SC Administrative Law Court Decisions

Pursuant to S.C. Code Ann. §§ 1-23-110 and 1-23-111 (Supp. 1999), a public hearing was held on November 13, 2000, at the offices of the Administrative Law Judge Division (Division) in Columbia, South Carolina, to determine the "need and reasonableness" of these proposed regulations. The proposed regulations establish rules and standards which apply and further clarify the guidelines for continuing insurance education for individuals qualified or licensed to act as insurance agents in South Carolina.

Pursuant to Rule 45, ALJDRP, "...the agency shall provide a statement confirming the need for a hearing as required by S.C. Code Ann. § 1-23-110 (1976) (as amended) on the basis that a request for a hearing was made by twenty-five (25) persons, a governmental subdivision or agency, or an association having not less than twenty-five (25) members." On November 2, 2000, the Department of Insurance (Department) timely forwarded a request for public hearing filed by The South Carolina Association of Insurance and Financial Advisors, an association comprised of more than twenty-five (25) members. At the public hearing, the Department and interested persons were given the opportunity to present written materials and oral testimony, all of which were incorporated into the record of the hearing.

The following Proponents of the proposed regulations participated in the public hearing:

T. Douglas Concannon, Associate General Counsel, South Carolina Department of Insurance

James Byrd, Senior Advisor to the Director of Insurance

Rebecca McCormack, President, Continuing Education Advisory Committee; Director of Education, Independent Insurance Agents Association of South Carolina

Kathleen Carson, Secretary, Continuing Education Advisory Committee; President, The Lowcountry Chapter of the South Carolina Association of Health Underwriters

The following Opponents of the proposed regulations participated in the public hearing:

Marcia Pierce, Executive Director, The South Carolina Association of Insurance and Financial Advisors

Based upon the statements, testimony, exhibits, written comments, and applicable law, I find and conclude the following:

1. S.C. Code Ann. § 1-23-111 (B) (Supp. 1999), sets forth that this Court must make findings as to the need and reasonableness of the proposed regulations and "may include suggested modifications to the proposed regulations in the case of a finding of lack of need or reasonableness."

2. The Notice of Drafting of the proposed regulations was published in the State Register on August 25, 2000.

3. The Department filed an Agency Transmittal Form with the Administrative Law Judge Division on September 6, 2000.

4. The Notice of Proposed Regulation was published in the State Register on September 22, 2000, and included a synopsis of the proposed regulations and the "Notice of Public Hearing."

5. The Department complied with all notice and procedural requirements of the Administrative Procedures Act and the Administrative Law Judge Division Rules of Procedure.

6. A public hearing to allow the Department's presentation and public comment was conducted on November 13, 2000, pursuant to S.C. Code Ann. § 1-23-111 (Supp. 1999), at which time this Court received oral testimony, exhibits, and written comments from the Department and interested persons.

7. The Opponents of the proposed regulations generally support the regulations. However, the Opponents have two particular areas of concern. The Opponents believe that the proposed regulations' extensions of time in which continuing education class sponsors can file class rosters along with the time period sponsors have in which to provide a certificate of course certification to attendees is unreasonable. See 25A S.C. Code Ann. Regs. 69-50 § VII (A) & (B) (proposed Sept. 22, 2000). The Opponents also contend that the proposed regulations' requirement that requests made by agents for extensions to comply with continuing education requirements must be made in writing only and postmarked on or before May 1 of the reporting year is unreasonable. See 25A S.C. Code Ann. Regs. 69-50 § XII (proposed Sept. 22, 2000). More specifically, the Opponents take the position that the fifteen (15) day reporting timetable under the existing regulations should be upheld for submitting rosters to the Continuing Education Administrator and course certification to attendees. The Opponents do not want sponsors to take full advantage of the thirty (30) and sixty (60) day extensions because they contend sponsors have had trouble complying with the current fifteen (15) day deadlines. As to the proposed "Extension" changes, the Opponents want the requests to be accepted verbally, by electronic mail and by telefax, as they contend requests have been accepted in the past.

8. S.C. Code Ann. §§ 38-3-10 et seq. (1989 and Supp. 1999) set forth the powers of the Department of Insurance. More specifically, S.C. Code Ann. § 38-3-110 (1989 and Supp. 1999) gives the Director of Insurance broad authority to promulgate regulations to implement the insurance laws of this state. S.C. Code Ann. § 38-43-106(C) (Supp. 1999) further gives the Director of Insurance the authority to "promulgate regulations prescribing the overall parameters of continuing insurance education requirements." These regulations are found under 25A S.C. Code Ann. Regs. 69-50.

As stated in the "Preamble" to the proposed regulations contained in Document No. 2552 of the State Register, Vol. 24, Issue 9, dated September 22, 2000, the proposed regulations are intended to clarify and improve current continuing education requirements placed on licensed agents. The proposed regulations create a smoother and more uniform continuing education reporting process and help achieve closer uniformity with continuing education and agent licensing requirements of other states. ⁽¹⁾

a. Approved classroom course or seminar;

b. Approved self-study course; and

c. Approved national designation courses.

Under these three categories in the proposed regulations, sponsors are required to submit class rosters to the Continuing Education Administrator under new expanded timetables. A sponsor who conducts an approved classroom course or seminar is required to submit the roster within thirty (30) days of completion of the course or seminar. See 25A S.C. Code Ann. Regs. 69-50 § VII (A)(1) (proposed Sept. 22, 2000). A sponsor who conducts an approved self-study course has thirty (30) days from the day of examination to submit the roster. See 25A S.C. Code Ann. Regs. 69-50 § VII (A)(2) (proposed Sept. 22, 2000). Finally, a sponsor who conducts an approved national designation course must submit the course roster to the Continuing Education Administrator sixty (60) days from the date the examination is completed. See 25A S.C. Code Ann. Regs. 69-50 § VII (A)(3) (proposed Sept. 22, 2000). Under Section VII (B), the timetable in which sponsors have to provide attendees with certification of course attendance is expanded from fifteen (15) to thirty (30) days after the course is completed or the competency examination results are received. See 25A S.C. Code Ann. Regs. 69-50 § VII (B) (proposed Sept. 22, 2000).

As set forth above, the Opponents contend that the proposed regulations should retain the fifteen (15) day timetables so that the insurance agents who attend continuing education classes have their hours reported quickly and receive the certificates of course completion promptly.

The Proponents support the time extensions in order that pressure be taken off sponsors and the Continuing Education Administrator. For instance, some examinations are administered in essay form. In those cases, the fifteen (15) day reporting period places extra burdens on the sponsors who may be situated all over the country. Furthermore, certificates of course completion cannot be provided until the exams have been graded. Moreover, the Proponents explained that the thirty (30) day timetables are standard across the country and, therefore, the regulations as written would be in keeping with the uniformity and reciprocity of other states.

10. Section XII of the proposed regulations, entitled "Extension,"sets forth:

An agent unable to complete continuing insurance education requirements as required by this regulation, may request an extension from the Continuing Education Administrator. The request for an extension must be in writing and must be postmarked on or before May 1 of the biennial compliance year. The written request for an extension shall be automatically granted for a period of not more than sixty (60) days. The extension will expire at 5 P.M. on July 1, of the biennial compliance year.

25A S.C. Code Ann. Regs. 69-50 § XII (proposed Sept. 22, 2000) (emphasis added). ⁽³⁾ As set forth above, the Opponents contend that the extension requests should be accepted verbally, by electronic mail or by telefax, as they contend requests have been accepted in the past. The Opponents' reasoning is that insurance agents are constantly on the road and do not have time to get extension requests in the mail or that they may forget to do so.

The Proponents to these changes again stress that they are trying to maintain uniformity. In the past, problems have occurred where the staff allegedly received verbal extension requests without any written follow-up. Therefore, in the interest of equality and uniformity, the proposed regulations set forth that all requests must be in writing by a set deadline. However, at the hearing, the Proponents did agree that faxed requests may be accepted.

1. S.C. Code Ann. § 1-23-111 (B) (Supp. 1999) calls for a written report by the presiding Administrative Law Judge that includes "findings as to the need and reasonableness of the proposed regulation based on an analysis of factors listed in Section 1-23-115(C). . . , and other factors as the presiding official identifies and may include suggested modifications to the proposed regulation in the case of a finding of lack of need or reasonableness." In essence, the public hearing serves to edify the agency as to potential problems with the regulations. To that end, Section § 1-23-111(C) provides that if the presiding Administrative Law Judge determines that the need for or reasonableness of the proposed regulation(s) has not been established, the agency must elect to:

(a) follow the suggestions of the Administrative Law Judge and submit the modified proposal for legislative approval;

(b) not modify the proposed regulations but submit the proposed regulations as originally drafted for legislative approval; or

(c) withdraw the proposed regulations.

2. S.C. Code Ann. § 38-3-110 (1989 and Supp. 1999) gives the Director of Insurance broad authority to promulgate regulations to implement the insurance laws of this state. To that end, S.C. Code Ann. § 38-43-106(C) (Supp. 1999) further gives the Director of Insurance the authority to "promulgate regulations prescribing the overall parameters of continuing insurance education requirements."

3. An agency is implicitly authorized to interpret, clarify and explain statutes by prescribing regulations to "fill in the details" for the complete and consistent operation and enforcement of the law within its expressed general purpose. An administrative regulation is valid so long as it is reasonably related to the purpose of the enabling legislation. Young v. S.C. Dep't of Highways and Public Transportation, 287 S.C. 108, 336 S.E.2d 879 (Ct. App. 1985); Hunter & Walden Co. v. S.C. State Licensing Bd. For Contractors, 272 S.C. 211, 251 S.E.2d 186 (1978). A regulation which is beyond the authorization of the agency's enabling legislation or which materially alters or adds to the law, however, is invalid. Society of Professional Journalist v. Sexton, 283 S.C. 563, 324 S.E.2d 313 (1984); Banks v. Batesburg Hauling Co., 202 S.C. 273, 24 S.E.2d 496 (1943).

4. "Reasonableness" is defined as "[f]air, proper, just, moderate, suitable under the circumstances. . . . [n]ot immoderate or excessive, being synonymous with rational, honest, equitable, fair, suitable, moderate, tolerable." Black's Law Dictionary, 1265 (6th ed. 1990). The word has been further defined to mean "agreeable to reason under the facts and circumstances of the case before the Court." Ellis v. Taylor, 311 S.C. 66, 427 S.E.2d 678 (Ct. App. 1992).

5. In proposed Regulation 69-50 § VII (A), the Department has broken down the three types of continuing insurance education available to the agents licensed in this state. The Department has also expanded reporting times for sponsors based on these three classifications, with approved national designation course sponsors having sixty (60) days to submit class rosters. In that same respect, under Section VII (B), the Department has also expanded the timetable in which sponsors have to provide attendees with certification of course attendance of approved courses or approved self-study courses from fifteen (15) to thirty (30) days after the course is completed or the competency examination results are received. Based upon the above Opponent/Proponent positions, I find that the Department's expanded timetables are reasonable.

6. Under proposed Regulation 69-50 § XII, the Department has created a new section to cover requests for extensions for complying with continuing education requirements. The Department has set out a specific and definite schema by which insurance agents must file extensions. Once the request is filed, the agent is automatically granted a sixty (60) day extension with a definite expiration date. Furthermore, the Department's continuing education program's compliance periods run biennially. By specifying dates and granting an "automatic" extension, I find this requirement to be reasonable. The Department is not requiring anything of its agents that other professions do not ask. When an individual's license and livelihood are in the balance, they should, as other professions are required to do, make themselves cognizant of impending deadlines. Should the Department allow initial requests to be made via telefax by the deadline with written follow-up with an original signature within ten (10) days, I would still find this regulation reasonable.

7. Based upon the above Findings and Conclusions, I find that it is within the authority of the Department to promulgate these proposed regulations and that the regulations are both reasonable and needed.

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Ralph King Anderson, III

Administrative Law Judge

February 1, 2001

Columbia, South Carolina

1. In November 1999, Congress enacted the Gramm-Leach-Bliley Act, also known as the Financial Services Modernization Act of 1999. Under this Act, "at least a majority of the States representing at least 50 percent of the total United States commercial-lines insurance premiums must have satisfied the uniformity or reciprocity requirements" contained in that Act within a specified time period or the Federal government would take charge of the licensing of agents through a national association. 15 U.S.C.A. § 6762 (West 2000).

2. Under the current regulations, "Certification" is found under 25A S.C. Code Ann. Regs. 69-50 § V (Supp. 1999).

3. The portion of the current regulations pertaining to filing extensions for agents to comply with continuing education requirements is found under 25A S.C. Code Ann. Regs. 69-50 § X (Supp. 1999), entitled "Hardship."