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Bill 3820

Indicates Matter Stricken
Indicates New Matter

Indicates Matter Stricken

Indicates New Matter

COMMITTEE REPORT

May 2, 2007

H. 3820

Introduced by Reps. Cato, Viers, Clemmons, Bales, Hardwick, Miller, Haley, Perry, Leach, Anderson, Witherspoon, Barfield, Battle, Dantzler, Edge and Herbkersman

S. Printed 5/2/07--H.    [SEC 5/4/07 2:00 PM]

Read the first time March 29, 2007.

To whom was referred a Bill (H. 3820) to amend the Code of Laws of South Carolina, 1976, by enacting the "Omnibus Coastal Property Insurance Reform Act of 2007"; by adding Article 11 to Chapter 6, etc., respectfully

That they have duly and carefully considered the same and recommend that the same do pass with amendment:

Amend the bill, as and if amended, by striking all after the enacting words and inserting:

/SECTION    1.    This act may be cited as the "Omnibus Coastal Property Insurance Reform Act of 2007".

SECTION    2.    Chapter 6, Title 12 of the 1976 Code is amended by adding:

Section 12-6-1610.    As used in this article:

(1)    'Qualified catastrophe expenses' mean expenses paid or incurred by reason of a major disaster that has been declared by the Governor to be an emergency by executive order.

(2)    'Qualified deductible' means the deductible for the individual's homeowner's policy for a taxpayer's legal residence.

(3)    'Legal residence' means the taxpayer's legal residence pursuant to Section 12-43-220(c).

Section 12-6-1620.    (A)(1)    An individual taxpayer is allowed a deduction from the tax imposed pursuant to Section 12-6-510 for amounts contributed to a Catastrophe Savings Account in accordance with subsection (B)(3); and

(2)    All interest income earned by the Catastrophe Savings Account is exempt from the tax imposed pursuant to Section 12-6-510 as provided in this article.

(B)(1)    As used in this article, 'Catastrophe Savings Account' means a regular savings account or money market account established by an insurance policyholder for residential property in this State to cover an insurance deductible under an insurance policy for the taxpayer's legal residence property that covers hurricane, rising floodwaters, or other catastrophic windstorm event damage or by an individual to cover self-insured losses for the taxpayer's legal residence from a hurricane, rising floodwaters, or other catastrophic windstorm event. The account must be labeled as a Catastrophe Savings Account in order to qualify as a Catastrophe Savings Account as defined in this article. A taxpayer shall establish only one Catastrophe Savings Account and shall specify that the purpose of the account is to cover the amount of insurance deductibles and other uninsured portions of risks of loss from hurricane, rising floodwater, or other catastrophic windstorm event.

(2)    A Catastrophe Savings Account is not subject to attachment, levy, garnishment, or legal process in this State.

(3)    The total amount that may be contributed to a Catastrophe Savings Account may not exceed:

(a)    in the case of an individual whose qualified deductible is not more than one thousand dollars, two thousand dollars;

(b)    in the case of an individual whose qualified deductible is more than one thousand dollars, the amount equal to the lesser of fifteen thousand dollars or twice the amount of the taxpayer's qualified deductible; or

(c)    in the case of a 'self-insured' individual who chooses not to obtain insurance on his legal residence, two hundred fifty thousand dollars, but shall not exceed the value of the individual taxpayer's legal residence.

(4)    If a taxpayer contributes in excess of the limits provided in item (3), the taxpayer shall withdraw the amount of the excess contributions and include that amount in South Carolina income for purposes of Section 12-6-510 in the year of withdrawal.

Section 12-6-1630.    (A)    A distribution from a Catastrophe Savings Account must be included in the income of the taypayer unless the amount of the distribution is used to cover qualified catastrophe expenses.

(B)    No amount is included in income, pursuant to subsection (A) of this section, if the qualified catastrophe expenses of the taypayer during the taxable year are equal to or greater than the aggregate distributions during the taxable year.

(C)    If aggregate distributions exceed the qualified catastrophe expenses during the taxable year, the amount otherwise included in income must be reduced by the amount of the distributions for qualified catastrophe expenses.

(D)(1)    The tax paid pursuant to Section 12-6-510 attributable to a taxable distribution must be increased by two and one-half percent of the amount which is includable in income.

(2)    This additional tax does not apply if the:

(a)    taxpayer no longer owns a legal residence that qualifies under Section 12-43-220(C); or

(b)    distribution is from an account conforming with Section 12-6-1620(B)(3)(c) and is made on or after the date on which the taypayer attains the age of seventy.

(E)(1)    No amount is includable in taxable income, pursuant to subsection (A) of this section, if the distribution is from an account conforming with Section 12-6-1620(B)(3)(a) or (b) and is made on or after the date on which the taypayer attains the age of seventy.

(2)    If a taxpayer receives a nontaxable distribution under this subsection, the taxpayer may not make further contributions to any Catastrophe Savings Account.

(F)    If a taxpayer owns a Catastrophe Savings Account dies, his account is included in the income of the person who receives the account, unless that person is the surviving spouse of the taxpayer. Upon the death of the surviving spouse, the account is included in the income of the person who receives the account. The additional tax in subsection (D) does not apply to distribution on death."

SECTION    3.    Article 25, Chapter 6, Title 12 of the 1976 Code is amended by adding:

"Section 12-6-3660.    (A)    An individual taxpayer is allowed a credit against the tax imposed pursuant to Section 12-6-510 for costs incurred to retrofit, as specified in subsection (B), a structure qualifying as the taxpayer's legal residence pursuant to Section 12-43-220(c) to make it more resistant to loss due to hurricane, rising water, or other catastrophic wind event.

(B)    In order to qualify for the state income tax credit allowed pursuant to this section, costs must not include ordinary repair or replacement of existing items, and must be associated with those fortification measures defined in subsection (C), and must increase the residence's resistance to hurricane, rising water, or catastrophic wind event damage, as defined by the director or his designee by way of a bulletin, an order, or a regulation.

(C)    The fortification measures qualifying for the state income tax credit allowed pursuant to this section must be promulgated by the Department of Insurance in regulations pursuant to the Administrative Procedures Act.

(D)    The tax credit allowed pursuant to this section for any taxable year may not exceed the lesser of:

(1)    twenty-five percent of the cost incurred; or

(2)    one thousand dollars.

(E)    The cost of items that otherwise qualify for the credit that are purchased with grant funds awarded pursuant to Section 38-75-485 are not eligible for this credit if the grants are not included in the income of the taxpayer.

Section 12-6-3665.    (A)    An individual taxpayer is allowed a credit from the income tax imposed pursuant to Section 12-6-510 for South Carolina state sales or use taxes paid on purchases of tangible personal property used to retrofit the individual's legal residence pursuant to Section 12-6-3660. The credit amount is calculated by multiplying the purchase price of tangible personal property for which the individual may claim the income tax credit in Section 12-6-3660 by six percent. The maximum credit allowed under this section is one thousand five hundred dollars.

(B)    The cost of items that otherwise qualify for the credit that are purchased with grant funds awarded pursuant to Section 38-75-485 are not eligible for this credit if the grants are not included in the income of the taxpayer.

Section 12-6-3670.    (A)    An individual taxpayer may claim a credit against the income tax imposed pursuant to Section 12-6-510 for excess premium paid during the applicable tax year for property and casualty insurance, as defined in Articles 1, 3, and 5 of Chapter 75, Title 38, providing coverage on the taxpayer's legal residence pursuant to Section 12-43-220(c).

(B)    For the purposes of computing the credit allowed by this section, excess premium paid is the amount by which the premium paid exceeds five percent of the taxpayer's adjusted gross income.

(C)(1)    The credit allowed pursuant to this section for any taxable year may not exceed one thousand two hundred fifty dollars.

(2)    If the credit allowed under this section exceeds the state income tax liability for the taxable year, any unused credit may be carried forward for five succeeding taxable years."

SECTION    4.    A.        Sections 38-3-10 through 38-3-240 of the 1976 Code are designated Article 1, Chapter 3, Title 38 and entitled "General Provisions".

B.    Chapter 3, Title 38 of the 1976 Code is amended by adding:

Section 38-3-410.    (A)    If the Governor declares a state of emergency pursuant to Section 1-3-420, the director may issue one or more general orders applicable to all insurance companies, entities, and persons, as defined in Section 38-1-20, that are subject to Title 38.

(B)    An order issued by the director under this section becomes effective upon issuance and continues for one hundred twenty days unless terminated sooner by the director. The director may extend an order for additional periods of one hundred twenty days if he determines that the emergency conditions that gave rise to the initial order still exist. By concurrent resolution, the General Assembly may terminate an order issued under this section.

(C)    The director shall publish in the next available publication of the State Register a copy of the text of an order issued under this section, together with a statement explaining how the order facilitates recovery from the emergency.

Section 38-3-420.    (A)    By an order issued pursuant to Section 38-3-410, the director may adopt any rule that facilitates recovery from the emergency. The department may adopt a rule by any procedure which is fair under the circumstances if the:

(1)    procedure provides at least the procedural protection given by other statutes, the Constitution of this State, or the United States Constitution;

(2)    department takes only that action necessary to protect the public interest under the emergency procedure; and

(3)    department publishes in writing, at the time of or before its action, the specific facts and reasons for finding an immediate danger to the public health, safety, or welfare and its reasons for concluding that the procedure used is fair under the circumstances. If, notice of emergency rules, other than those of educational units or units of government with jurisdiction in only one or a part of one county, including the full text of the rules, is published in the first available issue of the State Register and provided to the General Assembly, then the department's findings of immediate danger, necessity, and procedural fairness are judicially reviewable under Section 38-3-210.

(B)    Subject to applicable constitutional and statutory provisions, an emergency rule becomes effective immediately on filing, or on a date less than twenty days after that time if specified in the rule, if the adopting department finds that the effective date is necessary because of immediate danger to the public health, safety, or welfare.

Section 38-3-430.    (A)    The department may promulgate by order, pursuant to Section 38-3-410, standardized requirements that may be applied to insurers as a consequence of a hurricane or other natural disaster. The rules must address the following areas:

(1)    claims reporting requirements;

(2)    grace periods for payment of premiums and performance of other duties by insureds;

(3)    temporary postponement of cancellations and nonrenewals; and

(4)    any other rule the director considers necessary.

(B)    The rules adopted under this section shall require the department to issue an order within ten days after the occurrence of a hurricane or other natural disaster specifying, by line of insurance, which of the standardized requirements apply, the geographic areas in which they apply, the time at which applicability commences, and the time at which applicability terminates.

Section 38-3-440.    The department may promulgate the regulations necessary to implement the provisions of this article."

SECTION    5.    Chapter 7, Title 38 of the 1976 Code is amended by adding:

"Section 38-7-200.    (A)    A licensed insurer providing full property and casualty coverage, to specifically include wind and hail coverage, to property owners within the area defined in Section 38-75-310(5), including any portion of the area as it may be expanded from time to time by an expansion order pursuant to Section 38-75-460, may claim as a nonrefundable credit against the premium tax imposed by Sections 38-7-20 and 38-7-40 in an amount equal to twenty-five percent of the tax that otherwise is due on the premium written for the property owners for the taxable year.

(B)    The credit allowed by this section is available only to an insurer licensed or authorized to do business in this State with respect to a property and casualty insurance policy providing full coverage as defined in subsection (A).

(C)    A taxpayer who claims the credit allowed by this section shall provide information required by the Department of Insurance to demonstrate that the taxpayer is eligible for the credit and that the amount paid for premiums for which the credit is claimed was not excluded from the taxpayer's gross income for the taxable year.

(D)    The tax credit allowed under this section for a taxable year may be claimed only once for any one structure, regardless of the number of policies written on the structure.

(E)    This section applies to all new policies issued with an effective date after December 31, 2007."

SECTION    6.    Article 9, Chapter 75, Title 38 is amended by adding:

"Section 38-75-755.    (A)    All insurers, at the issuance of a new policy and at each renewal, clearly shall notify the applicant or policyholder of a commercial property or personal lines residential property insurance policy of the availability and the range of each premium discount, credit, other rate differential, or reduction in deductibles for properties on which fixtures or construction techniques demonstrated to reduce the amount of loss in a windstorm have been installed or implemented. The notice must describe generally what measures the policyholders may take to reduce their windstorm premium.

(B)    All insurers, at the issuance of a new policy and at each renewal of a commercial property insurance policy, shall include a notice that advises the policyholder that a reduction in premium may be available if the policyholder has taken steps to prevent or reduce damage from windstorm and that the policyholder may contact its agent, broker, or insurer for additional information.

(C)    This section applies to policies issued or renewed after December 31, 2007."

SECTION    7.    Section 38-3-110 of the 1976 Code is amended by adding at the end:

"(5)    The director shall hold a public hearing at least annually at a location within the seacoast area, as defined in Section 38-75-310(7), to provide the public with an opportunity to discuss the rates, territory, and other pertinent issues regarding the South Carolina Wind and Hail Underwriting Association. The director shall provide notice of the public hearing in newspapers of general circulation within the seacoast area at least thirty days before the date of the public hearing. The director shall provide a report to the General Assembly in January of each year regarding the status of the South Carolina Wind and Hail Underwriting Association, including any recommended modifications to statutory or regulatory law regarding the operation of the South Carolina Wind and Hail Underwriting Association and its territory."

SECTION    8.    Section 38-73-260 of the 1976 Code, as last amended by Act 332 of 2006, is further amended by adding at the end:

"(F)(1)    Nothing in this section prevents the director or his designee from considering the impact on individual territories or individual insureds when determining whether the rate is excessive, inadequate, or unfairly discriminatory. Rate level increases or decreases falling within the limitation specified in this subsection must comply with the requirements of this chapter prohibiting rate increases from being excessive, inadequate, or unfairly discriminatory.

(2)    This subsection does not apply to private passenger automobile insurance nor to insurance against liability arising out of the ownership, maintenance, or the use of:

(a)    an individual private passenger automobile as defined in Section 38-77-30(5.5)(a); or

(b)    property having wheels."

SECTION    9.    Section 38-73-1095(C) of the 1976 Code is amended to read:

"(C)    Rating plans for essential property insurance in the coastal area or in the seacoast area, may shall include discounts and credits or surcharges and debits calculated upon the following rating factors:

(1)    use of storm shutters;

(2)    use of roof tie downs;

(3)    construction standards;

(4)    building codes;

(5)    distance from water;

(6)    elevation;

(7)    flood insurance;

(8)    policy deductibles; and

(9)    other applicable factors requested by the insurer or rating organization or selected by order of the director involving the risk or hazard.

The department may by order or regulation define how the implementation of these factors qualify for credits or discounts. The regulation or order must specify what evidence or proof the policyholder or applicant shall present to obtain the credit or discount. This section applies to policies issued or renewed after December 31, 2007."

SECTION    10.    Article 5, Chapter 75, Title 38 of the 1976 Code is amended to read:

Section 38-75-310. In this article, unless the context otherwise requires:

(1)    'Essential property insurance' means insurance against direct loss to property as defined and limited in the wind and hail insurance policy and forms approved by the director or his designee; and after January 1, 1995, at the request of the insured, coverage for:

(a)    actual loss of business income; or

(b)    additional living expense; or

(c)    fair rental value loss.

Prior to Before November 1, 1994, the South Carolina Wind and Hail Underwriting Association must file with the department for approval additional policy forms defining the terms of and providing coverage for actual loss of business income, additional living expense and fair rental value loss.

(2)    'Association' means the South Carolina Wind and Hail Underwriting Association established pursuant to the provisions of this article.

(3)    'Plan of operation' means the plan of operation of the association approved or promulgated by the department pursuant to the provisions of this article.

(4)    'Insurable property' means immovable property at fixed locations in coastal areas of the State as that term is hereinafter defined, or tangible personal property located therein in it, which property is determined by the association to be in an insurable condition as determined by reasonable underwriting standards, but not to include farm or manufacturing property, or motor vehicles which are eligible to be licensed for highway use. Any A structure commenced on or after September 15, 1971, not built in substantial compliance with the Southern Standard most recent building code, adopted by the Building Codes Council as referenced in Section 6-9-50, or the approved building code in existence at the time of construction or the standards promulgated under the National Manufactured Housing Construction Standards and Safety Act, including the design-wind requirements therein in it, is not an insurable risk under the terms of this article. Any A structure commenced on or after September 15, 1971, shall must comply with any construction and zoning requirements affecting the structure, promulgated or adopted pursuant to the requirements of the Federal Flood Insurance Program.

(5)    'Coastal area' means:

(a)    all areas in Beaufort County and Colleton County which are east of the west bank of the intracoastal waterway;

(b)    the following areas in Georgetown County: all areas between the Harrell Siau Bridge and Murrells Inlet which are east of a line paralleling and lying one hundred fifty feet east of U.S. Highway No. 17 Business, all areas in Murrells Inlet which are east of U.S. Highway No. 17 Business, and Cedar Island, North Island, and South Island;

(c)    all areas in Horry County east of a line paralleling and lying one hundred fifty feet east of U. S. Highway No. 17 Business;

(d)    the following areas in Charleston County: Edingsville Beach, Kiawah Island, Botany Bay Island, Folly Island, Seabrook Island, Morris Island, and all areas north of the City of Charleston which are east of the west bank of the intracoastal waterway.

(6)    'Net direct premiums' means gross direct premiums excluding reinsurance assumed and ceded written on property other than farm or manufacturing in this State for fire and extended coverage insurance, including the fire and extended coverage components of homeowners policy and commercial multiple peril package policies, less return premiums upon canceled contracts, dividends paid or credited to policyholders, or the unused or unabsorbed portion of premium deposits.

(7)    'Seacoast area' means all areas within Horry, Georgetown, Berkeley, Charleston, Dorchester, Colleton, Beaufort, and Jasper Counties.

Section 38-75-320. The purpose of this article is to provide a method whereby wind and hail insurance may be obtained more easily and equitably assure an adequate market for wind and hail insurance in the coastal areas of this State.

Section 38-75-330.    (A)    There is created the South Carolina Wind and Hail Underwriting Association, an unincorporated association whose responsibilities, liability, and regulations are governed and defined by this article, consisting. The association shall function as a residual market mechanism to provide wind and hail insurance for residential and commercial property to applicants who are unable to procure this insurance in the coastal area.

(B)    The association consists of all private insurers authorized to write and engage in writing property insurance within this State on a direct and statewide basis, but excluding insurers whose writings are limited to property wholly owned by parent, subsidiary, or allied organizations, or insurers whose writings are limited to property wholly owned by religious organizations, provided,. However, as a condition of exemption from membership such these insurers providing property insurance for insurable property in the coastal area as defined by this article shall also shall provide essential property insurance for such these risks. Every such Each insurer must be a member of the association and must shall remain a member of the association so long as the association is in existence as a condition of its authority to continue to transact the business of insurance in this State.

Section 38-75-340.    (A)    The association must shall operate pursuant to a plan of operation which shall set forth provides for the following:

(1)    the number, qualifications, terms of office, and manner of election of the members of the board of directors and shall provide for;

(2)    the efficient, economical, fair, and nondiscriminatory administration of the association; and for

(3)    the prompt and efficient provision of essential property insurance in the coastal areas of the State so as to promote orderly community development in those areas and to provide means for the adequate maintenance and improvement of the property in such areas. The plan may include;

(4)    the manner of election of officers;

(5)    the establishment of necessary facilities,;

(6)    the management of the association, plan for;

(7)    the assessment of members to defray losses and expenses,;

(8)    reasonable underwriting standards, rating subdivisions and rates;

(9)    commissions to be paid to agents or brokers,;

(10)    procedures for the acceptance and cession of reinsurance, procedures and for determining the amounts of insurance to be provided to specific risks,;

(11)    time limits and procedures for processing applications for insurance,; and for any

(12) other provisions considered necessary by the director or his designee to carry out the purposes of this article.

(B)    Insurance effected pursuant to this article shall must have limits of liability provided in the plan of operation. The director or his designee shall approve the limits. Excess insurance is not permitted until the maximum available under the plan has been purchased. Thereafter After that, excess insurance may be purchased and must be included for the purpose of meeting any coinsurance requirement.

(C)    The directors board of the association may, subject to the approval of the director or his designee, may amend the plan of operation at any time. The director or his designee shall review the plan of operation, including annually. The director or his designee shall review the rate structure and loss experience, not less than once in each calendar year semi-annually in accordance with Section 38-75-400. After review of the plan, the director or his designee may amend the plan upon approval of the directors of the association and the amendment takes effect immediately upon ratification by the board.

Section 38-75-350.    (a)(A)    Any A person having an insurable interest in insurable property is entitled to apply to the association for coverage and for an inspection of the property. The application must be made on behalf of the applicant by a licensed broker or agent authorized by him. Applications An application must be submitted on forms a form prescribed by the association and approved by the director or his designee. The application shall must contain a statement as to whether or not there are any unpaid premiums due from the applicant for fire insurance on the property. The term 'insurable interest' as used in this section includes any lawful and substantial economic interest in the safety or preservation of property from loss, destruction, or pecuniary damage.

(b)(B)    If the association determines that the property is insurable and that there is no unpaid premium due from the applicant for prior insurance on the property, the association upon receipt of the premium, or such a portion thereof of it as is prescribed in the plan of operation, shall cause to be issued a policy of essential property insurance for a term of at least one year.

(c)(C)    If the association, for any reason, denies an application and refuses to cause to be issued an insurance policy on insurable property to any an applicant or takes no action on an application within the time prescribed in the plan of operation, the applicant may appeal to the director or his designee and the director or a member of his staff designated by him, after reviewing the facts, may direct the association to issue or cause to be issued an insurance policy to the applicant. In carrying out its duties pursuant to this section, the director or his designee may request, and the association shall provide, any information the director or his designee considers necessary to a determination concerning the reasons for the denial or delay of the application.

Section 38-75-360.    (A)    The association, pursuant to the provisions of this article and the plan of operation, and with respect to essential property insurance on insurable property, has the power on behalf of its members to:

(a)(1)    To cause to be issued policies of insurance to applicants.;

(b)(2)    To assume reinsurance from its members.;

(c)(3)    To cede reinsurance to its members and to purchase reinsurance in behalf of its members. on risks insured by the association in amounts that are in accordance with procedures adopted by the board;

(4)    receive, hold, and transfer personal and real property in the name of the association;

(5)    contract for goods and services that reasonably may not be performed by its employees;

(6)    solicit and accept goods, loans, grants, etc. in the name of the association;

(7)    borrow funds; and

(8)    issue bonds, surplus notes, or other debentures.

(B)    The association, pursuant to the provisions of this article and the plan of operation, and with respect to essential property insurance on insurable property, shall perform other acts necessary or proper to effectuate the purpose of this subsection.

Section 38-75-370.    (A)    All members of the association shall participate in its writings, expenses, profits, and losses in the proportion that the net direct premium of the member written in this State during the calendar year two years before the current year bears to the aggregate net direct premiums written in this State by all members of the association, as certified to the association by the department after review of annual statements, other reports, and other statistics which the department considers necessary to provide the information required and which the department is authorized to obtain from a member of the association. After certification by the department, the association may rely on the member company's annual statement in determining the company's participation in profits and losses for each year.

(B)    Each member's participation in the association must be determined annually in the same manner as the initial determination. An insurer authorized to write and engage in writing insurance, the writing of which requires the insurer to be a member of the association pursuant to Section 38-75-330, becomes a member of the association on January first immediately following the authorization. The determination of the insurer's participation in the association must be made as of the date of the membership in the same manner as for all other members of the association. Member insurers shall receive credit annually for essential property insurance voluntarily written in the coastal area and their participation in the writings of the association must be reduced accordingly. The board of directors shall authorize the method of determining the credit. In order to receive credit for essential property voluntarily written in the coastal area, each member company shall submit its requests by March thirty-first of the year preceding the year for which credit is sought.

(C)    The assessment of a member insurer after hearing may be ordered deferred in whole or in part upon application by the insurer if, in the opinion of the director or his designee, payment of the assessment would render the insurer insolvent or in danger of insolvency or would otherwise leave the insurer in a condition so that further transaction of the insurer's business would be hazardous to its policyholders, creditors, members, subscribers, stockholders, or the public. If payment of an assessment against a member insurer is deferred by order of the director or his designee in whole or in part, the amount by which the assessment is deferred must be assessed against other member insurers in the same manner as provided in this section. In its order of deferral, or in necessary subsequent orders, the director or his designee shall prescribe a plan by which the assessment so deferred must be repaid to the association by the impaired insurer with interest at the six-month treasury bill rate adjusted semi-annually. Profits, dividends, or other funds of the association to which the insurer is otherwise entitled must not be distributed to the impaired insurer but must be applied toward repayment of an assessment until the obligation has been satisfied. The association shall distribute the repayments, including interest, to the other member insurers on the basis at which assessments were made.

Section 38-75-375.    (A)    If a member company perceives an assessment or interest levied by the association to be unjust or illegal, the company shall pay the assessment or interest under protest in writing within thirty days of the assessment or interest charge. Upon receiving this payment, the association shall pay the money collected into the association account and designate the money as having been paid under protest.

(B)    A member company paying an assessment or interest under protest shall appeal to the association within thirty days after making the payment. If it is determined in that appeal that the assessment or interest was collected unjustly or illegally, the association shall refund the assessment or interest to the payor.

(C)    If a member company fails to pay an assessment or interest within thirty days of the assessment or interest charge by the association, the company is subject to disciplinary procedures pursuant to Section 38-5-120 or 38-5-130.

Section 38-75-380.    There may be no liability on the part of and no cause of action of any nature may arise against the department or any of its staff or the association or its agents, employees, or any participating insurer for any inspections made hereunder or any statements made in good faith by them in any reports or communications concerning risk submitted to the association or at any administrative hearings conducted in connection therewith with it under the provisions of this article.

Section 38-75-385.    There is no liability on the part of, and no cause of action of any nature may arise against, any member insurer, the association's agents or employees, the board of directors, or the director, his designees, or his representatives for any act or omission in the performance of their powers and duties under this article. This section does not relieve the association of any of its liability.

Section 38-75-386.    No liability on the part of, and no cause of action of any nature may arise against, the director, the Department of Insurance or its staff, the association, any member insurer, the association's agents or employees, its board of directors, or the legal representatives of any of the above persons, for any act or omission made in good faith or for any statement made to, or for information provided to, any insurer regarding rates; premiums; classifications; cancellations, determinations, or nonrenewals of coverage; underwriting; inspections; or claims experience history made to facilitate the underwriting of essential property insurance for risks in the coastal area by private insurers or to facilitate competition for the underwriting of essential property insurance for risks in the coastal area among private insurers.

Section 38-75-390.    Any A member of the association who is designated to receive and write essential property insurance from or through the association shall cede one hundred percent cede to the association that the essential property insurance.

Section 38-75-400.    (A)    The rates, rating plans, and rating rules applicable to the insurance written by the association are those approved for use of the association by the director or his designee. Surcharges may be used as approved by the director or his designee. Rates may include rules for classification of risks insured hereunder under the provisions of this article and rate modifications thereof of it.

(B)    As a residual market mechanism, the association is not intended to offer rates competitive with the admitted market. Rates for policies issued by the association must be adequate and established at a level that permits the association to operate as a self-sustaining mechanism. The association shall maintain the necessary rate-making data in order to permit the actuarial determination of rates and rating plans appropriate for the business insured by the association. The association shall monitor rate adequacy and shall notify the director semi-annually to enable the director to take corrective action by an order. Rates adjusted by a corrective action order are exempt from the twelve-month limitation requirement of Section 38-73-920. The corrective action order is subject to judicial review by the Administrative Law Court.

Section 38-75-410.    (A)    A person insured pursuant to this article or his representative or a member company who is aggrieved by an act, ruling, or decision of the association:

(1)    regarding rates, classification of risks, assessments, voluntary credits, cancellation or termination of policies, or underwriting shall appeal to the director or his designee within sixty days after the act, ruling, or decision;

(2)    other than those specified in item (1), may appeal to the director or his designee within thirty days after the act, ruling, or decision.

(B)    Hearings A hearing held by the director or his designee pursuant to this section must be in accordance with the procedures set forth in Chapter 3, Title 38 and Article 3, Chapter 23, Title 1, 'Administrative Procedures'.

Section 38-75-420.    All reports of inspection performed by or on behalf of the association must be made available to the members of the association, applicants, agent, or broker, and the department.

Section 38-75-430.    The association shall file with the department by March thirty-first of each year a statement which summarizes the transactions, conditions, operations, and affairs of the association during the preceding fiscal year ending October thirty-first. The statement shall must contain any matters and information prescribed by the department and must be in the form required by it. The department may at any time require the association to furnish to it any additional information with respect to its transactions or any other matter which it considers material to assist it in evaluating the operation and experience of the association.

Section 38-75-440.    The department may make an examination into the affairs of the association and in undertaking the examination may hold a public hearing. The expense of the examination must be borne and paid by the association.

Section 38-75-450.    The department has authority to make reasonable regulations, not inconsistent with law, to enforce, carry out, and make effective the provisions of this article after notice and hearing before the Administrative Law Judge Division.

Section 38-75-460.    The director or his designee, by written order, temporarily may expand the area in which the association shall provide essential property insurance. The director or his designee shall find and declare the existence of an emergency because of the unavailability of coastal property insurance or other unavailability of coastal property insurance on a reasonable basis through normal channels. The order must include the surveys of the market conducted in order to make the determination. The director or his designee may expand the area in which the association shall provide essential property insurance to the whole area or just part of the area. The director may expand the area by construction type or age of construction. The area may not be expanded further than the seacoast territory as defined in Section 38-75-310(7) and may not be expanded to cover the area for more than twenty-four months. If the director or his designee issues an order that expands the area in which the association provides essential property insurance, he shall notify the General Assembly of that order and he shall recommend to the General Assembly any appropriate statutory changes in the law concerning the definition of 'coastal area' which he believes needs to be enacted.(A)    In order to maintain stability in the property insurance market and to assure the continued, consistent availability of essential property insurance coverage in the coastal area, the director or his designee, by written order, may expand the coastal area in which the association shall provide essential property insurance for periods up to twenty-four months. The order is subject to renewal by the director but no renewal shall exceed twenty-four months. In determining whether expansion of the coastal area is warranted, the director or his designee shall consider:

(1)    changes in the number of insurers writing essential property insurance in the seacoast area and the capacity of those insurers;

(2)    changes in the extent to which nonadmitted or surplus lines insurers are providing essential property insurance in the seacoast area;

(3)    changes in reinsurance activity impacting insurers writing essential property insurance in the seacoast area;

(4)    changes in the demand for property insurance in the seacoast area; and

(5)    any other information considered relevant to effectuate the purpose of this chapter.

(B)    The director or his designee shall find and declare the existence of conditions that threaten to destabilize the property insurance market and jeopardize the continued, consistent availability of essential property insurance in the seacoast area. The director or his designee shall utilize market surveys, data calls, catastrophe models, reinsurance information, and other objective sources to support the order of expansion.

(C)    The director or his designee may expand the coastal area in which the association shall provide essential property insurance. The expansion may encompass a portion of the seacoast area or the entire seacoast area, but may not extend further than the seacoast area. The area must not be expanded more than reasonably necessary to ensure a stable property insurance market. An expansion of the coastal area is subject to the plan of operation as amended and approved by the director or his designee. The director or his designee shall report any expansion of the coastal area to the General Assembly within thirty days of the order of expansion or upon commencement of the next term of the General Assembly, if expansion occurs when the General Assembly is not in session. The General Assembly may vacate any expansion order by passage of a joint resolution."

SECTION    11.    Article 8, Chapter 75, Title 38 of the 1976 Code is amended to read:

Section 38-75-470.    (A)    The Director of Insurance shall appoint an advisory committee to the director and the South Carolina Building Codes Council to study issues associated with the development of strategies for reducing loss of life and mitigating property losses due to hurricane, earthquake, and fire. The advisory committee also must shall consider the costs associated with these strategies to individual property owners. The advisory committee must include is composed of:

(1)    the director or his designee;

(2)    the Chairman of the Building Codes Council or his designee;

(3)    one a representative from Clemson University involved with wind engineering;

(2)(4)    one a representative from an academic institution involved with the study of earthquakes;

(3)    one representative from the Department of Insurance;

(4)(5)    one a representative from an insurer writing property insurance in South Carolina;

(5)(6)    one a representative from the Department of Commerce;

(6)(7)    one a representative from the Federal Emergency Management South Carolina's Municipal Association;

(8)    a representative from the South Carolina Association of Counties;

(7)(9)    one a representative from the Homebuilders Association;

(8)(10)    one a representative from the Manufactured Housing Institute of South Carolina;

(9)(11)    one a representative from the State Fire Marshal's office;

(10)(12)    one a representative from the South Carolina Emergency Management Division;

(11)(13)    one a representative from the State Flood Mitigation Program;

(12)(14)    three two at-large members appointed by the director; and

(13)(15)    three two at-large members appointed by the Governor;

(16)    a general contractor;

(17)    a representative from the South Carolina Association of Realtors; and

(18)    a structural engineer.

(B)    Members shall serve for terms of two years and shall receive no per diem, mileage, or subsistence. Vacancies must be filled in the same manner as the original appointment.

(C)    Within thirty days after its appointment, the advisory committee shall meet at the call of the Director of Insurance. The advisory committee shall elect from its members a chairman and a secretary and shall adopt rules not inconsistent with this chapter. Meetings may be called by the chairman on his own initiative and must be called at the request of three or more members of the advisory committee. All members shall must be notified by the chairman of the time and place of the meeting at least seven days in advance of the meeting. All meetings must be open to the public. At least two-thirds vote of those members in attendance at the meeting shall constitute an official decision of the advisory committee. Implementation of this program and continued existence of this program is subject to the availability of funding through legislative appropriations or alternative funding sources.

Section 38-75-480.    (A)    There is established within the Department of Insurance a loss mitigation grant program. Funds may be appropriated to the grant program, and any funds so appropriated shall must be used for the purpose of making grants to local governments or for the study and development of strategies for reducing loss of life and mitigating property losses due to hurricane, flood, earthquake, and fire. Grants to local governments shall must be for the following purposes:

(1)    implementation of building code enforcement programs including preliminary and ongoing training of inspectors;

(2)    conducting assessments to determine need for and desirability of making agreements to provide enforcement services pursuant to Section 6-9-60; and

(3)    providing technical assistance to and acting as an information resource for local governments in the development of proactive hazard mitigation strategies as they relate to reducing the loss of life and mitigating property losses due to natural hazards to include hurricane, flood, earthquake, and fire.

(B)    Funds may be appropriated for a particular grant only after a majority affirmative vote on each grant by the advisory committee.

(B)(C)    The Department of Insurance may make application and enter into contracts for and accept grants in aid from federal and state government and private sources for the purposes of:

(1)    implementation of building code enforcement programs including preliminary and ongoing training of inspectors;

(2)    conducting assessments to determine need for and desirability of making agreements to provide enforcement services pursuant to Section 6-9-60; and

(3)    study and development of strategies for reducing loss of life and mitigating property losses due to hurricane, flood, earthquake, and fire; and

(4)    any other purposes consistent with this article.

Section 38-75-485.    (A)    There is established within the Department of Insurance, the South Carolina Hurricane Damage Mitigation Program. The advisory council, established pursuant to Section 38-75-470, shall provide advice and assistance to the program administrator with regard to his administration of the program.

(B)    This section does not create an entitlement for property owners or obligate the State in any way to fund the inspection or retrofitting of residential property in this State. Implementation of this program is subject to annual legislative appropriations.

(C)    The program shall develop and implement a comprehensive and coordinated approach for hurricane damage mitigation that includes the following:

(1)    The program administrator shall apply for financial grants to be used to assist single-family, site-built or manufactured or modular, owner-occupied, residential property owners to retrofit their properties to make them less vulnerable to hurricane damage.

(a)    To be eligible for a grant, a residential property must:

(i)        have been granted a homestead exemption;

(ii)    be a dwelling with an insured value of three hundred thousand dollars or less; and

(iii)    have undergone an acceptable wind certification and hurricane mitigation inspection.

(b)    All grants must be matched on a dollar-for-dollar basis for a total of ten thousand dollars for the mitigation project with the state's contribution not to exceed five thousand dollars.

(c)    The program must create a process in which mitigation contractors agree to participate and seek reimbursement from the State and homeowners selected from a list of participating contractors. All mitigation must be based upon the securing of all required local permits and inspections. Mitigation projects are subject to random reinspection of up to at least ten percent of all projects.

(d)    Matching fund grants also must be made available to local governments and nonprofit entities for projects that reduce hurricane damage to single-family, site-built or manufactured or modular owner-occupied, residential property.

(e)    Grants may be used for the following improvements:

(i)            roof deck attachment;

(ii)        secondary water barrier;

(iii)        roof covering;

(iv)        brace gable ends;

(v)        reinforce roof-to-wall connections;

(vi)        opening protection;

(vii)        exterior doors, including garage doors;

(viii)    tie downs;

(ix)        problems associated with weakened trusses, studs, and other structural components;

(x)        inspection and repair or replacement of manufactured home piers, anchors, and tiedown straps; and

(xi)        any other mitigation techniques approved by the advisory committee.

(f)(i)        Low-income homeowners, who otherwise meet the requirements of subitems (a) and (c) are eligible for a grant of up to five thousand dollars and are not required to provide a matching amount to receive the grant. These grants must be used to retrofit single-family, site-built or manufactured or modular, owner-occupied, residential properties, valued at one hundred fifty thousand dollars or less, in order to make them less vulnerable to hurricane damage.

(ii)    For purposes of this item, 'low-income persons' means one or more natural persons or a family, the total annual adjusted gross household income of which does not exceed eighty percent of the median annual adjusted gross income for households within the county in which the person or family resides, whichever is greater.

(2)    The department shall define by regulation or order the details of the mitigation measures necessary to qualify for the grants or public assistance described in this section.

(3)    Multimedia public education, awareness, and advertising efforts designed to specifically address mitigation techniques must be employed, as well as a component to support ongoing consumer resources and referral services.

(4)    The department shall use its best efforts to obtain grants or funds from the federal government to supplement the financial resources of the program. In addition to state appropriations, if any, this program must be implemented by the department through the use of the premium taxes due to this State by the South Carolina Wind and Hail Underwriting Association, and one percent of the premium taxes collected annually and remitted to the Department of Insurance.

(5)    The director or his designee may promulgate regulations or order the rules necessary to implement the provisions of this article."

SECTION    12.    Section 38-75-1140(C) of the 1976 Code, as added by Act 290 of 2004, is amended to read:

"(C)    The modeling organization shall submit a supplemental report to the director or his designee following any substantially material revision of the model if the revision is used by insurers in determining rates for this State. The supplemental report must specify the changes made to the catastrophe model, specify a list of variables that are subject to insurer input, and contain one or more statements by experts attesting to the continuing validity of the model for use in predicting losses associated with natural hazard catastrophes in this State."

SECTION    13.    Section 38-75-1140 of the 1976 Code, as added by Act 290 of 2004, is amended by adding at the end:

"(G)(1)    To recover the costs associated with the review and evaluation of catastrophe models, the director or his designee may impose a filing fee on:

(a)    all insurers who use catastrophe or other computer simulated models; and

(b)    modelers or modeling organizations that submit a model to the department for its review, evaluation, or approval. This fee must be retained by the department to defray the costs of retaining actuaries and other experts to evaluate such models.

(2)    The fees collected pursuant to this section must be used only to offset expenses associated with the review of catastrophe models."

SECTION    14.    Section 38-75-1160(A)(1)(b) and (d), as added by Act 290 of 2004, is amended to read:

"(b)    state the date not less than thirty sixty days after the date of the mailing or delivering on which the cancellation or refusal to renew becomes effective;

(d)    inform the insured of his right to request in writing within fifteen thirty days of the receipt of notice that the director review the action of the insurer. The notice of cancellation or refusal to renew must contain the following statement in bold print to inform the insured of this right:

'IMPORTANT NOTICE: Within fifteen thirty days of receiving this notice, you or your attorney may request in writing that the director review this action to determine whether the insurer has complied with South Carolina laws in canceling or nonrenewing your policy. If this insurer has failed to comply with the cancellation or nonrenewal laws, the director may require that your policy be reinstated. However, the director is prohibited from making underwriting judgments. If this insurer has complied with the cancellation or nonrenewal laws, the director does not have the authority to overturn this action.';"

SECTION    15.    Section 38-75-1160(B), as added by Act 290 of 2004, is amended to read:

"(B)    Subsection (A) does not apply if the:

(1)    insurer has manifested to the insured its willingness to renew by actually issuing or offering to the insured to issue a renewal policy, certificate, or other evidence of renewal, or has manifested this intention to the insured by another means;

(2)    named insured has demonstrated by some overt action to the insurer or its agent that he expressly intends that the policy be canceled or that it not be renewed; or

(3)    the notice of cancellation or refusal to renew by an insurer regarding private passenger automobile insurance or to insurance against liability arising out of ownership, maintenance, or use of:

(a)    an individual private passenger automobile as defined in Section 38-77-30(5.5)(a); or

(b)    property having wheels."

SECTION    16.    Unless otherwise provided, this act takes effect upon approval by the Governor and is applicable to all taxable years beginning after December 31, 2006. /

Renumber sections to conform.

Amend title to conform.

HARRY F. CATO for Committee.

TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ENACTING THE "OMNIBUS COASTAL PROPERTY INSURANCE REFORM ACT OF 2007"; BY ADDING ARTICLE 11 TO CHAPTER 6, TITLE 12 SO AS TO ALLOW AN INSURANCE POLICYHOLDER TO ESTABLISH A CATASTROPHE SAVINGS ACCOUNT, TO DEFINE QUALIFIED CATASTROPHE SAVINGS EXPENSES AND QUALIFIED DEDUCTIBLE, AND TO ALLOW A TAXPAYER TO CLAIM A CREDIT AGAINST THE STATE INCOME TAX FOR DEPOSITS MADE INTO A CATASTROPHE SAVINGS ACCOUNT; BY ADDING SECTION 12-6-3660 SO AS TO ALLOW A TAXPAYER TO CLAIM A CREDIT AGAINST THE STATE INCOME TAX FOR COSTS INCURRED TO RETROFIT A LEGAL RESIDENCE TO MAKE IT MORE RESISTANT TO LOSS DUE TO HURRICANE, RISING WATER, OR OTHER CATASTROPHIC WIND EVENT; BY ADDING SECTION 12-6-3670 SO AS TO ALLOW A TAXPAYER TO CLAIM A CREDIT AGAINST THE STATE INCOME TAX EQUAL TO THE INSURANCE PREMIUM COSTS INCURRED BY THE TAXPAYER; TO AMEND SECTION 12-36-910, AS AMENDED, RELATING TO SALES TAX EXEMPTIONS, SO AS TO ALLOW A THREE PERCENT SALES TAX ON SPECIFIED BUILDING MATERIALS USED ON HOMES TO MITIGATE DAMAGE FROM WIND; TO DESIGNATE SECTIONS 38-3-10 THROUGH 38-3-240 AS ARTICLE 1, CHAPTER 3, TITLE 38 AND ENTITLED "GENERAL PROVISIONS"; BY ADDING ARTICLE 3 TO CHAPTER 3, TITLE 38 SO AS TO PROVIDE THAT THE DIRECTOR OF THE DEPARTMENT OF INSURANCE HAS AUTHORITY TO ISSUE GENERAL ORDERS APPLICABLE TO ALL INSURANCE COMPANIES AFTER THE GOVERNOR DECLARES A STATE OF EMERGENCY; TO PROVIDE THAT THE DEPARTMENT BY ORDER, MAY ADOPT ANY RULE THAT FACILITATES RECOVERY FROM THE EMERGENCY; TO PROVIDE THAT THE DEPARTMENT SHALL ADOPT RULES STANDARDIZING REQUIREMENTS THAT MAY BE APPLIED TO INSURERS AFTER A HURRICANE, ADDRESSING CLAIMS REPORTING REQUIREMENTS, GRACE PERIODS FOR PAYMENT OF PREMIUMS, TEMPORARY POSTPONEMENT OF CANCELLATIONS AND NONRENEWAL, AND ANY OTHER RULE THE DIRECTOR CONSIDERS NECESSARY; BY ADDING SECTION 38-7-200 SO AS TO ALLOW TAX CREDIT INCENTIVES TO INSURANCE COMPANIES THAT PROVIDE FULL INSURANCE COVERAGE TO PROPERTY OWNERS ALONG THE COAST OF SOUTH CAROLINA, SPECIFYING THE AMOUNT OF THE CREDIT, AND ALLOWING UNUSED CREDITS TO BE APPLIED IN SUCCEEDING TAXABLE YEARS UNDER CERTAIN CIRCUMSTANCES; BY ADDING SECTION 38-75-755 SO AS TO REQUIRE INSURERS TO DISCLOSE ALL AVAILABLE DISCOUNTS TO THE INSURED; TO AMEND SECTION 38-73-260, AS AMENDED, SO AS TO CLARIFY THAT RATES FALLING WITHIN THE SEVEN PERCENT FLEX-BAND LIMITATION REMAIN SUBJECT TO THE PROHIBITION AGAINST RATES NOT BEING EXCESSIVE, INADEQUATE, OR UNFAIRLY DISCRIMINATORY AND THAT THE DEPARTMENT MAY CONSIDER THE RATE IMPACT ON INDIVIDUALS AND TERRITORIES WHEN DETERMINING WHETHER A RATE IS EXCESSIVE, INADEQUATE, OR UNFAIRLY DISCRIMINATORY; TO AMEND SECTION 38-73-1095, RELATING TO ESSENTIAL PROPERTY INSURANCE AND RATING PLAN FACTORS, SO AS TO PROVIDE DISCOUNTS FOR RETROFITTING PROPERTY; TO AMEND ARTICLE 5, CHAPTER 75, TITLE 38, RELATING TO WINDSTORM AND HAIL INSURANCE, SO AS TO CLARIFY THE DEFINITIONS OF INSURABLE PROPERTY AND COASTAL AREA RELATING TO ELIGIBILITY FOR COVERAGE BY THE SOUTH CAROLINA WIND AND HAIL UNDERWRITING ASSOCIATION; TO CLARIFY THE PURPOSE OF ARTICLE 5; TO CLARIFY THAT THE SOUTH CAROLINA WIND AND HAIL UNDERWRITING ASSOCIATION SHALL PROVIDE WIND AND HAIL INSURANCE FOR RESIDENTIAL AND COMMERCIAL PROPERTY TO APPLICANTS UNABLE TO PROCURE IT IN THE COASTAL AREAS OF THIS STATE; TO PROVIDE INFORMATION THAT MUST BE ADDRESSED IN THE PLAN OF OPERATION; TO MAKE TECHNICAL CHANGES; TO PROVIDE FOR ADDITIONAL GENERAL CORPORATE POWERS AND DUTIES FOR THE SOUTH CAROLINA WIND AND HAIL UNDERWRITING ASSOCIATION; TO PROVIDE THAT RATES CHARGED BY THE SOUTH CAROLINA WIND AND HAIL UNDERWRITING ASSOCIATION BE ESTABLISHED AT A SELF-SUSTAINING LEVEL; TO PROVIDE OBJECTIVE STANDARDS FOR EXPANDING THE TERRITORY COVERED BY THE SOUTH CAROLINA WIND AND HAIL UNDERWRITING ASSOCIATION; TO AMEND ARTICLE 8, CHAPTER 75, TITLE 38, RELATING TO THE ADVISORY COMMITTEE TO THE DIRECTOR AND THE SOUTH CAROLINA BUILDING CODES COUNCIL AND LOSS MITIGATION GRANT PROGRAM, SO AS TO MODIFY THE MEMBERSHIP OF THE ADVISORY COMMITTEE AND TO CLARIFY THAT THE CONTINUED EXISTENCE OF THE PROGRAM IS SUBJECT TO ANNUAL LEGISLATIVE APPROPRIATIONS; TO CLARIFY THAT THE PURPOSE IS TO PROVIDE FOR ONGOING TRAINING FOR INSPECTORS AND FOR OTHER PURPOSES CONSISTENT WITH THE ARTICLE; TO ESTABLISH THE "SOUTH CAROLINA HURRICANE GRANT DAMAGE MITIGATION PROGRAM" WHICH PROVIDES FOR A GRANT PROGRAM FOR THE MITIGATION OF DAMAGE TO OR THE ENHANCEMENT OF MANUFACTURED HOMES; TO PROVIDE FOR MATCHING GRANTS TO ENCOURAGE SINGLE-FAMILY SITE-BUILT HOMES TO RETROFIT TO REDUCE THE STRUCTURE'S VULNERABILITY TO A HURRICANE; TO PROVIDE MATCHING GRANT FUNDS TO LOCAL GOVERNMENTS FOR PROJECTS THAT REDUCE HURRICANE DAMAGE TO SINGLE-FAMILY SITE-BUILT RESIDENTIAL PROPERTY; TO PROVIDE THAT IN ADDITION TO STATE APPROPRIATIONS AND OTHER POTENTIAL GRANT FUNDS, THE PREMIUM TAXES PAID BY THE SOUTH CAROLINA WIND AND HAIL UNDERWRITING ASSOCIATION AND ONE PERCENT OF THE COMMISSIONS PAID TO PRODUCERS MUST BE USED TO FUND THIS PROGRAM ANNUALLY; TO AMEND SECTION 38-75-1140, RELATING TO THE EVALUATION OF NATURAL HAZARD CATASTROPHE MODELS AND REQUIREMENTS FOR MODELING ORGANIZATIONS, SO AS TO REQUIRE MODELERS TO PROVIDE THE DEPARTMENT WITH A LIST OF VARIABLES THAT ARE SUBJECT TO INSURER INPUT WITH THEIR FILING AND TO PROVIDE THAT THE DEPARTMENT MAY IMPOSE A FEE ON MODELERS AND INSURERS TO RECOVER THE COSTS OF EVALUATING HURRICANE MODELS; AND TO AMEND SECTION 38-75-1160, RELATING TO NOTICE REQUIREMENTS AND EXCEPTIONS BEFORE CANCELLATION OR REFUSAL TO RENEW A POLICY OF INSURANCE, SO AS TO INCREASE THE TIME PERIOD FOR NOTIFYING AN INSURED OF THE CANCELLATION OR REFUSAL TO RENEW A POLICY OF INSURANCE.

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

SECTION    1.    This act may be cited as the "Omnibus Coastal Property Insurance Reform Act of 2007".

SECTION    2.    Chapter 6, Title 12 of the 1976 Code is amended by adding:

Section 12-6-1610.    As used in this article:

(1)    'Qualified catastrophe expenses' mean expenses paid or incurred by reason of a major disaster that has been declared by the governor to be an emergency by executive order.

(2)    'Qualified deductible' means the annual deductible for the individual's homeowner's policy.

Section 12-6-1620.    (A)    A Catastrophe Savings Account is exempt from income tax imposed pursuant to Section 12-6-510 in the manner provided in this article.

(B)(1)    As used in this article, 'Catastrophe Savings Account' means an account established by an insurance policyholder for residential property in this State to cover an insurance deductible or other uninsured portion of the risks of loss from a hurricane, rising floodwaters, or other catastrophic windstorm event. The deposits must be made in one regular savings account or money market account and must be labeled as a Catastrophe Savings Account in order to qualify as a Catastrophe Savings Account as defined in this article. A taxpayer may establish only one Catastrophe Savings Account. The residential property must meet the requirements of the taxpayer's legal residence pursuant to Section 12-43-220(c) and specify that the purpose of the account is to cover the amount of insurance deductibles and other uninsured portions of risks of loss from hurricane, rising floodwater, or other catastrophic windstorm event.

(2)    Monies paid into or out of the assets of and the income of any Catastrophe Savings Account established by an insurance policyholder for residential property in this State equal to twice the deductible sum of such insurance to cover an insurance deductible or other uninsured portion of the risks of loss from a hurricane, rising floodwaters, or other catastrophic windstorm event are not liable to attachment, levy, garnishment, or legal process in this State in favor of any creditor of or claimant against any account participant, purchaser, owner or contributor, or account beneficiary and are exempt from the income tax imposed pursuant to Section 12-6-510.

(3)    The total amount that may be deposited in a Catastrophe Savings Account may not exceed:

(a)    in the case of an individual whose qualified deductible is not more than one thousand dollars, two thousand dollars;

(b)    in the case of an individual whose qualified deductible is more than one thousand dollars, the amount equal to the lesser of fifteen thousand dollars or twice the amount of the taxpayer's qualified deductible; and

(c)    in the case of an individual who chooses to 'self-insure', the account may be established up to a maximum amount of two hundred fifty thousand dollars.

Section 12-6-1630.    (A)    A distribution from a Catastrophe Savings Account must be included in the taxable income of the distributee unless the amount of the distribution is used to cover qualified catastrophe expenses.

(B)    No amount may be included in gross income, pursuant to subsection (A) of this section, if the qualified catastrophe expenses of the distributee during the taxable year are equal to or greater than the aggregate distributions during the taxable year.

(C)    If aggregate distributions exceed expenses during the taxable year, the amount otherwise included in gross income must be reduced by the amount of the distributions for qualified catastrophe expenses.

(D)    The tax imposed pursuant to Section 12-6-510 attributable to a nonexempt distribution must be increased by two and one half percent of the amount which is includable.

(E)    No amount is includable in taxable income, pursuant to subsection (A) of this section, if the payment or distribution is made on or after the date on which the distributee attains the age of seventy.

(F)    The exemptions provided for in this article expire with the death of the primary Catastrophe Savings Account or self-insured savings account holder.

Section 12-6-1640.    The South Carolina Department of Revenue may promulgate regulations to enforce, carry out, and make effective the provisions of this article after notice and hearing before the Administrative Law Court."

SECTION    3.    Article 25, Chapter 6, Title 12 of the 1976 Code is amended by adding:

"Section 12-6-3660.    (A)    An individual is allowed a credit against the tax imposed pursuant to Section 12-6-510 for costs incurred to retrofit, as specified in subsection (B), a structure qualifying as a legal residence pursuant to Section 12-43-220(c) to make it more resistant to loss due to hurricane, rising water, or other catastrophic wind event.

(B)    As used in this section, the measures qualifying for the state income tax credit allowed pursuant to this section include the costs associated with:

(1)    roof deck attachment;

(2)    secondary water barrier;

(3)    roof covering;

(4)    brace gable ends;

(5)    reinforce roof-to-wall connections;

(6)    opening protection;

(7)    exterior doors, including garage doors;

(8)    tie downs;

(9)    problems associated with weakened trusses, studs and other structural components; and

(10)    any other mitigation techniques approved by the advisory committee established pursuant to Section 38-75-470.

(C)    The tax credit allowed pursuant to this section for any taxable year may not exceed the lesser of:

(1)    twenty-five percent of the cost incurred; or

(2)    one thousand dollars.

Section 12-6-3670.    (A)    A taxpayer meeting the eligibility requirements of subsection (B) of this section may claim as a nonrefundable credit against the income tax imposed pursuant to Section 12-6-510 in an amount equal to the premium costs, exceeding the limit imposed pursuant to subsection (B)(2) of this section, that the taxpayer paid during the taxable year for property and casualty insurance, as defined in Articles 1, 3, and 5 of Chapter 75, Title 38, that offers coverage on a structure qualifying as that taxpayer's legal residence pursuant to Section 12-43-220(c) for the taxable year.

(B)    The credit allowed pursuant to this section is available only to a taxpayer who:

(1)    held a property and casualty insurance policy as defined in subsection (A) covering the legal residence of the taxpayer, the taxpayer's spouse, or a person the taxpayer was eligible to claim as a dependent on his federal income tax return, or any combination of these persons; and

(2)    incurs premiums for the policy in an amount greater than five percent of the taxpayer's adjusted gross income.

(C)    A taxpayer who claims the credit allowed by this section shall provide information required by the Department of Revenue to demonstrate that the taxpayer is eligible for the credit and that the amount paid for premiums for which the credit is claimed was not excluded from the taxpayer's gross income for the taxable year.

(D)(1)    The credit allowed pursuant to this section for any taxable year may not exceed one thousand two hundred fifty dollars for a taxpayer claiming a credit and only one credit may be claimed for each structure.

(2)    If the credit allowed under this section exceeds the state income tax liability for the taxable year, any unused credit may be carried forward for five succeeding taxable years."

SECTION    4.    Section 12-36-910 of the 1976 Code, as last amended by Act 388 of 2006, is further amended by adding an appropriately lettered subsection to read:

"( )    Notwithstanding the rate of the tax imposed pursuant to subsection (A) of this section or the rate of any other sales tax imposed pursuant to this chapter and the rate of any use tax imposed pursuant to this chapter, the sales and use tax on the gross proceeds of sales or sales price of the items or items needed to carry out the measures listed in Section 12-6-3660(B) is three percent."

SECTION    5.    A.    Sections 38-3-10 through 38-3-240 of the 1976 Code are designated Article 1, Chapter 3, Title 38 and entitled "General Provisions".

B.    Chapter 3, Title 38 of the 1976 Code is amended by adding:

Section 38-3-410.    (A)    If the Governor declares a state of emergency pursuant to Section 1-3-420, the director may issue one or more general orders applicable to all insurance companies, entities, and persons, as defined in Section 38-1-20, that are subject to Title 38.

(B)    An order issued by the director under this section becomes effective upon issuance and continues for one hundred twenty days unless terminated sooner by the director. The director may extend an order for additional periods of one hundred twenty days if he determines that the emergency conditions that gave rise to the initial order still exist. By concurrent resolution, the General Assembly may terminate an order issued under this section.

(C)    The director shall publish in the next available publication of the State Register a copy of the text of an order issued under this section, together with a statement explaining how the order facilitates recovery from the emergency.

Section 38-3-420.    (A)    By an order issued pursuant to Section 38-3-410, the director may adopt any rule that facilitates recovery from the emergency. The department may adopt a rule by any procedure which is fair under the circumstances if the:

(1)    procedure provides at least the procedural protection given by other statutes, the Constitution of this State, or the United States Constitution;

(2)    department takes only that action necessary to protect the public interest under the emergency procedure; and

(3)    department publishes in writing, at the time of or before its action, the specific facts and reasons for finding an immediate danger to the public health, safety, or welfare and its reasons for concluding that the procedure used is fair under the circumstances. If, notice of emergency rules, other than those of educational units or units of government with jurisdiction in only one or a part of one county, including the full text of the rules, is published in the first available issue of the State Register and provided to the General Assembly, then the department's findings of immediate danger, necessity, and procedural fairness are judicially reviewable under Section 38-3-210.

(B)    Subject to applicable constitutional and statutory provisions, an emergency rule becomes effective immediately on filing, or on a date less than twenty days after that time if specified in the rule, if the adopting department finds that the effective date is necessary because of immediate danger to the public health, safety, or welfare.

Section 38-3-430.    (A)    The department may promulgate by order, pursuant to Section 38-3-410, standardized requirements that may be applied to insurers as a consequence of a hurricane or other natural disaster. The rules must address the following areas:

(1)    claims reporting requirements;

(2)    grace periods for payment of premiums and performance of other duties by insureds;

(3)    temporary postponement of cancellations and nonrenewals; and

(4)    any other rule the director considers necessary.

(B)    The rules adopted under this section shall require the department to issue an order within ten days after the occurrence of a hurricane or other natural disaster specifying, by line of insurance, which of the standardized requirements apply, the geographic areas in which they apply, the time at which applicability commences, and the time at which applicability terminates.

Section 38-3-440.    The department may promulgate the regulations necessary to implement the provisions of this article."

SECTION    6.    Chapter 7, Title 38 of the 1976 Code is amended by adding:

"Section 38-7-200.    (A)    An insurer providing full property and casualty coverage, to specifically include wind and hail coverage, to property owners within the seacoast area, as defined in Section 38-75-310(7), may claim as a nonrefundable credit against the premium tax imposed by Sections 38-7-20 and 38-7-40 in an amount equal to twenty-five percent of the tax that otherwise is due on the premium written for the property owners for the taxable year.

(B)    The credit allowed by this section is available only to an insurer licensed or authorized to do business in this State with respect to a property and casualty insurance policy providing full coverage as defined in subsection (A).

(C)    A taxpayer who claims the credit allowed by this section shall provide information required by the Department of Revenue to demonstrate that the taxpayer is eligible for the credit and that the amount paid for premiums for which the credit is claimed was not excluded from the taxpayer's gross income for the taxable year.

(D)(1)    The tax credit allowed under this section for a taxable year may be claimed only once for any one structure, regardless of the number of policies written on the structure.

(2)    If the credit allowed under this section exceeds the state income tax liability for the taxable year, any unused credit may be carried forward and applied to succeeding taxable years until the earlier of the:

(a)    full amount of the credit is used; or

(b)    expiration of the fifth taxable year after the taxable year in which the credit arose."

SECTION    7.    Article 9, Chapter 75, Title 38 is amended by adding:

"Section 38-75-755.    All insurers, at the issuance of a new policy and at each renewal, clearly shall notify the applicant or policyholder of a commercial property or personal lines residential property insurance policy of the availability and the range of each premium discount, credit, other rate differential, or reduction in deductibles for properties on which fixtures or construction techniques demonstrated to reduce the amount of loss in a windstorm have been installed or implemented. The notice must describe generally what measures the policyholders may take to reduce their windstorm premium."

SECTION    8.    Section 38-73-260 of the 1976 Code, as last amended by Act 332 of 2006, is further amended by adding at the end:

"(F)    Nothing in this section prevents the director or his designee from considering the impact on individual territories or individual insureds when determining whether the rate is excessive, inadequate, or unfairly discriminatory. Rate level increases or decreases falling within the limitation specified in this subsection must comply with the requirements of this chapter prohibiting rate increases from being excessive, inadequate, or unfairly discriminatory."

SECTION    9.    Section 38-73-1095(C) of the 1976 Code is amended to read:

"(C)    Rating plans for essential property insurance in the coastal area or in the seacoast area, may shall include discounts and credits or surcharges and debits calculated upon the following rating factors:

(1)    use of storm shutters;

(2)    use of roof tie downs;

(3)    construction standards;

(4)    building codes;

(5)    distance from water;

(6)    elevation;

(7)    flood insurance;

(8)    policy deductibles; and

(9)    other applicable factors requested by the insurer or rating organization or selected by order of the director involving the risk or hazard."

SECTION    10.    Article 5, Chapter 75, Title 38 of the 1976 Code is amended to read:

Section 38-75-310. In this article, unless the context otherwise requires:

(1)    'Essential property insurance' means insurance against direct loss to property as defined and limited in the wind and hail insurance policy and forms approved by the director or his designee; and after January 1, 1995, at the request of the insured, coverage for:

(a)    actual loss of business income; or

(b)    additional living expense; or

(c)    fair rental value loss.

Prior to Before November 1, 1994, the South Carolina Wind and Hail Underwriting Association must file with the Department for approval additional policy forms defining the terms of and providing coverage for actual loss of business income, additional living expense and fair rental value loss.

(2)    'Association' means the South Carolina Wind and Hail Underwriting Association established pursuant to the provisions of this article.

(3)    'Plan of operation' means the plan of operation of the association approved or promulgated by the department pursuant to the provisions of this article.

(4)    'Insurable property' means immovable property at fixed locations in coastal areas of the State as that term is hereinafter defined, or tangible personal property located therein in it, which property is determined by the association to be in an insurable condition as determined by reasonable underwriting standards, but not to include farm or manufacturing property, or motor vehicles which are eligible to be licensed for highway use. Any A structure commenced on or after September 15, 1971, not built in substantial compliance with the Southern Standard most recent building code, adopted by the Building Codes Council as referenced in Section 6-9-50, including the design-wind requirements therein in it, is not an insurable risk under the terms of this article. Any A structure commenced on or after September 15, 1971, shall must comply with any construction and zoning requirements affecting the structure, promulgated or adopted pursuant to the requirements of the Federal Flood Insurance Program.

(5)    'Coastal area' means:

(a)    all areas in Beaufort County and Colleton County which are east of the west bank of the intracoastal waterway;

(b)    the following areas in Georgetown County: all areas between the Harrell Siau Bridge and Murrells Inlet which are east of a line paralleling and lying one hundred fifty feet east of U.S. Highway No. 17 Business, all areas in Murrells Inlet which are east of U.S. Highway No. 17 Business, and Cedar Island, North Island, and South Island;

(c)    all areas in Horry County east of a line paralleling and lying one hundred fifty feet east of U. S. Highway No. 17 Business;

(d)    the following areas in Charleston County: Edingsville Beach, Kiawah Island, Botany Bay Island, Folly Island, Seabrook Island, Morris Island, and all areas north of the city of Charleston which are east of the west bank of the intracoastal waterway.

(6)    'Net direct premiums' means gross direct premiums excluding reinsurance assumed and ceded written on property other than farm or manufacturing in this State for fire and extended coverage insurance, including the fire and extended coverage components of homeowners policy and commercial multiple peril package policies, less return premiums upon canceled contracts, dividends paid or credited to policyholders, or the unused or unabsorbed portion of premium deposits.

(7)    'Seacoast area' means all areas within Horry, Georgetown, Berkeley, Charleston, Dorchester, Colleton, Beaufort, and Jasper Counties.

Section 38-75-320. The purpose of this article is to provide a method whereby wind and hail insurance may be obtained more easily and equitably assure an adequate market for wind and hail insurance in the coastal areas of this State.

Section 38-75-330.    (A)    There is created the South Carolina Wind and Hail Underwriting Association, an unincorporated association whose responsibilities, liability, and regulations are governed and defined by this article, consisting. The association shall function as a residual market mechanism to provide wind and hail insurance for residential and commercial property to applicants who are unable to procure this insurance in the coastal area.

(B)    The association consists of all private insurers authorized to write and engage in writing property insurance within this State on a direct and statewide basis, but excluding insurers whose writings are limited to property wholly owned by parent, subsidiary, or allied organizations, or insurers whose writings are limited to property wholly owned by religious organizations, provided,. However, as a condition of exemption from membership such these insurers providing property insurance for insurable property in the coastal area as defined by this article shall also shall provide essential property insurance for such these risks. Every such Each insurer must be a member of the association and must shall remain a member of the association so long as the association is in existence as a condition of its authority to continue to transact the business of insurance in this State.

Section 38-75-340.    (A)    The association must shall operate pursuant to a plan of operation which shall set forth provides for the following:

(1)    the number, qualifications, terms of office, and manner of election of the members of the board of directors and shall provide for;

(2)    the efficient, economical, fair, and nondiscriminatory administration of the association; and for

(3)    the prompt and efficient provision of essential property insurance in the coastal areas of the State so as to promote orderly community development in those areas and to provide means for the adequate maintenance and improvement of the property in such areas. The plan may include;

(4)    the manner of election of officers and chairs;

(5)    the establishment of necessary facilities,;

(6)    the management of the association, plan for;

(7)    the assessment of members to defray losses and expenses,;

(8)    reasonable underwriting standards, rating subdivisions and rates;

(9)    commissions to be paid to agents or brokers,;

(10)    procedures for the acceptance and cession of reinsurance, procedures and for determining the amounts of insurance to be provided to specific risks,;

(11)    time limits and procedures for processing applications for insurance,; and for any

(12) other provisions considered necessary by the director or his designee to carry out the purposes of this article.

(B)    Insurance effected pursuant to this article shall must have limits of liability provided in the plan of operation. The director or his designee shall approve the limits. Excess insurance is not permitted until the maximum available under the plan has been purchased. Thereafter After that, excess insurance may be purchased and must be included for the purpose of meeting any coinsurance requirement.

(C)    The directors board of the association may, subject to the approval of the director or his designee, may amend the plan of operation at any time. The director or his designee shall review the plan of operation, including annually. The director or his designee shall review the rate structure and loss experience, not less than once in each calendar year annually in accordance with Section 38-75-400. After review of the plan, the director or his designee may amend the plan upon approval of the directors of the association and the amendment takes effect immediately upon ratification by the board.

Section 38-75-350.    (a)(A)    Any A person having an insurable interest in insurable property is entitled to apply to the association for coverage and for an inspection of the property. The application must be made on behalf of the applicant by a licensed broker or agent authorized by him. Applications An application must be submitted on forms a form prescribed by the association and approved by the director or his designee. The application shall must contain a statement as to whether or not there are any unpaid premiums due from the applicant for fire insurance on the property. The term 'insurable interest' as used in this section includes any lawful and substantial economic interest in the safety or preservation of property from loss, destruction, or pecuniary damage.

(b)(B)    If the association determines that the property is insurable and that there is no unpaid premium due from the applicant for prior insurance on the property, the association upon receipt of the premium, or such a portion thereof of it as is prescribed in the plan of operation, shall cause to be issued a policy of essential property insurance for a term of at least one year.

(c)(C)    If the association, for any reason, denies an application and refuses to cause to be issued an insurance policy on insurable property to any an applicant or takes no action on an application within the time prescribed in the plan of operation, the applicant may appeal to the director or his designee and the director or a member of his staff designated by him, after reviewing the facts, may direct the association to issue or cause to be issued an insurance policy to the applicant. In carrying out its duties pursuant to this section, the director or his designee may request, and the association shall provide, any information the director or his designee considers necessary to a determination concerning the reasons for the denial or delay of the application.

Section 38-75-360.    (A)    The association, pursuant to the provisions of this article and the plan of operation, and with respect to essential property insurance on insurable property, has the power on behalf of its members to:

(a)(1)    To cause to be issued policies of insurance to applicants.;

(b)(2)    To assume reinsurance from its members.;

(c)(3)    To cede reinsurance to its members and to purchase reinsurance in behalf of its members. on risks insured by the association in amounts that are in accordance with procedures adopted by the board;

(4)    receive, hold, and transfer personal and real property in the name of the association;

(5)    contract for goods and services that reasonably may not be performed by its employees;

(6)    solicit and accept goods, loans, grants, etc., in the name of the association;

(7)    borrow funds; and

(8)    issue bonds, surplus notes, or other debentures.

(B)    The association, pursuant to the provisions of this article and the plan of operation, and with respect to essential property insurance on insurable property, shall perform other acts necessary or proper to effectuate the purpose of this subsection.

Section 38-75-370.    (A)    All members of the association shall participate in its writings, expenses, profits, and losses in the proportion that the net direct premium of the member written in this State during the calendar year two years before the current year bears to the aggregate net direct premiums written in this State by all members of the association, as certified to the association by the department after review of annual statements, other reports, and other statistics which the department considers necessary to provide the information required and which the department is authorized to obtain from a member of the association. After certification by the department, the association may rely on the member company's annual statement in determining the company's participation in profits and losses for each year.

(B)    Each member's participation in the association must be determined annually in the same manner as the initial determination. An insurer authorized to write and engage in writing insurance, the writing of which requires the insurer to be a member of the association pursuant to Section 38-75-330, becomes a member of the association on January first immediately following the authorization. The determination of the insurer's participation in the association must be made as of the date of the membership in the same manner as for all other members of the association. Member insurers shall receive credit annually for essential property insurance voluntarily written in the coastal area and their participation in the writings of the association must be reduced accordingly. The board of directors shall authorize the method of determining the credit. In order to receive credit for essential property voluntarily written in the coastal area, each member company shall submit its requests by March thirty-first of the year for which credit is sought.

(C)    The assessment of a member insurer after hearing may be ordered deferred in whole or in part upon application by the insurer if, in the opinion of the director or his designee, payment of the assessment would render the insurer insolvent or in danger of insolvency or would otherwise leave the insurer in a condition so that further transaction of the insurer's business would be hazardous to its policyholders, creditors, members, subscribers, stockholders, or the public. If payment of an assessment against a member insurer is deferred by order of the director or his designee in whole or in part, the amount by which the assessment is deferred must be assessed against other member insurers in the same manner as provided in this section. In its order of deferral, or in necessary subsequent orders, the director or his designee shall prescribe a plan by which the assessment so deferred must be repaid to the association by the impaired insurer with interest at the six-month treasury bill rate adjusted semiannually. Profits, dividends, or other funds of the association to which the insurer is otherwise entitled must not be distributed to the impaired insurer but must be applied toward repayment of an assessment until the obligation has been satisfied. The association shall distribute the repayments, including interest, to the other member insurers on the basis at which assessments were made.

Section 38-75-375.    (A)    If a member company perceives an assessment or interest levied by the association to be unjust or illegal, the company shall pay the assessment or interest under protest in writing within thirty days of the assessment or interest charge. Upon receiving this payment, the association shall pay the money collected into the association account and designate the money as having been paid under protest.

(B)    A member company paying an assessment or interest under protest shall appeal to the association within thirty days after making the payment. If it is determined in that appeal that the assessment or interest was collected unjustly or illegally, the association shall refund the assessment or interest to the payor.

(C)    If a member company fails to pay an assessment or interest within thirty days of the assessment or interest charge by the association, the company is subject to disciplinary procedures pursuant to Section 38-5-120 or 38-5-130.

Section 38-75-380.    There may be no liability on the part of and no cause of action of any nature may arise against the department or any of its staff or the association or its agents, employees, or any participating insurer for any inspections made hereunder or any statements made in good faith by them in any reports or communications concerning risk submitted to the association or at any administrative hearings conducted in connection therewith with it under the provisions of this article.

Section 38-75-385.    There is no liability on the part of, and no cause of action of any nature may arise against, any member insurer, the association's agents or employees, the board of directors, or the director, his designees, or his representatives for any act or omission in the performance of their powers and duties under this article. This section does not relieve the association of any of its liability.

Section 38-75-386.    No liability on the part of, and no cause of action of any nature may arise against, the director, the Department of Insurance or its staff, the association, any member insurer, the association's agents or employees, its board of directors, or the legal representatives of any of the above persons, for any act or omission made in good faith or for any statement made to, or for information provided to, any insurer regarding rates; premiums; classifications; cancellations, determinations, or nonrenewals of coverage; underwriting; inspections; or claims experience history made to facilitate the underwriting of essential property insurance for risks in the coastal area by private insurers or to facilitate competition for the underwriting of essential property insurance for risks in the coastal area among private insurers.

Section 38-75-390.    Any A member of the association who is designated to receive and write essential property insurance from or through the association shall cede one hundred percent cede to the association that the essential property insurance.

Section 38-75-400.    (A)    The rates, rating plans, and rating rules applicable to the insurance written by the association are those approved for use of the association by the director or his designee. Surcharges may be used as approved by the director or his designee. Rates may include rules for classification of risks insured hereunder under the provisions of this article and rate modifications thereof of it.

(B)    As a residual market mechanism, the association is not intended to offer rates competitive with the admitted market. Rates for policies issued by the association must be adequate and established at a level that permits the association to operate as a self-sustaining mechanism. The association shall maintain the necessary rate-making data in order to permit the actuarial determination of rates and rating plans appropriate for the business insured by the association. The association shall monitor rate adequacy and shall notify the director annually to enable the director to take corrective action by an order. Rates adjusted by a corrective action order are exempt from the twelve-month limitation requirement of Section 38-73-920. The corrective action order is subject to judicial review by the Administrative Law Court.

Section 38-75-410.    (A)    A person insured pursuant to this article or his representative or a member company who is aggrieved by an act, ruling, or decision of the association:

(1)    regarding rates, classification of risks, assessments, voluntary credits, cancellation or termination of policies, or underwriting shall appeal to the director or his designee within sixty days after the act, ruling, or decision;

(2)    other than those specified in item (1), may appeal to the director or his designee within thirty days after the act, ruling, or decision.

(B)    Hearings A hearing held by the director or his designee pursuant to this section must be in accordance with the procedures set forth in Chapter 3, Title 38 and Article 3, Chapter 23, Title 1, 'Administrative Procedures'.

Section 38-75-420.    All reports of inspection performed by or on behalf of the association must be made available to the members of the association, applicants, agent, or broker, and the department.

Section 38-75-430.    The association shall file with the department by March thirty-first of each year a statement which summarizes the transactions, conditions, operations, and affairs of the association during the preceding fiscal year ending October thirty-first. The statement shall must contain any matters and information prescribed by the department and must be in the form required by it. The department may at any time require the association to furnish to it any additional information with respect to its transactions or any other matter which it considers material to assist it in evaluating the operation and experience of the association.

Section 38-75-440.    The department may make an examination into the affairs of the association and in undertaking the examination may hold a public hearing. The expense of the examination must be borne and paid by the association.

Section 38-75-450.    The department has authority to make reasonable regulations, not inconsistent with law, to enforce, carry out, and make effective the provisions of this article after notice and hearing before the Administrative Law Judge Division.

Section 38-75-460.    The director or his designee, by written order, temporarily may expand the area in which the association shall provide essential property insurance. The director or his designee shall find and declare the existence of an emergency because of the unavailability of coastal property insurance or other unavailability of coastal property insurance on a reasonable basis through normal channels. The order must include the surveys of the market conducted in order to make the determination. The director or his designee may expand the area in which the association shall provide essential property insurance to the whole area or just part of the area. The director may expand the area by construction type or age of construction. The area may not be expanded further than the seacoast territory as defined in Section 38-75-310(7) and may not be expanded to cover the area for more than twenty-four months. If the director or his designee issues an order that expands the area in which the association provides essential property insurance, he shall notify the General Assembly of that order and he shall recommend to the General Assembly any appropriate statutory changes in the law concerning the definition of 'coastal area' which he believes needs to be enacted.(A)    In order to maintain stability in the property insurance market and to assure the continued, consistent availability of essential property insurance coverage in the coastal area, the director or his designee, by written order, may expand the coastal area in which the association shall provide essential property insurance for periods up to twenty-four months. The order is subject to renewal by the director but no renewal shall exceed twenty-four months. In determining whether expansion of the coastal area is warranted, the director or his designee shall consider:

(1)    changes in the number of insurers writing essential property insurance in the seacoast area and the capacity of those insurers;

(2)    changes in the extent to which nonadmitted or surplus lines insurers are providing essential property insurance in the seacoast area;

(3)    changes in reinsurance activity impacting insurers writing essential property insurance in the seacoast area;

(4)    changes in the demand for property insurance in the seacoast area; and

(5)    any other information considered relevant to effectuate the purpose of this chapter.

(B)    The director or his designee shall find and declare the existence of conditions that threaten to destabilize the property insurance market and jeopardize the continued, consistent availability of essential property insurance in the seacoast area. The director or his designee shall utilize market surveys, data calls, catastrophe models, reinsurance information, and other objective sources to support the order of expansion.

(C)    The director or his designee may expand the coastal area in which the association shall provide essential property insurance. The expansion may encompass a portion of the seacoast area or the entire seacoast area, but may not extend further than the seacoast area. The area must not be expanded more than reasonably necessary to ensure a stable property insurance market. An expansion of the coastal area is subject to the plan of operation as amended and approved by the director or his designee. The director or his designee shall report any expansion of the coastal area to the General Assembly within thirty days of the order of expansion or upon commencement of the next term of the General Assembly, if expansion occurs when the General Assembly is not in session. The General Assembly may vacate any expansion order by passage of a joint resolution."

SECTION    11.    Article 8, Chapter 75, Title 38 of the 1976 Code is amended to read:

Section 38-75-470.    (A)    The Director of Insurance shall appoint an advisory committee to the director and the South Carolina Building Codes Council to study issues associated with the development of strategies for reducing loss of life and mitigating property losses due to hurricane, earthquake, and fire. The advisory committee also must shall consider the costs associated with these strategies to individual property owners. The advisory committee must include is composed of:

(1)    the director or his designee;

(2)    the chairman of the Building Codes Council or his designee;

(3)    one a representative from Clemson University involved with wind engineering;

(2)(4)    one a representative from an academic institution involved with the study of earthquakes;

(3)    one representative from the Department of Insurance;

(4)(5)    one a representative from an insurer writing property insurance in South Carolina;

(5)(6)    one a representative from the Department of Commerce;

(6)(7)    one a representative from the Federal Emergency Management South Carolina's Municipal Association;

(8)    a representative from the South Carolina Association of Counties;

(7)(9)    one a representative from the Homebuilders Association;

(8)(10)    one a representative from the Manufactured Housing Institute of South Carolina;

(9)(11)    one a representative from the State Fire Marshal's office;

(10)(12)    one a representative from the South Carolina Emergency Management Division;

(11)(13)    one a representative from the State Flood Mitigation Program;

(12)(14)    three two at-large members appointed by the director; and

(13)(15)    three two at-large members appointed by the Governor.

(B)    Members shall serve for terms of two years and shall receive no per diem, mileage, or subsistence. Vacancies must be filled in the same manner as the original appointment.

(C)    Within thirty days after its appointment, the advisory committee shall meet at the call of the Director of Insurance. The advisory committee shall elect from its members a chairman and a secretary and shall adopt rules not inconsistent with this chapter. Meetings may be called by the chairman on his own initiative and must be called at the request of three or more members of the advisory committee. All members shall must be notified by the chairman of the time and place of the meeting at least seven days in advance of the meeting. All meetings must be open to the public. At least two-thirds vote of those members in attendance at the meeting shall constitute an official decision of the advisory committee. Implementation of this program and continued existence of this program is subject to the availability of funding through legislative appropriations or alternative funding sources.

Section 38-75-480.    (A)    There is established within the Department of Insurance a loss mitigation grant program. Funds may be appropriated to the grant program, and any funds so appropriated shall must be used for the purpose of making grants to local governments or for the study and development of strategies for reducing loss of life and mitigating property losses due to hurricane, flood, earthquake, and fire. Grants to local governments shall must be for the following purposes:

(1)    implementation of building code enforcement programs including preliminary and ongoing training of inspectors;

(2)    conducting assessments to determine need for and desirability of making agreements to provide enforcement services pursuant to Section 6-9-60; and

(3)    providing technical assistance to and acting as an information resource for local governments in the development of proactive hazard mitigation strategies as they relate to reducing the loss of life and mitigating property losses due to natural hazards to include hurricane, flood, earthquake, and fire.

(B)    Funds may be appropriated for a particular grant only after a majority affirmative vote on each grant by the advisory committee.

(B)(C)    The Department of Insurance may make application and enter into contracts for and accept grants in aid from federal and state government and private sources for the purposes of:

(1)    implementation of building code enforcement programs including preliminary and ongoing training of inspectors;

(2)    conducting assessments to determine need for and desirability of making agreements to provide enforcement services pursuant to Section 6-9-60; and

(3)    study and development of strategies for reducing loss of life and mitigating property losses due to hurricane, flood, earthquake, and fire; and

(4)    any other purposes consistent with this article.

Section 38-75-485.    (A)    There is established within the Department of Insurance, the South Carolina Hurricane Damage Mitigation Program. The advisory council, established pursuant to Section 38-75-470, shall provide advice and assistance to the program administrator with regard to his administration of the program.

(B)    This section does not create an entitlement for property owners or obligate the State in any way to fund the inspection or retrofitting of residential property in this State. Implementation of this program is subject to annual legislative appropriations.

(C)    The program shall develop and implement a comprehensive and coordinated approach for hurricane damage mitigation that includes the following:

(1)    The program administrator shall apply for financial grants to be used to assist single-family, site-built, owner-occupied, residential property owners to retrofit their properties to make them less vulnerable to hurricane damage.

(a)    To be eligible for a grant, a residential property must:

(i)    have been granted a homestead exemption;

(ii)    be a dwelling with an insured value of two hundred fifty thousand dollars or less; and

(iii)    have undergone an acceptable wind certification and hurricane mitigation inspection.

(b)    All grants must be matched on a dollar-for-dollar basis for a total of ten thousand dollars for the mitigation project with the State's contribution not to exceed five thousand dollars.

(c)    The program must create a process in which mitigation contractors agree to participate and seek reimbursement from the State and homeowners selected from a list of participating contractors. All mitigation must be based upon the securing of all required local permits and inspections. Mitigation projects are subject to random reinspection of up to at least ten percent of all projects.

(d)    Matching fund grants also must be made available to local governments and nonprofit entities for projects that reduce hurricane damage to single-family, site-built, owner-occupied, residential property.

(e)    Grants may be used for the following improvements:

(i)    roof deck attachment;

(ii)    secondary water barrier;

(iii)    roof covering;

(iv)    brace gable ends;

(v)    reinforce roof-to-wall connections;

(vi)    opening protection;

(vii)    exterior doors, including garage doors;

(viii)    tie downs;

(ix)    problems associated with weakened trusses, studs and other structural components; and

(x)    any other mitigation techniques approved by the advisory committee.

(f)(i)        Low-income homeowners, who otherwise meet the requirements of subitems (a) and (c) are eligible for a grant of up to five thousand dollars and are not required to provide a matching amount to receive the grant. These grants must be used to retrofit single-family, site-built, owner-occupied, residential properties, valued at one hundred thousand dollars or less, in order to make them less vulnerable to hurricane damage.

(ii)    For purposes of this item, 'low-income persons' means one or more natural persons or a family, the total annual adjusted gross household income of which does not exceed eighty percent of the median annual adjusted gross income for households within the county in which the person or family resides, whichever is greater.

(g)(i)    There is created the 'Manufactured Housing Mitigation and Enhancement Program'. The program requires the mitigation of damage to or the enhancement of manufactured houses in this State. The mitigation or enhancement includes, but is not limited to, problems associated with weakened trusses, studs, and other structural components caused by wood rot or termite damage, site-built additions, or tie-down systems, and, also may address other issues considered appropriate by the advisory council. The program includes an education and outreach component to ensure that owners of manufactured homes are aware of the benefits of participation.

(ii)    The program must be a grant program that ensures that entire manufactured home communities and mobile home parks may be improved wherever practicable. The grant funding appropriated for this program must be distributed directly to the Department of Insurance for the uses set forth under this subsection.

(iii)    Upon evidence of completion of the program, insurers shall grant, on a pro rata basis, discounts, credits, or other rate differentials or appropriate reductions in deductibles for the properties of owners of manufactured homes on which fixtures or construction techniques, that have been demonstrated to reduce the amount of loss in a windstorm, have been installed or implemented in accordance with building code standards. The discount on the premium must be applied to subsequent renewal premium amounts.

(iv)    On or before January thirty-first of each year, the advisory council shall provide a report of activities under this subsection to the Governor, the President of the Senate, and the Speaker of the House of Representatives. The report must set forth the number of homes that have taken advantage of the program, the types of enhancements and improvements made to the manufactured homes and attachments to these homes, and whether there has been an increase in availability of insurance products to owners of manufactured homes.

(v)    The advisory council shall develop the programs as provided for in this subsection. The grant monies appropriated for the programs as provided for in this subsection must be distributed directly to the department to be used as provided for in this subsection.

(vi)    Grant monies provided to the department under this section are intended to supplement other funding sources of the mitigation program and may not supplant other funding sources of the mitigation program.

(2)    Multimedia public education, awareness, and advertising efforts designed to specifically address mitigation techniques must be employed, as well as a component to support ongoing consumer resources and referral services.

(3)(a)    The department shall use its best efforts to obtain grants or funds from the federal government to supplement the financial resources of the program. In addition to state appropriations, if any, this program must be funded as follows:

(i)        by the premium taxes due to this State by the South Carolina Wind and Hail Underwriting Association; and

(ii)    by reducing the commission paid to producers placing business in the South Carolina Wind and Hail Underwriting Association by one percent.

(b)    These funds must be remitted to the department by July first, to be used for the purposes provided for in this section.

(4)    The director or his designee may promulgate regulations or order the rules necessary to implement the provisions of this article."

SECTION    12.    Section 38-75-1140(C) of the 1976 Code, as added by Act 290 of 2004, is amended to read:

"(C)    The modeling organization shall submit a supplemental report to the director or his designee following any substantially material revision of the model if the revision is used by insurers in determining rates for this State. The supplemental report must specify the changes made to the catastrophe model, specify a list of variables that are subject to insurer input, and contain one or more statements by experts attesting to the continuing validity of the model for use in predicting losses associated with natural hazard catastrophes in this State."

SECTION    13.    Section 38-75-1140 of the 1976 Code, as added by Act 290 of 2004, is amended by adding at the end:

"(G)    To recover the costs associated with the review and evaluation of catastrophe models, the director or his designee may impose a filing fee on:

(1)    all insurers who use catastrophe or other computer simulated models; and

(2)    modelers or modeling organizations that submit a model to the department for its review, evaluation or approval. This fee must be retained by the department to defray the costs of retaining actuaries and other experts to evaluate such models."

SECTION    14.    Section 38-75-1160(A)(1)(b) and (d), as added by Act 290 of 2004, is amended to read:

"(b)    state the date not less than thirty sixty days after the date of the mailing or delivering on which the cancellation or refusal to renew becomes effective;

(d)    inform the insured of his right to request in writing within fifteen thirty days of the receipt of notice that the director review the action of the insurer. The notice of cancellation or refusal to renew must contain the following statement in bold print to inform the insured of this right:

'IMPORTANT NOTICE: Within fifteen thirty days of receiving this notice, you or your attorney may request in writing that the director review this action to determine whether the insurer has complied with South Carolina laws in canceling or nonrenewing your policy. If this insurer has failed to comply with the cancellation or nonrenewal laws, the director may require that your policy be reinstated. However, the director is prohibited from making underwriting judgments. If this insurer has complied with the cancellation or nonrenewal laws, the director does not have the authority to overturn this action.';"

SECTION    15.    This act takes effect upon approval by the Governor and is applicable to all taxable years beginning after December 31, 2006.

This web page was last updated on Monday, June 22, 2009 at 2:45 P.M.