The Surplus Lines Law Group held its spring meeting on Friday, April 5 in Biloxi, Mississippi.  A number of presentations were given at the meeting, including updates on the trends around the nation with respect to the diligence search requirement, international tax and cybersecurity issues, as well as a presentation by this author as to the challenges surrounding placing group insurance coverage on a surplus lines basis (including unique hurdles applicable to risk purchasing groups).

Some of the notable developments discussed during the meeting were:

• New York Senate Bill 769 to eliminate the diligent search requirement as to certain commercial lines coverages (previously discussed in our blog entry here) as well as momentum to allow for the insurability of punitive damages in the state.
• California’s legislature has expressed concern regarding the number of policies entering the surplus lines market and has also proposed to increase California’s stamping fee.  In addition, California will consider pursuing regulatory action in instances where insurers offer workers’ compensation coverage on a surplus lines basis (even in situations where such carriers believe they are required under applicable law to offer such coverage).
• Colorado is considering amending its diligent search requirement so that declinations must be obtained from three different “groups” of insurers (i.e., declinations cannot be obtained from multiple affiliated insurance companies).
• Florida has proposed eliminating the limit on surplus lines broker fees (currently $35 per policy) and to instead allow for any “reasonable” policy fee.
• HB 1648 is pending in Texas that would require surplus lines policies that have arbitration provisions to require that the arbitration be conducted in and governed by the laws of Texas.
• There is a growing trend around the country to allow for various forms of medical coverage to be written through the surplus lines market, and New York currently has pending legislation that would allow for “catastrophic business interruption” coverage to be written as an excess lines risk, with Maine, Rhode Island, Montana and South Dakota all considering similar proposals.
• A number of states are requiring remittance of surplus lines premium taxes on policies where the insured resides in or maintains its principal place of business in such state and where 100% of the risk is international in nature under the theory that there is no other “home state” under the Nonadmitted Reinsurance and Reform Act that would have jurisdiction over the policy.
• A handful of jurisdictions are attempting to tax ocean marine insurance even if otherwise exempted from surplus lines regulation under applicable law.

As always, we will continue to report on any and all material surplus lines meetings and updates.

*Locke Lord is proud to publish the Locke Lord Excess and Surplus Lines Manual on an annual basis, located here.