Garris v. Governing Board of the South Carolina Reinsurance Facility

511 S.E.2d 48, 333 S.C. 432, 1998 S.C. LEXIS 177
CourtSupreme Court of South Carolina
DecidedDecember 29, 1998
DocketNo. 24871
StatusPublished
Cited by31 cases

This text of 511 S.E.2d 48 (Garris v. Governing Board of the South Carolina Reinsurance Facility) is published on Counsel Stack Legal Research, covering Supreme Court of South Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Garris v. Governing Board of the South Carolina Reinsurance Facility, 511 S.E.2d 48, 333 S.C. 432, 1998 S.C. LEXIS 177 (S.C. 1998).

Opinion

WALLER, Justice:

This appeal follows the circuit court’s reversal of the decision of the Board of Governors (the Governing Board) of the South Carolina Reinsurance Facility (Facility) to revoke D. Carroll Garris’s (Garris) status as a designated agent. We affirm in part, reverse in part, and remand for further proceedings.

FACTS

Garris, a licensed insurance agent, is a designated agent of [437]*437Facility.1 Prompted by an audit performed by one of Facility’s servicing carriers, Facility began investigating allegations of underwriting irregularities at Garris’s agency in mid-1993. Facility issued a notice of hearing and rule to show cause seeking to revoke Garris’s status as a designated agent in December 1993. Facility alleged Garris had improperly classified private risks as commercial risks (which have lower premiums that are not subject to recoupment fees), insured “phantom” vehicles, wrote duplicate coverages, endorsed policies to insure additional vehicles after a policy had been canceled, and violated trust accounting procedures.

The Governing Board voted in November 1994 to revoke Garris’s status as a designated agent. Garris petitioned the circuit court for review. The circuit court, following additional discovery, reversed the Governing Board’s decision in November 1997. Both parties now appeal the circuit court’s decision.

ISSUES

1. Did the circuit court err in ruling that Governing Board members who voted to revoke Garris’s status as a designated agent acted as prosecutor and adjudicator in violation of Article I, Section 22 of the state constitution?
2. Did the circuit court err in ruling that the doctrine of res judicata bars Garris’s argument about the composition of the Governing Board?
3. If res judicata does not bar Garris’s argument, did the circuit court err in ruling that the composition of the [438]*438Governing Board violates Article III, Section 1 of the state constitution?
4. Did the circuit court err in ruling that proxies were properly exercised and a quorum was present at Garris’s hearing before the Governing Board?

1. ARTICLE I, SECTION 22

The circuit court reversed the Governing Board’s decision to revoke Garris’s status as a designated agent, finding the procedure followed by Facility unconstitutional. Under the state constitution, a person shall not “be subject to the same person for both prosecution and adjudication.” S.C. Const, art. I, § 22.2 Facility now argues the circuit court erred for three reasons.

A. FACILITY IS AN ADMINISTRATIVE AGENCY

Facility contends it is a private organization that merely acts as a statutory agent for the automobile insurance industry. Facility argues it receives no state funding, has no rule-making authority, and is subject to regulation by a state agency, the South Carolina Department of Insurance. Consequently, Facility argues it is not an “administrative agency” for purposes of Article I, Section 22 under the statute creating it or the Administrative Procedure Act (APA), S.C.Code Ann. §§ 1-23-10 to -660 (1986 & Supp.1997). We disagree.

An agency “means each state board, commission, department, executive department or officer, other than the legislature or the courts, authorized by law to make regulations or to determine contested cases.” S.C.Code Ann. § 1-23-10(1) (1986) (emphasis added); accord S.C.Code Ann. § 1-23-310(1) (Supp.1997) (agency “means each state board, commission, department or officer, other than the legislature or the courts, [439]*439but to include the Administrative Law Judge Division, authorized by law to determine contested cases”). It is true that Facility, a statutory creature, “is subject to regulations and orders promulgated by 'the director [of the Department of Insurance] or his designee.” S.C.Code Ann. §§ 38-1-20(16) and 38-77-510 (Supp.1997).

Facility clearly possesses rule-making authority in the area of automobile insurance, a subject that touches the life of most South Carolinians. See S.C.Code Ann. § 38-77-520 (Supp. 1997) (every automobile insurer in South Carolina is bound by Facility’s plan of operation as approved by the director of the Department of Insurance and by rules lawfully prescribed by Facility’s Governing Board); S.C.Code Ann. § 38-77-596 to -610 (Supp.1997) (Facility must calculate and file recoupment fees that are assessed on all automobile insurance policies in South Carolina, and changes in rates are subject to public hearing pursuant to APA). See also Garris v. Governing Board of South Carolina Reinsurance Facility, 319 S.C. 388, 461 S.E.2d 819 (1995) (applying APA to remand case for failure to exhaust administrative remedies); Moore v. South Carolina Reinsurance Facility, 297 S.C. 276, 376 S.E.2d 510 (1989) (applying APA in deciding whether Facility properly refused to certify each of designated agent’s existing locations); Grain Dealers Mut. Ins. Co. v. Lindsay, 279 S.C. 355, 306 S.E.2d 860 (1983) (upholding Facility’s power to enact rules regarding the distribution of Facility losses); Mungo v. Smith, 289 S.C. 560, 347 S.E.2d 514 (Ct.App.1986) (applying APA to decide that designated agent’s status may not be revoked arbitrarily, but must be based upon substantial evidence); S.C.Code Ann. § 38-77-510 (Supp.1997) (designating Facility as a “using agency,” which is defined as “any governmental body of the State which utilizes any supplies, services, or construction purchased” under state Procurement Code).

Facility has the authority to assign the status of designated agent to an individual, as well as the authority to revoke that designation. S.C.Code Ann. §§ 38-77-590 to -595 (Supp. 1997). Facility argues it does not decide “contested cases” as such cases are defined in the APA. See S.C.Code Ann. § 1-23-310(2) (Supp.1997) (contested case “means a proceeding, including but not restricted to ratemaking, price fixing, and licensing, in which the legal rights, duties or privileges of a [440]*440party are required by law to be determined by an agency after an opportunity for hearing”). Nevertheless, Facility assured Garris during the course of its investigation that “a full contested type hearing will be offered to you at which time your response can be as full and complete as you deem appropriate.” Facility concedes in its brief that, while it does not believe it is an administrative agency, it “has no objection to following due process standards applicable under the APA in all hearings before the Board.”

We have interpreted Section 1-23-310(2) to mean that a “contested case”is one in which an agency is required by law to determine a party’s rights after an opportunity for a hearing. League of Women Voters of Georgetown County v. Litchfield-by-the-Sea, 305 S.C. 424, 426, 409 S.E.2d 378, 380 (1991); Triska v. Dep’t of Health and Envtl. Control, 292 S.C. 190, 196, 355 S.E.2d 531, 534 (1987). No statute explicitly requires Facility to hold a hearing before revoking an agent’s status as a designated agent; therefore, Garris’s case is not a “contested case” as defined in the APA.

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Bluebook (online)
511 S.E.2d 48, 333 S.C. 432, 1998 S.C. LEXIS 177, Counsel Stack Legal Research, https://law.counselstack.com/opinion/garris-v-governing-board-of-the-south-carolina-reinsurance-facility-sc-1998.