The passage of a bill addressing late filing of surplus lines policies in the 2011 Texas legislative session was a victory for surplus lines professionals in the state. Senate Bill 1806 was backed by the Texas Surplus Lines Association, which worked with state insurance regulators to craft legislation that creates a new penalty structure for late-filing of surplus lines policies with the Surplus Lines Stamping Office of Texas.
The bill was designed to reward surplus lines agents and agencies that maintain a low rate of non-compliance in policy filings, explained Gil Hine, of McClelland & Hine in San Antonio, who led the TSLA task force that helped craft the legislation.
The bill signed into law on May 28, 2011, stipulates that surplus lines agents with low non-compliance rates would pay a late-filing fee in lieu of an administrative penalty, which typically amounts to a dollar per day per policy for overdue filings.
Under the new structure, going forward as of May 28 of this year, “if you maintain a low non-compliance rate of 5 percent or less and you file within the 180 days of the effective date, [the fine is] just $50,” explained Greg Hooser, general counsel for the TSLA, speaking at the association’s recent annual meeting. The fine may increase depending on several factors, including the non-compliance rate of the filer and the number of days beyond 180 that a late policy is filed.
“It’s a little complicated but that was necessary as a part of the carrot and the stick” to get the bill passed, Hooser said. “Without question we have agreement with the TDI enforcement division that as of May the 28th of this year if you have a late-file policy that you have never filed … and it’s never been on a late-filed policy report, that you can file now and your filing fee will only be $50.”
In order to take advantage of the new fee structure for a pre-2010 effective date late-filing, it must be completed by Jan. 1, 2012, Hooser said. Otherwise it is subject to the dollar per day scenario of previous years.
“We want to encourage you all to audit your filings, to audit your policies, find those files, and get ’em filed by January 1,” Hooser said.
A Hitch
TSLA is pleased with the language of SB 1806 and the fee/penalty structure, however, there seems to be a hitch with the way the Texas Department of Insurance is interpreting one section of the legislation.
Hine worked closely with Hooser in guiding the bill through the legislature. While the association was successful in getting SB 1806 passed, “our work here is not complete,” Hine said. He explained that with regard to policies filed more than 365 days late and filed before the signing into law of SB 1806, TDI’s enforcement division’s interpretation of the bill is such that those policies are subject to the dollar per day penalty rather than the fee.
TDI’s interpretation would seem to penalize those who received late file notices and did their due diligence and took care of them, and rewards those who ignored previous notices and waited until after the passage of the bill to file the late policies, Hine said.
When working with TDI to craft the bill, “I thought we made it clear that this is an important issue for the Texas Surplus Lines Association,” Hine said. “Best of my recollection there was never any indication they would interpret the law in this way.”
Topics Texas Legislation Excess Surplus
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