S T A T E   O F   N E W   Y O R K
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                                  3800

                       2011-2012 Regular Sessions

                          I N  A S S E M B L Y

                            January 27, 2011
                               ___________

Introduced  by M. of A. MORELLE -- read once and referred to the Commit-
  tee on Insurance

AN ACT to amend the insurance law, in relation to excess line brokers

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Subsection  (b)  of section 2118 of the insurance law, as
amended by chapter 630 of the laws of 1988, paragraph 3  as  amended  by
chapter  684  of  the  laws  of 1993, subparagraph (A) of paragraph 3 as
amended by chapter 498 of the laws of 1996,  paragraph  7  as  added  by
chapter 74 of the laws of 2001, and paragraphs 8 and 9 as added by chap-
ter 687 of the laws of 2003, is amended to read as follows:
  (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 estab-
lished pursuant to section two thousand one hundred thirty of this arti-
cle 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 submit-
ted 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.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD05250-01-1

              

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  (3) (A) The submission of insurance documents to the excess line asso-
ciation 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 (I) FOR
TRANSACTIONS DEFINED IN SUBPARAGRAPH (F) OF THIS PARAGRAPH, OR  (II)  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 insurance depart-
ment, 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 place-
ment of each risk pursuant to this section, shall record on the  affida-
vit required pursuant to subparagraph (A) of this paragraph the informa-
tion  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.
  (D)  Declinations  obtained  from authorized insurers which are affil-
iates 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) (I) The superintendent, in a  regulation,  may  determine  whether
there are circumstances where it may be appropriate, due to the unavail-

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ability  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.
  (II) ANY QUOTE FOR COVERAGE FROM AN AUTHORIZED INSURER WHERE THE GROSS
PREMIUM EXCEEDS BY TWENTY-FIVE PERCENT OR MORE, A QUOTE  FOR  COMPARABLE
COVERAGE  ACQUIRED BY AN EXCESS LINE BROKER MAY BE SUBMITTED AS A DECLI-
NATION BY THE EXCESS LINE BROKER OR AFFIRMING BROKER.
  (F) NO DILIGENT EFFORT SHALL BE REQUIRED WHERE THE POLICY PROCURED:
  (I) INSURES A PUBLICLY TRADED ENTITY,
  (II) INSURES AN ENTITY WHICH PAYS AGGREGATE  ANNUAL  PREMIUMS  ON  ALL
RISKS  TOTALING AT LEAST ONE HUNDRED THOUSAND DOLLARS FOR POLICIES WRIT-
TEN EXCLUSIVE OF PREMIUM FOR WORKERS' COMPENSATION AND HEALTH  INSURANCE
BENEFITS,  EMPLOYS,  UTILIZES OR RETAINS A RISK MANAGER TO ASSIST IN THE
NEGOTIATION AND PURCHASE OF A POLICY; AND  IN  ADDITION,  IN  ALL  CASES
MEETS  ANY  ONE  OF  THE FOLLOWING CRITERIA: HAS A NET WORTH OF AT LEAST
TWENTY-FIVE MILLION DOLLARS, IS A FOR-PROFIT BUSINESS ENTITY THAT GENER-
ATES ANNUAL GROSS REVENUES OF FIFTY MILLION DOLLARS, IS A NOT-FOR-PROFIT
ORGANIZATION  OR  PUBLIC  ENTITY  WITH  AN   ANNUAL   BUDGET   EXCEEDING
TWENTY-FIVE  MILLION  DOLLARS  OR IS A MUNICIPALITY WITH A POPULATION OF
NOT LESS THAN FIFTY THOUSAND PERSONS, OR
  (III) RENEWS A POLICY WITH THE SAME INSURER FOR A  SECOND  CONSECUTIVE
ONE  YEAR  TERM,  OR  RENEWS THE POLICY FOR A THIRD CONSECUTIVE ONE YEAR
TERM.
  (4) The number of declinations constituting diligent effort in  regard
to  placement of coverage with authorized insurers for purposes of para-
graph three of this subsection shall be three, unless (A)  THE  DILIGENT
SEARCH  IS  EXCUSED  BY  SUBPARAGRAPH  (F)  OF  PARAGRAPH  THREE OF THIS
SUBSECTION, OR (B) the superintendent after a hearing, on a record, upon
findings and conclusions, determines that another number of such  decli-
nations is appropriate in regard to particular coverages. In making such
determinations, the superintendent shall consider relevant market condi-
tions, including [unavailability of particular coverages from authorized
insurers,  and may conduct market surveys] WHAT IS IN THE BEST INTERESTS
OF INSUREDS SEEKING INSURANCE, THE NECESSITY FOR  MANUSCRIPTED  POLICIES
WHERE  STANDARD FORMS ARE INADEQUATE OR UNAVAILABLE, FOSTERING INSURANCE
PRODUCT INNOVATION AND DEVELOPMENT, AND WHERE PARTICULAR  COVERAGES  ARE
NOT  REASONABLY  AND  WIDELY AVAILABLE.   THE SUPERINTENDENT MAY CONDUCT
MARKET SURVEYS TO DETERMINE MARKET CONDITIONS.   Any such  determination
shall be reviewed at least annually by the superintendent.
  (5)  Before placing business with an unauthorized insurer, each licen-
see 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  place-
ment  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.

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  (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 decla-
rations 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.
  (8) For purposes of this article, unless exempt under  the  provisions
of  section two thousand one hundred seventeen of this article, a policy
of insurance obtained from an insurer not authorized to  transact  busi-
ness  in  this state must be procured pursuant to an excess line license
when the entire property or risk exposure insured or any  part  thereof,
is located in this state and:
  (A)  the  insured  negotiated to acquire the coverage from within this
state; or
  (B) the policy was delivered to the insured in this state.
  (9) Nothing in this article shall prohibit  an  excess  line  licensee
from placing risks under the excess or surplus line law of another state
provided that the excess line licensee:
  (A) is licensed under the applicable state law as an excess or surplus
line  broker  or  places  such risk through a licensed excess or surplus
line broker in such state; and
  (B) either no portion of the property or  risk  exposure  is  in  this
state,  or  the insured has property or risk exposure both in this state
and in another state where the insured maintains a bona fide office from
which it negotiated to acquire the coverage and to which the  policy  is
delivered.
  S  2.  This  act shall take effect on the ninetieth day after it shall
have become a law; provided, however, that the amendments to  subsection
(b) of section 2118 of the insurance law made by section one of this act
shall  not  affect the expiration of such subsection and shall be deemed
to expire therewith.