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Volume 2, No. 1 - February 2011   
 
Compliance Corner

We continue to see a pattern of noncompliance in the areas noted below. This section has been created to assist you in keeping your insurance business in compliance. The items are intended as reminders only and are not necessarily the exact text of the Florida Statutes or Florida Administrative Code. The legal cites have been provided for your further reference.


Surplus Lines: Placing Coverage Properly versus Improperly
One of the Florida Legislature's stated purposes of the Surplus Lines Law is to protect authorized insurers from unwarranted competition by unauthorized insurers who are not subject to the same requirements. Additionally, there is no guaranty fund for unauthorized insurers if one should become insolvent, thus offering no consumer protection. It's for this reason, Florida law states that a surplus lines agent cannot export insurance coverage for a person's risk when the risk is already covered by, or can be covered by, an admitted/authorized insurer. The Department issued a bulletin in 1997 to further remind the industry that doing so is a violation of the Florida Insurance Code, as the policy is procurable from an authorized insurer. General lines agents are reminded that if they are unable to place a risk with an admitted carrier (either a company with whom they are appointed or through another agent appointed by an admitted company), they must utilize a Florida licensed and appointed surplus lines agent if they export the risk to an eligible surplus lines insurer. For example, if an admitted/authorized insurer were willing to write a home owner's insurance policy excluding wind coverage, then provided all the requirements of Section 626.916, F.S., have been fulfilled, the surplus lines agent would be permitted to export the wind coverage, and only the wind coverage.
[See 626.914 and 626.916, Florida Statutes]
Click here to read the 97-007 bulletin >>

Surplus Lines: Diligent Effort Requirement
Prior to exporting a risk to the surplus lines market, a legitimate diligent effort is required to be conducted by the producing agent of insurers authorized to transact and actually write that kind and class of insurance in Florida. Surplus lines agents must verify that the diligent effort has been made by requiring a properly documented statement of diligent effort from the retail or producing agent. However, to be in compliance with the diligent effort requirement, the surplus lines agent's reliance must be reasonable under the particular circumstances surrounding the export of that particular risk. Reasonableness shall be assessed by taking into account factors which include, but are not limited to, a regularly conducted program of verification of the information provided by the retail or producing agent. Only searching insurers that an agent knows will not place coverage for the risk is a violation of Florida law. Fraudulently completing a diligent effort form (e.g. fake contact names, dates, signatures) is a serious violation and will be prosecuted by the Department.
[See 626.916, Florida Statutes]

Bail Bond Agents: Go Get Registered!
Before April 1 of this year, all bail bond agents must:

  • Register with the sheriff and the clerk of the court
  • File a certified copy of the renewed power of attorney to represent your surety company.
Failure to do so can result in the county refusing to accept bail bonds from you. We may open a formal investigation into the business activities of any bail bond agent who fails to register or file the renewed power of attorney form as required.
[See 648.42, Florida Statutes]