N.Y. Insurance Law § 2118: Excess line brokers; duties

§ 2118. Excess line brokers; duties. (a) (1) Every licensee licensed

pursuant to section two thousand one hundred five of this article shall

be required to use due care in selecting the unauthorized insurer from

whom policies are procured under his license.

(2) (A) No policy of insurance may be procured by a licensee from any

foreign or alien insurer which is controlled, by a foreign government or

by a political subdivision thereof, or which is an agency of any such

government or subdivision if the superintendent determines that: (i)

such insurer receives a subsidy or other competitive advantage, as a

result of such control or status, that would enable it to compete

unfairly with similarly situated insurers which are not so controlled or

constituted; (ii) such insurer is entitled to claim sovereign immunity

as a result of such control and the insurer has not waived the sovereign

immunity; or (iii) the use of such insurer would be detrimental to the

interests of the people of this state.

(B) No licensee shall be deemed to be in noncompliance with this

subsection unless: (i) the superintendent has made a prior determination

that the foreign or alien insurer from which the licensee procured a

policy of insurance should not be used as an excess line insurer in this

state in accordance with the provisions of this subsection; or (ii) the

licensee knew or should have known that such insurer should not be used

as an excess line insurer in accordance with the provisions of this

subsection. The superintendent may promulgate regulations to provide

guidance to the licensee.

(C) Every such insurer shall otherwise satisfy all applicable

requirements for placement by an excess line broker.

* (b) (1) Within forty-five days after a policy is procured, a

licensee shall submit the declarations page or cover note of every

policy procured under his or her license to the excess line association

established pursuant to section two thousand one hundred thirty of this

article for recording and stamping. In the event that no declarations

page or cover note is available to the licensee, within forty-five days

after the policy is procured, the licensee shall submit a binder to the

excess line association in lieu of such declarations page or cover note.

In the event that a binder is submitted to the excess line association,

the licensee shall submit the declarations page or cover note to the

excess line association promptly upon receipt. Every insurance document

submitted to the excess line association pursuant to this subsection

shall set forth:

(A) the name and address of the insured;

(B) the gross premium charged;

(C) the name of the unauthorized insurer; and

(D) the kind of insurance procured.

(2) Subsequent endorsements which do not affect the premium charged

are exempted from stamping.

(3) (A) Except as provided in subparagraph (F) of this paragraph,

submission of insurance documents to the excess line association shall

be accompanied by a statement subscribed to, and affirmed by, the

licensee or sublicensee as true under the penalties of perjury that,

after diligent effort, the full amount of insurance required could not

be procured, from authorized insurers, each of which is authorized to

write insurance of the kind requested and which the licensee has reason

to believe might consider writing the type of coverage or class of

insurance involved, and further showing that the amount of insurance

procured from an unauthorized insurer is only the excess over the amount

procurable from an authorized insurer. The licensee, however, shall be

excused from affirming that a diligent effort, as defined above, was

made to procure the coverage from authorized insurers if the licensee's

affidavit is accompanied by the affidavit of another broker involved in

the placement affirming as true under the penalties of perjury that,

after diligent effort by the affirming broker, the required insurance

could not be procured from an authorized insurer which the affirming

broker had reason to believe might consider writing the type of coverage

or class of insurance involved. The licensee and the affirming broker

shall be excused from affirming that a diligent effort was made if the

superintendent determines, pursuant to paragraph four of this

subsection, that no declinations are required.

(B) A licensee or affirming broker shall be considered to have the

reason to believe required by subparagraph (A) of this paragraph if the

decision to offer the risk to the authorized insurer was based on any of

the following:

(i) Recent acceptance by the authorized insurer of a type of coverage

or class of insurance similar to that for which coverage is presently

being sought;

(ii) Advertising by the authorized insurer or its agent indicating

that the authorized insurer is willing to consider acceptance of this or

a similar type of coverage or class of insurance;

(iii) Media communications (i.e., newspaper or magazine articles,

trade publications, television and radio programming) indicating that

the authorized insurer is writing, or is considering writing, this type

of coverage or class of insurance;

(iv) Communications with other insurance professionals, risk managers,

trade associations, the excess line association or the department of

financial services which indicates that the authorized insurer might

consider writing this type of coverage or class of insurance; or

(v) Any other valid basis for making such decision.

(C) Every licensee, or affirming broker, in connection with the

placement of each risk pursuant to this section, shall record on the

affidavit required pursuant to subparagraph (A) of this paragraph the

name, date of the declination, and national association of insurance

commissioners code of each authorized insurer declining a risk and

information relied upon that formed the basis of such licensee's or

affirming broker's reason to believe that the authorized insurer might

consider writing the type of coverage or class of insurance involved. A

licensee or affirming broker shall not be required to record on the

affidavit the name of the representative declining the risk, the

representative's affiliation, or the reason for the declination.

(D) Declinations obtained from authorized insurers which are

affiliates of, or, as defined in article fifteen of this chapter, under

common control with, each other or the unauthorized insurer shall not

meet the requirements of this subsection unless such related insurers

operate as distinct and autonomous entities, and for underwriting

purposes, compete with each other for the same type of coverage or class

of insurance.

(E) The superintendent, in a regulation, may determine whether there

are circumstances where it may be appropriate, due to the unavailability

from an authorized insurer of the leading type of coverage or the

leading class of insurance required by the insured, to waive the

requirement in subparagraph (A) of this paragraph that a licensee may

procure from an unauthorized insurer only the amount of insurance which

is excess over the amount procurable from an authorized insurer, and to

instead permit the licensee to procure from an unauthorized insurer the

full amount of insurance required by the insured.

(F) A licensee seeking to procure or place insurance in this state for

an exempt commercial purchaser shall not be required to satisfy any

requirement of this state to make a due diligence search to determine

whether the full amount or type of insurance sought by the exempt

commercial purchaser can be obtained from authorized insurers if:

(i) the licensee procuring or placing the excess line insurance has

disclosed to the exempt commercial purchaser that the insurance may or

may not be available from the authorized market that may provide greater

protection with more regulatory oversight; and

(ii) the exempt commercial purchaser has subsequently requested in

writing that the licensee procure or place the insurance from an

unauthorized insurer.

(4) The number of declinations constituting diligent effort in regard

to placement of coverage with authorized insurers for purposes of

paragraph three of this subsection shall be three, unless the

superintendent after a hearing, on a record, upon findings and

conclusions, determines that another number of such declinations is

appropriate in regard to particular coverages. In making such

determinations, the superintendent shall consider relevant market

conditions, including unavailability of particular coverages from

authorized insurers, and may conduct market surveys. Any such

determination shall be reviewed at least annually by the superintendent.

(5) Before placing business with an unauthorized insurer, each

licensee shall ascertain and verify the fact that such insurer is

authorized in its domiciliary jurisdiction to write the insurance policy

proposed to be procured from it by the licensee. No unauthorized insurer

shall be deemed unacceptable for placement of business solely on the

ground that it has been so authorized to write such business in its

domiciliary jurisdiction for a period of less than three years preceding

the placement of such risk by the licensee. In determining whether

business may be placed with such unauthorized insurer, the

superintendent shall consider such factors as: the interests of the

public and policyholders, the length of time such insurer has been

authorized in its domiciliary jurisdiction and elsewhere, its financial

condition, and unavailability of particular coverages from authorized

insurers.

(6) It shall be unlawful for a licensee as defined in section two

thousand one hundred one of this article and pursuant to sections two

thousand one hundred four and two thousand one hundred five of this

article to deliver in this state any declarations page of an insurance

policy or cover note evidencing insurance unless such insurance document

is stamped by the excess line association or is exempt from such

requirements; provided, however, that a licensee's failure to comply

with the requirements of this subsection shall not affect the validity

of the coverage.

(7) Compliance by a licensee with the requirements set forth in this

section in connection with submitting for recording and stamping

declarations pages, cover notes, binders, endorsements, affidavits,

notices of excess line placement and other excess line insurance

documents may be accomplished by means of electronic or other media

transmission, provided the superintendent first approves such methods of

submitting for recording and stamping.

* NB Effective until July 1, 2029

* (b) (1) When any policy of insurance is procured under the authority

of a license issued pursuant to section two thousand one hundred five of

this article, there shall be submitted, both by the licensee or

sub-licensee and by the insured, statements subscribed and affirmed by

them as true under the penalties of perjury setting forth facts showing

that such insured and such licensee were unable after diligent effort to

procure, from authorized insurers, each authorized to write coverages of

the kind requested, the full amount of insurance required to protect the

interest of such insured, and further showing that the amount of

insurance procured from an unauthorized insurer or insurers is only the

excess over the amount so procurable from authorized insurers; provided,

however, that the licensee shall be excused from affirming that a

diligent effort was made to procure the coverage from such authorized

insurers if the licensee's affidavit is accompanied by the affidavit of

another broker involved in the placement affirming as true under the

penalties of perjury that, after diligent effort by the affirming

broker, the required insurance could not be procured from such

authorized insurers.

(2) The number of declinations constituting diligent effort in regard

to placement of coverage with authorized insurers for purposes of

paragraph one of this subsection shall be three, unless the

superintendent after a hearing, on a record, upon findings and

conclusions, determines that another number of such declinations is

appropriate in regard to particular coverages. In making such

determinations, the superintendent shall consider relevant market

conditions, including unavailability of particular coverages from

authorized insurers, and may conduct market surveys. Any such

determination shall be reviewed at least annually by the superintendent.

(3) Before placing business with an unauthorized insurer, each

licensee shall ascertain and verify the fact that such insurer is

authorized in its domiciliary jurisdiction to write the insurance policy

proposed to be procured from it by the licensee. No unauthorized insurer

shall be deemed unacceptable for placement of business solely on the

ground that it has been so authorized to write such business in its

domiciliary jurisdiction for a period of less than three years preceding

the placement of such risk by the licensee. In determining whether

business may be placed with an unauthorized insurer, the superintendent

shall consider such factors as: the interests of the public and

policyholders, the length of time such insurer has been authorized in

its domiciliary jurisdiction and elsewhere, its financial condition, and

unavailability of particular coverages from authorized insurers.

(4) The statements required pursuant to paragraph one of this

subsection shall be filed by such licensee with the superintendent

within thirty days after such policies have been procured.

* NB Effective July 1, 2029

* (c) (1) The licensee shall keep a complete and separate record of

all policies procured from unauthorized insurers under such license. The

licensee shall also maintain files supporting declinations by authorized

insurers. An authorized insurer need not maintain underwriting

submissions or other records with respect to any declination, unless the

superintendent, after a hearing on a record, finds substantial abuses of

the provisions of this section and determines that recordkeeping or

reporting requirements in regard to authorized insurers are necessary to

redress or eliminate such abuses.

(2) Such records shall be open to examination by the excess line

association as provided for in section two thousand one hundred thirty

of this article and by the superintendent, as provided in section three

hundred ten of this chapter, at all reasonable times and shall show:

(A) the exact amount of each kind of insurance permitted under this

section which has been procured for each insured;

(B) the gross premiums charged by the insurers for each kind of

insurance permitted under this section;

(C) the amount of each kind of premiums of insurance permitted by this

section which were returned to each insured;

(D) the name of the insurer or insurers which issued each of said

policies;

(E) the effective dates of such policies;

(F) the terms for which they were issued; and

(G) the cities and villages within this state in which the insured

risks, respectively, are located.

* NB Effective until July 1, 2029

* (c)(1) The licensee shall keep a complete and separate record of all

policies procured from unauthorized insurers under such license. The

licensee shall also maintain files supporting declinations by authorized

insurers. An authorized insurer need not maintain underwriting

submissions or other records with respect to any declination, unless the

superintendent, after a hearing on a record, finds substantial abuses of

the provisions of this section and determines that recordkeeping or

reporting requirements in regard to authorized insurers are necessary to

redress or eliminate such abuses. The superintendent shall review

recordkeeping requirements applicable to this section and, by October

first, nineteen hundred eighty-six, shall take measures in order to

simplify forms and other aspects of compliance with such requirements.

(2) Such records shall be open to examination by the superintendent,

as provided in section three hundred ten of this chapter, at all

reasonable times and shall show:

(A) the exact amount of each kind of insurance permitted under this

section which has been procured for each insured;

(B) the gross premiums charged by the insurers for each kind of

insurance permitted under this section;

(C) the amount of each kind of premiums of insurance permitted by this

section which were returned to each insured;

(D) the name of the insurer or insurers which issued each of said

policies;

(E) the effective dates of such policies;

(F) the terms for which they were issued; and

(G) the cities and villages within this state in which the insured

risks, respectively, are located.

* NB Effective July 1, 2029

(d) (1) Where this state is the insured's home state, a person, firm,

association or corporation licensed pursuant to the provisions of

section two thousand one hundred five of this article shall pay to the

superintendent a sum equal to three and six-tenths percent of the gross

premiums charged the insureds by the insurers for insurance procured by

such licensee pursuant to such license, less the amount of such premiums

returned to such insureds.

(2) The amount of such payments which represents a sum equal to three

percent of fire insurance premiums shall be distributed by the

superintendent as prescribed in section nine thousand one hundred five

of this chapter, and the balance thereof shall be paid over by the

superintendent to the state treasurer.

(3) Such licensee shall be required to make such payments to the

superintendent on the fifteenth day of March of each year for the taxes

on all policies procured by such licensee, pursuant to such license,

during the next preceding calendar year, and on such date such licensee

shall also file with the superintendent a return in the form prescribed

by the superintendent, showing such information as may be necessary for

the proper distribution of such payments.

(e)(1) Except as provided in paragraph two of this subsection, no

licensee shall be required to obtain a declination from an association

established pursuant to article fifty-four or fifty-five of this

chapter, or to apply for insurance through a plan established pursuant

to article fifty-three of this chapter, as a condition of procuring

insurance pursuant to this section.

(2) (A) Unless the licensee obtains a declination from the appropriate

association, or from an insurer pursuant to an application for coverage

through a plan, no diligent effort shall be considered to have been made

if the insurance is available from the plan or association in connection

with the placement of:

(i) a policy of non-commercial motor vehicle liability insurance;

(ii) medical malpractice insurance for a general hospital, as defined

in subdivision ten of section two thousand eight hundred one of the

public health law, a physician or dentist; or

(iii) insurance which by law must be provided by an authorized

insurer.

(B) In connection with the placement of any other kind of insurance, a

declination from the appropriate association, or from an insurer

pursuant to an application for coverage through a plan, shall be

required unless prior to the placement the insured has been advised of

the availability of insurance from the plan or association.

(C) The affirming broker shall provide written notice to the insured

that the placement was made with an unauthorized insurer. A copy of this

notice shall be attached to the affirming broker's affidavit. The

affidavits required by this section to be completed by the affirming

broker shall include a statement that the affirming broker advised the

insured in writing:

(i) that the unauthorized insurer with which the coverage is being

placed is not authorized to do an insurance business in this state and

is not subject to supervision by this state;

(ii) that in the event of the insolvency of the unauthorized insurer,

losses will not be covered by any New York state insolvency fund;

(iii) that the policy may not be subject to all of the regulations of

the superintendent pertaining to policy forms; and

(iv) such other information as the superintendent may, by regulation,

require.

(f) (1) An excess line broker licensed pursuant to section two

thousand one hundred five of this article may execute an authority to

bind coverage and may exercise binding authority on behalf of an insurer

not licensed or authorized to do business in this state pursuant to the

provisions of this subsection.

(2) As used in this subsection:

(A) an "authority to bind coverage" means the written agreement

between an excess line broker and an insurer not licensed or authorized

to do business in this state and shall set forth the terms, conditions,

and limitations governing the exercise of binding authority by the

excess line broker;

(B) a "binder" means written evidence of a temporary insurance

contract; and

(C) "binding authority" means the authority to issue and deliver

binders, and to issue and deliver insurance policies on behalf of an

insurer not licensed or authorized to do business in this state.

(3) (A) Every excess line broker who exercises binding authority shall

have filed an authority to bind coverage, the contents of which shall

not be public, with the excess line association established pursuant to

section two thousand one hundred thirty of this article.

(B) Such authority shall be valid until (i) terminated by the

appointing insurer after termination in accordance with the contract

between the broker and the insurer; (ii) the excess line license is

suspended or revoked by the superintendent; or (iii) the excess line

license expires and is not renewed.

(4) Notwithstanding any other provision of law to the contrary, the

execution or filing of an authority to bind coverage and the exercise of

binding authority by an authorized excess line broker shall not

constitute the doing of insurance business by an insurer not licensed or

authorized to do business in this state.

(5) Any coverage so written must be in compliance with this section.

(6) Every binder shall contain a description and location of the

subject of insurance, coverage, conditions and term of insurance, the

premium, the name and address of the excess line broker, the name and

address of the producing broker, the name of the insurer and the name

and address of the insured.

(7) Any binding authority agreement made and filed pursuant to this

section may authorize an excess line broker to bind coverage for risks

located within or outside of the state of New York, notwithstanding any

other provision of this chapter.

(8) Any binding authority agreement made and filed pursuant to this

section may authorize an excess line broker to issue notice of

cancellation of any insurance policy bound pursuant to such agreement

(A) for non-payment of premium, (B) for a material increase in the

hazard insured, or (C) upon discovery of a material misrepresentation in

the application for insurance. The excess line broker shall not be

deemed an agent of the insurer solely for issuing such notice of

cancellation.