§ 58-16-35. Unauthorized Insurers Process Act.
§58‑16‑35. Unauthorized Insurers Process Act.
(a) Purpose of Section. The purpose of this section is to subject certain insurers to thejurisdiction of courts of this State in suits by or on behalf of insureds orbeneficiaries under insurance contracts. The General Assembly declares that itis a subject of concern that many residents of this State hold policies ofinsurance issued by insurers not authorized to do business in this State, thuspresenting to such residents the often insuperable obstacle of resorting todistant forums for the purpose of asserting legal rights under such policies.In furtherance of such State interest, the General Assembly herein provides amethod of substituted service of process upon such insurers and declares thatin so doing it exercises its power to protect its residents and to define, forthe purpose of this statute, what constitutes doing business in this State, andalso exercises powers and privileges available to the State by virtue of PublicLaw 15, 79th Congress of the United States, Chapter 20, 1st Session, s. 340, asamended, which declares that the business of insurance and every person engagedtherein shall be subject to the laws of the several states.
(b) Service of Processupon Unauthorized Insurer.
(1) Any of the followingacts in this State, effected by mail or otherwise, by an unauthorized foreignor alien insurer:
a. The issuance ordelivery of contracts of insurance to residents of this State or tocorporations authorized to do business therein,
b. The solicitation ofapplications for such contracts,
c. The collection ofpremiums, membership fees, assessments or other considerations for suchcontracts, or
d. Any othertransaction of business,
is equivalent toand shall constitute an appointment by such insurer of the Commissioner and hissuccessor or successors in office, to be its true and lawful attorney, uponwhom may be served all lawful process in any action, suit, or proceedinginstituted by or on behalf of an insured or beneficiary arising out of any suchcontract of insurance, and any such act shall be signification of its agreementthat such service of process is of the same legal force and validity aspersonal service of process in this State upon such insurer.
(2) Such service ofprocess shall be made by delivering to and leaving with the Commissioner orsome person in apparent charge of his office two copies thereof and the paymentto him of ten dollars ($10.00). The Commissioner shall within four businessdays mail by certified or registered mail one of the copies of such process tothe defendant at its last known principal place of business, and shall keep arecord of all process so served upon him. Such service of process issufficient, provided notice of such service and a copy of the process are sentwithin 10 days thereafter by certified or registered mail by plaintiff orplaintiff's attorney to the defendant at its last known principal place ofbusiness, and the defendant's receipt, or receipt issued by the transmittingpost office, showing the name of the sender of the letter and the name andaddress of the person to whom the letter is addressed, and the affidavit of theplaintiff or plaintiff's attorney showing a compliance herewith are filed withthe clerk of the court in which such action is pending on or before the datethe defendant is required to appear, or within such further time as the courtmay allow.
(3) Service of processin any such action, suit or proceeding shall in addition to the manner providedin subdivision (2) of this subsection be valid if:
a. It is served on aperson within this State who is in the State on behalf of the insurer tosolicit insurance, make, issue, or deliver a contract of insurance, or collector receive a premium, membership fee, assessment, or other consideration forinsurance;
b. A copy of theprocess is sent within 10 days after service by certified or registered mail bythe plaintiff or plaintiff's attorney to the defendant at the defendant's lastknown principal place of business; and
c. The defendant'sreceipt, or the receipt issued by the transmitting post office, showing thename of the sender of the letter and the name and address of the person to whomthe letter is addressed, and the affidavit of the plaintiff or plaintiff'sattorney showing a compliance herewith are filed with the clerk of the court inwhich such action is pending on or before the date the defendant is required toappear, or within such further time as the court may allow.
(4) No plaintiff orcomplainant shall be entitled to a judgment by default under this section untilthe expiration of 30 days from the date of the filing of the affidavit ofcompliance.
(5) Nothing in thissection contained shall limit or abridge the right to serve any process, noticeor demand upon any insurer in any other manner now or hereafter permitted bylaw.
(c) Defense of Actionby Unauthorized Insurer.
(1) Before anyunauthorized foreign or alien insurer shall file or cause to be filed anypleading in any action, suit or proceeding instituted against it, suchunauthorized insurer shall either
a. Deposit with theclerk of the court in which such action, suit or proceeding is pending cash orsecurities or file with such clerk a bond with good and sufficient sureties, tobe approved by the court, in an amount to be fixed by the court sufficient tosecure the payment of any final judgment which may be rendered in such action;or
b. Procure a license totransact the business of insurance in this State.
(2) The court in anyaction, suit, or proceeding, in which service is made in the manner provided insubdivisions (2) or (3) of subsection (b) may, in its discretion, order suchpostponement as may be necessary to afford the defendant reasonable opportunityto comply with the provisions of subdivision (1) of this subsection and todefend such action.
(3) Nothing insubdivision (1) of this subsection is to be construed to prevent anunauthorized foreign or alien insurer from filing a motion to quash a writ orto set aside service thereof made in the manner provided in subdivisions (2) or(3) of subsection (b) on the ground either
a. That suchunauthorized insurer has not done any of the acts enumerated in subdivision (1)of subsection (b), or
b. That the person onwhom service was made pursuant to subdivision (3) of subsection (b) was notdoing any of the acts therein enumerated.
(d) Attorney Fees. Inany action against an unauthorized foreign or alien insurer upon a contract ofinsurance issued or delivered in this State to a resident thereof or to acorporation authorized to do business therein, if the insurer has failed for 30days after demand prior to the commencement of the action to make payment inaccordance with the terms of the contract, and it appears to the court thatsuch refusal was vexatious and without reasonable cause, the court may allow tothe plaintiff a reasonable attorney fee and include such fee in any judgmentthat may be rendered in such action; providing, however, that the fee orportion of fee included in the judgment shall be not less than twenty‑fivedollars ($25.00) nor more than twelve and one‑half percent (12 1/2%) ofthe amount which the court or jury finds the plaintiff is entitled to recoveragainst the insurer. Failure of an insurer to defend any such action shall bedeemed prima facie evidence that its failure to make payment was vexatious andwithout reasonable cause.
(e) Short Title. Thissection may be cited as the Unauthorized Insurers Process Act. (1955,c. 1040; 1985, c. 666, ss. 5, 8; 1987, c. 752, s. 11; 1989, c. 645, s. 3; 1991,c. 720, s. 4; 1999‑132, s. 9.1.)