Insurance agents and brokers in New York have called upon state officials to ease the rules for how agents obtain coverage for some high-risk policies.
The Excess Line Association of New York has proposed adding dozens of new policy-types – including coastal homeowners insurance on Long Island, vacant building coverage and some types of professional liability policies – to the so-called export list, a catalog of coverages that excess lines brokers can place for agents without them first having three standard market carriers decline to insure a risk.
The three declinations rule is viewed by many agents and brokers as a tedious, unnecessary administrative procedure that slows the process for obtaining coverage on a risk that most agents know immediately cannot be placed in the standard market. Adding additional types of coverage to the export list would ease the process of obtaining policies for certain hard-to-place risks, the agents and brokers said.
Other types of coverage which the ELA has proposed adding to the list include liquor law liability, pollution clean-up, ski areas, nursing homes and some types of excess commercial liability.
The New York Insurance Department held a hearing earlier this month in Manhattan and about a dozen agents and brokers showed up to support expansion of the export list. Agents told state regulators that the rule change would reduce administrative hurdles in their offices.
Neal Sullivan, president of Sullivan Financial Group in Mahopac and chairman of the Independent Insurance Agents and Brokers of New York, said that using a wholesale broker to access surplus lines coverage can be expensive and time-consuming to meet the statutory procedures to access the non-admitted market.
“It is much easier and more profitable for me to place as much business as I can with the insurers I represent,” he said. “I know their products and business they want to write, I know their premium rates, I know how they handle claims, and in many cases, I have worked with their underwriters for some time. Going to a wholesale broker to access the excess lines market is expensive in terms of commission I must share and time I must spend. However, in the interest of serving the client and dissuading him from giving his business to a competing agent or broker who represents other insurers, I am willing to seek coverage from the non-admitted market.”
Some agents testified that the process of requiring the diligent search of the admitted market ends up being just a time-waster for them and their clients as well, since many already know which risks their insurers want – and those they will not accept.
For Sharon Emek, managing director for Manhattan-based CBS Coverage Group Inc., the current process has veered from what lawmakers intended in setting up the system. “On the one hand, we must obtain declinations from at least three admitted insurers that we had reason to believe would consider insuring the risk before we seek coverage from the non-admitted market,” she said. “On the other hand, none of our admitted markets want us to even submit such risks to them. How then are we to truthfully say that we had reason to believe that an insurer would consider insuring that client?”
Emek added that “the diligent search requirement in these situations ceases to be a protection for admitted insurers and consumers. Rather, it becomes a potential pitfall for the broker, and we don’t believe that the Legislature intended for it to be so.”
Wholesalers who testified also said they believe an expanded export list would be beneficial to agents and insurance consumers in New York.
“One of the main purposes of the export list is to reduce the complexity of the non-admitted placement process… We see the major advantage of expanding the export list to be the reduction in time, expense and effort of retail producers in documenting declinations for accounts that are clearly no within the risk appetite of licensed insurers,” said Gary D. Ricker Jr., president of the Professional Insurance Wholesalers Association of New York State and president of Pacific Pro Intermediaries.
The insurance department said it expects to make a decision on expanding the export list by the end of summer. Any changes would probably be implemented Jan 1, 2009.
Proposed New Coverages for N.Y. Export List
Primary and excess property insurance for vacant and unoccupied buildings
Primary and excess liability coverage for general contractors, subcontractors and all construction trades for damages arising out of construction, building, demolition or renovation of any building or structure;
Owners Contractors Protective: Primary and excess liability purchased by a contractor to protect the interests of the property owner relating to a specific construction projects;
Special events – primary and excess liability coverage for unique exposures of limited duration which require varied and specialized terms, conditions and coverages (generally issued to sponsors, organizers, performers and participants of tradeshows, parades, flea markets, concerts fairs and other events.)
Commercial Excess and Umbrella Liability
Coverage for commercial excess liability and commercial umbrella liability where underlying policy limits are at least $10 million per occurrence
Special Multi-Peril Coverage
Primary and excess liability for contractors, subcontractors and construction trades for damages arising out of construction, building, demolition, or renovation of any building or structure when the coverage is packaged along with property coverage
Coverage against financial loss by reason of payment of any sum or item awarded to a participant in any lawful contest of sports-related event
Coverage indemnifying professional sports participants, entertainers, or entities with which they are under contract and business executives or their employers, whose contractual obligations cannot be fulfilled due to death, personal injury or bodily injury
Employed Lawyers Liability
Insurance for lawyers employed by a business entity and not a law firm
Liability and property insurance for homeowners in Nassau or Suffolk counties
Professional liability, E&O, medical malpractice and combined general liability for: alcohol and drug rehabilitation centers and programs, convalescent centers, nursing homes, assisted care facilities, day care centers, group homes, halfway houses, hospices, social service agencies, foster care providers and home health care providers
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