Section 2118. Excess line brokers; duties

(a) (1) Every licensee licensed
  pursuant to section two thousand one hundred five of this article  shall
  be  required  to use due care in selecting the unauthorized insurer from
  whom policies are procured under his license.
    (2) (A) No policy of insurance may be procured by a licensee from  any
  foreign or alien insurer which is controlled, by a foreign government or
  by  a  political  subdivision thereof, or which is an agency of any such
  government or subdivision if the  superintendent  determines  that:  (i)
  such  insurer  receives  a  subsidy or other competitive advantage, as a
  result of such control or  status,  that  would  enable  it  to  compete
  unfairly with similarly situated insurers which are not so controlled or
  constituted;  (ii)  such insurer is entitled to claim sovereign immunity
  as a result of such control and the insurer has not waived the sovereign
  immunity; or (iii) the use of such insurer would be detrimental  to  the
  interests of the people of this state.
    (B)  No  licensee  shall  be  deemed  to be in noncompliance with this
  subsection unless: (i) the superintendent has made a prior determination
  that the foreign or alien insurer from which  the  licensee  procured  a
  policy of insurance should not be used as an excess line insurer in this
  state  in accordance with the provisions of this subsection; or (ii) the
  licensee knew or should have known that such insurer should not be  used
  as  an  excess  line  insurer  in accordance with the provisions of this
  subsection. The superintendent may  promulgate  regulations  to  provide
  guidance to the licensee.
    (C)   Every  such  insurer  shall  otherwise  satisfy  all  applicable
  requirements for placement by an excess line broker.
    * (b) (1) Within  forty-five  days  after  a  policy  is  procured,  a
  licensee  shall  submit  the  declarations  page  or cover note of every
  policy procured under his or her license to the excess line  association
  established  pursuant to section two thousand one hundred thirty of this
  article for recording and stamping. In the event  that  no  declarations
  page  or cover note is available to the licensee, within forty-five days
  after the policy is procured, the licensee shall submit a binder to  the
  excess line association in lieu of such declarations page or cover note.
  In  the event that a binder is submitted to the excess line association,
  the licensee shall submit the declarations page or  cover  note  to  the
  excess  line association promptly upon receipt. Every insurance document
  submitted to the excess line association  pursuant  to  this  subsection
  shall set forth:
    (A) the name and address of the insured;
    (B) the gross premium charged;
    (C) the name of the unauthorized insurer; and
    (D) the kind of insurance procured.
    (2)  Subsequent  endorsements  which do not affect the premium charged
  are exempted from stamping.
    (3) (A) The submission of  insurance  documents  to  the  excess  line
  association  shall  be  accompanied  by  a  statement subscribed to, and
  affirmed by, the licensee or sublicensee as true under the penalties  of
  perjury  that,  after  diligent  effort,  the  full  amount of insurance
  required could not be procured, from authorized insurers, each of  which
  is  authorized  to  write  insurance of the kind requested and which the
  licensee has reason to  believe  might  consider  writing  the  type  of
  coverage  or  class  of insurance involved, and further showing that the
  amount of insurance procured from an unauthorized insurer  is  only  the
  excess  over  the  amount  procurable  from  an  authorized insurer. The
  licensee, however, shall be  excused  from  affirming  that  a  diligent
  effort,  as  defined  above,  was  made  to  procure  the  coverage from
  authorized insurers if the licensee's affidavit is  accompanied  by  the

  affidavit  of another broker involved in the placement affirming as true
  under the penalties of  perjury  that,  after  diligent  effort  by  the
  affirming  broker,  the required insurance could not be procured from an
  authorized  insurer  which  the  affirming  broker had reason to believe
  might consider writing the  type  of  coverage  or  class  of  insurance
  involved.  The  licensee  and the affirming broker shall be excused from
  affirming  that  a  diligent  effort  was  made  if  the  superintendent
  determines,  pursuant  to  paragraph  four  of  this subsection, that no
  declinations are required.
    (B) A licensee or affirming broker shall be  considered  to  have  the
  reason  to believe required by subparagraph (A) of this paragraph if the
  decision to offer the risk to the authorized insurer was based on any of
  the following:
    (i) Recent acceptance by the authorized insurer of a type of  coverage
  or  class  of  insurance similar to that for which coverage is presently
  being sought;
    (ii) Advertising by the authorized insurer  or  its  agent  indicating
  that the authorized insurer is willing to consider acceptance of this or
  a similar type of coverage or class of insurance;
    (iii)  Media  communications  (i.e.,  newspaper  or magazine articles,
  trade publications, television and radio  programming)  indicating  that
  the  authorized insurer is writing, or is considering writing, this type
  of coverage or class of insurance;
    (iv) Communications with other insurance professionals, risk managers,
  trade  associations,  the  excess  line  association  or  the  insurance
  department,  which  indicates that the authorized insurer might consider
  writing this type of coverage or class of insurance; or
    (v) Any other valid basis for making such decision.
    (C) Every licensee,  or  affirming  broker,  in  connection  with  the
  placement  of  each  risk  pursuant to this section, shall record on the
  affidavit required pursuant to subparagraph (A) of  this  paragraph  the
  information  relied  upon  that  formed  the basis of such licensee's or
  affirming broker's reason to believe that the authorized  insurer  might
  consider writing the type of coverage or class of insurance involved.
    (D)   Declinations   obtained   from  authorized  insurers  which  are
  affiliates of, or, as defined in article fifteen of this chapter,  under
  common  control  with,  each other or the unauthorized insurer shall not
  meet the requirements of this subsection unless  such  related  insurers
  operate  as  distinct  and  autonomous  entities,  and  for underwriting
  purposes, compete with each other for the same type of coverage or class
  of insurance.
    (E) The superintendent, in a regulation, may determine  whether  there
  are circumstances where it may be appropriate, due to the unavailability
  from  an  authorized  insurer  of  the  leading  type of coverage or the
  leading class of  insurance  required  by  the  insured,  to  waive  the
  requirement  in  subparagraph  (A) of this paragraph that a licensee may
  procure from an unauthorized insurer only the amount of insurance  which
  is  excess over the amount procurable from an authorized insurer, and to
  instead permit the licensee to procure from an unauthorized insurer  the
  full amount of insurance required by the insured.
    (4)  The number of declinations constituting diligent effort in regard
  to placement of  coverage  with  authorized  insurers  for  purposes  of
  paragraph   three   of  this  subsection  shall  be  three,  unless  the
  superintendent  after  a  hearing,  on  a  record,  upon  findings   and
  conclusions,  determines  that  another  number  of such declinations is
  appropriate  in  regard  to  particular  coverages.   In   making   such
  determinations,   the  superintendent  shall  consider  relevant  market
  conditions,  including  unavailability  of  particular  coverages   from

  authorized   insurers,   and   may  conduct  market  surveys.  Any  such
  determination shall be reviewed at least annually by the superintendent.
    (5)  Before  placing  business  with  an  unauthorized  insurer,  each
  licensee shall ascertain and  verify  the  fact  that  such  insurer  is
  authorized in its domiciliary jurisdiction to write the insurance policy
  proposed to be procured from it by the licensee. No unauthorized insurer
  shall  be  deemed  unacceptable  for placement of business solely on the
  ground that it has been so authorized to  write  such  business  in  its
  domiciliary jurisdiction for a period of less than three years preceding
  the  placement  of  such  risk  by  the licensee. In determining whether
  business  may  be   placed   with   such   unauthorized   insurer,   the
  superintendent  shall  consider  such  factors  as: the interests of the
  public and policyholders, the length  of  time  such  insurer  has  been
  authorized  in its domiciliary jurisdiction and elsewhere, its financial
  condition, and unavailability of particular  coverages  from  authorized
  insurers.
    (6)  It  shall  be  unlawful  for a licensee as defined in section two
  thousand one hundred one of this article and pursuant  to  sections  two
  thousand  one  hundred  four  and  two thousand one hundred five of this
  article to deliver in this state any declarations page of  an  insurance
  policy or cover note evidencing insurance unless such insurance document
  is  stamped  by  the  excess  line  association  or  is exempt from such
  requirements; provided, however, that a  licensee's  failure  to  comply
  with  the  requirements of this subsection shall not affect the validity
  of the coverage.
    (7) Compliance by a licensee with the requirements set forth  in  this
  section  in  connection  with  submitting  for  recording  and  stamping
  declarations pages,  cover  notes,  binders,  endorsements,  affidavits,
  notices  of  excess  line  placement  and  other  excess  line insurance
  documents may be accomplished by means  of  electronic  or  other  media
  transmission, provided the superintendent first approves such methods of
  submitting for recording and stamping.
    (8)  For  purposes of this article, unless exempt under the provisions
  of section two thousand one hundred seventeen of this article, a  policy
  of  insurance  obtained  from  an  insurer  not  authorized  to transact
  business in this state must be  procured  pursuant  to  an  excess  line
  license  when  the  entire property or risk exposure insured or any part
  thereof, is located in this state and:
    (A) the insured negotiated to acquire the coverage  from  within  this
  state; or
    (B) the policy was delivered to the insured in this state.
    (9)  Nothing  in  this  article shall prohibit an excess line licensee
  from placing risks under the excess or surplus line law of another state
  provided that the excess line licensee:
    (A) is licensed under the applicable state law as an excess or surplus
  line broker or places such risk through a  licensed  excess  or  surplus
  line broker in such state; and
    (B)  either  no  portion  of  the property or risk exposure is in this
  state, or the insured has property or risk exposure both in  this  state
  and in another state where the insured maintains a bona fide office from
  which  it  negotiated to acquire the coverage and to which the policy is
  delivered.
    * NB Effective until July 1, 2014
    * (b) (1) When any policy of insurance is procured under the authority
  of a license issued pursuant to section two thousand one hundred five of
  this article,  there  shall  be  submitted,  both  by  the  licensee  or
  sub-licensee  and  by the insured, statements subscribed and affirmed by
  them as true under the penalties of perjury setting forth facts  showing

  that such insured and such licensee were unable after diligent effort to
  procure, from authorized insurers, each authorized to write coverages of
  the kind requested, the full amount of insurance required to protect the
  interest  of  such  insured,  and  further  showing  that  the amount of
  insurance procured from an unauthorized insurer or insurers is only  the
  excess over the amount so procurable from authorized insurers; provided,
  however,  that  the  licensee  shall  be  excused  from affirming that a
  diligent effort was made to procure the coverage  from  such  authorized
  insurers  if the licensee's affidavit is accompanied by the affidavit of
  another broker involved in the placement affirming  as  true  under  the
  penalties  of  perjury  that,  after  diligent  effort  by the affirming
  broker,  the  required  insurance  could  not  be  procured  from   such
  authorized insurers.
    (2)  The number of declinations constituting diligent effort in regard
  to placement of  coverage  with  authorized  insurers  for  purposes  of
  paragraph   one   of   this   subsection  shall  be  three,  unless  the
  superintendent  after  a  hearing,  on  a  record,  upon  findings   and
  conclusions,  determines  that  another  number  of such declinations is
  appropriate  in  regard  to  particular  coverages.   In   making   such
  determinations,   the  superintendent  shall  consider  relevant  market
  conditions,  including  unavailability  of  particular  coverages   from
  authorized   insurers,   and   may  conduct  market  surveys.  Any  such
  determination shall be reviewed at least annually by the superintendent.
    (3)  Before  placing  business  with  an  unauthorized  insurer,  each
  licensee  shall  ascertain  and  verify  the  fact  that such insurer is
  authorized in its domiciliary jurisdiction to write the insurance policy
  proposed to be procured from it by the licensee. No unauthorized insurer
  shall be deemed unacceptable for placement of  business  solely  on  the
  ground  that  it  has  been  so authorized to write such business in its
  domiciliary jurisdiction for a period of less than three years preceding
  the placement of such risk  by  the  licensee.  In  determining  whether
  business  may be placed with an unauthorized insurer, the superintendent
  shall consider  such  factors  as:  the  interests  of  the  public  and
  policyholders,  the  length  of time such insurer has been authorized in
  its domiciliary jurisdiction and elsewhere, its financial condition, and
  unavailability of particular coverages from authorized insurers.
    (4)  The  statements  required  pursuant  to  paragraph  one  of  this
  subsection  shall  be  filed  by  such  licensee with the superintendent
  within thirty days after such policies have been procured.
    * NB Effective July 1, 2014
    * (c) (1) The licensee shall keep a complete and  separate  record  of
  all policies procured from unauthorized insurers under such license. The
  licensee shall also maintain files supporting declinations by authorized
  insurers.   An   authorized   insurer  need  not  maintain  underwriting
  submissions or other records with respect to any declination, unless the
  superintendent, after a hearing on a record, finds substantial abuses of
  the provisions of this section  and  determines  that  recordkeeping  or
  reporting requirements in regard to authorized insurers are necessary to
  redress or eliminate such abuses.
    (2)  Such  records  shall  be  open  to examination by the excess line
  association as provided for in section two thousand one  hundred  thirty
  of  this article and by the superintendent, as provided in section three
  hundred ten of this chapter, at all reasonable times and shall show:
    (A) the exact amount of each kind of insurance  permitted  under  this
  section which has been procured for each insured;
    (B)  the  gross  premiums  charged  by  the  insurers for each kind of
  insurance permitted under this section;

    (C) the amount of each kind of premiums of insurance permitted by this
  section which were returned to each insured;
    (D)  the  name  of  the  insurer or insurers which issued each of said
  policies;
    (E) the effective dates of such policies;
    (F) the terms for which they were issued; and
    (G) the cities and villages within this state  in  which  the  insured
  risks, respectively, are located.
    * NB Effective until July 1, 2014
    * (c)(1) The licensee shall keep a complete and separate record of all
  policies  procured  from  unauthorized  insurers under such license. The
  licensee shall also maintain files supporting declinations by authorized
  insurers.  An  authorized  insurer  need   not   maintain   underwriting
  submissions or other records with respect to any declination, unless the
  superintendent, after a hearing on a record, finds substantial abuses of
  the  provisions  of  this  section  and determines that recordkeeping or
  reporting requirements in regard to authorized insurers are necessary to
  redress or  eliminate  such  abuses.  The  superintendent  shall  review
  recordkeeping  requirements  applicable  to this section and, by October
  first, nineteen hundred eighty-six, shall  take  measures  in  order  to
  simplify forms and other aspects of compliance with such requirements.
    (2)  Such  records shall be open to examination by the superintendent,
  as provided in section  three  hundred  ten  of  this  chapter,  at  all
  reasonable times and shall show:
    (A)  the  exact  amount of each kind of insurance permitted under this
  section which has been procured for each insured;
    (B) the gross premiums charged  by  the  insurers  for  each  kind  of
  insurance permitted under this section;
    (C) the amount of each kind of premiums of insurance permitted by this
  section which were returned to each insured;
    (D)  the  name  of  the  insurer or insurers which issued each of said
  policies;
    (E) the effective dates of such policies;
    (F) the terms for which they were issued; and
    (G) the cities and villages within this state  in  which  the  insured
  risks, respectively, are located.
    * NB Effective July 1, 2014
    (d)  (1)  Every  person,  firm,  association  or  corporation licensed
  pursuant to the provisions of section two thousand one hundred  five  of
  this  article  shall  pay to the superintendent a sum equal to three and
  six-tenths percent of the gross premiums charged  the  insureds  by  the
  insurers  for  insurance  procured  by  such  licensee  pursuant to such
  license, less the amount of such premiums  returned  to  such  insureds.
  Where the insurance covers property or risks located or resident both in
  and out of this state, the sum payable shall be computed on that portion
  of the gross premiums allocated to this state pursuant to subsection (b)
  of section nine thousand one hundred two of this chapter less the amount
  of gross premiums allocated to this state and returned to the insured.
    (2)  The amount of such payments which represents a sum equal to three
  percent  of  fire  insurance  premiums  shall  be  distributed  by   the
  superintendent  as  prescribed in section nine thousand one hundred five
  of this chapter, and the balance thereof  shall  be  paid  over  by  the
  superintendent to the state treasurer.
    (3)  Such  licensee  shall  be  required  to make such payments to the
  superintendent on the fifteenth day of March of each year for the  taxes
  on  all  policies  procured  by such licensee, pursuant to such license,
  during the next preceding calendar year, and on such date such  licensee
  shall  also file with the superintendent a return in the form prescribed

  by the superintendent, showing such information as may be necessary  for
  the proper distribution of such payments.
    (e)(1)  Except  as  provided  in  paragraph two of this subsection, no
  licensee shall be required to obtain a declination from  an  association
  established  pursuant  to  article  fifty-four  or  fifty-five  of  this
  chapter, or to apply for insurance through a plan  established  pursuant
  to  article  fifty-three  of  this  chapter, as a condition of procuring
  insurance pursuant to this section.
    (2) (A) Unless the licensee obtains a declination from the appropriate
  association, or from an insurer pursuant to an application for  coverage
  through a plan, no diligent effort shall be considered to have been made
  if the insurance is available from the plan or association in connection
  with the placement of:
    (i) a policy of non-commercial motor vehicle liability insurance;
    (ii)  medical malpractice insurance for a general hospital, as defined
  in subdivision ten of section two thousand  eight  hundred  one  of  the
  public health law, a physician or dentist; or
    (iii)  insurance  which  by  law  must  be  provided  by an authorized
  insurer.
    (B) In connection with the placement of any other kind of insurance, a
  declination  from  the  appropriate  association,  or  from  an  insurer
  pursuant  to  an  application  for  coverage  through  a  plan, shall be
  required unless prior to the placement the insured has been  advised  of
  the availability of insurance from the plan or association.
    (C)  The  affirming broker shall provide written notice to the insured
  that the placement was made with an unauthorized insurer. A copy of this
  notice shall be  attached  to  the  affirming  broker's  affidavit.  The
  affidavits  required  by  this  section to be completed by the affirming
  broker shall include a statement that the affirming broker  advised  the
  insured in writing:
    (i)  that  the  unauthorized  insurer with which the coverage is being
  placed is not authorized to do an insurance business in this  state  and
  is not subject to supervision by this state;
    (ii)  that in the event of the insolvency of the unauthorized insurer,
  losses will not be covered by any New York state insolvency fund;
    (iii) that the policy may not be subject to all of the regulations  of
  the superintendent pertaining to policy forms; and
    (iv)  such other information as the superintendent may, by regulation,
  require.
    (f) (1) An  excess  line  broker  licensed  pursuant  to  section  two
  thousand  one  hundred  five of this article may execute an authority to
  bind coverage and may exercise binding authority on behalf of an insurer
  not licensed or authorized to do business in this state pursuant to  the
  provisions of this subsection.
    (2) As used in this subsection:
    (A)  an  "authority  to  bind  coverage"  means  the written agreement
  between an excess line broker and an insurer not licensed or  authorized
  to  do business in this state and shall set forth the terms, conditions,
  and limitations governing the  exercise  of  binding  authority  by  the
  excess line broker;
    (B)  a  "binder"  means  written  evidence  of  a  temporary insurance
  contract; and
    (C) "binding authority" means  the  authority  to  issue  and  deliver
  binders,  and  to  issue  and deliver insurance policies on behalf of an
  insurer not licensed or authorized to do business in this state.
    (3) (A) Every excess line broker who exercises binding authority shall
  have filed an authority to bind coverage, the contents  of  which  shall

  not  be public, with the excess line association established pursuant to
  section two thousand one hundred thirty of this article.
    (B)  Such  authority  shall  be  valid  until  (i)  terminated  by the
  appointing insurer after termination in  accordance  with  the  contract
  between  the  broker  and  the  insurer; (ii) the excess line license is
  suspended or revoked by the superintendent; or  (iii)  the  excess  line
  license expires and is not renewed.
    (4)  Notwithstanding  any  other provision of law to the contrary, the
  execution or filing of an authority to bind coverage and the exercise of
  binding  authority  by  an  authorized  excess  line  broker  shall  not
  constitute the doing of insurance business by an insurer not licensed or
  authorized to do business in this state.
    (5) Any coverage so written must be in compliance with this section.
    (6)  Every  binder  shall  contain  a  description and location of the
  subject of insurance, coverage, conditions and term  of  insurance,  the
  premium,  the  name  and address of the excess line broker, the name and
  address of the producing broker, the name of the insurer  and  the  name
  and address of the insured.
    (7)  Any  binding  authority agreement made and filed pursuant to this
  section may authorize an excess line broker to bind coverage  for  risks
  located  within or outside of the state of New York, notwithstanding any
  other provision of this chapter.
    (8) Any binding authority agreement made and filed  pursuant  to  this
  section  may  authorize  an  excess  line  broker  to  issue  notice  of
  cancellation of any insurance policy bound pursuant  to  such  agreement
  (A)  for  non-payment  of  premium,  (B)  for a material increase in the
  hazard insured, or (C) upon discovery of a material misrepresentation in
  the application for insurance. The  excess  line  broker  shall  not  be
  deemed  an  agent  of  the  insurer  solely  for  issuing such notice of
  cancellation.