2.1 Valued Policy Law & SC Property Insurance Regulations

South Carolina property insurance regulation combines long-standing statutory consumer protections with modern disaster management protocols. For claims adjusters, understanding how state statutes dictate loss valuation, coastal coverage disclosures, and emergency licensing procedures is critical for compliant claims handling.

South Carolina Valued Policy Law (S.C. Code § 38-75-20)

One of the most vital property insurance statutes in South Carolina is the Valued Policy Law, codified under S.C. Code § 38-75-20. This statute fundamentally alters standard loss settlement principles for total fire losses involving real property.

Legislative Rationale & Purpose

Historically, insurance companies could issue property policies with high face values, collect premiums based on those limits, and then—upon a total loss—conduct an post-loss actual cash value (ACV) appraisal to pay a significantly lower amount. To eliminate this unfair practice and prevent speculative over-insurance or under-payment, the South Carolina General Assembly enacted the Valued Policy Law.

Statutory Provisions & Requirements

Under S.C. Code § 38-75-20, whenever any policy of insurance is written to insure real property in South Carolina against loss by fire, and the property suffers a total loss by fire:

• The insurer must pay the full face value (policy limit) stated in the policy for which premiums were charged and collected.
• The policy limit is conclusively presumed to be the true value of the real property at the time of loss.
• The insurer is legally barred from reducing the payout based on depreciation, actual cash value appraisals, or post-loss calculations.

Definition of Total Loss

For Valued Policy Law to trigger, the fire loss must be a total loss. In South Carolina jurisprudence, a total loss occurs when:

1. Actual Total Loss: The structure is completely destroyed, losing its specific character and identity as a building, even if some unburned bricks or foundation remain.
2. Constructive Total Loss: The building is damaged to such an extent that local municipal building codes, setback ordinances, or floodplain regulations prohibit repairs, forcing the remaining structure to be demolished.

Scope of Application: Real Property vs. Personal Property

It is an essential exam distinction that S.C. Code § 38-75-20 applies strictly to real property (buildings, fixtures, and permanent structures attached to the land).

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Statutory Exceptions to Valued Policy Law

While S.C. Code § 38-75-20 is strict, South Carolina law provides specific statutory and contractual exceptions where full face value payment is not mandated:

1. Replacement Cost Coverage Provisions: If the policy contains a replacement cost endorsement requiring the insured to rebuild or replace the structure on the same site, the loss is settled based on actual replacement expenditure up to policy limits.
2. Coinsurance Clauses: Policies written with valid coinsurance provisions (where the insured agrees to maintain insurance to a specified percentage of value) are exempt from Valued Policy Law, provided statutory disclosure requirements are satisfied.
3. Fraud or Intentional Misrepresentation: If the total loss is caused by arson committed by or at the direction of the insured, or if the policy was procured through fraudulent overvaluation, the Valued Policy Law protection is voided.
4. Concurrent / Multiple Policies: When two or more insurance policies cover the same real property, the total recovery across all policies cannot exceed the maximum insurable value agreed upon. Insurers pay their pro-rata proportion of the loss based on respective policy limits.

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Coastal Property Insurance Regulations & The Wind Pool

Coastal property risks present unique underwriting and adjusting challenges due to hurricane exposures. South Carolina regulates coastal property insurance through statutory residual markets and mandatory consumer disclosures.

South Carolina Wind and Hail Underwriting Association (SCWHUA)

Known as "The Wind Pool," SCWHUA was created by the General Assembly under S.C. Code Title 38 Chapter 75 to provide essential windstorm and hail insurance to property owners in designated coastal beach areas. When private insurers decline to write windstorm coverage in coastal zones, property owners can secure coverage through SCWHUA.

SC Wind and Hail Right-to-Know Act

To ensure homeowners understand their hurricane coverage limitations, the South Carolina Wind and Hail Right-to-Know Act requires insurers to deliver a clear, standardized written disclosure form at policy issuance and annual renewal. The notice explicitly informs the policyholder:

• Whether windstorm and hail coverage is included or excluded under the primary property policy.
• The exact operation of hurricane deductibles (typically expressed as a percentage of Coverage A limits, such as 2%, 5%, or 10%).
• The specific trigger for hurricane deductibles (e.g., from the issuance of a hurricane watch/warning by the National Weather Service until 24 to 48 hours after the warning terminates).

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Emergency Adjuster Permits During Declared Catastrophes

When severe hurricanes, tornadic outbreaks, or widespread severe weather hit South Carolina, local claims adjusters can be overwhelmed by the volume of First Notices of Loss (FNOL). To ensure rapid claims resolution, state law allows non-resident adjusters to practice temporarily under emergency permits.

Regulatory Framework (SCDOI Regulation 69-1)

Under SCDOI Regulation 69-1, when the Governor declares a state of emergency or a catastrophe is recognized by the SCDOI Director, the Department establishes an expedited Emergency Adjuster Permit process. (Former § 38-47-50 was repealed by Act 209 of 2026; emergency permitting is now governed by SCDOI regulation.)

Catastrophe / Disaster Declared in SC
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Insurer Submits Emergency Adjuster Registration to SCDOI
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SCDOI Verifies Home State License / Experience
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Emergency Permit Issued (Valid up to 120 Days)
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Non-Resident Adjuster Operates in SC for Sponsoring Insurer

Key Emergency Permitting Rules

• Insurer Registration Requirement: Emergency permits cannot be requested independently by adjusters. An authorized insurance company or licensed adjusting firm must submit the emergency application to the SCDOI Director.
• Qualifications: The emergency adjuster must hold a valid adjuster license in their home state or regularly adjust insurance losses in a non-licensing state.
• Validity Window: Emergency adjuster permits are valid for a temporary period—typically up to 120 days from issuance. The SCDOI Director may grant an extension if disaster conditions persist.
• Examination Waiver: Emergency adjusters are exempt from taking the South Carolina licensing examination during the emergency permit window but remain subject to all South Carolina unfair claims settlement laws and SCDOI regulatory oversight.