Opinion ID: 1288711
Heading Depth: 1
Heading Rank: 5

Heading: exempt commercial policy

Text: Plaintiff argues the policy at issue is not an exempt commercial policy as that term is defined in S.C.Code Ann. § 38-1-20(40) because Old Republic never sought or obtained Department's approval before selling such a policy. Old Republic contends the policy is an exempt commercial policy under the definition in effect at the time of Decedent's death in January 2002. The Legislature, defining the term for the first time, provided in 2000 that [e]xempt commercial policies means policies for large commercial insureds where the total combined premiums to be paid for these policies for one insured is greater than $50,000 annually and as may be further provided for in regulation or in bulletins issued by the director. Exempt commercial policies include all property and casualty coverages except for commercial property and insurance related to credit transactions written through financial institutions. Act No. 235 § 1, 2000 S.C. Acts 1680 (effective March 7, 2000, and codified at S.C.Code Ann. § 38-1-20(40) (2002)). This provision was in effect at the time of the fatal wreck. [1] Act No. 235 further provided [i]t is unlawful for an insurer doing business in this State to issue or sell in this state any exempt commercial policy, contract or certificate until it has been filed with and approved by the director or his designee. A filing that is filed with the department is deemed to have met the requirements of this chapter unless it (1) does not meet the requirements of law, (2) contains any provisions which are unfair, deceptive, ambiguous, misleading, or unfairly discriminatory, or (3) is going to be solicited by means of advertising, communication, or dissemination of information which is deceptive or misleading. If a filing is not in compliance with this chapter, the director or his designee shall issue an order specifying in detail the provisions with which the insurer has not complied and stating the time within which the insurer has to comply with the order before the filing is no longer valid. An order issued by the director pursuant to this section must be on a prospective basis only and may not affect a contract issued or made before the effective date of the order. Act No. 235 § 4, 2000 Acts 1681 (codified at S.C.Code Ann. § 38-61-25 (2002)). Under this provision, it is apparent the Legislature intended to allow issuers of exempt commercial policies to file a policy form with Department, and it would be deemed approved unless Department subsequently issued an order to the contrary. See also Act No. 235 § 3, 2000 Acts 1680 (providing that insurers which issue exempt commercial policies are not required to obtain approval from Department before selling them) (codified at S.C.Code Ann. § 38-61-20(A) (Supp.2004)). The Legislature further provided that sellers of exempt commercial policies are not required to file rate schedules and plans with Department. Act No. 235 §§ 6-7, 2000 Acts 1682-83 (codified at S.C.Code Ann. §§ 38-73-340 and -520 (Supp. 2004)); [2] see also Act No. 235 § 8, 2000 Acts 1683 (providing that statute requiring notice of hearings on rate increases does not apply to exempt commercial policies, which are not subject to prior approval by Department) (codified at S.C.Code Ann. § 38-73-910(G) (2002)). Department has promulgated regulations which for the most part track the language of the previously cited statutes. The regulations provide that [n]o insurer of exempt commercial policies will be required to file any classification, rate, rule, or rating plan, or modifications thereof, for any exempt commercial insurance line prior to its use in this state. An insurer issuing an exempt commercial policy must file the policy form with Department and must maintain a desk file of such forms for examination by Department upon request. Department, after reviewing such a policy form, may disapprove the form for continued use on a prospective basis. S.C.Code Ann. Reg. 69-64 (Supp.2004) (effective June 27, 2003). Lastly, the Legislature amended a provision contained in Chapter 73 of Title 38, which deals with the filing and approval of certain insurance rates. The Legislature added a subsection in the Declaration of Purpose provisions to state that a purpose of the chapter is to provide for reasonable competition for commercial property and casualty insurers of insureds who make large purchases of insurance. Act No. 235 § 5, 2000 Acts 1681 (codified at S.C.Code Ann. § 38-73-10(a)(4) (2002)); see also Act No. 181 § 783, 1993 Acts 2079 (setting forth previous version of § 38-73-10(a)). Based on the above provisions and focusing primarily on Act No. 235 which took effect in 2000, we answer Question 1 yes, the policy at issue is an exempt commercial policy pursuant to S.C.Code Ann. § 38-1-20(40) (2002). The combined premium for the policy at issue exceeded $50,000 annually and the policy provided casualty coverage. Old Republic's failure to seek or obtain Department's approval of the policy before selling it does not change the nature of the policy. Old Republic was required to file the policy form with Department, but was not required to obtain Department's approval before selling such policies. Department may impose an administrative fine on Old Republic for failing to follow the filing requirements. See S.C.Code Ann. § 38-2-10 (2002).