Could a subpoena for an insurer that was not a party be served through South Carolina's insurance director?

Plain-English summary

The South Carolina Department of Insurance asked whether attorneys could serve subpoenas for insurers that were not parties to a lawsuit by delivering them to the insurance director, whom insurers appointed as statutory agent for service. The Attorney General expected a court to read the broad words “legal process” to include subpoenas. But the statutes also spoke of an action or proceeding “against” the insurer. The opinion could not say whether that language covered a subpoena aimed at a nonparty insurer, and it identified no South Carolina decision resolving that point.

The opinion distinguished initial service to obtain jurisdiction over an insurer from discovery served after jurisdiction was already established. It also noted a separate interstate discovery statute for obtaining evidence from out-of-state sources. The Attorney General recommended that the department act in accordance with the existing statutes' broad language pending legislative clarification, while expressly preserving the third-party uncertainty.

What this means for you

Insurance regulators

The opinion viewed a subpoena as a kind of legal process and recommended following the statutes' broad text until lawmakers clarified it. It did not settle whether the director could accept a nonparty subpoena in a case against someone else.

Litigants and insurers

The opinion treated substituted service through the director as a method of obtaining jurisdiction over an insurer. It described limits on using that method for discovery after jurisdiction had already been acquired and left nonparty subpoenas unsettled.

Common questions

Is a subpoena “legal process” under the insurer service statutes?

The Attorney General said a court would likely read the statutes broadly enough to include subpoenas within legal process. That did not resolve every situation in which a subpoena might be served.

Could the insurance director receive a subpoena for an insurer that was not sued?

The opinion did not give a definitive answer. It said the phrase “action or proceeding against it” left uncertain whether the substitute service procedure reached a third-party or nonparty insurer.

Could the director be served with discovery papers after jurisdiction over the insurer was established?

The opinion cited Equilease Corporation v. Weathers for the distinction: the substitute service statutes were meant to obtain jurisdiction, rather than serve later discovery papers after jurisdiction was already in place.

Did the opinion identify another route for out-of-state subpoenas?

Yes. It discussed the Uniform Interstate Depositions and Discovery Act and said a subpoena could be served under that scheme if the foreign insurer was subject to jurisdiction in another state that had adopted it.

Background and legal framework

The Department of Insurance had received many third-party subpoenas and questioned whether the director's statutory agency role covered them. One statute required insurers to appoint the director to receive process against them; another set the service procedure. The Attorney General read “process” to include a subpoena, then considered the narrower phrase “against” an insurer and the South Carolina Supreme Court's treatment of substitute service as a way to obtain jurisdiction. The opinion called for legislative clarification on nonparty insurers.

Citations and references

• S.C. Code section 38-5-70 (insurer appointment of the director for service).
• S.C. Code section 15-9-270 (substituted service procedure).
• Equilease Corporation v. Weathers, 275 S.C. 478, 272 S.E.2d 789 (1980) (service to obtain jurisdiction).

Official title

Opinion addressing whether S.C. Code Sections 15-9-270 and 38-5-70 authorize substitute service of process of third party subpoenas.

Requester

Requested by Gwendolyn Fuller McGriff, Esquire, Deputy Director and General Counsel, South Carolina Department of Insurance.

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/opinion-addressing-whether-sc-code-sections-15-9-270-and-38-5-70-authorize-substitute-service-of-process-of-third-party-subpoenas/
• Original PDF: https://www.scag.gov/media/5ldnmxqn/03146512.pdf

Original opinion text

£ o

Alan Wilson
attorney General

November 01, 2022

Gwendolyn Fuller McGriff, Esq.
Deputy Director and General Counsel
South Carolina Department of Insurance
PO Box 100105
Columbia, SC 29202-3105

Dear Ms. McGriff,

Attorney General Alan Wilson has referred your letter to the Opinions section.
Your
letter states the following:

As you may be aware, the Director of Insurance is the statutory agent for service of process for insurers transacting business in South Carolina. I am writing to seek legal advice from your office regarding the Department’s interpretation about what constitutes “process” for purposes of service of process on insurers transacting business in this state. At issue is the interpretation of S.C. Code Ann.
§§ 38-5-70 and 15-9-270 regarding the service of third-party subpoenas. The Department has forwarded subpoenas in the past when attached to the summons and complaint. Around 2020, the Department served some subpoenas (primarily in the context of a receivership proceeding) without regard to the content of the document, but when it started receiving hundreds of nonparty subpoenas in a various types of cases, it took a closer look at the statute(s) and notified the attorneys that it could not serve third party subpoenas because they were not the type of process contemplated by Sections 38-5-70 and 15-9-270. Based on the language of the statute and applicable case law, this Department determined that legal process included the summons and complaint and other documents which initiated the cause of action against the insurer.

As previously stated, the Department’s interpretation is based on its preliminary research which indicates third party subpoenas are not the type of process contemplated by the statutes. The plain meaning and purpose of Sections 38-5-70 and 15-9-270 indicates that nonparty subpoenas do not fall within the type of process described in the statute.

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Specifically, S.C. Code Ann. § 38-5-70 provides:
Every insurer shall, before being licensed, appoint in writing the director and his successors in office to be its true and lawful attorney upon whom all legal process in any action or proceeding against it must be served and in this writing shall agree that any lawful process against it which is served upon this attorney is of the same legal force and validity as if served upon the insurer and that the authority continues in force so long as any liability remains outstanding in the State. Copies of the appointment, certified by the director, are sufficient evidence of the appointment and must be admitted in evidence with the same force and effect as the original might be admitted.

S.C. Code Ann. § 38-5-70 (2015) (emphasis added).

Section 38-5-70 addresses the appointment of the Director of Insurance as the insurer’s statutory agent for service of process. Because the statute requires the appointment of the Director, courts have concluded that the Director serves as the statutory agent of the insurers in the state, making service upon the Director sufficient service upon the company. See, e.g., Elliott v. American States Insurance Company, 883 F.3d 884 (2018) (statute appointing commissioner for service of process made the commissioner the statutory agent not the registered agent).

S.C. Code § 15-9-270 addresses the procedure for service of process:

The summons and any other legal process in any action or proceeding against it must be served on an insurance company as defined in Section 38-1-20, including fraternal benefit associations, by delivering two copies of the summons or any other legal process to the Director of the Department of Insurance, as attorney of the company with a fee of ten dollars, of which five dollars must be retained by the director to offset the costs he incurs in service of process and of which five dollars must be deposited to the credit of the general fund of the State. A company shall appoint the director as its attorney pursuant to the provisions of Section 38-5-70. This service is considered sufficient service upon the company. When legal process against any company with the fee provided in this section is served upon the director, he shall immediately forward by registered or certified mail one of the duplicate copies prepaid directed toward the company at its home office or, in the case of a Gwendolyn Fuller McGriff, Esq.
Page 3
November 01, 2022

fraternal benefit association, to its secretary or corresponding officer at the head of the association.

S.C. Code Ann. § 15-9-270 (2015) (emphasis added).

Black’s Law Dictionary defines “process” as “1. The proceedings in any action or prosecution . 2. A summons or writ, esp. to appear or respond in court . Also termed judicial process; legal process." Black's Law Dictionary 1399 (10th ed. 2014). Therefore, process is generally defined as the summons and complaint, writ or other pleading that initiates a court action against an insurer or that requires a court appearance or response in an action against the insurer.

The Department does not contend subpoenas do not constitute process but instead contends subpoenas are not the type of process that was envisioned by the statute.
The plain language of S.C. Code Ann. §§ 15-9-270 and 38-5-70 only requires and/or authorizes the Director to serve “process,” such as a summons and complaint, writ, or other case initiating document, etc., on an insurance company in an action or proceeding against it. Neither S.C. Code Ann. § 38-5-70 nor § 15-9-270 require the Department or its director to serve subpoenas on non-party insurers . Subpoenas do not confer personal jurisdiction and are not the type of process contemplated by Sections 38-5-70 or 15-9-270. Moreover, South Carolina courts have opined that process constitutes case-initiating documents such as the summons and complaint or a writ that initiates a judicial proceeding. See Equilease Corp, v. Weathers, 275 S.C. 478, 272 S.E.2d 789 (1980); White Oak Manor, Inc, v. Lexington Insurance Co., et. al, 407 S.C. 1, 753 S.E.2d 537 (2014).
Third/nonparty subpoenas are not case-initiating documents.

Law/Analysis

It is this Office’s opinion that a court would likely find the language used in S.C. Code §§ 15-9-270 and 38-5-70 is broad enough to include subpoenas within the types of process that are subject to the substituted service procedures thereunder. This Office has not identified a decision from our state courts interpreting whether third-party subpoenas are included within the types of process that are subject to substitute service under S.C. Code §§ 15-9-270 and 38-5-70. As this appears to be a matter of first impression, it should be emphasized that the General Assembly’s intent is the primary consideration in interpreting the terms of a statute. See Kerr v. Richland Mem'l Hosp., 383 S.C. 146,148, 678 S.E.2d 809, 811 (2009) (The primary rule of statutory construction is to “ascertain and give effect to the intent of the legislature.”). “A statute as a whole must receive a practical, reasonable and fair interpretation consonant with the purpose, design, and policy of lawmakers.” State v. Henkel, 413 S.C. 9, 14, 774 S.E.2d 458, 461 (2015), Gwendolyn Fuller McGriff, Esq. Page 4 November 01, 2022

reh'g denied (Aug. 5, 2015). With these principles in mind, this opinion will next examine the language of both section 15-9-270 and 38-5-70 to ascertain legislative intent.

The two statutes work in tandem to permit substitution of service for insurance companies on the Director of the Department of Insurance (“the Director”). Section 38-5-70 contains language suggesting intent for broad application for service of process.

Every insurer shall, before being licensed, appoint in writing the director and his successors in office to be its true and lawful attorney upon whom all legal process in any action or proceeding against it must be served and in this writing shall agree that any lawful process against it which is served upon this attorney is of the same legal force and validity as if served upon the insurer.

S.C. Code Ann. § 38-5-70 (emphasis added). The statute’s use of “all” and “any” suggests the Legislature intended for this substitute service to apply to a wide range of legal process. However, in both instances, the statute also denotes that the action, proceeding, or process must be “against it,” meaning the insurer. Id. Section 15-9-270 similarly employs expansive language to describe process, “any other legal process,” and it maintains the same limitation that the process be “against it.”

The summons and any other legal process in any action or proceeding against it must be served on an insurance company ... by delivering two copies of the summons or any other legal process to the Director of the Department of Insurance, as attorney of the company .... A company shall appoint the director as its attorney pursuant to the provisions of Section 38-5-70. This service is considered sufficient service upon the company. . . .

S.C. Code Ann. § 15-9-270 (emphasis added). As noted in your letter above, Black’s Law Dictionary defines “process” to include “[a] summons or writ, esp. to appear or respond in court.” PROCESS, Black's Law Dictionary (11th ed. 2019) (emphasis added). Black’s Law Dictionary also defines “subpoena” as “[a] writ or order commanding a person to appear before a court or other tribunal, subject to a penalty for failing to comply.” SUBPOENA, Black's Law Dictionary (1 1th ed. 2019) (emphasis added). Because a subpoena is a type of writ and writs are included within the definition of process, a subpoena is a type of legal process.

Although a subpoena is a legal process, it may not be of the kind the Legislature intended to be covered by these substitute service statutes. See AARP v. Am. Fam. Prepaid Legal Corp., No. 06 CVS 10216, 2007 WL 2570841, at *5 (N.C. Super. Feb. 23, 2007) (“The Court has no quarrel with AARP's unremarkable assertion that ‘[a] subpoena is a process[.]’ ... But, it is quite another thing to say that a subpoena is the type of process that may properly be served on a non- party insurer pursuant to” the North Carolina substitution of service statutes.). In Equilease Corporation v. Weathers, 275 S.C. 478, 272 S.E.2d 789 (1980), the South Carolina Supreme Court considered whether an earlier version of the substitute service statutes permitted service of a summons and cross-complaint on the Chief Insurance Commissioner rather than a foreign Gwendolyn Fuller McGriff, Esq. Page 5 November 01, 2022

insurer’s attorneys of record. Therein, counsel for co-defendants argued that “after jurisdiction had already been acquired over [insurer], substituted service statutes of the Code were no longer applicable. . .” Id. at 483, 272 S.E.2d at 791 . The Court agreed stating:

This reasoning is logical and practical and it is clear that Code Sections 1 5-9-270 and 38-52-80 [currently codified as 38-5-70] were intended by the legislature to be methods of obtaining jurisdiction over a foreign insurance company. Once jurisdiction has been acquired over such an insurance company, these code sections have no further applicability. Any other construction of these statutes would lead to ridiculous results if taken to their logical conclusion, such as allowing service of notices of depositions, interrogatories, motions, et cetera, on the Chief Insurance Commissioner.

Id. at 483-84, 272 S.E.2d at 791. The Court explained that, at the time of its opinion, “where jurisdiction has not yet been acquired over an insurance company, service under the applicable substituted service statute is the proper and exclusive method of obtaining jurisdiction over the insurance company.” Id. at 484, 272 S.E.2d at 792. 1 The Court’s statements regarding sections 15-9-270 and 38-5-70 plainly support substitution of service on the Director to obtain jurisdiction over an insurer. In contrast, substitution of service could not be used to serve notice of depositions and other discovery after obtaining jurisdiction.

Your letter raises the additional issue of whether the substitute service procedures in sections 15-9-270 and 38-5-70 could be used to obtain discovery from a third-party foreign insurance company when a state court does, not yet have jurisdiction. As discussed above, the plain language of the statutes broadly authorizes substitute service of “all” or “any” legal process “against” an insurer. S.C. Code Ann. §§ 15-9-270, 38-5-70. It is unclear, however, whether a court would find the language “action or proceeding against it” demonstrates legislative intent to authorize substitute service of a subpoena upon an insurer when it is a third-party or non-party. Id,

Nevertheless, there is a separate statutory scheme that specifically authorizes depositions and discovery from foreign sources. A majority of states have enacted a standardized method for taking depositions and obtaining discovery from individuals and entities located out of state. In 2010, the General Assembly adopted the Uniform Interstate Depositions and Discovery Act (“UIDDA”), S. C. Code Ann. § 15^17-100 et seq.

The Act sets forth procedures for the request, issuance, contents, and service of foreign subpoenas, as well as for application to the court for a protective order or to enforce, quash, or modify such a subpoena. The Act further provides that when a subpoena issued thereunder commands a person to attend and give testimony at

1 While both sections 15-9-270 and 38-5-70 have been amended since Equi lease, the Court has subsequently maintained the Legislature’s intent in adopting and amending these statutes was “to provide an insured with a method to obtain service of process on insurance companies.” White Oak Manor, Inc, v, Lexington Ins. Co., 407 S.C. 1, 9, 753 S.E.2d 537, 541 (2014). Gwendolyn Fuller McGriff, Esq. Page 6 November 01, 2022

a deposition, produce designated books, documents, records, electronically stored information, or tangible items, or permit inspection of premises, the lime and place and the manner of the taking of the deposition, the production, or the inspection must comply with the South Carolina Rules of Civil Procedure relating to discovery.

32 S.C. Jur. Witnesses § 4; sec also Hawkins v. Blair, 334 Ga. App. 898, 902-03, 780 S.E.2d 515, 519 (2015) (“[B]oth South Carolina and Georgia have enacted a version of the Uniform Interstate Depositions and Discovery Act. See OCGA § 24-13-1 10 et seq. and S. C. Code Ann.
§ 15^47-100 et seq., which allows discovery as indicated in the title of the Act.”). If a foreign insurer is subject to jurisdiction within a state that has likewise adopted the UIDDA, a subpoena could be served upon it as directed thereunder.

Conclusion

It is this Office’s opinion that a court would likely find the language used in S.C. Code §§ 15-9-270 and 38-5-70 is broad enough to include subpoenas within the types of process that are subject to the substituted service procedures thereunder. This Office has not identified a decision from our slate courts interpreting whether third-party subpoenas arc included within the types of process that are subject to these substitute service statutes. The plain language of the statutes authorizes substitute service of “all” or “any” legal process “against” an insurer. S.C. Code Ann.
§§ 15-9-270, 38-5-70. It is unclear, however, whether a court would find the language “action or proceeding against it” demonstrates legislative intent to authorize substitute service of a subpoena upon an insurer when it is a third-party or non-party. Id. Legislative clarification may be warranted regarding whether sections 15-9-270 and 38-5-70 arc intended to authorize substitute service of subpoenas upon third-party insurers. While legislative clarification is probably advisable, we recommend your agency act in accordance with the present broad language of the statute until such clarification is adopted.

Sincerely,

Matthew Houck
Assistant Attorney General

REVIE ED AND APPROVED BY:

Robert D. Cook
Solicitor General