III. South Carolina Financial Responsibility Requirements

• Library: The Law of Automobile Insurance in SC (SCBar) (2015 Ed.)

III. South Carolina Financial Responsibility Requirements

Forty-four (44) states and the District of Columbia have laws requiring the owners of automobiles registered in the state to have liability insurance or an approved form of security. These laws were generally referred to as financial responsibility laws because they required the driver to furnish proof of insurance after the occurrence of an accident.

A. Compulsory Insurance for Owners

The purpose of compulsory insurance laws, like that of financial responsibility laws, is to provide a financially responsible defendant for every person injured in a motor vehicle accident.¹⁷² Compulsory laws, however, are more preventative legislation than remedial. Their provisions become operative when a motor vehicle is registered and not merely upon the subsequent occurrence of an accident. Generally, these provisions require all owners of motor vehicles to produce proof of insurance before registration and license plates may be issued. Thus, these laws incorporate mandatory financial responsibility requirements as a prerequisite for the operation of a motor vehicle.

1. Overview of South Carolina Motor Vehicle Financial Responsibility Act

Financial responsibility requirements have been in effect since 1974. The South Carolina Motor Vehicle Financial Responsibility Act is codified at §§ 56-9-10 et seq. Its purpose is to protect innocent victims who have been injured by the negligent operation of motor vehicles.¹⁷³ Proof of financial responsibility may be demonstrated by providing proof of insurance (i.e., insurance cards) or presentation of a certificate of insurance, a bond or certificate of deposit of money or securities.

2. Compulsory Insurance

All motor vehicles required to be registered in South Carolina must be insured.¹⁷⁴ Like the financial responsibility statute, compulsory insurance laws are a part of an integrated system designed to protect the public. The rationale behind requiring compulsory automobile liability insurance is to protect members of the public injured on the highways through the operation of a covered motor vehicle.

Section 56-10-220 provides that every person at the time of registering a motor vehicle must declare the vehicle to be an "insured motor vehicle" and further execute and furnish to the Department a certificate that the motor vehicle is an "insured motor vehicle" upon which insurance will be maintained during the registration period. The Department may also require an insurance certificate executed by a producer of the owner's insurance company. The certificate must also be in the form prescribed by the Department.¹⁷⁵ Furthermore, South Carolina law requires every automobile insurance policy to cover loss caused by an insured. The minimum liability insurance requirements are $25,000 for bodily injury or death of one person in an accident; $50,000 for bodily injury or death of two or more persons in any one accident subject to the $25,000 per person limit; and $25,000 for destruction of property of others in an accident.¹⁷⁶

Section 56-10-10 provides that no registration certificate shall be issued unless the owner provides the name of his insurer and his signed statement subject to the state's perjury statutes that insurance is in place as required by this section. In order to qualify as an "insured motor vehicle," an insurance policy or policies on the vehicle must provide for at least the minimum coverages specified in § 38-77-140 through § 38-77-230. In addition to requiring proof of insurance at the time of registration, the Department of Motor Vehicles may, in its discretion, demand proof of insurance on a Form FR-10 from owners and operators at the time a vehicle is operated.¹⁷⁷ Section 56-1-80 requires all first-time applicants for driver's licenses (except beginner's permits), and all drivers at renewal time, to complete a written verification of liability insurance coverage. The section also makes provision for non-owners of vehicles, allowing them to obtain or renew their driver's license without having to provide verification of insurance. Section 56-10-220 now requires that proof of insurance be provided.

Finally, § 56-10-225 provides that the owner of the motor vehicle maintain proof of insurance in the automobile at all times and produce it upon demand of a police officer or other authorized official. Failure to maintain proof of insurance in the vehicle is considered a misdemeanor upon conviction. Upon notice of the conviction, the driver's license of the operator must be suspended until satisfactory proof of insurance is provided. A person failing to maintain in his or her vehicle the required proof of insurance, within 30 days of being cited for such failure, must provide proof of insurance or have his or her driver's license suspended until satisfactory proof is provided.¹⁷⁸ Such proof must be provided every quarter for one year after being cited for driving without proof of liability insurance. Failure to provide such proof when required will cause his or her driver's license to be suspended until satisfactory proof is provided.¹⁷⁹

B. Persons Not Covered by the Motor Vehicle Financial Responsibility Act

The Motor Vehicle Financial Responsibility Act does not apply to any motor vehicle owned by the United States, the State of South Carolina or any political subdivision, nor, except for § 56-9-590, does it apply to any motor vehicle which is subject to other laws of this state which require their owners to carry insurance or other security in addition to those amounts required by the Financial Responsibility Act.

C. Penalties

Section 56-10-260 provides that any person who knowingly makes "a false certificate as to whether a motor vehicle is an insured motor vehicle" or presents to the Department of Public Safety "false evidence that any motor vehicle sought to be registered is insured," is guilty of a misdemeanor. Upon conviction for a first offense, the person may be fined not less than $100 nor more than $200 or imprisoned for 30 days or both. Upon conviction of a second offense, the person may be fined $200 or imprisoned for 30 days, or both. Third and subsequent offenses carry a 45-day to six-month imprisonment.¹⁸⁰ Further, the Department of Public Safety must deny registration of the person's motor vehicle for which a false certificate or evidence has been presented for a period of six months and must also revoke his driver's license for a period of six months. If the owner of a motor vehicle whose registration and license plates have been suspended sells or otherwise disposes of the motor vehicle to any member of his family who resides in his household, he is guilty of a misdemeanor for which he may be fined for the first offense not less than $100 nor more than $200 or imprisoned for 30 days.

Upon conviction of knowingly operating or allowing the operation of an uninsured motor vehicle, the Department is required "to suspend the driving privilege and all license plates and registration certificates issued in such person's name for a period of thirty days."¹⁸¹ The privileges of the convicted person may not to be reinstated until proof of his financial responsibility has been filed. Although not specifically defined in the Act, it would seem to be clear, and the Department of Motor Vehicles takes the position, that proof of financial responsibility here refers to the proof required under Article 5, Chapter 9 of Title 56.¹⁸²

Section 56-10-245 requires the South Carolina Department of Motor Vehicles to identify lapses in insurance coverage when a person provides proof of insurance in response to a license/registration suspension or cancellation notice. Essentially, the Department is required to compare the date of coverage on the proof of insurance form furnished to the department with the date on the notice of termination of insurance previously received by the department. If a gap in coverage exists, the department will impose a $5 per day fine, in addition to other fines and penalties imposed. The maximum fine for first offense is $200. There is no monetary cap for second and subsequent offenses. The fine may not be assessed if the person furnishes a sworn statement that the vehicle was not operated during the lapse period and the lapse was due to either military service or illness, as documented by a signed physician's statement.¹⁸³

The Department of Motor Vehicles also has a form FR-11, Uninsured Motor Vehicle Complaint, to be completed when there is legitimate reason to believe a person has intentionally falsified liability insurance information to obtain a motor vehicle registration certificate or license plate or deliberately allowed his insurance coverage to be canceled on a motor vehicle subject to registration in South Carolina. Submission of the completed form alerts the department to confirm liability insurance on the subject vehicle. This form may be submitted by any person who has knowledge of someone operating an uninsured motor vehicle.

D. Minimum Policy Term

Section 56-10-280 prohibits an insurer from the issuance of any...