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This entry was published on 2019-01-11
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SECTION 2118
Excess line brokers; duties
Insurance (ISC) CHAPTER 28, ARTICLE 21
§ 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
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.

(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, 2024

* (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, 2024

* (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, 2024

* (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, 2024

(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.