§ 2118 — Excess line brokers; duties

New York § 2118

• Jurisdiction: New York
• Law ISC: Insurance
• Art. 21: Agents, Brokers, Adjusters, Consultants and Intermediaries

Text

§ 2118. Excess line brokers; duties. (a) (1) Every licensee licensed\npursuant to section two thousand one hundred five of this article shall\nbe required to use due care in selecting the unauthorized insurer from\nwhom policies are procured under his license.\n (2) (A) No policy of insurance may be procured by a licensee from any\nforeign or alien insurer which is controlled, by a foreign government or\nby a political subdivision thereof, or which is an agency of any such\ngovernment or subdivision if the superintendent determines that: (i)\nsuch insurer receives a subsidy or other competitive advantage, as a\nresult of such control or status, that would enable it to compete\nunfairly with similarly situated insurers which are not so controlled or\nconstituted; (ii) such insurer is entitled to claim sovereign immunity\nas a result of such control and the insurer has not waived the sovereign\nimmunity; or (iii) the use of such insurer would be detrimental to the\ninterests of the people of this state.\n (B) No licensee shall be deemed to be in noncompliance with this\nsubsection unless: (i) the superintendent has made a prior determination\nthat the foreign or alien insurer from which the licensee procured a\npolicy of insurance should not be used as an excess line insurer in this\nstate in accordance with the provisions of this subsection; or (ii) the\nlicensee knew or should have known that such insurer should not be used\nas an excess line insurer in accordance with the provisions of this\nsubsection. The superintendent may promulgate regulations to provide\nguidance to the licensee.\n (C) Every such insurer shall otherwise satisfy all applicable\nrequirements for placement by an excess line broker.\n * (b) (1) Within forty-five days after a policy is procured, a\nlicensee shall submit the declarations page or cover note of every\npolicy procured under his or her license to the excess line association\nestablished pursuant to section two thousand one hundred thirty of this\narticle for recording and stamping. In the event that no declarations\npage or cover note is available to the licensee, within forty-five days\nafter the policy is procured, the licensee shall submit a binder to the\nexcess line association in lieu of such declarations page or cover note.\nIn the event that a binder is submitted to the excess line association,\nthe licensee shall submit the declarations page or cover note to the\nexcess line association promptly upon receipt. Every insurance document\nsubmitted to the excess line association pursuant to this subsection\nshall set forth:\n (A) the name and address of the insured;\n (B) the gross premium charged;\n (C) the name of the unauthorized insurer; and\n (D) the kind of insurance procured.\n (2) Subsequent endorsements which do not affect the premium charged\nare exempted from stamping.\n (3) (A) Except as provided in subparagraph (F) of this paragraph,\nsubmission of insurance documents to the excess line association shall\nbe accompanied by a statement subscribed to, and affirmed by, the\nlicensee or sublicensee as true under the penalties of perjury that,\nafter diligent effort, the full amount of insurance required could not\nbe procured, from authorized insurers, each of which is authorized to\nwrite insurance of the kind requested and which the licensee has reason\nto believe might consider writing the type of coverage or class of\ninsurance involved, and further showing that the amount of insurance\nprocured from an unauthorized insurer is only the excess over the amount\nprocurable from an authorized insurer. The licensee, however, shall be\nexcused from affirming that a diligent effort, as defined above, was\nmade to procure the coverage from authorized insurers if the licensee's\naffidavit is accompanied by the affidavit of another broker involved in\nthe placement affirming as true under the penalties of perjury that,\nafter diligent effort by the affirming broker, the required insurance\ncould not be procured from an authorized insurer which the affirming\nbroker had reason to believe might consider writing the type of coverage\nor class of insurance involved. The licensee and the affirming broker\nshall be excused from affirming that a diligent effort was made if the\nsuperintendent determines, pursuant to paragraph four of this\nsubsection, that no declinations are required.\n (B) A licensee or affirming broker shall be considered to have the\nreason to believe required by subparagraph (A) of this paragraph if the\ndecision to offer the risk to the authorized insurer was based on any of\nthe following:\n (i) Recent acceptance by the authorized insurer of a type of coverage\nor class of insurance similar to that for which coverage is presently\nbeing sought;\n (ii) Advertising by the authorized insurer or its agent indicating\nthat the authorized insurer is willing to consider acceptance of this or\na similar type of coverage or class of insurance;\n (iii) Media communications (i.e., newspaper or magazine articles,\ntrade publications, television and radio programming) indicating that\nthe authorized insurer is writing, or is considering writing, this type\nof coverage or class of insurance;\n (iv) Communications with other insurance professionals, risk managers,\ntrade associations, the excess line association or the department of\nfinancial services which indicates that the authorized insurer might\nconsider writing this type of coverage or class of insurance; or\n (v) Any other valid basis for making such decision.\n (C) Every licensee, or affirming broker, in connection with the\nplacement of each risk pursuant to this section, shall record on the\naffidavit required pursuant to subparagraph (A) of this paragraph the\nname, date of the declination, and national association of insurance\ncommissioners code of each authorized insurer declining a risk and\ninformation relied upon that formed the basis of such licensee's or\naffirming broker's reason to believe that the authorized insurer might\nconsider writing the type of coverage or class of insurance involved. A\nlicensee or affirming broker shall not be required to record on the\naffidavit the name of the representative declining the risk, the\nrepresentative's affiliation, or the reason for the declination.\n (D) Declinations obtained from authorized insurers which are\naffiliates of, or, as defined in article fifteen of this chapter, under\ncommon control with, each other or the unauthorized insurer shall not\nmeet the requirements of this subsection unless such related insurers\noperate as distinct and autonomous entities, and for underwriting\npurposes, compete with each other for the same type of coverage or class\nof insurance.\n (E) The superintendent, in a regulation, may determine whether there\nare circumstances where it may be appropriate, due to the unavailability\nfrom an authorized insurer of the leading type of coverage or the\nleading class of insurance required by the insured, to waive the\nrequirement in subparagraph (A) of this paragraph that a licensee may\nprocure from an unauthorized insurer only the amount of insurance which\nis excess over the amount procurable from an authorized insurer, and to\ninstead permit the licensee to procure from an unauthorized insurer the\nfull amount of insurance required by the insured.\n (F) A licensee seeking to procure or place insurance in this state for\nan exempt commercial purchaser shall not be required to satisfy any\nrequirement of this state to make a due diligence search to determine\nwhether the full amount or type of insurance sought by the exempt\ncommercial purchaser can be obtained from authorized insurers if:\n (i) the licensee procuring or placing the excess line insurance has\ndisclosed to the exempt commercial purchaser that the insurance may or\nmay not be available from the authorized market that may provide greater\nprotection with more regulatory oversight; and\n (ii) the exempt commercial purchaser has subsequently requested in\nwriting that the licensee procure or place the insurance from an\nunauthorized insurer.\n (4) The number of declinations constituting diligent effort in regard\nto placement of coverage with authorized insurers for purposes of\nparagraph three of this subsection shall be three, unless the\nsuperintendent after a hearing, on a record, upon findings and\nconclusions, determines that another number of such declinations is\nappropriate in regard to particular coverages. In making such\ndeterminations, the superintendent shall consider relevant market\nconditions, including unavailability of particular coverages from\nauthorized insurers, and may conduct market surveys. Any such\ndetermination shall be reviewed at least annually by the superintendent.\n (5) Before placing business with an unauthorized insurer, each\nlicensee shall ascertain and verify the fact that such insurer is\nauthorized in its domiciliary jurisdiction to write the insurance policy\nproposed to be procured from it by the licensee. No unauthorized insurer\nshall be deemed unacceptable for placement of business solely on the\nground that it has been so authorized to write such business in its\ndomiciliary jurisdiction for a period of less than three years preceding\nthe placement of such risk by the licensee. In determining whether\nbusiness may be placed with such unauthorized insurer, the\nsuperintendent shall consider such factors as: the interests of the\npublic and policyholders, the length of time such insurer has been\nauthorized in its domiciliary jurisdiction and elsewhere, its financial\ncondition, and unavailability of particular coverages from authorized\ninsurers.\n (6) It shall be unlawful for a licensee as defined in section two\nthousand one hundred one of this article and pursuant to sections two\nthousand one hundred four and two thousand one hundred five of this\narticle to deliver in this state any declarations page of an insurance\npolicy or cover note evidencing insurance unless such insurance document\nis stamped by the excess line association or is exempt from such\nrequirements; provided, however, that a licensee's failure to comply\nwith the requirements of this subsection shall not affect the validity\nof the coverage.\n (7) Compliance by a licensee with the requirements set forth in this\nsection in connection with submitting for recording and stamping\ndeclarations pages, cover notes, binders, endorsements, affidavits,\nnotices of excess line placement and other excess line insurance\ndocuments may be accomplished by means of electronic or other media\ntransmission, provided the superintendent first approves such methods of\nsubmitting for recording and stamping.\n * NB Effective until July 1, 2029\n * (b) (1) When any policy of insurance is procured under the authority\nof a license issued pursuant to section two thousand one hundred five of\nthis article, there shall be submitted, both by the licensee or\nsub-licensee and by the insured, statements subscribed and affirmed by\nthem as true under the penalties of perjury setting forth facts showing\nthat such insured and such licensee were unable after diligent effort to\nprocure, from authorized insurers, each authorized to write coverages of\nthe kind requested, the full amount of insurance required to protect the\ninterest of such insured, and further showing that the amount of\ninsurance procured from an unauthorized insurer or insurers is only the\nexcess over the amount so procurable from authorized insurers; provided,\nhowever, that the licensee shall be excused from affirming that a\ndiligent effort was made to procure the coverage from such authorized\ninsurers if the licensee's affidavit is accompanied by the affidavit of\nanother broker involved in the placement affirming as true under the\npenalties of perjury that, after diligent effort by the affirming\nbroker, the required insurance could not be procured from such\nauthorized insurers.\n (2) The number of declinations constituting diligent effort in regard\nto placement of coverage with authorized insurers for purposes of\nparagraph one of this subsection shall be three, unless the\nsuperintendent after a hearing, on a record, upon findings and\nconclusions, determines that another number of such declinations is\nappropriate in regard to particular coverages. In making such\ndeterminations, the superintendent shall consider relevant market\nconditions, including unavailability of particular coverages from\nauthorized insurers, and may conduct market surveys. Any such\ndetermination shall be reviewed at least annually by the superintendent.\n (3) Before placing business with an unauthorized insurer, each\nlicensee shall ascertain and verify the fact that such insurer is\nauthorized in its domiciliary jurisdiction to write the insurance policy\nproposed to be procured from it by the licensee. No unauthorized insurer\nshall be deemed unacceptable for placement of business solely on the\nground that it has been so authorized to write such business in its\ndomiciliary jurisdiction for a period of less than three years preceding\nthe placement of such risk by the licensee. In determining whether\nbusiness may be placed with an unauthorized insurer, the superintendent\nshall consider such factors as: the interests of the public and\npolicyholders, the length of time such insurer has been authorized in\nits domiciliary jurisdiction and elsewhere, its financial condition, and\nunavailability of particular coverages from authorized insurers.\n (4) The statements required pursuant to paragraph one of this\nsubsection shall be filed by such licensee with the superintendent\nwithin thirty days after such policies have been procured.\n * NB Effective July 1, 2029\n * (c) (1) The licensee shall keep a complete and separate record of\nall policies procured from unauthorized insurers under such license. The\nlicensee shall also maintain files supporting declinations by authorized\ninsurers. An authorized insurer need not maintain underwriting\nsubmissions or other records with respect to any declination, unless the\nsuperintendent, after a hearing on a record, finds substantial abuses of\nthe provisions of this section and determines that recordkeeping or\nreporting requirements in regard to authorized insurers are necessary to\nredress or eliminate such abuses.\n (2) Such records shall be open to examination by the excess line\nassociation as provided for in section two thousand one hundred thirty\nof this article and by the superintendent, as provided in section three\nhundred ten of this chapter, at all reasonable times and shall show:\n (A) the exact amount of each kind of insurance permitted under this\nsection which has been procured for each insured;\n (B) the gross premiums charged by the insurers for each kind of\ninsurance permitted under this section;\n (C) the amount of each kind of premiums of insurance permitted by this\nsection which were returned to each insured;\n (D) the name of the insurer or insurers which issued each of said\npolicies;\n (E) the effective dates of such policies;\n (F) the terms for which they were issued; and\n (G) the cities and villages within this state in which the insured\nrisks, respectively, are located.\n * NB Effective until July 1, 2029\n * (c)(1) The licensee shall keep a complete and separate record of all\npolicies procured from unauthorized insurers under such license. The\nlicensee shall also maintain files supporting declinations by authorized\ninsurers. An authorized insurer need not maintain underwriting\nsubmissions or other records with respect to any declination, unless the\nsuperintendent, after a hearing on a record, finds substantial abuses of\nthe provisions of this section and determines that recordkeeping or\nreporting requirements in regard to authorized insurers are necessary to\nredress or eliminate such abuses. The superintendent shall review\nrecordkeeping requirements applicable to this section and, by October\nfirst, nineteen hundred eighty-six, shall take measures in order to\nsimplify forms and other aspects of compliance with such requirements.\n (2) Such records shall be open to examination by the superintendent,\nas provided in section three hundred ten of this chapter, at all\nreasonable times and shall show:\n (A) the exact amount of each kind of insurance permitted under this\nsection which has been procured for each insured;\n (B) the gross premiums charged by the insurers for each kind of\ninsurance permitted under this section;\n (C) the amount of each kind of premiums of insurance permitted by this\nsection which were returned to each insured;\n (D) the name of the insurer or insurers which issued each of said\npolicies;\n (E) the effective dates of such policies;\n (F) the terms for which they were issued; and\n (G) the cities and villages within this state in which the insured\nrisks, respectively, are located.\n * NB Effective July 1, 2029\n (d) (1) Where this state is the insured's home state, a person, firm,\nassociation or corporation licensed pursuant to the provisions of\nsection two thousand one hundred five of this article shall pay to the\nsuperintendent a sum equal to three and six-tenths percent of the gross\npremiums charged the insureds by the insurers for insurance procured by\nsuch licensee pursuant to such license, less the amount of such premiums\nreturned to such insureds.\n (2) The amount of such payments which represents a sum equal to three\npercent of fire insurance premiums shall be distributed by the\nsuperintendent as prescribed in section nine thousand one hundred five\nof this chapter, and the balance thereof shall be paid over by the\nsuperintendent to the state treasurer.\n (3) Such licensee shall be required to make such payments to the\nsuperintendent on the fifteenth day of March of each year for the taxes\non all policies procured by such licensee, pursuant to such license,\nduring the next preceding calendar year, and on such date such licensee\nshall also file with the superintendent a return in the form prescribed\nby the superintendent, showing such information as may be necessary for\nthe proper distribution of such payments.\n (e)(1) Except as provided in paragraph two of this subsection, no\nlicensee shall be required to obtain a declination from an association\nestablished pursuant to article fifty-four or fifty-five of this\nchapter, or to apply for insurance through a plan established pursuant\nto article fifty-three of this chapter, as a condition of procuring\ninsurance pursuant to this section.\n (2) (A) Unless the licensee obtains a declination from the appropriate\nassociation, or from an insurer pursuant to an application for coverage\nthrough a plan, no diligent effort shall be considered to have been made\nif the insurance is available from the plan or association in connection\nwith the placement of:\n (i) a policy of non-commercial motor vehicle liability insurance;\n (ii) medical malpractice insurance for a general hospital, as defined\nin subdivision ten of section two thousand eight hundred one of the\npublic health law, a physician or dentist; or\n (iii) insurance which by law must be provided by an authorized\ninsurer.\n (B) In connection with the placement of any other kind of insurance, a\ndeclination from the appropriate association, or from an insurer\npursuant to an application for coverage through a plan, shall be\nrequired unless prior to the placement the insured has been advised of\nthe availability of insurance from the plan or association.\n (C) The affirming broker shall provide written notice to the insured\nthat the placement was made with an unauthorized insurer. A copy of this\nnotice shall be attached to the affirming broker's affidavit. The\naffidavits required by this section to be completed by the affirming\nbroker shall include a statement that the affirming broker advised the\ninsured in writing:\n (i) that the unauthorized insurer with which the coverage is being\nplaced is not authorized to do an insurance business in this state and\nis not subject to supervision by this state;\n (ii) that in the event of the insolvency of the unauthorized insurer,\nlosses will not be covered by any New York state insolvency fund;\n (iii) that the policy may not be subject to all of the regulations of\nthe superintendent pertaining to policy forms; and\n (iv) such other information as the superintendent may, by regulation,\nrequire.\n (f) (1) An excess line broker licensed pursuant to section two\nthousand one hundred five of this article may execute an authority to\nbind coverage and may exercise binding authority on behalf of an insurer\nnot licensed or authorized to do business in this state pursuant to the\nprovisions of this subsection.\n (2) As used in this subsection:\n (A) an "authority to bind coverage" means the written agreement\nbetween an excess line broker and an insurer not licensed or authorized\nto do business in this state and shall set forth the terms, conditions,\nand limitations governing the exercise of binding authority by the\nexcess line broker;\n (B) a "binder" means written evidence of a temporary insurance\ncontract; and\n (C) "binding authority" means the authority to issue and deliver\nbinders, and to issue and deliver insurance policies on behalf of an\ninsurer not licensed or authorized to do business in this state.\n (3) (A) Every excess line broker who exercises binding authority shall\nhave filed an authority to bind coverage, the contents of which shall\nnot be public, with the excess line association established pursuant to\nsection two thousand one hundred thirty of this article.\n (B) Such authority shall be valid until (i) terminated by the\nappointing insurer after termination in accordance with the contract\nbetween the broker and the insurer; (ii) the excess line license is\nsuspended or revoked by the superintendent; or (iii) the excess line\nlicense expires and is not renewed.\n (4) Notwithstanding any other provision of law to the contrary, the\nexecution or filing of an authority to bind coverage and the exercise of\nbinding authority by an authorized excess line broker shall not\nconstitute the doing of insurance business by an insurer not licensed or\nauthorized to do business in this state.\n (5) Any coverage so written must be in compliance with this section.\n (6) Every binder shall contain a description and location of the\nsubject of insurance, coverage, conditions and term of insurance, the\npremium, the name and address of the excess line broker, the name and\naddress of the producing broker, the name of the insurer and the name\nand address of the insured.\n (7) Any binding authority agreement made and filed pursuant to this\nsection may authorize an excess line broker to bind coverage for risks\nlocated within or outside of the state of New York, notwithstanding any\nother provision of this chapter.\n (8) Any binding authority agreement made and filed pursuant to this\nsection may authorize an excess line broker to issue notice of\ncancellation of any insurance policy bound pursuant to such agreement\n(A) for non-payment of premium, (B) for a material increase in the\nhazard insured, or (C) upon discovery of a material misrepresentation in\nthe application for insurance. The excess line broker shall not be\ndeemed an agent of the insurer solely for issuing such notice of\ncancellation.\n