W. Va. Code R. § 114-20-4

Current through Register Vol. XLI, No. 45, November 8, 2024

Section 114-20-4 - Placement of Surplus Lines Coverages

4.1. Diligent Search -- Except as provided in section 4A of this rule, insurance coverage written by a surplus lines insurer and placed by a surplus lines licensee for an insured whose home state is West Virginia may not be procured until a diligent search has been made by the individual insurance producer to place the risk with an admitted insurer. The surplus lines licensee shall submit to the commissioner a sworn notarized affidavit that a diligent search has been made by the individual insurance producer to place the risk with licensed insurers authorized to write and actually writing the particular risk sought to be placed in the excess lines market. This affidavit shall be maintained, as required by W. Va. Code § 33-12C-16, as part of the full and true record of each surplus lines contract procured.

4.2. The following minimum requirements and conditions apply to the conduct of a diligent search to place a risk with licensed insurers:

4.2.a. The individual insurance producer shall execute and forward to the licensed surplus lines licensee a written statement, in a form prescribed by the commissioner, declaring that a diligent effort to procure the desired coverage from admitted insurers was made. The form shall contain an affidavit that the individual insurance producer complied with the due diligence requirements of this rule. The affidavit shall affirm that the insured was expressly advised prior to the placement of the insurance that:

4.2.a.1. The surplus lines insurer with which the insurance is to be placed is not an admitted authorized insurer in this state and is not subject to the commissioner's supervision; and,

4.2.a.2. In the event the surplus lines insurance becomes insolvent, claims will not be paid nor will unearned premiums be returned by any West Virginia insurance guaranty fund.

4.2.b. No individual insurance producer may solicit, procure, place, or renew any insurance with a nonadmitted insurer unless the producer has been unable to procure the requested insurance from an authorized insurer after conducting a diligent search. A diligent search requires the individual insurance producer to contact as many insurers as the individual insurance producer represents, that customarily write the kind of insurance requested by the insured. A diligent search is presumed if declinations are received from each authorized insurer contacted.

4.2.c. An individual insurance producer shall obtain a declination in writing from the licensed insurer or create a written record of an oral declination by the licensed insurer. A written record of an oral declination shall be made by the person who initially received the declination or by another employee of the individual insurance producer from information transmitted by the person who received the declination. A declination shall be obtained from the licensed insurer or recorded by or on behalf of the individual insurance producer at or near the time of receipt of the declination, and the records shall be maintained in the regular course of business.

4.2.d. A written record documenting an oral declination shall include:

4.2.d.1. The name, office location and phone number of the licensed insurer or firm acting in the capacity of underwriting manager for the licensed insurer.

4.2.d.2. The name and position of the person contacted.

4.2.d.3. The date of contact.

4.2.d.4. A detailed explanation of the licensed insurer's reasons for declining to insure the risk.

4.2.e. If a licensed insurer fails to respond within 5 business days after first being contacted by the individual insurance producer, the individual insurance producer may assume that the insurer has declined to write the risk. The individual insurance producer shall create a written record of the contact, including the manner in which contact was made and the information required under subdivision d of this subsection.

4.2.f. A declination of coverage by a licensed insurer shall be made by a full time employee of the licensed insurer who has underwriting responsibility or by a full time employee of a firm acting in the capacity of underwriting manager for the licensed insurer.

4.2.g. Affiliates.

4.2.g.1. A declination may not be obtained from a licensed insurer which is an affiliate of a licensed insurer from which a declination has already been obtained.

4.2.g.2. Surplus lines insurance may not be placed with an unlicensed insurer that is an affiliate of a licensed insurer from which a declination has been obtained.

4.2.g.3. The restrictions in paragraphs 1 and 2 of this subdivision do not apply if the affiliated insurers write coverage independently of each other using separate and independently developed underwriting criteria and marketing plans and, for underwriting purposes, compete with each other for the same type of coverage or class of insurance.

4.3. Notification. -- Each surplus lines insurance policy or evidence of insurance shall have printed or stamped in contrasting color on the front page the following statement:

THIS COMPANY IS NOT LICENSED TO DO BUSINESS IN WEST VIRGINIA

AND IS NOT SUBJECT TO THE WEST VIRGINIA INSURANCE GUARANTY ACT.

4.4. Records of surplus lines licensee. -- Each surplus lines licensee shall keep in his or her office a full and true record of each surplus lines contract procured by him or her on behalf of any insured whose home state is West Virginia, and the records may be examined at any time thereafter by the commissioner. The records shall include the following items as they are applicable:

4.4.a. The name and address of the surplus lines insurer;

4.4.b. The names and addresses of the insureds;

4.4.c. The amount of insurance;

4.4.d. The gross premium charged;

4.4.e. The return premium paid, if any;

4.4.f. The rate of premium charged on the several items of coverages;

4.4.g. The effective date of the contract and the terms of the contract;

4.4.h. A brief general description of the risks insured against and the property insured;

4.4.i. The policy number;

4.4.j. The written due diligence declaration of the individual insurance producer required in subsection 4.2 of this section unless the due diligence requirement is not applicable; and

4.4.k. Any additional information the commissioner may require to effectuate the provisions of The Nonadmitted Insurance Act, W. Va. Code § 33-12C-1et seq. and, if executed, NIMA.

4.5. Responsibilities of the surplus lines licensee. -- Each licensed surplus lines licensee who participates directly or indirectly in effecting any insurance contract on a surplus lines basis on behalf of any insured whose home state is West Virginia:

4.5.a. Shall, in no instance, knowingly place any coverage in an insolvent insurer, in accordance with the provisions of W. Va. Code § 33-12C-26;

4.5.b. May accept and place authorized surplus lines business from any individual insurance producer licensed in this state for the kind of insurance involved, and may compensate the individual insurance producer. The surplus lines licensee has the right to receive from the surplus lines insurer the customary commission, in accordance with the provisions of W. Va. Code § 33-12C-15; and

4.6. Surplus lines insurance valid. -- In accordance with the provisions of W. Va. Code § 33-12C-5, any insurance contract procured as surplus lines coverage from a surplus lines insurer shall be fully valid and enforceable as to all parties, and shall be given recognition in all matters and respects to the same effect as like contracts issued by licensed insurers.

W. Va. Code R. § 114-20-4