2013 New York Consolidated Laws
ISC - Insurance
Article 21 - (2101 - 2138) AGENTS, BROKERS, ADJUSTERS, CONSULTANTS AND INTERMEDIARIES
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
  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, 2019
    * (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, 2019
    * (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, 2019
    * (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, 2019
    (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.