuity and pure endowment contracts issued prior to such effective date shall be that provided for by the laws in effect immediately prior to such date but replacing the interest rates as specified in such laws by an interest rate of five percent per annum.

(b) Except as otherwise provided in subparagraph (c) of this subsection and subsection (3), the minimum standard for the valuation of all such policies and contracts issued on or after March 24, 1960, shall be the Commissioners' reserve valuation methods defined in subsections (4), (5), and (8) of this section, five percent interest for group annuity and pure endowment contracts and three and one-half percent interest for all other such policies and contracts, or in the case of policies and contracts, other than annuity and pure endowment contracts, issued on or after May 26, 1975, four percent interest for such policies issued prior to January 1, 1979, five and one-half percent interest for single premium life insurance policies, and four and one-half percent interest for all other such policies issued on or after January 1, 1979, and the following tables:

(i) For all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies, the Commissioner's 1941 Standard Ordinary Mortality Table for such policies issued prior to the operative date stated in Section 38-63-650, the Commissioner's 1958 Standard Ordinary Mortality Table for such policies issued on or after the operative date of Section 38-63-590 of the Standard Nonforfeiture Law for Life Insurance and prior to the operative date of Section 38-63-590 of the Standard Nonforfeiture Law for Life Insurance, provided, that for any category of such policies issued on female risks, all modified net premiums and present values referred to in this section may be calculated according to an age not more than three years younger than the actual age of the insured; for policies issued prior to January 1, 1979, and not more than six years younger than the actual age of the insured for policies issued on or after January 1, 1979, and prior to the operative date of Section 38-63-600; and for such policies issued on or after the operative date of Section 38-63-600 of the Standard Nonforfeiture Law for Life Insurance (1) the Commissioner's 1980 Standard Ordinary Mortality Table or (2) at the election of the company for any one or more specified plans of life insurance, the Commissioner's 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors or (3) any ordinary mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the Commissioner for use in determining the minimum standard of valuation for such policies.

(ii) For all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in such policies, the 1941 Standard Industrial Mortality Table for such policies issued prior to the operative date stated in Section 38-63-650; for all policies issued on or after such operative date, either the 1941 Standard Industrial Mortality Table or the Commissioner's 1961 Standard Industrial Mortality Table or any industrial mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the Commissioner for use in determining the minimum standard of valuation for such policies, according to which of these tables is used to calculate adjusted premiums and present values as specified in Section 38-63-580.

(iii) For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies, the 1937 Standard Annuity Mortality Table or, at the option of the company, the Annuity Mortality Table for 1949, Ultimate, or any modification of either of these tables approved by the Commissioner.

(iv) For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies, the Group Annuity Mortality Table for 1951, any modification of such table approved by the Commissioner or, at the option of the insurer, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts.

(v) For total and permanent disability benefits in or supplementary to ordinary policies or contracts, for policies or contracts issued on or after January 1, 1966, the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries, with due regard to the type of benefit or any tables of disablement rates and termination rates, adopted after 1980 by the National Association of Insurance Commissioners, that are approved by regulation promulgated by the Commissioner for use in determining the minimum standard of valuation for such policies; for policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either such tables or, at the option of the company, the Class (3) Disability Table (1926) and for policies issued prior to January 1, 1961, the Class (3) Disability Table (1926) or such other table as may be approved by the Commissioner. Any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies.

(vi) For accidental death benefits in or supplementary to policies, for policies issued on or after January 1, 1966, the 1959 Accidental Death Benefits Table, or any accidental death benefits table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the Commissioner for use in determining the minimum standard of valuation for such policies; for policies issued on or after January 1, 1961, and prior to January 1, 1966, either such table or, at the option of the company, the Inter-Company Double Indemnity Mortality Table; and for policies issued prior to January 1, 1961, the Inter-Company Double Indemnity Mortality Table, or such other table as may be approved by the Commissioner. Any such table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies.

(vii) For any extra benefits provided in life or endowment contracts or policies under which there is payable a series of coupons or guaranteed dividends or a series of constant or variable pure endowments maturing either during the term of the contract and the continuation of the life of the insured or maturing as a series after the death of the insured, such table or basis of reserves as may be approved by the Commissioner.

(viii) For group life insurance, life insurance issued on the substandard basis and other special benefits, such tables as may be approved by the Commissioner.

(c) Except as provided in item (3), the minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after the operative date of this item (c), as defined herein, and for all annuities and pure endowments purchased on or after such operative date under group annuity and pure endowment contracts, shall be the Commissioner's reserve valuation methods defined in items (4) and (5) of this section and the following tables and interest rates:

(i) For individual annuity and pure endowment contracts issued prior to January 1, 1979, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, or any modification of this table approved by the Commissioner, and six percent interest for single premium immediate annuity contracts, and four percent interest for all other individual annuity and pure endowment contracts.

(ii) For individual single premium immediate annuity contracts issued on or after January 1, 1979, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table or any individual annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the Commissioner for use in determining the minimum standard of valuation for such contracts, or any modification of these tables approved by the Commissioner, and seven and one-half percent interest.

(iii) For individual annuity and pure endowment contracts issued on or after January 1, 1979, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table or any individual annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the Commissioner for use in determining the minimum standard of valuation for such contracts, or any modification of these tables approved by the Commissioner, and five and one-half percent interest for single premium deferred annuity and pure endowment contracts and four and one-half percent interest for all other such individual annuity and pure endowment contracts.

(iv) For all annuities and pure endowments purchased prior to January 1, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, the 1971 Group Annuity Mortality Table, or any modification of this table approved by the Commissioner, and six percent interest.

(v) For all annuities and pure endowments purchased on or after January 1, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death

benefits purchased under such contracts, the 1971 Group Annuity Mortality Table or any group annuity mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation promulgated by the Commissioner for use in determining the minimum standard of valuation for such annuities and pure endowments, or any modification of these tables approved by the Commissioner, and seven and one-half percent interest.

After May 26, 1975, any insurer may file with the Commissioner a written notice of its election to comply with the provisions of this item (c) after a specified date before January 1, 1979, which shall be the operative date of this item (c) for such insurer, provided that an insurer may elect a different effective date for individual annuity and pure endowment contracts from that elected for group annuity and pure endowment contracts. If an insurer makes no such election, the effective date of this item (c) for the insurer shall be January 1, 1979.

(3)(a) The interest rates used in determining the minimum standard for the valuation of:

(i) All life insurance policies issued in a particular calendar year, on or after the operative date of Section 38-63-600 of the Standard Nonforfeiture Law for Life Insurance,

(ii) All individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1983,

(iii) All annuities and pure endowments purchased in a particular calendar year on or after January 1, 1983, under group annuity and pure endowment contracts,

(iv) The net increase, if any, in a particular calendar year after January 1, 1983, in amounts held under guaranteed interest contracts shall be the calendar year statutory valuation interest rates as defined in this subsection (3).

(b) The calendar year statutory valuation interest rates, I, shall be determined as follows and the results rounded to the nearer one-quarter of one percent:

(i) For life insurance,

m I = .03 + W (R1 - .03) + 2 (R2 - .09).

(ii) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options,

I = .03 + W (R - .03)

where R1 is the lesser of R and .09, R2 is the greater of R and .09, R is the reference interest rate defined in this subsection (3), and W is the weighting factor defined in this subsection (3).

(iii) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in (ii) above, the formula for life insurance stated in (i) above shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of ten years and the formula for single premium immediate annuities stated in (ii) above shall apply to annuities and guaranteed interest contracts with guarantee duration of ten years or less,

(iv) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in (ii) above shall apply,

(v) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued

on a change in fund basis, the formula for single premium immediate annuities stated in (ii) above shall apply.

However, if the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one percent, the calendar year statutory valuation interest rate for such life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980 (using the reference interest rate defined for 1979) and shall be determined for each subsequent calendar year regardless of when Section 38-63-600 of the Standard Nonforfeiture Law for Life Insurance becomes operative.

(i) Weighting Factors for Life Insurance:

Guarantee

Duration Weighting

(Years) Factors

10 or less .50

More than 10, but

not more than 20 .45

More than 20 .35

For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy;

(ii) Weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options:

.80

(iii) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in (ii) above, shall be as specified in tables a, b, and c below, according to the rules and definitions in d, e, and f below:

a. For annuities and guaranteed interest contracts valued on an issue year basis:

Guarantee Weighting Factor

Duration for Plan Type

(Years) A B C

5 or less: .80 .60 .50

More than 5, but

not more than 10: .75 .60 .50

More than 10, but

not more than 20: .65 .50 .45

More than 20: .45 .35 .35

Plan Type

A B C

b. For annuities and

guaranteed interest

contracts valued on a

change in fund basis,

the factors shown in a.

above increased by:

.15 .25 .05

Plan Type

A B C

c. For annuities

and guaranteed interest

contracts valued on an

issue year basis (other

than those with no cash

settlement options) which

do not guarantee interest

on considerations received

more than one year after

issue or purchase and for

annuities and guaranteed

interest contracts

valued on a change

in fund basis which

do not guarantee

interest rates on

considerations received

more than twelve months

beyond the valuation date,

the factors shown in a.

or derived in b. increased

by: .05 .05 .05

d. For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of twenty years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.

e. Plan type as used in the above tables is defined as:

Plan Type A: At any time policyholder may withdraw funds only (1) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, or (2) without such adjustment but in installments over five years or more, or (3) as an immediate life annuity, or (4) no withdrawal permitted. Plan Type B: Before expiration of the interest rate guarantee, policyholder may withdraw funds only (1) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, or (2) without such adjustment but in installments over five years or more, or (3) no withdrawal permitted. At the end of interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than five years.

Plan Type C: Policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less than five years either (1) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, or (2) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

f. An insurer may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue year basis. As used in this subsection (3), an issue year basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract, and the change in fund basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund.

(d) The Reference Interest Rate referred to in subitem (b) of this subsection (3) shall be defined as:

(i) For all life insurance, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June thirtieth of the calendar year next preceding the year of issue, of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(ii) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or year of purchase, of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(iii) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in (ii) above, with guarantee duration in excess of ten years, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(iv) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in (ii) above, with guarantee duration of ten years or less, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(v) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(vi) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in (ii) above, the average over a period of twelve months, ending on June thirtieth of the calendar year of the change in the fund, of Moody's Corporate Bond Yield Average--Monthly Average Corporates, as published by Moody's Investors Service, Inc.

(e) In the event that Moody's Corporate Bond Yield Average--Monthly Average Corporates is no longer published by Moody's Investors Service, Inc., or in the event that the National Association of Insurance Commissioners determines that Moody's Corporate Bond Yield Average--Monthly Average Corporates as published by Moody's Investors Service, Inc., is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate, which is adopted by the National Association of Insurance Commissioners and approved by regulation promulgated by the Commissioner, may be substituted.

(4) Except as otherwise provided in subsections (5) and (8), reserves according to the Commissioners' reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums, shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums therefor. The modified net premiums for any such policy shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the policy and the excess of item (a) over item (b), as follows:

(a) A net level annual premium equal to the present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due; provided, however, that such net level annual premium shall not exceed the net level annual premium on the nineteen year premium whole life plan for insurance of the same amount at an age one year higher than the age of issue of such policy.

(b) A net one year term premium for such benefits provided for in the first policy year.

For any life insurance policy issued on or after January 1, 1986, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the Commissioners' reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium shall, except as otherwise provided in subsection (8), be the greater of the reserve as of such policy anniversary calculated as described in the preceding paragraph and the reserve as of such policy anniversary calculated as described in that paragraph, but with (i) the value defined in item (a) of that paragraph being reduced by fifteen percent of the amount of such excess first year premium, (ii) all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, (iii) the policy being assumed to mature on such date as an endowment, and (iv) the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison the mortality and interest bases stated in subsection (2)(a) and (3) shall be used.

Reserves according to the Commissioners' reserve valuation method for: (i) life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums, (ii) group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as amended, (iii) disability and accidental death benefits in all policies and contracts, and (iv) all other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, shall be calculated by a method consistent with the principles of subsection (3) of this section, except that any extra premiums charged because of impairments or special hazards shall be disregarded in the determination of modified net premiums.

(5) This subsection shall apply to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as amended. Reserves according to the Commissioners' annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by such contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of such contract, that become payable prior to the end of such respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate, or rates, specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of such contracts to determine nonforfeiture values.

(6) In no event shall an insurer's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after March 24, 1960, be less than the aggregate reserves calculated in accordance with the methods set forth in subsections (4), (5), (8), and (9) and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for such policies.

(7) Reserves for all policies and contracts issued prior to March 24, 1960, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by the laws in effect immediately prior to such date.

Reserves for any category of policies, contracts, or benefits as established by the Commissioner, issued on or after March 24, 1960, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard provided in this section, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided therein.

Any such insurer which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided in this section may, with the approval of the Commissioner, adopt any lower standard of valuation, but not lower than the minimum provided in this section.

(8) If in any contract year the gross premium charged by any life insurer on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for such policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for such policy or contract, or the reserve calculated by the method actually used for such policy or contract but using the minimum valuation standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this subsection are those standards stated in subsections (2)(a) and (3).

For any life insurance policy issued on or after January 1, 1986, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the foregoing provisions of this subsection (8) shall be applied as if the method actually used in calculating the reserve for such policy were the method described in subsection (4), ignoring the second paragraph of subsection (4). The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with subsection (4), including the second paragraph of that subsection, and the minimum reserve calculated in accordance with this subsection (8).

(9) In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurer based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of such a nature that the minimum reserves cannot be determined by the methods described in subsections (4), (5), and (8), the reserves which are held under any such plan must:

(a) Be appropriate in relation to the benefits and the pattern of premiums for that plan, and

(b) Be computed by a method which is consistent with the principles of this Standard Valuation Law, as determined by regulations promulgated by the Commissioner.

(10) This section is known as the 'Standard Valuation Law'.

Section 38-9-190. Loss and claim reserves.

Every company authorized to transact insurance in this State shall maintain reserves in an amount estimated in the aggregate as being sufficient to provide for the payment of all losses or claims arising by the date of any annual or other statement, whether reported or unreported, which are unpaid as of that date and for which the insurer may be liable, and also reserves in an amount estimated to provide for the expenses of adjustment or settlement of these claims.

The reserves for unpaid losses and loss expenses under policies of personal injury liability insurance, employer's liability insurance, and workers' compensation insurance must be calculated in accordance with any regulations the Commissioner prescribes, and every company authorized to write these kinds of insurance shall file with its annual statement schedules of its experience thereon in the form the Commissioner requires.

Every company may receive credit for reinsurance recoverable (a) from an insurer licensed to transact that insurance in this State or approved as a reinsurer by the Commissioner as provided by Section 38-5-60 in the full amount thereof or (b) from an insurer not so licensed in an amount not exceeding the funds withheld under a reinsurance treaty with the unlicensed company as security for the payment of obligations thereunder if the funds are held subject to withdrawal by and are under the control of the ceding company.

Notwithstanding any other provision of this title, the Commissioner may by official order or regulation prescribe the conditions under which a ceding insurer may be allowed credit as an asset or a deduction from loss reserves for claims recoverable from a reinsurer not licensed in this State but for which reinsurer, upon the request of the Commissioner, there is presented evidence satisfactory to him that the reinsurer meets the standards of solvency required in this State.

If the loss experience of an insurer shows that its loss reserves, however estimated, are inadequate, the Commissioner shall require the insurer to maintain loss reserves in an increased amount as is needed to make them adequate.

CHAPTER 11

Investments

Section 38-11-10. Legislative intent.

The legislative intent is that policyholder obligations and the minimum capital, or guaranty fund, and surplus required by law, must be covered only by assets of unquestioned integrity and stability and that assets in excess of those required to cover policyholder obligations, minimum capital, or guaranty funds, and surplus, may be invested by insurers at the discretion of such insurers, except that the assets may not be invested in assets prohibited under Section 38-11-90.

Section 38-11-20. Application of chapter to domestic, foreign, and alien insurers.

This chapter applies to all domestic insurers. Foreign insurers and United States branches of alien insurers transacting an insurance business in this State shall maintain investments of the same general type and character as specified for domestic insurers, except that investments of substantially the same quality as those specified herein, authorized by the law of the insurer's state of domicile, or state of entry if an alien insurer, may be recognized as eligible investments for purposes of this chapter by the Commissioner in the sound exercise of his discretion.

Section 38-11-30. 'Policyholder obligations' defined.

As used in this chapter, unless the context requires otherwise, 'policyholder obligations' means those liabilities of the insurer to, or for, its policyholders arising out of its policies and to its creditors and includes the liabilities required to be included in the insurer's annual statement, including, but not limited to (a) the unearned premium reserve, (b) reserves required by applicable mortality or morbidity tables, and (c) claim or loss reserves including incurred but not reported claims. 'Policyholder obligations' does not include that portion of the insurer's capital or guaranty fund, nor that portion of its surplus, in excess of the minimum capital, or guaranty fund, and surplus required by law for such insurer, nor the Mandatory Securities Valuation Reserve.

Section 38-11-40. Investments must be maintained to cover policyholder obligations, minimum capital or guaranty fund, and surplus.

Every insurer shall have and maintain investments, of the classes described in this section, to the extent of policyholder obligations and minimum capital, or guaranty fund, and surplus less, with respect to insurers other than life insurers, an amount equal to thirty percent of its surplus as regards policyholders. In no event may insurers, other than life insurers, have and maintain investments of the character described below less than an amount equal to seventy percent of policyholder obligations and one hundred percent of the minimum required capital, or guaranty fund, and surplus:

(a) Cash, cash funds, and interest accrued thereon on deposit or in savings accounts, under certificates of deposit, or in any other form, in solvent banks and trust companies which have qualified for the insurance protection afforded by the Federal Deposit Insurance Corporation, but the cash or cash funds are not limited to, or by, the amount of insurance protection.

(b) Premiums in the course of collection, including due and deferred premiums of life insurers, other than from agencies or general agencies effectively owned or controlled by, or owning or controlling, the insurer, not more than three months past due, less commissions payable, and installment premiums to the extent of the unearned premium reserve carried on the policies to which the premiums apply, less commissions payable thereon. However, premium balances not more than ninety days past due from agencies or general agencies effectively owned or controlled by, or owning or controlling, the insurer are considered admitted assets of the insurer to the extent that balances due from the agency or general agency are represented by assets of the kinds described in this section as limited by Section 38-11-50.

(c) Reinsurance recoverables, not more than three months past due from solvent, authorized reinsurers, including deposits made with assuming reinsurers, or held by ceding insurers, under reinsurance agreements, but only to the extent that the deposits are available as offsets against liabilities assumed under the reinsurance agreements.

(d) Bonds, notes, warrants, and other securities which are the direct obligations of the United States or for which the faith and credit of the United States are pledged for the payment of principal and interest.

(e) Obligations or stock, where stated, of the following agencies or instrumentalities of the United States, whether or not such obligations are guaranteed by the government:

(1) Commodity Credit Corporation.

(2) Federal intermediate credit banks.

(3) Federal land banks.

(4) Central Bank for Cooperatives.

(5) Federal home loan banks and their stock.

(6) Federal National Mortgage Association and its stock when acquired in connection with sale of mortgage loans to the Federal National Mortgage Association.

(7) Government National Mortgage Association.

(8) Other agencies or instrumentalities of the United States approved by the Commissioner.

(f) Bonds, notes, warrants, and other securities which are the direct obligations of any state or territory of the United States or of the District of Columbia, or for which the full faith and credit of the state, territory, or District of Columbia have been pledged for the payment of principal and interest.

(g) Bonds, notes, warrants, and other securities which are valid and legally authorized obligations, issued, assumed, or guaranteed by any county, city, town, village, municipality, or district of any state or territory of the United States, or by any political subdivision thereof, or by any civil division or public instrumentality of the United States, any state or territory of the United States, or any county, city, town, or district of any state or territory, if, by statutory or other legal requirements applicable thereto, such obligations are payable, both as to principal and interest, from taxes levied, or required by such law to be levied, upon all taxable property or taxable income within the jurisdiction of the governmental unit, or from special revenues pledged or otherwise appropriated or by law required to be appropriated for the purpose of the payment, but not including any obligations payable solely out of special assessments on properties benefited by local improvements. However, obligations payable out of special revenues pledged or otherwise appropriated or required by law to be appropriated for the purpose of the payment, are eligible for purposes of this section only if the obligations are eligible for amortization in accordance with regulations promulgated by the Commissioner after notice and hearing.

(h) Bonds, notes, warrants, or other securities of Canada, or of any of its provinces, or of any municipality in Canada, if the municipal obligations are required or permitted to be amortized in the annual statement prescribed by law, or any bonds fully guaranteed by Canada, or any of its provinces or municipalities, if the bonds are payable in lawful money of the United States or Canada.

(i) Bonds, notes, or debentures of solvent corporations existing under the laws of the United States or any of its states or territories, the District of Columbia, Canada, or any of its provinces, if the obligations are qualified under any of the following:

(1) Obligations which are secured by adequate collateral security and bear fixed interest if, during each of the last two, and one additional year, of the five fiscal years next preceding the date of acquisition by the insurer, the net earnings of the issuing, assuming, or guaranteeing corporation available for its fixed charges have not been less than one and one-fourth times the total of its fixed charges for that year. In determining the adequacy of collateral security not more than one-third of the total value of the required collateral may consist of stock other than preferred or guaranteed stocks. The Commissioner may approve the collateral as adequate notwithstanding that more than one third of the total value of the required collateral consists of stocks other than preferred or guaranteed stocks if he finds the collateral to be adequate otherwise and states, in writing, his reasons for so finding.

(2) Fixed interest-bearing obligations other than those described in (1) above, if the net earnings of the issuing, assuming, or guaranteeing corporation available for its fixed charges for a period of five fiscal years next preceding the date of acquisition by the insurer have averaged per year not less than one and one-half times its annual fixed charges applicable to that period and during the last two years of the period the net earnings have been not less than one and one-half times its fixed charges for those years. Notwithstanding the failure of an issuing corporation to meet the test with respect to its fixed interest-bearing obligations as provided in this item, the obligations must be considered to be eligible hereunder if they are secured or guaranteed by leases or other contracts as long as the guaranteeing, leasing, or contracting corporation fulfills the requirements of this section with respect to its fixed interest obligations.

(3) Adjustment income or other contingent interest obligations if the net earnings of the issuing, assuming, or guaranteeing corporation available for its fixed charges for a period of five fiscal years next preceding the date of acquisition by the insurer have averaged per year not less than one and one-half times the

sum of its average annual fixed charges and its average annual maximum contingent interest applicable to that period and if during each of the last two years of the period the net earnings have been not less than one and one-half times the sum of its fixed charges and maximum contingent interest for those years. As used herein, 'net earnings available for fixed charges' means net income after deducting operating and maintenance expenses, taxes other than federal and state income taxes, depreciation, and depletion, but excluding extraordinary nonrecurring items of income or expenses appearing in the regular financial statement of the corporation. 'Fixed charges' includes interest on funded and unfunded debt and amortization of debt discount.

(j) Preferred or guaranteed stocks or shares, other than common stocks, of solvent institutions existing under the laws of the United States or of any of its states, districts, or territories, if all of the prior obligations and prior preferred stocks, if any, of the institution at the date of acquisition by the insurer are eligible as investments under this chapter and if qualified under either of:

(1) Preferred stocks or shares are considered qualified if both of these requirements are met:

(i) The net earnings of the institution available for its fixed charges for a period of five fiscal years next preceding the date of acquisition by the insurer shall have averaged per year not less than one and one-half times the sum of its average annual fixed charges, if any, its average annual maximum contingent interest, if any, and its average annual preferred dividend requirements applicable to the period; and

(ii) During each of the last two years of the period the net earnings must have been not less than one and one-half times the sum of its fixed charges, contingent interest, and preferred dividend requirements. 'Preferred dividend requirements' means cumulative or noncumulative dividends whether paid or not.

(2) Guaranteed stocks or shares are considered qualified if the assuming or guaranteeing institution meets the requirements of Section 38-11-40 (j) (2) construed to include as a fixed charge the amount of guaranteed dividends of the issue or the rental covering the guarantee of the dividends.

(k) If a life insurer, loans to policyholders upon pledge of the policy as collateral security, amounts not exceeding the cash surrender values of the policies, or loans against pledge or assignment of any of its supplementary contracts or other contracts or obligations, as long as the loan is adequately secured by pledges or assignments.

(l) If a life insurer, bonds, or evidences of debts secured by first mortgages or deeds of trust on improved unencumbered real property or the equity of the seller of any of this property in the contract for a deed covering the entire balance due on a bona fide sale of property located in the United States or any of its states or territories or the District of Columbia; but no mortgage loan or investment in the equity of the seller in the contract for deed may exceed at the time of acquisition seventy-five percent of the fair market value of the property.

Real estate is not considered to be encumbered within the meaning of this chapter by reason of the existence of taxes or assessments which are not delinquent, instruments creating or reserving mineral, oil, or timber rights, rights-of-way, joint driveways, sewer rights, rights in walls, nor by reason of building restrictions or other restrictive covenants, nor when the real estate is subject to lease in whole or in part whereby rents or profits are reserved to the owner if in any event the security for the loan or investment is a first lien upon the real estate. The value of any mineral, oil, timber, or similar right reserved may not be included in the fair market value of the property.

(m) If a life insurer, evidences of debt secured by first mortgages or deeds of trust upon leasehold estates running for a term not less than ten years beyond the maturity of the loan as made or as extended, in improved real property, otherwise unencumbered, if the mortgagee is entitled to be subrogated to all rights under the leasehold. No investment under this item may exceed seventy-five percent of the fair market value of the leasehold estate.

(n) If a life insurer, bonds or notes secured by mortgage or trust deed guaranteed or insured as to principal in whole or in part by the Administrator of Veterans' Affairs pursuant to the provisions of Title III of an Act of Congress of the United States of June 22, 1944, entitled the 'Service Men's Readjustment Act of 1944', as amended, or bonds or notes secured by mortgage or trust deed guaranteed or insured by the Federal Housing Administration under the terms of an Act of Congress of the United States of June 27, 1936, entitled the 'National Housing Act', as amended.

(o) Land and buildings to the extent used and occupied for home office purposes together with other real estate as is required for the insurer's convenient transaction of its business at net value plus improvements less normal depreciation.

(p) If a life insurer, improved unencumbered real estate for the production of income or property now under lease or being constructed under a definite agreement providing for lease to solvent institutions, individuals, or governmental agencies for governmental, professional, commercial, residential, or industrial purposes other than agricultural, horticultural, ranch, mining, mineral, or oil purposes at net value plus improvements less normal depreciation; however, upon approval by the Commissioner of South Carolina, the real estate investment may be encumbered or need not be under lease.

(q) Loans secured by pledge of collateral determined by the Commissioner to be adequate and appropriate for investment of policyholder obligation funds of the insurer.

(r) Common stocks of any solvent corporation incorporated under the laws of the United States or any state, or Canada, or any of its provinces, if the stocks of the corporation are listed or admitted to trading on a securities exchange located in the United States, which exchange is approved or recognized by the Securities and Exchange Commission of the United States or if the stocks are listed in the Manual on Valuation of Securities issued by the Committee on Valuation of Securities of the National Association of Insurance Commissioners.

(s) Any investment not specifically included herein nor prohibited under Section 38-11-90, if and to the extent as, the Commissioner finds the investment appropriate for investment of policyholder obligations funds. This finding is to be based upon the standards prescribed by Section 38-11-10.

Section 38-11-50. Limitations on investments made under Section 38-11-40.

Investments made by insurers for the purpose of covering policyholder obligations, and their minimum capital or guaranty fund and surplus required by law, as provided in Section 38-11-40, are subject to:

(a) None of the securities mentioned in Section 38-11-40 are eligible for the purposes of that section if, within the five years immediately preceding, the obligor has defaulted in the payment of principal or interest on any of its bonds, warrants, or other securities.

(b) With respect to investments under item (g) of Section 38-11-40, not more than twenty percent of the insurer's policyholder obligations may be invested in the securities of any one county, city, town, village, municipality, or district of any state or territory of the United States or of any political subdivision thereof, or any civil division or public instrumentality of the United States. However, the foregoing limitation does not apply with respect to an investment which qualifies for sinking fund purposes under the laws of this State.

(c) Investments described in item (h) of Section 38-11-40 may not exceed ten percent of the insurer's policyholder obligations.

(d) Investments described in item (i) of Section 38-11-40 may not exceed sixty-six and two-thirds percent of the insurer's policyholder obligations, nor may more than ten percent of the insurer's policyholder obligations be invested in any one investment.

(e) Investments described in item (j) of Section 38-11-40 may not exceed fifteen percent of the insurer's policyholder obligations.

(f) Investments described in items (l), (m), and (n) of Section 38-11-40 may not exceed in the aggregate sixty-six and two-thirds percent of the insurer's policyholder obligations, nor, with respect to investments under any of these items, may more than ten percent of the insurer's policyholder obligations be invested in any one investment or in any one project, subdivision, or transaction or series of related transactions.

(g) Investments described in item (o) of Section 38-11-40 may not exceed ten percent of the insurer's policyholder obligations.

(h) Investments described in item (p) of Section 38-11-40 may not exceed ten percent of the insurer's policyholder obligations. Where a life insurer does not, wholly or in part, avail itself of item (o) of Section 38-11-40, as limited by item (f) of Section 38-11-40, the investments under item (p) of Section 38-11-40 may be increased to the extent of the unused portion but in no event may the life insurer's investments under item (p) of Section 38-11-40 exceed fifteen percent of the insurer's policyholder obligations. However, this limitation does not apply to real estate acquired by bona fide mortgage foreclosure if the insurer has had title to such real estate for less than a five-year period.

(i) Investments described in item (q) of Section 38-11-40 may not exceed ten percent of the insurer's policyholder obligations.

(j) Investments described in item (r) of Section 38-11-40 may not exceed ten percent of the insurer's policyholder obligations.

(k) Investments authorized under item (s) of Section 38-11-40 may not exceed ten percent of the insurer's policyholder obligations.

(l) For the purposes of the limitations contained in this section, the property and securities enumerated in Section 38-11-40 may be valued at cost, less depreciation, or market, whichever is less. However, the Commissioner may, by regulation, authorize valuation of securities in accordance with stated values established for the securities in writing or as published by the Committee on Valuation of Securities of the National Association of Insurance Commissioners. However, mortgage loans may, in any event, be valued at amortized value.

Section 38-11-60. Consolidated statement by insurer owning eighty percent or more of stock of another insurer.

An insurer owning not less than eighty percent of all classes of the outstanding stock of one or more other insurers transacting an insurance business may, for the purposes of complying with Section 38-11-40, so comply on the basis of a consolidated statement. However, every subsidiary must fully comply with the requirements of Section 38-11-40.

Section 38-11-70. Notice to Commissioner of noncompliance with chapter; suspension or revocation of license; certain investments excepted.

An insurer not in compliance with the requirements imposed by this chapter shall within thirty days notify the Commissioner. Upon being notified, or upon otherwise ascertaining noncompliance, the Commissioner shall order the insurer to make good the deficiency within thirty days, and he shall, upon failure of the insurer to do so, revoke or suspend the license of the insurer until the deficiency has been made good. However, if noncompliance results from the acquisition of the property or security through foreclosure or otherwise results from a default in a loan or other obligation and the acquisition has been rendered necessary in order to protect the investment or avoid greater loss, the Commissioner may further extend the period not to exceed one hundred eighty days if the insurer establishes that the extension is necessary, that it will not prejudice the policyholders and that the insurer has, in good faith, entered upon a course of action calculated to terminate the noncompliance on or before the expiration of the extended period.

Further, investments in real estate and mortgage loans on real estate already made and recognized as admitted assets as of December 31, 1970, are not affected by the restrictions and limitations of this chapter, and are considered as assets covering policyholder obligations and minimum capital, or guaranty fund, and surplus required by law.

Section 38-11-80. Authority required for making loans and investments.

No insurer may make any loan or investment, except the policy loans of a life insurer, or any sale or exchange unless authorized, approved, or ratified by its board of directors or other governing body or by a committee charged by the board of directors, other governing body, or the bylaws with the duty of making the investment, loan, sale, or exchange. The minutes of the committee must be submitted to the board of directors or other governing body at the next meeting of the board of directors or other governing body.

Section 38-11-90. Investments in and loans upon certain securities prohibited.

No insurer may invest any of its funds in or lend any of its funds upon the security of:

(a) Issued shares of its own capital stock except with the written permission of the Commissioner which may be granted, at his discretion, where the purpose of the acquisition is in connection with a lawful plan for mutualization of the insurer, or in furtherance of a retirement, pension, or incentive program for officers or employees of the insurer, which plan has been approved by the stockholders, or if otherwise the acquisition is shown to be for the benefit of all stockholders; but in no event may shares so acquired be admissible as an asset or shown as an asset in any financial statement of the insurer.

(b) Securities issued by a corporation which is insolvent at the time of the proposed investment except upon the written approval of the Commissioner.

(d) Any investment or security which is found by the Commissioner to be designed to evade any prohibition of this chapter.

Section 38-11-100. Certain assets considered admitted assets; valuation.

The assets enumerated in Section 38-11-40 and other assets not prohibited under Section 38-11-90 nor required to be scheduled as nonadmitted assets in the annual statement, as prescribed by the Commissioner, are considered admitted assets and all these assets must be valued in accordance with the standards prescribed in item (l) of Section 38-11-50.

Section 38-11-110. Valuation of other investments.

All investments of insurers authorized to do business in this State, for which no rule or method of valuation has been otherwise provided, must be valued in the discretion of the Commissioner at their fair market value, appraised value, or at amounts determined by the Commissioner as their fair market value. If any valuation of an investment by an insurer appears to be an unreasonable estimate of its true value, the Commissioner has the authority to cause the investment to be appraised, and the appraised value must be substituted as the true value. The appraisal must be made by two disinterested and competent persons, one to be appointed by the Commissioner and one to be appointed by the insurer. In the event these two persons fail to agree, they shall appoint a third disinterested and competent person, and the estimate of the value of the investment, as arrived at by these three persons, must be substituted as the true value.

CHAPTER 13

Examinations, Investigations,

Records, and Reports

Section 38-13-10. Examination of insurers.

The Commissioner or an examiner shall visit every domestic insurer during the year immediately following the end of each three-year period of operation and thoroughly inspect and examine at least those affairs conducted during each full year of operation since the last examination, especially as to the insurer's financial condition, ability to fulfill its obligations, and compliance with the law. The Commissioner may also examine any domestic insurer whenever he considers it prudent to do so. Whenever the Commissioner considers it prudent for the protection of policyholders in this State, he may examine or have examined any insurer applying for admission or already admitted to do business in this State. The insurer shall pay the charges incurred in this examination, including the expenses of the Commissioner and the expenses and compensation of his assistants. The Commissioner may, in lieu of conducting the examination, accept an examination conducted by the supervising official of the insurer's domiciliary state.

Section 38-13-20. Access to books and papers; examination of directors, officers, agents, or trustees.

For the purposes of Section 38-13-10 the Commissioner or person making the examination shall have free access to all books and papers relevant to the examination of an insurer, including those kept by any of its agents or affiliated or subsidiary corporations or partnerships and may summon, administer oaths to, and examine as witnesses the directors, officers, agents, or trustees of any company, agents, affiliated or subsidiary companies, or any other person in relation to matters relevant to the examination.

Section 38-13-30. Remedies for refusal to submit to examination or pay expenses.

The refusal of any insurer to submit to examination or the refusal or failure of an insurer to pay the expenses of an examination is grounds for the revocation or refusal of its license. The Commissioner is authorized to make public the revocation or refusal of license and the reasons for revocation or refusal. The Commissioner shall promptly institute a civil action to recover the expenses of examination against an insurer which refuses or fails to pay.

Section 38-13-40. Opportunity for hearing on report of examination; public report.

Before, during, and after the examination of an insurer neither the Commissioner nor any of his representatives may make public or allow to be made public the financial statement, findings, or report of examination or any report affecting the status or standing of the insurer examined until the insurer has either accepted or approved the final report of examination or has been afforded a reasonable opportunity to be heard and to answer or rebut any statements or findings. This hearing, if requested, shall be informal and private. If, within thirty days after the final report of examination has been submitted to it, the insurer examined has neither notified the Commissioner of its acceptance and approval of the report nor requested that it be heard, thereon, the report must be filed as a public document and is open to public inspection.

Section 38-13-50. Time for hearing and filing of report.

If, within thirty days after the final report of examination has been submitted to it, the insurer examined requests a hearing, a hearing must be held within thirty days after receipt of the request and the report as amended, modified, or affirmed must be filed as a public document thirty days after the hearing.

Section 38-13-60. Other powers to revoke or suspend license not affected.

Sections 38-13-40 and 38-13-50 do not prohibit the Commissioner from taking any action provided for or from exercising any power conferred by any other provision of this title to suspend or revoke the license of an insurer.

Section 38-13-70. Investigation of charges; liability for expenses.

Upon his own motion or upon written complaint filed by a citizen of this State that an insurer has violated this title, the Commissioner shall investigate the matter and, if necessary, examine under oath the president and other officers or agents of the insurer and all books, records, and papers of the insurer. If the Commissioner finds upon substantial evidence that a complaint against an insurer is justified, the insurer, in addition to the penalties imposed for violation of this title, is liable for the expenses of the investigation, and the Commissioner shall promptly present the insurer with a statement of the expenses. If the insurer refuses or neglects to pay, the Commissioner is authorized to revoke its license and to bring civil action for the collection of the expenses.

Section 38-13-80. Annual statement as to business standing and financial condition.

Every insurer shall annually file with the Commissioner by March first, in the form and detail the Commissioner prescribes, a statement showing the business standing and financial condition of the insurer on December thirty-first of the preceding year, except that upon timely written request by the chief managing agent or officer setting forth reasons why the statement cannot be filed within the time provided, the Commissioner may, in writing, grant an extension of filing time for a period not to exceed thirty days. The statement must be signed by the president and attested to by the secretary or treasurer of the insurer or any other officer prescribed by regulation promulgated by the Commissioner. All signatures must be sworn to before the Commissioner or some other officer authorized by law to administer oaths. The Commissioner shall furnish each domestic insurer two blanks for their annual statement.

Section 38-13-90. Publication of assets and liabilities.

No insurer may publish a statement of its assets and liabilities unless it shows both its assets and liabilities with equal conspicuousness. The statement shall reflect the assets and liabilities as were shown on the last annual statement or subsequent report of examination accepted by the Commissioner unless the Commissioner has given prior written approval to the publishing of a statement as of another date. Any publication purporting to show the capital of the insurer shall exhibit only the amount of capital actually paid in. The license of an insurer or agent violating this section may, in the discretion of the Commissioner, be suspended or revoked.

Section 38-13-100. Items to be included as liabilities in financial statements.

In any determination of the financial condition of an insurer, capital stock and liabilities to be charged against its assets shall include:

(1) The amount of its capital stock outstanding, if any;

(2) The amount, estimated consistent with provisions of the law and rulings of the Commissioner, necessary to pay all its unpaid losses and claims incurred on or prior to the date of statement, whether reported or unreported, together with the expenses of adjustment or settlement;

(3) With reference to life and accident and health insurance and annuity contracts:

(a) the amount of reserves on life insurance policies and annuity contracts in force, valued according to the tables of mortality, rates of interest, and methods adopted pursuant to Section 38-9-180 which are applicable,

(b) reserves for disability benefits, for both active and disabled lives,

(d) any additional reserves which may be reasonably required by the Commissioner;

(4) With reference to insurance other than specified in the law and rulings of the Commissioner, the amount of reserves equal to the unearned portions of the gross premiums charged on policies in force, computed in accordance with the law and rulings of the Commissioner; and

(5) Taxes, expenses, and other obligations due or accrued at the date of the statement.

Section 38-13-110. Treatment of contingent debts or liabilities in financial statements.

Contingent debts or liabilities of domestic insurers must be set forth in financial statements in the following manner:

(1) In the event a contingent liability or surplus certificate liability is in the form of certain borrowings provided for under Section 38-19-610 and the borrowings are made by a domestic mutual insurer insuring properties only, then the obligation of the corporation or association must be shown as a footnote on any published financial statement of the corporation or association;

(2) In the event a contingent liability or surplus certificate liability of the corporation is in connection with a domestic mutual assessment association or other form of domestic mutual insurer having issued and in force policies containing an assessment provision for either life insurance or property insurance, then the liability must be set forth as a footnote on any published financial statement of the corporation or association;

(3) In the event that a domestic mutual insurer has outstanding or is issuing a contract that does not contain an assessment provision, then the statement of assets and liabilities shall show as a part of the liabilities the face amount of the liability, with a footnote explaining that payment of the liability must be made out of the surplus earnings of the insurer and, in the event of dissolution of the corporation or association, is a junior liability to the claims of the policyholders but a senior liability to the distribution of any remaining assets to policyholders; and

(4) In the event there is a contingent liability or a surplus certificate liability outstanding in connection with any domestic capital stock insurance corporation, the full face amount of the liability must be separately stated as a part of the surplus of the insurer and is considered to be a junior liability to policyholders' reserves and claimants' liabilities but is considered a senior liability, either in the event of dissolution or for statement purposes, to that which otherwise would be a liability to the stockholders.

Section 38-13-120. Record of business done; inspection by Commissioner.

All companies doing any kind of insurance business in this State shall make and keep a full and correct record of the business done by them, showing the number, date, term, amount insured, premiums, and the person to whom issued of every policy or certificate of renewal. This information must be furnished to the Commissioner on demand, and the original books or record must be open to the inspection of the Commissioner on demand.

Section 38-13-130. Records of losses and claims.

Every insurer doing business in this State shall maintain a record of losses paid under its policies and notices as provided in its policies which may normally result in claim or loss. The records must be maintained until the next regular examination by an insurance department or for a period of three years from the date of payment of the loss or receipt of the notice.

Section 38-13-140. Refusal to exhibit records; false statements; confidentiality of replies.

Any person having in his possession or control any books, accounts, or papers of any company licensed under this title shall exhibit them to the Commissioner or to any deputy, actuary, accountant, or person acting with or for the Commissioner. Any person who refuses, on demand, to exhibit any books, accounts, or

papers or knowingly or wilfully makes any false statement in regard to them is guilty of a misdemeanor and, upon conviction, must be fined or imprisoned, or both, at the discretion of the court. All replies are strictly confidential except for the purposes of prosecution for any false or fraudulent statement made to the Commissioner.

Section 38-13-150. Returns of reinsurance by insurers; effect of refusal.

Every insurer shall file a return, on a form and at times prescribed by the Commissioner, showing all reinsurance or cessions of risk or liability contracted for or effected by it, whether by issue of policy, entry or bordereau, general participation agreement, excess loss reinsurance, or in any manner whatsoever, upon property located in this State or covering, whether specified or otherwise, any risk or liability upon property so located. The return must be certified by the oath of its president and secretary, if a company of the United States, and, if a company of a foreign country, by the oath of its managers in the United States as to reinsurance or cessions effected through its branch office in the United States and by the oath of its president and secretary or by officers corresponding thereto, at its home office, wherever located, as to reinsurance or cessions contracted for or effected through the foreign office. The refusal of an insurer to file the required return is presumptive evidence that it is guilty of violating the provisions of Section 38-9-190 and subjects it to the penalties prescribed and imposed by Sections 38-5-120 and 38-5-130.

Section 38-13-160. Commissioner may require special reports; confidentiality of replies.

The Commissioner may require any authorized insurer or its officers to answer any inquiry in relation to its transactions, condition, or any connected matter necessary to the administration of the insurance laws of the State. Every corporation or person must reply in writing to the inquiry promptly and truthfully, and the reply must be verified, if required by the Commissioner, by the individual or by the officer or officers of a corporation as he designates. These replies are strictly confidential.

Section 38-13-170. Penalties for making or aiding in making false statement.

If an insurer, in its annual or other statement required by law, wilfully misstates the facts, the insurer and the person signing the statement and any person aiding, abetting, or participating in the making of the statement must be severally punished by a fine of not more than two thousand dollars or imprisonment for not more than five years, or both, in the discretion of the court, and the insurer, upon conviction, forfeits its right to do business in this State.

Section 38-13-180. Insurance reserve fund defined.

For purposes of Sections 38-13-190 and 38-13-200, 'insurance reserve fund' or 'funds' means the insurance reserve funds administered by the Division of General Services of the State Budget and Control Board to provide liability and property insurance, as authorized under Section 1-11-140, Chapter 7 of Title 10, and the regulations prescribed by the State Budget and Control Board.

Section 38-13-190. Commissioner to examine affairs and methods of operations of insurance reserve fund; reports of findings.

(1) At the end of each three years of operation, and at any other time considered prudent, the Commissioner shall examine the affairs of the insurance reserve funds and make findings and recommendations as provided by this section. For purposes of examination, the Commissioner or person making the examination has free access to all relevant records, books, and papers in the possession of any person or entity and may summon, administer oaths to, and examine as witnesses any persons in relation to matters relevant to the examination.

(2) The Commissioner shall examine all methods of operation of the insurance reserve funds to determine whether the funds are being administered in accordance with sound insurance practices and in the best interest of the State. Following the examination, the Commissioner shall prepare a report for submission to the State Budget and Control Board, the Speaker of the House of Representatives, and the President of the Senate containing his findings and conclusions and any recommendations to improve the efficiency, effectiveness, and overall operation of the funds.

Section 38-13-200. Penalty for refusal to be examined under oath.

Any person or entity having possession or control of any records, books, or papers relevant to an insurance reserve fund examination who fails or refuses to be examined under oath is guilty of a misdemeanor and upon conviction must be punished by a fine of not more than ten thousand dollars or imprisonment for not more than one year and is subject to suspension or revocation of any insurance licenses issued by the Commissioner.

CHAPTER 15

Surety Insurers

Section 38-15-10. Special authority required for writing certain bonds; forms of the bonds.

No surety insurer authorized to transact business in this State may execute a fidelity or surety bond for an officer or employee of this State or of a county, municipality, or other subdivision of this State or for an officer or employee of a bank, trust company, or other fiduciary corporation organized under the laws of this State except upon the assumption of risk and upon the forms prescribed by law or approved by the Governor, the Commissioner, and the Attorney General, or by any two of these officials. The insurer shall also procure special authority from the Governor, the Commissioner, and the Attorney General, or any two of them, for the writing of the fidelity or surety bonds.

Section 38-15-20. Withdrawal of special authority for writing certain bonds.

The Governor, the Commissioner, and the Attorney General shall remove from the list of surety insurers whose bonds are acceptable under Section 38-15-10 the names of insurers who in their judgment fail or refuse to carry out promptly their obligations in good faith.

Section 38-15-30. Deposit of securities required.

Insurers doing business in this State who offer or undertake to become surety upon any bond or other surety contract must in addition to any other deposit required by the laws of this State deposit with the the Commissioner bonds of the United States or of any state of the United States in the market value of one hundred thousand dollars which are receipted for by the Commissioner and held by him. The securities must be held to pay any final judgment entered against the insurer in a court of competent jurisdiction in this State requiring it to pay any loss or liability arising during the term of the bond or while the securities are held. Any judgment obtained is a lien upon the securities. When the insurer ceases to do business in this State, has settled all claims against it, and has been released from all bonds upon which it has been taken as surety, the securities deposited are delivered to the proper party on presentation of the Commissioner's receipt for the securities. While the securities are deposited with the Commissioner, the owner is entitled to collect the interest on them. The faith of the State is pledged for the return of the deposited securities to the person entitled to receive them.

An insurer which has complied with the provisions required of qualified insurers in Section 38-9-100 is relieved of making the deposit required by this section and, subject to the provisions of Section 38-7-90, is entitled to the return of the deposit filed or deposited by it under this section.

A domestic insurer making a voluntary deposit provided by Section 38-9-110 is relieved of making this deposit if the insurer meets the definition of a qualified insurer as defined in Section 38-9-100 and if the voluntary deposit meets the requirements of that section.

Section 38-15-40. Effect of reduction in value of bonds deposited by surety.

When the bonds required to be deposited by an insurer in Section 38-15-30 are reduced below the value of fifty thousand dollars, except by unexpected fluctuation in value, the right of that insurer to do business in this State may be revoked or suspended.

Section 38-15-50. Deposit of cash in trust in lieu of giving bond or depositing securities.

In lieu of depositing bonds with a market value of fifty thousand dollars, an insurer may satisfy Section 38-15-30 by depositing fifty thousand dollars in cash in the name of the Commissioner with the trust department of a national or state bank of this State approved by the Commissioner. The Commissioner shall give the insurer a receipt for the deposit. When the insurer ceases to do business in this State, has settled all claims against it, and has been released from all the bonds upon which it has been taken as surety, the cash deposit must be delivered to the proper party upon presentation of the Commissioner's receipt. While the cash is deposited, its owner is entitled to collect the interest. The cash deposit is liable to the same extent as securities deposited with the Commissioner and subject to like procedure in case of default or insolvency.

Section 38-15-60. Power to become surety; release; rights and liabilities.

A surety insurer having an unrevoked certificate of authority may, upon production of the certificate, be accepted as surety on the bond of any person required by the laws of this State to give bond and may be the only surety necessary to render this bond valid. However, other surety may, in the discretion of the official authorized to approve the bond, be required and the surety may be released from its liability on the same terms and conditions as are by law prescribed for the release of individuals. Corporations becoming this surety have and are subject to all the rights and liabilities of natural persons.

Section 38-15-70. Estoppel to deny power to execute bond or assume liability.

An insurer which executes any bond or undertaking of surety under this chapter is estopped, in any proceeding to enforce the liability which it has assumed to incur, from denying its corporate power to execute the bond or assume the liability.

Section 38-15-80. Persons considered agents of surety insurers.

A person is considered as acting agent for a surety insurer established in another state when he represents the insurer by:

(a) receiving or transmitting applications for suretyship,

(b) receiving for delivery bonds founded on applications forwarded from this State, or

(c) procuring suretyship to be effected by the insurer upon the bonds of this State or upon bonds given to persons in this State.

Section 38-15-90. Approval of public officer's books and accounts does not release his surety; remedy in case of default.

No insurer is relieved of its liability upon any bond of a city, county, or state officer because the books and accounts of the principal have been examined and approved as correct by the proper authorities when in fact there has been a breach of the bond of the officer and a loss accruing from this breach. In case of default upon the bond, the city, county, or state authorities have all the remedies against the principal and sureties upon the bonds as are provided by law.

Section 38-15-100. Venue for suit on bonds or obligations.

If a fidelity insurer or other corporation or company doing a fidelity insurance business in this State becomes surety on bonds or obligations mentioned in this chapter, it is subject to being sued on these bonds or obligations in the county of the residence of the principal of the bond or obligation.

CHAPTER 17

Reciprocal Insurance

Section 38-17-10. Subscribers authorized to exchange reciprocal or interinsurance contracts.

Individuals, partnerships, and corporations of this State, designated as 'subscribers', may exchange reciprocal or interinsurance contracts with each other or with individuals, partnerships, and corporations of other states and countries, providing indemnity among themselves from any loss which may be insured against under other provisions of law, excepting life insurance.

Section 38-17-20. Contracts may be executed by attorney in fact.

The reciprocal or interinsurance contracts may be executed by an attorney in fact herein designated 'attorney', duly authorized and acting for the subscribers. The attorney may be a corporation. The office or offices of the attorney, herein defined as an 'exchange', may be maintained at the place or places as designated by the subscribers in the power of attorney.

Section 38-17-30. Verified declaration to be filed with Commissioner.

The subscribers shall, through their attorney, file with the Commissioner a declaration verified by the oath of the attorney setting forth:

(1) The name of the office at which the subscribers propose to exchange the indemnity contracts. This name may not be so similar to any name previously adopted by a similar organization or by any insurance corporation or association that in the opinion of the Commissioner is calculated to result in confusion or deception.

(2) The kind of insurance to be effected or exchanged.

(3) A copy of the form of policy contract or agreement under or by which the insurance is to be effected or exchanged.

(4) A copy of the form of power of attorney or other authority of the attorney under which the insurance is to be effected or exchanged.

(5) The location of the office or offices from which the contracts or agreements are to be issued.

(6) That applications have been made for indemnity upon at least one hundred separate risks aggregating not less than one and one-half million dollars represented by executed contracts or bona fide applications to become concurrently effective. In the case of automobile insurance, applications must have been made for indemnity upon at least one thousand motor vehicles or for insurance aggregating not less than one and one-half million dollars represented by executed contracts or bona fide applications to become concurrently effective on any or all classes of automobile insurance effected by the subscribers through the attorney.

(7) That there are assets conforming to the requirements of Section 38-17-100 in the possession of the attorney and available for the payment of losses.

Section 38-17-40. Maximum liability of subscribers.

The maximum liability of any subscriber for losses and expenses must be fixed and determined by the power of attorney.

Section 38-17-50. Deposit of securities.

The Commissioner shall require every reciprocal exchange to provide security deposits pursuant to Sections 38-9-80 to 38-9-140 as required for other insurers doing business in this State.

Section 38-17-60. Commissioner shall be appointed agent for service of process on exchanges.

When filing the declaration provided for in Section 38-17-30, the attorney shall also file with the Commissioner a written instrument executed by him for the subscribers stipulating that upon the issuance of a certificate of authority provided for in Section 38-17-70 service of process may be had upon the Commissioner in all suits in this State arising out of the policies, contracts, or agreements and that this service is valid and binding upon all subscribers exchanging at any time reciprocal or interinsurance contracts through the attorney.

Section 38-17-70. Annual certificate of authority.

Each attorney by or through whom are issued any policies of or contracts for indemnity referred to in this chapter shall annually procure from the Commissioner a certificate of authority, stating that all of the requirements of this chapter have been complied with and, upon compliance and the payment of the fees required by this chapter, the Commissioner shall issue the certificate of authority. The Commissioner may revoke or suspend the certificate of authority upon breach of any condition imposed by this chapter after reasonable written notice has been given to the attorney so that he may appear and show cause why action should not be taken. Any attorney who may have procured a certificate of authority under this section may renew it annually.

Section 38-17-80. Domestic corporations may exchange reciprocal or interinsurance contracts.

Any domestic corporation may, in addition to the rights, powers, and franchises specified in its articles of incorporation, exchange reciprocal or interinsurance insurance contracts. The right to exchange these contracts is incidental to the purposes for which domestic corporations are organized and is granted the same as rights and powers expressly conferred.

Section 38-17-90. Maximum indemnity on fire risk; statement required.

The attorney shall file a sworn statement with the Commissioner showing the maximum amount of indemnity upon any single fire insurance risk. The attorney shall also file, whenever required, a sworn statement with the Commissioner that he has examined the commercial rating of the subscribers as shown by the reference book of a commercial agency having at least one hundred thousand subscribers and that from this examination or other information in his possession it appears that no subscriber has assumed more than ten percent of its net worth on any single fire insurance risk.

Section 38-17-100. Maintenance of assets and guaranty fund.

There must at all times be maintained as a reserve assets in cash or securities equal to fifty percent of the net annual advance premiums or deposits collected and credited to the accounts of subscribers on policies having one year or less to run and prorata on those for longer periods or, in lieu thereof, one hundred percent of the net unearned premiums or deposits collected and credited to the accounts of subscribers. There must also be maintained as a guaranty fund or surplus an additional sum in cash or securities in the amount required of mutual insurers by Section 38-9-20 or 38-9-30. In addition to the foregoing requirements, in the case of liability insurance there must be maintained as a claim or loss reserve in cash or securities assets sufficient to discharge all liabilities on all outstanding losses arising under policies issued, these losses to be calculated in accordance with the law of the state relating to similar reserve companies insuring similar risks. The securities referred to in this section must be securities authorized by the laws of the state in which the principal office of the attorney is located for the investments of similar funds of insurers doing the same kind of business. If at any time the amounts on hand are less than the foregoing requirements, the subscribers or their attorney shall make up the deficiency.

Section 38-17-110. 'Net annual advance premiums or deposits' defined.

'Net annual advance premiums or deposits', as used in this chapter, means the advance premiums or deposits made by subscribers after deducting the amounts specifically provided in the subscribers' agreements for expenses.

Section 38-17-120. Disposition of funds advanced to make up deficiencies.

When funds other than those which have accrued from premiums or deposits of subscribers are supplied to make up a deficiency as provided in Section 38-17-100, they must be deposited and held for the benefit of subscribers under any terms and conditions the Commissioner may require as long as a deficiency exists and thereafter returned to the depositors.

Section 38-17-130. Exchanges may sue and be sued.

A reciprocal exchange transacting business in this State may sue or be sued in the name in which its contracts are authorized to be exchanged.

Section 38-17-140. Exchanges subject to examinations.

The business affairs and assets of reciprocal or interinsurance exchanges, as shown at the office of its attorney, are subject to examination by the Commissioner as often as he sees fit. The cost of the examination must be paid by the exchange examined.

Section 38-17-150. Annual report of business.

Each attorney shall annually make and file by March first with the Commissioner a sworn statement, upon a form to be prescribed and furnished by the Commissioner, showing that the financial condition of affairs at the office where the reciprocal or interinsurance contracts are issued is in accordance with the standard of solvency provided for in this chapter and stating:

(1) The amount of all premiums or deposits collected from subscribers in this State during the previous calendar year;

(2) The amounts actually paid subscribers on losses;

(3) The total amounts returned to subscribers as savings and the amounts retained for expenses;

(4) The amount of insurance reinsured in other insurers licensed in this State, naming them and the amount of premiums paid;

(5) The amount of insurance reinsured in insurers not licensed in this State, naming them and the amount of premiums paid; and

(6) The amount of reinsurance accepted from admitted companies and the premiums received for that reinsurance on risks located in this State, with the names of the insurers so reinsured.

However, the attorney may not be required to furnish the names and addresses of any subscribers.

Section 38-17-160. Fees, taxes, and bond of attorney.

Each attorney shall pay a license fee of two hundred dollars annually for the issuance of the certificate of authority or its renewal. In addition to the license fee, each attorney shall pay all of the taxes provided by law on companies doing a like business in this State and shall file the bond required of other companies doing a like class of business.

Section 38-17-170. Violations of chapter; conditional permit to organize.

Any attorney who exchanges any contract for indemnity specified in this chapter or directly or indirectly solicits or negotiates any applications for this contract without first complying with this chapter is guilty of a misdemeanor and, upon conviction, is subject to a fine of not more than one thousand dollars. However, the Commissioner may, in his discretion and on terms he may prescribe, issue a permit for organization purposes which must continue in force or be cancelled at his pleasure.

CHAPTER 19

Domestic Mutual Insurers

Article 1

Members and Meetings

Section 38-19-10. Membership in mutual insurer.

Any person, government or governmental agency, state or political subdivision of a state, public or private corporation, board, association, estate, trustee, or fiduciary may be a member of a mutual insurer.

Section 38-19-20. Contract shall stipulate membership of contract holder.

Each holder of one or more insurance contracts issued by a domestic mutual insurer, other than a contract of reinsurance, is a member of the insurer, with the rights and obligations of membership. Each insurance contract so issued shall effectively so stipulate.

Section 38-19-30. General rights of members.

A domestic mutual insurer is owned by and must be operated in the interest of its members. Each member is entitled to one vote in the election of directors and on matters coming before corporate meetings of members, subject to reasonable minimum requirements as to duration of membership and amount of insurance held as may be made in the insurer's bylaws. With respect to the management, records, and affairs of the insurer a member has the same character of rights and relationship as a stockholder has toward a domestic stock insurer.

Section 38-19-40. Notice of annual meetings.

Notice of the time and place of the annual meeting of members of a domestic mutual insurer must be given by imprinting the notice plainly on the policies issued by the insurer. Any change of the date or place of the annual meeting may be made only by an annual meeting of members. Notice of the change may be given:

(1) by imprinting the new date or place on all policies which will be in effect as of the date of the changed meeting; or

(2) unless the Commissioner otherwise orders, only through policies issued after the date of the annual meeting at which the change was made and in premium notices and renewal certificates issued during the twenty-four months immediately following the meeting.

Section 38-19-50. Use of proxies.

A member of a domestic mutual insurer may vote in person or by proxy given another member on any matter coming before a corporate meeting of members. An officer of the insurer may not hold or vote the proxy of any member. The proxy is not valid beyond the earlier of the following dates:

(1) The date of expiration set forth in the proxy;

(2) The date of termination of membership; or

(3) One year from the date of execution of the proxy.

No member's vote upon any proposal to divest the insurer of its business and assets, or the major part thereof, may be registered or taken except in person or by a proxy newly executed and specific as to the matter to be voted upon.

Section 38-19-60. Quorum for conduct of business at annual meeting; form and approval of voting proxies.

At any annual meeting of a domestic mutual insurer all business including the election of directors must be conducted pursuant to majority vote of those members present and voting either in person or by proxy of nonpresent members as provided for in Section 38-19-50. No other quorum requirements may limit the conduct of this business. No proxy may be utilized by a domestic mutual insurer subject to the provisions of this chapter unless:

(1) it is printed in ballot form;

(2) it includes in the case of elections for members of boards of directors adequate provisions for the voting by write-in for persons other than those nominees appearing on the proxy for each office;

(3) it includes adequate notice that votes for directors where more than one office of director is subject to election may be cast cumulatively;

(4) it includes in the case of issues or matters for consideration adequate provisions for affirmative or negative votes individually on each issue or matter;

(5) the Commissioner has given prior approval to it.

Article 3

Operations Generally

Section 38-19-210. Bylaws.

A domestic mutual insurer shall adopt bylaws for the conduct of its affairs. These bylaws, or any modification of them, must be immediately filed with the Commissioner. The Commissioner shall disapprove any bylaw or modification if he finds after a hearing that it is not in compliance with the laws of this State. He shall immediately notify the insurer of disapproval. No disapproved bylaw or modification is effective during the existence of the disapproval.

Section 38-19-220. Directors.

No individual may be a director of a domestic mutual insurer by reason of his holding public office. Adjudication as a bankrupt, taking the benefit of any insolvency law, or making a general assignment for the benefit of creditors disqualifies an individual from being or acting as a director.

Section 38-19-230. Limitation of expenses for property and casualty insurance.

For any calendar year after its first two full calendar years of operation no domestic mutual insurer may incur any expense in the writing or administration of property and casualty insurances, other than boiler and machinery or elevator, transacted by it which, exclusive of losses paid, loss adjustment expenses, investment expenses, dividends, and taxes, exceeds the sum of:

(1) Forty percent of the net premium income during that year after deducting net earned reinsurance premiums for the year; plus

(2) All reinsurance commissions received on reinsurance ceded by it.

Section 38-19-240. Limitation of expenses of certain companies.

The bylaws of domestic mutual property insurers on the assessment premium plan shall impose a reasonable limitation upon its expenses.

Section 38-19-250. Violation of expense limitations.

The officers and directors of an insurer violating Section 38-19-230 or 38-19-240 are jointly and severally liable to the insurer for any excess of expenses incurred. If the insurer fails to exercise reasonable diligence or refuses to enforce the liability, the Commissioner may prosecute action thereon for the benefit of the insurer. Failure or refusal to enforce this liability constitutes grounds for revocation of the insurer's certificate of authority.

Section 38-19-260. Limitation of actions on officers' and directors' salaries.

No action to recover, or on account of, any salary or other compensation due or claimed to be due any officer or director of a domestic mutual insurer or on any note or agreement relative thereto may be brought against the insurer more than one year after the date on which the salary or compensation, or any installment thereof, first accrued.

Section 38-19-270. Dividends.

The directors of a domestic mutual insurer may apportion and pay dividends to its members as entitled thereto, but only out of that part of its surplus funds which is in excess of its required minimum surplus and which represents net realized savings and net realized earnings from its business. Any classification of its participating policies and of risks assumed thereunder which the insurer may make must be reasonable. No dividend may be paid which is inequitable or which unfairly discriminates as between the classifications or as between policies within the same classification. No dividend, otherwise earned, may be made contingent upon the payment of a renewal premium on any policy.

Article 5

Liability of Members and Nonassessable Policies

Section 38-19-410. Contingent liability of members.

Each member of a domestic mutual insurer, except as otherwise provided in this chapter, has a contingent liability, prorata and not one for another, for the discharge of its obligations. The contingent liability is, at a maximum, the amount stated in the insurer's articles of incorporation but may not be less than one nor more than five additional premiums for the member's policy at the annual premium rate. Every policy issued by the insurer shall contain a statement of the contingent liability. Cancellation of the policy of a member does not relieve the member of contingent liability for his proportion of the obligations of the insurer which accrued while the policy was in force.

Section 38-19-420. Contingent liability is not an asset of the insurer.

The contingent liability of members of a domestic mutual insurer to assessment does not constitute an asset of the insurer in the determination of its financial condition.

Section 38-19-430. Validity of guaranty against liability.

No person may insure against or agree or promise any member of a domestic mutual insurer holding a policy which provides for contingent liability to save him harmless from the contingent liability or any assessment under the policy. Any insurance, agreement, or promise attempted of this nature is void.

Section 38-19-440. Assessments for deficiencies.

If at any time the surplus of a domestic mutual insurer is less than the amount required by this title and the deficiency is not cured from other sources, its directors may with the Commissioner's approval make an assessment on its members who, at any time within the twelve months immediately preceding the date the assessment was authorized by the directors, held policies providing for contingent liability. The Commissioner may refuse to approve the assessment if in his judgment refusal will best promote the interests of the insurer's members and creditors and of the insuring public.

Section 38-19-450. Computation of individual assessments.

A member's proportionate part of any deficiency is computed by applying to the premium earned within the twelve-month period on his contingently liable policy or policies the ratio of the total deficiency to the total premium earned during the period on all contingently liable policies. In computing the earned premiums for the purposes of this section the gross premium received by the insurer for the policy must be used as a base, deducting charges not recurring upon the renewal or extension of the policy.

No member may have an offset against any assessment for which he is liable on account of any claim for unearned premium or losses payable.

Section 38-19-460. Enforcement of contingent liability on assessment premium plan.

The contingent liability of members of a domestic mutual insurer doing business on the assessment premium plan must be called upon and enforced by its directors as provided in its bylaws.

Section 38-19-470. Nonassessable policies.

A domestic mutual insurer, after it has established a surplus not less than the minimum capital and surplus required of a stock insurer to transact like kinds of insurance and for so long as it maintains this surplus, may extinguish the contingent liability of its members to assessment and omit provisions imposing contingent liability in all policies currently issued. Any deposit made with the Commissioner as a prerequisite to the insurer's certificate of authority may be included as part of the surplus referred to in this section. When the surplus has been established and the Commissioner has so ascertained, he shall issue to the insurer, at its request, his certificate authorizing the extinguishment of the contingent liability of its members and the issuance of policies free from contingent liability.

Section 38-19-480. Nonassessable plan applies to all policies.

The Commissioner may not authorize a domestic mutual insurer to extinguish the contingent liability of any of its members or in any of its policies to be issued unless it qualifies to and does extinguish the liability of all its members and in all policies for all kinds of insurance transacted by it.

Section 38-19-490. Revocation of authority to issue nonassessable policies.

The Commissioner shall revoke the authority of a domestic mutual insurer to extinguish the contingent liability of its members if:

(1) at any time the insurer's surplus is less than the minimum capital and surplus required of a stock insurer to transact similar kinds of business; or

(2) the insurer, by resolution of its directors approved by its members, requests that the authority be revoked.

Upon revocation of this authority for any cause the insurer may not thereafter issue any policies without contingent liability nor renew any policies then in force without written endorsement thereon providing for contingent liability.

Article 7

Borrowing

Section 38-19-610. Borrowed surplus.

A domestic mutual insurer may, with the Commissioner's advance approval and without the pledge of any of its assets, borrow money to defray the expenses of its organization or for any purpose required by its business upon an agreement that the money and the interest as may be agreed upon, but not exceeding eight percent per annum, must be repaid only out of the insurer's earned surplus in excess of its required minimum surplus. If the money is to be borrowed upon multiple agreements, the agreements must be serially numbered. No loan agreement or series of agreements may have or be given any preferential rights over any other such loan agreement or series. No commission or promotional expense may be paid to a director, officer, or employee of the insurer on account of this loan.

The Commissioner's approval of the loan, if granted, shall specify the amount to be borrowed, the purpose for which the money is to be used, the terms and forms of the loan agreement, the date by which the loan must be completed, and other related matters the Commissioner considers proper.

This article does not apply to loans obtained by the insurer in the ordinary course of business from banks and other financial institutions nor to loans secured by pledge or mortgage of assets.

Section 38-19-620. Loans may not be part of legal liabilities but must be reflected in financial statements.

Any money so borrowed may not form a part of the insurer's legal liabilities or be the basis of any setoff but, until it is repaid, financial statements filed or published by the insurer shall show as a footnote the amount of the loan then unpaid together with interest accrued but unpaid.

Section 38-19-630. Repayment of loans.

The insurer may repay the loan only out of its realized net earned surplus in excess of the minimum surplus required for the kinds of insurance transacted. This loan may not be repaid out of borrowed money. The insurer shall repay the loan or a part of it when its realized net earned surplus has become adequate to repay without impairing the insurer's operations.

Section 38-19-640. Repayment of more than one loan or by multiple agreement.

If there is more than one such loan or if any such loan is represented by multiple agreements, the loan agreement shall provide, in addition to any other time of repayment specified in it, that any part of the loan may be repaid at any time by selection by lot, under supervision of the Commissioner, of those loan agreements, out of all similar agreements then outstanding, to be then repaid in part or in whole.

Section 38-19-650. Commissioner's approval required for repayment.

No repayment of the loan may be made unless approved by the Commissioner. The insurer shall notify the Commissioner in writing not less than sixty days in advance of its intention to repay the loan or any part of it. The Commissioner shall immediately ascertain whether the insurer's financial condition is such that the repayment can properly be made.

Section 38-19-660. Rights of holders of loan upon dissolution.

Upon dissolution and liquidation of the insurer the holders of such loan agreements remaining unpaid after the retirement of all the insurer's other outstanding obligations are entitled to payment before any distribution may be made to the insurer's members.

Article 9

Conversion or Reinsurance, Liquidation, and Merger

Section 38-19-810. Conversion into stock insurer or reinsurance.

No domestic mutual insurer may be converted, changed, or reorganized as a stock corporation, except that:

(1) a domestic mutual insurer may be wholly reinsured in and its assets transferred to and its liabilities assumed by another mutual or stock insurer under terms and conditions approved by the Commissioner in advance of the reinsurance. The Commissioner may not approve the reinsurance agreement if it does not determine the amount of and make adequate provision for paying to policyholders of the mutual insurer reasonable compensation for their equities as owners of the insurer. This compensation must be apportioned to policyholders as identified and in the manner prescribed in Section 38-19-820; or

(2) a domestic mutual insurer, after having given notice once a week for six weeks of its intention to do so in a newspaper published in each county in which the domestic mutual insurer does business, may, with written consent of all of its policyholders and members and all of its officers, directors, and guarantors, become a stock insurer as long as it also complies fully with the provisions of this title pertaining to stock insurers.

Section 38-19-820. Members' share of assets on liquidation.

Upon the liquidation of a domestic mutual insurer its assets remaining after discharge of its indebtedness and policy obligations must be distributed to its members who were members within the five years prior to the termination of its certificate of authority. The distributive share of each of these members must be in the proportion that the aggregate premiums earned by the insurer on the policies of the members during the combined periods of his membership bear to the aggregate of all premiums so earned on the policies of all such members.

Section 38-19-830. Merger.

Two or more domestic mutual insurers may merge into a single mutual insurer under the conditions prescribed by Sections 38-19-840 to 38-19-890.

Section 38-19-840. Merger plan.

A merger plan, setting forth the following, must be approved by the boards of directors of the insurers proposing to merge:

(1) The name of the merged insurer.

(2) Its principal office.

(3) Its number of directors.

(4) The date for its annual meeting.

(5) Its proposed bylaws to govern the conduct of its business.

(6) The tentative date on which the merger is to be submitted to the policyholders of the merging insurers and at which meeting directors of the merged insurer will be elected if the plan receives approval.

(7) A pro forma statement of the merged insurer as of any date within ninety days preceding the date of the adoption of the plan.

(8) A brief statement showing what provision will be made for creditors of the merging insurers.

(9) A statement as to whether policyholder equities of the merging insurers will be similar or dissimilar.

Section 38-19-850. Submission of merger plan to Commissioner; notice of hearing.

The merger plan must be submitted to the Commissioner on behalf of the merging insurers. The Commissioner shall then publish notice in a newspaper of general circulation in each city where the principal office of a merging insurer is located that a hearing on the merger plan will be held in his office no sooner than ten days from the date the notice is published, at which hearing any policyholder, creditor, or other affected person of any of the merging insurers may appear in person or by attorney and present objections to the plan.

Section 38-19-860. Approval or disapproval by Commissioner.

Following the hearing held pursuant to Section 38-19-850 the Commissioner shall signify in writing his approval or disapproval of the proposed merger. If the Commissioner approves the merger, he shall set the time and place of a meeting of the policyholders of the merging insurers, which may be the same as that tentatively proposed in the merger plan.

Section 38-19-870. Submission of approved plan to policyholders; election of directors.

At the meeting held pursuant to Section 38-19-860 the plan must be submitted separately to the policyholders of each merging insurer and, if it is approved by resolution adopted by a majority of the policyholders present at that meeting in person or by proxy, the merger plan is declared effective. Whereupon the policyholders must meet in a joint meeting and elect a board of directors of the merged insurer.

Section 38-19-880. Filing certificate of merger; issuance of certificate by Secretary of State.

As soon as convenient after being elected, the board of directors of the merged insurer shall sign and send a certificate reflecting adoption of the merger plan and stating the results of the meetings held to approve the merger plan and to elect the board of directors of the merged insurer to the Secretary of State. The Secretary of State shall file this certificate and shall issue a certificate stating that a merger has been effected and that the merged insurer must thereafter be known by the name selected in the merger plan.

Section 38-19-890. Transfer of assets and liabilities to merged insurer.

Upon completion of the merger, the merged insurer succeeds, without further deed or formality, to all property of whatsoever kind or nature of each merging insurer and likewise completely assumes all liabilities of each merging insurer.

CHAPTER 21

Insurance Holding Company Regulatory Act

Section 38-21-10. Definitions.

In this chapter, unless the context otherwise requires:

(1) An 'affiliate' of, or person 'affiliated' with, a specific person means a person who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the person specified.

(2) The term 'control' (including the terms 'controlling,' 'controlled by', and 'under common control with' ) means the possession, direct or indirect, 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 38-21-210 that control does not exist in fact. The Commissioner 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.

(3) An 'insurance holding company system' consists of two or more affiliated persons, one or more of which is an insurer.

(4) The term 'insurer' has the same meaning as set forth in Section 38-1-20 except that it does not include (a) agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state, (b) fraternal benefit societies, or (c) nonprofit medical and hospital service associations.

(5) A 'person' means an individual, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization, any similar entity, or any combination of the foregoing acting in concert.

(6) A 'securityholder' of a specified person is one who owns any security of that person, including common stock, preferred stock, debt obligations, and any other security convertible

into or evidencing the right to acquire any of the foregoing.

(7) A 'subsidiary' of a specified person is an affiliate controlled by that person directly or indirectly through one or more intermediaries.

(8) The term 'voting security' includes any security convertible into or evidencing a right to acquire a voting security.

Section 38-21-20. Authority of insurers to organize or acquire subsidiaries.

A domestic insurer, either by itself or in cooperation with one or more persons, may organize or acquire one or more subsidiaries engaged in the following kinds of business:

(1) Any kind of insurance business authorized by the jurisdiction in which it is incorporated;

(2) Acting as an insurance broker or as an insurance agent for its parent or for any of its parent's insurer subsidiaries;

(3) Investing, reinvesting, or trading in securities for its own account, that of its parent, any subsidiary of its parent, or any affiliate or subsidiary;

(4) Management of an investment company subject to or registered pursuant to the Investment Company Act of 1940, as amended, including related sales and services;

(5) Acting as a broker-dealer subject to or registered pursuant to the Securities Exchange Act of 1934, as amended;

(6) Rendering investment advice to governments, government agencies, corporations, or other organizations or groups;

(7) Rendering other services related to the operations of an insurance business, including, but not limited to, actuarial, loss prevention, safety engineering, data processing, accounting, claims, appraisal, and collection services;

(8) Ownership and management of assets which the parent corporation could itself own or manage;

(9) Acting as administrative agent for a governmental instrumentality which is performing an insurance function;

(10) Financing of insurance premiums, agents, and other forms of consumer financing;

(11) Any other business activity determined by the Commissioner to be reasonably ancillary to an insurance business; or

(12) Owning a corporation or corporations engaged or organized to engage exclusively in one or more of the businesses specified in this section.

Section 38-21-30. Authority of insurers to invest in securities of subsidiaries.

In addition to investment in common stock, preferred stock, debt obligations, and other securities permitted under this title, a domestic insurer may also:

(1) Invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts which do not exceed the lesser of ten percent of the insurer's assets or fifty percent of the insurer's surplus as regards policyholders if, after these investments, the insurer's surplus as regards policyholders must be reasonable in relation to the insurer's outstanding liabilities and adequate to meet its financial needs. In calculating the amount of the investments, investments in domestic or foreign insurance subsidiaries must be excluded, and there must be included (a) total net monies or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of the subsidiary whether or not represented by the purchase of capital stock or issuance of other securities, and (b) all amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities and all contributions to the capital or surplus of a subsidiary after its acquisition or formation;

(2) Invest any amount in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer if each subsidiary agrees to limit its investments in any asset so that the investments will not cause the total investment of the insurer to exceed any of the investment limitations specified in item (1) or in the investment laws or regulations of this State. For the purpose of this item, 'the total investment of the insurer' includes (a) any direct investment by the insurer in an asset, and (b) the insurer's proportionate share of any investment in an asset by a subsidiary of the insurer, which must be calculated by multiplying the amount of the subsidiary's investment by the percentage of the ownership of the subsidiary;

(3) With the approval of the Commissioner, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries if after such investment the insurer's surplus as regards policyholders will be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.

Section 38-21-40. Investments in securities of subsidiaries are not subject to other restrictions.

Investments in common stock, preferred stock, debt obligations, or other securities of subsidiaries made pursuant to Section 38-21-30 are not subject to any other investment restrictions or prohibitions contained in this title.

Section 38-21-50. Determining compliance with provision authorizing investments in securities of subsidiaries; disposition of investments upon ceasing to control subsidiary.

Whether an investment meets the applicable requirements of Section 38-21-30 is to be determined before the investment is made by calculating the applicable investment limitations as though the investment had already been made, taking into account the then outstanding principal balance on all previous investments in debt obligations, and the value of all previous investments in equity securities as of the day they were made, net of any return of capital invested, not including dividends.

If an insurer ceases to control a subsidiary, it must dispose of any investment made pursuant to Section 38-21-30 within three years from the time of the cessation of control or within such further time that the Commissioner may prescribe unless, at any time after the investment has been made, the investment has met the requirements for investment under any other section of this title and the insurer has notified the Commissioner.

Section 38-21-60. Statement required by person seeking to acquire control of insurer.

No person other than the issuer may make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire or acquire, in the open market or otherwise, any voting security of a domestic insurer if, after the consummation thereof, the person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of the insurer, and no person may enter into an agreement to merge with or otherwise to acquire control of a domestic insurer unless, at the time the offer, request, or invitation is made or the agreement is entered into, or prior to

the acquisition of the securities if no offer or agreement is involved, the person has filed with the Commissioner a statement containing the information required by this section and the offer, request, invitation, agreement, or acquisition has been approved by the Commissioner in the manner hereinafter prescribed.

For purposes of this section, a domestic insurer includes any other person controlling a domestic insurer unless the other person as determined by the Commissioner is either directly or through its affiliates primarily engaged in business other than the business of insurance. As used in this section, 'person' does not include any securities broker holding, in the usual and customary brokers' function, less than twenty percent of the voting securities of an insurance company or of any person which controls an insurance company.

Section 38-21-70. Contents of statement; amendment.

The statement to be filed with the Commissioner, as prescribed in Section 38-21-60, must be made under oath or affirmation and shall contain the following information:

(1) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in Section 38-21-60 is to be effected, hereinafter called 'acquiring party', and

(a) If the acquiring party is an individual, his principal occupation and all offices and positions held during the past five years and any conviction of crimes other than minor traffic violations during the past ten years;

(b) If the acquiring party is not an individual, a report of the nature of its business operations during the past five years or for any lesser period as the acquiring party and any predecessors have been in existence; an informative description of the business intended to be done by the acquiring party and its subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of the acquiring party or who perform or will perform functions appropriate to these positions. The list shall include for each of these individuals the information required by subitem (a) of this section.

(2) The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction in which funds were or are to be obtained for this purpose, and the identity of persons furnishing the consideration. Where a source of the consideration is a loan made in the lender's ordinary course of business, the identity of the lender must remain confidential, if the person filing the statement so requests.

(3) Fully audited financial information as to the earnings and financial condition for the preceding five fiscal years of each acquiring party or for any lesser period as the acquiring party and any of its predecessors have been in existence.

(4) Unaudited financial information of the earnings and financial condition of each acquiring party as of a date within ninety days prior to filing the statement.

(5) Any plans or proposals which each acquiring party may have to liquidate the insurer, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management.

(6) The number of shares of any security referred to in Section 38-21-60 which each acquiring party proposes to acquire and the terms of the offer, request, invitation, agreement, or acquisition referred to in Section 38-21-60 and a statement as to the method by which the fairness of the proposal was arrived.

(7) The amount of each class of any security referred to in Section 38-21-60 which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.

(8) A full description of any contracts, arrangements, or understandings with respect to any security referred to in Section 38-21-60 in which an acquiring party is involved, including, but not limited to, transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of division of losses or profits, or the giving or withholding of proxies. The description shall identify the persons with whom the contracts, arrangements, or understandings have been entered into.

(9) A description of the purchase of any security referred to in Section 38-21-60 during the twelve calendar months preceding the filing of the statement, by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid.

(10) A description of any recommendations to purchase any security referred to in Section 38-21-60 made during the twelve calendar months preceding the filing of the statement by any acquiring party, or by anyone based upon interviews or at the suggestion of the acquiring party.

(11) Copies of all tender offers for, requests or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in Section 38-21-60, if distributed, of additional soliciting material relating thereto.

(12) The terms of any agreement, contract, or understanding made with any broker-dealer as to solicitation of securities referred to in Section 38-21-60 for tender, and the amount of any fees, commissions, or other compensation to be paid the broker-dealers.

(13) Any additional information the Commissioner may by regulation prescribe as necessary or appropriate for the protection of policyholders of the insurer or in the public interest.

If the person required to file the statement referred to in Section 38-21-60 is a partnership, limited partnership, syndicate, or other group, the Commissioner may require that the information called for by this section be given with respect to each partner of the partnership or limited partnership, each member of the syndicate or group, and each person who controls the partner or member. If this partner, member, or person is a corporation or the person required to file the statement referred to in Section 38-21-60 is a corporation, the Commissioner may require that the information called for by this section be given with respect to the corporation, each officer and director of the corporation, and each person who is directly or indirectly the beneficial owner of more than ten percent of the outstanding voting securities of the corporation.

If any material change occurs in the facts set forth in the statement filed with the Commissioner and sent to the insurer pursuant to this section, an amendment setting forth the change, together with copies of all documents and other material relevant to the change, must be filed with the Commissioner and sent to the insurer within two business days after the person learns of the change.

Section 38-21-80. Use of certain documents required by other laws in furnishing information called for in statement.

If any offer, request, invitation, agreement, or acquisition referred to in Section 38-21-60 is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in Section 38-21-60 may utilize these documents in furnishing the information called for by that statement.

Section 38-21-90. Approval of Commissioner of acquisition of control; hearing.

(1) The Commissioner shall approve any merger or other acquisition of control referred to in Section 38-21-60 unless, after a public hearing, he finds that:

(a) After the change of control the domestic insurer referred to in Section 38-21-60 is not able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed;

(b) The effect of the merger or other acquisition of control would substantially lessen competition in insurance in this State or tend to create a monopoly therein;

(c) The financial condition of the acquiring party might jeopardize the financial stability of the insurer or prejudice the interest of its policyholders;

(d) The plans or proposals which the acquiring party has to liquidate the insurer, sell its assets, or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the insurer and not in the public interest;

(e) The competence, experience, and integrity of those persons who would control the operation of the insurer are such that it is not in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control;

(f) The acquisition is likely to be hazardous or prejudicial to the insurance-buying public.

(2) The public hearing referred to in subsection (1) must be held within thirty days after the statement required by Section 38-21-60 is filed and at least twenty days' notice must be given by the Commissioner to the person filing the statement, to the insurer, and to other persons designated by the Commissioner. The Commissioner shall make a determination within thirty days after the conclusion of the hearing. At the hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interest is affected has the right to present evidence, examine and cross-examine witnesses, and offer oral and written arguments and is entitled to conduct discovery proceedings in the same manner as is allowed in the circuit courts of this State. All discovery proceedings must be concluded not later than three days before the commencement of the public hearing.

(3) The Commissioner may retain at the acquiring person's expense any attorneys, actuaries, accountants, and other experts not otherwise a part of the Commissioner's staff as may be reasonably necessary to assist the Commissioner in reviewing the proposed acquisition of control.

Section 38-21-100. Certain transactions exempt from Sections 38-21-60 to 38-21-120.

The provisions of Sections 38-21-60 to 38-21-120 do not apply to:

(1) Any transaction which is subject to the provisions of Sections 38-19-830 through 38-19-890 dealing with the merger or consolidation of two or more insurers.

(2) Any offer, request, invitation, agreement, or acquisition which the Commissioner by order exempts as (a) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer, or (b) as otherwise not comprehended within the purposes of Sections 38-21-60 through 38-21-120.

Section 38-21-110. Violations of Sections 38-21-60 to 38-21-120.

The following are violations of Sections 38-21-60 to 38-21-120:

(1) The failure to file any statement, amendment, or other material required to be filed pursuant to Section 38-21-60 or 38-21-70; or

(2) The effectuation or any attempt to effectuate an acquisition or control of, or merger with, a domestic insurer unless the Commissioner has given his approval.

Section 38-21-120. Jurisdiction of courts; service of process.

The courts of this State are vested with jurisdiction over each person not resident, domiciled, or authorized to do business in this State who files a statement with the Commissioner under this chapter and over all actions involving the person arising out of violations of Sections 38-21-60 through 38-21-120. This person must be considered to have performed acts equivalent to and constituting an appointment by him of the Commissioner to be his true and lawful attorney upon whom all lawful process may be served in any action, suit, or proceeding arising out of violations of Sections 38-21-60 through 38-21-120. Copies of all lawful process must be served on the Commissioner and transmitted by registered or certified mail by the Commissioner to the person at his last known address.

Section 38-21-130. Registration of members of insurance holding company systems.

An insurer authorized to do business in this State and which is a member of an insurance holding company system must register with the Commissioner, unless it is a foreign insurer subject to registration requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in this chapter. The insurer shall file a copy of the registration statement and summary of its registration statement as required by Sections 38-21-140 and 38-21-150 with the National Association of Insurance Commissioners.

The insurer shall also file a copy of the summary of its registration as required by Section 38-21-150 in each state in which that insurer is authorized to do business if requested by the Commissioner of that state. Any insurer which is subject to registration under this chapter must register within fifteen days after it becomes subject to registration, and annually thereafter by March first of each year for the previous calendar year, unless the Commissioner for good cause shown extends the time for registration and then within the extended time. The Commissioner may require an authorized insurer which is a member of a holding company system which is not subject to registration under this section to furnish a copy of the registration statement or other information filed by the insurer with the insurance regulatory authority of its domiciliary jurisdiction.

Section 38-21-140. Registration statement.

An insurer subject to registration shall file the registration statement on a form prescribed by the National Association of Insurance Commissioners, which shall contain the following current information about:

(1) The capital structure, general financial condition, ownership, and management of the insurer and any person controlling the insurer.

(2) The identity and relationship of every member of the insurance holding company system.

(3) The following agreements in force, and transactions currently outstanding or which have occurred during the last calendar year between the insurer and its affiliates:

(a) Loans, other investments, or purchases, sales, or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates;

(b) Purchases, sales, or exchanges of assets;

(d) Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the insurer's assets to liability, other than insurance contracts entered into in the ordinary course of the insurer's business;

(e) All management agreements, service contracts, and all cost-sharing arrangements;

(f) Reinsurance agreements;

(g) Dividends and distributions to shareholders; and

(h) Consolidated tax allocation agreements.

(4) Other matters concerning transactions between registered insurers and affiliates as may be included in registration forms adopted or approved by the Commissioner.

Section 38-21-150. Summary outlining changes since previous registration statement required.

All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.

Section 38-21-160. Information which need not be disclosed in registration statement.

No information need be disclosed on the registration statement filed pursuant to Section 38-21-140 if the information is not material for the purposes of this chapter. Unless the Commissioner by regulation or order provides otherwise, sales, purchases, exchanges, loans or extension of credit, or investments involving one-half of one percent or less of an insurer's admitted assets as of the previous December thirty-first are not considered material for purposes of Sections 38-21-140 through 38-21-240.

Section 38-21-170. Dividends and distributions must be reported.

Subject to Section 38-21-270, each registered insurer shall report to the Commissioner all dividends and other distributions to shareholders within fifteen business days following the declaration thereof.

Section 38-21-180. Information from persons within insurance holding company.

Any persons within an insurance holding company subject to registration are required to provide complete and accurate information to an insurer, where such information is reasonably necessary to enable the insurer to comply with the provisions of this chapter.

Section 38-21-190. Termination of registration.

The Commissioner shall terminate the registration of an insurer that is no longer a member of an insurance holding company system.

Section 38-21-200. Filing of consolidated or individual registration statements by affiliated insurers.

The Commissioner may require or allow two or more affiliated insurers subject to registration to file a consolidated registration statement.

Section 38-21-210. Filing of registration statement on behalf of affiliated insurer.

The Commissioner may allow an insurer which is authorized to do business in this State and which is part of an insurance holding company system to register on behalf of an affiliated insurer which is required to register under Section 38-21-130 and to file all information and material required to be filed under Sections 38-21-130 through 38-21-240.

Section 38-21-220. Disclaimer of affiliation.

A person may file with the Commissioner a disclaimer of affiliation with an authorized insurer or a disclaimer may be filed by an insurer or a member of an insurance holding company system. The disclaimer shall fully disclose all material relationships and bases for affiliation between the person and the insurer as well as the basis for disclaiming this affiliation. After a disclaimer has been filed, the insurer is relieved of any duty to register or report under Sections 38-21-130 through 38-21-240 which may arise out of the insurer's relationship with that person unless and until the Commissioner disallows the disclaimer. The Commissioner may disallow the disclaimer only after furnishing all parties in interest with notice and an opportunity to be heard and after making specific findings of fact to support the disallowance.

Section 38-21-230. Failure to file registration statement or amendment.

The failure to file a registration statement or any summary of such registration as required by this chapter within the time specified for filing constitutes a violation of these sections.

Section 38-21-240. Exemptions from registration statement provisions.

The provisions of Sections 38-21-130 to 38-21-240 do not apply to any insurer, information, or transaction if and to the extent that the Commissioner by regulation or order exempts it from these sections.

Section 38-21-250. Transactions between registered insurers and their affiliates.

(1) Transactions within a holding company system to which an insurer subject to registration is a party are subject to the following standards:

(i) The terms must be fair and reasonable;

(ii) Charges or fees for services performed must be reasonable;

(iii) Expenses incurred and payment received must be allocated to the insurer in conformity with customary insurance accounting practices consistently applied;

(iv) The books, accounts, and records of each party to all transactions must be so maintained as to clearly and accurately disclose the nature and details of the transactions including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties; and

(v) The insurer's surplus as regards policyholders following any dividends or distributions to shareholder affiliates must be reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs.

(2) The following transactions involving a domestic insurer and any person in its holding company system may not be entered into unless the insurer has notified the Commissioner in writing of its intention to enter into the transaction at least thirty days prior thereto, or such shorter period as the Commissioner may permit, and the Commissioner has not disapproved it within such period:

(i) sales, purchases, exchanges, loans, or extensions of credit, guarantees, or investments if the transactions are equal to or exceed:

(a) with respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders;

(b) with respect to life insurers, three percent of the insurer's admitted assets, each as of the thirty-first day of December next preceding;

(ii) loans or extensions of credit to any person who is not an affiliate, where the insurer makes the loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit as long as such transactions are equal to or exceed:

(a) with respect to nonlife insurers, the lesser of three percent of the insurer's admitted assets or twenty-five percent of surplus as regards policyholders;

(b) with respect to life insurers, three percent of the insurer's admitted assets, each as of the thirty-first day of December next preceding;

(iii) reinsurance agreements or modifications thereto in which the reinsurance premium or a change in the insurer's liabilities equals or exceeds five percent of the insurer's surplus as regards policyholders, as of the thirty-first day of December next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the insurer;

(iv) all management agreements, service contracts, and all cost-sharing arrangements; and

(v) any material transactions, specified by regulation, which the Commissioner determines may adversely affect the interests of the insurer's policyholders.

Nothing herein authorizes or permits any transactions which, in the case of an insurer, not a member of the same holding company system, would be otherwise contrary to law.

(3) A domestic insurer may not enter into transactions, which are part of a plan or series of like transactions with persons within the holding company system, if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. If the Commissioner determines that such separate transactions were entered into over any twelve-month period for such purpose, he may exercise his authority under Section 38-21-340.

(4) The Commissioner, in reviewing transactions pursuant to subsection (2), shall consider whether the transactions comply with the standards set forth in subsection (1) and whether they may adversely affect the interests of policyholders.

(5) The Commissioner must be notified within thirty days of any investment of the domestic insurer in any one corporation if the total investment in the corporation by the insurance holding company system exceeds ten percent of the corporation's voting securities.

Section 38-21-260. Determining adequacy of insurer's surplus.

For purposes of this chapter, in determining whether an insurer's surplus as regards policyholders is reasonable in relation to the insurer's outstanding liabilities and adequate to its financial needs, the following factors, among others, are considered:

(1) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria;

(2) The extent to which the insurer's business is diversified among the several lines of insurance;

(3) The number and size of risks insured in each line of business;

(4) The extent of the geographical dispersion of the insured risks;

(5) The nature and extent of the reinsurance program;

(6) The quality, diversification, and liquidity of the investment portfolio;

(7) The recent past and projected future trend in the size of the insurer's investment portfolio;

(8) The surplus as regards policyholders maintained by other comparable insurers;

(9) The adequacy of the reserves; and

(10) The quality and liquidity of investments in affiliates. The Commissioner may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in his judgment the investment so warrants.

Section 38-21-270. Notice and approval of extraordinary dividends or distributions required.

No domestic insurer shall pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until (i) the Commissioner has approved the payment or (ii) the Commissioner has not disapproved the payment within thirty days after receiving notice of the declaration.

For purposes of this section, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding twelve months exceeds (a) ten percent of the insurer's surplus as regards policyholders as of the previous December thirty-first, or (b) the net gain from operations of the insurer, if the insurer is a life insurer, or the net investment income, if the insurer is not a life insurer not including realized capital gains, for the year ending the previous December thirty-first but does not include pro rata distributions of any class of the insurer's own securities. In determining whether a dividend or distribution is extraordinary, an insurer may carry forward income from the previous two calendar years that has not already been paid as dividends.

An insurer may declare an extraordinary dividend or distribution which is conditional upon the Commissioner's approval. The declaration confers no rights upon shareholders until (1) the Commissioner has approved the payment of the dividend or distribution or (2) the Commissioner has not disapproved the payment within thirty days after receiving notice of the declaration.

Section 38-21-280. Power of Commissioner to compel production of information.

(a) In addition to his powers relating to examinations or investigations of insurers, the Commissioner has the power to order an insurer registered under Sections 38-21-130 through 38-21-240 to produce records, books, or other information papers in the possession of the insurer or its affiliates as considered necessary to ascertain the insurer's financial condition or legality of its conduct. If the insurer fails to comply with the order, the Commissioner has, in addition to powers prescribed in Section 38-21-340, the power to examine the affiliates to obtain this information.

(b) The Commissioner may retain at the registered insurer's expense attorneys, actuaries, accountants, and other experts not otherwise a part of the Commissioner's staff reasonably necessary to assist in the conduct of the examination under subsection (a). Any persons so retained are under the direction and control of the Commissioner and must act in a purely advisory capacity.

(c) Each registered insurer producing for examination records, books, and papers pursuant to subsection (a) is liable for and must pay the expense of the examination.

Section 38-21-290. Information must be kept confidential.

All information, documents, and copies thereof obtained by or disclosed to the Commissioner or any other person in the course of an examination or investigation made pursuant to Section 38-21-280 and all information reported pursuant to Sections 38-21-130 through 38-21-240 must be given confidential treatment and is not subject to subpoena and may not be made public by the Commissioner, the National Association of Insurance Commissioners, or any other persons, except to insurance departments of other states, without the prior written consent of the insurer to which it pertains unless the Commissioner, after giving the insurer and its affiliates who would be affected thereby notice and opportunity to be heard, determines that the interests of policyholders, shareholders, or the public will be served by the publication thereof, in which event he may publish all or any part thereof in the manner he considers appropriate.

Section 38-21-300. Regulations and orders of Commissioner.

The Commissioner may, upon notice and opportunity for all interested persons to be heard, issue regulations and orders necessary to carry out the provisions of this chapter.

Section 38-21-310. Enjoining violations of chapter, regulations, or orders.

Whenever it appears to the Commissioner that an insurer or a director, officer, employee, or agent of it has committed or is about to commit a violation of this chapter or of any regulation or order issued by the Commissioner hereunder, the Commissioner may apply to the circuit court for the county in which the principal office of the insurer is located or if the insurer has no such office in this State then to the circuit court for Richland County for an order enjoining the insurer or its director, officer, employee, or agent from violating or continuing to violate this chapter or any regulation or order and for any other equitable relief which the nature of the case and the interests of the insurer's policyholders, creditors, and shareholders or the public may require.

Section 38-21-320. Voting of securities acquired in violation of chapter, regulations, or orders may be enjoined.

No security which is the subject of an agreement or arrangement regarding acquisition, or which is acquired or to be acquired, in contravention of this chapter or of any regulation or order issued by the Commissioner hereunder may be voted at any shareholders' meetings or may be counted for quorum purposes, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though these securities were not issued and outstanding. No action taken at a shareholders' meeting may be invalidated by the voting of these securities, unless the action would materially affect control of the insurer or unless the courts of this State have so ordered. If an insurer or the Commissioner has reason to believe that any security of the insurer has been or is about to be acquired in contravention of this chapter or of any regulation or order issued by the Commissioner hereunder, the insurer or the Commissioner may apply to the circuit court for Richland County or to the circuit court for the county in which the insurer has its principal place of business to enjoin any offer, request, invitation, agreement, or acquisition made in contravention of Sections 38-21-60 through 38-21-120 or any regulation or order issued by the Commissioner thereunder, to enjoin the voting of any security so acquired, to void any vote of the security already cast at any meeting of shareholders, and for any other equitable relief which the nature of the case and the interests of the insurer's policyholders, creditors, and shareholders or the public may require.

Section 38-21-330. Seizure or sequestration of securities acquired in violation of chapter, regulations, or order.

In a case where a person has acquired or is proposing to acquire voting securities in violation of this chapter, or any regulation or order issued by the Commissioner hereunder, the circuit court for Richland County or the circuit court for the county in which the insurer has its principal place of business may, on notice which the court considers appropriate, upon the application of the insurer or the Commissioner, seize or sequester any voting securities of the insurer owned directly or indirectly by this person and issue orders appropriate to effectuate this chapter. Notwithstanding any other provision of law, for the purposes of this chapter the situs of the ownership of the securities of domestic insurers is considered to be in this State.

Section 38-21-340. Criminal prosecutions; penalties.

(a) Any insurer failing, without just cause, to file any registration statement or summary thereof as required in this chapter is required, after notice and hearing, to pay a penalty of one thousand dollars for each day's delay, to be recovered by the Commissioner, and the penalty so recovered must be paid into the general fund of the State. The maximum penalty under this section is thirty thousand dollars. The Commissioner may reduce the penalty if the insurer demonstrates to the Commissioner that the imposition of the penalty would constitute a financial hardship to the insurer.

(b) Every director or officer of an insurance holding company system who knowingly violates, participates in, or assents to, or who knowingly permits any of the officers or agents of the insurer to engage in transactions or make investments which have not been properly reported or submitted pursuant to this chapter or which violate this chapter, shall pay, in their individual capacity, a civil forfeiture of not more than ten thousand dollars per violation, after notice and hearing before the Commissioner. In determining the amount of the civil forfeiture, the Commissioner shall take into account the appropriateness of the forfeiture with respect to the gravity of the violation, the history of previous violations, and other matters as justice may require.

(c) Whenever it appears to the Commissioner that any insurer subject to this chapter or any director, officer, employee, or agent thereof has engaged in any transaction or entered into a contract which is subject to Sections 38-21-250 through 38-21-270 and which would not have been approved had such approval been requested, the Commissioner may order the insurer to cease and desist immediately any further activity under that transaction or contract. After notice and hearing the Commissioner may also order the insurer to void any such contracts and restore the status quo if such action is in the best interest of the policyholders, creditors, or the public.

(d) Whenever it appears to the Commissioner that an insurer or a director, officer, employee, or agent of it has committed a willful violation of this chapter, the Commissioner may, in addition to other powers prescribed in this section, cause criminal proceedings to be instituted in the circuit court for the county in which the principal office of the insurer is located or, if the insurer has no such office in the State, then in the Circuit Court for Richland County against the insurer or the responsible director, officer, employee, or agent of it. An insurer which willfully violates this chapter may be fined not more than fifty thousand dollars. An individual who willfully violates this chapter is guilty of a misdemeanor and, upon conviction, must be fined an amount not to exceed ten thousand dollars or be imprisoned for a term not to exceed two years, or both.

(e) Any officer, director, or employee of an insurance holding company system who willfully and knowingly subscribes to or makes or causes to be made any false statements or false reports or false filings with the intent to deceive the Commissioner in the performance of his duties under this chapter is guilty of a misdemeanor and, upon conviction, must be imprisoned for not more than two years or fined ten thousand dollars, or both. Any fines imposed must be paid by the officer, director, or employee in his individual capacity.

(f) Whenever it appears to the Commissioner that any insurer has committed a violation of this chapter, or that any person has committed a violation of this chapter which makes continued operation of the insurer contrary to the interests of policyholders or the public, the Commissioner may, after giving notice and an opportunity to be heard, determine to suspend, revoke, or refuse to renew such insurer's license or authority to do business in this State for such period as he finds is required for the protection of policyholders or the public. Any such determination must be accompanied by specific findings of fact and conclusions of law.

Section 38-21-350. Commissioner may take possession of property and conduct business of insurer.

Whenever it appears to the Commissioner that a person has committed a violation of this chapter which so impairs the financial condition of a domestic insurer as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, or the public, then the Commissioner may proceed as provided in Chapter 27 of this title to take possession of the property of the insurer and to conduct its business.

Section 38-21-360. Authority of receiver to recover certain distributions and payments.

(a) If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed under the order has a right to recover on behalf of the insurer (i) from any parent corporation or holding company or person or affiliate who otherwise controlled the insurer, the amount of distributions (other than distributions of shares of the same class of stock) paid by the insurer on its capital stock, or (ii) any payment in the form of a bonus, termination settlement, or extraordinary lump sum salary adjustment made by the insurer or its subsidiary to a director, officer, or employee, where the distribution or payment pursuant to (i) or (ii) is made at any time during the one year preceding the petition for liquidation, conservation, or rehabilitation, as the case may be, subject to the limitations of subsections (b), (c), and (d).

(b) No such distribution may be recoverable if the parent or affiliate shows that when paid the distribution was lawful and reasonable and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.

(c) Any person who was a parent corporation or holding company or a person who otherwise controlled the insurer or affiliate at the time the distributions were paid is liable up to the amount of distributions or payments under subsection (a). Any person who otherwise controlled the insurer at the time the distributions were declared is liable up to the amount of distributions he would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they are jointly and severally liable.

(d) The maximum amount recoverable under this section is the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty funds.

(e) To the extent that any person liable under subsection (c) is insolvent or otherwise fails to pay claims due from it pursuant to such subsection, its parent corporation or holding company or person who otherwise controlled it at the time the distribution was paid is jointly and severally liable for any resulting deficiency in the amount recovered from the parent corporation or holding company or person who otherwise controlled it.

Section 38-21-370. Mandamus.

A person aggrieved by the failure of the Commissioner to act or make a determination required by this chapter may petition the circuit court for Richland County for a writ in the nature of a mandamus or a peremptory mandamus directing the Commissioner to act or make the determination immediately.

Section 38-21-380. Inconsistent laws superseded.

All laws and parts of laws of this State inconsistent with this chapter are superseded.

Section 38-21-390. Severability.

If any provision of this chapter or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and for this purpose the provisions of this chapter are separable.

CHAPTER 23

Insider Trading In Securities of

Domestic Stock Insurers

Section 38-23-10. Short title.

This chapter is known and may be cited as the 'Insider Trading Statute'.

Section 38-23-20. 'Equity security' defined.

'Equity security', when used in this chapter, means any stock or similar security; or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right; or any other security which the Commissioner considers to be of similar nature and considers necessary or appropriate, by any regulation he may prescribe in the public interest or for the protection of investors, to treat as an equity security.

Section 38-23-30. 'Beneficial owner' defined.

'Beneficial owner', when used in this chapter, means a person who directly or indirectly beneficially owns more than ten percent of any class of any equity security of a domestic stock insurer.

Section 38-23-40. Beneficial owners, directors, and officers of domestic stock insurers shall file statements with Commissioner.

Every beneficial owner, director, or officer of a domestic stock insurer shall file in the office of the Commissioner within ten days after he becomes a beneficial owner, director, or officer a statement, in a form the Commissioner may prescribe, of the amount of all equity securities of the insurer which he beneficially owns. Within ten days after the close of each calendar month thereafter, if there has been a change in his ownership during the month, he shall file in the office of the Commissioner a statement, in a form the Commissioner may prescribe, indicating his ownership at the close of the calendar month and the changes in his ownership which have occurred during the calendar month.

Section 38-23-50. Profits realized from certain transactions by beneficial owners, directors, or officers inure to insurer; suit to recover these profits.

For the purpose of preventing the unfair use of information which may have been obtained by a beneficial owner, director, or officer by reason of his relationship to the insurer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of the insurer within any period of less than six months, unless the security was acquired in good faith in connection with a debt previously contracted, inures to and is recoverable by the insurer, irrespective of any intention on the part of the beneficial owner, director, or officer in entering into the transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. Suit to recover this profit may be instituted at law or in equity in any court of competent jurisdiction by the insurer or by the owner of any security of the insurer in the name and in behalf of the insurer if the insurer fails or refuses to bring the suit within sixty days after request or fails diligently to prosecute it thereafter. This suit may not be brought more than two years after the date the profit was realized. This section may not be construed to cover any transaction where the beneficial owner was not a beneficial owner both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the Commissioner, by regulation, may exempt as not comprehended within the purpose of this section.

Section 38-23-60. Certain sales of equity securities by beneficial owners, directors, or officers are unlawful.

It is unlawful for a beneficial owner, director, or officer, directly or indirectly, to sell any equity security of the insurer if the person selling the security or his principal (a) does not own the security sold, or (b) if owning the security, does not deliver it against the sale within twenty days thereafter, or does not within five days after the sale deposit it in the mails or other usual channels of transportation. A person is not considered to have violated this section if he proves that, notwithstanding the exercise of good faith, he was unable to make the delivery or deposit within this time or that to do so would cause undue inconvenience or expense.

Section 38-23-70. Sales by dealers in ordinary course of business excepted.

Section 38-23-50 does not apply to any purchase and sale, or sale and purchase, and Section 38-23-60 does not apply to any sale of an equity security of a domestic stock insurer, not then or theretofore held by him in an investment account, by a dealer in the ordinary course of his business and incident to the establishment or maintenance by him of a primary or secondary market, otherwise than on an exchange as defined in the Securities Exchange Act of l934, for the security. The Commissioner may, by any regulation he considers necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market.

Section 38-23-80. Foreign or domestic arbitrage transactions excepted.

Sections 38-23-40 to 38-23-60 do not apply to foreign or domestic arbitrage transactions unless made in contravention of regulations the Commissioner may adopt in order to carry out the purposes of this chapter.

Section 38-23-90. Transactions in registered securities and securities held by fewer than one hundred persons excepted.

Sections 38-23-40 to 38-23-60 do not apply to equity securities of a domestic stock insurer if (a) the securities are registered or are required to be registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or (b) the domestic stock insurer does not have any class of its equity securities held of record by one hundred or more persons on the last business day of the previous year in which equity securities of the insurer would be subject to Sections 38-23-40 to 38-23-60 except for this section.

Section 38-23-100. Regulations of Commissioner.

The Commissioner has the power to make and promulgate regulations necessary for the execution of the functions vested in him by Sections 38-23-20 through 38-23-90 including, but without limitation, regulations pertaining to and governing the solicitation of proxies, including financial reporting in connection therewith, with respect to the capital stock or other equity securities of any domestic stock insurer; he may, for these purposes, classify domestic insurers, securities, and other persons or matters within his jurisdiction. No provision of Sections 38-23-40 to 38-23-60 imposing any liability applies to any act done or omitted in good faith in conforming with any regulation of the Commissioner, notwithstanding that the regulation may, after the act or omission, be amended, rescinded, or determined by judicial or other authority to be invalid for any reason.

CHAPTER 25

Unauthorized Transaction of Insurance Business

Article 1

Declarations

Section 38-25-10. Declaration.

(a) The General Assembly declares that it is concerned with the protection of residents of this State against acts by insurers not authorized to conduct an insurance business in this State, by the maintenance of fair and honest insurance markets, by protecting authorized insurers which are subject to regulation from unfair competition by unauthorized insurers, and by protecting against the evasion of the insurance regulatory laws of this State. In furtherance of this state interest, the General Assembly herein provides methods for substituted service of process upon such insurers in any proceeding, suit, or action in any court and substituted service of any notice, order, pleading, or process upon such insurers in any proceeding by the Commissioner to enforce or effect full compliance with the insurance laws of this State. In so doing, the State exercises its powers to protect residents of this State and to define what constitutes transacting an insurance business in this State and also exercises powers and privileges available to this State by virtue of Public Law 79-15, 79th Congress of the United States, Chapter 20, 1st Session, S. 340, 59 Stat. 33; 15 U.S.C., Sections 1011 to 1015, inclusive, as amended, which declares that the business of insurance and every person engaged therein are subject to the laws of the several states.

(b) The remedies and proceedings provided in this chapter are in addition to, and not in substitution for, any other remedies or proceedings provided by law.

Article 3

Unauthorized Insurance Transactions

Section 38-25-110. Prohibition on transaction of insurance business in State without certificate of authority.

It is unlawful for an insurer to transact insurance business in this State without a certificate of authority from the Commissioner. Any of the acts listed in items (1) through (8) in this State effected by mail or otherwise by or on behalf of an unauthorized insurer is considered to constitute the transaction of an insurance business in this State. The venue of an act committed by mail is at the point where the matter transmitted by mail is delivered and takes effect. Unless otherwise indicated, the term 'insurer' as used in this section includes all corporations, associations, partnerships, and individuals engaged as principals in the business of insurance and also includes interinsurance exchanges and mutual benefit societies.

(1) The making of or proposing to make, as an insurer, an insurance contract.

(2) The making of or proposing to make, as guarantor or surety, any contract of guaranty or suretyship as a vocation and not merely incidental to any other legitimate business or activity of the guarantor or surety.

(3) The taking or receiving of any application for insurance.

(4) The receiving or collection of any premium, commission, membership fees, assessments, dues, or other consideration for any insurance or any part thereof.

(5) The issuance or delivery of contracts of insurance to residents of this State or to persons authorized to do business in this State.

(6) Directly or indirectly acting as an agent for or otherwise representing or aiding on behalf of another any person or insurer in the solicitation, negotiation, procurement, or effectuation of insurance or renewals thereof or in the dissemination of information as to coverage or rates, or forwarding of applications, or delivery of policies or contracts, or inspection of risks, a fixing of rates or investigation or adjustment of claims or losses or in the transaction of matters after effectuation of the contract and arising out of it, or in any other manner representing or assisting a person or insurer in the transaction of insurance with respect to subjects of insurance resident, located, or to be performed in this State. This section does not prohibit full-time salaried employees of a corporate insured from acting in the capacity of an insurance manager or buyer in placing insurance in behalf of their employer.

(7) The transaction of any kind of insurance business specifically recognized as transacting an insurance business within the meaning of the statutes relating to insurance.

(8) The transacting or proposing to transact any insurance business in substance equivalent to any of the foregoing in a manner designed to evade the insurance laws of this State.

Section 38-25-120. Acting as agent for unauthorized insurer prohibited.

No person may in this State act as agent for an insurer not authorized to transact business in this State or negotiate for or place or aid in placing insurance coverage in this State for another with an unauthorized insurer.

Section 38-25-130. Aiding unauthorized insurer prohibited.

No person may in this State aid an unauthorized insurer in effecting insurance or in transacting insurance business in this State, either by fixing a rate, or by adjusting or investigating losses, by inspecting or examining risks, by acting as attorney in fact or as attorney for service of process or otherwise, except as provided in Sections 38-25-510 and 38-25-520.

Section 38-25-140. Insurance on out-of-state property by insurer not locally authorized.

No person may make, negotiate for or place, or aid in negotiating or placing an insurance contract in this State for another who is an applicant for insurance covering any property or risk in another state, territory, or district of the United States with an insurer not authorized to transact insurance business in the state, territory, or district where the property or risk or any part thereof is located.

Section 38-25-150. Exemptions from article.

This article does not apply to:

(1) The lawful transaction of surplus lines insurance.

(2) The lawful transaction of reinsurance by insurers.

(3) Transactions in this State involving a policy lawfully solicited, written, and delivered outside this State covering only subjects of insurance not resident, located, or expressly to be performed in this State at the time of issuance, and which transactions are subsequent to the issuance of the policy.

(4) Attorneys acting in the ordinary relation of attorney and client in the adjustment of claims or losses.

(5) Except for mass-marketed insurance, transactions in this State involving group life and group accident and health or blanket accident and health insurance or group annuities where (i) the master policy was lawfully issued and delivered in and pursuant to the laws of a state in which the insurer was authorized to do an insurance business and in which the policyholder was domiciled or otherwise had a bona fide situs and (ii) except for group annuities, the insurer complies with Sections 38-65-50, 38-65-60, 38-71-740, and 38-71-750.

(6) Transactions in this State involving any policy of insurance or annuity contract issued before April 30, 1975.

(7) Contracts of insurance covering risks of transportation and navigation and transactions in this State relative to a policy issued or to be issued outside this State involving insurance on vessels, craft or hulls, cargoes, marine builder's risk, marine protection and indemnity, or other risk, including strikes and war risks commonly insured under ocean or wet marine forms of policy.

(8) Transactions in this State involving contracts of insurance other than contracts of life, accident, or accident and health insurance issued to one or more industrial insureds. An 'industrial insured' means an insured:

(i) Which procures insurance by use of the services of a full-time employee acting as a risk manager or insurance manager or utilizing the services of a regularly and continuously qualified insurance consultant;

(ii) Whose aggregate annual premiums for insurance on all risks total at least twenty-five thousand dollars; and

(iii) Which has at least twenty-five full-time employees.

Section 38-25-160. Commissioner may exempt insurer or other organization from provisions of chapter; certain requirements; discontinuance of exemption.

The Commissioner may, by regulation or order, exempt from all or any provisions of this chapter an insurer or other organization not formed or operating for profit which affords life insurance or annuities to nonprofit educational and scientific institutions and their staff members in this State. However, in affording this exemption the Commissioner shall require the insurer or other organization to appoint him as agent for service of process. The Commissioner may require the insurer or other organization to file with him, as information, policy forms, annual statements, and financial and other similar material. The Commissioner may, after due notice and hearing, discontinue the exemption for any reason which would have, if then existing or known, justified his refusal to afford the exemption when it was granted.

Article 5

Remedies and Penalties

Section 38-25-310. Commissioner authorized to seek restraining order.

Whenever the Commissioner believes, from evidence satisfactory to him, that an insurer is violating or about to violate Section 38-25-110 the Commissioner may, through the Attorney General, cause a complaint to be filed in the Court of Common Pleas of Richland County to enjoin and restrain the insurer from continuing the violation, engaging in the violation, or doing any act in furtherance of the violation. The court has jurisdiction of the proceeding and has the power to make and enter an order or judgment awarding preliminary or final injunctive relief as in its judgment is proper.

Section 38-25-320. Penalty for unauthorized insurers.

An unauthorized insurer who transacts any unauthorized act of an insurance business as set forth in Article 3 of this chapter may be fined not more than ten thousand dollars.

Section 38-25-330. Criminal penalty for violation of chapter.

Any person violating this chapter is guilty of a misdemeanor and, upon conviction, must be fined not more than five hundred dollars or imprisoned for not more than two years, or both.

Section 38-25-340. Civil penalty for violation of chapter.

An insurer which willfully violates or fails to observe and comply with this chapter is subject to and liable to pay a penalty of five hundred dollars for each violation. This penalty may be collected and recovered in an action brought in the name of the State in any court having jurisdiction.

Section 38-25-350. Revocation of license for failure to pay civil penalty.

An insurer which neglects or refuses for thirty days after final judgment in an action under Section 38-25-340 to pay and discharge the judgment shall have its authority to transact business in this State revoked by the Commissioner. The revocation must continue for at least one year from the date of revocation. Before the insurer may be authorized or permitted to transact business in this State, it shall pay the amount of the judgment and shall file in the office of the Commissioner a certificate, signed by its president or other chief officer, to the effect that the terms and

obligations of this chapter and Section 38-43-60 are accepted by it as part of the conditions of its rights and authority to transact business in this State.

Section 38-25-360. Personal liability on contracts of unauthorized insurers.

In the event of failure of an unauthorized insurer to pay any claim or loss within the provisions of the insurance contract, a person who assisted or in any manner aided directly or indirectly in the procurement of the insurance contract is liable to the insured for the full amount of the claim or loss in the manner provided by the insurance contract.

Article 7

General Provisions

Section 38-25-510. Service of process on an unauthorized insurer in actions brought by the Commissioner or the State or in actions before the Commissioner.

(a) Any act of transacting an insurance business as set forth in Section 38-25-110 by an unauthorized insurer is equivalent to and constitutes an irrevocable appointment by the insurer, binding upon him, his executor or administrator, or successor in interest if a corporation, of the Secretary of State or his successor in office to be the true and lawful attorney of the insurer upon whom may be served all lawful process in any action, suit, or proceeding in any court by the Commissioner or by the State and upon whom may be served any notice, order, pleading, or process in any proceeding before the Commissioner and which arises out of transacting an insurance business in this State by the insurer. Any act of transacting an insurance business in this State by an unauthorized insurer is signification of its agreement that any lawful process in the court action, suit, or proceeding and any notice, order, pleading, or process in the administrative proceeding before the Commissioner so served is of the same legal force and validity as personal service of process in this State upon the insurer.

(b) Service of process in the action must be made by delivering to and leaving with the Secretary of State, or some person in apparent charge of his office, two copies thereof and by payment to the Secretary of State of the fee prescribed by law. Service upon the Secretary of State as attorney is service upon the principal.

(c) The Secretary of State shall immediately forward by certified mail one of the copies of the process or the notice, order, pleading, or process in proceedings before the Commissioner to the defendant in the court proceeding or to whom the notice, order, pleading, or process in the administrative proceeding is addressed or directed at its last known principal place of business and shall keep a record of all process so served on him which shall show the day and hour of service. The service is sufficient if:

(1) Notice of the service and a copy of the court process or the notice, order, pleading, or process in the administrative proceeding are sent within ten days thereafter by certified mail by the plaintiff or the plaintiff's attorney in the court proceeding or by the Commissioner in the administrative proceeding to the defendant in the court proceeding or to whom the notice, order, pleading, or process in the administrative proceeding is addressed or directed at the last known principal place of business of the defendant in the court or administrative proceeding.

(2) The defendant's receipt or receipts issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person or insurer to whom the letter is addressed, and an affidavit of the plaintiff or the plaintiff's attorney in a court proceeding or of the Commissioner in an administrative proceeding, showing compliance therewith, are filed with the clerk of court in which the action, suit, or proceeding is pending or with the Commissioner in administrative proceedings, by the date the defendant in the court or administrative proceeding is required to appear or respond thereto, or within any further time as the court or Commissioner may allow.

(d) No plaintiff is entitled to a judgment by default, a judgment with leave to prove damages, or a judgment pro confesso in any court or administrative proceeding in which court process or notice, order, pleading, or process in proceedings before the Commissioner is served under this section until the expiration of thirty days from the date of filing of the affidavit of compliance.

(e) Nothing in this section limits or affects the right to serve any process, notice, order, or demand upon any person or insurer in any other manner permitted by law.

Section 38-25-520. Commissioner agent for service of process on unauthorized insurers.

(a) The issuance and delivery of a policy of insurance or contract of insurance or indemnity to any person in this State or the collection of a premium thereon by an insurer not licensed in this State, as herein required, irrevocably constitutes the Commissioner and any successor of his in office the true and lawful attorney in fact upon whom service of any and all processes, pleadings, actions, or suits arising out of the policy or contract in behalf of the insured may be made.

(b) Service of process in this action is made by delivering to and leaving with the Commissioner or some person in apparent charge of his office two copies thereof and by payment to the Commissioner of a fee of four dollars.

(c) The Commissioner shall immediately mail by registered mail one of the copies of the process to the defendant at its last known principal place of business and shall keep a record of all process served upon him. The service of process is sufficient if:

(1) notice of the service and a copy of the process are sent within ten days thereafter by registered mail by the plaintiff's attorney to the defendant at its last known principal place of business, and

(2) the defendant's receipt or a receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, and the affidavit of the plaintiff's attorney showing compliance herewith are filed with the clerk of court in which the action is pending by the date the defendant is required to appear or within any further time which the court may allow.

(d) No plaintiff is entitled to a judgment by default, a judgment with leave to prove damages, or a judgment pro confesso under this section until the expiration of thirty days from the date of filing of the affidavit of compliance.

(e) Nothing in this section limits or abridges the right to serve any process, notice, order, or demand upon any person or insurer in any other manner permitted by law.

Section 38-25-530. Alternative method for service on unauthorized insurer.

Service of process in any action, suit, or proceeding involving an unauthorized insurer is, in addition to that provided in Sections 38-25-510 and 38-25-520, valid if served upon

any person within this State who, in this State on behalf of the insurer, is:

(1) soliciting insurance,

(2) making any contract of insurance or issuing or delivering any policies or written contracts of insurance, or

(3) collecting or receiving any premium for the insurer, or adjusting any loss or claim for the insurance, and if counsel, within ten days after service upon the person, causes to be sent by registered mail to the last known address of the insurer a copy of the process with proper postage affixed to the envelope containing it and files an affidavit, with the clerk of court or magistrate in whose court the cause is pending, of compliance herewith, with leave to the court to extend the time for the mailing of process and filing of affidavit.

Section 38-25-540. Actions by unauthorized insurers.

An unauthorized insurer is not permitted to maintain any action, suit, or proceeding in this State to enforce a right, claim, or demand arising out of the transaction of insurance business until the insurer has obtained a certificate of authority to transact insurance business in this State. The unauthorized insurer may maintain an action, suit, or proceeding in connection with its investments in this State or in connection with a contract issued by it at a time when it was authorized to do business in the state where the contract was issued. This section does not prevent the insurer from defending an action in the courts of this State. The failure of an insurer transacting insurance business in this State to obtain a certificate of authority does not impair the validity of any act or contract of the insurer.

Section 38-25-550. Prerequisites to pleading by unauthorized insurer.

(a) Before an unauthorized insurer files or causes to be filed any pleading in any court action, suit, or proceeding or any notice, order, pleading, or process in an administrative proceeding before the Commissioner instituted against the person or insurer, the insurer shall either:

(1) Deposit with the clerk of court in which the action, suit, or proceeding is pending, or with the Commissioner in administrative proceedings before the Commissioner, cash or securities, or file with the clerk of court or Commissioner a bond with good and sufficient sureties, to be approved by the clerk or Commissioner, in an amount to be fixed by the court or Commissioner sufficient to secure the payment of any final judgment which may be rendered in the action or administrative proceeding.

(2) Procure a certificate of authority to transact the business of insurance in this State. In considering the application of an insurer for a certificate of authority, for the purposes of this paragraph, the Commissioner need not assert the provisions of Section 38-7-90 against the insurer with respect to its application if he determines that the insurer would otherwise comply with the requirements for a certificate of authority.

(b) The Commissioner, in an administrative proceeding in which service is made as provided in Section 38-25-510, may in his discretion order a postponement as may be necessary to afford the defendant reasonable opportunity to comply with subsection (a) and to defend the action.

Section 38-25-560. Filing of certain motions.

Nothing in this article may be construed to prevent an unauthorized insurer from filing a motion to quash a writ or to set aside service thereof made in the manner provided in Section 38-25-510, 38-25-520, or 38-25-530 on the ground that (a) no policy or contract of insurance has been issued or delivered to a citizen or resident of this State or to a corporation authorized to do business in this State, (b) the insurer has not been transacting business in this State, or (c) the person on whom service was made pursuant to Section 38-25-530 was not doing any of the acts listed in that section.

Section 38-25-570. Enforcement of foreign decrees.

(a) The Attorney General upon request of the Commissioner may proceed in the courts of this State or any reciprocal state to enforce an order or decision in any court proceeding or in any administrative proceeding before the Commissioner.

(b) As used in this section:

(1) 'Reciprocal state' means any state or territory of the United States the laws of which contain procedures substantially similar to those specified in this section for the enforcement of decrees or orders in equity issued by courts located in other states or territories of the United States against an insurer incorporated or authorized to do business in that state or territory.

(2) 'Foreign decree' means any decree or order in equity of a court located in a reciprocal state, including a court of the United States located therein, against any insurer incorporated or authorized to do business in this State.

(3) 'Qualified party' means a state regulatory agency acting in its capacity to enforce the insurance laws of its state.

(c) The Commissioner shall determine which states and territories qualify as reciprocal states and shall maintain an up-to-date list of these states.

(d) A copy of any foreign decree authenticated in accordance with the law of this State may be filed in the office of the clerk of court of any circuit court of this State. The clerk, upon verifying with the Commissioner that the decree or order qualifies as a foreign decree, shall treat the foreign decree in the same manner as a decree of a circuit court of this State. A foreign decree so filed has the same effect as a decree of a circuit court of this State and is subject to the same procedures, defenses, and proceedings for reopening, vacating, or staying as a decree of a circuit court of this State and may be enforced or satisfied in like manner.

(e) (1) At the time of the filing of the foreign decree, the Attorney General shall make and file with the clerk of court an affidavit setting forth the name and last known post office address of the defendant.

(2) Promptly upon the filing of the foreign decree and the affidavit, the clerk shall mail notice of the filing of the foreign decree to the defendant at the address given and to the Commissioner and shall make a note of the mailing in the docket. In addition, the Attorney General may mail a notice of the filing of the foreign decree to the defendant and to the Commissioner and may file proof of mailing with the clerk. Failure to mail notice of the filing by the clerk does not affect the enforcement proceedings if proof of mailing by the Attorney General has been filed.

(3) No execution or other process for enforcement of a foreign decree filed hereunder may issue for thirty days after the date the decree is filed.

(f) (1) If the defendant shows the circuit court that an appeal from the foreign decree is pending or will be taken, or that a stay of execution has been granted, the court shall stay enforcement of the foreign decree until the appeal is concluded, the time for appeal expires, or the stay of execution expires or is vacated, upon proof that the defendant has furnished the security for the satisfaction of the decree required by the state in which it was rendered.

(2) If the defendant shows the circuit court any ground upon which enforcement of a decree of any circuit court of this State would be stayed, the court shall stay enforcement of the foreign decree for an appropriate period, upon requiring the same security for satisfaction of the decree which is required in this State.

(g) Any person filing a foreign decree shall pay to the clerk of court fifteen dollars. Fees for docketing, transcription, or other enforcement proceedings are as provided for decrees of the circuit court.

CHAPTER 27

Insurers' Supervision, Rehabilitation,

and Liquidation

Article 1

General Provisions

Section 38-27-10. Title.

This chapter is known and may be cited as the 'Insurers' Supervision, Rehabilitation, and Liquidation Act'.

Section 38-27-20. Construction.

This chapter does not limit the powers granted the Commissioner by other provisions of law and must be liberally construed to effect the purpose stated in Section 38-27-30.

Section 38-27-30. Purpose.

The purpose of this chapter is the protection of the interests of insureds, claimants, creditors, and the public generally, with minimum interference with the normal prerogatives of the owners and managers of insurers, through:

(1) Early detection of any potentially dangerous condition in an insurer and prompt application of appropriate corrective measures.

(2) Improved methods for rehabilitating insurers, involving the cooperation and management expertise of the insurance industry.

(3) Enhanced efficiency and economy of liquidation, through clarification of the law, to minimize legal uncertainty and litigation.

(4) Equitable apportionment of any unavoidable loss.

(5) Lessening the problems of interstate rehabilitation and liquidation by facilitating cooperation between states in the liquidation process and by extending the scope of personal jurisdiction over debtors of the insurer outside this State.

(6) Regulation of the insurance business by the impact of the law relating to delinquency procedures and substantive rules on the entire insurance business.

Section 39-27-40. Persons covered.

The proceedings authorized by this chapter may be applied to:

(1) All insurers who are doing, or have done, an insurance business in this State and against whom claims arising from that business may exist now or in the future.

(2) All insurers who purport to do an insurance business in this State.

(3) All insurers who have insureds resident in this State.

(4) All other persons organized or in the process of organizing with the intent to do an insurance business in this State.

(5) All nonprofit service plans and all fraternal benefit societies and beneficial societies.

(6) All title insurance companies.

(7) All surety companies subject to Chapter 15 of Title 38.

(8) Multiple employer self-insured health plans as defined in Chapter 41 of Title 38.

Section 38-27-50. Definitions.

For the purposes of this chapter:

(1) 'Ancillary state' means any state other than a domiciliary state.

(2) 'Creditor' is a person having any claim, whether matured or unmatured, liquidated or unliquidated, secured or unsecured, absolute, fixed, or contingent.

(3) 'Delinquency proceeding' means any proceeding instituted against an insurer for the purpose of liquidating, rehabilitating, reorganizing, or conserving the insurer, and any summary proceeding under Section 38-27-210 or 38-27-220. 'Formal delinquency proceeding' means any liquidation or rehabilitation proceeding.

(4) 'Doing business' includes any of the following acts, whether effected by mail or otherwise:

(a) the issuance or delivery of contracts of insurance to persons resident in this State;

(b) the solicitation of applications for such contracts or other negotiations preliminary to the execution of such contracts;

(d) the transaction of matters subsequent to execution of such contracts and arising out of them; or

(e) operating under a license or certificate

of authority, as an insurer, issued by the Commissioner.

(5) 'Domiciliary state' means the state in which an insurer is incorporated or organized, or, in the case of an alien insurer, its state of entry.

(6) 'Fair consideration' is given for property or obligation:

(a) when in exchange for the property or obligation, as a fair equivalent therefor and in good faith, property is conveyed or services are rendered or an obligation is incurred or an antecedent debt is satisfied; or

(b) when the property or obligation is received in good faith to secure a present advance or antecedent debt in amount not disproportionately small as compared to the value of the property or obligation obtained.

(7) 'Foreign country' means any other jurisdiction not in any state.

(8) 'General assets' means all property, real, personal, or otherwise, not specifically mortgaged, pledged, deposited, or otherwise encumbered for the security or benefit of specified persons or classes of persons. As to specifically encumbered property, 'general assets' includes all such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and on deposit for the security or benefit of all policyholders or all policyholders and creditors, in more than a single state, are treated as general assets.

(9) 'Guaranty association' means the South Carolina Property and Casualty Insurance Guaranty Association, the South Carolina Life and Accident and Health Insurance Guaranty Association, and any other similar entity created by the legislature of this State for the payment of claims of insolvent insurers.

'Foreign guaranty association' means any similar entity created by the legislature of any other state.

(10) 'Insolvency' or 'insolvent' means:

(a) For an insurer issuing only assessable fire insurance policies:

(i) the inability to pay any obligation within thirty days after it becomes payable, or

(ii) if an assessment is made within thirty days after that date, the inability to pay the obligation thirty days following the date specified in the first assessment notice issued after the date of loss.

(b) For any other insurer, that it is unable to pay its obligations when they are due, or when its admitted assets do not exceed its liabilities plus the greater of:

(i) any capital and surplus required by law for its organization, or

(ii) the total par or stated value of its authorized and issued capital stock.

(c) For purposes of this item (10) 'liabilities' includes, but is not limited to, reserves required by statute, regulations, or specific requirements imposed by the Commissioner upon a subject company at the time of admission or subsequent thereto.

(11) 'Insurer' means any person who has done, purports to do, is doing, or is licensed to do an insurance business and is or has been subject to the authority of, or to liquidation, rehabilitation, reorganization, supervision, or conservation by, the commissioner of insurance, or similar entity, of any state. For purposes of this chapter, any other persons included under Section 38-27-40 are considered insurers.

(12) 'Person' means natural persons, corporations, partnerships, trusts, associations, societies, orders, or any other organizations or entities.

(13) 'Preferred claim' means any claim with respect to which the terms of this chapter accord priority of payment from the general assets of the insurer.

(14) 'Receiver' means receiver, liquidator, rehabilitator, or conservator as the context requires.

(15) 'Reciprocal state' means any state other than this State in which in substance and effect subsection (a) of Section 38-27-370, Section 38-27-930, Section 38-27-940, and Sections 38-27-960 through 38-27-980 are in force, and in which provisions are in force requiring that the Commissioner or equivalent official be the receiver of a delinquent insurer, and in which some provision exists for the avoidance of fraudulent conveyances and preferential transfers.

(16) 'Secured claim' means any claim secured by mortgage, trust deed, pledge, deposit as security, escrow, or otherwise, but not including special deposit claims or claims against general assets. The term also includes claims which have become liens upon specific assets by reason of judicial process.

(17) 'Special deposit claim' means any claim secured by a deposit made pursuant to statute for the security or benefit of a limited class or classes of persons, but not including any claim secured by general assets.

(18) 'State' means any state, district, or territory of the United States and the Panama Canal Zone.

(19) 'Transfer' includes the sale and every other and different mode, direct or indirect, of disposing of or of parting with property or with an interest therein or with the possession thereof or of fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily, by or without judicial proceedings. The retention of a security title to property delivered to a debtor is considered a transfer suffered by the debtor.

Section 38-27-60. Jurisdiction and venue.

(a) Except as provided in this subsection, no delinquency proceeding may be commenced under this chapter by anyone other than the Commissioner and no court has jurisdiction to entertain, hear, or determine any proceeding commenced by any other person. However, the court may consider the application for receivership of a person other than the Commissioner if the applicant for receivership has proceeded as follows:

(1) The applicant for receivership, before presenting his complaint or petition to the court for action thereon, presents a copy thereof to the Commissioner for action thereon, as hereinafter set forth, and gives reasonable notice to the insurance company to be affected that a copy has been lodged with the Commissioner.

(2) The insurance company affected thereby has ten days after the service of the notice within which to lodge with the Commissioner a copy of the answer which it proposes to file, and thereupon the Commissioner shall proceed to investigate and within a reasonable time determine the merits of the application for receivership and shall fix a time for the hearing of the investigation of the matters involved in the petition or complaint.

(3) The Commissioner, after completing the investigation, shall recommend to the court that the receiver be or not be appointed. The court shall then consider the application for a receiver.

(b) No court of this State has jurisdiction to entertain, hear, or determine any complaint praying for the dissolution, liquidation, rehabilitation, sequestration, conservation, or receivership of an insurer or praying for an injunction or restraining order or other relief preliminary to, incidental to, or relating to the proceedings other than in accordance with this chapter.

(c) Whenever the Commissioner finds that any of the grounds for rehabilitation or liquidation of a domestic or alien insurance company as set forth in Sections 38-27-310 and 38-27-360 exists, he may apply to the circuit court for an order directing the company to show cause by a designated date why a receiver should not be appointed for the company or why an order should not be entered authorizing the Commissioner to proceed with the delinquency proceedings of the company or to take any other appropriate steps authorized in this chapter. The application and order may include any other relief the nature of the case and the interests of the policyholders, creditors, stockholders, and members of the company and of the public may require. A copy of the application and the order to show cause must be served upon the company by registered or certified mail and constitutes legal process in lieu of any summons or process otherwise provided by law.

(d) In addition to other grounds for jurisdiction provided by the law of this State, a court of this State having jurisdiction of the subject matter in an action brought by the receiver of a domestic insurer or an alien insurer domiciled in this State has jurisdiction over a person served with process by registered or certified mail:

(1) if the person served is obligated to the insurer in any way as an incident to any agency or brokerage arrangement that may exist or has existed between the insurer and the agent or broker, in any action on or incident to the obligation;

(2) if the person served is a reinsurer who has at any time written a policy of reinsurance for an insurer against which a rehabilitation or liquidation order is in effect when the action is commenced, or is an agent or broker of or for the reinsurer, in any action on or incident to the reinsurance contract; or

(3) if the person served is or has been an officer, manager, trustee, organizer, promoter, or person in a position of comparable authority or influence in an insurer against which a rehabilitation or liquidation order is in effect when the action is commenced, in any action resulting from such a relationship with the insurer.

(e) If the court on motion of any party finds that any action should as a matter of substantial justice be tried in a forum outside this State, the court may enter an appropriate order to stay further proceedings on the action in this State.

(f) All actions herein authorized shall be brought in the Court of Common Pleas for Richland County.

Section 38-27-70. Injunctions and orders.

(a) Any receiver appointed in a proceeding under this chapter may at any time apply for, and any court of general jurisdiction may grant, restraining orders, preliminary and permanent injunctions, and other orders considered necessary and proper to prevent:

(1) the transaction of further business;

(2) the transfer of property;

(3) interference with the receiver or with a proceeding under this chapter;

(4) waste of the insurer's assets;

(5) dissipation and transfer of bank accounts;

(6) the institution or further prosecution of any actions or proceedings;

(7) the obtaining of preferences, judgments, attachments, garnishments, or liens against the insurer, its assets, or its policyholders;

(8) the levying of execution against the insurer, its assets, or its policyholders;

(9) the making of any sale or deed for nonpayment of taxes or assessments that would lessen the value of the assets of the insurer;

(10) the withholding from the receiver of books, accounts, documents, or other records relating to the business of the insurer; or

(11) any other threatened or contemplated action that might lessen the value of the insurer's assets or prejudice the rights of policyholders, creditors, or shareholders, or the administration of any proceeding under this chapter.

(b) The receiver may apply to any court outside of the State for the relief described in subsection (a).

Section 38-27-80. Cooperation of officers, owners, and employees.

(a) Any officer, manager, director, trustee, owner, employee, or agent of any insurer or any other person with authority over or in charge of any segment of the insurer's affairs must cooperate with the Commissioner in any proceeding under this chapter or any investigation preliminary to the proceeding. The term 'person' as used in this section includes any person who exercises control directly or indirectly over activities of the insurer through any holding company or other affiliate of the insurer. 'To cooperate' includes, but is not limited to:

(1) To reply promptly in writing to any inquiry from the Commissioner requesting a reply.

(2) To make available to the Commissioner any books, accounts, documents, or other records or information or property of or pertaining to the insurer and in his possession, custody, or control.

(b) No person may obstruct or interfere with the Commissioner in the conduct of any delinquency proceeding or any investigation preliminary or incidental thereto.

(c) This section may not be construed to abridge otherwise existing legal rights, including the right to resist a petition for liquidation or other delinquency proceedings, or other orders.

(d) Any person included within subsection (a) who fails to cooperate with the Commissioner, or any person who obstructs or interferes with the Commissioner in the conduct of any delinquency proceeding or any investigation preliminary or incidental thereto, or who violates any valid order the Commissioner issues under this chapter may:

(1) upon conviction, be sentenced to pay a fine not exceeding ten thousand dollars or to undergo imprisonment for a term of not more than one year, or both, or

(2) after a hearing, be subject to the imposition by the Commissioner of a civil penalty not to exceed ten thousand dollars and be subject further to the revocation or suspension of any insurance licenses issued by the Commissioner.

Section 38-27-90. Bonds.

In any proceeding under this chapter, the Commissioner and his deputies are responsible on their official bonds for the faithful performance of their duties. If the court considers it desirable for the protection of the assets, it may at any time require an additional bond from the Commissioner or his deputies. These bonds must be paid for out of the assets of the insurer as a cost of administration.

Article 3

Summary Provisions

Section 38-27-210. Commissioner's summary orders and supervision proceedings.

(a) Whenever the Commissioner has reasonable cause to believe, and determines, after a hearing held under subsection (e), that any domestic insurer has committed or engaged in, or is about to commit or engage in, any act, practice, or transaction that would subject it to delinquency proceedings under this chapter, he may make and serve upon the insurer and any other persons involved any orders reasonably necessary to correct, eliminate, or remedy the conduct, condition, or ground.

(b) If upon examination or at any other time the Commissioner has reasonable cause to believe that a domestic insurer is in a condition that renders the continuance of its business hazardous to the public or to holders of its policies or certificates of insurance, or if the domestic insurer gives its consent, then the Commissioner shall upon his determination:

(1) Notify the insurer of his determination; and

(2) Furnish to the insurer a written list of the Commissioner's requirements to abate his determination.

(c) If the Commissioner makes a determination to supervise an insurer subject to an order under subsection (a) or (b), he shall notify the insurer that it is under the supervision of the Commissioner. During the period of supervision, the Commissioner may appoint a supervisor to supervise the insurer. The order appointing a supervisor shall direct the supervisor to enforce orders issued under subsections (a) and (b) and may also require that the insurer may not do any of the following things, during the period of supervision, without the prior approval of the Commissioner or his supervisor:

(1) Dispose of, convey, or encumber any of its assets or its business in force;

(2) Withdraw from any of its bank accounts;

(3) Lend any of its funds;

(4) Invest any of its funds;

(5) Transfer any of its property;

(6) Incur any debt, obligation, or liability;

(7) Merge or consolidate with another company; or

(8) Enter into any new reinsurance contract or treaty.

(d) Any insurer subject to an order under this section shall comply with the lawful requirements of the Commissioner and, if placed under supervision, has sixty days from the date the supervision order is served within which to comply with the Commissioner's requirements. In the event the insurer fails to comply within time, the Commissioner may institute proceedings under Section 38-27-310 or 38-27-360 to have a rehabilitator or liquidator appointed, or extend the period of supervision.

(e) The notice of hearing under subsection (a) and any order issued pursuant to that subsection must conform with and be served upon the insurer pursuant to Article II of Act 176 of 1977 (the Administrative Procedure Act) and the regulations of the Department. The notice of hearing shall state the time and place of hearing and the conduct, condition, or ground upon which the Commissioner would base his order. Unless mutually agreed between the Commissioner and the insurer, the hearing may not occur less than thirty days after notice is served and must be held in Richland County at the offices of the South Carolina Department of Insurance. The Commissioner shall hold all hearings under subsection (a) privately unless the insurer requests a public hearing, in which case the hearing must be public.

(f) (1) Any insurer subject to an order under subsection (b) may request a hearing to review that order. The hearing must be held as provided in subsection (e), but the request for a hearing does not stay the effect of the order.

(2) If the Commissioner issues an order under subsection (b), the insurer may, at any time, waive a Commissioner's hearing and apply for immediate judicial relief by means of any remedy afforded by law without first exhausting administrative remedies. After a hearing, any party to the proceedings whose interests are substantially affected is entitled to judicial review of any order issued by the Commissioner. An application for judicial relief or judicial review as provided in this section does not automatically stay the effect of any order of the Commissioner.

(g) During the period of supervision the insurer may request the Commissioner to review an action taken or proposed to be taken by the supervisor, specifying wherein the action complained of is believed not to be in the best interest of the insurer.

(h) If any person has violated any supervision order issued under this section which as to him was then still in effect, he is liable to pay a civil penalty imposed by the circuit court not to exceed ten thousand dollars.

(i) The Commissioner may apply for, and any court of general jurisdiction may grant, restraining orders, preliminary and permanent injunctions, and other orders considered necessary and proper to enforce a supervision order.

(j) If any person, subject to the provisions of this chapter, including those persons described in subsection (a) of Section 38-27-80, knowingly violates any valid order of the Commissioner issued under this section and, as a result of the violation, the net worth of the insurer is reduced or the insurer suffers loss

it would not otherwise have suffered, that person becomes personally liable to the insurer for the amount of the reduction or loss. The Commissioner or supervisor is authorized to bring an action on behalf of the insurer in the circuit court to recover the amount of the reduction or loss together with any costs.

Section 38-27-220. Court's seizure order.

(a) The Commissioner may file in the circuit court a petition alleging, with respect to a domestic insurer:

(1) that grounds exist that would justify a court order for a formal delinquency proceeding against an insurer under this chapter;

(2) that the interests of policyholders, creditors, or the public will be endangered by delay; and

(3) the contents of an order considered necessary by the Commissioner.

(b) Upon a filing under subsection (a), the court may issue forthwith, ex parte and without a hearing, the requested order which shall direct the Commissioner to take possession and control of all or a part of the property, books, accounts, documents, and other records of an insurer and of the premises occupied by it for transaction of its business and, until further order of the court, shall enjoin the insurer and its officers, managers, agents, and employees from disposition of its property and from transaction of its business except with the Commissioner's written consent.

(c) The court shall specify in the order what its duration is, which must be the time the court considers necessary for the Commissioner to ascertain the condition of the insurer. On motion of either party or on its own motion, the court may hold any hearings it considers desirable after notice it considers appropriate and may extend, shorten, or modify the terms of the seizure order. The court shall vacate the seizure order if the Commissioner fails to commence a formal proceeding under this chapter after having had a reasonable opportunity to do so. An order of the court pursuant to a formal proceeding under this chapter ipso facto vacates the seizure order.

(d) Entry of a seizure order under this section does not constitute an anticipatory breach of any contract of the insurer.

(e) An insurer subject to an ex parte order under this section may petition the court at any time after the issuance of the order for a hearing and review of the order. The court shall hold the hearing and review not more than fifteen days after the request. A hearing under this subsection may be held privately in chambers and it must be so held if the insurer proceeded against so requests.

(f) If, at any time after the issuance of a seizure order, it appears to the court that any person whose interest is or will be substantially affected by the order did not appear at the hearing and has not been served, the court may order that notice be given. An order that notice be given does not stay the effect of any order previously issued by the court.

Section 38-27-230. Confidentiality of hearings.

In all proceedings and judicial reviews thereof under Sections 38-27-210 and 38-27-220, all records of the insurer, other documents, and all insurance department files and court records and papers, so far as they pertain to or are a part of the record of the proceedings, are and must remain confidential except as is necessary to obtain compliance therewith, unless and until the circuit court, after hearing arguments from the parties in chambers, orders otherwise, or unless the insurer requests that the matter be made public. Until a court order, all papers

filed with the clerk of the circuit court must be held by him in a confidential file.

Article 5

Formal Proceedings

Section 38-27-310. Grounds for rehabilitation.

The Commissioner may apply by petition to the circuit court for an order authorizing him to rehabilitate a domestic insurer or an alien insurer domiciled in this State on any one or more of the following grounds:

(1) The insurer is in a condition in which the further transaction of business would be hazardous, financially, to its policyholders, creditors, or the public.

(2) There is reasonable cause to believe that there has been embezzlement from the insurer, wrongful sequestration or diversion of the insurer's assets, forgery or fraud affecting the insurer, or other illegal conduct in, by, or with respect to the insurer that if established would endanger assets in an amount threatening the solvency of the insurer.

(3) The insurer has failed to remove any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, employee, or other person, if the person has been found after notice and hearing by the Commissioner to be dishonest or untrustworthy in a way affecting the insurer's business.

(4) Control of the insurer, whether by stock ownership or otherwise, and whether direct or indirect, is in a person or persons found after notice and hearing to be untrustworthy.

(5) Any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, director or trustee, employee, or other person, has refused to be examined under oath by the Commissioner concerning its affairs, whether in this State or elsewhere, and, after reasonable notice of the fact, the insurer has failed promptly and effectively to terminate the employment and status of the person and all his influence on management.

(6) After demand by the Commissioner under Section 38-13-20 or 38-13-120 or under this chapter, the insurer has failed to make available promptly for examination any of its own property, books, accounts, documents, or other records, or those of any subsidiary or related company within the control of the insurer, or those of any person having executive authority in the insurer so far as they pertain to the insurer.

(7) Without first obtaining the Commissioner's written consent, the insurer has transferred, or attempted to transfer, substantially its entire property or business or has entered into any transaction the effect of which is to merge, consolidate, or reinsure substantially its entire property or business in or with the property or business of any other person.

(8) The insurer or its property has been or is the subject of an application for the appointment of a receiver, trustee, custodian, conservator, or sequestrator or similar fiduciary of the insurer or its property otherwise than as authorized under the insurance laws of this State and the appointment has been made or is imminent and the appointment might oust the courts of this State of jurisdiction or might prejudice orderly delinquency proceedings under this chapter.

(9) Within the previous three years the insurer has willfully violated its charter or articles of incorporation, its bylaws, any insurance law of this State, or any valid order of the Commissioner under Section 38-27-210.

(10) The insurer has failed to pay within sixty days after due date any obligation to any state or any subdivision thereof or any judgment entered in any state, if the court in which the judgment was entered had jurisdiction over the subject matter, except that the nonpayment may not be a ground until sixty days after any good faith effort by the insurer to contest the obligation has been terminated, whether it is before the Commissioner or in the courts, or the insurer has systematically attempted to compromise or renegotiate previously agreed settlements with its creditors on the ground that it is financially unable to pay its obligations in full.

(11) The insurer has failed to file its annual report or other financial report required by statute within the time allowed by law and, after written demand by the Commissioner, has failed to give an adequate explanation immediately.

(12) The board of directors or the holders of a majority of the shares entitled to vote request or consent to rehabilitation under this chapter.

Section 38-27-320. Rehabilitation orders.

(a) An order to rehabilitate the business of a domestic insurer or an alien insurer domiciled in this State shall appoint the Commissioner, and his successors in office, the rehabilitator and shall direct the rehabilitator to take possession immediately of the assets of the insurer and to administer them under the general supervision of the court. The filing or recording of the order with the clerk of court or register of mesne conveyances of the county in which the principal business of the company is conducted or the county in which its principal office or place of business is located imparts the same notice which a deed, bill of sale, or other evidence of title duly filed or recorded with that office would have imparted. The order to rehabilitate the insurer shall by operation of law vest title to all assets of the insurer in the rehabilitator.

(b) Any order issued under this section shall require accounting to the court by the rehabilitator. Accountings must be at intervals as the court specifies in its order.

Section 38-27-330. Powers and duties of rehabilitator.

(a) The Commissioner as rehabilitator may appoint one or more special deputies who have all the powers and responsibilities of the rehabilitator granted under this section, and the Commissioner may employ any counsel, clerks, and assistants considered necessary. The compensation of the special deputy, counsel, clerks, and assistants and all expenses of taking possession of the insurer and of conducting the proceedings must be fixed by the Commissioner with the court's approval and must be paid out of the funds or assets of the insurer. The persons appointed under this section shall serve at the Commissioner's pleasure. In the event that the property of the insurer does not contain sufficient cash or liquid assets to defray the costs incurred, the Commissioner may advance the costs so incurred out of any appropriation for the maintenance of the Insurance Department. Any amounts so advanced for expenses of administration must be repaid to the Commissioner for the use of the Insurance Department out of the first available monies of the insurer.

(b) The rehabilitator may take any action he considers necessary or appropriate to reform and revitalize the insurer. He has all the powers of the directors, officers, and managers, whose authority is suspended, except as they are redelegated by the rehabilitator. He has full power to direct and manage, to hire and discharge employees subject to any contract rights they may have, and to deal with the property and business of the insurer.

(c) If it appears to the rehabilitator that there has been criminal or tortious conduct or breach of any contractual or fiduciary obligation detrimental to the insurer by any officer, manager, agent, broker, employee, or other person, he may pursue all appropriate legal remedies on behalf of the insurer.

(d) If the rehabilitator determines that reorganization, consolidation, conversion, reinsurance, merger, or other transformation of the insurer is appropriate, he shall prepare a plan to effect the changes. Upon application of the rehabilitator for approval of the plan, and after any notice and hearings the court may prescribe, the court may either approve or disapprove the proposed plan, or may modify it and approve it as modified. Any plan approved under this section must be, in the judgment of the court, fair and equitable to all parties concerned. If the plan is approved, the rehabilitator shall carry out the plan. In the case of a life insurer, the plan proposed may include the imposition of liens upon the policies of the company, if all rights of shareholders are first relinquished. A plan for a life insurer may also propose imposition of a moratorium upon loan and cash surrender rights under policies, for the period and to the extent necessary.

(e) The rehabilitator has the power under Sections 38-27-450 and 38-27-460 to avoid fraudulent transfers.

Section 38-27-340. Actions by and against rehabilitator.

(a) Any court in this State before which any action or proceeding in which the insurer is a party or is obligated to defend a party is pending when a rehabilitation order against the insurer is entered shall stay the action or proceeding for ninety days and any additional time necessary for the rehabilitator to obtain proper representation and prepare for further proceedings. The rehabilitator shall take any action respecting the pending litigation he considers necessary in the interests of justice and for the protection of creditors, policyholders, and the public. The rehabilitator shall immediately consider all litigation pending outside this State and shall petition the courts having jurisdiction over that litigation for stays whenever necessary to protect the estate of the insurer.

(b) No statute of limitations or defense of laches runs with respect to any action by or against an insurer between the filing of a petition for appointment of a rehabilitator for that insurer and the order granting or denying that petition. Any action by or against the insurer that might have been commenced when the petition was filed may be commenced for at least sixty days after the order of rehabilitation is entered or the petition is denied.

(c) Any guaranty association or foreign guaranty association covering life or health insurance or annuities has standing to appear in any court proceeding concerning the rehabilitation of a life or health insurer if the association is or may become liable to act as a result of the rehabilitation.

Section 38-27-350. Termination of rehabilitation.

(a) Whenever the Commissioner believes further attempts to rehabilitate an insurer would substantially increase the risk of loss to creditors, policyholders, or the public or would be futile, the Commissioner may petition the circuit court for an order of liquidation. A petition under this subsection has the same effect as a petition under Section 38-27-360. The circuit court shall permit the directors of the insurer to take actions reasonably necessary to defend against the petition and may order payment from the estate of the insurer of costs and other expenses of defense as justice requires.

(b) The rehabilitator may at any time petition the circuit court for an order terminating rehabilitation of an insurer. The court shall also permit the directors of the insurer to petition the court for an order terminating rehabilitation of the insurer and may order payment from the estate of the insurer of costs and other expenses of the petition as justice requires. If the circuit court finds that rehabilitation has been accomplished and that grounds for rehabilitation under Section 38-27-310 no longer exist, it shall order that the insurer be restored to possession of its property and the control of its business. The circuit court may also make that finding and issue that order at any time upon its own motion.

Section 38-27-360. Grounds for liquidation.

The Commissioner may petition the circuit court for an order directing him to liquidate a domestic insurer or an alien insurer domiciled in this State on the basis:

(1) of any ground for an order of rehabilitation as specified in Section 38-27-310, whether or not there has been a prior order directing the rehabilitation of the insurer;

(2) that the insurer is insolvent; or

(3) that the insurer is in such a condition that the further transaction of business would be hazardous, financially or otherwise, to its policyholders, its creditors, or the public.

Section 38-27-370. Liquidation orders.

(a) An order to liquidate the business of a domestic insurer shall appoint the Commissioner, and his successors in office, as liquidator and shall direct the liquidator immediately to take possession of the assets of the insurer and to administer them under the general supervision of the court. The liquidator is vested by operation of law with the title to all of the property, contracts, and rights of action and all of the books and records of the insurer ordered liquidated, wherever located, as of the entry of the final order of liquidation. The filing or recording of the order with the clerk of court or the register of mesne conveyances of the county in which its principal office or place of business is located or, in the case of real estate, with the clerk of court and the register of mesne conveyances of the county where the property is located imparts the same notice which a deed, bill of sale, or other evidence of title duly filed or recorded with that office would have imparted.

(b) Upon issuance of the order, the rights and liabilities of the insurer and of its creditors, policyholders, shareholders, members, and all other persons interested in its estate become fixed as of the date of entry of the order of liquidation, except as provided in Sections 38-27-380 and 38-27-560.

(c) An order to liquidate the business of an alien insurer domiciled in this State must be in the same terms and has the same legal effect as an order to liquidate a domestic insurer, except that the assets and the business in the United States are the only assets and business included therein.

(d) At the time of petitioning for an order of liquidation, or at any time thereafter, the Commissioner, after making appropriate findings of an insurer's insolvency, may petition the court for a judicial declaration of insolvency.

After providing notice and hearing it considers proper the court may make the declaration.

(e) Any order issued under this section shall require accounting to the court by the liquidator. Accountings must be at intervals the court specifies in its order.

Section 38-27-380. Continuance of coverage.

(a) All policies, other than life or health insurance or annuities, in effect at the time of issuance of an order of liquidation continue in force only for the lesser of:

(1) a period of thirty days from the date of entry of the liquidation order;

(2) the expiration of the policy coverage;

(3) the date when the insured has replaced the insurance coverage with equivalent insurance in another insurer or otherwise terminated the policy; or

(4) the liquidator has effected a transfer of the policy obligation pursuant to item (8) of subsection (a) of Section 38-27-400.

(b) An order of liquidation under Section 38-27-370 terminates coverages at the time specified in subsection (a) of this section for purposes of any other statute.

(c) Policies of life or health insurance or annuities continue in force for the period and under the terms as provided for by any applicable guaranty association or foreign guaranty association.

(d) Policies of life or health insurance or annuities or any period or coverage of the policies not covered by a guaranty association or foreign guaranty association terminates under subsections (a) and (b) of this section.

Section 38-27-390. Dissolution of insurer.

The Commissioner may petition for an order dissolving the corporate existence of a domestic insurer or the United States branch of an alien insurer domiciled in this State at the time he

applies for a liquidation order. The court shall order dissolution of the corporation upon petition by the Commissioner upon or after the granting of a liquidation order. If the dissolution has not previously been ordered, it must be effected by operation of law upon the discharge of the liquidator if the insurer is insolvent but may be ordered by the court upon the discharge of the liquidator if the insurer is under a liquidation order for some other reason.

Section 38-27-400. Powers of liquidator.

(a) The liquidator has the power:

(1) To appoint a special deputy to act for him under this chapter and to determine the special deputy's reasonable compensation. The special deputy has all powers of the liquidator granted by this section. The special deputy serves at the pleasure of the liquidator.

(2) To employ employees and agents, legal counsel, actuaries, accountants, appraisers, consultants, and other personnel he considers necessary to assist in the liquidation.

(3) To fix the reasonable compensation of employees and agents, legal counsel, actuaries, accountants, appraisers, and consultants with the court's approval.

(4) To pay reasonable compensation to persons appointed and to defray from the funds or assets of the insurer all expenses of taking possession of, conserving, conducting, liquidating, disposing of, or otherwise dealing with the business and property of the insurer. In the event that the property of the insurer does not contain sufficient cash or liquid assets to defray the costs incurred, the Commissioner may advance the costs so incurred out of any appropriation for the maintenance of the Insurance Department. Any amounts so advanced for expenses of administration must be repaid to the Commissioner for the use of the Insurance Department out of the first available monies of the insurer.

(5) To hold hearings, to subpoena witnesses to compel their attendance, to administer oaths, to examine any person under oath, and to compel any person to subscribe to his testimony after it has been correctly reduced to writing and, in connection therewith, to require the production of any books, papers, records, or other documents which he considers relevant to the inquiry.

(6) To collect all debts and monies due and claims belonging to the insurer, wherever located, and, for this purpose:

(i) To institute timely action in other jurisdictions in order to forestall garnishment and attachment proceedings against the debts.

(ii) To do other acts necessary or expedient to collect, conserve, or protect its assets or property, including the power to sell, compound, compromise, or assign debts for purposes of collection upon terms and conditions he considers best.

(iii) To pursue any creditor's remedies available to enforce his claims.

(7) To conduct public and private sales of the property of the insurer.

(8) To use assets of the estate of an insurer under a liquidation order to transfer policy obligations to a solvent assuming insurer, if the transfer can be arranged without prejudice to applicable priorities under Section 38-27-610.

(9) To acquire, hypothecate, encumber, lease, improve, sell, transfer, abandon, or otherwise dispose of or deal with any property of the insurer at its market value or upon terms and conditions that are fair and reasonable. He also has power to execute, acknowledge, and deliver any and all deeds, assignments, releases, and other instruments necessary or proper to effectuate any sale of property or other transaction in connection with the liquidation.

(10) To borrow money on the security of the insurer's assets or without security and to execute and deliver all documents necessary to that transaction for the purpose of facilitating the liquidation.

(11) To enter into contracts necessary to carry out the order to liquidate, and to affirm or disavow any contracts to which the insurer is a party.

(12) To continue to prosecute and to institute in the name of the insurer or in his own name any and all suits and other legal proceedings, in this State or elsewhere, and to abandon the prosecution of claims he considers unprofitable to pursue further. If the insurer is dissolved under Section 38-27-390, he has the power to apply to any court in this State or elsewhere for leave to substitute himself for the insurer as plaintiff.

(13) To prosecute any action which may exist in behalf of the creditors, members, policyholders, or shareholders of the insurer against any officer of the insurer or any other person.

(14) To remove any or all records and property of the insurer to the offices of the Commissioner or to any other place convenient for the purposes of efficient and orderly execution of the liquidation. Guaranty associations and foreign guaranty associations shall have such reasonable access to the records of the insurer as is necessary for them to carry out their statutory obligations.

(15) To deposit in one or more banks in this State sums required for meeting current administration expenses and dividend distributions.

(16) To invest all sums not currently needed, unless the court orders otherwise.

(17) To file any necessary documents for recording in the office of any recorder of deeds or record office in this State or elsewhere where property of the insurer is located.

(18) To assert all defenses available to the insurer as against third persons, including statutes of limitation, statutes of fraud, and the defense of usury. A waiver of any defense by the insurer after a petition in liquidation has been filed does not bind the liquidator. Whenever a guaranty association or foreign guaranty association has an obligation to defend any suit, the liquidator shall give precedence to that obligation and may defend only in the absence of a defense by the guaranty associations.

(19) To exercise and enforce all the rights, remedies, and powers of any creditor, shareholder, policyholder, or member, including any power to avoid any transfer or lien that may be given by the general law and that is not included with Sections 38-27-450 through 38-27-470.

(20) To intervene in any proceeding wherever instituted that might lead to the appointment of a receiver or trustee and to act as the receiver or trustee whenever the appointment is offered.

(21) To enter into agreements with any receiver or commissioner of any other state relating to the rehabilitation, liquidation, conservation, or dissolution of an insurer doing business in both states.

(22) To exercise all powers now held or hereafter conferred upon receivers by the laws of this State not inconsistent with this chapter.

(b) The enumeration, in this section, of the powers and authority of the liquidator may not be construed as a limitation upon him; nor shall it exclude in any manner his right to do other acts not herein specifically enumerated, or otherwise provided for, that may be necessary or

appropriate for the accomplishment of or in aid of the purpose of liquidation.

Section 38-27-410. Notice to creditors and others.

(a) Unless the court otherwise directs, the liquidator shall give or cause to be given notice of the liquidation order as soon as possible:

(1) By first class mail and either by telegram or telephone to the insurance commissioner of each jurisdiction in which the insurer is doing business.

(2) By first class mail to any guaranty association or foreign guaranty association which is or may become obligated as a result of the liquidation.

(3) By first class mail to all insurance agents of the insurer.

(4) By first class mail to all persons known or reasonably expected to have claims against the insurer, including all policyholders, at their last known addresses as indicated by the records of the insurer.

(5) By publication in a newspaper of general circulation in the county in which the insurer has its principal place of business and in any other locations the liquidator considers appropriate.

(b) Notice to potential claimants under subsection (a) requires claimants to file with the liquidator their claims together with proper proofs thereof under Section 38-27-550 by a date the liquidator specifies in the notice. The liquidator need not require persons claiming cash surrender values or other investment values in life insurance and annuities to file a claim. All claimants have a duty to keep the liquidator informed of any changes of address.

(c) If notice is given in accordance with this section, the distribution of assets of the insurer under this chapter is conclusive with respect to all claimants, whether or not they received notice.

Section 38-27-420. Duties of agents.

(a) Every person who receives notice in the form prescribed in Section 38-27-410 that an insurer which he represents as an agent is the subject of a liquidation order shall within fifteen days of the notice give notice of the liquidation order. The notice must be sent by first class mail to the last address contained in the agent's records to each policyholder or other person named in any policy issued through the agent by the insurer, if he has a record of the address of the policyholder or other person. A policy is considered issued through an agent if the agent has a property interest in the expiration of the policy, or if the agent has had in his possession a copy of the declarations of the policy at any time during the life of the policy, except where the ownership of the expiration of the policy has been transferred to another. The written notice shall include the name and address of the insurer, the name and address of the agent, identification of the policy impaired, and the nature of the impairment including termination of coverage, as described in Section 38-27-380. Notice by a general agent satisfies the notice requirement for any agents under contract to him. Each agent obligated to give notice under this section shall file a report of compliance with the liquidator.

(b) Any agent failing to give notice or file a report of compliance as required in subsection (a) of this section may be subject to payment of a penalty of not more than one thousand dollars and may have his license suspended. The penalty must be imposed after a hearing held by the Commissioner.

other notice to the policyholders of the insurer under liquidation is adequate.

Section 38-27-430. Actions by and against liquidator.

(a) Upon issuance of an order appointing a liquidator of a domestic insurer or of an alien insurer domiciled in this State, no action at law or equity may be brought against the insurer or liquidator, whether in this State or elsewhere; nor may any existing actions be maintained or further presented after issuance of the order. The courts of this State shall give full faith and credit to injunctions against the liquidator or the company or the continuation of existing actions against the liquidator or the company, when the injunctions are included in an order to liquidate an insurer issued pursuant to corresponding provisions in other states. Whenever, in the liquidator's judgment, protection of the estate of the insurer necessitates intervention in an action against the insurer that is pending outside this State, he may intervene in the action. The liquidator may defend any action in which he intervenes under this section at the expense of the estate of the insurer.

(b) The liquidator may, upon or after an order for liquidation, within two years or such time in addition to two years as applicable law may permit, institute an action or proceeding on behalf of the estate of the insurer upon any cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which the order is entered. Where, by any agreement, a period of limitation is fixed for instituting a suit or proceeding upon any claim, or for filing any claim, proof of claim, proof of loss, demand, notice, or the like, or where in any proceeding, judicial or otherwise, a period of limitation is fixed, either in the proceeding or by applicable law, for taking any action, filing any claim or pleading, or doing any act, and where in the case the period had not expired at the date of the filing of the petition, the liquidator may, for the benefit of the estate, take any action or do any act, required of or permitted to the insurer, within a period of one hundred eighty days after the entry of an order for liquidation, or within a further period that is shown to the satisfaction of the court not to be unfairly prejudicial to the other party.

(c) No statute of limitations or defense of laches runs with respect to any action against an insurer between the filing of a petition for liquidation against an insurer and the denial of the petition. Any action against the insurer that might have been commenced when the petition was filed may be commenced for at least sixty days after the petition is denied.

(d) Any guaranty association or foreign guaranty association has standing to appear in any court proceeding concerning the liquidation of an insurer if the association is or may become liable to act as a result of the liquidation.

Section 38-27-440. Collection and list of assets.

(a) As soon as practicable after the liquidation order but not later than one hundred twenty days thereafter, the liquidator shall prepare in duplicate a list of the insurer's assets. The list must be amended or supplemented from time to time as the liquidator may determine. One copy must be filed in the office of the clerk of the circuit court and one copy must be retained for the liquidator's files. All amendments and supplements must be similarly filed.

(b) The liquidator shall reduce the assets to a degree of liquidity that is consistent with the effective execution of the liquidation.

(c) A submission to the court for disbursement of assets in accordance with Section 38-27-530 fulfills the requirements of subsection (a) of this Section 38-27-440.

Section 38-27-450. Fraudulent transfers prior to petition.

(a) Every transfer made or suffered and every obligation incurred by an insurer within one year prior to the filing of a successful petition for rehabilitation or liquidation under this chapter is fraudulent as to then existing and future creditors if made or incurred without fair consideration or with actual intent to hinder, delay, or defraud either existing or future creditors. A transfer made or an obligation incurred by an insurer ordered to be rehabilitated or liquidated under this chapter, which is fraudulent under this section, may be avoided by the receiver, except as to a person who in good faith is a purchaser, lienor, or obligee for a present fair equivalent value and except that any purchaser, lienor, or obligee, who in good faith has given a consideration less than fair for the transfer, lien, or obligation, may retain the property, lien, or obligation as security for repayment. The court may, on due notice, order the transfer or obligation to be preserved for the benefit of the estate, and, in that event, the receiver succeeds to and may enforce the rights of the purchaser, lienor, or obligee.

(b)(1) A transfer of property other than real property is considered made or suffered when it becomes so far perfected that no later lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee under Section 38-27-470.

(2) A transfer of real property is considered made or suffered when it becomes so far perfected that no subsequent bona fide purchaser from the insurer could obtain rights superior to the rights of the transferee.

(3) A transfer which creates an equitable lien is not considered perfected if there are available means by which a legal lien could be created.

(4) Any transfer not perfected prior to the filing of a petition for liquidation is considered made immediately before the filing of the successful petition.

(5) This subsection (b) applies whether or not there are or were creditors who might have obtained any liens or persons who might have become bona fide purchasers.

(c) Any transaction of the insurer with a reinsurer is considered fraudulent and may be avoided by the receiver under subsection (a) if:

(1) The transaction consists of the termination, adjustment, or settlement of a reinsurance contract in which the reinsurer is released from any part of its duty to pay the originally specified share of losses that had occurred prior to the time of the transaction, unless the reinsurer gives a present fair equivalent value for the release.

(2) Any part of the transaction took place within one year prior to the date of filing of the petition through which the receivership was commenced.

Section 38-27-460. Fraudulent transfer after petition.

(a) After petition for rehabilitation or liquidation has been filed a transfer of any of the real property of the insurer made to a person acting in good faith is valid against the receiver if made for a present fair equivalent value or, if not made for a present fair equivalent value, then to the extent of the present consideration actually paid therefor, for which amount the transferee shall have a lien on the property so transferred. The commencement of a proceeding in rehabilitation or liquidation is constructive notice upon the recording of a copy of the petition for or order of rehabilitation or liquidation with the register of mesne conveyances in the county where any real property in question is located. The exercise by a court of the United States or any state or jurisdiction to authorize or effect a judicial sale of real property of the insurer within any county in any state is not impaired by the pendency of the proceeding unless the copy is recorded in the county prior to the consummation of the judicial sale.

(b) After a petition for rehabilitation or liquidation has been filed and before either the receiver takes possession of the property of the insurer or an order of rehabilitation or liquidation is granted:

(1) A transfer of any of the property of the insurer, other than real property, made to a person acting in good faith is valid against the receiver if made for a present fair equivalent value or, if not made for a present fair equivalent value, then to the extent of the present consideration actually paid therefor, for which amount the transferee shall have a lien on the property so transferred.

(2) A person indebted to the insurer or holding property of the insurer may, if acting in good faith, pay the indebtedness or deliver the property, or any part thereof, to the insurer or upon his order, with the same effect as if the petition were not pending.

(3) A person having actual knowledge of the pending rehabilitation or liquidation is considered not to act in good faith.

(4) A person asserting the validity of a transfer under this section has the burden of proof. Except as elsewhere provided in this section, no transfer by or on behalf of the insurer after the date of the petition for liquidation by any person other than the liquidator is valid against the liquidator.

Section 38-27-470. Voidable preferences and liens.

(a) (1) A preference is a transfer of any of the property of an insurer to or for the benefit of a creditor, for or on account of an antecedent debt, made or suffered by the insurer within one year before the filing of a successful petition for liquidation under this chapter, the effect of which transfer may be to enable the creditor to obtain a greater percentage of this debt than another creditor of the same class would receive. If a liquidation order is entered while the insurer is already subject to a rehabilitation order, then the transfers are considered preferences if made or suffered within one year before the filing of the successful petition for rehabilitation or within two years before the filing of the successful petition for liquidation, whichever time is shorter.

(2) Any preference may be avoided by the liquidator if:

(i) the insurer was insolvent at the time of the transfer;

(ii) the transfer was made within four months before the filing of the petition;

(iii) the creditor receiving it or to be benefited thereby or his agent acting with reference thereto had, at the time when the transfer was made, reasonable cause to believe that the insurer was insolvent or was about to become insolvent; or

(iv) the creditor receiving it was an officer, employee, attorney, or other person who was in fact in a position of comparable influence in the insurer to an officer, whether or not he held such position, or any shareholder holding directly or indirectly more than five percent of any class of any equity security, as defined in Section 38-23-20, issued by the insurer, or any other person, firm, corporation, association, or aggregation of persons with whom the insurer did not deal at arm's length.

(3) Where the preference is voidable, the liquidator may recover the property or, if it has been converted, its value from any person who has received or converted the property, except where a bona fide purchaser or lienor has given less than fair equivalent value, he shall have a lien upon the property to the extent of the consideration actually given by him. Where a preference by way of lien or security title is voidable, the court may on due notice order the lien or title to be preserved for the benefit of the estate, in which event the lien or title passes to the liquidator.

(b) (1) A transfer of property other than real property is considered made or suffered when it becomes so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee.

(3) A transfer which creates an equitable lien is not considered to be perfected if there are available means by which a legal lien could be created.

(4) A transfer not perfected prior to the filing of a petition for liquidation is considered made immediately before the filing of the successful petition.

(5) This subsection (b) applies whether or not there are or were creditors who might have obtained liens or persons who might have become bona fide purchasers.

(c) (1) A lien obtainable by legal or equitable proceedings upon a simple contract is one arising in the ordinary course of the proceedings upon the entry or docketing of a judgment or decree, or upon attachment, execution, or like process, whether before or upon levy. It does not include liens which under applicable law are given a special priority over other liens which are prior in time.

(2) A lien obtainable by legal or equitable proceedings could become superior to the rights of a transferee, or a purchaser could obtain rights superior to the rights of a transferee within the meaning of subsection (b) of this section, if such consequences would follow only from the lien or purchase itself, or from the lien or purchase followed by any step wholly within the control of the respective lienholder or purchaser, with or without the aid of ministerial action by public officials. The lien could not, however, become superior and the purchase could not create superior rights for the purpose of subsection (b) of this section through any acts subsequent to the obtaining of the lien or subsequent to the purchase which require the agreement or concurrence of any third party or which require any further judicial action or ruling.

(d) A transfer of property for or on account of a new and contemporaneous consideration which is considered under subsection (b) of this section made or suffered after the transfer because of delay in perfecting it does not thereby become a transfer for or on account of an antecedent debt if any acts required by applicable law to be performed in order to perfect the transfer as against liens or bona fide purchasers' rights are performed within twenty-one days or any period expressly allowed by law, whichever is less. A transfer to secure a future loan, if the loan is actually made, or a transfer which becomes security for a future loan has the same effect as a transfer for or on account of a new and contemporaneous consideration.

(e) If any lien considered voidable under paragraph (2) of subsection (a) of this section has been dissolved by the furnishing of a bond or other obligation, the surety on which has been indemnified directly or indirectly by the transfer of or the creation of a lien upon any property of an insurer before the filing of a petition under this chapter which results in a liquidation order, the indemnifying transfer or lien is also considered voidable.

(f) The property affected by any lien considered voidable under subsections (a) and (e) of this section is discharged from the lien, and that property and any of the indemnifying property transferred to or for the benefit of a surety pass to the liquidator, except that the court may on due notice order the lien to be preserved for the benefit of the estate and the court may direct that the conveyance be executed as may be proper or adequate to evidence the title of the liquidator.

(g) The circuit court has summary jurisdiction of any proceeding by the liquidator to hear and determine the rights of any parties under this section. Reasonable notice of any hearing in the proceeding must be given to all parties in interest, including the obligee of a releasing bond or other like obligation. Where an order is entered for the recovery of indemnifying property in kind or for the avoidance of an indemnifying lien, the court, upon application of any party in interest, shall in the same proceeding ascertain the value of the property or lien, and, if the value is less than the amount for which the property is indemnified or than the amount of the lien, the transferee or lienholder may elect to retain the property or lien upon payment of its value, as ascertained by the court, to the liquidator, within a reasonable time the court shall fix.

(h) The liability of a surety under a releasing bond or other like obligation is discharged to the extent of the value of the indemnifying property recovered or the indemnifying lien nullified and voided by the liquidator, or, where the property is retained under subsection (g), to the extent of the amount paid to the liquidator.

(i) If a creditor has been preferred and afterward in good faith gives the insurer further credit without security of any kind for property which becomes a part of the insurer's estate, the amount of the new credit remaining unpaid at the time of the petition may be set off against the preference which would otherwise be recoverable from him.

(j) If an insurer, directly or indirectly, within four months before the filing of a successful petition for liquidation under this chapter or at any time in contemplation of a proceeding to liquidate it pays money or transfers property to an attorney-at-law for services rendered or to be rendered, the transaction may be examined by the court on its own motion or must be examined by the court on petition of the liquidator and may be held valid only to the extent of a reasonable amount to be determined by the court. The excess may be recovered by the liquidator for the benefit of the estate; however, where the attorney is in a position of influence in the insurer or an affiliate thereof, payment of any money or the transfer of any property to the attorney-at-law for services rendered or to be rendered is governed by item (iv) of paragraph (2) of subsection (a) of this section.

(k) (1) Every officer, manager, employee, shareholder, member, subscriber, attorney, or any other person acting on behalf of the insurer who knowingly participates in giving any preference when he has reasonable cause to believe the insurer is or is about to become insolvent at the time of the preference is personally liable to the liquidator for the amount of the preference. It is permissible to infer that there is reasonable cause to so believe if the transfer was made within four months before the date of filing of the successful petition for liquidation.

(2) Every person receiving any property from the insurer or the benefit thereof as a preference voidable under subsection (a) is personally liable therefor and is bound to account to the liquidator.

(3) Nothing in this subsection (k) prejudices any other claim by the liquidator against any person.

Section 38-27-480. Claims of holders of voidable rights.

(a) No claim of a creditor who has received or acquired a preference, lien, conveyance, transfer, assignment, or encumbrance voidable under this chapter is allowed unless he surrenders the preference, lien, conveyance, transfer, assignment, or encumbrance. If the avoidance is effected by a proceeding in which a final judgment has been entered, the claim may not be allowed unless the money is paid or the property is delivered to the liquidator within thirty days from the date of the entering of the final judgment, except that the court having jurisdiction over the liquidation may allow further time if there is an appeal or other continuation of the proceeding.

(b) A claim allowable under subsection (a) of this section by reason of the avoidance, whether voluntary or involuntary, or a preference, a lien, conveyance, transfer, assignment, or encumbrance, may be filed as an excused late filing under Section 38-27-540 if filed within thirty days from the date of the avoidance or within the further time allowed by the court under subsection (a) of this section.

Section 38-27-490. Setoffs and counterclaims.

(a) Mutual debts or mutual credits between the insurer and another person in connection with any action or proceeding under this chapter must be set off and the balance only may be allowed or paid, except as provided in subsection (b) of this section and Section 38-27-520.

(b) No setoff or counterclaim is allowed in favor of any person where:

(1) the obligation of the insurer to the person would not at the date of the filing of a petition for liquidation entitle the person to share as a claimant in the assets of the insurer;

(2) the obligation of the insurer to the person was purchased by or transferred to the person with a view to its being used as a setoff;

(3) the obligation of the person is to pay an assessment levied against the members or subscribers of the insurer or is to pay a balance upon a subscription to the capital stock of the insurer or is in any other way in the nature of a capital contribution; or

(4) the obligation of the person is to pay premiums whether earned or unearned to the insurer.

Section 38-27-500. Assessments.

(a) As soon as practicable but not more than two years from the date of an order of liquidation under Section 38-27-370 of an insurer issuing assessable policies, the liquidator shall make a report to the court setting forth:

(1) The reasonable value of the assets of the insurer.

(2) The insurer's probable total liabilities.

(3) The probable aggregate amount of the assessment necessary to pay all claims of creditors and expenses in full, including expenses of administration and costs of collecting the assessment.

(4) A recommendation as to whether or not an assessment should be made and in what amount.

(b) (1) Upon the basis of the report provided in subsection (a), including any supplements and amendments thereto, the circuit court may levy one or more assessments against all members of the insurer who are subject to assessment.

(2) Subject to any applicable legal limits on assessability, the aggregate assessment must be for the amount that the sum of the probable liabilities, the expenses of administration, and the estimated cost of collection of the assessment exceeds the value of existing assets, with due regard being given to assessments that cannot be collected economically.

(c) After levy of assessment under subsection (b) the liquidator shall issue an order directing each member who has not paid the assessment pursuant to the order to show cause why the liquidator should not pursue a judgment therefor.

(d) The liquidator shall give notice of the order to show cause by publication and by first class mail to each member liable thereunder mailed to his last known address as it appears on the insurer's records, at least twenty days before the return day of the order to show cause.

(e) (1) If a member does not appear and serve duly verified objections upon the liquidator by the return day of the order to show cause under subsection (c), the court shall make an order adjudging the member liable for the amount of the assessment against him, pursuant to subsection (c), together with costs, and the liquidator shall have a judgment against the member therefor.

(2) If by the return day the member appears and serves duly verified objections upon the liquidator, the Commissioner may hear and determine the matter or may appoint a referee to hear it and make an order as the facts warrant. In the event that the Commissioner determines that the objections do not warrant relief from assessment, the member may request the court to review the matter and vacate the order to show cause.

(f) The liquidator may enforce any order or collect any judgment under subsection (e) by any lawful means.

Section 38-27-510. Reinsurer's liability.

The amount recoverable by the liquidator from reinsurers may not be reduced as a result of delinquency proceedings, regardless of any provision in the reinsurance contract or other agreement. Payment made directly to an insured or other creditor does not diminish the reinsurer's obligation to the insurer's estate except when the reinsurance contract provided for direct coverage of a named insured and the payment was made in discharge of that obligation.

Section 38-27-520. Recovery of premiums owed.

(a) (1) An agent, broker, premium finance company, or any other person, other than the insured, responsible for the payment of a premium is obligated to pay any unpaid premium for the full policy term due the insurer at the time of the declaration of insolvency, whether earned or unearned, as shown on the records of the insurer. The liquidator has the right to recover from that person any part of an unearned premium that represents that person's commission. Credits or setoffs or both are not allowed to an agent, broker, or premium finance company for any amounts advanced to the insurer by the agent, broker, or premium finance company on behalf of, but in the absence of a payment by, the insured.

(2) An insured is obligated to pay any unpaid earned premium due the insurer at the time of the declaration of insolvency, as shown on the records of the insurer.

(b) Upon satisfactory evidence of a violation of this section, the Commissioner may pursue either one or both of the following courses of action:

(1) Suspend or revoke or refuse to renew the licenses of the offending party or parties.

(2) Impose a penalty of not more than one thousand dollars for each and every act in violation of this section by the party or parties.

(c) Before the Commissioner takes any action as set forth in subsection (b), he shall give written notice to the person, company, association, or exchange accused of violating the law, stating specifically the nature of the alleged violation and advising of an opportunity of hearing to be held at least ten days thereafter. After the hearing, upon failure of the accused to appear at the hearing, or upon failure to request the hearing, the Commissioner, if he finds a violation, shall impose the penalties under subsection (b) he considers advisable.

(d) When the Commissioner takes action in any or all of the ways set out in subsection (b), the party aggrieved may appeal from the action to the circuit court.

Section 38-27-530. Domiciliary liquidator's proposal to distribute assets.

(a) Within one hundred twenty days of a final determination of insolvency of an insurer by a court of competent jurisdiction of this State, the liquidator shall make application to the court for approval of a proposal to disburse assets out of marshaled assets, as the assets become available, to a guaranty association or foreign guaranty association having obligations because of the insolvency. If the liquidator determines that there are insufficient assets to disburse, the application required by this section is considered satisfied by a filing by the liquidator stating the reasons for this determination.

(b) The proposal shall at least include provisions for:

(1) Reserving amounts for the payment of expenses of administration and the payment of claims of secured creditors, to the extent of the value of the security held, and claims falling within the priorities established in Section 38-27-610, Classes 1 and 2.

(2) Disbursement of the assets marshaled to date and subsequent disbursement of assets as they become available.

(3) Equitable allocation of disbursements to each of the guaranty associations and foreign guaranty associations entitled thereto.

(4) The securing by the liquidator from each of the associations entitled to disbursements pursuant to this section of an agreement to return to the liquidator the assets, together with income earned on assets previously disbursed, as may be required to pay claims of secured creditors and claims falling within the priorities established in Section 38-27-610 in accordance with such priorities. No bond is required of the associations.

(5) A full report to be made by each association to the liquidator accounting for all assets so disbursed to the association, all disbursements made therefrom, any interest earned by the association on the assets, and any other matter as the court may direct.

(c) The liquidator's proposal shall provide for disbursements to the associations in amounts estimated at least equal to the claim payments made or to be made thereby for which the

associations could assert a claim against the liquidator and shall further provide that if the assets available for disbursement do not equal or exceed the amount of the claim payments made or to be made by the association then disbursements must be in the amount of available assets.

(d) The liquidator's proposal shall, with respect to an insolvent insurer writing life or health insurance or annuities, provide for disbursements of assets to any guaranty association or any foreign guaranty association covering life or health insurance or annuities or to any other entity or organization reinsuring, assuming, or guaranteeing policies or contracts of insurance under the acts creating the associations.

(e) Notice of the application must be given to the association and to the commissioners of insurance of each of the states. The notice is considered to have been given when deposited in the United States certified mails, first class postage prepaid, at least thirty days prior to submission of the application to the court. Action on the application may be taken by the court if the above required notice has been given and if the liquidator's proposal complies with items (1) and (2) of subsection (b) of this section.

Section 38-27-540. Filing of claims.

(a) Proof of all claims must be filed with the liquidator in the form required by Section 38-27-550 by the last day for filing specified in the notice required under Section 38-27-410, except that proof of claims for cash surrender values or other investment values in life insurance and annuities need not be filed unless the liquidator expressly so requires.

(b) The liquidator may permit a claimant making a late filing to share in distributions, whether past or future, as if he were not late, to the extent that the payment will not prejudice the orderly administration of the liquidation, under the following circumstances:

(1) The existence of the claim was not known to the claimant and he filed his claim as promptly thereafter as reasonably possible after learning of it.

(2) A transfer to a creditor was avoided under Sections 38-27-450 through 38-27-470, or was voluntarily surrendered under Section 38-27-480 and the filing satisfies the conditions of Section 38-27-480.

(3) The valuation under Section 38-27-600, of security held by a secured creditor, shows a deficiency, which is filed within thirty days after the valuation.

(c) The liquidator shall permit late filing claims to share in distributions, whether past or future, as if they were not late, if the claims are claims of a guaranty association or foreign guaranty association for reimbursement of covered claims paid or expenses incurred, or both, after the last day for filing where the payments were made and expenses incurred as provided by law.

(d) The liquidator may consider any claim filed late which is not covered by subsection (b) of this section and permit it to receive distributions which are subsequently declared on any claims of the same or lower priority if the payment does not prejudice the orderly administration of the liquidation. The late-filing claimant shall receive, at each distribution, the same percentage of the amount allowed on his claim as is then being paid to claimants of any lower priority. This must continue until his claim has been paid in full.

Section 38-27-550. Proof of claim.

(a) Proof of claim consists of a statement signed by the claimant that includes all of the following that are applicable:

(1) The particulars of the claim, including the consideration given for it.

(2) The identity and amount of the security on the claim.

(3) The payments made on the debt, if any.

(4) That the sum claimed is justly owing and that there is no setoff, counterclaim, or defense to the claim.

(5) Any right of priority of payment or other specific right asserted by the claimants.

(6) A copy of the written instrument which is the foundation of the claim.

(7) The name and address of the claimant and the attorney who represents him, if any.

(b) No claim need be considered or allowed if it does not contain all the information in subsection (a) which may be applicable. The liquidator may require that a prescribed form be used and may require that other information and documents be included.

(c) At any time the liquidator may request the claimant to present information or evidence supplementary to that required under subsection (a) and may take testimony under oath, require production of affidavits or depositions, or otherwise obtain additional information or evidence.

(d) No judgment or order against an insured or the insurer entered after the date of filing of a successful petition for liquidation and no judgment or order against an insured or the insurer entered at any time by default or by collusion need be considered as evidence of liability or of quantum of damages. No judgment or order against an insured or the insurer entered within four months before the filing of the petition need be considered as evidence of liability or of the quantum of damages.

(e) All claims of a guaranty association or foreign guaranty association must be in the form and shall contain the substantiation as agreed to by the association and the liquidator.

Section 38-27-560. Special claims.

(a) The claim of a third party which is contingent only on his first obtaining a judgment against the insured must be considered and allowed as if there were no contingency.

(b) A claim may be allowed even if contingent, if it is filed in accordance with Section 38-27-540. It may be allowed and may participate in all distributions declared after it is filed to the extent that it does not prejudice the orderly administration of the liquidation.

(c) Claims that are due except for the passage of time must be treated as absolute claims are treated, except that the claims may be discounted at the legal rate of interest.

(d) Claims made under employment contracts by directors, principal officers, or persons in fact performing similar functions or having similar powers are limited to payment for services rendered prior to the issuance of any order of rehabilitation or liquidation under Section 38-27-320 or 38-27-370.

Section 38-27-570. Special provisions for third party and insureds' claims.

(a) Whenever any third party asserts a cause of action against an insured of an insurer in liquidation, the third party may file a claim with the liquidator.

(b) Whether or not the third party files a claim, the insured may file a claim on his own behalf in the liquidation. If the insured fails to file a claim by the date for filing claims specified in the order of liquidation or within sixty days after mailing of the notice required by Section 38-27-410, whichever is later, he is an unexcused late-filer.

(c) The liquidator shall make his recommendations to the court under Section 38-27-610 for the allowance of an insured's claim under subsection (b) of this section after consideration of the probable outcome of any pending action against the insured on which the claim is based, the probable damages recoverable in the action, and the probable costs and expenses of defense. After allowance by the court, the liquidator shall withhold any dividends payable on the claim, pending the outcome of litigation and negotiation with the insured. Whenever it seems appropriate, he shall reconsider the claim on the basis of additional information and amend his recommendations to the court. The insured must be afforded the same notice and opportunity to be heard on all changes in the recommendations as in their initial determination. The court may amend its allowance as it thinks appropriate. As claims against the insured are settled or barred, the insured must be paid from the amount withheld the same percentage dividend as was paid on other claims of like property, based on the lesser of (1) the amount actually recovered from the insured by action or paid by agreement, plus the reasonable costs and expenses of defense, or (2) the amount allowed on the claims by the court. After all claims are settled or barred, any sum remaining from the amount withheld reverts to the undistributed assets of the insurer. Delay in final payment under this subsection (c) is not a reason for unreasonable delay of final distribution and discharge of the liquidator.

(d) If several claims founded upon one policy are filed, whether by third parties or as claims by the insured under this section, and the aggregate allowed amount of the claims to which the same limit of liability in the policy is applicable exceeds that limit, each claim as allowed must be reduced in the same proportion so that the total equals the policy limit. Claims by the insured must be evaluated as in subsection (c). If any insured's claim is subsequently reduced under subsection (c), the amount thus freed must be apportioned ratably among the claims which have been reduced under this subsection (d).

(e) No claim may be presented under this section if it is or may be covered by any guaranty association or foreign guaranty association.

Section 38-27-580. Disputed claims.

(a) When a claim is denied in whole or in part by the liquidator, written notice of the determination must be given to the claimant or his attorney by first class mail at the address shown in the proof of claim. Within sixty days from the mailing of the notice, the claimant may file his objections with the liquidator. If no filing is made, the claimant may not further object to the determination.

(b) Whenever objections are filed with the liquidator and the liquidator does not alter his denial of the claim as a result of the objections, the liquidator shall ask the court for a hearing as soon as practicable and give notice of the hearing by first class mail to the claimant or his attorney and to any other persons directly affected, not less than ten nor more than thirty days before the date of the hearing. The matter may be heard by the court or by a court-appointed referee who shall submit findings of fact along with his recommendation.

Section 38-27-590. Claims of surety.

Whenever a creditor whose claim against an insurer is secured, in whole or in part, by the undertaking of another person fails to prove and file that claim, the other person may do so in the creditor's name and is subrogated to the rights of the creditor, whether the claim has been filed by the creditor or by the other person in the creditor's name, to the extent that he discharges the undertaking. In the absence of an agreement with the creditor to the contrary, however, the other person is not entitled to any distribution until the amount paid to the creditor on the undertaking, plus the distributions paid on the claim from the insurer's estate to the creditor, equals the amount of the entire claim of the creditor. Any excess received by the creditor must be held by him in trust for the other person. The term 'other person' as used in this section is not intended to apply to a guaranty association or foreign guaranty association.

Section 38-27-600. Secured creditor's claims.

(a) The value of any security held by a secured creditor must be determined in one of the following ways, as the court may direct:

(1) by converting the same into money according to the terms of the agreement pursuant to which the security was delivered to the creditor; or

(2) by agreement, arbitration, compromise, or litigation between the creditor and the liquidator.

(b) The determination must be under the supervision and control of the court with due regard for the recommendation of the liquidator. The amount so determined must be credited upon the secured claim, and any deficiency is treated as an unsecured claim. If the claimant surrenders his security to the liquidator, the entire claim is allowed as if unsecured.

Section 38-27-610. Priority of distribution.

The priority of distribution of claims from the insurer's estate must be in accordance with the order in which each class of claims is herein set forth. Every claim in each class must be paid in full or adequate funds retained for such payment before the members of the next class receive any payment. No subclasses may be established within any class. The order of distribution of claims is the following:

(1) Class 1. The costs and expenses of administration, including, but not limited to, the following:

(a) The actual and necessary costs of preserving or recovering the assets of the insurer.

(b) Compensation for services rendered by the receiver in the amount of five percent of the total assets of the insurer coming into the possession of the receiver.

(d) The fees and mileage payable to witnesses.

(e) Compensation of the special deputies, attorneys, and other persons as may be appointed by the receiver for the efficient conduct of the receivership, rehabilitation, or liquidation.

(f) The reasonable expenses of a guaranty association or foreign guaranty association in handling claims.

(2) Class 2. Debts due to employees for services performed to the extent that they do not exceed one thousand dollars and represent payment for services performed within one year before the filing of the petition for liquidation. Officers and directors are not entitled to the benefit of this priority. This priority is in lieu of any other similar priority which may be authorized by law as to wages or compensation of employees.

(3) Class 3. All claims under policies for losses incurred, including third party claims, all claims against the insurer for liability for bodily injury or for injury to or destruction of tangible property which are not under policies, and all claims of a guaranty association or foreign guaranty association. All claims under life insurance and annuity policies, whether for death proceeds, annuity proceeds, or investment values, must be treated as loss claims. That portion of any loss, indemnification for which is provided by other benefits or advantages recovered by the claimant, may not be included in this class, other than benefits or advantages recovered or recoverable in discharge of familial obligations of support or by way of succession at death or as proceeds of life insurance or as gratuities. No payment by an employer to his employee may be treated as a gratuity.

(4) Class 4. Claims under nonassessable policies for unearned premium or other premium refunds and claims of general creditors.

(5) Class 5. Claims of the federal or any state or local government. Claims, including those of any governmental body for a penalty or forfeiture, are allowed in this class only to the extent of the pecuniary loss sustained from the act, transaction, or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby. The remainder of the claims are postponed to the class of claims under item (8) of this section.

(6) Class 6. Claims filed late or any other claims other than claims under items (7) and (8) of this section.

(7) Class 7. Surplus or contribution notes, or similar obligations, and premium refunds on assessable policies. Payments to members of domestic mutual insurance companies are limited in accordance with law.

(8) Class 8. The claims of shareholders or other owners.

Section 38-27-620. Liquidator's recommendations to court.

(a) The liquidator shall review all claims duly filed in the liquidation and shall make any further investigation he considers necessary. He may compound, compromise, or in any other manner

negotiate the amount for which claims will be recommended to the court except where the liquidator is required by law to accept claims as settled by any person or organization, including any guaranty association or foreign guaranty association. Unresolved disputes are determined under Section 38-27-580. As soon as practicable, he shall present to the court a report of the claims against the insurer with his recommendations. The report shall include the name and address of each claimant and the amount of the claim finally recommended, if any. If the insurer has issued annuities or life insurance policies, the liquidator shall report the persons to whom, according to the records of the insurer, amounts are owed as cash surrender values or other investment value and the amounts owed.

(b) The court may approve, disapprove, or modify the report on claims by the liquidator. The reports not modified by the court within a period of sixty days following submission by the liquidator must be treated by the liquidator as allowed claims, subject thereafter to later modification or to rulings made by the court pursuant to Section 38-27-580. No claim under a policy of insurance may be allowed for an amount in excess of the applicable policy limits.

Section 38-27-630. Distribution of assets.

Under the direction of the court, the liquidator shall pay distributions in a manner that will assure the proper recognition of priorities and a reasonable balance between the expeditious completion of the liquidation and the protection of unliquidated and undetermined claims, including third party claims. Distribution of assets in kind may be made at valuations set by agreement between the liquidator and the creditor and approved by the court.

Section 38-27-640. Unclaimed and withheld funds.

(a) All unclaimed funds subject to distribution remaining in the liquidator's hands when he is ready to apply to the court for discharge, including the amount distributable to any creditor, shareholder, member, or other person who is unknown or cannot be found, must be deposited with the State Treasurer and must be paid without interest except in accordance with Section 38-27-610 to the person entitled thereto or his legal representative upon proof satisfactory to the State Treasurer of his right thereto. Unclaimed funds deposited with the State Treasurer in accordance with this section must be advertised and disposed of in accordance with the provisions of Section 27-19-220.

(b) All funds withheld under Section 38-27-560 and not distributed must, upon discharge of the liquidator, be deposited with the State Treasurer and paid by him in accordance with Section 38-27-610. Any sums remaining which under Section 38-27-610 would revert to the undistributed assets of the insurer must be transferred to the State Treasurer and become the property of the State under subsection (a) of this section unless the Commissioner in his discretion petitions the court to reopen the liquidation under Section 38-27-660.

Section 38-27-650. Termination of proceedings.

(a) When all assets justifying the expense of collection and distribution have been collected and distributed under this chapter the liquidator shall apply to the court for discharge. The court may grant the discharge and make any other orders, including an order to transfer any remaining funds that are uneconomic to distribute, as may be considered appropriate.

(b) Any other person may apply to the court at any time for an order under subsection (a) of this section. If the application is denied, the

applicant shall pay the costs and expenses of the liquidator in resisting the application, including a reasonable attorney's fee.

Section 38-27-660. Reopening liquidation.

After the liquidation proceeding has been terminated and the liquidator discharged, the Commissioner or other interested party may at any time petition the circuit court to reopen the proceedings for good cause, including the discovery of additional assets. If the court is satisfied that there is justification for reopening, it must so order.

Section 38-27-670. Disposition of records during and after termination of liquidation.

Whenever it appears to the Commissioner that the records of any insurer in process of liquidation or completely liquidated are no longer useful, he may recommend to the court, and the court shall direct, what records should be retained for future reference and what should be destroyed.

Section 38-27-680. External audit of receiver's books.

The circuit court may, as it considers desirable, cause audits to be made of the books of the Commissioner relating to any receivership established under this chapter, and a report of each audit must be filed with the Commissioner and with the court. The books, records, and other documents of the receivership must be made available to the auditor at any time without notice. The expense of each audit is considered a cost of administration of the receivership.

Article 7

Interstate Relations

Section 38-27-910. Conservation of property of foreign or alien insurers found in South Carolina.

(a) If a domiciliary liquidator has not been appointed, the Commissioner may apply to the circuit court by verified petition for an order directing him to act as conservator to conserve the property of an alien insurer not domiciled in this State or a foreign insurer on any one or more of the following grounds:

(1) Any of the grounds in Section 38-27-310.

(2) That any of its property has been sequestered by official action in its domiciliary state or in any other state.

(3) That enough of its property has been sequestered in a foreign country to give reasonable cause to fear that the insurer is or may become insolvent.

(4) (i) That its certificate of authority to do business in this State has been revoked or that none was ever issued; and

(ii) That there are residents of this State with outstanding claims or outstanding policies.

(b) When an order is sought under subsection (a) of this section, the court shall cause the insurer to be given reasonable notice and time to respond.

(c) The court may issue the order in whatever terms it considers appropriate. The filing or recording of the order with the clerk of court or the register of mesne conveyances of the county in which the principal business of the company is located or the county in which its principal office or place of business is located imparts the same notice which a deed, bill of sale, or other evidence of title duly filed or recorded with that office would have imparted.

(d) The conservator may at any time petition for, and the court may grant, an order under Section 38-27-920 to liquidate assets of a foreign or alien insurer under conservation or, if appropriate, for an order under Section 38-27-940, to be appointed ancillary receiver.

(e) The conservator may at any time petition the court for an order terminating conservation of an insurer. If the court finds that the conservation is no longer necessary, it shall order that the insurer be restored to possession of its property and the control of its business. The court may also make that finding and issue the order at any time upon motion of any interested party, but, if the motion is denied, all costs must be assessed against the interested party.

Section 38-27-920. Liquidation of property of foreign or alien insurers found in South Carolina.

(a) If no domiciliary receiver has been appointed, the Commissioner may apply to the circuit court by verified petition for an order directing him to liquidate the assets found in this State of a foreign insurer or an alien insurer not domiciled in this State, on any of the following grounds:

(1) any of the grounds in Section 38-27-310 or 38-27-360; or

(2) any of the grounds specified in items (2) through (4) of subsection (a) of Section 38-27-910.

(b) When an order is sought under subsection (a) of this section, the court shall cause the insurer to be given reasonable notice and time to respond.

(c) If it appears to the court that the best interests of creditors, policyholders, and the public require, the court may issue an order to liquidate in whatever terms it considers appropriate. The filing or recording of the order with the clerk of court or the register of mesne conveyances of the county in which the principal business of the company is located or the county in which its principal office or place of business is located imparts the same notice which a deed, bill of sale, or other evidence of title duly filed or recorded with that office would have imparted.

(d) If a domiciliary liquidator is appointed in a reciprocal state while a liquidation is proceeding under this section, the liquidator under this section must thereafter act as ancillary receiver under Section 38-27-940. If a domiciliary liquidator is appointed in a nonreciprocal state while a liquidation is proceeding under this section, the liquidator under this section may petition the court for permission to act as ancillary receiver under Section 38-27-940.

(e) On the same grounds as are specified in subsection (a) of this section, the Commissioner may petition any appropriate federal district court to be appointed receiver to liquidate that portion of the insurer's assets and business over which the court will exercise jurisdiction or any lesser part thereof that the Commissioner considers desirable for the protection of the policyholders and creditors in this State.

(f) The court may order the Commissioner, when he has liquidated the assets of a foreign or alien insurer under this section, to pay claims of residents of this State against the insurer under such rules as to the liquidation of insurers under this chapter as are otherwise compatible with the provisions of this section.

Section 38-27-930. Domiciliary liquidators in other states.

(a) The domiciliary liquidator of an insurer domiciled in a reciprocal state is, except as to special deposits and security on secured claims under subsection (c) of Section 38-27-940, vested by operation of law with the title to all of the assets, property, contracts and rights of action, agents' balances, and all of the books, accounts, and other records of the insurer located in this State. The date of vesting is the date of the filing of the petition, if that date is specified by the domiciliary law for the vesting of property in the domiciliary state. Otherwise, the date of vesting is the date of entry of the order directing possession to be taken. The domiciliary liquidator has the immediate right to recover balances due from agents and to obtain possession of the books, accounts, and other records of the insurer located in this State. He also has the right to recover all other assets of the insurer located in this State, subject to Section 38-27-940.

(b) If a domiciliary liquidator is appointed for an insurer not domiciled in a reciprocal state, the Commissioner of this State is vested by operation of law with the title to all of the property, contracts and rights of action, and all of the books, accounts, and other records of the insurer located in this State, at the same time that the domiciliary liquidator is vested with title in the domicile. The Commissioner of this State may petition for a conservation or liquidation order under Section 38-27-910 or 38-27-920, or for an ancillary receivership under Section 38-27-940 or, after approval by the circuit court, may transfer title to the domiciliary liquidator, as the interests of justice and the equitable distribution of the assets require.

(c) Claimants residing in this State may file claims with the liquidator or ancillary receiver, if any, in this State or with the domiciliary liquidator, if the domiciliary law permits. The claims must be filed by the last date fixed for the filing of claims in the domiciliary liquidation proceedings.

Section 38-27-940. Ancillary formal proceedings.

(a) If a domiciliary liquidator has been appointed for an insurer not domiciled in this State, the Commissioner may file a petition with the circuit court requesting appointment as ancillary receiver in this State:

(1) If he finds that there are sufficient assets of the insurer located in this State to justify the appointment of an ancillary receiver.

(2) If the protection of creditors or policyholders in this State so requires.

(b) The court may issue an order appointing an ancillary receiver in whatever terms it considers appropriate. The filing or recording of the order with a register of mesne conveyances in this State imparts the same notice which a deed, bill of sale, or other evidence of title duly filed or recorded with that office would impart.

(c) When a domiciliary liquidator has been appointed in a reciprocal state, then the ancillary receiver appointed in this State may, whenever necessary, aid and assist the domiciliary liquidator in recovering assets of the insurer located in this State. The ancillary receiver shall, as soon as practicable, liquidate from their respective securities those special deposit claims and secured claims which are proved and allowed in the ancillary proceedings in this State and shall pay the necessary expenses of the proceedings. He shall promptly transfer all remaining assets, books, accounts, and records to the domiciliary liquidator. Subject to this section, the ancillary receiver and his deputies have the same powers and are subject to the same duties with respect to the administration of assets as a liquidator of an insurer domiciled in this State.

(d) When a domiciliary liquidator has been appointed in this State, ancillary receivers appointed in reciprocal states have, as to assets and books, accounts, and other records in their respective states, corresponding rights, duties, and powers to those provided in subsection (c) of this section for ancillary receivers appointed in this State.

Section 38-27-950. Ancillary summary proceedings.

The Commissioner in his sole discretion may institute proceedings under Sections 38-27-210 through 38-27-230 at the request of the commissioner or other appropriate insurance official of the domiciliary state of any foreign or alien insurer having property located in this State.

Section 38-27-960. Claims of nonresidents against insurers domiciled in South Carolina.

(a) In a liquidation proceeding begun in this State against an insurer domiciled in this State, claimants residing in foreign countries or in states not reciprocal states shall file claims in this State and claimants residing in reciprocal states may file claims either with the ancillary receivers, if any, in their respective states or with the domiciliary liquidator. Claims must be filed by the last date fixed for the filing of claims in the domiciliary liquidation proceeding.

(b) Claims belonging to claimants residing in reciprocal states may be proved either in the liquidation proceeding in this State as provided in this chapter or in ancillary proceedings, if any, in the reciprocal states. If notice of the claims and opportunity to appear and be heard are afforded the domiciliary liquidator of this State as provided in subsection (b) of Section 38-27-970 with respect to ancillary proceedings, the final allowance of claims by the courts in ancillary proceedings in reciprocal states is conclusive as to amount and as to priority against special deposits or other security located in the ancillary states but is not conclusive with respect to priorities against general assets under Section 38-27-610.

Section 38-27-970. Claims of residents against insurers domiciled in reciprocal states.

(a) In a liquidation proceeding in a reciprocal state against an insurer domiciled in that state, claimants against the insurer who reside within this State may file claims either with the ancillary receiver, if any, in this State or with the domiciliary liquidator. Claims must be filed by the last dates fixed for the filing of claims in the domiciliary liquidation proceeding.

(b) Claims belonging to claimants residing in this State may be proved either in the domiciliary state under the law of that state or in ancillary proceedings, if any, in this State. If a claimant elects to prove his claim in this State, he shall file his claim with the liquidator in the manner provided in Sections 38-27-540 and 38-27-550. The ancillary receiver shall make his recommendation to the court as under Section 38-27-620. He shall also arrange a date for hearing if necessary under Section 38-27-580 and shall give notice to the liquidator in the domiciliary state, either by certified mail or by personal service, at least forty days prior to the date set for hearing. If the domiciliary liquidator, within thirty days after the giving of the notice, gives notice in writing to the ancillary receiver and to the claimant, either by certified mail or by personal service, of his intention to contest the claim, he is entitled to appear or to be represented in any proceeding in this State involving the adjudication of the claim.

(c) The final allowance of the claim by the courts of this State is conclusive as to the amount and as to priority against special deposits or other security located in this State.

Section 38-27-980. Attachment, garnishment, and levy of execution.

During the pendency in this State or any other state of a liquidation proceeding, whether called by that name or not, no action or proceeding in the nature of an attachment, garnishment, or levy of execution may be commenced or maintained in this State against the delinquent insurer or its assets.

Section 38-27-990. Interstate priorities.

(a) In a liquidation proceeding in this State involving one or more reciprocal states, the order of distribution of the domiciliary state controls as to all claims of residents of this State and reciprocal states. All claims of residents of reciprocal states are given equal priority of payment from general assets regardless of where the assets are located.

(b) The owner of a secured claim against an insurer for which a liquidator has been appointed in this State or any other state may surrender his security and file his claim as a general creditor, or the claim may be discharged by resort to the security in accordance with Section 38-27-600, in which case the deficiency, if any, is treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors.

Section 38-27-1000. Subordination of claims for noncooperation.

If an ancillary receiver in another state or foreign country, whether called by that name or not, fails to transfer to the domiciliary liquidator in this State any assets within his control other than special deposits, diminished only by the expenses of the ancillary receivership, if any, the claims filed in the ancillary receivership, other than special deposit claims or secured claims, must be placed in the class of claims under item (7) of Section 38-27-610.

CHAPTER 29

South Carolina Life and Accident

and Health Insurance Guaranty Association

Section 38-29-10. Short title.

This chapter is known and may be cited as the 'South Carolina Life and Accident and Health Insurance Guaranty Association Act'.

Section 38-29-20. Definitions.

As used in this chapter:

(1) 'Account' means any of the three accounts created under Section 38-29-50.

(2) 'Association' means the South Carolina Life and Accident and Health Insurance Guaranty Association created under Section 38-29-50.

(3) 'Contractual obligation' means any obligation under covered policies.

(4) 'Covered policy' means any policy or contract within the scope of Section 38-29-40.

(5) 'Impaired insurer' means:

(a) an insurer which becomes insolvent and is placed under a final order of liquidation, rehabilitation, or conservation by a court of competent jurisdiction, or

(b) an insurer considered by the Commissioner to be unable or potentially unable to fulfill its contractual obligations.

(6) 'Member insurer' means any person authorized to transact in this State any kind of insurance to which this chapter applies under Section 38-29-40.

(7) 'Premiums' means direct gross insurance premiums and annuity considerations collected or written on covered policies, less return premiums and considerations thereon and dividends paid or credited to policyholders on the direct business. 'Premiums' does not include premiums and considerations on contracts between insurers and reinsurers. As used in Section 38-29-80, 'premiums' means those for the calendar year preceding the determination of impairment.

(8) 'Resident' means any person who resides in this State at the time the impairment is determined and to whom contractual obligations are owed.

Section 38-29-30. Declaration of purpose.

The purpose of this chapter is to maintain public confidence in the promises of insurers by providing a mechanism for protecting policy owners, insureds, beneficiaries, annuitants, payees, and assignees of life insurance policies, accident and health insurance policies, annuity contracts, and supplemental contracts against failure in the performance of contractual obligations due to the impairment of the insurer issuing these policies or contracts. To provide this protection:

(1) an Association of insurers is created to enable the guaranty of payment of benefits and of continuation of coverages;

(2) members of the Association are subject to assessment to provide funds to carry out the purpose of this chapter; and

(3) the Association is authorized to assist the Commissioner, in the prescribed manner, in the detection and prevention of insurer impairments.

Section 38-29-40. Application of chapter.

(1) This chapter applies to direct life insurance policies, accident and health insurance policies, annuity contracts, and contracts supplemental to life and accident and health insurance policies and annuity contracts issued by persons authorized to transact insurance in this State at any time.

(2) This chapter does not apply to:

(a) Any policy or contract or part thereof under which the risk is borne by the policyholder.

(b) Any policy or contract or part thereof assumed by the impaired insurer under a contract of reinsurance, other than reinsurance for which assumption certificates have been issued.

Section 38-29-50. Association created; membership as a condition of authority to transact insurance; accounts; supervision.

(1) There is created a nonprofit legal entity to be known as the South Carolina Life and Accident and Health Insurance Guaranty Association. All member insurers are and must remain members of the Association as a condition of their authority to transact insurance in this State. The Association shall perform its functions under the plan of operation established and approved under Section 38-29-90 and shall exercise its powers through a board of directors established under Section 38-29-60. For purposes of administration and assessment, the Association shall maintain three accounts:

(a) the accident and health insurance account;

(b) the life insurance account; and

(2) The Association is under the immediate supervision of the Commissioner and is subject to the applicable insurance laws of this State.

Section 38-29-60. Board of directors.

(1) The board of directors of the Association shall consist of not less than five nor more than nine members serving terms as established in the plan of operation. Member insurers shall select the members of the board subject to the Commissioner's approval. Any vacancies on the board must be filled for the remaining period of the term in the manner described in the plan of operation.

(2) In approving selections or in appointing members to the board, the Commissioner shall consider, among other things, whether all member insurers are fairly represented.

(3) Members of the board may be reimbursed from the assets of the Association for expenses incurred by them as members of the board of directors, but members of the board may not otherwise be compensated by the Association for their services.

Section 38-29-70. Powers and duties of Association.

In addition to the powers and duties enumerated in other sections of this chapter:

(1) If a domestic insurer is an impaired insurer, the Association may, prior to an order of liquidation or rehabilitation and subject to any conditions imposed by the Association other than those which impair the contractual obligations of the impaired insurer and approved by the impaired insurer and the Commissioner:

(a) Guarantee or reinsure, or cause to be guaranteed, assumed, or reinsured, all the covered policies of the impaired insurer.

(b) Provide monies, pledges, notes, guarantees, or other means as are proper to effectuate paragraph (a) of this item (1) and assure payment of the impaired insurer's contractual obligations pending action under paragraph (a) of this item (1).

(2) If a foreign or alien insurer is an impaired insurer, the Association may prior to an order of liquidation, rehabilitation, or conservation, with respect to the covered policies of residents and subject to any conditions imposed by the Association other than those which impair the contractual obligations of the impaired insurer and approved by the impaired insurer and the Commissioner:

(a) Guarantee or reinsure, or cause to be guaranteed, assumed, or reinsured, the impaired insurer's covered policies of residents.

(b) Provide monies, pledges, notes, guarantees, or other means as are proper to effectuate paragraph (a) of this item (2) and assure payment of the impaired insurer's contractual obligations to residents pending action under paragraph (a) of this item (2).

(3) If a domestic insurer is an impaired insurer under an order of liquidation or rehabilitation, the Association shall, subject to the approval of the Commissioner:

(a) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the impaired insurer's covered policies.

(b) Assure payment of the impaired insurer's contractual obligations.

(c) Provide money, pledges, notes, guarantees, or other means as are reasonably necessary to discharge its duties. If the Association fails to act within a reasonable period of time, the Commissioner has the powers and duties of the Association under this chapter with respect to the domestic impaired insurer.

(4) If a foreign or alien insurer is an impaired insurer under an order of liquidation, rehabilitation, or conservation, the Association shall, subject to the approval of the Commissioner:

(a) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the covered policies of residents.

(b) Assure payment of the impaired insurer's contractual obligations to residents.

(c) Provide monies, pledges, notes, guarantees, or other means as are reasonably necessary to discharge its duties. If the Association fails to act within a reasonable period of time, the Commissioner has the powers and duties of the Association under this chapter with respect to the foreign or alien impaired insurer.

(5) Liens may be imposed as long as the Association:

(a) In carrying out its duties under items (3) and (4) of this section, requests that there be imposed policy liens, contract liens, moratoriums on payments, or other similar means. These liens, moratoriums, or similar means may be imposed if the Commissioner finds that the amounts which can be assessed under this chapter are less than the amounts needed to assure full and prompt performance of the impaired insurer's contractual obligations or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of policy or contract liens, moratoriums, or similar means to be in the public interest and approves the specific policy liens, contract liens, moratoriums, or similar means to be used.

(b) Before being obligated under items (3) and (4) of this section, requests, subject to the Commissioner's approval, that there be imposed temporary moratoriums or liens on payments of cash values and policy loans.

(6) The Association has no liability under this section for any covered policy of a foreign or alien insurer whose domiciliary jurisdiction or state of entry provides by statute or regulation for residents of this State protection substantially similar to that provided by this chapter for residents of other states.

(7) The Association may render assistance and advice to the Commissioner, upon his request, concerning rehabilitation, payment of claims, continuations of coverage, or the performance of other contractual obligations of an impaired insurer.

(8) The Association has the authority to appear before any court in this State with jurisdiction over an impaired insurer concerning which the Association is or may become obligated under this chapter. This authority extends to all matters germane to the powers and duties of the Association, including, but not limited to, proposals for reinsuring or guaranteeing the covered policies of the impaired insurer and the determination of the covered policies and contractual obligations.

(9) Any person receiving benefits under this chapter is considered to have assigned his rights under the covered policy to the Association to the extent of the benefits received because of this chapter whether the benefits are payments of contractual obligations or continuation of coverage. The Association may require an assignment to it of these rights by any payee, policy or contract owner, beneficiary, insured, or annuitant as a condition precedent to the receipt of any rights or benefits conferred by this chapter upon that person. The Association is subrogated to these rights against the assets of any impaired insurer, and the subrogation rights of the Association have the same priority against the assets as that possessed by the person entitled to receive benefits under this chapter.

(10) The contractual obligations of the impaired insurer for which the Association becomes or may become liable are the same as the contractual obligations of the impaired insurer would have been in the absence of an impairment, but the Association has no liability with respect to any portion of a covered policy to the extent that the policy's benefits to any one person exceed an aggregate of three hundred thousand dollars.

(11) The Association may:

(a) Enter into contracts that are necessary or proper to carry out the provisions and purposes of this chapter.

(b) Sue or be sued, including taking any legal actions necessary or proper for recovery of any unpaid assessments under Section 38-29-80.

(c) Borrow money to effect the purposes of this chapter. Any notes or other evidence of indebtedness of the Association not in default shall be legal investments for domestic insurers and may be carried as admitted assets.

(d) Employ or retain persons necessary to handle the financial transactions of the Association and to perform other functions as become necessary or proper under this chapter.

(e) Negotiate and contract with any liquidator, rehabilitator, conservator, or ancillary receiver to carry out the powers and duties of the Association.

(f) Take legal action necessary to avoid payment of improper claims.

(g) Exercise, for the purposes of this chapter and to the extent approved by the Commissioner, the powers of a domestic life or accident and health insurer, but in no case may the Association issue insurance policies or annuity contracts other than those issued to perform the contractual obligations of the impaired insurer.

Section 38-29-80. Assessments.

(1) For the purpose of providing the funds necessary to carry out the powers and duties of the Association, the board of directors shall assess the member insurers, separately for each account, at times and for amounts as the board finds necessary. Payment is due thirty days after written notice to the member insurers.

(2) There are three classes of assessments, as follows:

(a) Class A assessments are made for the purpose of meeting administrative costs and other general expenses not related to a particular impaired insurer.

(b) Class B assessments are made to the extent necessary to carry out the powers and duties of the Association under Section 38-29-70 with regard to a domestic impaired insurer.

(c) Class C assessments are made to the extent necessary to carry out the powers and duties of the Association under Section 38-29-70 with regard to a foreign or alien impaired insurer.

(3) Assessments must be determined as follows:

(a) The amount of any Class A, Class B, or Class C assessment for each account must be determined by the board based on the amounts necessary to satisfy the obligation of the Association under this chapter.

(b) Class A assessments must be divided equally among all members not to exceed one hundred dollars per assessment. Class C assessments against member insurers for each account must be in the proportion that the premiums received on business in this State by each assessed member insurer on policies covered by each account bear to the premiums received on business in this State by all assessed member insurers.

(c) Class B assessments for each account must be made separately for each state in which the domestic impaired insurer was authorized to transact insurance at any time, in the proportion that the premiums received on business in that state by the impaired insurer on policies covered by that account bear to those premiums received in all of those states by the impaired insurer. The assessments against member insurers must be in the proportion that the premiums received on business in each of these states by each assessed member insurer on policies covered by each account bear to those premiums received on business in each state by all assessed member insurers.

(d) Assessments for funds to meet the requirements of the Association with respect to an impaired insurer may not be made until necessary to implement the purposes of this chapter. Classification of assessments under subsection (2) of this section and computation of assessments under subsection (3) of this section must be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible.

(4) The Association may abate or defer, in whole or in part, the assessment of a member insurer if, in the opinion of the board, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations. The total of all assessments upon a member insurer for each account may not in any one calendar year exceed four percent of the insurer's premiums in this State on the policies covered by the account.

(5) In the event an assessment against a member insurer is abated or deferred, in whole or in part, because of the limitations set forth in subsection (4) of this section, the amount by which the assessment is abated or deferred must be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section. If the maximum assessment, together with the other assets of the Association in either account, does not provide in any one year in either account an amount sufficient to carry out the responsibilities of the Association, the necessary additional funds must be assessed as soon thereafter as permitted by this chapter.

(6) The board may, by an equitable method as established in the plan of operation, refund to member insurers the amount by which the assets of the account exceed the amount the board finds is necessary to carry out during the coming year the obligations of the Association with regard to that account, including assets accruing from net realized gains and income from investments. Refunds to member insurers must be in proportion to the contribution of the insurer to that account. A reasonable amount may be retained in any account to provide funds for the continuing expenses of the Association and for future losses if refunds are impractical.

(7) It is proper for any member insurer, in determining its premium rates and policy owner dividends as to any kind of insurance within the scope of this chapter, to consider the amount reasonably necessary to meet its assessment obligations under this chapter.

(8) The Association shall issue to each insurer paying an assessment under this chapter a certificate of contribution, in a form prescribed by the Commissioner, for the amount so paid. All outstanding certificates are of equal dignity and priority without reference to amounts or dates of issue. A certificate of contribution may be shown by the insurer in its financial statement as an asset in the form and for the amount, if any, and period of time as the Commissioner may approve.

Section 38-29-90. Plan of operation.

(1) The Association shall submit to the Commissioner a plan of operation and any amendments necessary or suitable to assure the fair, reasonable, and equitable administration of the Association. The plan of operation and any amendments become effective upon the Commissioner's written approval. If the Association fails to submit suitable amendments to the plan, the Commissioner shall, after notice and hearing, adopt and promulgate reasonable amendments necessary or advisable to effectuate the provisions of this chapter.

These amendments must continue in force until modified by the Commissioner or superseded by amendments submitted by the Association and approved by the Commissioner.

(2) All member insurers shall comply with the plan of operation.

(3) The plan of operation shall, in addition to requirements enumerated elsewhere in this chapter:

(a) Establish procedures for handling the assets of the Association.

(b) Establish the amount and method of reimbursing members of the board of directors under Section 38-29-60.

(d) Establish procedures for records to be kept of all financial transactions of the Association, its agents, and the board of directors.

(e) Establish the procedure whereby selections for the board of directors must be made and submitted to the Commissioner.

(f) Establish any additional procedures for assessments under Section 38-29-80.

(g) Contain additional provisions necessary or proper for the execution of the powers and duties of the Association.

(4) The plan of operation may provide that any or all powers and duties of the Association, except those under subitem (c) of item (11) of Section 38-29-70 and Section 38-29-80, are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this Association, or its equivalent, in two or more states. Such a corporation, association, or organization must be reimbursed for any payments made on behalf of the Association and must be paid for its performance of any function of this Association. A delegation under this subsection takes effect only with the approval of both the board of directors and the Commissioner and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this chapter.

Section 38-29-100. Duties and powers of Commissioner; suspension or revocation of certificate of authority; appeals from board of directors; notice to interested persons of effect of chapter.

In addition to the duties and powers enumerated elsewhere in this chapter:

(1) The Commissioner:

(a) Shall notify the board of directors of the existence of an impaired insurer not later than three days after a determination of impairment is made or he receives notice of impairment.

(b) Shall, upon request of the board of directors, provide the Association with a statement of the premiums in the appropriate states for each member insurer.

(c) Shall, when an impairment is declared and the amount of the impairment is determined, serve a demand upon the impaired insurer to make good the impairment within a reasonable time. Notice to the impaired insurer constitutes notice to its shareholders, if any. The failure of the insurer to comply promptly with the demand does not excuse the Association from the performance of its powers and duties under this chapter.

(d) Must, in any liquidation or rehabilitation proceeding involving a domestic insurer, be appointed as the liquidator or rehabilitator. If a foreign or alien member insurer is subject to a liquidation proceeding in its domiciliary jurisdiction or state of entry, the Commissioner must be appointed conservator.

(2) The Commissioner may suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this State of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the Commissioner may levy a forfeiture on any member insurer which fails to pay an assessment when due. This forfeiture may not exceed five percent of the unpaid assessment a month, but no forfeiture may be less than one hundred dollars a month.

(3) Any action of the board of directors or the Association may be appealed to the Commissioner by any member insurer if the appeal is taken within thirty days of the action being appealed.

(4) The liquidator, rehabilitator, or conservator of an impaired insurer may notify all interested persons of the effect of this chapter.

Section 38-29-110. Detection and prevention of insurer impairments.

To aid in the detection and prevention of insurer impairments:

(1) The board of directors shall, upon majority vote, notify the Commissioner of any information indicating a member insurer may be unable or potentially unable to fulfill its contractual obligations.

(2) The board of directors may, upon majority vote, request that the Commissioner order an examination of a member insurer which the board in good faith believes may be unable or potentially unable to fulfill its contractual obligations. The examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by the Commissioner. The cost of the examination must be paid by the Association and the examination report must be treated as are other examination reports. In no event may the examination report be released to the board of directors of the Association prior to its release to the public, but this does not excuse the Commissioner from his obligation to comply with item (3) of this section. The Commissioner shall notify the board of directors when the examination is completed. The request for an examination must be kept on file by the Commissioner, but it is not open to public inspection prior to the release of the examination report to the public. It must be released at that time only if the examination discloses that the examined insurer is unable or potentially unable to meet its contractual obligations.

(3) The Commissioner shall report to the board of directors when he has reasonable cause to believe that a member or licensed insurer may be unable or potentially unable to fulfill its contractual obligations.

(4) The board of directors may, upon majority vote, make reports and recommendations to the Commissioner upon any matter germane to the solvency, liquidation, rehabilitation, or conservation of a member insurer. These reports and recommendations are not open to public inspection.

(5) The board of directors may, upon majority vote, make recommendations to the Commissioner for the detection and prevention of insurer impairments.

(6) The board of directors shall, at the conclusion of an insurer impairment in which the Association carried out its duties under this chapter or exercised any of its powers under this chapter, prepare a report on the history and causes of the impairment, based on the information available to the Association, and submit the report to the Commissioner.

Section 38-29-120. Appointment of special deputy for Commissioner.

The Association may recommend the appointment of a person to serve as a special deputy to act for the Commissioner and under his supervision in the liquidation, rehabilitation, or conservation of a member insurer.

Section 38-29-130. Assessment liability of insureds not reduced; records of Association; Association considered creditor of impaired insurer; distribution of assets of impaired insurer; unfair trade practice; recovery procedure.

(1) Nothing in this chapter may be construed to reduce the liability for unpaid assessments of the insureds of an impaired insurer operating under a plan with assessment liability.

(2) Records must be kept of all negotiations and meetings in which the Association or its representatives are involved to discuss the activities of the Association in carrying out its powers and duties under Section 38-29-70. Records of these negotiations or meetings must be made public only upon the termination of a liquidation, rehabilitation, or conservation proceeding involving the impaired insurer, upon the termination of the impairment of the insurer, or upon the order of a court of competent jurisdiction. Nothing in this subsection (2) limits the duty of the Association to render a report of its activities under Section 38-29-140.

(3) For the purpose of carrying out its obligations under this chapter, the Association is considered to be a creditor of the impaired insurer to the extent of assets attributable to covered policies reduced by any amounts to which the Association is entitled as subrogee pursuant to item (9) of Section 38-29-70. All assets of the impaired insurer attributable to covered policies must be used to continue all covered policies and pay all contractual obligations of the impaired insurer as required by this chapter. Assets attributable to covered policies, as used in this subsection (3), are that proportion of the assets which the reserves that should have been established for those policies bear to the reserve that should have been established for all policies of insurance written by the impaired insurer.

(4) With respect to distributing assets:

(a) Prior to the termination of any liquidation, rehabilitation, or conservation proceeding, the court may take into consideration the contributions of the respective parties, including the Association, the shareholders, policy owners of the impaired insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of the impaired insurer. In this determination, consideration must be given to the welfare of the policyholders of the continuing or successor insurer.

(b) No distribution to stockholders, if any, of an impaired insurer may be made until and unless the total amount of assessments levied by the Association with respect to the insurer has been fully recovered by the Association.

(5) It is a prohibited unfair trade practice for any person to make use in any manner of the protection afforded by this chapter in the sale of insurance.

(6) The recovery procedure shall provide that:

(a) If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed under the order has a right to recover on behalf of the insurer, from any affiliate that controlled it, the amount of distributions, other than stock dividends paid by the insurer on its capital stock, made at any time during the five years preceding the petition for liquidation or rehabilitation subject to the limitations of items (b), (c), and (d) of this subsection (6).

(b) No such dividend is recoverable if the insurer shows that when paid the distribution was lawful and reasonable and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.

(c) Any person who was an affiliate that controlled the insurer at the time the distributions were paid is liable up to the amount of distributions he received. Any person who was an affiliate that controlled the insurer at the time the distributions were declared is liable up to the amount of distributions he would have received if they had been paid immediately. If two persons are liable with respect to the same distributions, they are jointly and severally liable.

(d) The maximum amount recoverable under this section is the amount needed in excess of all other available assets of the impaired insurer to pay the contractual obligations of the impaired insurer.

(e) If any person liable under item (c) of this subsection (6) is insolvent, all its affiliates that controlled it at the time the dividend was paid are jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate.

Section 38-29-140. Examination and regulation of Association; annual reports.

The Association is subject to examination and regulation by the Commissioner. The board of directors shall annually submit to the Commissioner, by May first, a financial report for the preceding calendar year in a form approved by the Commissioner and a report of its activities during the preceding calendar year.

Section 38-29-150. Exemption of Association from fees and taxes.

The Association is exempt from payment of all fees and all state, county, and municipal taxes.

Section 38-29-160. Showing certificate of contribution as asset; offset of write-off against tax liability; payment of certain refunds to State.

(1) Unless a longer period has been allowed by the Commissioner, a member insurer, at its option, has the right to show a certificate of contribution as an asset in the form approved by the Commissioner pursuant to subsection (8) of Section 38-29-80, at percentages of the original face amount approved by the Commissioner, for calendar years as follows:

one hundred percent for the calendar year of issuance;

eighty percent for the first calendar year after the year of issuance;

sixty percent for the second calendar year after the year of issuance;

forty percent for the third calendar year after the year of issuance;

twenty percent for the fourth calendar year after the year of issuance;

zero percent for the fifth calendar year after the year of issuance and thereafter.

(2) The insurer may offset the amount written off by it in a calendar year under subsection (1) against its premium (or income) tax liability to this State accrued with respect to business transacted in that year.

(3) Any sums acquired by refund, pursuant to subsection (6) of Section 38-29-80, from the Association which have previously been written off by contributing insurers and offset against premium (or income) taxes as provided in subsection (2) of this section and are not then needed for purposes of this chapter must be paid by the Association to the Commissioner and by him deposited with the State Treasurer for credit to the general fund of this State.

Section 38-29-170. Immunity from liability for action taken under chapter.

There is no liability on the part of, and no cause of action of any nature may arise against, any member insurer or its agents or employees, the Association or its agents or employees, members of the board of directors, or the Commissioner or his representatives for any action taken by them in the authorized performance of their powers and duties under this chapter.

Section 38-29-180. Stay of proceedings involving impaired insurer; setting aside default judgment.

All proceedings in which the impaired insurer is a party in any court in this State must be stayed sixty days from the date an order of liquidation, rehabilitation, or conservation is final to permit proper legal action by the Association on any matters germane to its powers or duties. As to a judgment under any decision, order, verdict, or finding based on default the Association may apply to have the judgment set aside by the same court that made the judgment and must be permitted to defend against the suit on the merits.

Section 38-29-190. Final date for filing claims.

The court shall fix a date, not less than four months from the date of the order, as the last day for the filing of claims, together with proper proofs thereof, with the Association and shall prescribe the notice that must be given to insureds and claimants of the date. Prior to the date fixed the court may extend the time for the filing of claims.

Section 38-29-200. Construction.

This chapter must be liberally construed to effect the purpose under Section 38-29-30 which constitutes an aid and guide to interpretation.

CHAPTER 31

South Carolina Property and Casualty

Insurance Guaranty Association

Section 38-31-10. Short title.

This chapter is known and may be cited as the 'South Carolina Property and Casualty Insurance Guaranty Association Act'.

Section 38-31-20. Definitions.

As used in this chapter:

(1) 'Account' means any one of the three accounts created by Section 38-31-40.

(2) 'Association' means the South Carolina Property and Casualty Insurance Guaranty Association created under Section 38-31-40.

(3) 'Covered claim' means an unpaid claim, including one of unearned premiums, which arises out of and is within the coverage and not in excess of 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, or (b) the property from which the claim arises is permanently located in this State. It does not include any amount due any reinsurer, insurer, insurance pool, or underwriting association, as subrogation recoveries or otherwise.

(4) 'Insolvent insurer' means an insurer (a) authorized 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.

(5) '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.

(6) 'Net direct written premiums' means direct gross premiums written in this State on insurance policies to which this chapter applies, less return premiums thereon and dividends paid or credited to policyholders on such direct business. It does not include premiums on contracts between insurers or reinsurers.

Section 38-31-30. Application of chapter.

This chapter applies to all kinds of direct insurance except life, title, surety, accident and health, credit, mortgage guaranty, and ocean marine insurance.

Section 38-31-40. Association created; membership as condition of authority to transact insurance; accounts.

There is created a nonprofit unincorporated legal entity to be known as the South Carolina Property and Casualty Insurance Guaranty Association. All insurers defined as member insurers in item (5) of Section 38-31-20 are members of the Association as a condition of their authority to transact insurance in this State. The Association shall perform its functions under a plan of operation established and approved under Section 38-31-70 and shall exercise its powers through a board of directors established under Section 38-31-50. For purposes of administration and assessment, the Association is divided into three separate accounts:

(a) the workers' compensation insurance account;

(b) the automobile insurance account; and

Section 38-31-50. Board of directors.

(1) The board of directors of the Association shall consist of not less than five nor more than nine persons who shall serve terms as established in the plan of operation. Member insurers shall select the members of the board subject to the Commissioner's approval. Any vacancy on the board must be filled for the unexpired portion of the term in the same manner as any initial appointment.

(2) In approving selections to the board, the Commissioner shall consider, among other things, whether all member insurers are fairly represented.

(3) Members of the board may be reimbursed from the assets of the Association for expenses incurred by them as members of the board of directors.

Section 38-31-60. Powers and duties of Association.

The Association:

(a) Is obligated to the extent of claims existing prior to the determination of insolvency and claims arising up to the earliest of the following dates:

(i) thirty days after the determination of insolvency;

(ii) the policy expiration date; or

(iii) the date the insured replaces or cancels the policy.

This obligation includes only the amount each covered claim is in excess of one hundred dollars and is less than three hundred thousand dollars. However, the Association shall pay the full amount of any covered workers' compensation claim. In no event is the Association obligated to a policyholder or claimant in an amount in excess of the obligation of the insolvent insurer under the policy from which the claim arises.

(b) Is considered the insurer to the extent of its obligation on the covered claims and, to this extent, has all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent.

(c) Shall allocate claims paid and expenses incurred among the three accounts separately and assess member insurers separately for each account amounts necessary to pay:

(i) the obligation of the Association under item (a) of this section;

(ii) the expenses of handling covered claims;

(iii) the cost of examinations under Section 38-31-110; and

(iv) other expenses authorized by this chapter.

The assessments of each member insurer must be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the insolvency on the kinds of insurance in the account bear to the net direct written premiums of all member insurers for the calendar year preceding the insolvency on the kinds of insurance in the account. Each member insurer must be notified of the assessment not later than thirty days before it is due. No member insurer may be assessed in any year on any account an amount greater than one percent of that member insurer's net direct written premiums for the calendar year preceding the insolvency on the kinds of insurance in the account. If the maximum assessment, together with the other assets of the Association in any account, does not provide in any year an amount sufficient to make all necessary payments from that account, the funds available must be prorated and the unpaid portion must be paid as soon thereafter as funds become available. The Association may exempt or defer, in whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. Any member insurer serving in the capacity of a servicing carrier for the South Carolina Reinsurance Facility, the South Carolina Windstorm and Hail Underwriting Association, the Medical Malpractice Joint Underwriting Association, or any other involuntary association may not be assessed for the premiums so written, but the assessment must be made directly against the facility, pool, joint underwriting association, or other association. Each member insurer serving as a servicing facility on behalf of the Association may set off against any assessment authorized payments made on covered claims and expenses incurred in the payment of such claims by the member insurer.

(d) Shall investigate claims brought against the Association and adjust, compromise, settle, and pay covered claims to the extent of the Association's obligation and deny all other claims and may review settlements, releases, and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which these settlements, releases, and judgments may be properly contested;

(e) Shall notify any person the Commissioner directs under item (a) of subsection (2) of Section 38-31-80.

(f) Shall handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the Commissioner's approval, but designation may be declined by a member insurer.

(g) Shall reimburse each servicing facility for obligations of the Association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the Association and pay the other expenses of the Association authorized by this chapter.

(h) May employ or retain persons necessary to handle claims and perform other duties of the Association.

(i) May borrow funds necessary to effect the purpose of this chapter in accord with the plan of operation.

(j) May sue or be sued.

(k) May negotiate and become a party to contracts necessary to carry out the purpose of this chapter.

(l) May perform any other acts necessary or proper to effectuate the purpose of this chapter.

(m) May refund to the member insurers in proportion to the contribution of each member insurer to that account that amount by which the assets of the account exceed the liabilities, if, at the end of any calendar year, the board of directors finds that the assets of the Association in any account exceed the liabilities of that account as estimated by the board of directors for the coming year.

Section 38-31-70. Plan of operation.

(2) All member insurers shall comply with the plan of operation.

(3) The plan of operation shall:

(a) Establish the procedures whereby all the powers and duties of the Association under Section 38-31-60 will be performed.

(b) Establish procedures for handling assets of the Association.

(d) Establish procedures by which claims may be filed with the Association and establish acceptable forms of proof of covered claims. Notice of claims to the receiver or liquidator of the insolvent insurer is considered notice to the Association or its agent and a list of these claims must be periodically submitted to the Association or similar organization in another state by the receiver or liquidator.

(e) Establish regular places and times for meetings of the board of directors.

(f) Establish procedures for records to be kept of all financial transactions of the Association, its agents, and the board of directors.

(g) Provide that any member insurer aggrieved by any final action or decision of the Association may appeal to the Commissioner within thirty days after the action or decision.

(h) Establish the procedures whereby selections for the board of directors will be submitted to the Commissioner.

(i) Contain additional provisions necessary or proper for the execution of the powers and duties of the Association.

(4) The plan of operation may provide that any or all powers and duties of the Association, except those under items (c) and (i) of Section 38-31-60, are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this Association, or its equivalent, in two or more states. This corporation, association, or organization must be reimbursed as a servicing facility would be reimbursed and must be paid for its performance of any other functions of the Association. A delegation under this subsection (4) takes effect only with the approval of both the board of directors and the Commissioner and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this chapter.

Section 38-31-80. Powers and duties of Commissioner.

(1) The Commissioner shall:

(a) Notify the Association of the existence of an insolvent insurer not later than three days after he receives notice of the determination of the insolvency.

(b) Upon request of the board of directors, provide the Association with a statement of the net direct written premiums of each member insurer.

(2) The Commissioner may:

(a) Require that the Association notify the insureds of the insolvent insurer and any other interested parties of the determination of insolvency and of their rights under this chapter. The notification must be by mail at their last known address, where available, but if sufficient information for notification by mail is not available, notice by publication in a newspaper of general circulation is sufficient.

(b) Suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this State of any member insurer which fails to pay an assessment when due or which fails to comply with the plan of operation. As an alternative, the Commissioner may levy a fine on any member insurer which fails to pay an assessment when due. This fine may not exceed five percent of the unpaid assessment per month, except that no fine may be less than one hundred dollars per month.

Section 38-31-90. Effect of payment of claim under chapter; rights of Association against assets of insolvent insurer.

(1) Any person recovering under this chapter is considered to have assigned his rights under the policy to the Association to the extent of his recovery from the Association. Every insured or claimant seeking the protection of this chapter shall cooperate with the Association to the same extent as he would have been required to cooperate with the insolvent insurer. The Association has no cause of action against the insured of the insolvent insurer for any sums it has paid out except the causes of action the insolvent insurer would have had if the sums had been paid by the insolvent insurer. In the case of an insolvent insurer operating on a plan with assessment liability, payments of claims of the Association do not operate to reduce the liability of insureds to the receiver, liquidator, or statutory successor for unpaid assessments.

(2) The receiver, liquidator, or statutory successor of an insolvent insurer is bound by settlements of covered claims by the Association or a similar organization in another state. The court having jurisdiction shall grant these claims priority equal to that to which the claimant would have been entitled in the absence of this chapter against the assets of the insolvent insurer. The expenses of the Association or similar organization in handling claims must be accorded the same priority as the liquidator's expenses.

(3) The Association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the Association and estimates of anticipated claims on the Association which shall preserve the rights of the Association against the assets of the insolvent insurer.

Section 38-31-100. Claimants required to exhaust rights under other policies; claims recoverable from more than one association.

(1) Any person, having a claim against an insurer under any provision in an insurance policy other than a policy of an insolvent insurer which is also a covered claim, is required to exhaust first his right under that policy. Any amount payable on a covered claim under this chapter must be reduced by the amount of any recovery under that insurance policy.

(2) Any person having a claim which may be recovered under more than one insurance guaranty association or its equivalent shall seek recovery first from the association of the place of residence of the insured except that, if it is a first-party claim for damage to property with a permanent location, he shall seek recovery first from the association of the location of the property, and, if it is a workers' compensation claim, he shall seek recovery first from the association of the residence of the claimant. Any recovery under this chapter must be reduced by the amount of recovery from any other insurance guaranty association or its equivalent.

Section 38-31-110. Detection and prevention of insurer insolvencies.

To aid in the detection and prevention of insurer insolvencies:

(1) It is the duty of the board of directors, upon majority vote, to notify the Commissioner of any information indicating any member insurer may be insolvent or in a financial condition hazardous to the policyholders or the public.

(2) The board of directors may, upon majority vote, request that the Commissioner order an examination of any member insurer which the board in good faith believes may be in a financial condition hazardous to the policyholders or the public. Within thirty days of the receipt of this request, the Commissioner shall begin the examination. The examination may be conducted as a National Association of Insurance Commissioners examination or by the Commissioner. The cost of the examination must be paid by the Association and the examination report must be treated as are other examination reports. In no event may the examination report be released to the board of directors prior to its release to the public, but this does not excuse the Commissioner from complying with item (3) of this section. The Commissioner shall notify the board of directors when the examination is completed. The request for an examination must be kept on file by the Commissioner, but it is not open to public inspection prior to the release of the examination report to the public.

(3) The Commissioner shall report to the board of directors when he has reasonable cause to believe that any member insurer examined or being examined at the request of the board of directors may be insolvent or in a financial condition hazardous to the policyholders or the public.

(5) The board of directors may, upon majority vote, make recommendations to the Commissioner for the detection and prevention of insurer insolvencies.

(6) The board of directors shall, at the conclusion of any insurer insolvency in which the Association was obligated to pay covered claims, prepare a report on the history and causes of the insolvency, based on the information available to the Association, and submit the report to the Commissioner.

Section 38-31-120. Examination and regulation of Association; financial reports.

The Association is subject to examination and regulation by the Commissioner. The board of directors shall annually submit by March thirtieth a financial report for the preceding calendar year in a form approved by the Commissioner.

Section 38-31-130. Exemption of Association from fees and taxes.

The Association is exempt from payment of all fees and all taxes levied by this State or any of its political subdivisions, except taxes levied on real or personal property.

Section 38-31-140. Rates.

The rates and premiums charged for insurance policies to which this chapter applies shall include amounts sufficient to recoup a sum equal to the amounts paid to the Association by the member insurer less any amounts returned to the member insurer by the Association. These rates may not be considered excessive because they contain an amount reasonably calculated to recoup assessments paid by the member insurer.

Section 38-31-150. Immunity from liability for action taken under chapter.

There is no liability on the part of, and no cause of action of any nature may arise against, any member insurer, the Association or its agents or employees, the board of directors, or the Commissioner or his representatives for any action taken by any of them in the performance of their powers and duties under this chapter.

Section 38-31-160. Stay of proceedings involving insolvent insurers; rights of Association in these proceedings.

All proceedings involving covered claims in which the insolvent insurer is a party or is obligated to defend a party in any court in this State must be stayed sixty days from the date insolvency is determined to permit proper defense by the Association. As to any judgment, decision, order, verdict, or finding based on the insurer's default or failure to defend the insured, the Association may apply to have the judgment, decision, order, verdict, or finding set aside by the same court or administrator which made it and must be permitted to defend against the claim on its merits.

Section 38-31-170. Termination of Association by Commissioner.

(1) The Commissioner shall by order terminate the operation of the Association as to any kind of insurance covered by this chapter with respect to which he has found, after hearing, that there is in effect a statutory or voluntary plan which:

(a) is a permanent plan which is adequately funded or for which adequate funding is provided; and

(b) extends, or will extend, to the South Carolina policyholders and residents protection and benefits with respect to insolvent insurers not substantially less favorable and effective to such policyholders and residents than the protection and benefits provided with respect to such kinds of insurance under this chapter.

(2) The Commissioner shall by the same order authorize discontinuance of future payments by insurers to the Association with respect to the same kinds of insurance. However, the assessments and payments must continue, as necessary, to liquidate covered claims of insurers adjudged insolvent prior to the order and the related expenses not covered by such other plan.

(3) In the event the operation of the Association is terminated as to all kinds of insurance within its scope, the Association shall as soon as possible thereafter distribute the balance of remaining money and assets, after first discharging the Association's duties with respect to prior insurer insolvencies and related expenses not covered by such other plan. The distribution must be to the insurers which are then writing in this State policies of the kinds of insurance covered by this chapter and which had made payments to this Association, pro rata upon the basis of the aggregate of the payments made by the respective insurers during the period of five years next preceding the date of the order. Upon completion of the distribution with respect to all of the kinds of insurance covered by this chapter, this chapter is considered to have expired.

Section 38-31-180. Construction.

This chapter must be so construed as to effectuate its general purpose to make uniform the law of those states which enact it.

CHAPTER 33

Health Maintenance Organizations

Section 38-33-10. 'Health maintenance organization' defined.

A health maintenance organization is an organization which, as a minimum:

(a) Provides directly, or through agreement with others, general health services to persons enrolled with the organization on a per capita prepaid basis, which may include dependents of enrollees.

(b) Provides for enrollees comprehensive health maintenance and treatment services as defined by regulations of the State Department of Health and Environmental Control promulgated under this chapter, including at least: primary personal physician care, emergency medical care, acute inpatient hospital care, inpatient and outpatient medical care, and general preventive health services. The organization may provide, with the approval of the Commissioner of Health and Environmental Control, all other health care and services, including clinical and institutional care of mentally ill, infirm, disabled, and aged persons, dental care, physical and mental rehabilitation programs, podiatry, drugs, appliances, medical equipment, and all other health-related services as recognized and permitted by law.

(c) Provides professional health services which may include services of physicians, dentists, nurses, pharmacists, optometrists, and other health professionals and also hospital and clinical or other institutional services, as necessary to the operation of an effective health maintenance program for enrollees. These services are to be provided under contracts or agreements between the organization and the health professionals or hospitals and institutions concerned. The contracts must be in accord with the laws and codes of professional ethics governing these professions, institutions, and hospitals.

(d) Demonstrates to the satisfaction of the Chief Insurance Commissioner proof of financial capability to provide the services which it proposes to furnish to its enrollees, establishes and maintains proper and sound bookkeeping and actuarial practices approved by the Chief Insurance Commissioner, annually files with the Chief Insurance Commissioner the enrollee contract forms and table of rates for its services, and is subject to annual or other regular audit requirements as the Chief Insurance Commissioner prescribes.

(e) Develops contracts or agreements with physicians, hospitals, and other health professionals and institutions licensed and in good standing under the laws of this State which satisfy the Commissioner of Health and Environmental Control of the organization's capability to provide health maintenance and treatment services to the group of enrollees intended to be served. The organization may provide only health services approved by the Commissioner of Health and Environmental Control and shall maintain quality standards approved by him.

Section 38-33-20. Licensing of organizations; regulation of functions.

Upon compliance with this chapter, any organization, association, or corporation, public or private, may be licensed by the State Department of Health and Environmental Control and the State Department of Insurance to organize, operate, and maintain a health maintenance organization for its duly enrolled members and their dependents in this State. However, the Chief Insurance Commissioner may, after notice and hearing, promulgate reasonable regulations with respect to the filing and approval of contractual forms and may disapprove the rates or premium charges for contracts upon his finding that the rates or premium charges are not reasonable in relation to the benefits provided or to be provided. The Chief Insurance Commissioner may also, after notice and hearing, promulgate reasonable regulations necessary to provide for the licensing of agents. For the purposes of this chapter, an 'agent' means a person directly or indirectly associated with a health maintenance organization who engages in solicitation. The Department of Insurance shall annually certify to the Department of Health and Environmental Control that all requirements set forth in this chapter and in regulations promulgated pursuant to it have been fully complied with. The Department of Health and Environmental Control may not renew the license of any health maintenance organization until the certification concerning it has been received from the Department of Insurance. A health maintenance organization may be annually relicensed if it complies with this chapter and regulations promulgated pursuant to it and if enrollment in the organization is entirely voluntary.

Section 38-33-30. Services.

Health maintenance organizations may provide directly or by contract or agreement with other persons, corporations, institutions, associations, foundations, or other legal entities, public or private, the services required of it in accordance with this chapter and the laws governing these professions and services. The organization may contract or agree with others, including an authorized insurer, for these others to provide actuarial, underwriting, marketing, billing, fiscal, and other services as may be required for operation of a health maintenance organization. Nothing herein may be construed to authorize any health maintenance organization, insurer, or any other person to engage in the practice of medicine or any other profession except as provided by law.

Section 38-33-40. Services in federal programs.

Health maintenance organizations may provide any services included in federal health care programs such as 'Medicare', 'Medicaid', 'Champus', and veterans administrations and other health programs provided in whole or in part by federal funds, in accordance with the laws governing these programs if approval is granted as provided for in items (d) and (e) of Section 38-33-10.

Section 38-33-50. Services to enrollees outside State.

Health maintenance services may be furnished to enrollees outside this State only in accordance with the laws of the state or of the United States which govern the provision of these services in the state or place concerned. However, an enrollee may be reimbursed directly for emergency health care expenses incurred by him while temporarily outside this State, when these expenses would have been provided under the enrollee's program had he been within this State. The reimbursement may not be construed as an indemnity. No health maintenance organization may be an insurer or make any contract of insurance.

Section 38-33-60. License fees; enforcement of chapter.

The State Department of Health and Environmental Control and the State Department of Insurance shall set and collect license fees for the operation of health maintenance organizations, enforce the provisions of this chapter, and promulgate regulations necessary to effectuate the purposes of this chapter, to protect the public, and to ensure the sound, proper, and efficient operation of health maintenance organizations in this State. License fees collected must be utilized for the administration and enforcement of this chapter.

Section 38-33-70. Transfer of license or certificate; fee.

Any license or certificate required by law for the operation and maintenance of a health maintenance organization may be transferred from one entity to another with existing certificate qualifications upon payment of a transfer fee of one thousand dollars each to the State Department of Health and Environmental Control and the State Department of Insurance. The entity to which the licenses and certificates are to be transferred shall meet all requirements contained in Section 38-33-10 and must be authorized to do business in this State.

Section 38-33-80. Licensed physicians, podiatrists, optometrists, and oral surgeons may not be prohibited from participating as provider on basis of profession.

No health maintenance organization may prohibit any licensed physician, podiatrist, optometrist, or oral surgeon from participating as a provider in the organization on the basis of his profession. Nothing in this section may be construed to interfere in any way with the medical decision of the primary health care provider to use or not use any health professional on a case-by-case basis.

CHAPTER 35

Mutual Benevolent Aid Associations

Section 38-35-10. Formation of mutual associations.

Members of religious denominations, local lodges, or fraternal orders under the control and supervision of a representative governing body within this State or of local labor organizations with a national or international charter or any number of persons, not less than twenty, a majority of whom must be bona fide residents of this State may, when investigated and approved by the Commissioner, form mutual associations, incorporated or unincorporated, for the purpose of aiding their members or their beneficiaries in times of sickness and death by levying equitable assessments for the payment of sick relief or death benefits upon compliance with this chapter.

Section 38-35-20. Conduct of associations.

A mutual association may not have paid agents for the soliciting of business or members and must be conducted without profit.

Section 38-35-30. Assessments.

Assessments must be made by a mutual association at the time an individual becomes a member or at the time of death or sickness of a member and for the purpose of paying benefits due the member because of death or sickness.

Section 38-35-40. Annual report; certificate of compliance.

Mutual associations shall file an annual report with the Commissioner. If, after examination of the report, the Commissioner determines that the mutual association has complied with the insurance laws, he may issue it a certificate showing compliance.

Section 38-35-50. Examinations.

A mutual association is subject to any examination by the Commissioner which will enable him to determine that it has complied with the state insurance laws.

Section 38-35-60. Exemption from license fees.

Mutual associations shall not pay a license fee.

CHAPTER 37

Fraternal Benefit Associations

Article 1

General Provisions

Section 38-37-10. 'Fraternal benefit association' defined.

A corporation, society, order, or voluntary association without capital stock, organized and carried on solely for the mutual benefit of its members and their beneficiaries and not for profit by a lodge system with ritualistic form of work and a representative form of government and which may make provision for the payment of benefits, in accordance with Section 38-37-730, is a 'fraternal benefit association'.

Section 38-37-20. Associations considered operating under lodge system.

An association having a supreme governing or legislative body and subordinate lodges or branches, by whatever name known, into which members are elected and initiated in accordance with its constitution and bylaws, rules, regulations, and prescribed ritualistic ceremonies, when the supreme or governing body meets at least every fourth year, and the subordinate lodge or branches are required by the constitution and bylaws of the association to hold regular or stated meetings at least once each month, is considered to be operating on the lodge system.

Section 38-37-30. Associations considered to have representative form of government.

An association is considered to have a representative form of government if it requires in its constitution and bylaws that there be a supreme legislative or governing body composed of representatives elected either (a) by the members or (b) by delegates elected directly or indirectly by the members, together with any members as may be prescribed by its constitution and bylaws. However, the electing members must constitute a majority in number and may not have less than a majority of the votes nor less than the votes required to amend the constitution and bylaws of the association. Provision must be made for the election of at least one representative to the supreme governing body from the membership in this State.

Section 38-37-40. Standards prerequisite to incorporation or qualification.

No fraternal benefit association may be incorporated which does not provide for stated periodic contributions sufficient to provide for meeting the mortuary obligations contracted when valued upon the basis of the American Men Ultimate Table of Mortality, three and one-half percent Illinois Standard, or any higher standard with interest assumption not more than three and one-half percent per annum. No fraternal benefit association may be admitted to transact business in this State which does not provide for stated periodic contributions sufficient to provide for meeting the mortuary obligations contracted when valued upon one of the bases named in Article 11 of this chapter and applicable thereunder to the association. No fraternal benefit association may hereafter be incorporated or admitted to write or accept members for permanent disability benefits except upon tables based upon reliable experience with an interest assumption not higher than three and one-half percent.

Section 38-37-50. Applicability of chapter to certain associations.

A fraternal benefit association organized and incorporated and operating prior to March 13, 1919, within the definition set forth in Section 38-37-10, providing for benefits in case of death or disability resulting solely from accidents, but which does not obligate itself to pay death or sick benefits, may be licensed under this chapter. It shall have all the privileges and is subject to all the provisions and regulations of this chapter, except the provisions of this chapter requiring medical examinations, valuations of benefit certificates, and that the certificates specify the amount of benefits.

Section 38-37-60. Chapter not applicable to certain associations.

This chapter does not apply to the following:

(1) Associations which limit their membership to one hazardous occupation.

(2) Similar societies which do not issue insurance certificates.

(3) An association of local lodges of an association.

(4) The ladies' societies or ladies' auxiliaries to such societies or associations, doing business in this State on May 12, 1947, which provide death benefits not exceeding five hundred dollars to any person or disability benefits not exceeding three hundred dollars in any one year to any one person or both.

(5) Any contracts or reinsurance business on such plans in this State.

(6) Domestic associations which limit their membership to the employees of a particular city or town or designated firm, business house, or corporation.

(7) Domestic lodges, orders, or associations of a purely religious, charitable, and benevolent description which do not provide for a death benefit of more than one hundred dollars or for disability benefits of more than one hundred fifty dollars to any one person in any one year.

The Commissioner may require from an association any information that will enable him to determine whether it is exempt from this chapter.

Section 38-37-70. General insurance laws inapplicable.

Fraternal benefit associations are governed by this chapter. The general insurance laws of this State do not apply to fraternal benefit associations unless express provision is made in the law for them.

Article 3

Incorporation, Powers, and Closing

of Domestic Associations

Section 38-37-210. Articles of incorporation.

Seven or more persons, citizens of the United States and a majority of whom are citizens of this State, who desire to form a fraternal benefit association may make, sign, giving their address, and acknowledge before some officer competent to take acknowledgments of deeds articles of incorporation in which must be stated:

(1) The proposed corporate name of the association, which may not so closely resemble the name of a fraternal benefit association or insurer already transacting business in this State as to mislead the public or to lead to confusion;

(2) The purpose for which it is formed, which may not include more liberal powers than are granted by this chapter, but any lawful social, intellectual, educational, charitable, benevolent, moral, or religious advantages may be set forth among the purposes of the society, as well as the mode in which its corporate powers are to be exercised; and

(3) The names, residences, and official titles of all the officers, trustees, directors, or other persons who are to have and exercise the general control and management of the affairs and funds of the association for the first year or until the ensuing election at which all the officers are elected by the supreme legislative or governing body. This election must be held not later than one year from the date of the issuance of a permanent certificate pursuant to Section 38-37-260.

Section 38-37-220. Filing articles and other papers with Commissioner.

Articles of incorporation, duly certified copies of the constitution, and bylaws, rules, and regulations, copies of all proposed forms of benefit certificates, applications for benefit certificates, circulars to be issued by the association, and a bond in the sum of five thousand dollars, with sureties approved by the Commissioner, conditioned upon the return of the advanced payments, as provided in Section 38-37-230, to applicants if the organization is not completed within one year, must be filed with the Commissioner. The Commissioner may require further information.

Section 38-37-230. Preliminary certificate and operations thereunder.

If the purposes of the association conform to the requirements of this chapter and all laws have been complied with, the Commissioner shall so certify and retain and record, or file, the articles of incorporation and furnish the incorporators a preliminary certificate authorizing the association to solicit members as herein provided. Upon receipt of the certificate from the Commissioner, the association may solicit members for the purpose of completing its organization and shall collect from each applicant the amount of not less than one regular monthly payment, in accordance with its table of rates as provided by its constitution and bylaws and shall issue to each applicant a receipt for the amount so collected. The advanced payments must be credited to the mortuary or disability fund on account of the applicants. No part of the advanced payments may be used for expenses. The payments must, during the period of organization, be held in trust, and, if the organization is not completed within one year as herein provided, they must be returned to the applicants.

Section 38-37-240. Expiration of preliminary certificate.

No preliminary certificate granted under Section 38-37-230 is valid one year after its date or after a further period, not exceeding one year, as may be authorized by the Commissioner, upon cause shown, unless the five hundred applicants required under Section 38-37-250 have been secured and the organization has been completed as provided. The articles of incorporation and all proceedings thereunder become null and void one year from the date of the preliminary certificate or at the expiration of the extended period, unless the society has completed its organization and obtained the required commercial business.

Section 38-37-250. Prerequisites to doing other business.

No fraternal benefit association may incur any liability other than for the advanced payments or issue any benefit certificate or pay or allow, or offer or promise to pay or allow, to any person any death or disability benefit until:

(1) Actual bona fide applications for death benefit certificates have been secured upon at least five hundred lives for at least one thousand dollars each, all applicants for death benefits have been regularly examined by licensed physicians, and certificates of examinations have been duly filed and approved by the chief medical examiner of the association;

(2) There have been established ten subordinate lodges or branches into which the five hundred or more applicants have been initiated;

(3) There has been submitted to the Commissioner, under oath of the president and secretary or corresponding officers of the association, a list of the applicants, stating their names, addresses, dates examined, dates approved, dates initiated, names and numbers of the subordinate branch of which each applicant is a member, amounts of benefits to be granted, and rates of stated periodic contributions, which must be sufficient to provide for (a) meeting the mortuary obligation contracted when valued for death benefits upon the basis of the National Fraternal Congress Table of Mortality, as adopted by The National Fraternal Congress, August 23, 1899, or by the American Men Ultimate Table of Mortality, with interest assumption not more than three and one-half percent per annum, or any higher standard at the option of the association, (b) disability benefits by tables based upon reliable experience, and (c) combined death and permanent total disability benefits by tables based upon reliable experience, with an interest assumption not higher than three and one-half percent per annum; and

(4) It has been shown to the Commissioner by the sworn statement of the treasurer or corresponding officer of the society that at

least five hundred applicants have each paid in cash at least one regular monthly payment as herein provided per one thousand dollars of indemnity to be effected, which payments in the aggregate amount to at least two thousand five hundred dollars.

Section 38-37-260. Issuance of permanent certificate.

The Commissioner may make an examination and require any further information of a fraternal benefit association he considers advisable. Upon presentation of satisfactory evidence that the association has complied with the law, he shall issue to the association a certificate to that effect. The certificate is prima facie evidence of the existence of the association at the date of the certificate. The Commissioner shall cause a record of the certificate to be made. A certified copy of the record may be given in evidence with like effect as the original certificate.

Section 38-37-270. Making and altering constitution and bylaws; incidental powers.

Every fraternal benefit association may make a constitution and bylaws for the government of the association, the admission of its members, the management of its affairs, and the fixing and readjusting of the rates of contribution of its members. The association may change, alter, add to, or amend the constitution and bylaws and has any other power necessary and incidental to carrying into effect its objects and purposes.

Section 38-37-280. Meetings; principal office.

A domestic fraternal benefit association may provide that the meetings of its legislative or governing body may be held in any state, district, province, or territory where the association has subordinate branches. All business transacted at these meetings is as valid in all respects as if the meeting had been held in this State. However, its principal office must be located in this State.

Section 38-37-290. Discontinuance of business as voiding charter.

When a domestic fraternal benefit association has discontinued business for the period of one year or has less than four hundred members, its charter becomes null and void.

Section 38-37-300. Proceedings to close associations.

If after examination the Commissioner is satisfied that a domestic fraternal benefit association (a) has failed to comply with this chapter, (b) is exceeding its powers, (c) is not carrying out its contracts in good faith, (d) is transacting business fraudulently, or (e) after being in existence for one year or more has less than four hundred members or has determined to discontinue business, the Commissioner may present the relevant facts to the Attorney General. If he considers the circumstances warrant, the Attorney General may commence an action in quo warranto in a court of competent jurisdiction. The court shall thereupon notify the officers of the association of a hearing. If it appears at the hearing that the association should be closed, the association must be enjoined from carrying on any further business, and the Commissioner must be appointed receiver of the association. The Commissioner must then immediately proceed to take possession of the books, papers, monies, and other assets of the association and, under the direction of the court, must immediately proceed to close the affairs of the association and to distribute its funds to those entitled to them. These proceedings may not be commenced by the Attorney General against an association until after notice has been duly served on the chief executive officers of the association and a reasonable opportunity has been given to it, on a date to be named in the notice, to show cause why the proceedings should not be commenced.

Section 38-37-310. No application or proceeding for injunction, dissolution, or appointment of receiver except by Attorney General.

No application or proceeding for an injunction against or for the dissolution of or for the appointment of a receiver for a domestic fraternal benefit association or any branch of it may be entertained by any court in this State unless the application or proceeding is made or instituted by the Attorney General.

Article 5

Licenses of Foreign Associations

Section 38-37-510. Requirements for licensing of foreign associations.

No foreign fraternal benefit association may transact any business in this State without a license from the Commissioner. On seeking admission to do business in this State a foreign association shall file with the Commissioner:

(1) A duly certified copy of its charter or articles of incorporation;

(2) A copy of its constitution and bylaws certified by its secretary or corresponding officer;

(3) A power of attorney to the Commissioner as hereinafter provided;

(4) A statement under oath by its president and secretary or corresponding officers in the form herein prescribed of its business for the preceding year;

(5) A copy of its application form, certificate of membership form, and all circulars in use by it;

(6) A certificate from the proper official in its home state, territory, district, province, or country that the association is legally organized, that it is authorized to transact business therein, and that it has the further qualifications required of domestic associations organized under this chapter and has its assets invested as required by the laws of the state, territory, district, province, or country in which it is organized; and

(7) Any other information the Commissioner may require.

Section 38-37-520. Additional requirements for admission to do business.

No foreign association not now licensed to do business in this State may be admitted hereafter to do business in this State unless its methods and plans are in accord with the standards recognized as applying to fraternal benefit associations and the Commissioner is satisfied that reasonable provision has been made to fulfill its contracts. However, the Commissioner may grant a license if he is otherwise satisfied that a license should be granted.

Section 38-37-530. Refusal of license.

When the Commissioner refuses to license a foreign association, he shall reduce his ruling, order, or decision to writing and file it in his office. The Commissioner shall furnish a copy of his ruling, order, or decision, together with a statement of his reasons, to the officers of the association.

Section 38-37-540. Revocation of licenses of foreign associations.

When the Commissioner, on investigation, is satisfied that a foreign fraternal benefit association transacting business under this chapter (a) has exceeded its powers, (b) has failed to comply with this chapter, (c) is conducting business fraudulently, or (d) is not carrying out its contracts in good faith, he shall notify the association of his findings and state in writing the grounds of his dissatisfaction and after reasonable notice require the association, on a date named, to show cause why its license should not be revoked. If on the date named in the notice the objections have not been removed to the satisfaction of the Commissioner or the association does not present good and sufficient reasons why its authority to transact business in this State should not at that time be revoked, the Commissioner may revoke the authority of the association to continue business in this State.

Section 38-37-550. Continuance of contracts of association whose license is revoked.

Nothing contained in this chapter may be taken or construed as preventing a foreign association whose license to do business in this State has been revoked from continuing in good faith all contracts made in this State during the time the association was legally authorized to transact business in the State.

Article 7

General Regulations

Section 38-37-710. Annual renewal of licenses; fee.

The authority of a fraternal benefit association authorized to transact business in this State which complies with this chapter must be renewed annually by the Commissioner and in all cases terminates on April first. However, a license continues in full force and effect until a new license is issued or specifically refused. For each license or renewal the association shall pay the Commissioner five hundred dollars. However, if the association has less than two hundred members, it shall pay the Commissioner a fee of fifty dollars for its license or renewal. A duly certified copy or duplicate of the license is prima facie evidence that the licensee is a fraternal benefit association within the meaning of this chapter.

Section 38-37-720. Amendments of or additions to constitution and bylaws must be filed.

Every fraternal benefit association transacting business under this chapter shall file with the Commissioner a duly certified copy of all amendments of or additions to its constitution and bylaws within ninety days after the enactment of the amendments or additions. Printed copies of the constitution and bylaws and of amendments of or additions thereto, certified by the secretary or corresponding officer of the association, are prima facie evidence of the legal adoption of the amendments or additions to the constitution or bylaws.

Section 38-37-730. Benefits which association must and may provide.

Every fraternal benefit association transacting business under this chapter shall provide for the payment of natural or accidental death benefits and may provide for the payment of benefits in case of temporary or permanent physical disability as the result of disease, accident, or old age, for the placing of and payment for monuments or tombstones to the memory of its deceased members, and for the payment of funeral benefits. However, the period of life at which the payment of benefits for disability on account of old age commence may not be under seventy years. The association may also give a member, when permanently disabled or on attaining the age of seventy, all or that portion of the face value of his certificate as the constitution and bylaws of the association may provide.

Section 38-37-740. Surrender values.

Fraternal benefit associations may grant surrender values, not to exceed the net value of the certificates, less any surrender charges as specified by the constitution and bylaws of the association.

Section 38-37-750. Certificates payable upon death within terms of years.

Nothing contained in this chapter may be construed to prevent the issuing by a fraternal benefit association of benefit certificates for a term of years less than the whole of life which are payable upon the death or disability of the member occurring within the term for which the benefit certificate may be issued.

Section 38-37-760. Beneficiaries.

The payment of death benefits must be made to the beneficiary designated by the insured if the beneficiary has an insurable interest in the life of the insured.

Section 38-37-770. Qualifications for membership; medical examinations.

An association may admit to beneficial membership any person sixteen years of age or over who has been examined by a competent physician and whose examination has been supervised and approved as provided by the bylaws of the association or who has made a declaration of insurability acceptable to the society. This declaration is unimpeachable as evidence of insurability except upon proof of willful misstatement. However, any beneficial member of the society who applies for a certificate providing for disability benefits need not be required to pass an additional

medical examination or make an additional declaration of insurability therefor.

Nothing contained in this section prevents the association from accepting general or social members.

Section 38-37-780. Binding effect of constitution and bylaws of association.

No subordinate body or any officer or member of a subordinate body may waive any of the provisions of the constitution and bylaws of any fraternal benefit association. The constitution and bylaws are binding upon the association and each and every member and his beneficiaries.

Section 38-37-790. Conditions must be specified in certificates; changes in charter, constitution, or bylaws are binding.

Every certificate issued by a fraternal benefit association shall specify the maximum amount of benefits provided and shall provide that the certificate, the charter or articles of the association, the constitution and bylaws of the association, and the application for membership and medical examination, signed by the applicant, constitute the agreement between the association and the member. However, any changes, additions, or amendments to the charter or articles of the association or the constitution and bylaws duly made or enacted after the issuance of the benefit certificate bind the member and his beneficiaries and govern and control the contract in all respects the same as though the changes, additions, or amendments had been made prior thereto and were in force at the time of the application for membership.

Section 38-37-800. Surplus, emergency, and other funds; funds for benefits and expenses.

An association may create, maintain, invest, disburse, and apply an emergency, surplus, or other similar fund in accordance with its constitution and bylaws. Unless otherwise provided in the contract the funds must be held, invested, and disbursed for the use and benefit of the association. No member or beneficiary has or may acquire individual rights or may become entitled to any apportionment or the surrender of any part of the funds except as provided in Section 38-37-730. The funds from which benefits must be paid and the funds from which the expenses of the association are defrayed must be derived from periodic or other payments by the members of the society and accretions of such funds.

Section 38-37-810. Payment of expenses.

Each fraternal benefit association shall keep a separate fund for expenses. No part of any other fund may be used for expenses or in collecting, disbursing, or investing the reserve or disability funds. All expenses must be paid out of the expense fund of the association.

Section 38-37-820. Division of payments; use of funds for expenses.

Every provision for payment by members of a fraternal benefit association, in whatever form made, shall distinctly state the purpose of the payment and the proportion of it which may be used for expenses. No part of the money collected for mortuary or disability purposes and no part of the reserve, emergency, or surplus funds or the net accretions of either or of any of these funds may be used for expenses.

Section 38-37-830. Investment of funds.

A domestic fraternal benefit association may invest its funds in accordance with the statutes regulating investments of life insurers.

Section 38-37-840. Exemption of funds from taxation.

Every fraternal benefit association organized or licensed under this chapter is declared to be a charitable and benevolent institution, and all of its funds are exempt from every state, county, district, municipal, and school tax, other than taxes on real estate and office equipment and other than agents' license fees.

Section 38-37-850. Fixed liabilities; reserve fund.

Deferred payments or installments of claims must be considered as fixed liabilities on the happening of the contingency upon which the payments or installments are to be paid. This liability is the present value of the future payments or installments upon the rate of interest and mortality assumed by the association for valuation. Every fraternal benefit association shall maintain a fund sufficient to meet this liability regardless of proposed future collections to meet any of these liabilities.

Section 38-37-860. Maximum interest on assessments.

No assessment levied against any certificate holder and charged against the policy may bear interest at a greater rate than three and one-half percent per annum compounded annually. The interest may in no event exceed the amount of the original assessment, and no amount in excess thereof may be a charge against the certificate.

Section 38-37-870. Benefits in associations are not subject to attachment or like process.

No money or other benefit, charity, relief, or aid to be paid, provided, or rendered by a fraternal benefit association is liable to attachment, garnishment, or other process or to be seized, taken, appropriated, or applied by any legal or equitable process or operation of law to pay any debt or liability of a member or beneficiary or of any person who may have a right thereunder, either before or after payment.

Section 38-37-880. No personal liability of officers or members.

Officers and members of the supreme, grand, or any subordinate body of a fraternal benefit association are not individually liable for the payment of any disability or death benefit provided for in the constitution and bylaws and agreements of the association. This payment is payable only out of the funds of the association and in the manner provided by its constitution and bylaws.

Section 38-37-890. Certain collectors considered agents of fraternal or beneficiary associations.

When the members of a fraternal insurance or beneficiary society, order, or association of this State or of any other state, province, or territory, operating within this State and having lodges, councils, chapters, branches, or subordinate or branch offices duly established and organized in this State, are, under the laws, rules, or regulations of the society, order, or association, required to pay or customarily and with the knowledge and consent of the society, order, or association do pay premiums, dues, assessments, fines, or other payments to any other member or person for the purpose of transmitting or delivering them to the general office or to any division or subordinate or branch office of the society, order, or association, then such member or person, by whatever name or title known and called, so collecting the premiums, dues, assessments, fines, and other payments is considered the agent of the fraternal insurance or beneficiary society, order, or association.

Section 38-37-900. Annual reports and other statements.

Every fraternal benefit association transacting business in this State shall annually file with the Commissioner by March first, in the form he requires, a statement, under oath of its president and secretary or corresponding officers, of its condition and standing on the previous December thirty-first and of its transactions for the year ending on that date. It shall also furnish any other information the Commissioner considers necessary for a proper exhibit of its business and plan of working. The Commissioner may at other times require any further statement he may consider necessary to be made relating to the society.

Section 38-37-910. Examination of associations by the Commissioner.

The Commissioner or any person he may appoint has the power of visitation and examination into the affairs of any domestic fraternal benefit association. The examiner shall have free access to all the books, papers, and documents that relate to the business of the association and may summon and qualify as witnesses under oath and examine its officers, agents, and employees or other persons in relation to the affairs, transactions, and condition of the association. The expense of the examination must be paid by the association examined upon statement furnished by the Commissioner. The examination must be made at least once in three years.

Section 38-37-920. Associations shall have opportunity to reply before findings are made public.

Pending, during, or after an examination or investigation of a fraternal benefit association, either domestic or foreign, the Commissioner may not make public any financial statement, report, or finding, nor may he permit to become public any financial statement, report, or finding affecting the status, standing, or rights of the association, until a copy has been served upon the association, at its home office, nor until the association has been afforded a reasonable opportunity to answer any financial statement, report, or finding and to make any showing in connection therewith as it may desire.

Section 38-37-930. False representations punishable.

Any person, officer, member, or examining physician of a fraternal benefit association who knowingly or willfully makes any false or fraudulent statement or representation in or with reference to any application for membership or for the purpose of obtaining money from or benefit in any association transacting business under this chapter is guilty of a misdemeanor and, upon conviction, must be punished by a fine of not more than five hundred dollars or imprisonment for not more than one year, or both, in the discretion of the court.

Section 38-37-940. Certain false statements are perjury.

Any person who (a) willfully makes a false statement of any material fact or thing in a sworn statement as to the death or disability of a certificate holder in a fraternal benefit association for the purpose of procuring payment of a benefit named in the certificate of the holder or (b) willfully makes any false statement in any verified report or declaration under oath required or authorized by this chapter is guilty of perjury and must be proceeded against and punished as provided by the statutes of this State in relation to the crime of perjury.

Section 38-37-950. Soliciting membership in unauthorized associations.

Any person who solicits membership for, or in any manner assists in procuring membership in, any fraternal benefit association not authorized to do business in this State must be punished by a fine of not more than two hundred dollars.

Section 38-37-960. General penalty.

An association or any of its officers, agents, or employees neglecting or refusing to comply with or violating this chapter, the penalty for which neglect, refusal, or violation is not specified in this chapter, must be fined not exceeding two hundred dollars upon conviction.

Article 9

Death Benefits for Children

Section 38-37-1110. Death benefits authorized.

A fraternal benefit society authorized to do business in this State may provide in its constitution and bylaws, in addition to other benefits provided for therein, for the payment of death, endowment, and annuity benefits upon the lives of children under twenty-one years of age at the time of application therefor, upon the application of some adult person, and may grant withdrawal equities and nonforfeiture options as its bylaws, rules, or regulations may provide. Every fraternal benefit society may, at its option, organize and operate branches for such children. Membership and initiation in local lodges are not required of the children, nor may they have a voice in the management of the society.

(2) the Attorney General of this State, any circuit solicitor of this State, any prosecuting attorney for a county, circuit, or district of another state or of the United States;

(3) the South Carolina Department of Insurance, the South Carolina Department of Highways and Public Transportation, and the South Carolina Department of Consumer Affairs.

(b) 'Relevant' means having any tendency to make the existence of any fact that is of consequence to the investigation or determination of the issue more probable or less probable than it would be without the evidence.

(d) 'Immune' means that neither a civil action nor a criminal prosecution may arise from any action taken pursuant to this article unless actual malice on the part of the insurance company or authorized agency against the insured or gross negligence or reckless disregard for his rights is present.

Section 38-77-1130. Provision to authorized agencies, by insurance companies, of information regarding motor vehicle theft or motor vehicle insurance fraud; release of information by authorized agencies; immunity from liability.

(a) Any authorized agency may require, in writing, the insurance company at interest to release to the requesting agency any or all relevant information or evidence considered important to the authorized agency which the company may have in its possession, relating to any specific motor vehicle theft or motor vehicle insurance fraud. Relevant information includes:

(1) pertinent insurance policy information relevant to theft or fraud under investigation and any application for a policy;

(2) policy premium payment records which are available;

(3) history of previous claims made by the insured;

(4) material relating to the investigation of the loss including statements of any person, proof of loss, and any other evidence relevant to the investigation.

(b) When an insurance company has reason to believe that a motor vehicle loss in which it has an interest may involve theft or a fraudulent claim, the company may notify, in writing, an authorized agency and provide it with any or all material developed from the company's inquiry into the loss; however, when this information includes possible evidence of motor vehicle theft or motor vehicle insurance fraud involving specifically named persons, the information in all cases may be furnished to the solicitor in the circuit where the loss occurred and he shall furnish the information to other authorized agencies if he considers the action appropriate. When an insurance company provides any one of the authorized agencies with notice of a theft or fraud, it is sufficient notice for the purpose of this article.

(c) The authorized agency provided with information may release or provide the information to any agency asked to participate in the investigation.

(d) Any insurance company providing information to an authorized agency has the right to be informed, upon written request, as to the status of the case by the agency within a reasonable time, as determined by the authorized agency.

(e) Any insurance company or authorized agency which releases information, whether oral or written, and any person acting in their behalf, pursuant to this article, is immune from any liability arising out of the release.

Section 38-77-1140. Requirement that information be held in confidence until release is required; obligation of authorized agency, and its agents and employees, to testify.

(a) Any authorized agency or insurance company which receives any information furnished pursuant to this article shall hold the information in confidence until its release is required pursuant to a criminal or civil action or proceeding.

(b) Any authorized agency, its agents, or employees, may be required to testify in any litigation in which the insurance company at interest is named as a party.

Section 38-77-1150. Prohibitions relative to disclosure or nondisclosure of information.

(a) No person may intentionally or knowingly refuse to release any information requested pursuant to this article.

(b) No person may fail to hold in confidence information required to be held in confidence by this article.

Section 38-77-1160. Violations and penalties.

Any person who violates the provisions of this article is guilty of a misdemeanor and upon conviction must be fined not more than three thousand dollars or imprisoned for not more than two years, or both.

CHAPTER 79

Medical Malpractice Insurance

Article 1

General Provisions

Section 38-79-10. Medical malpractice claims to be filed by insurers with Commissioner.

All medical malpractice insurance claims filed in the State with any insurer must be reported to the Commissioner by the insurer in the form and under the terms and conditions that the Commissioner prescribes. The Commissioner shall maintain complete and accurate records on all medical malpractice claims, including the causes of the complaints, the disposition of each claim, and any other information which he considers important in observing and reporting on professional liability trends in this State, including, but not limited to, the reserves set aside for each claim, the amounts paid in settlement or awarded by jury, and the names of the claimant and defendant. The Commissioner may release to appropriate disciplinary and licensing agencies any such data or information which may assist the agencies in improving the quality of health care. The Commissioner may promulgate regulations necessary to carry out the provisions of this section.

Article 3

South Carolina Medical Malpractice Liability

Joint Underwriting Association

Section 38-79-110. Definitions.

As used in this article:

(1) 'Association' means any joint underwriting association established pursuant to the provisions of this article.

(2) 'Licensed health care providers' means physicians and surgeons, nurses, oral surgeons, dentists, pharmacists, chiropractors, podiatrists, hospitals, nursing homes, or any similar major category of licensed health care providers.

(3) 'Medical malpractice insurance' means medical professional liability insurance or insurance protection against the legal liability of the insured and against loss, damage, or expense incident to a claim arising out of the death or injury of any person as the result of negligence or malpractice in rendering or failing to render professional service by any licensed physician, licensed health care provider, or hospital.

(4) 'Net direct premiums' means gross direct premiums written on bodily injury liability insurance, other than automobile liability insurance, including the liability component of multiple peril package policies, as computed by the Commissioner, less return premiums or the unused or unabsorbed portions of premium deposits.

Section 38-79-120. Association created; membership as a condition of authority to transact insurance; purpose; calling Association into operation.

(1) A joint underwriting association (Association) is created, consisting of all insurers authorized to write within this State, on a direct basis, bodily injury liability insurance, other than automobile bodily injury liability insurance, including insurers covering such peril in multiple peril package policies. Every such insurer is and must remain a member of the Association as a condition of its authority to continue to transact such kind of insurance in this State.

(2) The purpose of the Association is to provide medical malpractice insurance on a self-supporting basis to the fullest extent possible.

(3) The Association must be called into operation at any time that the Commission finds and declares the existence of an emergency because of the unavailability of medical malpractice liability insurance, or the unavailability of medical malpractice liability insurance on a reasonable basis through normal channels, in respect to all or any one or more of the major categories of licensed health care providers listed in item (2) of Section 38-79-110.

Section 38-79-130. Powers of Association.

The Association, pursuant to the provisions of this article and the approved plan of operation in respect to medical malpractice insurance, has the power on behalf of its members:

(1) To issue, or cause to be issued, policies of insurance to applicants including incidental coverages, such as, but not limited to, premises or operations liability coverage on the premises where services are rendered, all subject to limits of liability as specified in the plan of operation but not to exceed one hundred thousand dollars for each claimant under one policy and three hundred thousand dollars for all claimants under one policy in any one year.

(2) To underwrite medical malpractice insurance and to adjust and pay losses with respect thereto or to appoint service companies to perform those functions.

(3) To cede and assume reinsurance.

Section 38-79-140. Plan of operation.

(1) The Association must operate pursuant to a plan of operation which shall provide for economic, fair, and nondiscriminatory administration and for the prompt and efficient provision of medical malpractice insurance and may contain other provisions including, but not limited to, preliminary assessment of all members for initial expenses necessary to commence operations, establishment of necessary facilities, management of the Association, assessment of the members to defray losses and expenses, commissions arrangements, reasonable and objective underwriting standards, acceptance and cession of reinsurance, appointment of servicing carriers, and procedures for determining amounts of insurance to be provided by the Association.

(2) The plan of operation shall provide that any profit achieved by the Association must be added to the reserves of the Association or returned to the policyholders as a dividend.

(3) The plan of operation becomes effective and operative no later than thirty days after the declaration of any emergency by the Commission.

(4) Amendments to the plan of operation may be made by the directors of the Association with the approval of the Commissioner or must be made at the direction of the Commissioner after due notice and public hearing.

Section 38-79-150. Application for coverage.

Any licensed health care provider in a category in which the Commission has declared an emergency exists is entitled to apply to the Association for coverage. The application may be made on behalf of the applicant by a licensed agent or broker authorized in writing by the applicant. If the Association determines that the applicant meets the underwriting standards of the Association as set forth in the approved plan of operation and there is no unpaid, uncontested premium due from the applicant for any prior insurance of the same kind, the Association, upon receipt of the premium, or a portion thereof as prescribed by the plan of operation, shall cause to be issued a policy of medical malpractice liability insurance for a term of one year.

The rates, rating plans, rating rules, rating classifications, territories, and policy forms applicable to insurance written by the Association and the statistical and experience data relating thereto are subject to this article and to those provisions of Chapter 73 of this title which are not inconsistent with the purposes and provisions of this article.

Section 38-79-160. Statistical data and plan.

The Commissioner shall obtain complete statistical data in respect to medical malpractice losses and reparation costs as well as all other costs or expenses which underlie or are related to medical malpractice liability insurance. He shall promulgate any statistical plan he considers necessary for the purpose of gathering data referable to loss and loss adjustment expense experience and other expense experience. When a statistical plan is promulgated all members of the Association shall adopt and use it. The Commissioner shall also obtain statistical data in respect to the costs of compensating or rehabilitating victims of medical malpractice without respect to insurance for purposes of studying the feasibility or desirability of alternative medical malpractice compensation systems and estimating the impact of medical malpractice loss and insurance costs upon other compensation and insurance systems such as workers' compensation and accident and health insurance. He may require from any person obtaining insurance through the Association loss, claim, or expense data. This information or data is confidential and the physician-patient privilege must be preserved.

Section 38-79-170. Investment income considered in rates and determination of profit or loss of Association.

In respect to the structuring of rates for medical malpractice liability insurance and the determination of the profit or loss of the Association in respect to that insurance, due consideration must be given by the Commissioner to all investment income.

Section 38-79-180. Initial filings of policy forms, rates, etc.

Within a time that the Commissioner directs, the Association shall submit, for the Commissioner's approval, an initial filing, in proper form, of policy forms, classifications, rates, rating plans, and rating rules applicable to medical malpractice liability insurance to be written by the Association. In the event the Commissioner disapproves the initial filing, in whole or in part, the Association shall amend the filing, in whole or in part, in accordance with the direction of the Commissioner. If the Commissioner is unable to approve the filing or amended filing, within the time specified, he shall promulgate the policy forms, classifications, rates, rating plans, and rules to be used by the Association in making rates for and writing the insurance.

Section 38-79-190. Policy forms; forbidden provisions; rates.

(1) The Commissioner shall specify whether policy forms and the rate structure must be on a 'claims-made' or 'occurrence' basis and coverage may be provided by the Association only on the basis specified by the Commissioner. The Commissioner shall specify the 'claims-made' basis only if the contract makes provision for residual 'occurrence' coverage upon the retirement, death, disability, or removal from the State of the insured. Provision may be made for a premium charge allocable to any such residual 'occurrence' coverage and the premium charges for the residual coverage must be segregated and separately maintained for such purpose which may include the reinsurance of all or a part of that portion of the risk.

(2) The policy may not contain any limitation in relation to the existing law in tort as provided by the statute of limitations of the State of South Carolina.

(3) The policy form whether on a 'claims-made' or 'occurrence' basis may not require as a condition precedent to settlement or compromise of any claim the consent or acquiescence of the insured. However, such settlement or compromise may never be held or considered to be an admission of fault or wrongdoing by the insured.

(4) The premium rate charged for either or both 'claims-made' or 'occurrence' coverage must be at rates established on an actuarially sound basis, including consideration of trends in the frequency and severity of losses, and must be calculated to be self-supporting.

Section 38-79-200. Rate increase or assessment authorized.

The Association is authorized to provide a rate increase or assessment which is subject to the Commissioner's approval.

Section 38-79-210. Deficits to be recouped.

Any deficit sustained by the Association in any year must be recouped, pursuant to the plan of operation and the rating plan then in effect, by one or both of the following procedures:

(1) An assessment upon the policyholders which may not exceed one additional annual premium at the then current rate.

(2) A rate increase applicable prospectively.

Section 38-79-220. Recoupment.

Effective after the initial year of operation, rates, rating plans, and rating rules, and any provision for recoupment through policyholder assessment or premium rate increase, must be based upon the Association's loss and expense experience and investment income, together with any other information based upon such experience and income as the Commissioner considers appropriate. The resultant premium rates must be on an actuarially sound basis and must be calculated to be self-supporting.

In the event that sufficient funds are not available for the sound financial operation of the Association, pending recoupment as provided in Section 38-79-210, all members shall, on a temporary basis, contribute to the financial requirements of the Association in the manner provided for in Section 38-79-230. Any such contribution must be reimbursed to the members following recoupment as provided in Section 38-79-210.

Section 38-79-230. Insurer participation in the Association.

All insurers which are members of the Association shall participate in its writings, expenses, profits, and losses in the proportion that the net direct premiums of each member (excluding that portion of premiums attributable to the operation of the Association) written during the preceding calendar year bear to the aggregate net direct premiums written in this State by all members of the Association. Each insurer's participation in the Association must be determined annually on the basis of the net direct premiums written during the preceding calendar year, as reported in the annual statements and other reports filed by the insurer with the Commissioner. No member may be obligated in any one year to reimburse the Association on account of its proportionate share in the deficit from operations of the Association in that year in excess of one percent of its surplus to policyholders and the aggregate amount not so reimbursed must be reallocated among the remaining members in accordance with the method of determining participation prescribed in this section after excluding from the computation the total net direct premiums of all members not sharing in such excess deficit. In the event the deficit from operations allocated to all members of the Association in any calendar year exceeds one percent of their respective surplus to policyholders, the amount of the deficit must be allocated to each member in accordance with the method of determining participation prescribed in this section.

Section 38-79-240. Plans to be binding on members of Association.

Every member of the Association is bound by the approved plan of operation of the Association and by any other rules the board of directors of the Association lawfully prescribes.

Section 38-79-250. Obligations of terminated members.

(1) If the authority of an insurer to transact bodily injury liability insurance, other than automobile, in this State terminates for any reason its obligations as a member of the Association nevertheless continue until all its obligations have been fulfilled and the Commissioner has so found and certified to the board of directors.

(2) If a member insurer merges into or consolidates with another insurer authorized to transact such insurance in this State or another insurer authorized to transact such insurance in this State has reinsured the insurer's entire general liability business in this State, both the insurer and its successor or assuming reinsurer, as the case may be, are liable for the insurer's obligations in respect to the Association.

(3) Any unsatisfied net liability of any insolvent member of the Association must be assumed by and apportioned among the remaining members in the same manner in which assessments or gain and loss are apportioned and the Association shall thereupon acquire and have all rights and remedies allowed by law in behalf of the remaining members against the estate or funds of the insolvent insurer for funds due the Association.

Section 38-79-260. Board of directors.

The Association is governed by a board of twenty-one directors, nine of whom are appointed by the Governor, one of whom represents consumers, two of whom represent licensed insurance agents or brokers, three of whom are members of the South Carolina Medical Association, two of whom are members of the South Carolina Hospital Association, and one of whom is a member of the South Carolina Dental Association. Twelve members are elected by cumulative voting by members of the Association, whose votes in the election must be weighed in accordance with each member's net direct premiums written during the preceding calendar year. The approved plan of operation of the Association may make provision for combining insurers under common ownership or management into groups for voting, assessment, and all other purposes and may provide that not more than one of the officers or employees of such a group may serve as a director at any one time. The insurer representatives of the board of directors must be elected at a meeting of the members or their authorized representatives, which must be held at a time and place designated by the Commissioner. The Commissioner is chairman of the board of directors, ex officio, and he, or his designee, must preside at all meetings of the board but has no vote except in the case of a tie.

Section 38-79-270. Appealing actions of Association.

Any person aggrieved by any ruling, action, or decision by or on behalf of the Association may appeal to the Commission within thirty days after the ruling, action, or decision.

Section 38-79-280. Annual statement required.

The Association shall file in the office of the Commissioner annually, by March first, a statement which contains information with respect to its transactions, condition, operations, and affairs during the preceding year. The statement shall contain such matters and information as are prescribed by the Commissioner and must be in the form he directs. The Commissioner may, at any reasonable time, require the Association to furnish additional information with respect to its transactions, condition, or any matter connected therewith considered to be material and of assistance in evaluating the scope, operation, and experience of the Association.

Section 38-79-290. Examination of Association.

The Commissioner shall make an examination into the financial condition and affairs of the Association at least annually and shall file a report thereon with the Commission, the Governor, and the General Assembly. The expenses of the examination must be paid by the Association.

Article 5

Patients' Compensation Fund for Benefit

of Licensed Health Care Providers

Section 38-79-410. 'Licensed health care providers' defined.

As used in this article, 'licensed health care providers' means physicians and surgeons; directors, officers, and trustees of hospitals; nurses; oral surgeons; dentists; pharmacists; chiropractors; hospitals; nursing homes; or any similar category of licensed health care providers.

Section 38-79-420. Creation of Patients' Compensation Fund; purpose.

There is created the South Carolina Patients' Compensation Fund (Fund) for the purpose of paying that portion of any medical malpractice claim, settlement, or judgment which is in excess of one hundred thousand dollars per incident or in excess of three hundred thousand dollars in the aggregate for one year. The Fund is liable only for payment of claims against licensed health care providers (providers) in compliance with the provisions of this article and includes reasonable and necessary expenses incurred in payment of claims and the Fund's administrative expense.

Section 38-79-430. Creation of Board of Governors; members; terms; meetings.

The Board of Governors (Board) is created to manage and operate the Fund. The Board is composed of the Chief Insurance Commissioner, three physicians to be appointed by the Governor after consultation with the South Carolina Medical Association, two dentists to be appointed by the Governor after consultation with the South Carolina Dental Association, two hospital representatives to be appointed by the Governor after consultation with the South Carolina Hospital Association, two insurance representatives to be appointed by the Governor after consultation with the insurance industry, one attorney to be appointed by the Governor after consultation with the South Carolina Bar, one attorney to be appointed by the Governor after consultation with the South Carolina Trial Lawyers Association, and two representatives of the general public appointed by the Governor who are unaffiliated with insurance or health care industries or the medical or legal professions. The appointed members shall serve for a term of six years. However, of those first appointed, one physician, one dentist, one hospital representative, and one insurance representative must be appointed for a term of two years and one representative of the general public, one attorney, one insurance representative, and one hospital representative must be appointed for a term of four years. The Board must meet at the call of the chairman or a majority of the members but in any event it must meet at least once a year. A majority of the Board members shall constitute a quorum for the transaction of any business of the Board. The affirmative vote by a majority of the quorum present at a duly called meeting after notice is required to exercise any function of the Board. The Board may promulgate any regulations necessary to carry out the provisions of this article. The Chief Insurance Commissioner must act in an advisory capacity and as chairman of the Board but has no vote. He may designate a deputy or other officer of his agency to serve in his behalf on the Board.

Section 38-79-440. Participation in Fund.

All South Carolina licensed health care providers may participate in the Fund and maintain the participation by remitting to the Board the appropriate membership fees and deficit assessments as are required by the Board on or before the provider's membership anniversary date.

Section 38-79-450. Membership fees and deficit assessments.

All Fund members shall pay annual membership fees set by the Board. In addition to the annual membership fees, the Board may make deficit assessments upon the determination by the Board that insufficient money is available to meet the Fund's liabilities.

Membership in the Fund is contingent upon the Fund member making timely payment of all membership fees and deficit assessments.

Self-insureds are eligible for membership in the Fund upon compliance with the requirements of the Board of Governors and shall pay the same membership fees and deficit assessments as the members.

Section 38-79-460. Fund to be held in trust; investments and expenses.

The Fund, and any income from it, must be held in trust, deposited in the office of the State Treasurer and kept in a segregated account entitled 'Patients' Compensation Fund', invested and reinvested by the State Treasurer in the same manner as provided by law for the investment of other state funds in interest-bearing investments and may not become a part of the general fund of the State. All expenses of collecting, protecting, and administering the Fund must be paid from the Fund.

Section 38-79-470. Method of withdrawing funds; audit of Fund; public inspection.

(1) Monies may be withdrawn from the Fund only upon the signature of the chairman of the Board of Governors or his designee upon written warrants of the Comptroller General, drawn on the State Treasurer to the payee designated in the requisition.

(2) All books, records, and audits of the Fund are open for reasonable inspection to the general public.

(3) On or before December thirty-first of each year the State Auditor shall audit the records of the Fund and shall furnish an audited financial report to all Fund participants, the Department of Insurance, the Legislative Audit Council, and the Budget and Control Board.

(4) A licensed health care provider participating in the Fund may withdraw upon written notice of thirty days prior to the date of withdrawal. However, the provider remains subject to any assessment pertaining to any year in which he participated in the Fund. A member who withdraws during any year is entitled to a pro rata return of the annual membership fee.

Section 38-79-480. Actions for damages.

(1) In an action for damages arising out of the rendering of medical services against a licensed health care provider covered under the Fund, the provider shall within five days of receipt of summons and complaint, excluding the first day and holidays, give notice to the Board of the action. If after reviewing the facts upon which the action is based it appears that the claim will exceed one hundred thousand dollars, the Board in its discretion may appear and actively defend the Fund. In so defending, the Board may retain counsel and pay out of the Fund attorney's fees and expenses including court costs incurred in defending the Fund. Any judgment affecting the Fund may be appealed.

(2) It is the responsibility of the insurer providing insurance for a licensed health care provider who is also covered by the Fund or for the self-insured provider covered by the Fund to provide an adequate defense on any claim filed that potentially affects the Fund with respect to such insurance contracts or self-insured's liability. The insurers or self-insured providers must act in a fiduciary relationship with respect to any claim affecting the Fund. No settlement exceeding one hundred thousand dollars per incident, or three hundred thousand dollars in the aggregate for one year, may be agreed to unless approved by the Board.

(3) A person who has recovered a final judgment or a settlement approved by the Board against a provider covered by the Fund may file a claim with the Board to recover that portion of the judgment or settlement which is in excess of one hundred thousand dollars or three hundred thousand dollars in the aggregate for one year. In the event the Fund incurs liability exceeding one hundred thousand dollars to any person under a single occurrence the fund may not pay more than one hundred thousand dollars per year until the claim has been paid in full. However, in its discretion the Board may pay an amount in excess of one hundred thousand dollars so as to avoid the payment of interest.

(4) Claims filed against the Fund must be paid in the order received within ninety days after filing unless the judgment is appealed. If the Fund does not have enough money to pay all of the claims, claims received after the funds are exhausted are immediately payable the following year in the order in which they were received.

Section 38-79-490. Judicial review.

Any ruling, action, or decision by or on behalf of the Fund is subject to judicial review as provided in Section 1-23-380.

CHAPTER 81

Legal Malpractice Insurance

Section 38-81-10. Legal professional malpractice claims to be filed by insurer with Commissioner.

All legal professional malpractice insurance claims filed in the State with any insurer must be reported to the Commissioner by the insurer in the form and under the terms and conditions that he prescribes. The Commissioner shall maintain complete and accurate records on all the claims including the causes of the complaints, the disposition of each claim, and any other information which he considers important in observing and reporting on professional liability trends in this State, including, but not limited to, the reserves set aside for each claim, the amounts paid in settlement or awarded by jury, and the names of the claimant and defendant. The Commissioner may release to appropriate disciplinary and licensing agencies any data or information which may assist the agencies in improving the quality of legal professional service. The Commissioner may promulgate regulations necessary to carry out the provisions of this chapter.

Section 38-81-20. Exemption from liability for action taken in performance of powers and duties in reporting legal professional malpractice claims.

There is no liability on the part of, and no cause of action of any nature may arise against, any insurer, its officers, its agents, or employees or the Commissioner or his representatives for any action taken by them in performance of their powers and duties under this chapter."

Secretary of State and service of process

SECTION 2. Section 15-9-280 of the 1976 Code is amended to read:

"Section 15-9-280. (a) Any act of transacting an insurance business as set forth in Section 38-25-110 by an unauthorized insurer is equivalent to and constitutes an irrevocable appointment by the insurer, binding upon him, his executor or administrator, or successor in interest if a corporation, of the Secretary of State or his successor in office to be the true and lawful attorney of the insurer upon whom may be served all lawful process in any action, suit, or proceeding in any court by the Chief Insurance Commissioner or by the State and upon whom may be served any notice, order, pleading, or process in any proceeding before the Chief Insurance Commissioner and which arises out of transacting an insurance business in this State by the insurer. Any act of transacting an insurance business in this State by an unauthorized insurer is signification of its agreement that any such lawful process in such court action, suit, or proceeding and any such notice, order, pleading, or process in such administrative proceeding before the Chief Insurance Commissioner so served are of the same legal force and validity as personal service of process in this State upon the insurer.

(b) Service of process in such action is made by delivering to and leaving with the Secretary of State, or some person in apparent charge of his office, two copies thereof and by payment to the Secretary of State of the fee prescribed by law. Service upon the Secretary of State as attorney is service upon the principal.

(c) The Secretary of State shall immediately forward by certified mail one of the copies of the process or the notice, order, pleading, or process in proceedings before the Chief Insurance Commissioner to the defendant in the court proceeding or to whom the notice, order, pleading, or process in the administrative proceeding is addressed or directed at its last known principal place of business and shall keep a record of all process so served on him which shall show the day and hour of service. The service is sufficient if:

(1) Notice of the service and a copy of the court process or the notice, order, pleading, or process in the administrative proceeding are sent within ten days thereafter by certified mail by the plaintiff or the plaintiff's attorney in the court proceeding or by the Chief Insurance Commissioner in the administrative proceeding to the defendant in the court proceeding or to whom the notice, order, pleading, or process in the administrative proceeding is addressed or directed at the last known principal place of business of the defendant in the court or administrative proceeding; and

(2) The defendant's receipt or receipts issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person or insurer to whom the letter is addressed, and an affidavit of the plaintiff or the plaintiff's attorney in a court proceeding or of the Chief Insurance Commissioner in an administrative proceeding, showing compliance therewith, are filed with the clerk of court in which the action, suit, or proceeding is pending or with the Chief Insurance Commissioner in administrative proceedings, by the date the defendant in the court or administrative proceeding is required to appear or respond thereto, or within any further time as the court or Chief Insurance Commissioner may allow.

(d) No plaintiff is entitled to a judgment by default, a judgment with leave to prove damages, or a judgment pro confesso in any court or administrative proceeding in which court process or notice, order, pleading, or process in proceedings before the Chief Insurance Commissioner is served under this section until the expiration of thirty days from the date of filing of the affidavit of compliance.

(e) Nothing in this section limits or affects the right to serve any process, notice, order, or demand upon any person or insurer in any other manner permitted by law."

Chief Insurance Commissioner and service of process

SECTION 3. Article 3 of Chapter 9 of Title 15 of the 1976 Code is amended by adding:

"Section 15-9-285. (a) The issuance and delivery of a policy of insurance or contract of insurance or indemnity to any person in this State or the collection of a premium thereon by an insurer not licensed in this State, as required, irrevocably constitutes the Chief Insurance Commissioner, and his successors in office, the true and lawful attorney in fact upon whom service of any and all processes, pleadings, actions, or suits arising out of the policy or contract in behalf of the insured may be made.

(b) Service of process in such action is made by delivering to and leaving with the Chief Insurance Commissioner or some person in apparent charge of his office two copies thereof and by payment to the Chief Insurance Commissioner of a fee of four dollars.

(c) The Chief Insurance Commissioner shall immediately mail by registered mail one of the copies of the process to the defendant at its last known principal place of business and shall keep a record of all process serviced upon him. The service of process is sufficient if:

(1) Notice of the service and a copy of the process are sent within ten days thereafter by registered mail by the plaintiff's attorney to the defendant at its last known principal place of business; and

(2) The defendant's receipt or a receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, and the affidavit of the plaintiff's attorney showing compliance herewith are filed with the clerk of court in which the action is pending by the date the defendant is required to appear or within such further time as the court may allow.

(e) Nothing in this section limits or abridges the right to serve any process, notice, order, or demand upon any person or insurer in any other manner permitted by law."

Service of process; unauthorized insurer

SECTION 4. Section 15-9-290 of the 1976 Code is amended to read:

"Section 15-9-290. Service of process in any action, suit, or proceeding involving an unauthorized insurer is, in addition to the manners provided in Section 15-9-280 and Section 15-9-285, valid if served upon any person within this State who, in this State on behalf of the insurer, is:

(1) soliciting insurance,

(2) making any contract of insurance or issuing or delivering any policies or written contracts of insurance, or

(3) collecting or receiving any premium for any such insurer, or adjusting any loss or claim for such insurance, and if counsel, within ten days after service upon such person, causes to be sent by registered mail to the last known address of the insurer a copy of the process with proper postage affixed to the envelope containing it and files an affidavit with the clerk of court or magistrate in whose court the cause is pending, of compliance herewith, with leave to the court to extend the time for the mailing of process and filing of affidavit."

Firemen's insurance and inspection fund

SECTION 5. Chapter 9 of Title 23 of the 1976 Code is amended by adding:

"Article 3

Firemen's Insurance and Inspection Fund

Section 23-9-310. In each city or town which has a regularly organized fire department under the control of the mayor and council or intendant and council of that city or town and in each unincorporated community having a population of two hundred fifty persons within an area of one mile radius in this State which has a regularly organized fire department under the control of a responsible authority or representative group of citizens in the community having in serviceable condition for fire duty fire apparatus and necessary equipment belonging thereto to the value of ten thousand dollars and upwards and having a total personnel of not less than ten men, including paid and volunteer members, deriving benefits from the provisions of this article, there must be appointed a local board of trustees, to be known as the trustees of the firemen's insurance and inspection fund, to be composed of three or five members.

Section 23-9-320. The board of trustees of the firemen's insurance and inspection fund in cities and towns, if composed of three, consists of the mayor, the councilman in charge of the fire department or the chairman of the fire committee, and the chief of the fire department. The board in cities and towns, if composed of five, consists of the chairman of the board of fire masters or the chairman of the fire committee, the chief of the fire department, the city or town treasurer, and two citizens, one to be appointed by the mayor and one to be appointed by the chief of the fire department, both to be confirmed by the governing body of the city or town. The term of office of the last two named members of the board is four years and until their successors are appointed and confirmed and qualify for office.

Section 23-9-330. The board of trustees of the firemen's insurance and inspection fund in unincorporated communities is composed of the treasurer of the county in which the greater part of the community is located and any residents of the community as may be appointed by the treasurer, on a recommendation by a majority of the legislative delegation or delegations of the county or counties in which the community is located. The term of office of the members, other than the county treasurer, is four years, and they shall serve until their successors are appointed and qualify for office.

Section 23-9-340. All members of the board of trustees of each firemen's insurance and inspection fund shall serve without compensation. The board shall elect from its number a chairman and secretary who shall likewise serve without compensation. The treasurer of the city or town, or, for a fund for an unincorporated community, the county treasurer, shall act as the treasurer of the board and is custodian of all funds received as a result of the provisions of this article.

Section 23-9-350. No city or town may enjoy any benefits under this article unless it has passed a suitable ordinance approved by the State Fire Marshal providing a building and inspection code for the proper erection and inspection of all buildings in the city or town so as to eliminate, as far as may be possible, the danger of fires arising from defective construction or the presence and existence of inflammable and combustible material and conditions.

Section 23-9-360. Every incorporated city or town and every county in which is located any unincorporated community accepting the benefits of this article shall annually, by February first, designate some person as the fire inspector for the city, town, or county and this person shall quarterly, by the first day of April, July, October, and January, make an inspection of every public building and business establishment located within the city, town, or county. Whenever the fire inspector finds in any building or establishment any combustible material or inflammatory conditions dangerous to the safety of the building or premises, he shall order the material or conditions removed. Quarterly reports must be filed with the State Fire Marshal, and one of these quarterly reports is considered an annual report and shall show in detail any hazardous or inflammable condition in connection with the condition of every public building, business establishment, or residence in the city, town, or county. If the requirements of this section are not complied with, the city, town, or county fire department is considered to have waived its rights for that year to the benefits to be derived under this article, and the treasurer of each county is directed not to distribute any benefits under this article to any city, town, or county fire department which has waived its rights to the benefits.

Section 23-9-370. For the purpose of supervision and inspection and as a guaranty that the provisions of this article are administered as herein set forth, every fire department enjoying the benefits of this article must be a member of the South Carolina State Firemen's Association. The association may supervise and inspect the operation of the ordinance required in this article to be passed in each of the several towns and cities enjoying the benefits of this article.

Section 23-9-380. The clerk of any incorporated city or town and the treasurer of the county in which is located the greater part of any unincorporated community accepting the benefits of this article as required herein shall annually, by October thirty-first, make and file with the State Fire Marshal on a blank to be furnished by the State Fire Marshal his certificate stating the existence of the department, the number of steam, hand, or other engines, hook and ladder trucks, and hose carts in actual use, the number of organized companies, and the system of water supply in use for the department, together with any other facts the State Fire Marshal requires. If the certificate required by this section is not filed with the State Fire Marshal by October thirty-first in any year, the city, town, or community failing to file the certificate is considered to have waived and relinquished its rights for that year to any benefits distributed under this article by the county treasurer.

Section 23-9-390. Any volunteer fire department having a headquarters station within or without a municipality, which is duly organized and has the officers which normally comprise the membership of a regular, organized fire department, with ten or more active members, is designated a regular, organized fire department.

The chief of the department shall annually certify to the governing body of the municipality or the county, dependent upon where the headquarters station is located, the names of all officers and active members. The clerk of the governing body shall in turn certify the names of the active members and the officers to the State Fire Marshal.

Section 23-9-400. Any benefits accruing to an area serviced by a volunteer fire department which qualifies as a regular, organized fire department must be transmitted to the treasurer of the governing body of the area and distributed according to the provisions of this article.

Section 23-9-410. The State Treasurer shall pay over the amount collected upon the premiums of the insurance business required to be reported under the provisions of Section 38-7-70 to the treasurers of the counties to which the premiums are allocated under the provisions of Section 38-7-70 in the respective portions resulting from the allocations. All monies so collected must be set apart and equitably used by each of the treasurers solely and entirely for the betterment and maintenance of skilled and efficient fire departments within the county.

Section 23-9-420. All monies or other benefits received and distributed under the provisions of this article by a city, town, or county treasurer or other financial officer must be distributed to the trustees of the local fire department designated by the county treasurer or other financial officer to receive the benefits within forty-five days after the receipt of the monies or other benefits in the initial year and within thirty days each year thereafter. Each designated fire department shall receive an amount of the tax computed on the basis of the assessed value of improvements to real estate within the service areas of the fire department, and all monies must be administered by the trustees under the regulations adopted by them.

Section 23-9-430. For the purposes of Section 23-9-370 and to defray the expenses thereof, each county treasurer shall pay over to the treasurer of the South Carolina State Firemen's Association the sum of five percent of the gross proceeds received annually by each county, town, or unincorporated community from the one percent tax on fire insurance allocated to the city, town, or community. The sums so paid must be expended for the sole purpose of the betterment and maintenance of skillful and efficient fire departments within the county.

Section 23-9-440. In cities which have adopted the provisions of Article 4 of Chapter 7 of Title 61 of the 1962 Code of Laws of South Carolina, the provisions of Sections 23-9-410 to 23-9-430 are subject to the provisions of Section 61-424 of the 1962 Code and in particular item (5) thereof.

Section 23-9-450. Before any disbursements exceeding one hundred dollars of the funds of any firemen's insurance and inspection fund are made by the treasurers of the counties, they shall first submit to the supervising trustees of the South Carolina State Firemen's Association a statement of how the funds are to be expended and shall receive from the trustees their written approval of the manner and method by which the funds are to be disbursed, so that the South Carolina Firemen's Association shall know that the funds are being expended solely for the benefit of the firemen of each particular fire department in the State. If a proposed disbursement is to be expended legally and in accordance with the law, it is mandatory upon the supervising trustees to give their approval. Failure upon the part of any treasurer to comply with the foregoing makes him liable on his official bond.

Section 23-9-460. No funds of firemen's insurance and inspection fund may be divided among the firemen of any fire department in cash. When any fire department by a majority provides for the expenditure of any funds for the collective benefit and enjoyment of the entire department, it is mandatory for the local trustees and the state trustees of the South Carolina State Firemen's Association to approve the expenditure. None of the funds may be expended in any manner for any purpose for which any city, town, unincorporated community, or county may be legally liable.

Section 23-9-470. No funds from the firemen's insurance and inspection fund may be withheld or used for any purpose except as prescribed in this article, and no agency of the State, including the Budget and Control Board, has the authority to reduce the amounts required to be distributed to counties and municipalities under the provisions of this article."

Motor club services

SECTION 6. Title 39 of the 1976 Code is amended by adding:

"CHAPTER 61

Motor Club Services Act

Section 39-61-10. Short title.

This chapter is known and may be cited as the 'Motor Club Services Act'.

Section 39-61-20. Definitions.

As used in this chapter:

(a) 'Administrator' means the Administrator of the Department of Consumer Affairs.

(b) 'Club' means any person presently or hereafter engaged in selling, furnishing, or making available to members, either as principal or agent, motor club services.

(c) 'Club representative' means any individual in this State designated by the club who acts or aids in any manner in the solicitation, negotiation, or renewal of service contracts. This definition does not include any individual performing only work of a clerical nature in the office of a club or providing an application to a potential club member.

(d) 'Insurance service' means any act by a club to sell or furnish to a member insurance benefits, including, but not limited to, accidental injury and death benefits when the insurance is issued only by an insurance company duly authorized to do business in this State.

(e) 'Motor club service' means the rendering, furnishing, or procuring of, or reimbursement for, any of the following: towing service, bail and arrest bond service, emergency road service, claim adjustment service, legal service, theft service, map service, emergency travel expense service, community traffic safety service, license service, merchandise and discount service, travel, touring, and travel information service, guaranteed hotel/motel rates service, new car pricing service, financial service, check cashing service, personal property registration service, credit card service, insurance service, and buying and selling service to any member of the club.

(f) 'Service contract' means any written agreement whereby any club, for a consideration, promises to render, furnish, or procure for any member a motor club service.

Section 39-61-30. Deposit of cash, securities, or bonds.

A club may not render or agree to render a motor club service without first depositing and thereafter continuously maintaining the amount of fifty thousand dollars in cash or securities approved by the Administrator or, in lieu thereof, a bond in the amount of fifty thousand dollars executed by a surety company authorized by the laws of this State to transact business within this State. The bond must be executed to the State of South Carolina and must be for the use of the State and for any members who may have a cause of action against the club.

Section 39-61-40. Security; required assurances.

The security:

(a) Must be for the protection, use, and benefit of all persons whose applications for membership in a motor club have been accepted by the club or its representatives.

(b) Shall assure that the club faithfully furnishes and renders to members any and all of the motor club services furnished, sold, or offered for sale by it.

(c) Shall assure that the club complies with and abides by all the provisions of this chapter and all the regulations of the Administrator prescribed, published, adopted, and promulgated under authority of this chapter.

(d) Shall assure that the club pays all fines and penalties that may become due to the State from the club and by virtue of the provisions of this chapter.

Section 39-61-50. Suits by aggrieved members; aggregate liability.

If any member is defrauded or aggrieved by any misconduct, wrongful act, misrepresentation, or failure of the club to render its services or fulfill its contractual obligations, the member may bring suit on the security in his own name, but the aggregate liability of the surety for all suits may, in no event, exceed the amount of the bond.

Section 39-61-60. Submission and approval of club name.

The name of the club must be submitted to the Administrator with its application for a certificate of authority, and the Administrator shall approve any name so submitted unless the proposed name is deceptively similar to that of any other club licensed or qualified to do business in this State or unless the name is likely to confuse or mislead the public.

Section 39-61-70. Application for, and issuance of, certificate of authority; fee.

(a) No club may offer, issue, or renew a motor club service contract in this State without first obtaining from the Administrator a certificate of authority so to act. A certificate of authority must be issued by the Administrator to the club upon submission of items (1) through (6) of this subsection (a) in a form satisfactory to the Administrator. The applicant shall submit:

(1) A formal application for the certificate in the form and detail the Administrator requires, executed under oath by its president and secretary or two other principal officers of the club or other persons the Administrator may require.

(2) A certified copy of its charter or articles of incorporation and its bylaws, if any.

(3) If a corporation, a certified copy of the certificate of authority or good standing certificate from the Secretary of State.

(4) A copy of its most recent financial statement prepared in accordance with generally accepted accounting principles and certified by two principal officers of the applicant or, in the event the applicant is not a corporation, other persons as the Administrator may require.

(5) An explanation of its plan of doing business and copies of the following:

(i) Its application for membership.

(ii) The proposed membership certificate or identification card and any proposed addendum thereto.

(iii) Any individual insurance policy or group certificate to be offered.

(iv) Any service contract to be issued.

(6) Any other relevant information requested by the Administrator.

(b) No certificate of authority may be issued by the Administrator until the club has paid an initial certificate of authority fee of five hundred dollars.

Section 39-61-80. Certificates of authority permanent unless suspended or revoked; renewal requirements.

Certificates of authority issued hereunder are permanent unless revoked or suspended as provided in this chapter. No certificate of authority may be renewed by the Administrator until the club has:

(a) Paid an annual certificate of authority renewal fee of five hundred dollars by October thirty-first.

(b) Filed a copy of its most recent financial statement prepared in accordance with generally accepted accounting principles and certified by two principal officers of the club or, in the

event the applicant is not a corporation, other persons as the Administrator may require.

Section 39-61-90. Service of process.

(a) Serving of process in any action, rule, order, or legal proceeding may be made on any club not domiciled in this State having a certificate of authority to transact business in this State by mailing two copies of the process to the Administrator by registered or certified mail. One copy, certified by the Administrator or his deputy as having been served upon him, is considered sufficient evidence, and service upon the Administrator or his deputy as attorney is considered valid service upon the club.

(b) When legal process is served upon the Administrator as attorney for a club not domiciled in this State, he shall forthwith forward one of the duplicate copies of the process served on him to the club. The Administrator shall give immediate notice of process to the club by telephone. As a condition of valid and effective service and of the duty of the Administrator in the premises, the plaintiff in each process shall pay to the Administrator at the time of service the sum of ten dollars, which the plaintiff may recover as taxable costs in the case if he prevails in the suit. The Administrator shall keep a record of all processes, which shall show the day and hour of service and where and by whom served.

Section 39-61-100. Cease and desist orders; revocation or suspension of certificate of authority.

The Administrator may order the club to cease and desist, or may revoke, suspend, or refuse to continue the certificate of authority of a club, whenever, after a hearing and for cause shown, he determines that the club:

(a) Has violated or failed to comply with any provisions of this chapter or regulations promulgated under authority of this chapter.

(b) Has obtained a certificate of authority through willful misrepresentation or fraud.

(d) Has willfully, orally or in writing, misrepresented the terms, benefits, privileges, and provisions of any service contract issued or to be issued by it or any other club.

(e) Is unable to meet its obligations as determined by generally accepted accounting principles.

(f) Has, after notice to the club of an alleged occurrence of any of items (a) through (e) of this section, refused without just cause to submit relevant information to the Administrator with respect to the motor club services within this State.

Section 39-61-110. Requirements of service contracts.

No service contract may be issued or delivered in this State unless it contains:

(a) The exact corporation or other name of the club.

(b) The exact location of its home office or any business office to which inquiries may be made.

(d) The territory wherein motor club services contracted for are to be rendered.

(e) The duration of the service contract.

Section 39-61-120. Registration of club representatives; termination of representative's authority; fee.

(a) No individual may act as a club representative in this State without the club having registered the individual with the Administrator within thirty days of the date of designation as a club representative. Registration as a club representative must be made to the Administrator upon forms prescribed and furnished by him. The registration is permanent, subject to revocation or suspension as provided in this chapter.

(b) The club representative shall furnish information concerning his identity, business address, personal history, business experience, and other information that the Administrator considers pertinent and germane. A club representative:

(1) Must be at least eighteen years of age.

(2) Must be a trustworthy person of good repute.

(3) Shall have received training from the club or must have otherwise qualified by experience in the business of clubs rendering motor club services.

(c) Any willful misrepresentation of any information required to be disclosed in any registration is subject to the sanctions provided for in this chapter.

(d) Upon termination of any club representative's authority to act on behalf of the club, the club shall notify the Administrator in writing within thirty days of termination.

(e) The fee to be paid to the Administrator at the time registration is made, and annually by April thirtieth for the renewal, is ten dollars.

Section 39-61-130. Sanctions for noncompliance by club representative.

Upon satisfactory evidence that a club representative has violated or failed to comply with any provision of this chapter or regulation promulgated under authority of this chapter, the Administrator may issue an order requiring the club representative to cease and desist from engaging in the violation or may revoke or suspend the club representative's authority.

Section 39-61-140. Restrictions on advertising.

No club may make reference to its certificate of authority or approval from the Administrator or the State in advertising, circular, contract, or a membership card nor may it advertise or describe its services in a manner which would lead the public to believe that it is an insurance company, association, or exchange.

Section 39-61-150. Services subject exclusively to this chapter.

The offering of motor club services is subject solely and exclusively to the provisions of this chapter and the offering of services by any authorized club is not considered transacting business as an insurance company, association, or exchange, except as otherwise provided herein.

Section 39-61-160. Authority of Administrator.

The Administrator shall administer this chapter and may promulgate regulations, subject to Act 176 of 1977 (the Administrative Procedures Act) necessary to carry out its provisions.

Section 39-61-170. Violations; penalties.

Any person who violates the provisions of this chapter is guilty of a misdemeanor and, upon conviction, must be punished by a fine of not more than five hundred dollars or imprisonment for not more than three months, or both.

Section 39-61-180. Sale of insurance by club representatives; license requirements.

A club representative is not required to be a licensed insurance agent in connection with the sale of accidental injury and death benefits or other insurance covering a motor club service, which is issued in conjunction with and as a part of a motor club service contract but must be licensed to sell any other type of insurance.

Section 39-61-190. Incidental services.

Nothing contained in this chapter prohibits a club from offering services which augment or are incidental to any service offered by the club or any other services which are of assistance and are beneficial to members and are feasible for the club to render.

Section 39-61-200. Attorney's fees.

Any person who brings a civil suit for damages suffered because of any violation of any provision of this chapter, or any regulation promulgated by its authority, and who prevails in the suit, may be awarded reasonable attorney's fees."

Motor vehicles; satisfaction of judgments

SECTION 7. Section 56-9-480 of the 1976 Code is amended to read:

"Section 56-9-480. Judgments referred to in this article must, for the purpose of this article only, be considered satisfied:

(1) When fifteen thousand dollars has been credited upon any judgment rendered in excess of that amount because of bodily injury to or death of one person as the result of any one accident;

(2) When, subject to the limit of fifteen thousand dollars because of bodily injury to or death of one person, the sum of thirty thousand dollars has been credited upon any judgments rendered in excess of that amount because of bodily injury to or death of two or more persons as the result of any one accident; or

(3) When five thousand dollars has been credited upon any judgments rendered in excess of that amount because of injury to or destruction of property of others as a result of any one accident.

Payments made in settlement of any claims because of bodily injury, death, or property damage arising from a motor vehicle accident must be credited in reduction of the amounts provided for in this section."

Motor vehicles; proof of financial responsibility

SECTION 8. Section 56-9-580 of the 1976 Code, as last amended by Act 80 of 1977, is further amended to read:

"Section 56-9-580. Proof of financial responsibility may be evidenced by the certificate of the State Treasurer that the person named therein has deposited with him thirty-five thousand dollars in cash or securities such as may legally be purchased by savings banks or for trust funds of a market value of thirty-five thousand dollars. The State Treasurer may not accept the deposit and issue a certificate therefor and the Department may not accept the certificate unless accompanied by evidence that there are no unsatisfied judgments of any character against the depositor in the county where the depositor resides.

The deposit must be held by the State Treasurer to satisfy, in accordance with the provisions of this chapter, any execution on a judgment issued against the person making the deposit for damages, including damage for care and loss of service, because of bodily injury to or death of any person or for damages because of injury to or destruction of property, including the loss of use thereof, resulting from the ownership, maintenance, use, or operation of a motor vehicle after the deposit was made. Money or securities deposited are not subject to attachment or execution unless the attachment or execution arises out of a suit for damages which this chapter covers."

Motor vehicle registration; financial security; insurance

SECTION 9. Title 56 of the 1976 Code is amended by adding:

"CHAPTER 10

Motor Vehicle Registration and

Financial Security

Article 1

Vehicle Financial Security

and Other Matters

Section 56-10-10. Every owner of a motor vehicle required to be registered in this State shall maintain the security required by Section 56-10-20 with respect to each such motor vehicle owned by him throughout the period the registration is in effect. No certificate of registration may be issued or transferred to an owner by the Chief Commissioner of the Department of Highways and Public Transportation unless the owner or prospective owner produces satisfactory evidence that such security is in effect.

Section 56-10-20. The security required under this chapter is a policy or policies written by insurers authorized to write such policies in South Carolina providing for at least (1) the minimum coverages specified in Sections 38-77-140 through 38-77-230 and (2) the benefits required under Sections 38-77-240, 38-77-250, and 38-77-260. However, the Chief Commissioner of the Department of Highways and Public Transportation may approve and accept another form of security in lieu of such a liability insurance policy if he finds that such other form of security is adequate to provide and does in fact provide the benefits required by this chapter.

Section 56-10-30. If at any time the security required of any person under Section 56-10-20 lapses or terminates, the certificate of registration of the motor vehicle for which the security was in effect is, as of the date the security lapses or terminates, automatically suspended and must remain suspended until the security is replaced.

Section 56-10-40. Every insurer writing automobile liability insurance in this State and every provider of other security approved and accepted by the Chief Commissioner of the Department of Highways and Public Transportation in lieu of such insurance shall immediately notify the Chief Commissioner of the Department of Highways and Public Transportation of the lapse or termination of any such insurance or security issued to or provided for a resident of this State. Upon receipt of any such notice the Chief Commissioner of the Department of Highways and Public Transportation shall make a reasonable effort to notify the person that his certificate of registration has been suspended and shall recover the certificate from such person and the motor vehicle registration plates from the vehicles concerned.

Section 56-10-50. No suspension of a certificate of registration hereunder affects the status of title to the motor vehicle or any property rights in such motor vehicle, but the provisions of Section 56-3-110 are applicable with respect to the operation of such motor vehicle.

Section 56-10-60. Notwithstanding the definition of 'insured', the insurer and any named insured may, by the terms of a written

amendatory endorsement, the form of which has been approved by the Chief Insurance Commissioner, agree that coverage under a policy of liability insurance does not apply while the motor vehicle is being operated by a natural person designated by name. The agreement, when signed by the named insured and the person to be excluded, or by someone acting in the excluded person's behalf, is binding upon every insured to whom the policy applies. However, no natural person may be excluded unless (1) his driver's license has been turned in to the South Carolina Department of Highways and Public Transportation or (2) an appropriate policy of liability insurance or other security as may be authorized by law has been properly executed in the name of the person to be excluded. The agent of the insurer writing the policy of insurance excluding a named driver shall determine that the necessary driver's license has been delivered to the Department of Highways and Public Transportation or that a policy of insurance or security described in item (2) of this section is in effect before submitting the application for exclusion of a named driver.

The Department of Highways and Public Transportation shall furnish to the agent an affidavit either stating that the necessary driver's license has been delivered to it or certifying that a policy of insurance or security described in item (2) of this section is in effect.

Article 3

Insurance Requirements Relating to

Motor Vehicle Registration

Section 56-10-210. As used in this article:

(1) The term 'insured motor vehicle' means a motor vehicle as to which there is maintained the security required by Section 56-10-20.

(2) The term 'operator' means every person who drives or is in actual physical control of a motor vehicle or who is exercising control over or steering a vehicle being towed by a motor vehicle.

(3) The term 'Department' means the South Carolina Department of Highways and Public Transportation.

Section 56-10-220. Every person applying for registration for a motor vehicle shall at the time of such registration and licensing declare the vehicle to be an insured motor vehicle under the penalty set forth in Section 56-10-260 and shall execute and furnish to the Department his certificate that such motor vehicle is an insured motor vehicle and that he will maintain insurance thereon during the registration period. The certificate must be in the form prescribed by the Department. The Department may require any registered owner or any applicant for registration and licensing of a motor vehicle declared to be an insured motor vehicle to submit a certificate of insurance executed by an authorized agent or representative of an insurance company authorized to do business in this State. Such certificate must also be in a form prescribed by the Department.

Section 56-10-230. Prior to the termination of insurance by cancellation or refusal to renew by the insurer notice thereof must be given as required by Sections 38-77-110 and 38-77-120.

Section 56-10-240. If, during the period for which it is licensed, a motor vehicle is or becomes an uninsured motor vehicle, then the vehicle owner shall immediately 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. When a motor vehicle is or becomes an uninsured motor vehicle, the insurer shall give written notice within ten days, in addition to that notice previously given in accordance with law, by delivery under United States Post Office Certificate of Mailing to the Department of the cancellation or refusal to renew. The Department may not thereafter reissue registration certificates and license plates for the vehicle until such time as satisfactory evidence has been filed by the owner that the vehicle is insured. Upon receiving information to the effect that a policy is cancelled or otherwise terminated on any motor vehicle registered in South Carolina, then the Department shall suspend the license plates and registration certificate and shall initiate such action as may be required within fifteen days of such notice of cancellation to pick up the license plates and registration certificate. Any person who has had his license plates and registration certificate suspended by the Department, but who at the time of such suspension does possess liability insurance coverage sufficient to meet the financial responsibility requirements as set forth in this chapter, has the right to appeal immediately such suspension to the Chief Insurance Commissioner. If the Chief Insurance Commissioner determines that such person does have sufficient liability insurance coverage, the Chief Insurance Commissioner shall notify the Department and the suspension must be immediately voided. The Department shall give notice by first class mail of such cancellation or suspension of registration privileges to the vehicle owner at his last known address. However, when license plates are surrendered pursuant to this section, they must be held at the Department of Highways and Public Transportation office in the county where the person who surrenders such plates resides.

In the event the vehicle owner refuses to surrender the suspended items as required in this article, the Department may through its duly designated agents or by request to any county or municipal law enforcement agency take possession of the suspended license plates and registration certificate and may not thereafter reissue the registration until proper proof of liability insurance coverage is provided and until the owner has paid a reinstatement fee in the amount of twenty-five dollars.

Any person wilfully failing to return his motor vehicle license plates and registration certificates as required in this section is guilty of a misdemeanor and, upon conviction, must be fined one hundred dollars or imprisoned for thirty days.

Section 56-10-250. It is unlawful for any vehicle owner to sell or otherwise dispose of any motor vehicle, for which the registration and license plates have been suspended, to any member of his family residing in the same household. Any person violating the provisions of this section is guilty of a misdemeanor and, upon conviction, must be fined one hundred dollars or imprisoned for thirty days.

Section 56-10-260. Any person knowingly making a false certificate as to whether a motor vehicle is an insured motor vehicle or presenting to the Department false evidence that any motor vehicle sought to be registered is insured is guilty of a misdemeanor and, upon conviction, must be fined not less than fifty dollars nor more than one hundred dollars or imprisoned for not less than ten days nor more than thirty days. The Department shall deny, for a period of six months, registration of any motor vehicle for which a false certificate or false evidence is presented that the vehicle is insured and shall revoke, and may not thereafter reissue for a period of six months, the driver's license of any person making such false certificate or offering such false evidence, and then only when all other provisions of law have been complied with by such person.

Section 56-10-270. (a) Any person knowingly operating an uninsured motor vehicle subject to registration in this State or any person knowingly allowing the operation of an uninsured motor vehicle subject to registration in this State is guilty of a misdemeanor and, upon conviction, must be fined not more than one hundred dollars or imprisoned for not more than thirty days. An uninsured motor vehicle includes an insured vehicle with respect to which the operator has been excluded from coverage pursuant to the provisions of Section 56-10-60.

(b) The Department upon receipt of information to the effect that any person has been duly convicted of violating subsection (a) of this section shall suspend the driving privilege and all license plates and registration certificates issued in such person's name for a period of thirty days and may not reinstate such person's privileges until such time as proof of financial responsibility has been filed.

Section 56-10-280. All contracts or policies of insurance issued to meet the financial responsibility requirements prescribed in this chapter must be issued for a period of not less than six months notwithstanding any power of attorney which may purport to give the attorney-in-fact the right to effect cancellation on behalf of the insured. The provisions of this section do not prohibit refunds to the insured for cancellations resulting from causes other than nonpayment of premium.

Section 56-10-290. The administration and enforcement of this article must be by the State Department of Highways and Public Transportation, and law enforcement officers generally shall also enforce this article within their respective jurisdictions.

Section 56-10-300. The Department has the power to prescribe, adopt, promulgate, rescind, and enforce regulations necessary to carry out the provisions and intent of this article."

Incorporation of nonprofit corporations

SECTION 10. Section 33-31-10 of the 1976 Code is amended to read:

"Section 33-31-10. The Secretary of State may issue certificates of incorporation to any nonprofit corporations having no capital stock and organized under this article for any lawful purposes, including, but not limited to, religious, educational, social, fraternal, charitable, or eleemosynary purposes other than for the insurance of life, health, accident, or property. However, mutual benevolent aid associations organized solely for the purposes defined in Section 38-35-10 may be incorporated under the provisions of this chapter."

State Fire Marshal; duties

SECTION 11. Section 23-9-20 of the 1976 Code, as last amended by Act 190 of 1979, is further amended to read:

"Section 23-9-20. The State Fire Marshal shall supervise enforcement of the laws and regulations of the Liquefied Petroleum Gas Board and shall employ and supervise personnel necessary to carry out the duties of his office."

Resident fire marshal

SECTION 12. Subsection (a) of Section 23-9-30 of the 1976 Code, as last amended by Act 347 of 1986, is further amended to read:

"(a) The chief of any organized fire department or county fire marshal is ex officio resident fire marshal; however, this chapter does not repeal, amend, or otherwise affect Chapter 25 of Title 5."

Service on unauthorized insurer

SECTION 13. Section 15-9-300 of the 1976 Code is amended to read:

"Section 15-9-300. Nothing contained in Section 15-9-280, Section 15-9-285, or Section 15-9-290 limits or abridges the right to serve any process, notice, or demand upon any insurer in any other manner permitted by law."

Service; reciprocal insurance subscribers

SECTION 14. Section 15-9-310 of the 1976 Code is amended to read:

"Section 15-9-310. Service of process on the attorney, as defined in Section 38-17-20, for subscribers, as defined in Section 38-17-10, to reciprocal or interinsurance contracts must be made by serving three copies thereof upon the Chief Insurance Commissioner as the agent of such attorney pursuant to the provisions of Section 38-17-60. The Commissioner shall file one copy, forward one copy to the attorney, and return one copy with the acceptance of service."

Service on insurance companies

SECTION 15. Section 15-9-270 of the 1976 Code, as last amended by Act 15 of 1979, is further amended to read:

"Section 15-9-270. The summons and any other legal process in any action or proceeding against it must be served on an insurance company as defined in Section 38-1-20, including fraternal benefit associations, which shall have appointed the Chief Insurance Commissioner as its attorney pursuant to the provisions of Section 38-5-70 only by delivering two copies thereof to the Chief Insurance Commissioner, as such attorney of such company with a fee of four dollars, and such service is considered sufficient service upon such company. When legal process against any such company with the fee herein provided is served upon the Chief Insurance Commissioner, he shall forthwith forward by registered or certified mail one of the duplicate copies prepaid directed toward the company at its home office or, in the case of a fraternal benefit association, to its secretary or corresponding officer at the head of the association."

Inapplicability of provisions of law to certain vehicles

SECTION 16. Section 56-9-30 of the 1976 Code, as last amended by Act 80 of 1977, is further amended to read:

"Section 56-9-30. This chapter does not apply with respect to any motor vehicle owned by the United States, this State, or any political subdivision of this State or any municipality therein, nor, except for Section 56-9-590, does it apply with respect to any motor vehicle which is subject to other laws of this State which require their owners to carry insurance or to place security in a manner which would make those owners carry insurance or place security in addition to the amounts required by this chapter."

Imputed liability; damages; uninsured minor; motor vehicles

SECTION 17. Section 56-1-110 of the 1976 Code is amended to read:

"Section 56-1-110. Any negligence or wilful misconduct of a minor when driving a motor vehicle upon a highway must be imputed to the person who has signed the application of such minor for a beginner's permit, instruction permit, or driver's license, which person is jointly and severally liable with such minor for any damage caused by such negligence or wilful misconduct, except that if such minor is protected by a policy of liability insurance in the form and in the amounts as required under Chapter 9 of this title and Sections 38-77-140 through 38-77-310, then such parent or guardian or other responsible adult is not subject to the liability otherwise imposed under this section."

Definition; insured motor vehicle

SECTION 18. Item (3) of Section 56-9-20 of the 1976 Code is amended to read:

"(3) 'Insured motor vehicle': A motor vehicle as to which there is bodily injury liability insurance and property damage liability insurance, meeting all of the requirements of item (7) of this section, or as to which a bond has been given or cash or securities delivered in lieu of such insurance or as to which the owner has qualified as a self-insurer in accordance with the provisions of Section 56-9-60;".

Definition; motor vehicle liability policy

SECTION 19. Item (7) of Section 56-9-20 of the 1976 Code is amended to read:

"(7) 'Motor vehicle liability policy': An owner's or an operator's policy of liability insurance that fulfills all the requirements of Sections 38-77-140 through 38-77-230, certified as provided in Section 56-9-550 or 56-9-560 as proof of financial responsibility and issued, except as otherwise provided in Section 56-9-560, by an insurance carrier duly authorized to transact business in this State, to or for the benefit of the person or persons named therein as insured, and any other person, as insured, using the vehicle described therein with the express or implied permission of the named insured, and subject to the following special conditions:

(a) Contents of motor vehicle liability policy. The motor vehicle liability policy shall state the name and address of the named insured, the coverage afforded by the policy, the premium charged therefor, the policy period, and the limits of liability and shall contain an agreement or be endorsed that insurance is provided thereunder in accordance with the coverage defined in this chapter as respects bodily injury and death or property damage, or both, and is subject to all of the provisions of this chapter.

(b) Provisions deemed incorporated in such policy. Every motor vehicle liability policy is subject to the following provisions, which need not be contained therein:

(1) The liability of the insurance carrier with respect to the insurance required by this chapter shall become absolute whenever injury or damage covered by the motor vehicle liability policy occurs;

(2) The policy may not be cancelled or annulled as to the liability by any agreement between the insurance carrier and the insured after the occurrence of the injury or damage;

(3) No statement made by the insured or on his behalf and no violation of the policy shall defeat or void the policy;

(4) The satisfaction by the insured of a judgment for the injury or damage shall not be a condition precedent to the right or duty of the insurance carrier to make payment on account of the injury or damage;

(5) The insurance carrier shall have the right to settle any claim covered by the policy, and if the settlement is made in good faith, the amount thereof shall be deductible from the limits of liability specified in Section 38-77-140; and

(6) The policy, written application therefor, if any, and any rider or endorsement which does not conflict with the provisions of this chapter shall constitute the entire contract between the parties.

(c) What policy need not cover. The motor vehicle liability policy need not insure any liability under the Workers' Compensation Law nor any liability on account of bodily injury to or death of an employee of the insured while engaged in the employment, other than domestic, of the insured, or while engaged in the operation, maintenance, or repair of the motor vehicle, nor any liability for damage to property owned by, rented to, in charge of, or transported by the insured.

(d) Additional coverage permitted. Any policy which grants the coverage required for a motor vehicle liability policy may also grant any lawful coverage in excess of or in addition to the coverage specified for a motor vehicle liability policy and the excess or additional coverage shall not be subject to the provisions of this chapter. With respect to a policy which grants this excess or additional coverage, the term 'motor vehicle liability policy' shall apply only to that part of the coverage which is required by this article.

(e) Additional permissible provisions. Any motor vehicle liability policy may provide:

(1) That the insured shall reimburse the insurance carrier for any payment the insurance carrier would not have been obligated to make under the terms of the policy except for the provisions of this chapter; and

(2) For the prorating of the insurance thereunder with other valid and collectible insurance.

(f) Requirements may be met by several policies. The requirements for a motor vehicle liability policy may be fulfilled by the policies of one or more insurance carriers which policies together meet such requirements.

(g) Legal binder deemed to meet requirements. Any legal binder issued pending the issuance of a motor vehicle liability policy shall be considered as fulfilling the requirements for such policy.

(h) Notice required to cancel certified policy; cancellation by subsequent policy. When an insurance carrier has certified a motor vehicle liability policy under Sections 56-9-550 or 56-9-560, the insurance so certified shall not be cancelled or terminated until at least ten days after a notice of cancellation or termination of the insurance certified shall be filed with the Department, except that a policy subsequently procured and certified shall at 12:01 A. M., on the effective date of its certification, terminate the insurance previously certified with respect to any motor vehicle designated in both certificates.

(i) Other required policies unaffected. This chapter shall not be held to apply to or affect policies of automobile insurance against liability insuring public carriers or policies which may be required by any other law of this State, any law or ordinance of any municipality or any law or regulation of the United States or any of its agencies, and those policies, if they contain an agreement or are endorsed to conform with the requirements of this chapter, may be certified as proof of financial responsibility under this chapter.

(j) Chapter inapplicable to policies covering use by employees, etc., of vehicles not owned by insured. This chapter shall not be held to apply to or affect policies insuring solely the insured named in the policy against liability resulting from the maintenance or use by the persons in the insured's employ or on his behalf of motor vehicles not owned by the insured;".

Definition; proof of financial responsibility

SECTION 20. Item (13) of Section 56-9-20 of the 1976 Code, as last amended by Act 80 of 1977, is further amended to read:

"(13) 'Proof of financial responsibility': Proof of ability to respond to damages for liability, as provided in Section 38-77-150, or, on account of accidents occurring after the effective date of such proof, arising out of the ownership, maintenance, or use of a motor vehicle in the amount of fifteen thousand dollars because of bodily injury to or death of one person in any one accident and, subject to such limit for one person, in the amount of thirty thousand dollars because of bodily injury to or death of two or more persons in any one accident and in the amount of five thousand dollars because of injury to or destruction of property of others in any one accident;".

Definition; uninsured motor vehicle

SECTION 21. Item (16) of Section 56-9-20 of the 1976 Code is amended to read:

"(16) 'Uninsured motor vehicle':

Any motor vehicle which is not an insured motor vehicle as defined in item (3) of this section."

Workers' Compensation Insolvency Fund

SECTION 22. Section 42-7-200 of the 1976 Code is amended to read:

"Section 42-7-200. (a) There is established within the office of the State Workers' Compensation Fund the State Workers' Compensation Insolvency Fund to insure payment of awards of workers' compensation benefits which are unpaid because of the insolvency of employers who fail to acquire necessary coverage for employees. The fund shall be administered by the director of the state fund.

When any award is made by the State Workers' Compensation Commission for workers' compensation benefits and such claim or any part thereof is not paid because of the insolvency of an employer who has not secured coverage, payments must be made from the insolvency fund upon certified approval of the State Workers' Compensation Commission. The director of the state fund shall establish procedures for the implementation of this section.

When any claimant is paid benefits from the insolvency fund the insolvency fund shall be subrogated to all rights of the claimant to the amount paid from the fund and the administrator of the fund shall institute proceedings for the collection of such funds against the party legally obligated for such payments.

(b) To establish and maintain the State Workers' Compensation Insolvency Fund there shall be earmarked from the collections of the tax on insurance carriers and self-insured persons provided for in Sections 38-7-50 and 42-5-190 an amount sufficient to establish and annually maintain the insolvency fund at a level of not less than two hundred thousand dollars."

Analysis lines for identification

SECTION 23. Any analysis lines following Code sections in any section of this act do not constitute a part of the Code sections but are intended only for the purpose of identification.

Insurance provisions enacted in 1987

SECTION 24. The Code Commissioner is authorized and directed to place all appropriate provisions of acts dealing with insurance enacted during the 1987 session of the General Assembly in the appropriate area covered by this act. He is further authorized and directed to eliminate or delete from this act any provision of law contained herein whose subject matter was repealed or eliminated by the General Assembly in any other act passed during the 1987 session. He is further authorized and directed to amend provisions of this act corresponding to amendments of the insurance laws of this State as may have been passed by the General Assembly during the 1987 session in other acts.

Repeal

SECTION 25. The following are repealed:

(a) Article 7 of Chapter 9 of Title 56 of the 1976 Code.

(b) Chapter 11 of Title 56 of the 1976 Code.

(d) Chapter 9 of Title 35 of the 1976 Code.

(e) Sections 42-5-90, 42-5-100, 42-5-110, 42-5-120, 42-5-140, 42-5-150, 42-5-160, 42-5-170, and 42-5-180 of the 1976 Code.

(f) Act 306 of 1975, Act 767 of 1976, Act 104 of 1977, Act 257 of 1977, Act 258 of 1977, Act 645 of 1978, Act 662 of 1978, Act 221 of 1979, Act 200 of 1981, Act 199 of 1983, Act 440 of 1986, and Act 518 of 1986.

(g) Subsections A, B, C, D, E, F, G, H, J, K, L, M, and N of Section 31 of Part II of Act 540 of 1986.

(h) Act 513 of 1986.

Time effective

SECTION 26. This act takes effect January 1, 1988.