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1 BIL: 601 2 TYP: General Bill GB 3 INB: Senate 4 IND: 20010419 5 PSP: Thomas 6 SPO: Thomas 7 DDN: l:\council\bills\nbd\11552ac01.doc 8 CBN: 3974 9 RBY: House 10 COM: Labor, Commerce and Industry Committee 26 HLCI 11 LAD: 20010523 12 SUB: Prescription drug discount card sellers report to Consumer Affairs; 13 Insurance; property, captive, health, motor vehicle 14 15 16 17 HST: 18 19 Body Date Action Description Com Leg Involved 20 ______21 House 20010524 Introduced, read first time, 26 HLCI 22 referred to Committee 23 Senate 20010523 Amended, read third time, 24 sent to House 25 ------20010521 Scrivener's error corrected 26 ------20010517 Scrivener's error corrected 27 Senate 20010516 Read second time, notice of 28 general amendments 29 Senate 20010516 Committee amendment adopted 30 ------20010515 Scrivener's error corrected 31 Senate 20010514 Committee report: Favorable with 02 SBI 32 amendment 33 ------20010424 Companion Bill No. 3974 34 Senate 20010419 Introduced, read first time, 02 SBI 35 referred to Committee 36 37 38 39 Versions of This Bill 40 41 42 Revised on 20010514 43 Revised on 20010515 44 Revised on 20010516 45 Revised on 20010517 46 Revised on 20010521 47 Revised on 20010523 48 49 1 TXT: 1 Indicates Matter Stricken 2 Indicates New Matter 3 4 AS PASSED BY THE SENATE 5 May 23, 2001 6 7 S. 601 8 9 Introduced by Senator Thomas 10 11 S. Printed 5/23/01--S. 12 Read the first time April 19, 2001. 13 14 15 16 17

1 [601-1] 1 2 3 4 5 6 7 8 9 A BILL 10 11 TO AMEND SECTION 37-17-10, CODE OF LAWS OF SOUTH 12 CAROLINA, 1976, RELATING TO REGULATION OF 13 PERSONS WHO SELL PRESCRIPTION DRUG DISCOUNT 14 CARDS, SO AS TO PROVIDE THAT SUCH PERSONS MUST 15 REGISTER AND REPORT TO THE DEPARTMENT OF 16 CONSUMER AFFAIRS, RATHER THAN TO THE 17 DEPARTMENT OF INSURANCE; TO AMEND SECTION 18 38-5-80, AS AMENDED, RELATING TO REQUIREMENTS TO 19 OBTAIN A LICENSE TO CONDUCT INSURANCE BUSINESS 20 IN THIS STATE, SO AS TO CLARIFY WHAT BOOKS AND 21 RECORDS OF AN INSURER MUST BE MAINTAINED IN 22 THIS STATE; TO AMEND SECTION 38-31-20, AS 23 AMENDED, RELATING TO DEFINITIONS IN THE SOUTH 24 CAROLINA PROPERTY AND CASUALTY INSURANCE 25 GUARANTY ASSOCIATION ACT, SO AS TO INCLUDE NEW 26 DEFINITIONS AND REVISE CERTAIN EXISTING 27 DEFINITIONS; TO AMEND SECTION 38-31-60, RELATING 28 TO THE POWERS AND DUTIES OF THE SOUTH CAROLINA 29 PROPERTY AND CASUALTY GUARANTY ASSOCIATION, 30 SO AS TO PROVIDE THAT THE ASSOCIATION’S 31 OBLIGATION TO AN INSURED CEASES WHEN TEN 32 MILLION DOLLARS HAS BEEN PAID TO OR ON BEHALF 33 OF THE INSURED AND TO ALLOW FOR ALLOCATION OF 34 PAYMENTS WHEN THERE IS MORE THAN ONE 35 CLAIMANT WITH A COVERED CLAIM; TO AMEND 36 SECTION 38-31-70, AS AMENDED, RELATING TO THE 37 PLAN OF OPERATION FOR THE ADMINISTRATION OF 38 THE GUARANTY ASSOCIATION, SO AS TO AUTHORIZE 39 REPORTING AND THE DELEGATION OF CERTAIN 40 AUTHORITY TO AN ASSOCIATION SIMILAR TO THE 41 GUARANTY ASSOCIATION; TO AMEND SECTION 38-31-90, 42 AS AMENDED, RELATING TO RIGHTS OF THE

1 [601] 1 1 GUARANTY ASSOCIATION REGARDING CLAIMANTS 2 PAID AND ASSETS OF INSOLVENT INSURERS, SO AS TO 3 PROVIDE THAT THE ASSOCIATION HAS THE RIGHT TO 4 RECOVER THE AMOUNT OF A CLAIM PAID FROM 5 CERTAIN INSUREDS AND AFFILIATES OF AN INSOLVENT 6 INSURER; TO AMEND SECTION 38-31-100, AS AMENDED, 7 RELATING TO PROCEDURES REQUIRED TO BE 8 FOLLOWED BY PERSONS ASSERTING CLAIMS AND TO 9 LIMITATIONS ON CLAIMS, SO AS TO REVISE THESE 10 PROVISIONS; TO AMEND SECTION 38-39-90, AS 11 AMENDED, RELATING TO CANCELLATION OF 12 INSURANCE CONTRACTS BY PREMIUM SERVICE 13 COMPANIES AND THE CREDITING OF RETURN 14 PREMIUMS WHICH RESULT IN A SURPLUS, SO AS TO 15 ALLOW A REFUND OF SURPLUS TO AN AGENT OF AN 16 INSURED AND TO PROVIDE THAT NO REFUND IS 17 REQUIRED IF IT AMOUNTS TO LESS THAN FIVE 18 DOLLARS, RATHER THAN THREE DOLLARS; TO AMEND 19 SECTION 38-43-80, AS AMENDED, RELATING TO LICENSE 20 FEES FOR AGENTS OF INSURERS, SO AS TO PROVIDE 21 THAT FEES MUST BE PAID AS PRESCRIBED BY THE 22 DEPARTMENT, RATHER THAN PAID IN ADVANCE; TO 23 AMEND SECTION 38-55-30, AS AMENDED, RELATING TO 24 THE AMOUNT OF RISK THAT AN INSURER OR CAPTIVE 25 INSURER MAY EXPOSE ITSELF TO, SO AS TO PROVIDE 26 THAT THIS SECTION DOES NOT APPLY TO CAPTIVE 27 INSURERS; TO AMEND SECTION 38-71-1370, AS 28 AMENDED, RELATING TO THE APPLICATION OF GROUP 29 ACCIDENT AND HEALTH INSURANCE PROVISIONS TO 30 SMALL EMPLOYER INSURERS, SO AS TO EXCLUDE 31 COVERAGE TO LATE ENROLLEES FOR A PERIOD OF 32 TIME; TO AMEND SECTION 38-71-1980, RELATING TO 33 EXPEDITED EXTERNAL REVIEWS, SO AS TO CHANGE AN 34 INTERNAL CROSS REFERENCE; TO AMEND SECTION 35 38-87-40, AS AMENDED, RELATING TO REQUIREMENTS 36 FOR OUT-OF-STATE CHARTERED RISK RETENTION 37 GROUPS TO DO BUSINESS IN SOUTH CAROLINA, SO AS 38 TO PROVIDE THAT SUCH GROUP IS SUBJECT TO 39 TAXATION AS AN ADMITTED INSURER WOULD BE, 40 RATHER THAN AS A FOREIGN ADMITTED INSURER 41 WOULD BE; TO AMEND SECTION 38-90-60, RELATING TO 42 INCORPORATION OPTIONS AND REQUIREMENTS FOR 43 CAPTIVE INSURANCE COMPANIES, SO AS TO CHANGE A

1 [601] 2 1 CROSS REFERENCE; TO AMEND SECTION 38-90-140, 2 RELATING TO TAX PAYMENTS BY CAPTIVE INSURANCE 3 COMPANIES, SO AS TO PROVIDE THAT THESE TAXES 4 MUST BE PAID TO THE DEPARTMENT OF INSURANCE 5 RATHER THAN TO THE DIRECTOR OF THE 6 DEPARTMENT; TO AMEND SECTION 38-90-180, RELATING 7 TO THE APPLICATION OF CERTAIN PROVISIONS OF THE 8 REHABILITATION AND LIQUIDATION ACT TO CAPTIVE 9 INSURANCE COMPANIES, SO AS TO ALSO APPLY 10 CERTAIN PROVISIONS OF THE ADMINISTRATIVE 11 SUPERVISION OF INSURERS ACT TO THESE COMPANIES; 12 TO AMEND SECTION 56-10-240, AS AMENDED, RELATING 13 TO PROCEDURES THAT MOTOR VEHICLE INSUREDS AND 14 INSURERS MUST FOLLOW IF A MOTOR VEHICLE 15 SUBJECT TO FINANCIAL RESPONSIBILITY 16 REQUIREMENTS BECOMES UNINSURED, SO AS TO 17 PROVIDE THAT NOTICE MUST BE GIVEN TO THE 18 DEPARTMENT OF INSURANCE IF THE LAPSE OR 19 TERMINATION OCCURRED WITHIN THREE MONTHS OF 20 THE ISSUANCE OF A NEW POLICY; AND TO AMEND 21 SECTION 56-10-280, AS AMENDED, RELATING TO THE 22 MINIMUM DURATION OF INSURANCE ISSUED TO MEET 23 MOTOR VEHICLE FINANCIAL RESPONSIBILITY 24 REQUIREMENTS, SO AS TO PROVIDE THAT IF A CHECK 25 TENDERED BY THE INSURED IS RETURNED FOR 26 INSUFFICIENT FUNDS, THE CANCELLATION IS 27 EFFECTIVE AS OF THE POLICY INCEPTION OR RENEWAL 28 DATE. 29 Amend Title To Conform 30 31 Be it enacted by the General Assembly of the State of South 32 Carolina: 33 34 SECTION 1. Section 37-1-109(4) of the 1976 Code is amended to 35 read: 36 37 “(4) The administrator, as defined in Section 37-1-301, shall by 38 regulation announce publish a notice in the State Register: 39 (a) On or before April thirtieth of each year in which dollar 40 amounts are to change, the changes in dollar amounts required by 41 subsection (2); and 42 (b) Promptly after the changes occur, changes in the index 43 required by subsection (3) including, if applicable, the numerical

1 [601] 3 1 equivalent of the Reference Base Index under a revised Reference 2 Base Index and the designation or title of any index superseding 3 the index.” 4 5 SECTION 2. Section 37-6-108(1) of the 1976 Code is amended to 6 read: 7 8 “(1) After notice and hearing, the administrator may order a 9 creditor or, a person acting in his behalf, or a person subject to this 10 title to cease and desist from engaging in violations of this title. A 11 respondent aggrieved by an order of the administrator may obtain 12 judicial review of the order and the administrator may obtain an 13 order of the court for enforcement of its order in the court of 14 common pleas. The proceeding for review or enforcement is 15 initiated by filing a petition in the court. Copies of the petition 16 shall must be served upon all parties of record.” 17 18 SECTION 3. Section 37-6-111(1) of the 1976 Code is amended to 19 read: 20 21 “(1) The administrator may bring a civil action to restrain a 22 person to whom this part title applies from engaging in a course of: 23 (a) making or enforcing unconscionable terms or provisions 24 of consumer credit transactions; 25 (b) fraudulent or unconscionable conduct in inducing 26 consumers to enter into consumer credit transactions; 27 (c) conduct of any of the types specified in paragraph item 28 (a) or (b) with respect to transactions that give rise to or that lead 29 persons to believe will give rise to consumer credit transactions; or 30 (d) fraudulent or unconscionable conduct in the collection of 31 debts arising from consumer credit transactions.” 32 33 SECTION 4. Section 37-6-113(1) of the 1976 Code is amended 34 to read: 35 36 “(1) After demand, the administrator may bring a civil action 37 against a creditor or a person subject to this title to recover actual 38 damages sustained and excess charges paid by one or more 39 consumers who have a right to recover explicitly granted by this 40 title. In a civil action under this subsection, penalties may not be 41 recovered by the administrator. The court shall order amounts 42 recovered under this subsection to be paid to each consumer or set 43 off against his obligation. A consumer’s action, except a class

1 [601] 4 1 action, takes precedence over a prior or subsequent action by the 2 administrator with respect to the claim of that consumer. A 3 consumer’s class action takes precedence over a subsequent action 4 by the administrator with respect to claims common to both 5 actions, but the administrator may intervene. An administrator’s 6 action on behalf of a class of consumers takes precedence over a 7 consumer’s subsequent class action with respect to claims common 8 to both actions. Whenever an action takes precedence over another 9 action under this subsection, the latter action may be stayed to the 10 extent appropriate while the precedent action is pending and 11 dismissed if the precedent action is dismissed with prejudice or 12 results in a final judgment granting or denying the claim asserted 13 in the precedent action. A defense available to a creditor in a civil 14 action brought by a consumer is available to him in a civil action 15 brought under this subsection.” 16 17 SECTION 5. Section 37-6-113(2) of the 1976 Code, as amended 18 by Act 142 of 1991, is further amended to read: 19 20 “(2) The administrator may bring a civil action against a 21 creditor or, a person acting in his behalf, or a person subject to this 22 title to recover a civil penalty of no more than five thousand 23 dollars for repeatedly and intentionally violating this title. A civil 24 penalty pursuant to this subsection may not be imposed for a 25 violation of this title occurring more than two years before the 26 action is brought.” 27 28 SECTION 6. Section 37-17-10 of the 1976 Code, as added by Act 29 400 of 2000, is amended to read: 30 31 “Section 37-17-10. (A) It is unlawful for a person to sell, 32 market, promote, advertise, or distribute a card or other purchasing 33 mechanism or device which is not insurance that purports to offer 34 discounts or access to discounts from pharmacies for prescription 35 drug purchases unless: 36 (1) the person is registered with the Department of Insurance 37 Consumer Affairs for this express purpose; 38 (2) the card or other purchasing mechanism or device 39 expressly states in bold and prominent type, prominently placed, 40 that the discounts are not insurance; 41 (3) documentation is provided to the Department of 42 Insurance Consumer Affairs that the discounts are specifically 43 authorized and the person has a separate contract with each

1 [601] 5 1 pharmacy or pharmacy chain listed in conjunction with the card or 2 other purchasing mechanism or device; and 3 (4) the discounts or access to discounts offered, or the range 4 of discounts or access to the range of discounts offered, are not 5 misleading, deceptive, or fraudulent. 6 (B)(1) A person who sells, markets, promotes, advertises, or 7 distributes a card or other purchasing mechanism or device which 8 is not insurance that purports to offer discounts or access to 9 discounts from pharmacies for prescription drug purchases in this 10 State shall designate a resident of this State as an agent for service 11 of process and register the agent with the Secretary of State. 12 (2) In the absence of proper registration under subsection 13 (B)(1), the Secretary of State is designated as an agent upon whom 14 process may be served. Service of any process on the Secretary of 15 State may be made by delivering to and leaving with the Secretary 16 of State, or with any person designated by him to receive such 17 service, duplicate copies of the process, notice, or demand. The 18 Secretary of State shall forward one of the copies by registered or 19 certified mail, return receipt requested, to the person required to 20 register under subsection (B)(1) at the last known physical address 21 to the party serving process. Refusal to sign the return receipt does 22 not affect the validity of the service. Service is effective under this 23 subsection as of the date shown on the return receipt or five days 24 after its deposit in the mail, whichever is earlier. The Secretary of 25 State may charge a fee of ten dollars for the service. This 26 subsection does not affect the right to serve process in any manner 27 otherwise provided by law. 28 (C)(1) A person who violates subsection (A) is guilty of a 29 misdemeanor and, upon conviction, must be imprisoned for not 30 more than six months or fined not more than one thousand dollars, 31 or both; for a second or subsequent violation a person must be 32 imprisoned for not more than two years or fined not more than five 33 thousand dollars, or both. 34 (2) Notwithstanding subsection (C)(1), a person who 35 violates this chapter is subject to all civil and administrative 36 remedies available in this title. 37 (D) This section does not apply to: 38 (1) a pharmacy holding a permit issued pursuant to Title 40, 39 Chapter 43; 40 (2) eye or vision care services or glasses or contact lenses 41 provided by an optometrist or ophthalmologist; 42 (3) an insured Any benefit or program offered in conjunction 43 with a health insurance plan administered by a health insurer,

1 [601] 6 1 health care service contractor, or health maintenance organization 2 regulated under Title 38; or 3 (4) an insured benefit administered by, or under contract 4 with, the State of South Carolina. 5 (E) For purposes of this section, ‘person’ means an individual, 6 corporation, partnership, or any other business entity, including, 7 but not limited to, a health maintenance organization, an insurance 8 company, or a third party payor. Representatives of corporations, 9 partnerships, or other business entities must be registered before 10 they shall offer services under this section. 11 (F) The department may promulgate regulations as necessary 12 to assist in administering this chapter, including, but not limited to, 13 regulations concerning assessment of registration fees and 14 standards for corporate and individual representative registration.” 15 16 SECTION 7. Section 38-5-80(k) of the 1976 Code, as last 17 amended by Act 181 of 1993, is further amended to read: 18 19 “(k) The insurer’s principal place of business and primary 20 executive, administrative, and home offices and all original books 21 and records of the insurer are located and maintained in this State. 22 The provisions of this subsection apply to domestic health 23 maintenance organizations. For purposes of this section, original 24 books and records mean corporate bylaws, charters, articles of 25 incorporation, and any other records deemed to constitute original 26 records by the director or his designee. Insurers desiring to move 27 business records or operations outside of the State shall apply to 28 the director or his designee for approval. Approvals or denials of 29 request to move records or operations fall within the discretion of 30 the director or his designee. The director may also rescind 31 approval of a request if in his discretion it is considered to be in the 32 best interest of the consumers and citizens of the State. Insurers 33 must comply with the records requirements of Section 38 - 5 - 190 34 and the requirements for domestic insurers set forth in this chapter. 35 The director or his designee shall outline via bulletin or order the 36 information required in such an application. Item (k) of this 37 section does not apply to any domestic insurer whose primary 38 executive, administrative, and home offices were located outside 39 this State on July 1, 1987. If subsequently the director or his 40 designee is of the opinion that a condition exists which would have 41 prohibited him from issuing the original certificate of authority or 42 license to the insurer, then that condition also constitutes a ground 43 for license revocation under Section 38-5-120.”

1 [601] 7 1 2 SECTION 8. Section 38-21-10(2) of the 1976 Code, as amended 3 by Act 181 of 1993, is further amended to read: 4 5 “(2) The term ‘control’ (including the terms ‘controlling’, 6 ‘controlled by’, and ‘under common control with’) means the 7 possession, direct or indirect, of the power to direct or cause the 8 direction of the management and policies of a person, whether 9 through the ownership of voting securities, by contract other than a 10 commercial contract for goods or nonmanagement services, or 11 otherwise, unless the power is the result of an official position with 12 or corporate office held by the person. Control is presumed to 13 exist if any person, directly or indirectly, owns, controls, holds 14 with the power to vote, or holds proxies representing ten percent or 15 more of the voting securities of any other person. This 16 presumption may be rebutted by a showing made in the manner 17 provided by Section 38-21-220 that control does not exist in fact. 18 The director or his designee may determine, after furnishing all 19 persons in interest notice and opportunity to be heard and making 20 specific findings of fact to support his determination, that control 21 exists in fact, notwithstanding the absence of a presumption to that 22 effect.” 23 24 SECTION 9. Section 38-31-20 of the 1976 Code, as last amended 25 by Act 97 of 1995, is further amended to read: 26 27 “Section 38-31-20. As used in this chapter: 28 (1) ‘Account’ means any one of the four accounts created by 29 Section 38-31-40. 30 (2) ‘Affiliate’ means a person who directly or indirectly, 31 through one or more intermediaries, controls, is controlled by, or is 32 under common control with an insolvent insurer on December 33 thirty-first of the year next preceding the date the insurer becomes 34 an insolvent insurer. 35 (3) ‘Affiliate of the insolvent insurer’ means a person who 36 directly or indirectly, through one or more intermediaries, controls, 37 is controlled by, or is under common control with an insolvent 38 insurer on December thirty - first of the year next preceding the date 39 the insurer becomes an insolvent insurer. 40 (4) ‘Association’ means the South Carolina Property and 41 Casualty Insurance Guaranty Association created under Section 42 38-31-40.

1 [601] 8 1 (5) ‘Association similar to the association’ means any guaranty 2 association, security fund, or other insolvency mechanism which 3 affords protection similar to that of the association. The term also 4 includes any property/casualty insolvency mechanism which 5 obtains assessments or other contributions from insurers on a 6 pre - insolvency basis. 7 (4)(6) ‘Claimant’ means any insured making a first party claim 8 or any person instituting a liability claim. However, no person 9 who is an affiliate of the insolvent insurer may be a claimant. 10 (5)(7) ‘Control’ means the possession, direct or indirect, of the 11 power to direct or cause the direction of the management and 12 policies of a person, whether through the ownership of voting 13 securities, by contract other than a commercial contract for goods 14 or nonmanagement services, or otherwise, unless the power is the 15 result of an official position with or corporate office held by the 16 person. Control is presumed to exist if any person directly or 17 indirectly owns, controls, holds with the power to vote, or holds 18 proxies representing ten percent or more of the voting securities of 19 any other person. This presumption may be rebutted by a showing 20 that control does not exist in fact. 21 (6)(8) ‘Covered claim’ means an unpaid claim, including one of 22 unearned premiums, which arises out of and is within the coverage 23 and is subject to the applicable limits of an insurance policy to 24 which this chapter applies issued by an insurer, if the insurer is an 25 insolvent insurer and (a) the claimant or insured is a resident of 26 this State at the time of the insured event, if for entities other than 27 an individual, the residence of a claimant or insured is the state in 28 which its principal place of business is located at the time of the 29 insured event or (b) the claim is for first-party benefits for damage 30 to property permanently located in this State. ‘Covered claim’ 31 does not include: 32 (a) any amount awarded as extra-contractual damages unless 33 awarded against the association; 34 (b) any amount sought as a return of premium under any 35 retrospective rating plan; or 36 (c) any amount due any reinsurer, insurer, insurance pool, or 37 underwriting association as subrogation recoveries, reinsurance 38 recoveries, contribution, indemnification, or otherwise. No such 39 claim for any amount due any reinsurer, insurer, insurance pool, or 40 underwriting association may be asserted against a claimant or a 41 person insured under a policy issued by an insolvent insurer other 42 than to the extent such a claim exceeds the association obligation 43 limitations set forth in Section 38 - 31 - 60;

1 [601] 9 1 (d) any first party claim by an insured whose net worth 2 exceeds ten million dollars on December thirty - first of the year 3 next preceding the date the insurer becomes an insolvent insurer; 4 provided, that an insured’s net worth on such date must be deemed 5 to include the aggregate net worth of the insured and all of its 6 subsidiaries as calculated on a consolidated basis; 7 (e) any first party claims by an insured which is an affiliate 8 of the insolvent insurer; 9 (f) any fee or other amount relating to goods or services 10 sought by or on behalf of any attorney or other provider of goods 11 or services retained by the insolvent insurer or an insured prior to 12 the date it was determined to be insolvent; 13 (g) any fee or other amount sought by or on behalf of any 14 attorney or other provider of goods or services retained by any 15 insured or claimant in connection with the assertion or prosecution 16 of any claim, covered or otherwise, against the association; or 17 (h) any claims for interest. 18 (7)(9) ‘Insolvent insurer’ means an insurer (a) licensed to 19 transact insurance in this State either at the time the policy was 20 issued or when the insured event occurred and (b) determined to be 21 insolvent by a court of competent jurisdiction in the insurer’s state 22 of domicile or of this State and which the director or his designee 23 has found fails to meet its obligation to policyholders in this State. 24 (10) ‘Insured’ means any named insured, any additional insured, 25 any vendor, lessor, or any other party identified as an insured 26 under the policy. 27 (8)(11)‘Member insurer’ means any person who (a) writes any 28 kind of insurance to which this chapter applies under Section 29 38-31-30, including the exchange of reciprocal or interinsurance 30 contracts, and (b) is licensed to transact insurance in this State. An 31 insurer shall cease to be a member insurer effective on the day 32 following the termination or expiration of its license to transact the 33 kinds of insurance to which this chapter applies; however, the 34 insurer shall remain liable as a member insurer for any and all 35 obligations, including obligations for assessments levied prior to 36 the termination or expiration of the insurer’s license and 37 assessments levied after the termination or expiration, which relate 38 to any insurer which became an insolvent insurer prior to the 39 termination or expiration of such insurer’s license. 40 (9)(12)‘Net direct written premiums’ means direct gross 41 premiums written in this State on insurance policies to which this 42 chapter applies, less return premiums on the policies and dividends

1 [601] 10 1 paid or credited to policyholders on the direct business. It does not 2 include premiums on contracts between insurers or reinsurers. 3 (13) ‘Person’ means an individual, corporation, partnership, 4 association, voluntary organization, or governmental entity.” 5 6 SECTION 10. Section 38-31-60(a) of the 1976 Code, as last 7 amended by Act 517 of 1994, is amended by adding at the end: 8 9 “(iv)Notwithstanding any other provisions of this chapter, 10 except in the case of a claim for benefits under worker’s 11 compensation coverage, any obligation of the association to or on 12 behalf of an insured and its affiliates on all covered claims 13 combined shall cease when ten million dollars shall have been paid 14 in the aggregate by the association and any one or more 15 associations similar to the association of any other state or states, 16 to or on behalf of that insured, its affiliates, and additional insureds 17 on covered claims or allowed claims arising under the policy or 18 policies of any one insolvent insurer. If the association determines 19 that there may be more than one claimant having a covered claim 20 or allowed claim against the association, or any associations 21 similar to the association in other states, under the policy or 22 policies of any one insolvent insurer, the association may establish 23 a plan to allocate amounts payable by the association in such 24 manner as the association in its discretion considers equitable.” 25 26 SECTION 11. Section 38-31-70(3)(d) of the 1976 Code, as 27 amended by Act 181 of 1993, is further amended to read: 28 29 “(d) Establish procedures by which claims may be filed with the 30 association and establish acceptable forms of proof of covered 31 claims. Notice of claims to the receiver or liquidator of the 32 insolvent insurer is considered notice to the association or its agent 33 and a list of these claims must be periodically submitted to the 34 association or similar organization an association similar to the 35 association in another state by the receiver or liquidator.” 36 37 SECTION 12. Section 38-31-70(4) of the 1976 Code, as 38 amended by Act 181 of 1993, is further amended to read: 39 40 “(4) The plan of operation may provide that any or all powers 41 and duties of the association, except those under items (c) and (i) 42 of Section 38-31-60, are delegated to a corporation, an association 43 similar to the association, or other another organization which

1 [601] 11 1 performs or will perform functions similar to those of this 2 association, or its equivalent, in two or more states. This 3 corporation, association, or organization must be reimbursed as a 4 servicing facility would be reimbursed and must be paid for its 5 performance of any other functions of the association. A 6 delegation under this subsection (4) takes effect only with the 7 approval of both the board of directors and the director or his 8 designee and may be made only to a corporation, association, or 9 organization which extends protection not substantially less 10 favorable and effective than that provided by this chapter.” 11 12 SECTION 13. Section 38-31-90 of the 1976 Code, as amended 13 by Act 181 of 1993, is further amended to read: 14 15 “Section 38-31-90. (1) Any A person recovering under this 16 chapter is considered to have assigned his rights under the policy 17 to the association to the extent of his recovery from the 18 association. Every insured or claimant seeking the protection of 19 this chapter shall cooperate with the association to the same extent 20 as he would have been required to cooperate with the insolvent 21 insurer. The association has no cause of action against the insured 22 of the insolvent insurer for any sums it has paid out except the 23 causes of action the insolvent insurer would have had if the sums 24 had been paid by the insolvent insurer and except as provided in 25 subsection (2). In the case of an insolvent insurer operating on a 26 plan with assessment liability, payments of claims of the 27 association do not operate to reduce the liability of insureds to the 28 receiver, liquidator, or statutory successor for unpaid assessments. 29 (2) The association has the right to recover from the following 30 persons the amount of any ‘covered claim’ paid on behalf of such 31 person pursuant to this chapter; 32 (a) an insured whose net worth on December thirty - one of 33 the year immediately preceding the date the insurer becomes an 34 insolvent insurer exceeds twenty - five million dollars and whose 35 liability obligations to other persons are satisfied in whole or in 36 part by payments made under this chapter; and 37 (b) a person who is an affiliate of the insolvent insurer and 38 whose liability obligations to other persons are satisfied in whole 39 or in part by payments made under this chapter. 40 (3) The receiver, liquidator, or statutory successor of an 41 insolvent insurer is bound by settlements of covered claims by the 42 association or a similar organization an association similar to the 43 association in another state. The court having jurisdiction shall

1 [601] 12 1 grant these claims priority equal to that to which the claimant 2 would have been entitled in the absence of this chapter against the 3 assets of the insolvent insurer. The expenses of the association or 4 similar organization an association similar to the association in 5 handling claims must be accorded the same priority as the 6 liquidator’s expenses. 7 (3)(4) The association shall periodically file with the receiver 8 or liquidator of the insolvent insurer statements of the covered 9 claims paid by the association and estimates of anticipated claims 10 on the association which shall preserve the rights of the association 11 against the assets of the insolvent insurer.” 12 13 SECTION 14. Section 38-31-100 of the 1976 Code, as last 14 amended by Act 235 of 2000, is further amended to read: 15 16 “Section 38-31-100. (1) Any A person, having a claim against 17 an insurer under any provision in an insurance policy other than a 18 policy of an insolvent insurer which is also a covered claim, is 19 under an insurance policy, whether or not it is a policy issued by a 20 member insurer, and the claim under such other policy arises from 21 the same facts, injury, or loss that gave rise to the covered claim 22 against the association, is required to exhaust first exhaust his right 23 under that all coverage and limits provided by any such policy. 24 Any amount payable on a covered claim under this chapter must 25 be reduced by the amount of any recovery under that insurance 26 policy full limits of such other coverage as set forth on the 27 declarations page and the association shall receive a full credit for 28 such limits, or, where there are no applicable limits, the claim must 29 be reduced by the total recovery. Notwithstanding the foregoing, 30 no person may be required to exhaust all coverage and limits under 31 the policy of an insolvent insurer. 32 (a) A claim under a policy providing liability coverage to a 33 person who may be jointly and severally liable with or a joint 34 tortfeasor with the person covered under the policy of the insolvent 35 insurer that gives rise to the covered claim must be considered to 36 be a claim arising from the same facts, injury, or loss that gave rise 37 to the covered claim against the association. Any amount payable 38 on a covered claim under this chapter must be reduced by the full 39 and combined policy limits of all joint tortfeasers. 40 (b) To the extent that the association’s obligation is reduced 41 by the application of this section, the liability of the person insured 42 by the insolvent insurer’s policy for the claim must be reduced in 43 the same amount.

1 [601] 13 1 (2) Any A person having a claim which may be recovered 2 under more than one insurance guaranty association or its 3 equivalent shall seek recovery first associations similar to the 4 association must be required first to exhaust all coverage and limits 5 in recovery from the association of the place of residence of the 6 insured except that, if it is a first-party claim for damage to 7 property with a permanent location, he shall seek recovery be 8 required first to exhaust all coverage and limits in recovery from 9 the association of the location of the property, and, if it is a 10 workers’ compensation claim, he shall seek recovery be required 11 first to exhaust all coverage and limits in recovery from the 12 association of the residence of the claimant. Any recovery under 13 this chapter must be reduced by the amount payable on a covered 14 claim under this chapter must be reduced by the full amount of 15 recovery from any other insurance guaranty association or its 16 equivalent associations similar to the association, and the 17 association shall receive full credit for such recovery. 18 (3) Any A person having a claim or legal right of recovery 19 under any governmental insurance or guaranty program which is 20 also a covered claim is shall be required first to exhaust first his 21 right all coverage and limits in recovery under the program. Any 22 amount payable on a covered claim under this chapter must be 23 reduced by the full amount of any recovery under the 24 governmental insurance or guaranty program. 25 (4) No claim held by an insurer, reinsurer, insurance pool, or 26 underwriting association, based on an assignment or on rights of 27 subrogation, or otherwise, may be recovered from a claimant or 28 asserted in any legal action against a person insured under a policy 29 issued by an insolvent insurer or the association except to the 30 extent the amount of the claim exceeds the obligation of the 31 association under this chapter. 32 (5) Any A person who has liquidated by settlement or 33 judgment a claim against an insured under a policy issued by an 34 insolvent insurer, and the claim is a covered claim and is also a 35 claim within the coverage of any policy issued by a solvent 36 insurer, is must be required to exhaust first to exhaust his rights all 37 coverage and limits provided under the policy issued by the 38 solvent insurer before execution, levy, or any other proceedings 39 are begun to enforce any judgment obtained against or the 40 settlement with the insured of the insolvent insurer. Any amount 41 payable on a covered claim under this chapter, whether through 42 settlement, judgment, or otherwise, must be reduced by the full

1 [601] 14 1 limits of such other coverage as set forth on the declarations page 2 of the policy issued by the insolvent insurer. 3 (6) A person having a claim against an insolvent insurer under 4 any provision in an insurance policy is limited to ten million 5 dollars aggregate payout from the association. 6 (7) A person having a net worth of greater than twenty-five 7 million dollars and having a claim against an insolvent insurer 8 under any provision in an insurance policy may not make a claim 9 against the association.” 10 11 SECTION 15. Section 38-33-80(A)(2) and (C) of the 1976 12 Code, as last amended by Act 181 of 1993, are further amended to 13 read: 14 15 “(2) No Evidence of coverage, or an amendment thereto to it, 16 may not be issued or delivered to any a person in this State until a 17 copy of the form of the evidence of coverage, or amendment 18 thereto to it, has been filed with and approved by the director or his 19 designee pursuant to Section 38 - 71 - 310(A) or 38 - 71 - 720(A). 20 (C) The director or his designee shall approve, within a 21 reasonable period, approve thirty days any form if the 22 requirements of subsection (A) are met and. The director or his 23 designee, in his discretion, may extend for up to an additional sixty 24 days the period within which he shall approve or disapprove the 25 form. The director or his designee shall approve, within a 26 reasonable period, any schedule of charges if the requirements of 27 subsection (B) are met. It is unlawful to issue a form or to use a 28 schedule of charges until approved. If the director or his designee 29 disapproves the filing, he shall notify the filer. The notice must 30 contain the reasons for disapproval, and the filer, upon request in 31 writing, is entitled to a public hearing thereon on it. If no action is 32 not taken to approve or disapprove any form or schedule of 33 charges within ninety thirty days of the filing of the forms or 34 charges form, if the period is not extended, or at the expiration of 35 the extended period, if any, the filing is deemed approved. If 36 action is not taken to approve or disapprove any schedule of 37 charges within ninety days of the filing of the charges, the filing is 38 deemed approved. An organization may not use a form or 39 schedule of charges deemed approved pursuant to the default 40 provision of this section until the organization has filed with the 41 director or his designee a written notice of its intent to use the form 42 or schedule of charges. The notice must be filed in the office of

1 [601] 15 1 the director at least ten days before the organization uses the form 2 or schedule of charges.” 3 4 SECTION 16. Section 38-39-90(f) of the 1976 Code, as last 5 amended by Act 181 of 1993, is further amended to read: 6 7 “(f) If the crediting of return premiums to the account of the 8 insured results in a surplus over the amount due from the insured, 9 the premium service company shall hold the surplus in a fiduciary 10 capacity and promptly refund the excess to the insured or the agent 11 of record. No refund is required if it amounts to less than three five 12 dollars.” 13 14 SECTION 17. Section 38-43-80(B) of the 1976 Code, as 15 amended by Section 11H, Part II, Act 501 of 1992, is further 16 amended to read: 17 18 “(B) The fees must be paid in advance. License fees for local, 19 state, or special agents must be paid by the insurer for whom the 20 agent proposes to act or by which the proposed agent is vouched 21 for in the application for license. The department shall promulgate 22 regulations specifying the time and manner of payment of these 23 fees.” 24 25 SECTION 18. Section 38-55-30 of the 1976 Code, as amended 26 by Act 13 of 1991, is further amended to read: 27 28 “Section 38-55-30. Except as otherwise provided in this title, no 29 insurer or captive doing business in this State may expose itself to 30 a loss on one risk in an amount exceeding ten percent of its surplus 31 to policyholders. A risk or portion of it which has been reinsured 32 must be deducted in determining the limitation of risk prescribed 33 in this section. As used in this section, “captive” means an 34 insurance company owned by another organization whose 35 exclusive purpose is to insure risks of the parent organization and 36 affiliated companies, or for groups and associations, an insurance 37 organization owned by the insureds whose exclusive purpose is to 38 insure risks of member organizations or group members and their 39 affiliates, or both. This section does not apply to captive insurers.” 40 41 SECTION 19. The 1976 Code is amended by adding: 42

1 [601] 16 1 “Section 38-55-75. The Department of Insurance may receive 2 and shall maintain as confidential any documents or information 3 furnished to the department by the National Association of 4 Insurance Commissioners or insurance departments of other states 5 which is classified as confidential by that association or state. The 6 Department of Insurance may share documents or information, 7 including confidential documents or information, with the National 8 Association of Insurance Commissioners or insurance departments 9 of other states if the association or other state agrees to maintain 10 the same level of confidentiality as is provided under South 11 Carolina law. Documents or information received or exchanged 12 pursuant to this section are not subject to subpoena or subpoena 13 duces tecum in any civil, criminal, or administrative proceeding.” 14 15 SECTION 20. Section 38-61-20 of the 1976 Code, as last 16 amended by Act 312 of 2000, is further amended to read: 17 18 “Section 38-61-20. (A) It is unlawful for an insurer doing 19 business in this State to issue or sell in this State any a policy, 20 contract, or certificate until it has been filed with and approved by 21 the director or his designee. The director or his designee may 22 disapprove the form if it: 23 (1) does not meet the requirements of law,; 24 (2) contains any provisions which are unfair, deceptive, 25 ambiguous, misleading, or unfairly discriminatory,; or 26 (3) is going to be solicited by means of advertising, 27 communication, or dissemination of information which is 28 deceptive or misleading. 29 However, this subsection does not apply to surety contracts or 30 fidelity bonds, except as required in Section 38-15-10, or to 31 insurance contracts, riders, or endorsements prepared to meet 32 special, unusual, peculiar, or extraordinary conditions applying to 33 an individual risk or exempt commercial policies. 34 (B) Within thirty days after the filing of a form requiring 35 approval, the director or his designee shall notify the organization 36 filing the form of the approval or disapproval of the form, and the 37 reason if the form is disapproved. The director or his designee, in 38 his discretion, may extend for up to an additional sixty days the 39 period within which he shall approve or disapprove the form. A 40 form received, but neither approved nor disapproved by the 41 director or his designee, is deemed approved at the expiration of 42 the thirty days if the period is not extended, or at the expiration of 43 the extended period, if any. An organization may not use a form

1 [601] 17 1 deemed approved pursuant to the default provision of this section 2 until the organization has filed with the director or his designee a 3 written notice of its intent to use the form. The notice must be 4 filed in the office of the director at least ten days before the 5 organization uses the form. 6 (C) At any time after having given written approval, and after 7 an opportunity for a hearing for which at least thirty days’ written 8 notice has been given, the director or his designee may withdraw 9 approval if he finds that the forms form: 10 (1) do does not meet the requirements of law,; 11 (2) contain any contains provisions which are unfair, 12 deceptive, ambiguous, misleading, or unfairly discriminatory,; or 13 (3) are being is solicited by means of advertising, 14 communication, or dissemination of information which is 15 deceptive or misleading. 16 (C)(D) The director or his designee may exempt from the 17 requirements of subsection (A) as long as he considers proper any 18 type of insurance policy, contract, or certificate to which in his 19 opinion subsection (A) practically must not be applied, or the 20 filing and approval of which, in his opinion, is not necessary for 21 the protection of the public. However, every each insurer at least 22 annually shall list the types and form numbers of all policies it 23 issues or sells in this State which the director or his designee has 24 exempted from being filed and approved, and an officer of the 25 insurer shall certify that all of these policies comply fully with the 26 laws of this State. If a policy, contract, or certificate is certified to 27 be in compliance with the laws of this State and the director or his 28 designee finds it violates a law of this State, he may disqualify that 29 insurer from certifying policies, contracts, or certificates allowed 30 under this subsection. 31 (D)(E) Nothing in this chapter precludes the issuance of a life 32 insurance contract that includes an optional accident, health, or 33 accident and health insurance rider. However, the optional 34 accident, health, or accident and health insurance rider must be 35 filed with and approved by the director or his designee pursuant to 36 Section 38-71-310, 38-71-720, or 38-71-740, as appropriate, and 37 comply with all applicable sections of Chapter 71 of this title and, 38 in addition, in the case of long term care insurance, Chapter 72 of 39 this title.” 40 41 SECTION 21. Section 38-61-40 of the 1976 Code, as last 42 amended by Act 181 of 1993, is further amended to read: 43

1 [601] 18 1 “Section 38-61-40. All insurers licensed to transact insurance 2 business in this State shall comply with the standards prescribed by 3 regulation of the department. The director or his designee is 4 empowered to recall withdraw approval or certification on all 5 existing policies of commonly purchased insurance that do not 6 comply with Section 38-61-30.” 7 8 SECTION 22. Section 38-65-60(3) of the 1976 Code, as last 9 amended by Act 181 of 1993, is further amended to read: 10 11 “(3) Upon request of the director or his designee, copies of 12 policies and certificates under a policy of group life insurance 13 issued outside this State and covering residents of this State must 14 be made available on an informational basis only. However, 15 mass-marketed life insurance policies and certificates shall must 16 have prior approval of the director or his designee pursuant to 17 Section 38 - 61 - 20 before they can be offered for sale to residents of 18 this State.” 19 20 SECTION 23. Section 38-71-310(A) and (F) of the 1976 Code, 21 as last amended by Act 411 of 1998, are further amended to read: 22 23 “(A) No A policy or certificate of accident, health, or accident 24 and health insurance may not be issued or delivered in this State, 25 nor may any application, endorsement, or rider which becomes a 26 part of the policy be used, until a copy of its form has been filed 27 with and approved by the director or his designee, except as 28 exempted by regulation of the department the director or his 29 designee as permitted by Section 38-61-20. The director or his 30 designee may disapprove the form if the form: 31 (1) does not meet the requirements of law,; 32 (2) contains any provisions which are unfair, deceptive, 33 ambiguous, misleading, or unfairly discriminatory,; or 34 (3) is going to be solicited by means of advertising, 35 communication, or dissemination of information which is 36 deceptive or misleading. 37 The director or his designee shall notify in writing, as soon as is 38 practicable, the insurer which that has filed the form of his 39 approval or disapproval. In the event of disapproval If the form is 40 disapproved, the notice must contain the reasons for disapproval, 41 and the insurer is entitled to a public hearing thereon on that 42 decision. If no action has been is not taken to approve or 43 disapprove a policy or certificate, application, endorsement, or

1 [601] 19 1 rider after the documents have document has been filed for ninety 2 thirty days, they are it is deemed to be approved. The director or 3 his designee, in his discretion, may extend for up to an additional 4 sixty days the period for approval or disapproval of the form. An 5 organization may not use a form deemed approved pursuant to the 6 default provision of this section until the organization has filed 7 with the director or his designee a written notice of its intent to use 8 the form. The notice must be filed in the office of the director at 9 least ten days before the organization uses the form. 10 (F) Nothing in this chapter precludes the issuance of an 11 individual accident, health, or accident and health insurance policy 12 that includes an optional life insurance rider. However, the 13 optional life insurance rider must be filed with and approved by 14 the director or his designee pursuant to Section 38-61-20 and 15 comply with all applicable sections of Chapter 63 and, in addition, 16 in the case of a life insurance rider with accelerated long term care 17 benefits, Chapter 72 of this title.” 18 19 SECTION 24. Section 38-71-720 of the 1976 Code, as last 20 amended by Act 411 of 1998, is further amended to read: 21 22 “Section 38-71-720. (A) A policy or contract of group 23 accident, group health, or group accident and health insurance may 24 not be issued or delivered in this State, nor may any application, 25 endorsement, or rider which becomes a part of the policy be used, 26 until a copy of the form has been filed with and approved by the 27 director or his designee except as exempted by regulation of the 28 department the director or his designee as permitted by Section 29 38-61-20. The director or his designee may disapprove the form if 30 the form: 31 (1) does not meet the requirements of law; 32 (2) contains provisions which are unfair, deceptive, 33 ambiguous, misleading, or unfairly discriminatory; or 34 (3) is going to be solicited by means of advertising, 35 communication, or dissemination of information which is 36 deceptive or misleading. 37 However, If no action has been is not taken to approve or 38 disapprove a policy, contract, certificate, application, endorsement, 39 or rider after the documents have document has been filed for 40 ninety thirty days, the it may be issued and delivered until or 41 unless subsequently disapproved by the director or his designee is 42 deemed to be approved. This time period may be extended thirty 43 days if the director or his designee gives written notice to the filer

1 [601] 20 1 that he needs additional time to review the filing. The director or 2 his designee, in his discretion, may extend for up to an additional 3 sixty days the time period for approval or disapproval of the form. 4 An organization may not use a form deemed approved pursuant to 5 the default provision of this section until the organization has filed 6 with the director or his designee a written notice of its intent to use 7 the form. The notice must be filed in the office of the director at 8 least ten days before the organization uses the form. The director 9 or his designee, as soon as is practicable, shall notify in writing the 10 insurer which has filed the form of his approval or disapproval. If 11 the form is disapproved, the notice must contain the reasons for 12 disapproval and the insurer is entitled to a public hearing on it that 13 decision. At any time after having given written approval, the 14 director or his designee, after a public hearing of which at least 15 thirty days’ written notice has been given, may withdraw approval 16 if he finds that the forms form: 17 (1) do does not meet the requirements of law; 18 (2) contain contains provisions which are unfair, deceptive, 19 ambiguous, misleading, or unfairly discriminatory; or 20 (3) are being is solicited by means of advertising, 21 communication, or dissemination of information which is 22 deceptive or misleading. 23 The withdrawal of approval must be effected by written notice 24 to the insurer and the insurer is entitled to a public hearing on it 25 that decision. Any action or decision of the director or his designee 26 to withdraw approval may be appealed to the Administrative Law 27 Judge Division in accordance with Section 38-3-210. 28 (B) Nothing in this chapter precludes the issuance of a policy or 29 contract of group accident, group health, or group accident and 30 health insurance that includes an optional life insurance rider. 31 However, the optional life insurance rider must be filed with and 32 approved by the director or his designee pursuant to Section 33 38-61-20 and comply with all applicable sections of Chapter 65 34 and, in addition, in the case of a life insurance rider with 35 accelerated long term care benefits, Chapter 72 of this title.” 36 37 SECTION 25. Section 38-71-750(3) of the 1976 Code, as last 38 amended by Act 181 of 1993, is further amended to read: 39 40 “(3) Upon request of the director or his designee, copies of 41 policies and certificates under a policy of group accident, group 42 health, or group accident and health insurance issued outside this 43 State and covering residents of this State must be made available

1 [601] 21 1 on an informational basis only. However, mass-marketed accident, 2 health, or accident and health insurance policies and certificates 3 shall must receive prior approval of the director or his designee 4 pursuant to Section 38 - 71 - 720 before they can be offered for sale 5 to residents of this State.” 6 7 SECTION 26. Section 38-71-1370 of the 1976 Code, as 8 amended by Act 5 of 1997, is further amended to read: 9 10 “Section 38-71-1370. ‘(A) Except to the extent inconsistent with 11 specific provisions of this article, all provisions of Article 5, are 12 applicable to any insurance plans required to be offered by small 13 employer insurers. 14 (B) Late enrollees may be excluded from coverage for the 15 greater of eighteen months or an eighteen-month preexisting 16 condition exclusion; however, if both a period of exclusion from 17 coverage and a preexisting condition exclusion are applicable to a 18 late enrollee, the combined period may not exceed eighteen 19 months.” 20 21 SECTION 27. Section 38-71-1980(F)(3) and (4) of the 1976 22 Code, as added by Act 380 of 2000, is amended to read: 23 24 “(3) If the notice provided pursuant to subsection (H)(1) (F)(1) 25 was not in writing, within two days after the date of providing that 26 notice, the independent review organization shall: 27 (a) provide written confirmation of the decision to the 28 covered person or his authorized representative and the health 29 carrier; and 30 (b) include the information set forth in Section 31 38-71-1970(H)(3). 32 (4) As expeditiously as reasonably possible after receipt of the 33 notice of a decision pursuant to subsection (H)(1) (F)(1) reversing 34 the adverse determination or final adverse determination, the 35 health carrier shall approve the covered benefit that was the subject 36 of the adverse determination or final adverse determination, 37 subject to applicable contract exclusions, limitations, or other 38 provisions.” 39 40 SECTION 28. Section 38-73-1300 of the 1976 Code, as last 41 amended by Act 181 of 1993, is further amended to read: 42

1 [601] 22 1 “Section 38-73-1300. Any A member of or subscriber to a rating 2 organization to whom the provisions of Article 3 of this chapter 3 are applicable may make written application to the director or his 4 designee for permission to file a deviation modification from the 5 class rates loss costs, schedules, rating plans, or rules respecting 6 any kind of insurance or class of risk within a kind of insurance or 7 any combination thereof of them. The application shall must 8 specify the basis for the modification. A copy of the application 9 must be sent simultaneously to the rating organization.” 10 11 SECTION 29. Section 38-73-1310 of the 1976 Code, as last 12 amended by Act 181 of 1993, is further amended to read: 13 14 “Section 38-73-1310. Any A member of or subscriber to a rating 15 organization to whom the provisions of Article 5 of this chapter 16 are applicable may make written application to the department for 17 permission to file a uniform percentage decrease or increase to be 18 applied to the premiums produced by the rating system so filed for 19 a kind of insurance or for a class of insurance which is found by 20 the director or his designee to be a proper rating unit for the 21 application of such uniform percentage decrease or increase or for 22 a subdivision of a kind of insurance (a) comprised of a group of 23 manual classifications which is treated as a separate unit for 24 rate-making purposes or (b) for which separate expense provisions 25 are included in the filings of the rating organization. The 26 application shall must specify the basis for the modification and 27 must be accompanied by the data upon which the applicant relies. 28 A copy of the application and data must be sent simultaneously to 29 the rating organization.” 30 31 SECTION 30. Section 38-87-40(3)(a) of the 1976 Code, as 32 amended by Act 181 of 1993, is further amended to read: 33 34 “(a) Each risk retention group is liable for the payment of 35 premium taxes and taxes on premiums of direct business for risks 36 resident or located within this State and shall report to the director 37 or his designee the net premiums written for risks resident or 38 located within this State. Such risk retention group is subject to 39 taxation, including any applicable fines and penalties related 40 thereto, on the same basis as a foreign an admitted insurer.” 41 42 SECTION 31. Section 38-90-60(E) of the 1976 Code, as added 43 by Act 331 of 2000, is amended to read:

1 [601] 23 1 2 “(E) The articles of incorporation, the certificate issued pursuant 3 to subsection (D), and the organization fees required by Section 4 38-90-20(D) 33 - 1 - 220 must be transmitted to the Secretary of 5 State, who shall record both the articles of incorporation and the 6 certificate.” 7 8 SECTION 32. Section 38-90-140(A) and (B) of the 1976 Code, 9 as added by Act 331 of 2000, is amended to read: 10 11 “(A) A captive insurance company shall pay to the director 12 department by March 1 of each year, a tax at the rate of four-tenths 13 of one percent on the first twenty million dollars and three-tenths 14 of one percent on the next twenty million dollars and two-tenths of 15 one percent on the next twenty million dollars and seventy-five 16 thousandths of one percent on each dollar thereafter on the direct 17 premiums collected or contracted for on policies or contracts of 18 insurance written by the captive insurance company during the 19 year ending December 31 next preceding, after deducting from the 20 direct premiums subject to the tax the amounts paid to 21 policyholders as return premiums which shall include dividends on 22 unabsorbed premiums or premium deposits returned or credited to 23 policyholders. 24 (B) A captive insurance company shall pay to the director 25 department by March 1 of each year, a tax at the rate of two 26 hundred and twenty-five thousandths of one percent on the first 27 twenty million dollars of assumed reinsurance premium, and one 28 hundred fifty thousandths of one percent on the next twenty 29 million dollars and fifty thousandths of one percent on the next 30 twenty million dollars and twenty-five thousandths of one percent 31 of each dollar thereafter. However, no reinsurance tax applies to 32 premiums for risks or portions of risks which are subject to 33 taxation on a direct basis pursuant to subsection (A). A premium 34 tax is not payable in connection with the receipt of assets in 35 exchange for the assumption of loss reserves and other liabilities of 36 another insurer under common ownership and control if the 37 transaction is part of a plan to discontinue the operations of the 38 other insurer and if the intent of the parties to the transaction is to 39 renew or maintain business with the captive insurance company.” 40 41 SECTION 33. Section 38-90-180(A) of the 1976 Code, as added 42 by Act 331 of 2000, is amended to read: 43

1 [601] 24 1 “(A) Except as otherwise provided in this section, the terms and 2 conditions set forth in Chapter Chapters 26 and 27 pertaining to 3 insurance reorganizations, receiverships, and injunctions apply in 4 full to captive insurance companies formed or licensed under this 5 chapter.” 6 7 SECTION 34. Section 56-10-240(A) of the 1976 Code, as 8 amended by Act 459 of 1996, is further amended to read: 9 10 “(A) If, during the period for which it is licensed, a motor 11 vehicle is or becomes an uninsured motor vehicle, then the vehicle 12 owner immediately shall obtain insurance on the vehicle or within 13 five days after the effective date of cancellation or expiration of his 14 liability insurance policy surrender the motor vehicle license plates 15 and registration certificates issued for the motor vehicle. If an 16 automobile liability insurance premium is not paid within five 17 working days after the last day to pay an automobile liability 18 insurance the premium, whether it is the premium due date or a 19 grace period that is granted customarily or contractually, a motor 20 vehicle is an uninsured motor vehicle, and the insurer shall give 21 written notice, or notice by magnetic or electronic media in a 22 manner considered satisfactory to the department, within ten days 23 after the five-day period ends, in addition to that notice previously 24 given in accordance with law, by delivery under United States Post 25 Office bulk certified mail, return receipt requested, to the 26 department of the cancellation or refusal to renew under the 27 following circumstances: 28 (1) if the lapse or termination of such insurance or security 29 occurs within three months of issuance, provided that this 30 subsection only applies to new policies, and not renewal or 31 replacement policies; or 32 (2) the lapse or termination occurs after three months for a 33 resident who fails one or more of the objective standards 34 prescribed in Section 38-73-455.” 35 36 SECTION 35. Section 56-10-280 of the 1976 Code, as amended 37 by Act 181 of 1993, is further amended to read: 38 39 “Section 56-10-280. (A) Contracts or policies of insurance 40 issued to meet the financial responsibility requirements prescribed 41 in this chapter must be issued for not less than six months. A 42 contract or policy of insurance remains in effect at least sixty days 43 notwithstanding a power of attorney which may purport to give the

1 [601] 25 1 attorney-in-fact the right to effect cancellation on behalf of the 2 insured. However, a contract or policy may be canceled within the 3 first sixty days only under one or more of the following 4 circumstances: 5 (1) a check or bank draft tendered by the insured for 6 payment of premium to an agent, an insurance company, or a 7 premium finance company is returned unpaid for insufficient funds 8 or other reason by the insured’s financial institution. If the check 9 or draft is an initial payment made by an applicant for insurance or 10 a payment made by an insured to renew a policy, the cancellation 11 is effective as of the policy inception or renewal date. 12 (2) the insured produces satisfactory proof from the 13 department that he has sold or otherwise disposed of the insured 14 vehicle or surrendered its tags and registration. 15 (3) the insured has secured another policy that meets the 16 financial responsibility requirements prescribed in this chapter. 17 (B) This section does not prohibit refunds to the insured for 18 cancellations after sixty days resulting from causes other than 19 nonpayment of premium. Where an insurance company or 20 premium finance company cancels a contract or policy pursuant to 21 this section for nonpayment of premium under the circumstances 22 in subsection (A) which occurs within the first sixty days, the 23 insurance company, premium finance company, or agent may 24 charge and collect a fifteen-dollar penalty in addition to that 25 otherwise provided by law, and the penalty charge is not a 26 premium charge.” 27 28 SECTION 36. The 1976 Code is amended by adding: 29 30 “Section 56-1-315 A violation of Section 56-1-460, driving 31 under suspension, must be dismissed by the Department of Public 32 Safety when: 33 (1) a person has been charged with driving under suspension 34 while his driver’s license is suspended because of an out-of-state 35 motor vehicle violation; and 36 (2) the person obtains a resolution to the out-of-state motor 37 vehicle violation that is considered satisfactory by the Department 38 of Public Safety.” 39 40 SECTION 37. Section 38-11-40(i) of the 1976 Code, as 41 amended by Act 181 of 1993, is further amended by adding at the 42 end:

1 [601] 26 1 “(4) If a life insurer, in obligations, or in commercial paper or 2 bankers’ acceptances, or similar evidences of indebtedness 3 customarily issued at a discount from principal value, issued, 4 assumed, or guaranteed by any business entity created or existing 5 under the laws of the United States, or any state, which are not in 6 default as to principal or interest; provided, that either the 7 obligation is or the issuing, assuming or guaranteeing business 8 entity’s or business entities’ long-term obligations are rated one of 9 the four highest grades by any of the nationally recognized 10 statistical rating organizations recognized by the NAIC-SVO or 11 one or two by the NAIC-SVO. 12 As used in this subitem, ‘business entity’ means a sole 13 proprietorship, corporation, limited liability company, association, 14 general or limited partnership, joint stock company, joint venture, 15 mutual fund, bank, trust, real estate investment trust, joint tenancy, 16 or other similar form of business organization, whether organized 17 for-profit or not-for-profit. 18 As used in this subitem, ‘obligation’ means a bond, note, 19 debenture, trust certificate including an equipment trust certificate, 20 production payment, negotiable bank certificate of deposit, 21 bankers’ acceptance, asset-backed security, credit tenant loan, loan 22 secured by financing a net lease or net leases, and other evidence 23 of indebtedness for the payment of money (or participations, 24 certificates or other evidences of an interest in any of the 25 foregoing), whether constituting a general obligation of the issuer 26 or payable only out of certain revenues or certain funds pledged or 27 otherwise dedicated for payment.” 28 29 SECTION 38. Section 38-11-40 of the 1976 Code, as amended 30 by Act 181 of 1993 is further amended by adding at the end: 31 32 “(t) If a life insurer, foreign investments, other than Canadian 33 investments, of substantially the same types as those that an 34 insurer is permitted to acquire under this chapter.” 35 36 SECTION 39. Section 38-11-50(A)(4) of the 1976 Code, as last 37 amended by Act 181 of 1993, is further amended to read: 38 39 “(4) Investments in Section 38-11-40(i)(1), (2), and(3) in the 40 aggregate may not exceed sixty-six and two-thirds percent of the 41 insurer’s policyholder obligations, nor may. However, 42 investments in Section 38 - 11 - 40(i)(4) may exceed sixty - six and 43 two - thirds percent of the insurer’s policyholder obligations. Not

1 [601] 27 1 more than ten percent of the insurer’s policyholder obligations 2 may be invested in one investment under Section 38 - 11 - 40(i).” 3 4 SECTION 40. Section 38-11-50(A) of the 1976 Code, as last 5 amended by Act 181 of 1993, is further amended by adding item 6 (12) to read: 7 8 “(12) Investments authorized pursuant to Section 38-11-40(t) 9 may not exceed twenty percent of the insurer’s policyholder 10 obligations, and the aggregate amount of such investments in a 11 single foreign jurisdiction may not exceed ten percent of its 12 policyholder obligations as to a foreign jurisdiction that has a 13 sovereign debt rating of SVO1, or an equivalent rating by a 14 nationally recognized statistical rating organization recognized by 15 the SVO, or three percent of its policyholder obligations as to any 16 other foreign jurisdiction.” 17 18 SECTION 41. Section 38-73-1320 of the 1976 Code is repealed. 19 20 SECTION 42. This act takes effect upon approval by the 21 Governor. 22 ----XX----

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