A regional manufacturing firm requires specialized environmental liability coverage that has been repeatedly declined by all admitted insurance companies currently operating in the state. The firm's executive contacts Victor, who holds an active standard resident property and casualty producer license, asking him to immediately secure the coverage through an offshore, non-admitted insurer.
Under standard state insurance licensing laws, how must Victor legally proceed with this specific transaction?
- He must refer the transaction to a licensed surplus lines broker who holds the specific statutory license required to place business with non-admitted insurers.Answer
- BHe may independently procure the policy using his existing producer license, provided he first files a sworn affidavit with the Commissioner proving a diligent search of the admitted market was conducted.
- CHe can legally bind the business because he possesses implied authority to seek coverage outside the admitted market when state-approved insurers have formally rejected the risk.
- DHe must request a 180-day temporary broker license from the Department of Insurance, which allows him to complete this single commercial transaction without passing the surplus lines exam.
Answer
He must refer the transaction to a licensed surplus lines broker who holds the specific statutory license required to place business with non-admitted insurers.
A standard resident property and casualty producer license only grants the authority to represent and place business with admitted (authorized) insurers operating within the state. To legally place coverage with a non-admitted insurer, the transaction must be executed by an individual holding a specific surplus lines broker license. Therefore, a standard producer must refer the client to a properly licensed surplus lines broker.
Step-by-Step Solution
Key Concept
Surplus Lines Broker Licensing and Authority Limits
Estimated Time:1m 30s