On May 15, 2014, the Utah Insurance Department and Surplus Line Association of Utah issued to all surplus lines insurers and surplus lines producers/brokers informing them of the following changes by the Utah legislature for policies issued or renewed in Utah after May 13, 2014:
Insurers who wish to audit a surplus lines policy must initiate the audit within six months after the expiration of the term for which the premium is paid and must complete the audit within three years after the surplus lines insurance transaction expires. The failure to meet either of these requirements will preclude the insurer from charging premiums in excess of the terms of the original policy.
A surplus lines insurer may not count as earned premium an amount in excess of 50% of the initial premium until the earlier of (1) the completion of the audit; or (2) the term for which the auditable policy was written has expired and the time to conduct an audit has passed.
If an audit is conducted, the insured is entitled to a refund if the actual exposure is less than the estimated exposure. The insured may request such an audit and the insurer will be bound by the insured’s statement of exposure, requiring refund of the excess portion of the premium, if the insurer does not conduct the audit as required by this law.
Alternatively, if the risk is determined to be greater than the initial estimate upon a timely audit, the insurer is entitled to additional premium.
These new laws apply to the extent they are not pre-empted by federal law.