NAII Surplus Lines Committee Reaffirms Position

The basic principle of surplus lines insurance dictates those insurers should be free to exclude coverage for any risk–including mold–so that they can provide especially crafted insurance that customers can’t get anywhere else, according to the Surplus Lines Committee of the National Association of Independent Insurers (NAII). The committee reaffirmed that position at a recent meeting in Illinois taking exception to a New Jersey Insurance Department policy prohibiting mold exclusion clauses by surplus lines insurers.

“For decades, surplus lines has been the alternative market, providing coverage which is unavailable in the standard market for unique risks or particular needs of consumers and businesses,” said Michael Koziol, NAII senior director and counsel. “The basis behind this market is freedom of rates and forms, the freedom to respond quickly to market needs. That includes the freedom to exclude any coverage that otherwise would make insurance unavailable. In the present situation, mold definitely falls within that category.”

The committee urged NAII to urge New Jersey to reverse its position on mold coverage by surplus lines insurers and to strive to assure that no other states takes a similar position.

“A viable surplus lines market provides a relief valve to the admitted market by offering market solutions in situations where coverage is unavailable,” Koziol said. “To do that, surplus lines insurers must be free to adapt products to current market needs. Without surplus lines, business will likely be unable to purchase insurance at all–even for basic coverages–or be placed in residual market mechanisms and joint underwriting associations. This in turn will force the admitted market to bear the risks assumed by those mechanisms.”

Topics Excess Surplus