Texas Surplus Lines Late-file Bill a Victory

But Implementation Issues Remain

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 insurance regulators to craft a bill that creates a new penalty structure late-filing of surplus lines policies with the Surplus Lines Stamping Office of Texas.

SB 1806 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, 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, TSLA’s general counsel, speaking at the association’s recent annual meeting. The fine may increase depending on 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 an 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.”

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.

“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

While TSLA was successful in getting SB 1806 passed, it’s finding there seems to be a hitch with the way the Texas Department of Insurance is interpreting part of the bill.

Hine explained that with regard to policies filed more than 365 days late and filed before SB 1806 was signed into law, TDI’s interpretation is such that those policies are subject to the dollar per day penalty rather than the fee.

TDI’s interpretation seems to penalize those who received late-file notices, did their due diligence and took care of them, and reward those who ignored the notices and waited until after the passage of the bill to file, 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 Excess Surplus