SOUTH CAROLINA ELIMINATES DRIVER'S LICENSE REQUIREMENT FOR OBTAINING AUTOMOBILE INSURANCE

Partner Michael Molony was instrumental in working with the South Carolina Department of Insurance and Department of Motor Vehicles on the wording of recent automobile insurance legislation (H3373) amending § 38-77-112 of the South Carolina Code to eliminate the requirement that a car owner hold a valid driver's license in order to obtain automobile insurance in South Carolina. H3373 became effective April 12, 2011 upon the signature of Governor Haley.

In reviewing the matter, the South Carolina Department of Insurance and Department of Motor Vehicles agreed the underwriting protocol in § 38-77-112 actually was a lingering anachronism from the South Carolina's "mandate to write" era of automobile insurance requirements. Former S.C. Code Ann. § 38-77-110 required automobile insurers to write and renew automobile insurance policies for individual private passenger automobiles and small commercial risks, but did not require them to do so for free. Bannister v. Ohio Casualty Co., 314 S.C. 388, 444 S.E.2d 528, (S.C. Ct. App. 1994). Section § 38-77-112 removed that mandate when it was amended in 1997, but retained the requirement that the owner or principal operator of a vehicle principally garaged and operated in South Carolina possess a valid South Carolina driver's license in order to obtain a South Carolina policy of insurance.

It came to the attention of the Department of Insurance that some non-standard automobile insurance carriers were disregarding § 38-77-112, and it responded by promulgating Bulletin 2008-21 to require every automobile insurance company to verify the driver's license status of potential insureds. South Carolina's market for illegal immigrants and other unlicensed persons is estimated to be about 13% of the entire automobile insurance market in any given month.

From a public policy standpoint, it made more sense to increase the number of insured automobiles on the road, regardless of the owner's license status.

H3373 also increases the record retention requirement for automobile insurance agents beyond three years in an effort to maintain safeguards against redlining. By eliminating the driver's license requirement, H3373 effectively moots South Carolina Department of Insurance Bulletin 2008-21.