A bill

 

TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY ADDING CHAPTER 103 TO TITLE 38 ENTITLED THE "FAIR ACCESS TO INSURANCE REQUIREMENTS" SO AS TO PROVIDE AN AFFORDABLE OPTION TO PROVIDE LIQUOR LIABILITY INSURANCE TO ANY PERSON OR BUSINESS REQUIRED TO MAINTAIN SUCH A POLICY, TO CREATE THE AFFORDABLE LIQUOR LIABILITY FUND TO AID IN THE FUNDING OF THE PROGRAM, AND TO PROVIDE THAT THE EXCISE TAX ON ALCOHOLIC LIQUOR BY THE DRINK MUST BE CREDITED TO THE FUND IN CERTAIN CIRCUMSTANCES; TO AMEND SECTION 12-33-245, RELATING TO THE EXCISE TAX, SO AS TO MAKE A CONFORMING CHANGE; BY AMENDING SECTION 61-2-145, RELATING TO LIABILITY INSURANCE COVERAGE REQUIREMENTS, SO AS TO PROVIDE FOR A LIQUOR LIABILITY RISK MITIGATION PROGRAM; AND TO PROVIDE THAT THE INSURANCE RESERVE FUND IS AUTHORIZED TO PROVIDE A START-UP LOAN TO THE FUND.

 

Whereas, private insurers are increasingly unwilling or unable to provide affordable liquor liability insurance coverage in this State; and

 

Whereas, the absence of affordable liquor liability insurance threatens the livelihood of certain businesses in this State and thus the economic health of the State; and

 

Whereas, the State therefore has a compelling public interest and a public purpose to assist in assuring that businesses in this State can affordably purchase liquor liability insurance; and

 

Whereas, the General Assembly intends to aid the businesses in this State in acquiring affordable liquor liability insurance while achieving efficiencies and economies, and while providing service to policyholders, applicants, and agents which is no less than the quality generally provided in the private market, for the achievement of the foregoing public purposes.  Now, therefore,

 

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

 

SECTION 1.  Title 38 of the S.C. Code is amended by adding:

 

CHAPTER 103

 

Fair Access to Insurance Requirements

 

    Section 38-103-10.     (A)  It is the purpose of this chapter to aid in providing an affordable option to provide liquor liability insurance to any person or business required to maintain such a policy pursuant to Section 61-2-145.

    (B)  For purposes of this chapter, "liquor liability insurance" means any type of liability insurance that would satisfy the requirements set forth in Section 61-2-145.

 

    Section 38-103-20. (A) There is created in the State Treasury the Fair Access to Insurance Requirements Fund. The fund is separate and distinct from the general fund of the State and all other funds.  Earnings and interest on this fund must be credited to it and any balance in the fund at the end of a fiscal year carries forward in the fund in the succeeding year. This fund only may be used to administer the program created in this chapter, to maintain reserve balances, and to repay any start-up loan.

    (B)  The State Treasurer may invest the monies in the fund, in the matter provided by law, upon request of the board established pursuant to Section 38-103-30. If the assets of the fund are insufficient, the State Treasurer shall notify the Department of Revenue to utilize the provisions of Section 38-103-50.

 

    Section 38-103-30. (A) There is established within the Department of Insurance a program whereby the department aids a business in purchasing liquor liability insurance whereby the insurance policy is backed by the fund. The department may contract with a private insurance company to serve as the administrator of the program.

    (B) The program is governed by a board of directors. The board shall consist of nine directors, one of whom is appointed by the Governor to represent the general public, one of whom is appointed by the Governor to represent the private insurance sector, and one of whom is appointed by the Governor to represent the businesses that purchase liquor liability insurance. Four directors are the President of the Senate or his designee, the Speaker of the House of Representatives or his designee, the Chairman of the Senate Judiciary Committee or his designee, and the Chairman of the House Judiciary Committee or his designee, all of whom shall serve ex officio. Two directors are the Director of the Department of Insurance or his designee and the Chief of the State Law Enforcement Division or his designee, both of whom shall serve ex officio. All appointees to the board shall serve at the pleasure of the appointing authority.

    (C)(1) The board, with consultation from the director and the administrator, shall develop a plan of operation for the program consistent with the provisions of this chapter. The plan of operation shall provide for economic, fair and nondiscriminatory administration, and for the prompt and efficient provision of liquor legal liability insurance, and shall contain other provisions including, but not limited to, establishment of necessary facilities, commission arrangements, reasonable and objective underwriting standards, acceptance and cession of reinsurance, appointment of servicing carriers and procedures for determining amounts of insurance to be provided. The plan of operation shall establish specific limits of coverage based upon type of license, gross volume of liquor sales or service, employee participation in alcohol awareness training programs, and such other criteria. The plan also shall provide for the offering of an installment payment plan for each policy which either gives the insured the option to pay the annual premium in a minimum of six monthly installments or gives the insured the option to pay the annual premium in four quarterly installments. Amendments to the plan of operation may be made by and at the discretion of the director.

       (2) The plan of operation shall specify the manner in which funds will be deposited and withdrawn from the fund. The plan shall specify the manner and timeliness in which the monies in the fund may be invested.

    (D)(1) The administrator shall submit, for the approval of the board, all policy forms, classifications, rates, rating plans, or rules applicable to its insurance product offerings pursuant to this chapter. Such filings must be submitted for approval to the board no less than sixty days prior to their intended effective date.  The board may extend the time for his review by an additional sixty days to allow the board and the department sufficient time to evaluate the proposed form, classification, rate, rating plan, or rule to be used by the administrator. Rates must be actuarially sound, self supporting, and may not be excessive, inadequate, or unfairly discriminatory.

       (2) Any rate increase on policyholders must be approved by the director before taking effect.

 

    Section 38-103-40. It is the intent of the General Assembly that policyholders, applicants, and agents of the administrator receive service and treatment of the highest possible level but never less than that generally provided in the private market. It is also intended that the administrator be held to service standards no less than those applied to insurers in the private market by the office with respect to responsiveness, timeliness, customer courtesy, and overall dealings with policyholders, applicants, or agents of the administrator.

 

    Section 38-103-50. The assets of the Affordable Liquor Liability Fund must be maintained at an actuarially sound level based upon the fund's deposits and withdrawals. Upon determination that the fund balance is insufficient, the State Treasurer shall notify the Department of Revenue. Beginning with the first day of the next month, all revenue collected from the excise tax imposed on alcoholic liquor by the drink for on-premises consumption pursuant to Section 12-33-245 for that month must be credited to the fund. The revenue of each month's collection shall continue to be credited to the fund until the first day of the next month after the State Treasurer notifies the Department of Revenue the assets of the fund are sufficient.

 

    Section 38-103-60. (A)(1) The administrator shall file a financial statement with the board and the department by March first of each year detailing its transactions, financial condition, operations, and affairs during the previous calendar year. In addition, the board may require the administrator to file quarterly financial statements with the department on the fifteenth of May, August, and November of each year. The statement shall contain such matters and information as are prescribed by the board and must be in the form the department directs and prepared in the format the department prescribes. The board may, at any reasonable time, require the administrator to furnish additional information with respect to its transactions, condition, or any matter connected therewith considered to be material and of assistance in evaluating the scope, operation, and experience of the administrator.

       (2) The director shall utilize such information to conduct an annual audit of the administrator.  The director may accept an audit of the administrator performed by a qualified public accounting firm in lieu of conducting his own examination.

    (B) Every five years, the director shall conduct a financial examination into the financial condition and affairs of the administrator and shall file a report thereon with the board, the Governor, and the General Assembly. The expenses of the examination must be paid by the administrator. The director may accept an examination of the administrator performed by a qualified public accounting firm in lieu of conducting his own examination.

    (C) Annually, the State Auditor shall audit or cause to be audited the Affordable Liquor Liability Fund.

 

    Section 38-103-70. The department may promulgate regulations and adopt rules necessary to implement the provisions of this chapter.

 

SECTION 2.  Section 12-33-245(B) of the S.C. Code is amended to read:

 

    (B) Eleven Except as required by Section 38-103-50, eleven percent of the revenue generated by the excise tax provided for in subsection (A) must be placed on deposit with the State Treasurer and credited to a fund separate and distinct from the general fund of the State. On a quarterly basis, the State Treasurer shall allocate this revenue to counties on a per capita basis according to the most recent United States Census. The State Treasurer must notify each county of the allocation pursuant to this subsection in addition to the funds allocated pursuant to Section 6-27-40(B), and the combination of these funds must be used by counties for educational purposes relating to the use of alcoholic liquors and for the rehabilitation of alcoholics and drug addicts. A county may pool these funds with other counties and may combine these funds with other funds for the same purpose.

 

SECTION 3.  Section 61-2-145 of the S.C. Code is amended to read:

 

    Section 61-2-145.  (A) In addition to all other requirements, a person licensed or permitted to sell alcoholic beverages for on-premises consumption, which remains open after five o'clock p.m. to sell alcoholic beverages for on-premises consumption, is required to maintain a liquor liability insurance policy or a general liability insurance policy with a liquor liability endorsement for a total coverage with an annual aggregate limit of at least one million dollars during the period of the biennial permit or license, unless the person licensed or permitted to sell alcoholic beverages qualifies under the terms of a liquor liability risk mitigation program pursuant to subsection (E). Failure to maintain this coverage during the period of the biennial permit or license constitutes grounds for suspension or revocation of the permit or license and is sufficient grounds for the department to seek an emergency revocation order as provided in Sections 12-60-1340 and 1-23-370(c).

    (B) The department shall add this requirement to all applications and renewals for biennial permits or licenses to sell alcoholic beverages for on-premises consumption, in which the permittees and licensees remain open and sell alcoholic beverages for on-premises consumption after five o'clock p.m. Each applicant or person renewing its license or permit, to whom this requirement applies, shall provide the department with documentation of a liquor liability insurance policy or a general liability insurance policy with a liquor liability endorsement in the required amounts.

    (C) Each insurer writing liquor liability insurance policies or general liability insurance policies with a liquor liability endorsement to a person licensed or permitted to sell alcoholic beverages for on-premises consumption, in which the person so licensed or permitted remains open to sell alcoholic beverages for on-premises consumption after five o'clock p.m., must notify the department in a manner prescribed by department regulation of the lapse or termination of the liquor liability insurance policy or the general liability insurance policy with a liquor liability endorsement.

    (D) For the purposes of this section, the term "alcoholic beverages" means beer, wine, alcoholic liquors, and alcoholic liquor by the drink as defined in Chapter 4, Title 61, and Chapter 6, Title 61.

    (E) A person licensed or permitted to sell alcoholic beverages for on-premises consumption, which remains open after five o'clock p.m. to sell alcoholic beverages for on-premises consumption, may qualify for liquor liability risk mitigation if such entity:

       (1) closes by ten o'clock pm.  A person meeting the requirements of this item may reduce the required annual aggregate limit by one hundred thousand dollars, and an additional one hundred thousand dollars for each hour earlier until six o'clock p.m.; or

       (2)(a) completes an alcohol server training course approved by the Department of Insurance;

           (b) meets the requirements set by the Department of Insurance to limit the risk to the public, which may include identification scanners, cameras, and limits on drink specials;

           (c) closes by ten o'clock p.m.; and

           (d) has less than thirty percent of its total sales deriving from alcohol sales; or

       (3) is a nonprofit organization, or the entity is engaging in a single event for which a Beer & Wine Special Event License or Liquor Special Event Permit is obtained.

    A person meeting the requirements of items (2) or (3) may reduce the required annual aggregate limit by five hundred thousand dollars.

 

SECTION 4.  The Insurance Reserve Fund of the State Fiscal Accountability Authority, on a one-time basis, is authorized to lend funds to the Department of Insurance to be deposited into the Affordable Liquor Liability Fund to administer the program established pursuant to Chapter 103, Title 38, and to pay such claims therefrom. The loan is to be repaid from monies from the Affordable Liquor Liability Fund in an agreed upon term with interest at the rate provided in Section 34-31-20(A). In the event any such loan payment to the Insurance Reserve Fund is not made within the prescribed time, the payment must be paid from the state general fund. The participants in the loan shall execute a document approved by the State Treasurer severally guaranteeing the loan. The Insurance Reserve Fund shall prepare a written loan agreement which must be executed by the Department of Insurance prior to entering into the loan authorized by this section.

 

SECTION 5.  This act takes effect upon approval by the Governor and the first insurance policy therefrom may be issued ninety days after the Governor's approval.

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