Senate Journal 01/24/2000 2:00 PM

JOURNAL OF THE SENATE

SEVENTY-FIFTH SESSION

TENTH DAY

STATE OF SOUTH DAKOTA
Senate Chamber, Pierre
January 24, 2000

     The Senate convened at 2:00 p.m., pursuant to adjournment, the President presiding.

     The prayer was offered by the Chaplain, Pastor Kent Atkinson, followed by the Pledge of Allegiance led by Senate page Candace MacArthur.

     Roll Call: All members present except Sen. Symens who was excused.

APPROVAL OF THE JOURNAL

MADAM PRESIDENT:

The Committee on Legislative Procedure respectfully reports that the Secretary of the Senate has had under consideration the Senate Journal of the ninth day and finds that the following correction shall be made:

On page 143, line 3, delete "Bogue" and insert "Brosz".

    On page 143, line 8, delete "Brosz" and insert "Bogue".

     All other errors, typographical or otherwise, are duly marked in the temporary journal for correction.

     And we hereby move the adoption of the report.

Respectfully submitted,

Harold Halverson, Chair

Which motion prevailed and the report was adopted.

The oath of office was administered by the President to the following named persons:

Pages: Jessica Boehrs, Elizabeth Boos, Athena Burnison, Seth Hirning, Bud Jerke, Candace MacArthur, JaLynn MacArthur, Jordan Micko, Abby Moore, Janelle Tschetter, and Paul Tschetter;

Assistant Sergeant-at-Arms: Rollie Benson.

Which were subscribed to and placed on file in the office of the Secretary of State.

HONORED GUESTS

The President introduced Pat Miller, Chief Executive Officer of Easter Seals South Dakota, Bob Blachford, Chairman, Easter Seals Board of Directors, and Nancy Bloechl, 1999-2000 South Dakota Easter Seals Family member from Sioux Falls, who were escorted to the Chamber by Sen. Paisley.

REPORTS OF STANDING COMMITTEES

MADAM PRESIDENT:

The Committee on State Affairs respectfully reports that it has had under consideration SB 92 and returns the same with the recommendation that said bill do pass.

Also MADAM PRESIDENT:

The Committee on State Affairs respectfully reports that it has had under consideration SB 75 and returns the same with the recommendation that said bill be amended as follows:

75jc

On the printed bill, delete everything after the enacting clause and insert:

" Section 1. This Act applies to any kind of direct insurance, but does not apply to:

(1) Life, annuity, health, or disability insurance;

(2) Mortgage guaranty, financial guaranty, or other forms of insurance offering protection against investment risks;

(3) Fidelity or surety bonds, or any other bonding obligations;

(4) Credit insurance, vendors' single-interest insurance, or collateral protection insurance, or any similar insurance protecting the interests of a creditor arising out of a creditor-debtor transaction;

(5) Insurance of warranties or service contracts including insurance that provides for the repair, replacement, or service of goods or property or indemnification for repair, replacement, or service for the operational or structural failure of the goods or property due to a defect in materials or workmanship or to normal wear and tear, or provides reimbursement for the liability incurred by the issuer of agreements or service contracts that provide such benefits;

(6) Title insurance;

(7) Ocean marine insurance;

(8) Any transaction or combination of transactions between a person, including affiliates of the person, and an insurer, including affiliates of the insurer, that involves the transfer of investment or credit risk unaccompanied by a transfer of insurance risk; or

(9) Any insurance provided by or guaranteed or reinsured by any governmental body.

Section 2. Terms used in this Act mean:

(1) "Account," any one of the three accounts created by this Act;

(2) "Affiliate," any person who, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with an insolvent insurer on December thirty-first of the year immediately preceding the date the insurer becomes an insolvent insurer;

(3) "Association," the South Dakota Insurance Guaranty Association created under this Act;

(4) "Claimant," any insured making a first party claim or any person instituting a liability claim. No person who is an affiliate of the insolvent insurer may be a claimant;

(5) "Director," the director of the Division of Insurance of the Department of Commerce and Regulation;

(6) "Control," the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control is presumed to exist if a person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing ten percent or more of the voting securities of any other person. This presumption may be rebutted by a showing that control does not exist in fact;

(7) "Covered claim," an unpaid claim, including one for unearned premiums, submitted by a claimant, which arises out of and is within the coverage and is subject to the applicable limits of an insurance policy to which this Act applies issued by an insurer, if the insurer becomes an insolvent insurer after July 1, 1970, and:

(a) The claimant or insured is a resident of this state at the time of the insured event. However, for entities other than an individual, the residence of a claimant, insured, or policyholder is the state in which its principal place of business is located at the time of the insured event; or

(b) The claim is a first party claim for damage to property with a permanent location in this state.

The term, covered claim, does not include:

(a) Any amount awarded as punitive or exemplary damages;

(b) Any amount sought as a return of premium under any retrospective rating plan;

(c) Any amount due any reinsurer, insurer, insurance pool, or underwriting association as subrogation recoveries, reinsurance recoveries, contribution, indemnification, or otherwise. No claim for any amount due any reinsurer, insurer, insurance pool, or underwriting association may be asserted against a person insured under a policy issued by an insolvent insurer other than to the extent the claim exceeds the association obligation limitations set forth in this Act;

(d) Any first party claims by an insured whose net worth exceeds fifty million dollars on December thirty-first of the year immediately preceding the year in which the insurer becomes an insolvent insurer. However, an insured's net worth on that date shall be deemed to include the aggregate net worth of the insured and any of its subsidiaries as calculated on a consolidated basis; or

(e) Any first party claims by an insured which is an affiliate of the insolvent insurer;

(8) "Insolvent insurer," an insurer authorized to transact insurance in this state, either at the time the policy was issued or when the insured event occurred, and against whom a final order of liquidation has been entered after July 1, 1970, with a finding of insolvency by a court of competent jurisdiction in the insurer's state of domicile;

(9) "Member insurer," any person who:

(a) Writes any kind of insurance to which this Act applies, including the exchange of reciprocal or interinsurance contracts; and

(b) Is licensed to transact insurance in this state except companies defined in chapter 58-35.

An insurer shall cease to be a member insurer effective on the day following the termination or expiration of its license to transact the kinds of insurance to which this Act applies, however, the insurer shall remain liable as a member insurer for any obligations, including obligations for assessments levied prior to the termination or expiration of the insurer's license and assessments levied after the termination or expiration, with respect to any insurer that became an insolvent insurer prior to the termination or expiration of the insurer's license;

(10) "Net direct written premiums," direct gross premiums written in this state on insurance policies to which this Act applies, less return premiums thereon and dividends paid or credited to policyholders on such direct business. The term, net direct written premiums, does not include premiums on contracts between insurers or reinsurers;

(11) "Person," any individual, corporation, partnership, association, or voluntary organization;

(12) "Unearned premium," the premium for the unexpired period of a policy that has been terminated prior to the expiration of the period for which the premium has been paid. The term does not include any premium that is returnable to the insured for any other reason.

Section 3. There is created a nonprofit unincorporated legal entity to be known as the South Dakota Insurance Guaranty Association. Any insurer defined as a member insurer in subdivision (8) of section 2 of this Act is a member of the association as a condition of its authority to transact insurance in this state. The association shall perform its functions under a plan of operation established and approved under sections 30 to 44, inclusive, of this Act and shall exercise its powers through a board of directors established under sections 4 and 5 of this Act.

Section 4. The board of directors of the association shall consist of seven persons, each of whom shall be appointed by the director for a term of three years and until a successor has been appointed and qualified. The director shall consult with member insurers concerning their recommendations for the board of directors. Any vacancy on the board shall be filled for the remaining period of the term by a majority vote of the remaining board members subject to the approval of the director.

Section 5. In approving selections to the board, the director shall consider, among other things, whether all member insurers are fairly represented. No less than two members of the board shall be domestic insurers.

Section 6. Members of the board may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors.

Section 7. The association may:

(1) Employ or retain such persons as are necessary to handle claims and perform other duties of the association;

(2) Borrow funds necessary to effect the purposes of this Act in accord with the plan of operation;

(3) Sue or be sued. The power to sue includes the power and right to intervene as a party before any court in this state that has jurisdiction over an insolvent insurer as defined by this Act;

(4) Negotiate and become a party to such contracts as are necessary to carry out the purpose of this Act;

(5) Perform such other acts as are necessary or proper to effectuate the purpose of this Act.

Section 8. The association is exempt from payment of all fees and all taxes levied by this state or any of its subdivisions except taxes levied on real property.

Section 9. To aid in the detection and prevention of insurer insolvencies, it is the duty of the board of directors, upon majority vote, to notify the director of any information indicating any member insurer may be insolvent or in a financial condition hazardous to the policyholders or the public.

Section 10. To aid in the detection and prevention of insurer insolvencies, the board of directors may, upon majority vote, request that the director order an examination of any member insurer which the board in good faith believes may be in a financial condition hazardous to the policyholders or the public. Within thirty days of the receipt of such request, the director shall begin the examination. The examination may be conducted as a National Association of Insurance Commissioners' examination or may be conducted by such persons as the director designates. The cost of the examination shall be paid by the association and the examination report shall be treated as are other examination reports. In no event may the examination report be released to the board of directors prior to its release to the public, but this does not preclude the director from complying with section 11 of this Act. The director shall notify the board of directors when the examination is completed. The request for an examination shall be kept on file by the director but it may not be open to public inspection prior to the release of the examination report to the public.

Section 11. The director shall report to the board of directors when the director has reasonable cause to believe that any member insurer examined or being examined at the request of the board of directors may be insolvent or in a financial condition hazardous to the policyholders or the public.

Section 12. The board of directors may, upon majority vote, make recommendations to the director for the detection and prevention of insurer insolvencies.

Section 13. The board of directors may, upon majority vote, make recommendations to the director on matters generally related to improving or enhancing regulation for solvency.

Section 14. The board of directors may, at the conclusion of any domestic insurer insolvency in which the association was obligated to pay covered claims, prepare a report on the history and causes of such insolvency, based on the information available to the association, and submit the report to the director.

Section 15. The association shall be obligated to pay covered claims existing prior to the order of liquidation arising within thirty days after the order of liquidation, or before the policy expiration date if less than thirty days after the order of liquidation, or before the insured replaces the policy or causes its cancellation, if the insured does so within thirty days of the order of liquidation. The obligation shall be satisfied by paying to the claimant an amount as follows:

(1) The full amount of a covered claim for benefits under a workers' compensation insurance coverage;

(2) An amount not exceeding twenty-five thousand dollars per policy for a covered claim for the return of unearned premium;

(3) An amount not exceeding three hundred thousand dollars per claim for all other covered claims.

In no event is the association obligated to a claimant in an amount in excess of the obligation of the insolvent insurer under the policy or coverage from which the claim arises. Notwithstanding any other provisions of this Act, a covered claim does not include a claim filed with the association after the earlier of (i) eighteen months after the date of the order of liquidation, or (ii) the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer and does not include any claim filed with the association or a liquidator for protection afforded under the insured's policy for incurred-but-not-reported losses. The association shall pay only that amount of each unearned premium which is in excess of one hundred dollars.

Any obligation of the association to defend an insured shall cease upon the association's (i) payment, by settlement releasing the insured or on a judgment, of an amount equal to the lesser of the association's covered claim obligation limit, or the applicable policy limit, or (ii) tender of such amount.

Notwithstanding any other provisions of this Act, except in the case of a claim for benefits under workers' compensation coverage, any obligation of the association to any person shall cease when ten million dollars has been paid in the aggregate by the association and any associations similar to the association of any other state or states or any property/casualty security fund which obtains contributions from insurers on a pre-insolvency basis, to or on behalf of any insured and its affiliates on covered claims or allowed claims arising under the policy or policies of any one insolvent insurer. For purposes of this section, the term, affiliate, means a person who, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another person. If the association determines that there may be more than one claimant having a covered claim or allowed claim against the association or any associations similar to the association or any property/casualty insurance security fund in other states, under the policy or policies of any one insolvent insurer, the

association may establish a plan to allocate amounts payable by the association in such manner as the association in its discretion deems equitable.

Section 16. The association shall be deemed the insurer to the extent of its obligation on the covered claims and to such extent, subject to the limitations provided in this Act, shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent, including the right to pursue and retain salvage and subrogation recoverable on paid covered claim obligations. The association may not be deemed the insolvent insurer for any purpose relating to the issue of whether the association is amenable to the personal jurisdiction of the courts of any state.

Section 17. The association shall investigate claims brought against the association and adjust, compromise, settle, and pay covered claims to the extent of the association's obligation and deny any other claims and may review settlements, releases, and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements, releases, and judgments may be properly contested. The association may appoint and direct legal counsel retained under liability insurance policies for the defense of covered claims.

Section 18. The association shall have the right to recover from the following persons the amount of any covered claim paid on behalf of such person pursuant to this chapter:

(1) Any insured whose net worth on December thirty-first of the year next preceding the date the insurer becomes an insolvent insurer exceeds fifty million dollars and whose liability obligations to other persons, including obligations under workers' compensation insurance coverages, are satisfied in whole or in part by payments made under this chapter; and

(2) Any person who is an affiliate of the insolvent insurer and whose liability obligations to other persons are satisfied in whole or in part by payments made under this Act. The term, affiliate, does not include any agent or broker of the insolvent insurer.

Section 19. The association shall handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the director, but such designation may be declined by a member insurer.

Section 20. The association shall reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this Act.

Section 21. For purposes of administration and assessment, the association shall be divided into three separate accounts:

(1) The workers' compensation insurance account;

(2) The automobile insurance account; and

(3) The account for all other insurance to which this Act applies.

Section 22. The association shall allocate claims paid and expenses incurred among the three accounts separately, and assess member insurers separately for each account amounts necessary to pay the obligations of the association under section 15 of this Act subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, the cost of examinations under section 10 of this Act and other expenses authorized by this Act, except that expenses paid from assessments authorized by section 23 of this Act need not be allocated to any particular account.

Section 23. In addition to any other assessments authorized by this Act, the association may assess each member insurer an administrative assessment not to exceed one hundred fifty dollars per annum. The administrative assessment shall be made for the purpose of paying operating expenses of the association and its employees not directly attributable to any particular insolvency or insolvent insurer, and the administrative assessment may not be on a pro rata basis. The assessments are due not less than thirty days after prior written notice to the member insurer and shall accrue interest at ten percent per annum on and after the due date.

Section 24. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the preceding calendar year on the kinds of insurance in the account bears to the net direct written premiums of all member insurers for the preceding calendar year on the kinds of insurance in the account. The assessment is due not less than thirty days after prior written notice to the member insurer and shall accrue interest at ten percent per annum on and after the due date.

Section 25. No member insurer may be assessed in any year on any account an amount greater than two percent of that member insurer's net direct written premiums for the preceding calendar year on the kinds of insurance in the account.

Section 26. Each member insurer may set off against any assessment, authorized payments made on covered claims and expenses incurred in the payment of such claims by the member insurer if they are chargeable to the account for which the assessment is made.

Section 27. The association may exempt or defer, in whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. However, during the period of deferment, no dividends may be paid to shareholders or policyholders. Deferred assessments shall be paid when such payment will not reduce capital or surplus below required minimums. Such payments shall be refunded to those companies receiving larger assessments by virtue of the deferment, or at the election of any such company, credited against future assessments.

Section 28. If the maximum assessment, together with the other assets of the association in any account, does not provide in any one year in any account an amount sufficient to make all necessary payments from that account, the funds available shall be prorated and the unpaid portion shall be paid as soon thereafter as funds become available.

Section 29. The association may refund to the member insurers in proportion to the contribution of each member insurer to that account that amount by which the assets of the account exceed the liabilities, if, at the end of any calendar year, the board of directors finds that the assets of the association in any account exceed the liabilities of that account as estimated by the board of directors for the coming year.

Section 30. The association shall submit to the director a plan of operation and any amendments necessary or suitable to assure the fair, reasonable, and equitable administration of the association. The plan of operation and any amendments is effective upon approval in writing by the director.

Section 31. The plan of operation shall:

(1) Establish the procedures whereby all the powers and duties of the association under sections 7, 15 to 20, inclusive, and 22 to 29, inclusive, of this Act will be performed;

(2) Establish procedures for handling assets of the association;

(3) Establish the amount and method of reimbursing members of the board of directors under section 6 of this Act;

(4) Establish procedures by which claims may be filed with the association and establish acceptable forms of proof of covered claims. Notice of claims to the receiver or liquidator of the insolvent insurer shall be deemed notice to the association or its agent and a list of such claims shall be periodically submitted to the association or similar organization in another state by the receiver or liquidator;

(5) Establish regular places and times for meetings of the board of directors;

(6) Establish procedures for records to be kept of all financial transactions of the association, its agents, and the board of directors;

(7) Provide that any member insurer aggrieved by any final action or decision of the association may appeal to the director within thirty days after the action or decision;

(8) Establish the procedures whereby selections for the board of directors will be submitted to the director;

(9) Establish procedures for the disposition of liquidating dividends or other moneys received from the estate of the insolvent insurer;

(10) Contain additional provisions necessary or proper for the execution of the powers and duties of the association;

Section 32. All member insurers shall comply with the plan of operation. Violation of this section is a Class 2 misdemeanor.

Section 33. The plan of operation may provide that any or all powers and duties of the association, except those under subdivision (2) of section 7 of this Act and those under sections 22 to 28, inclusive, of this Act are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this association, or its equivalent, in two or more states. Such a corporation, association, or organization shall be reimbursed as a servicing facility would be reimbursed and shall be paid for its performance of any other functions of the association. A delegation under this section shall take effect only with the approval of both the board of directors and the director, and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this Act.

Section 34. If at any time the association fails to submit suitable amendments to the plan of operation, the director shall, after notice and hearing, promulgate such reasonable rules as are necessary or advisable to effectuate the provisions of this Act. The rules shall continue in force until modified by the director or superseded by a plan submitted by the association and approved by the director.

Section 35. The director shall notify the association of the existence of an insolvent insurer not later than three days after the director receives notice of the determination of the insolvency. The association is entitled to a copy of any complaint seeking an order of liquidation with a finding of insolvency against a member company at the same time that the complaint is filed with a court of competent jurisdiction.

Section 36. The director shall, upon request of the board of directors, provide the association with a statement of the net direct written premiums of each member insurer.

Section 37. Any proceeding in which the insolvent insurer is a party or is obligated to defend a party in any court in this state shall, subject to waiver by the association in specific cases involving covered claims, be stayed until the last day fixed by the court for the filing of claims and such additional time thereafter as may be determined by the court from the date the insolvency is determined or an ancillary proceeding is instituted in the state, whichever is later, to permit proper defense by the association of all pending causes of action. As to any covered claims arising from a judgment under any decision, verdict, or finding based on the default of the insolvent insurer or its failure to defend an insured, the association, either on its own behalf or on behalf of such insured, may apply to have the judgment, order, decision, verdict, or finding set aside by the same court or administrator that made the judgment, order, decision, verdict, or finding and shall be permitted to defend against the claim on the merits.

Section 38. The director may suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer that fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the director may levy a fine on any member insurer which fails to pay an assessment when due. The fine may not exceed five percent of the unpaid assessment per month, except that no fine may be less than one hundred dollars per month.

Section 39. The director may revoke the designation of any servicing facility if the director finds claims are being handled unsatisfactorily.

Section 40. Any person having a claim against an insurer, whether or not the insurer is a member insurer, under any provision in an insurance policy other than a policy of an insolvent insurer which is also a covered claim, shall be required to first exhaust any right under the policy. Any amount payable on a covered claim under this Act shall be reduced by the amount of any recovery under the insurance policy.

Section 41. Any person having a claim which may be recovered under more than one insurance guaranty association or its equivalent shall seek recovery first from the association of the place of residence of the insured except that if it is a first-party claim for damage to property with a permanent location, the person shall seek recovery first from the association of the location of the property, and if it is a workers' compensation claim, the person shall seek recovery first from the association of the residence of the claimant. Any recovery under this Act shall be reduced by the amount of recovery from any other insurance guaranty association or its equivalent.

Section 42. Any person recovering under this Act shall be deemed to have assigned that person's rights under the policy to the association to the extent of any recovery from the association. Every insured or claimant seeking the protection of this Act shall cooperate with the association to the same extent as such person would have been required to cooperate with the insolvent insurer.

Section 43. The association has no cause of action against the insured of the insolvent insurer for any sums it has paid out, except such causes of action as the insolvent insurer would have had if the sums had been paid by the insolvent insurer and except as provided in section 18 of this Act.

Section 44. In the case of an insolvent insurer operating on a plan with assessment liability, payments of claims of the association may not operate to reduce the liability of insureds to the receiver, liquidator, or statutory successor for unpaid assessments.

Section 45. The receiver, liquidator, or statutory successor of an insolvent insurer is bound by determinations of covered claim eligibility under this Act and by settlements of claims made by the association or a similar organization in another state. The court having jurisdiction shall grant such claims priority equal to that which the claimant would have been entitled in the absence of this Act against the assets of the insolvent insurer. The expenses of the association or similar organization in handling claims shall be accorded the same priority as the liquidator's expenses.

Section 46. The association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the association and estimates of anticipated claims on the association which shall preserve the rights of the association against the assets of the insolvent insurer.

Section 47. The association is subject to examination and regulation by the director. The board of directors shall submit, not later than March thirtieth of each year, a financial report for the preceding calendar year in a form approved by the director.

Section 48. There is no liability on the part of and no cause of action of any nature may arise against any member insurer, the association or its agents or employees, the board of directors, any person serving as a representative of any director, or the director or the director's representatives for any action taken or any failure to act by them in the performance of their powers and duties under this Act.

Section 49. Any final action or order of the director under this Act is subject to judicial review in a court of competent jurisdiction.

Section 50. The rates and premiums charged for insurance policies to which this Act applies shall include amounts sufficient to recoup a sum equal to the amounts paid to the association by the member insurer less any amounts returned to the member insurer by the association and such rates may not be deemed excessive because they contain an amount reasonably calculated to recoup assessments paid by the member insurer.

Section 51. It is unfair trade practice for any insurer or agent to in any manner make use of the protection given policyholders by this Act as a reason for buying insurance from the insurer or agent.

Section 52. The association shall pay claims in any order which it deems reasonable, including the payment of claims as such are received from the claimants or in groups or categories of claims.

Section 53. The association and any similar organization in another state shall be recognized as claimants in the liquidation of an insolvent insurer for any amounts paid by them on covered claims obligations as determined under this Act or similar laws in other states and shall receive dividends and any other distributions at the priority set forth in § 58-29B-124.

Section 54. The liquidator, receiver, or statutory successor of an insolvent insurer covered by this chapter shall permit access by the board or its authorized representative to any of the insolvent insurer's records that are necessary for the board in carrying out its functions under this Act with regard to covered claims. In addition, the liquidator, receiver, or statutory successor shall provide the board or its representative with copies of such records upon request by the board and at the expense of the board.

Section 55. Except for actions by member insurers aggrieved by final actions or decisions of the association pursuant to subdivision (7) of section 31 of this Act, any action relating to or arising out of this Act against the association shall be brought in a court in this state. The courts in this state have exclusive jurisdiction over all actions relating to or arising out of this Act against the association.

Section 56. This Act shall be known as the South Dakota Insurance Guaranty Association Act.

Section 57. That § § 58-29A-1 to 58-29A-53, inclusive, be repealed. "

And that as so amended said bill do pass.

Also MADAM PRESIDENT:

The Committee on State Affairs respectfully reports that it has had under consideration SB 97 and returns the same with the recommendation that said bill be amended as follows:

97oa

On page 3 , line 6 of the printed bill , delete " subsection 28-13-27(6)(d) " and insert " subsections 28-13-27(6)(c) and (d) " .

And that as so amended said bill do pass.

Also MADAM PRESIDENT:

The Committee on State Affairs respectfully reports that it has had under consideration SJR 4 and SB 89 which were deferred to the 36th legislative day.

Respectfully submitted,
Harold Halverson, Chair

Also MADAM PRESIDENT:

The Committee on Judiciary respectfully reports that it has had under consideration SB 95 and returns the same with the recommendation that said bill do pass.

Also MADAM PRESIDENT:

The Committee on Judiciary respectfully reports that it has had under consideration SB 111 and returns the same with the recommendation that said bill do pass and be placed on the Consent Calendar.

Respectfully submitted,
Fred Whiting, Chair

Also MADAM PRESIDENT:

The Committee on Local Government respectfully reports that it has had under consideration SB 56 and returns the same with the recommendation that said bill do pass.

Also MADAM PRESIDENT:

The Committee on Local Government respectfully reports that it has had under consideration SB 52 and HB 1011 and returns the same with the recommendation that said bills do pass and be placed on the Consent Calendar.

Also MADAM PRESIDENT:

The Committee on Local Government respectfully reports that it has had under consideration SB 103 and returns the same with the recommendation that said bill be amended as follows:

103fa

On page 2 , line 14 of the printed bill , overstrike " auditor " and insert " municipal finance officer " .

On page 2 , line 19 , overstrike " shall " and insert " may " .

On page 3 , after line 5 , insert:

" Section 7. That § 9-11-2 be repealed.

9-11-2. Whenever the population of a municipality of the second class shall fall below five hundred inhabitants, as shown by the last preceding federal census, such municipality may be classed as a municipality of the third class and denominated a town.

Section 8. That § 9-11-3 be repealed.

9-11-3. In order so to change its status such first or second class municipality as described in § 9-11-2 may through its governing body apply to the circuit court having jurisdiction, for a judgment authorizing such change. Upon the presentation of such application the court shall by order fix a time and place for hearing such application. Notice thereof shall be given by publishing such order once a week for two successive weeks, the last publication to be not less than ten days prior to the day fixed for hearing and by posting a copy of the order in three public places in such municipality not less than ten days prior to the hearing.

Section 9. That chapter 9-11 be amended by adding thereto a NEW SECTION to read as follows:

If the population of a municipality, as shown by the last preceding federal census, increases or decreases causing the municipality to pass into a different class of municipality pursuant to § 9-2-1, the municipality may, through its governing body, apply to the circuit court having jurisdiction for a judgment authorizing the classification change. Upon the presentation of the application, the court shall establish a time and place for hearing the application. Notice of the hearing shall be given by publishing the order once a week for two successive weeks, the last publication to be not less than ten days prior to the day of the hearing, Not less than ten days

prior to the date of the hearing, the notice of hearing shall also be posted in three public places in the municipality.

Section 10. That § 9-11-4 be amended to read as follows:

9-11-4. Upon such hearing, if the facts warrant the granting of the application, the court shall make and enter its judgment changing the status of ~~such first or second class~~ the municipality to that of a municipality of the ~~third~~ appropriate class, pursuant to § 9-2-1. The court shall establish ~~fixing~~ the time when ~~such~~ the change shall be effective and ~~determining~~ determine the manner in which the change shall be made.

A certified copy of ~~such~~ the judgment shall be filed in the office of the register of deeds of the county wherein such municipality is situated, and also in the office of the secretary of state. "

And that as so amended said bill do pass.

Respectfully submitted,
Arlene H. Ham, Chair

Also MADAM PRESIDENT:

The Committee on Legislative Procedure respectfully reports that the Office of Engrossing and Enrolling has carefully compared SB 40 and finds the same correctly enrolled.

Respectfully submitted,
Harold Halverson, Chair

MESSAGES FROM THE HOUSE

MADAM PRESIDENT:

I have the honor to return herewith SB 40 which has passed the House without change.

Also MADAM PRESIDENT:

I have the honor to transmit herewith HB 1009, 1015, 1052, and 1065 which have passed the House and your favorable consideration is respectfully requested.

Respectfully,
Karen Gerdes, Chief Clerk

CONSIDERATION OF REPORTS OF COMMITTEES

     Sen. Rounds moved that the reports of the Standing Committees on

     State Affairs on SB 13 as found on page 134 of the Senate Journal; also

     Taxation on SB 51 as found on page 135 of the Senate Journal be adopted.

     Which motion prevailed and the reports were adopted.

FIRST READING OF SENATE BILLS AND JOINT RESOLUTIONS

     SB 174 Introduced by: Senators Everist, Olson, and Whiting and Representatives Michels, Hunt, and Wilson

     FOR AN ACT ENTITLED, An Act to revise certain provisions regarding the administration of trusts and estates.

     Was read the first time and referred to the Committee on Judiciary.

     SB 175 Introduced by: Senators Hutmacher, Bogue, Duxbury, Flowers, Lange, Moore, and Vitter and Representatives Nachtigal, Apa, Davis, Hanson, Kooistra, Sutton (Daniel), Volesky, and Weber

     FOR AN ACT ENTITLED, An Act to establish the Division of Antitrust Enforcement within the Office of the Attorney General.

     Was read the first time and referred to the Committee on Judiciary.

     SB 176 Introduced by: Senators Bogue, Halverson, Lawler, Paisley, and Shoener and Representatives Earley, Broderick, Konold, and Peterson

     FOR AN ACT ENTITLED, An Act to allow holders of installment sales contracts to collect a charge for a payment device returned for nonpayment.

     Was read the first time and referred to the Committee on Commerce.

SB 177 Introduced by: Senator Paisley and Representative Koetzle

FOR AN ACT ENTITLED, An Act to revise the method for computing weekly unemployment benefits.

Was read the first time and referred to the Committee on Commerce.

     SB 178 Introduced by: Senators Hainje, Frederick, Paisley, and Vitter and Representatives Brown (Richard), Munson (Donald), Peterson, and Richter

     FOR AN ACT ENTITLED, An Act to revise the school term.

     Was read the first time and referred to the Committee on Education.

     SB 179 Introduced by: Senators Daugaard, Brown (Arnold), and Lawler and Representatives Fischer-Clemens, Davis, Fiegen, Lockner, McCoy, and Wilson

     FOR AN ACT ENTITLED, An Act to raise the minimum age regulating the purchase and sale of tobacco products.

     Was read the first time and referred to the Committee on Judiciary.

     SB 180 Introduced by: Senator Kloucek and Representative Putnam

     FOR AN ACT ENTITLED, An Act to require certain intrastate railroads to place reflective materials on certain railroad cars.

     Was read the first time and referred to the Committee on State Affairs.

     SB 181 Introduced by: Senators Kloucek, Drake, Lange, and Vitter and Representatives Cerny, Chicoine, Crisp, Fryslie, Hanson, Kazmerzak, Kooistra, Nachtigal, Napoli, Patterson, Putnam, Sebert, Sutton (Duane), Waltman, Weber, and Wilson

     FOR AN ACT ENTITLED, An Act to award high school diplomas to certain veterans of World War II and the Korean War.

     Was read the first time and referred to the Committee on Education.

     SB 182 Introduced by: Senator Symens and Representatives Jaspers and Hanson

     FOR AN ACT ENTITLED, An Act to revise certain provisions relating to meandered and unmeandered lakes.

     Was read the first time and referred to the Committee on Agriculture and Natural Resources.

     SB 183 Introduced by: Senator Dunn (Rebecca) and Representatives Kazmerzak and Patterson

     FOR AN ACT ENTITLED, An Act to prohibit the discharge of firearms under certain conditions and to provide a penalty therefor.

     Was read the first time and referred to the Committee on Judiciary.

     SB 184 Introduced by: Senators Hainje, Albers, Brown (Arnold), Daugaard, Duxbury, Everist, Frederick, Halverson, Lange, Munson (David), Paisley, Reedy, and Staggers and Representatives Peterson, Broderick, Brown (Richard), Chicoine, Crisp, Diedrich (Larry), Earley, Fiegen, Fryslie, Heineman, Hunt, Kazmerzak, Richter, Roe, Slaughter, Sutton (Daniel), and Wudel

     FOR AN ACT ENTITLED, An Act to authorize the construction of an inmate housing unit on the grounds of the state penitentiary complex in Minnehaha County, to make an appropriation therefor, to authorize local governments to contract with the state for the care of local prisoners, and to declare an emergency.

     Was read the first time and referred to the Committee on State Affairs.

     SB 185 Introduced by: Senators Brosz, Brown (Arnold), Everist, and Olson and Representatives Diedrich (Larry), Garnos, and Lucas

     FOR AN ACT ENTITLED, An Act to create the South Dakota teacher forgivable loan program and to appropriate money therefor.

     Was read the first time and referred to the Committee on Education.

     SB 186 Introduced by: Senators Dennert and Lawler and Representatives Weber and Nachtigal

     FOR AN ACT ENTITLED, An Act to appropriate funds for increased salaries for direct care employees of adjustment training centers and nursing facilities.

     Was read the first time and referred to the Committee on Appropriations.

     SB 187 Introduced by: Senators Albers and Whiting

     FOR AN ACT ENTITLED, An Act to provide for the revocation or refusal of a gaming or racing license.

     Was read the first time and referred to the Committee on State Affairs.

     SB 188 Introduced by: Senators Staggers, Hainje, and Kloucek and Representatives Crisp, Earley, and Koetzle

     FOR AN ACT ENTITLED, An Act to exempt certain payments made by newspaper publishers to newspaper carriers from sales and use tax.

     Was read the first time and referred to the Committee on State Affairs.

     SB 189 Introduced by: Senator Staggers and Representative Sutton (Daniel)

     FOR AN ACT ENTITLED, An Act to allow for binding arbitration for school districts and employees under certain circumstances.

     Was read the first time and referred to the Committee on State Affairs.

     SB 190 Introduced by: Senators Whiting and Flowers and Representatives Duniphan, Hennies, and Wilson

     FOR AN ACT ENTITLED, An Act to allow the electronic storage of public records.

     Was read the first time and referred to the Committee on Judiciary.

     SB 191 Introduced by: Senators Kleven, Benson, Bogue, Dennert, Drake, Dunn (Rebecca), Duxbury, Frederick, Hainje, Lange, Madden, Olson, Rounds, Staggers, and Symens and Representatives Richter, Cerny, Clark, Derby, Klaudt, Lintz, McCoy, McNenny, Munson (Donald), Pummel, Putnam, and Sutton (Daniel)

     FOR AN ACT ENTITLED, An Act to revise the income eligibility requirements for property tax and sales tax refunds.

     Was read the first time and referred to the Committee on State Affairs.

     SB 192 Introduced by: Senators Everist, Bogue, Duxbury, Munson (David), and Whiting and Representatives Hunt, Broderick, Earley, Michels, Volesky, and Wilson

     FOR AN ACT ENTITLED, An Act to reenact the revised secured transactions article of the Uniform Commercial Code.

     Was read the first time and referred to the Committee on Commerce.

SB 193 Introduced by: Senators Everist and Olson and Representatives Duenwald, Michels, and Wilson

FOR AN ACT ENTITLED, An Act to establish certain requirements and procedures regarding electronic transactions.

Was read the first time and referred to the Committee on State Affairs.

     SB 194 Introduced by: Senators Moore, Dennert, Hutmacher, Kloucek, Lange, Lawler, Olson, Reedy, and Symens and Representatives Lucas, Davis, Haley, Koetzle, and Nachtigal

     FOR AN ACT ENTITLED, An Act to revise the commitment of adjudicated juveniles.

     Was read the first time and referred to the Committee on State Affairs.

     SB 195 Introduced by: Senators Lawler, Kloucek, Lange, and Staggers and Representatives Duenwald, Apa, Brown (Jarvis), Chicoine, Diedtrich (Elmer), Heineman, Juhnke, Monroe, Sebert, and Waltman

     FOR AN ACT ENTITLED, An Act to prohibit or restrict certain acts in relation to human embryos.

     Was read the first time and referred to the Committee on Judiciary.

     SB 196 Introduced by: Senator Frederick

     FOR AN ACT ENTITLED, An Act to provide for the deposit of certain funds into the general fund and to declare an emergency.

     Was read the first time and referred to the Committee on Appropriations.

     SB 197 Introduced by: The Committee on State Affairs at the request of the Governor

     FOR AN ACT ENTITLED, An Act to create a statewide underground tank cleanup program.

     Was read the first time and referred to the Committee on State Affairs.

     SB 198 Introduced by: The Committee on State Affairs at the request of the Governor

     FOR AN ACT ENTITLED, An Act to authorize the Governor to exercise certain powers regarding environmental protection and to enlist operator support to conduct mine cleanups.

     Was read the first time and referred to the Committee on State Affairs.

     SB 199 Introduced by: The Committee on State Affairs at the request of the Governor

     FOR AN ACT ENTITLED, An Act to revise property tax levies for the general fund of a school district.

     Was read the first time and referred to the Committee on State Affairs.

     SB 200 Introduced by: The Committee on Appropriations at the request of the Governor

     FOR AN ACT ENTITLED, An Act to make an appropriation to fund tax refunds for the elderly and disabled persons.

     Was read the first time and referred to the Committee on Appropriations.

     SB 201 Introduced by: The Committee on Appropriations at the request of the Governor

     FOR AN ACT ENTITLED, An Act to make an appropriation from the coordinated soil and water conservation fund to the State Conservation Commission.

     Was read the first time and referred to the Committee on Appropriations.

     SB 202 Introduced by: Senators Paisley, Munson (David), and Valandra and Representatives Lucas, Koetzle, Kooistra, McIntyre, and Roe

     FOR AN ACT ENTITLED, An Act to revise certain provisions relating to conciliation of labor disputes.

     Was read the first time and referred to the Committee on Commerce.

     SB 203 Introduced by: Senator Paisley and Representative Roe

     FOR AN ACT ENTITLED, An Act to provide for highway signs denominating South Dakota as the Home of the Lakota Sioux Nations.

     Was read the first time and referred to the Committee on Transportation.

     SB 204 Introduced by: Senator Rounds

     FOR AN ACT ENTITLED, An Act to require certain immunizations for students.

     Was read the first time and referred to the Committee on Education.

SECOND READING OF CONSENT CALENDAR ITEMS

Sen. Staggers requested that SB 46 be removed from the Consent Calendar.

SB 74: FOR AN ACT ENTITLED, An Act to require a report in certain circumstances when an audit finding reoccurs.

Was read the second time.

     The question being "Shall SB 74 pass?"

     And the roll being called:

     Yeas 34, Nays 0, Excused 1, Absent and Not Voting 0

     Yeas were:
Albers; Benson; Bogue; Brosz; Brown (Arnold); Daugaard; Dennert; Drake; Dunn (Jim); Dunn (Rebecca); Duxbury; Everist; Flowers; Frederick; Hainje; Halverson; Ham; Hutmacher; Kleven; Kloucek; Lange; Lawler; Madden; Moore; Munson (David); Olson; Paisley; Reedy; Rounds; Shoener; Staggers; Valandra; Vitter; Whiting

Excused were:
Symens

So the bill having received an affirmative vote of a majority of the members-elect, the President declared the bill passed and the title was agreed to.

SECOND READING OF SENATE BILLS AND JOINT RESOLUTIONS

SB 24: FOR AN ACT ENTITLED, An Act to require kindergarten attendance.

Was read the second time.

24ca

Sen. Paisley moved that SB 24 be amended as follows:

On page 1 , line 11 of the printed bill , overstrike " compulsory attendance " .

On page 1 , line 12 , overstrike " for children under the age of seven " and insert " to enroll in kindergarten for children six " .

Which motion prevailed and SB 24 was so amended.

     The question being "Shall SB 24 pass as amended?"

     And the roll being called:

     Yeas 11, Nays 23, Excused 1, Absent and Not Voting 0

     Yeas were:
Albers; Brosz; Brown (Arnold); Duxbury; Everist; Frederick; Ham; Munson (David); Paisley; Shoener; Whiting

Nays were:
Benson; Bogue; Daugaard; Dennert; Drake; Dunn (Jim); Dunn (Rebecca); Flowers; Hainje; Halverson; Hutmacher; Kleven; Kloucek; Lange; Lawler; Madden; Moore; Olson; Reedy; Rounds; Staggers; Valandra; Vitter

Excused were:
Symens

So the bill not having received an affirmative vote of a majority of the members-elect, the President declared the bill lost.

SB 54: FOR AN ACT ENTITLED, An Act to permit schools to display the Ten Commandants.

Was read the second time.

54ja

Sen. Bogue moved that SB 54 be amended as follows:

On page 1 , line 6 of the printed bill , delete " the Ten Commandments " and insert " any religious document or text " .

On page 1 , line 6 , delete " as recorded in the " and insert " to the extent it is used for purely secular purposes. "

On page 1 , delete line 7 .

Sen. Frederick moved the previous question.

Which motion prevailed.

Sen. Bogue requested a roll call vote.

Which request was supported.

    The question being on Sen. Bogue's motion that SB 54 be amended.

     And the roll being called:

     Yeas 19, Nays 15, Excused 1, Absent and Not Voting 0

     Yeas were:
Bogue; Brosz; Daugaard; Dunn (Jim); Dunn (Rebecca); Duxbury; Everist; Frederick; Hainje; Ham; Kleven; Kloucek; Lange; Moore; Olson; Paisley; Rounds; Valandra; Whiting

Nays were:
Albers; Benson; Brown (Arnold); Dennert; Drake; Flowers; Halverson; Hutmacher; Lawler; Madden; Munson (David); Reedy; Shoener; Staggers; Vitter

Excused were:
Symens

So the motion having received an affirmative vote of a majority of the members present, the President declared the motion carried and SB 54 was so amended.

     The question being "Shall SB 54 pass as amended?"

     And the roll being called:

     Yeas 33, Nays 0, Excused 2, Absent and Not Voting 0

     Yeas were:
Albers; Benson; Bogue; Brosz; Brown (Arnold); Daugaard; Dennert; Drake; Dunn (Jim); Dunn (Rebecca); Duxbury; Everist; Flowers; Frederick; Hainje; Halverson; Ham; Kleven; Kloucek; Lange; Lawler; Madden; Moore; Munson (David); Olson; Paisley; Reedy; Rounds; Shoener; Staggers; Valandra; Vitter; Whiting

Excused were:
Hutmacher; Symens

So the bill having received an affirmative vote of a majority of the members-elect, the President declared the bill passed.

The question being on the title.

Sen. Bogue moved that the title to SB 54 be amended as follows:

On page 1 , line 1 of the printed bill , delete " the Ten Commandments " and insert " religious documents under certain circumstances " .

Which motion prevailed and the title was so amended.

SB 66: FOR AN ACT ENTITLED, An Act to require all persons to wear a seat belt while in certain motor vehicles.

Was read the second time.

     The question being "Shall SB 66 pass?"

     And the roll being called:

     Yeas 14, Nays 20, Excused 1, Absent and Not Voting 0

     Yeas were:
Brosz; Brown (Arnold); Dunn (Rebecca); Duxbury; Everist; Hainje; Halverson; Ham; Hutmacher; Lange; Lawler; Munson (David); Reedy; Vitter

Nays were:
Albers; Benson; Bogue; Daugaard; Dennert; Drake; Dunn (Jim); Flowers; Frederick; Kleven; Kloucek; Madden; Moore; Olson; Paisley; Rounds; Shoener; Staggers; Valandra; Whiting

Excused were:
Symens

So the bill not having received an affirmative vote of a majority of the members-elect, the President declared the bill lost.

There being no objection the Senate reverted to Order of Business No. 5.

REPORTS OF STANDING COMMITTEES

MADAM PRESIDENT:

The Committee on Judiciary respectfully reports that it has had under consideration SB 154 and returns the same with the recommendation that said bill do pass.

Also MADAM PRESIDENT:

The Committee on Judiciary respectfully reports that it has had under consideration SB 146 and returns the same with the recommendation that said bill do pass and be placed on the Consent Calendar.

Also MADAM PRESIDENT:

The Committee on Judiciary respectfully reports that it has had under consideration SB 153 and returns the same with the recommendation that said bill be amended as follows:

153ra

On page 1 , delete lines 10 to 14 of the printed bill , inclusive .

And that as so amended said bill do pass.

Also MADAM PRESIDENT:

The Committee on Judiciary respectfully reports that it has had under consideration SB 156 which was tabled.

Also MADAM PRESIDENT:

The Committee on Judiciary respectfully reports that it has had under consideration SB 70 and 86 which were deferred to the 36th legislative day.

Also MADAM PRESIDENT:

The Committee on Judiciary respectfully reports that it has had under consideration the nomination of Theodore J. Pins of Lake County, Wentworth, South Dakota, to the Board of Pardons and Paroles and returns the same with the recommendation that the Senate advise and consent to the confirmation of said appointment.

Also MADAM PRESIDENT:

The Committee on Judiciary respectfully reports that it has had under consideration the nomination of Sharon Kallemeyn to the Crime Victims Compensation Commission and returns the same with the recommendation that the Senate advise and consent to the confirmation of said appointment.

Also MADAM PRESIDENT:

The Committee on Judiciary respectfully reports that it has had under consideration the nomination of Mary Lou Jorgensen, Sioux Falls, South Dakota, as a member of the Board of Pardons and Paroles, and returns the same with the recommendation that the Senate advise and consent to the confirmation of said appointment.

Respectfully submitted,
Fred Whiting, Chair

Also MADAM PRESIDENT:

The Committee on Health and Human Services respectfully reports that it has had under consideration SB 132 and 55 and returns the same with the recommendation that said bills do pass.

Respectfully submitted,
Arnold M. Brown, Chair

FIRST READING OF HOUSE BILLS AND JOINT RESOLUTIONS

HB 1009: FOR AN ACT ENTITLED, An Act to redefine what marks are prohibited on a ballot and to require the county auditor to provide certain directions in conducting a recount.

Was read the first time and referred to the Committee on Local Government.

HB 1015: FOR AN ACT ENTITLED, An Act to revise certain provisions relating to open enrollment.

Was read the first time and referred to the Committee on Education.

HB 1052: FOR AN ACT ENTITLED, An Act to codify the legislation passed in 1999.

Was read the first time and referred to the Committee on Judiciary.

HB 1065: FOR AN ACT ENTITLED, An Act to prohibit certain sexual acts between certain jail and juvenile correctional facility employees and prisoners and to provide a penalty therefor.

Was read the first time and referred to the Committee on Judiciary.

SIGNING OF BILLS

     The President publicly read the title to

     SB 40: FOR AN ACT ENTITLED, An Act to revise certain water supply and treatment system operator certification provisions to comply with the requirements of the federal Safe Drinking Water Act.

     And signed the same in the presence of the Senate.

Sen. Bogue moved that the Senate do now adjourn, which motion prevailed, and at 4:05 p.m. the Senate adjourned.

Patricia Adam, Secretary