Act 424 -- Workers' Compensation: Back Injury
H. 3838 -- House Labor, Commerce and Industry Committee

H. 3838 is the most significant workers' compensation proposal passed during the last two decades. The act provides sweeping revisions for workers' compensation, impacting more than 75,000 employers and 1.6 million workers. The legislation aims to update a sixty year old system and provide more consistent and equitable workers' compensation coverage.

Administrative Changes
"Average Weekly Wages" -- Method of Calculation Simplified (Section 1): total wages paid to the injured employee for the preceding four quarters and dividing this total wage figure by the lesser of 52 or actual number of weeks paid. Changing the calculation method is a projected cost saving measure.

Prohibits certain acts of health care providers until final adjudication (Section 7):

prohibits a health care provider from actively pursuing collection procedures against workers' compensation claimants until their claims are finally adjudicated.

No report for injury with minimal medical attention (Section 8):

Employers are not required to send a report of an injury which requires minimal medical attention and which does not cause more than one lost workday or permanency. However, the employer must maintain a record of the injury and pay directly the incurred medical cost.

Work Related Stress (Section 2): Provides a statutory definition of stress claims for the first time, defining work related stress claims and the benefits available to the employee. In the absence of code provisions, court cases have supplied guidelines for work related stress claims. This legislation provides statutory guidelines.

Start/Stop Payment (Section 6): Allows employers to start and stop payments of temporary total disability without prejudice for up to 150 days from the date the injury is reported if: (a) the employee has returned to work; (b) the employee agrees that he is able to return to work; (c) good faith investigation by the employer reveals grounds for denial of the claim; (d) the employee has been released by the treating physician to work without restriction and the employer offers comparable employment; or (e) the employee has been released by the treating physician to limited duty work; or (f) the employee refuses medical treatment, as provided in Section , or refuses an examination or evaluation, as provided in Section , and the termination or suspension of benefits continues until the refusal ceases or the commission determines the refusal is justified pursuant to either Section or .

An employee whose disability payments have been terminated or suspended pursuant to this section may request a hearing to have the payments reinstated and such hearing must be held within 60 days of the date of request.

If an employee has been declared as having reached maximum medical improvement, the employer may request a hearing to address the termination of temporary disability payments. The hearing must be held within sixty days of the date of the employer's request for a hearing. An employer may request a hearing at any time to address termination or reduction of temporary disability payments.

After the one-hundred-fifty-day period has expired, the commission shall provide by regulation the method and procedure by which benefits may be suspended or terminated for any cause -- in other words the current procedure applies (the hearing cannot stop without commission order).

If the employer decides to start payments: Employers that begin payment of workers' compensation benefits waive many defense rights and can experience costs of up to approximately $6,800 during the average four months wait for a commission hearing. This cost is unrecoverable by the employer, even if the Commission rules in the employer's favor (fraudulent claims, etc.). Prior to this legislation, only fourteen days were allowed for an employer to investigate the validity of a claim under the workers' compensation laws before that employer had to commit itself to payment of benefits. The start/stop payment provision of this act encourages employers to begin payments without fear of waiving any defenses.

Even with this legislation, the employer/insurance carrier does not have to start payment of temporary total disability payments. However, if such payments are commenced, then this provision governs and payments can be stopped without a Commission hearing under certain conditions during the 150 day period.

Optional Deductibles (Section 9): As of July 1, 1996, workers' compensation insurance carriers are required to offer, as a part of the policy or as an optional endorsement to the policy, deductibles optional to the employer (policyholder) for workers' compensation benefits. Deductible amounts offered must be disclosed fully to the prospective policyholder in writing and can be in the amount of $100, $200, $300, $400, $500, or increments of $500 up to a maximum of $2,500 for each compensable claim. These deductibles allow the employer the option to pay for small claims "out of pocket" in exchange for a lower workers' compensation insurance premium. The employer may decide which deductible amount would be affordable as an "out of pocket expense." Currently, insurers may allow an employer to have a larger deductible, usually over $10,000.

Repeal of the "Opt-Out" Provision; Corporate Officers Excepted (Sections 3, 4, 5, 10, 11, & 12): An employer with four or more employees shall operate within the workers' compensation system by purchasing workers' compensation insurance or by becoming self-insured. Corporate officers are, however, excepted under the rationale that their sophistication and their extensive experience and education afford them more leverage in negotiating their benefit packages. Many officers are acting in name only or because of their largely managerial/administrative role, have very little physical involvement with the manual labor duties of the company.

Section 13: Those employers who have opted out of the system have until July 1, 1997 to obtain workers' compensation coverage or become self-insured. Furthermore, any cause of action, right, or claim accruing before the effective date of this act shall not be affected or altered; however, any such cause of action, remedy, or claim accruing before the effective date of this act shall be governed by the law prior to the effective date of this act.

Signed June 18, 1996.

Act 320 -- Workers' Compensation: Exemption of Subcontractors from Liability for Injury Unless Responsibility is Contractually Assumed
H. 3909 -- Representative David Wright

The purpose of this legislation is to limit the exposure of architects, engineers, land surveyors, and landscape architects from third party liability lawsuits which are brought by workers of others who are injured on construction sites through no fault of the architect, engineer, land surveyor, or landscape architect. The act provides that an architect, engineer, land surveyor, or landscape architect who is retained to perform professional services on a construction project is not liable in any action brought pursuant to Section for any injury resulting from the employer's (general contractor's) failure to comply with safety standards on a construction project for which compensation is recoverable under this title, unless responsibility for safety practices is specifically assumed by contract or by direct supervision or continual direction of the injured employee relative to the segment of the job which results in the injury.

Increasingly, construction workers injured on the job site are suing the design professional on construction projects, even when the design firms have no job safety responsibility. These suits are in addition to the employees' workers' compensation claims. Thirteen (13) states have adopted similar legislation to protect design professionals from meritless claims by injured workers.

This act does not bar an employee's right to file a third party action against the design professional who may have been responsible for or contributed to the employee's injury.

Signed May 20, 1996.

Act 300 -- Insurance: Monetary Thresholds for Notices to the Public and Public Hearings on Applications for Rate Increases
H. 3985 -- Representative Scott Richardson

With this legislation, the General Assembly updates and streamlines the process which an insurer must undergo to raise insurance rates. Under the act, an insurer who applies to raise rates on a line of coverage for which he earned less than $2 million in premiums in the previous calendar year is exempt from the requirement of publishing thirty days notice of the increase in statewide newspapers. Under previous law, the threshold for this exemption was set at $500,000 -- a figure based upon the 1960 Consumer Price Index and never updated. To prevent future stagnation, this legislation requires that the dollar figure for the threshold be updated every three years.

Raising the threshold and arranging for its regular revision is intended to reduce the burden on the Administrative Law Judge Division and cut other administrative costs. That is also the aim of another of the act's provisions which alters the public hearings involved in rate increases. When an insurer who earns above the new $2 million threshold mark intends to raise rates, a public hearing is, under the act, no longer mandatory, but is held only if requested by an affected party. Thirty days public notice in statewide newspapers is still required for such increases, and all increases, irrespective of the new $2 million threshold, must be reviewed and approved by the Insurance Commissioner.

Became law without signature of the Governor on May 7, 1996.

Act 301 -- Manufactured Housing Act Modifications
H. 4064 -- Representative Harry Cato

This legislation requires manufactured home contractors, installers, and repairers to be licensed by the Manufactured Housing Board in the same manner that manufactured home retail dealers, retail salesmen, and manufacturers are licensed.

Act 301 adds a licensed manufactured home contractor, installer or repairer to the Manufactured Housing Board, increasing the Board's membership to ten members. In addition, this act provides warranty provisions for manufactured home contractors, installers, and/or repairers. Finally, the act requires that persons moving or hauling a new mobile home on the interstate highways travel at speeds no greater than ten miles below the posted speed limit.

Signed May 6, 1996.

Act 326 -- Auto Insurance: Mandate to Write Physical Damage Coverage Repealed
H. 4490 -- House Labor, Commerce and Industry Committee

H. 4490 repeals the mandate to write physical damage coverage (collision, comprehensive, fire, theft) for persons who do not have any insurance points. Beginning October 1, 1996, losses attributable to physical damage will no longer contribute to those of the Reinsurance Facility. During fiscal year 1994-95, the losses in the Facility attributable to comprehensive and collision coverage for nonpointed risks in the facility were $47,907,386 or 29% of the $165,390,713 total losses. Whereas, one year before, such losses were $32,809,985 or 23% of the total losses. Physical damage losses are one of the fastest growing contributing factors with facility losses.

This legislation was passed with the hope that removing the mandate will encourage competitive rates by attracting additional insurance companies to South Carolina who will offer this coverage. According to the South Carolina Department of Insurance, insurance companies (some of which stopped doing business in the State in ) indicated prior to the passage of this act that they would re-enter the South Carolina market and sell comprehensive and collision coverage. Currently, insurance companies are in the process of complying with the necessary regulatory procedures to re-enter and to sell such comprehensive and collision policies in the state. Insurers will compete for the "best risks" by lowering rates. Thus, a portion of the driving public may get a better rate than they currently have -- particularly that group of individuals which have been subsidizing other high risk drivers.

Prior to the passage of this bill, South Carolina was the only state in the nation which had a mandate to write these types of coverage for any group.

State law already allowed insurers to refuse to write physical damage coverage for a person who fails objective standards (pointed drivers). In 1992, the General Assembly also allowed this for any person who does not qualify for the safe driver discount. Since October 1, 1992, about 13% to 18% of the insured public has been operating in the free-market, non-mandated system.

A "nonpointed" driver with full coverage previously paid approximately 23% of his recoupment fee for physical damage losses ($11.33 of the $49.48 recoupment fee for July 1, 1995 to June 30, 1996). Effective July 1, 1996, the portion of the recoupment fee for physical damage coverage for the same driver increases to one-third or 33% of the total recoupment charge ($16.39 of the $50.33 total).

This legislation contains a strong anti-discrimination clause that prohibits an insurer, agent, or broker from refusing to write or renew physical damage insurance or single interest collision coverage based upon race, color, creed, religion, national origin, ancestry, location of residence in this state, economic status, or income level. Neither may these factors be used in the determination of rates for physical damage coverage or single interest collision coverage. If the insurer participates in discriminatory practices, the Insurance Director may impose a fine on the insurer of up to $200,000. Also, the Insurance Director can examine any insurer, agent, or broker at any time to enforce this antidiscriminatory provision.

This legislation does not affect liability insurance coverage which every driver must have on his motor vehicle before operating on the road. The law still requires every insurance carrier (or designated agent) to issue an automobile liability insurance policy to licensed drivers applying for coverage.

An insurance company, with the assistance of its underwriters, evaluates a driver's risk and determines whether or not to place that driver in the Reinsurance Facility. Items considered in this determination include type of car, length of daily commute to work, etc. Different insurance companies view risk in varying ways. For example, not every insured driver who is under 25 years of age, who is over 65 years of age, or who has a speeding violation is in the facility.

This legislation affects those drivers who qualify for the safe driver discount but who are, for other reasons, considered too risky for insurance companies to cover voluntarily. When these drivers are ceded to the Reinsurance Facility, they will receive physical damage coverage that is held at a self-sustaining rate. That is, the Reinsurance Facility will set rates to cover all physical damage losses experienced by this group of drivers. Drivers outside the facility will no longer absorb these physical damage losses through recoupment fees. Of the 2.2 million insured private passenger vehicles registered in the State, the South Carolina Department of Insurance estimates that this new facility rate for comprehensive and collision coverage is only expected to apply to some 250,000 to 300,000 insured vehicles where the owner of the vehicle cannot find an insurance company to voluntarily write his physical damage coverage in the open market.

This legislation takes effect on October 1, 1996, and the facility is instructed to develop and file the facility rate for comprehensive and collision coverage before that date.

Starting July 1, 1998 (provided the existing comprehensive and collision claims in the current facility fiscal year are resolved by October 1st, 1996) but no later than July 1st, 1999, no portion of the recoupment fees should be attributable to physical damage coverage.

Beginning on October 1, 1996, the facility can have no further losses from comprehensive and collision coverage. However, there are comprehensive and collision losses accumulated during the current facility fiscal year (October 1, 1995 through September 30, 1996) from accident claims of drivers in the facility. The recoupment fees based on these losses will be filed with the Department of Insurance by the facility around November or December 1996 for approval and review before the Administrative Law Judge Division. Once approved, these recoupment fees will be used from July 1, 1997 to June 30, 1998 to recoup the losses from October 1, 1995 to September 30, 1996. Therefore, all losses from comprehensive and collision claims should be recouped by July 1st, 1998, unless a claim made in the current facility fiscal year (10/1/95 thru 9/30/96) is not resolved by October 1st, 1996. For example, if a driver is involved in an accident on September 27, 1996, and he makes a collision claim, that driver may have a dispute with the adjuster over the value of the damage, or there may be an investigation into the facts surrounding the accident (whether the driver was at fault, whether the car was totaled, etc.). It may not be possible to resolve this matter prior to October 1st, 1996.

Signed May 20, 1996.

Act 491 -- Department of Insurance Regulation: Repeal of the Uniform Auto Classification and Territorial Plan
S. 1361 -- Senate Banking and Insurance Committee

The South Carolina Department of Insurance proposes to repeal, in its entirety, Regulation 69-13.4, which establishes the risk classifications and territories for automobile insurance. The Department will promulgate the revised plans by order as provided by statutory law (Section of the SC Code).

At present, auto insurers must make use of eight rating territories into which all of the state's drivers are divided according to county of residence. Currently, insurers also make use of several risk classifications for private passenger automobiles owned or leased (for example: "1A" Classification where there is no operator under 25 years of age, the automobile is not used for business, nor driven to or from work or school.)

The director (formerly the Commissioner) of the Department of Insurance has had the authority to establish both the territory and classification plan for automobiles since, at least, the passage of Act 1174 of 1974 which established the state's current auto insurance system. However, the Commissioner at that time opted to utilize his broad authority to establish these plans by regulation in 1976. Prior to passage of Act 491, the territory and classification plan for automobile insurance has not been altered since adoption by the General Assembly in 1976.

The South Carolina Department of Insurance estimates that there will be no additional cost incurred in repealing this regulation.

Signed May 20, 1996.

Act 354 -- Telecommunications: Incumbent and Small Local Exchange Carriers (LECs)
H. 4694 -- Representative James Harrison

Since the breakup of the Bell System in 1984, the pace of change in the telecommunications industry has continued to accelerate. Other companies compete for telephone services that were once provided exclusively by local exchange companies like Southern Bell. The industry has been radically "restructured" by federal government policy, technological innovations, increased competition, and most recently, mergers and acquisitions. In reaction to federal legislation signed by President Clinton on February 8, 1996, Act 354 aims to "cushion" the initial shock to the market and keep basic services affordable in those rural areas which are not attractive to the new competitors entering the market.

This measure allows the Public Service Commission to grant a certificate to operate a telephone company to applicants proposing to furnish local telephone service in the service territory of an incumbent local exchange carrier (ie. the prior existing carrier in that region), subject to the conditions and exemptions stated in this section and in applicable federal law. In determining whether or not to grant a certificate under this provision, there are certain considerations for the commission to review in the interest of the public.

The act also allows cost redistribution by establishing a Universal Service Fund into which all telecommunications companies will contribute based upon their intrastate gross revenues and out of which funds will be distributed to carriers where the cost of providing basic local phone service exceeds the maximum price permitted.

This act also allows the local exchange carrier or small local exchange carrier to elect price regulation in lieu of other forms of regulations (traditional rate of return or rate base monitoring regulation) by filing notice with the Public Service Commission, provided the commission has approved a local interconnection agreement in which such local exchange carrier is a participant or the commission determines that another provider's service competes with such local exchange carrier's basic local exchange telephone service.

Furthermore, any incumbent local exchange carrier operating under an alternative regulatory plan approved by the commission before the effective date of this section must continue to adhere to such plan until such time as the plan expires or is terminated by the commission.

Signed May 29, 1996.

Act 329 -- Limited Account Services: Off-site Account Openings
H. 4701 -- Representative Harold Worley

The act is primarily designed to provide a convenience for young adults attending a college or university away from home who wish to open personal checking accounts. This legislation ensures that banks and other financial institutions will be able to offer new deposit (checking and savings) accounts at public events or commercial locations. Prior agreement between the bank and the event sponsor is required before the bank may provide these services.

Only new off-site deposit accounts are allowed under this legislation. For example, the bill would not authorize banks to make loans, provide investment services, or provide other banking services other than opening new checking or savings accounts.

Became law without signature of the Governor on May 21, 1996.

Act 451 -- Workers' Compensation: Servicing Carriers of the Workers' Compensation Assigned Risk Pool
H. 4755 -- Representative David Wright

Although H. 4755 allows insurers to continue entering into assigned risk agreements which will equitably apportion among them applicants who have been unable to obtain workers' compensation coverage in the voluntary market, the director of the Department of Insurance is given more authority to regulate this residual market mechanism. With the director's approval, the Department may establish a competitive bidding process for servicing carriers of the pool.

Prior Approval of Agreement and Mechanism by Insurance Director

The residual market agreement and any mechanism designed to implement such agreement, along with any amendments, must be submitted in writing to the Director for his approval prior to use.

If, after a hearing, the director finds that any activity or practice of insurers participating in the residual market mechanism is unfair, unreasonable, or otherwise inconsistent with the provisions of the state's insurance laws, the director must issue a written order that specifies in what respects such activity or practice is unfair, unreasonable, or otherwise inconsistent with the insurance laws. In his order the director must require the discontinuance of such activity or practice. Upon such finding that the existing residual market mechanism is unfair, unreasonable, or inconsistent with the provisions of this chapter, the director may establish an Assigned Risk Plan or mechanism to implement assigned risk agreements by written order.

Submission of Requests to Insurance Director for State Servicing Carrier Status and Bidding Procedure

The servicing carriers for the workers' compensation assigned risk pool may be selected through competitive bidding. If the pool is competitively bid, then the Insurance Director must appoint a committee or committees of persons he deems qualified to establish standards and procedures for the consideration and evaluation of bids. Both insurers and "other vendors in conjunction with a licensed workers' compensation insurer" may submit bids. This is the first time that someone other than an insurance carrier may be a servicing carrier.

The committee or committees appointed by the Insurance Director must evaluate and award contracts pursuant to the bidding process it establishes, subject to the final approval of the Insurance Director or his designee. The director may require a bid fee to cover the expenses of implementing the bidding process.

National Guard -- Clarity and No "Double Dipping" in both state and federal systems

Current law is amended to exclude from state workers' compensation coverage those duties of National Guard members which are not ordered by the Governor of the State. Such duties are not legally recognized as compensable under the state workers' compensation system, but are compensable under the federal program. This provision is intended to prevent Guardsmen from receiving, or appearing to receive, both state and federal workers' compensation benefits.

This bill takes effect upon approval by the Governor.

Signed June 18, 1996.

Act 310 -- South Carolina Banking and Branching Efficiency Act of 1996
H. 4790 -- House Labor, Commerce and Industry Committee

This act was passed to comply with federal interstate banking law. Twenty-four (24) other states have enacted legislation similar to H. 4790.

Nationally chartered banks (i.e., Wachovia, Nationsbank) already enjoy the features of the federal act. This bill levels the playing field, providing parity for state and federally chartered banks operating in South Carolina.

The bill seeks to provide:

Customer convenience;

Coordination of bank holding company(s) to facilitate ease of examination of multi-state banks;

Parity for state chartered banks to provide services at other branches in-state and out-of-state for deposits, loan payments, and checks;

Increased efficiency through the elimination of duplicated services; and

The bill also includes a provision prohibiting "de novo branching" or direct branching as outlined under federal law. "De novo branching" is the acquisition of an existing branch separate from the acquisition of a charter.

Any pending applicant would have the option of notifying the Board of Financial Institutions within 30 days of the effective date of this act, that it (the applicant) is electing to go under the new procedure set forth in this bill. If no written election is made, the applicant would continue to operate under the law existing prior to this bill.

Became law without signature of the Governor on May 7, 1996.

Act 355 -- Loan Transactions: Choice of Attorney Form
H. 4795 -- Representative Margaret Gamble

This bill addresses the issue of a borrower's attorney and insurance agent preference in loan transactions secured by real estate. Act 355 requires that the preference information must be obtained prior to the loan closing, but deletes the requirement that the preference be contained on the first page of the application. The legislation also adjusts the time line for providing the preference information. The creditor may comply with the preference requirement by providing notice to the borrower no less than three (3) business days after the application is received or prepared.

Act 248 -- Demand, Savings, or Time Deposits Abandoned Under the Uniform Unclaimed Property Act
S. 296 -- Senator Robert Hayes

Act 248 codifies current banking practices in South Carolina as they relate to unclaimed or abandoned demand, savings, or time deposits. This legislation streamlines the process whereby the state's financial institutions and insurance companies must report abandoned property.

This legislation allows the South Carolina Department of Revenue to treat banks and financial institutions in the same manner as other corporate taxpayers with regard to abandoned property. It also modernizes and streamlines reporting and publishing requirements related to unclaimed or abandoned property. Passage of Act 248 means that financial institutions will no longer be required to submit information concerning the contents of lock boxes to the Department of Revenue before transferring the contents to the decedent's heirs. The legislation also deletes certain requirements relating to estate tax waivers.

Signed April 1, 1996.

Act 278 -- Insurance Fraud: Definition of Authorized Agency
S. 991 -- Senator Edward Saleeby

This bill, requested by the Insurance Fraud Division of the Attorney General's Office, makes changes in the "Omnibus Insurance Fraud And Reporting Immunity Act."

The definition of "authorized agency" is amended to add the State Accident Fund, the Second Injury Fund, the Employment Security Commission, the Human Affairs Commission, the Department of Consumer Affairs, the Department of Social Services, the Department of Health and Environmental Control, the Department of Labor, Licensing, and Regulation, the Department of Health and Human Services, and all other state boards, commissions, and agencies.

These additional entities will, like those entities already authorized, be required to report any knowledge or suspicion of insurance fraud. They will be immune from any liability arising out of filing reports, cooperating with investigations, or furnishing information concerning any suspected, anticipated or completed fraud.

Act 278 amends the definition of "false statement and misrepresentation" to include a statement or representation made with the intent of attempting to obtain or causing another to obtain an undeserved economic advantage or benefit. Prior to the passage of this act, there were no means of penalizing individuals for the improper attempt when that attempt proved unsuccessful. The legislation responds to complaints of attempted insurance fraud received by the Insurance Fraud Division.

The bill provides civil immunity to certain authorized individuals for sharing with other authorized individuals information relating to suspected fraudulent insurance acts. However, the insurer must provide the Department of Insurance with written notice of the names and job titles of those employees who are designated to share such information before information may be shared. A civil action does not arise against the insurer or designated employees for the sharing of such information to these entities or designated persons unless the designated employee acts in bad faith or in reckless disregard for the rights of any insured. This qualified immunity shall be forfeited if such information is shared, published, or exchanged with any unauthorized third person.

Signed May 6, 1996.

Act 335 -- Health Insurance: Childbirth Hospitalization
S. 1043 -- Senator Linda Short

S. 1043 provides that all individual and group health insurance and HMO policies providing hospitalization coverage for a mother and her newborn child or children must provide for the mother and her newborn(s) to remain in the hospital for a period not to exceed the second postpartum day after the vaginal delivery, not including the day of delivery, and the third post-operative day following a caesarian section, not including the date of surgery.

The attending physician retains his authority to decide that the mother and child stay longer or be released earlier than the lengths of time prescribed in this legislation.

The legislation was prompted by physician complaints that they were having to get approval to keep mothers in the hospital for more than twenty-four hours.

This act will not prohibit or discourage the practice of offering incentives to mothers for earlier hospital discharge. For instance, home health programs are generally provided by managed care carriers. These programs provide care and instruction for the patient at home rather than in the hospital. However, this program is normally not offered in non-managed care or indemnity policies. Also, other managed care carriers offer other incentives. For example, if the patient goes home early, she may be credited financially or she may be offered a reduction in her co-payment for subsequent visits to her and her child's physician.

Signed May 20, 1996.

Act 254 -- Insurance: Insurer Solvency Requirements (NAIC Accreditation)
S. 1044 -- Senator Glenn McConnell

This act requires insurers to maintain risk-based capital. Prior to this legislation, an insurer's capital and surplus requirements were set irrespective of risks undertaken by the insurer. The risk-based formulas enacted by this legislation can be used by the Department of Insurance to trigger regulatory actions against insurers whose assumed risks show evidence of deteriorating finances. The risk-based formulas are drawn by the National Association of Insurance Commissioners, and their enactment allows South Carolina's insurers to pass NAIC accreditation. Such accreditation is crucial for insurance companies which transact business in other states.

Signed April 1, 1996.

Act 358 -- Joint Power Agencies: Selling of Excess Power
S. 1054 -- Senator J. Verne Smith

S. 1054 narrows Public Service Commission approval requirements for projects which consist of the generation or transmission of electric power and energy designed to operate 125 kilovolts or more when undertaken by a joint power agency. The Commission's assessment of public convenience and necessity served by a project shall include an analysis of the benefit to the joint agency. However, there is no requirement for PSC approval of a project for transmission or of facilities for transmission of electric power or energy. These non-PSC approved projects must be approved by the joint agency's governing body. In addition, the joint agency may acquire, without PSC approval, a project that is wholly contained within the corporate limits of a municipality when the joint agency has the consent of the municipality's governing body.

Prior to passage of this act, any project of a joint power agency, including a distribution project, required prior PSC approval. Other types of utilities generating power, such as SCANA, CP&L and others, do not operate under a similar requirement of prior approval before the Public Service Commission for a distribution project. Also, a joint power agency was authorized to acquire by negotiated purchase or lease from an electric supplier (Duke, SCANA, CP&L, etc.) at least 10% of the rated capacity of one or more projects under construction in 1978. S.1054 removes the limitation, thereby allowing the joint power agency to negotiate and contract for any portion of a project (which means they could get less than 10%).

This act authorizes the joint power agency to enter into contracts for the purchase, exchange, transmission, marketing, sale, or use, for resale only, of power and energy (a) with any electric supplier within the State, or (b) with any person, firm, or corporation (public or private) outside South Carolina. The contract may provide that the joint agency is obligated to make the payments required by the contract whether the facilities from which the contracted services are provided, are completed, operable or operating, notwithstanding the suspension, interruption, interference, reduction or curtailment of the output of the facilities, or the power and energy contracted for, and that the payments under the contract must not be subject to any reductions, whether by offset or otherwise, and are not conditioned upon the performance or nonperformance of any party to the contract.

S. 1054 rewrites the statute concerning the investment of moneys prior to distribution so as to allow the board of directors for the joint power agency to make the investment decisions. The board members are deemed trustees and must act with care, skill, prudence, and diligence. The primary objective of a trustee is to safeguard the principal of the funds under its control. The secondary objective is to meet the liquidity needs of the joint agency. Any money not required for the immediate necessities of the joint power agency may be invested and reinvested in securities and other investments as the board of directors of joint agencies shall determine in accordance with the objectives enumerated above.

Signed May 20, 1996.

Act 371 -- South Carolina Credit Union Act of 1996
S. 1176 -- Senator Robert Hayes

The South Carolina Credit Union Act of 1996 recodifies the South Carolina Code governing credit unions operating under a state granted charter. This legislation: (1) clarifies that credit union records shall be examined by the State Board of Financial Institutions at least once during a two year period; (2) emphasizes parity between federal and state chartered credit unions; and (3) updates provisions relating to mortgage loans and credit union reserves.

Additionally, the Credit Union Act of 1996 addresses the issues of governance, supervision, safety and membership of credit unions operating under a state charter and establishes a more even playing field for South Carolina's state chartered credit unions. Industry representatives have testified that this legislation will update the law and preserve state chartered credit unions while retaining state oversight and control over credit unions operating in this State.

Signed May 20, 1996.

Act 360 -- Coastal Property Insurance
S. 1305 -- Senator Glenn McConnell

This act was suggested by the South Carolina Department of Insurance as a means of improving the way in which coastal residents receive essential property insurance. Since a sufficient number of insurance companies were not willing to write coverage on coastal property, the State Wind and Hail Association was created to fill that need for coastal residents. The Wind and Hail Association is designed to be a self-sustaining joint underwriting association (premiums paid in should pay all claims). However, the catastrophic and unpredictable nature of the Association's risk means that wind coverage premiums charged to insureds may be high and potentially insufficient. To compensate for insufficient premiums, the Association may assess all property and casualty insurers transacting business in the State. This means that these insurance companies share in the losses of the Association. For example, an insurer underwriting homeowner's coverage only in Greenville County or Aiken County will be assessed for a portion of the Association's coastal property losses.

Since the assessments by the Association from Hurricane Hugo, over 40 licensed insurers underwriting homeowners' insurance coverage throughout the State have withdrawn from this state's insurance marketplace. The premiums charged are becoming increasingly high and the Insurance Director believes that new insurers are reluctant to underwrite any type of homeowner's insurance coverage anywhere within South Carolina. S.1305 is offered in the hopes of reversing this trend.

The intent of this legislation is to: (1) depopulate the Wind and Hail Association, thereby reducing the Association's assessment potential; and (2) reduce the wind coverage premiums of residual market coastal insureds, which are extremely high (by contrast, the few voluntary market insureds are low).

S. 1305 allows insurers to file and use (without going through the lengthy pre-approval process) rates for wind coverage which are 90% or less than the rates charged by, and approved for, the Wind and Hail Association. This approval process is referred to as "flex rating." The Insurance Director has 30 days after the rate is filed to disapprove. He must indicate the specific reason for disapproval. Also, the Insurance Director may extend this 30 day review period for an additional 30 days within which he may approve or disapprove the rates.

The legislation also provides the Wind and Hail Association and the Department of Insurance certain immunity from liability when acting in good faith.

Finally, the bill: allows two rate changes during any 12 month period for any insurer's wind coverage premiums (which will allow rate changes as reinsurance costs change); allows the use of various newly-developed hurricane and wind rate formula factors both in a coastal area and in a newly-defined "seacoast area;" and allows insurers to use "consent-to-rate" for wind coverage. (Consent-to-rate is a rating methodology which allows an individual insured and an insurer to negotiate the premium which that insurer will charge that insured for a policy.)

Signed May 20, 1996.

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