South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
South Carolina Reinsurance Facility vs. SCDOI, et al

AGENCY:
South Carolina Department of Insurance

PARTIES:
Petitioners:
South Carolina Reinsurance Facility

Respondents:
South Carolina Department of Insurance and Philip S. Porter, Consumer Advocate for the State of South Carolina
 
DOCKET NUMBER:
97-ALJ-09-0702-CC

APPEARANCES:
n/a
 

ORDERS:

ORDER

This matter is before me upon the Petition of the South Carolina Reinsurance Facility ("Facility") to approve the recoupment calculation previously submitted to the Director of Insurance ("Director") in accordance with Sections 38-77-600 and 38-77-610 of the South Carolina Code of Laws (1976), as amended. Pursuant to the provisions of the Administrative Procedures Act, as required by Section 38-77-610, a hearing was held before me in Columbia, South Carolina on January 23, 1998.

STATEMENT OF THE CASE

On November 21, 1997, the Facility's Governing Board, pursuant to Section 38-77-610, filed a recoupment calculation ("filing") with the Director. This recoupment filing displayed the operating losses of the Facility for the fiscal year ending September 30, 1997, and proposed a recoupment calculation for the fees to be collected from automobile insureds July 1, 1998.

On November 26, 1997, a request for a hearing was submitted by the Department of Insurance ("Department") to the Administrative Law Judge Division. Notice of Assignment was provided to the parties on December 3, 1997.

On December 9, 1997, Philip S. Porter, Consumer Advocate for the State of South Carolina ("Consumer Advocate"), filed a motion to intervene. By Order dated December 18, 1997, the Consumer Advocate's motion was granted pursuant Sections 37-6-604 and 37-6-607 of the South Carolina Code of Laws (1976), as amended, and he was made a party-respondent to these proceedings.

On December 9, 1997, a Notice of Hearing was issued by me setting the hearing on the merits of this matter for February 11, 1998. Subsequently, on December 12, 1997, with the consent of all parties, an Amended Notice of Hearing rescheduled the hearing for January 19, 1998. On motion of the court, with the consent of all parties, the hearing scheduled for January 19, 1998, was continued and, by Order dated January 21, 1998, rescheduled for January 23, 1998.

At the hearing of this matter, all parties were present and represented by counsel. The Petitioner Facility was represented by Thomas C. Salane, Esquire. Respondent Department was represented by Gwendolyn L. Fuller, Esquire, General Counsel. Respondent Consumer Advocate was represented by Hana Pokorna-Williamson, Esquire. After due consideration and based upon the evidence, testimony and exhibits presented at the hearing, I make the following findings of fact and conclusions of law.

FINDINGS OF FACT

1. The filing is a private passenger automobile property and casualty insurance recoupment charge filing submitted by the Facility pursuant to Section 38-77-610 of the South Carolina Code of Laws (1976), as amended. The recoupment charges contained therein were calculated by the Facility in accordance with Section 38-77-600, South Carolina Code of Laws (1976), as amended, and are proposed to become effective July 1, 1998.

2. Public notice of the hearing on this matter was published more than 30 days in advance of the scheduled hearing date in five (5) newspapers of general publication in South Carolina. Affidavits of Publication of the Notice of Hearing were admitted into evidence.

3. The filing properly displayed the net operating losses of the Facility for the fiscal year ending September 30, 1997. Net losses of operation were adjusted to reflect applicable on-level premium taxes and commissions to be charged on anticipated recoupment fees to be collected. A conservative and agreed to "time value of money" factor based upon the average 30-year treasury rate was used to further account for the eighteen-month period until recoupment fees could be collected and advanced funds refunded. Total operating losses were arithmetically expressed in accordance with the formula stated in Section 38-77-600(1) to arrive at a recoupment charge by coverage based upon a risk distribution by surcharge points under the Uniform Merit Rating Plan.

4. Dean F. Kruger, the Department's Director of Forms and Rates, whose qualifications as an expert were stipulated by the parties, testified that he had reviewed the Facility's calculation of recoupment charges on behalf of the Department and had concluded that the recoupment charges as displayed in the filing had been calculated in strict accordance with Section 38-77-600 and complied with all other relevant statutory requirements. Mr. Kruger also observed that due to recent enactment of Act No. 154 of 1997, these recoupment charges should be used for the eight-month period commencing July 1, 1998. Effective March 1, 1999, in accordance with Act No. 154, recoupment charges will be changed. Such changes, however, should be the subject of a future filing by the Facility with the Department.

5. D.A. Gay, Manager of the Facility, testified that the recoupment charges displayed in the filing were independently calculated by AIPSO at the request of the Governing Board. The Governing Board verified and approved these calculations and resulting recoupment charges on November 21, 1997 as being consistent with Section 38-77-600 and all other relevant statutory directives. Mr. Gay concurred with Mr. Kruger's testimony and stated that the Facility anticipates making an additional filing prior to March 1, 1999, so as to comply with the directives of Act No. 154 pertaining to recoupment charges.

6. At the hearing, counsel for the Consumer Advocate stated that its independently retained actuary had reviewed the filing and its underlying data and had concluded that the filing complied with requirements of Section 38-77-600 and all other relevant statutory criteria. Accordingly, the Consumer Advocate had no objection to approval of the recoupment charges as filed.

CONCLUSIONS OF LAW

1. This action involves the determination required by Section 38-77-610 of whether the Facility's proposed recoupment charges were properly calculated in accordance with the provisions of Section 38-77-600. See S.C. Code Ann. §§ 38-77-610 and 38-77-600 (Cum. Supp. 1996). Subject matter jurisdiction of the Director is established by Section 38-77-610 and subject matter jurisdiction of the Administrative Law Judge Division is established by Section 1-23-600(B).

2. Public notice of this hearing was provided by publication of the Notice of Hearing dated December 9, 1997, as amended, in newspapers of general, statewide circulation at least thirty (30) days in advance of the scheduled hearing date. The notices so published stated the time and place of the hearing and the subject matter that was to be considered.

3. The recoupment charges prepared and filed by the Facility with the Director were properly calculated in accordance with the provisions of Section 38-77-600 and all other relevant statutory criteria. The total recoupment amount correctly reflects the operating losses of the Facility for the fiscal year ending September 30, 1997, and has been properly adjusted to reflect all considerations required by law. Consistent with the statutory formula, the recoupment amount has been properly distributed among risks based upon Uniform Merit Rating Plan points. The final recoupment charges, by coverage and by Merit Rating points, are properly calculated and should be approved for use by all private passenger automobile insurers effective July 1, 1998.

NOW, THEREFORE, IT IS HEREBY ORDERED that the final recoupment charges set forth in the filing of the Facility's Governing Board are hereby approved as filed. These recoupment charges are to be added to the applicable base rates and objective standards rates in effect for each automobile insurer commencing July 1, 1998.

__________________________________________

RALPH KING ANDERSON, III

ADMINISTRATIVE LAW JUDGE

January 23, 1998

Columbia, South Carolina


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