INSURANCE – Finkel – Spring 2005
Chapter One: Legislative Regulation of Insurance
i) S.C. Code Definition of Insurance
(1) A contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies
(2) You are trying to shift the risk of loss to a third party for a premium
ii) The government regulates the insurance industry
iii) the purpose of legislation in the area of rate making
(1) insure that the rates are sufficiently high to
(a) cover the payment of proceeds
(b) appropriate profits for the insurer
(c) the costs of the administration
(2) insure that they are not discriminatory among individuals or excessive
1) National Regulation
a) Regulation of Unfair Competition
i) McCarran Ferguson Act
(1) This is a reverse preemption
(2) It required things to be handled in state courts
ii) 15 USC 1012-1015
b) Regulation of Unauthorized Insurers
i) These are regulated by the Uniform Unauthorized Insurers Service of Process Act
2) Regulation in South Carolina
i) Department of Insurance
(1) Regulates insurance
(2) 7 members appointed by the governor
(3) Elects the chief insurance commissioner
ii) Statutes
(1) 38-1-20
(a) definitions
(2) 38-3-10
(a) Department of insurance and insurance commission established
(3) 38-3-60
(a) Powers and duties of commission and chief insurance commissioner
(4) 38-3-110
(a) Duties of CIO
(5) 38-77-320
(a) enforcement
iii) insurance is further regulated by requiring insurers to join the South Carolina Windstorm and Hail Underwriting Association
3) ERISA preemption of state law
i) Preempts state law claim for bad faith refusal to pay benefits when the claim arises under the employee benefit claim
– Duncan v. Provident Mutual Life Ins Co. – p. 10
ii) There is a saving clause
(1) Where a state had promulgated a law governing the insurance issue in controversy, this state law is NOT preempted
(2) This saving clause does not cover a tort claim based on bad faith (Duncan) against an employee benefit plan
Chapter Two: Judicial Regulation
i) If an insurer denies coverage and the court decided that the policy’s language provides coverage, the insurer is estopped from taking a counter position in future cases
i
ccident
(2) If no vehicle is involved, coverage is available to the extent of the coverage on any one of the vehicles with coverage
vii) Test to determine whether or not stacking is permitted is not the number of policies but the number of additional coverages that were separately contracted and paid for (Esler)
– Edens V. South Carolina Farm Bureau Ins. – p. 16
viii) Where language in ins policy is ambiguous, it will be construed in favor of the insured (Edens)
ix) Giving notice to the insured of cancellation requires that the insured shall personally receive the notice (Edens)
(1) Person shall have actually received it
– Trimper v. Nationwide – p. 19
x) Courts will not permit an insurer who has misled that a particular risk is within the coverage to use the K itself to prove otherwise (Trimper)
– MGC Mgt v. Kinghoen Ins – p. 22
Contract Construction: Applicable State Law
