2023 New York Laws › ISC - Insurance › Article 21 - 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
name, date of the declination, and  national  association  of  insurance
commissioners  code  of  each  authorized  insurer  declining a risk and
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.  A
licensee  or  affirming  broker  shall  not be required to record on the
affidavit the  name  of  the  representative  declining  the  risk,  the
representative's affiliation, or the reason for the declination.
(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, 2029
* (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, 2029
* (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, 2029
* (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, 2029
(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.