Laws / Regs
Surplus Lines Law
Article 16 of the Insurance Company Law of 1921,
P.L. 682, as amended and supplemented
PSLA claims no copyright in the text of these statutory materials. Text has been obtained from sources believed to be reliable and current as of June 30, 2011. To ensure compliance with the statute, the reader is advised to consult Purdon's Pennsylvania Statutes, Title 40, Chapter 2, Article XVI, published by West Publishing Company, 610 Operman, St. Paul, MN 55123.
(a) The purpose of this article is to protect the public interest by:
(1) Protecting persons seeking insurance in this Commonwelth.
(2) Permitting surplus lines insurance to be placed with reputable and financially sound nonadmitted insurers and exported from this Commonwealth pursuant to this article.
(3) Establishing a system of regulation which will permit orderly access to surplus lines insurance in this Commonwealth and encouraging insurers to make new and innovative types of insurance available to consumers in this Commonwealth.
(4) Protecting revenues of this Commonwealth.
(b) (1) The provisions of this article, insofar as they relate to the placement of surplus lines insurance and independently procured insurance, shall apply when this Commonwealth is the home state of the insured.
(2) The provisions of this article, insofar as they relate to the imposition of surplus lines and independently procured premium tax and penalties for policies placed after June 30, 2011, shall apply when this Commonwealth is the home state of the insured.
(3) The provisions of this article, insofar as they relate to the collection, reporting and remittance of surplus lines insurance and independently procured insurance premium tax for policies placed after June 30, 2011, shall apply when this Commonwealth is the home state of the insured.
As used in this article the following words and phrases shall have the meanings given to them in this section:
"Admitted insurer." An insurer licensed to do an insurance business in this Commonwealth.
"Affiliate." With respect to an insured, any entity that controls, is controlled by or is under common control with the insured.
"Affiliated group." Any group of entities that are all affiliated.
“Business entity.” A corporation, a partnership, a limited liability company, a limited liability partnership, a business trust or any other entity doing business other than as a natural person.
"Capital." The term, as used in the financial requirements of section 1605, means funds paid for stock or other evidence of ownership.
"Commissioner." The Insurance Commissioner of the Commonwealth.
"Control." An entity has control over another entity if:
(1) the entity directly or indirectly or acting through one or more other persons owns, controls or has the power to vote twenty-five per centum (25%) or more of any class of voting securities of the other entity; or
(2) the entity controls in any manner the election of a majority of the directors or trustees of the other entity.
"Department." The Insurance Department of the Commonwealth.
"Eligible surplus lines insurer." A nonadmitted insurer with which a surplus lines licensee may place surplus lines insurance under section 1604.
"Export." To place surplus lines insurance with either a nonadmitted insurer or an eligible surplus lines insurer in accordance with this article.
(1) Except as provided under paragraph (2), with respect to an insured:
(i) the state in which an insured maintains its principal place of business or, in the case of an individual, the individual's principal residence; or
(ii) if one hundred per centum (100%) of the insured risk is located out of the state referred to under subparagraph (i), the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated.
(2) If more than one insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term means the home state, as determined under paragraph (1), of the member of the affiliated group that has the largest percentage of premium attributed to it under the insurance contract.
(3) This definition shall not apply to section 1615(g).
"Independently procured insurance." Any insurance directly procured by an insured from a nonadmitted insurer.
“Insurance Producer.” A person that is licensed to sell solicit or negotiate contracts of insurance with admitted insurers.
"Kind of insurance." One of the types of insurance required to be reported in the annual statement which must be filed with the department by admitted insurers.
"Nonadmitted insurer." An insurer not authorized and not licensed to do an insurance business in this Commonwealth. The term includes insurance exchanges as authorized under the laws of various states. The term does not include a risk retention group.
“Person.” A natural person or business entity.
"Purchasing group." An entity formed to purchase liability insurance under the Risk Retention Amendments of 1986 (Public Law 99-563, 100 Stat. 3170).
"Risk retention group." An insurer organized to do business under the Risk Retention Amendments of 1986 (Public Law 99-563, 100 Stat. 3170).
"State." Any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands and American Samoa.
"Surplus." The term, as used in the financial requirements of section 1605, means funds over and above liabilities and capital of the company for the protection of its policyholders.
"Surplus lines insurance." Any insurance permitted to be placed through a surplus lines licensee with a nonadmitted insurer eligible to accept such insurance, other than reinsurance, wet marine and transportation insurance, independently procured insurance, life insurance and annuities and coverage obtained from risk retention groups under the Risk Retention Amendments of 1986 (Public Law 99-563, 100 Stat. 3170).
"Surplus lines licensee." A person licensed as a surplus lines producer under section 1615 to place surplus lines insurance with nonadmitted insurers eligible to accept such insurance.
"Type of insurance." Coverage afforded under the particular policy that is being placed.
"Wet marine and transportation insurance." Any of the following:
(1) Insurance upon vessels, crafts or hulls and of interests therein or with relation thereto.
(2) Insurance of marine builder's risks, marine war risks and contracts of marine protection and indemnity insurance.
(3) Insurance of freights and disbursements pertaining to a subject of insurance coming within this definition.
(4) Insurance of personal property and interest therein, in the course of exportation from or importation into any country, or in the course of transportation coastwise or on inland waters, including transportation by land, water or air from point of origin to final destination, in connection with any and all risks or perils of navigation, transit or transportation, and while being prepared for and while awaiting shipment, and during any delays, transshipment or reshipment. Insurance of personal property and interests therein shall not be considered wet marine and transportation insurance if:
(i) the property has been transported solely by land;
(ii) the property has reached its final destination as specified in the bill of lading or other shipping document; or
(iii) the insured no longer has an insurable interest in the property.
(5) Any insurance associated with transportation of property listed under this definition.
(a) No person in this Commonwealth shall directly or indirectly act as a producer for, or otherwise represent or aid on behalf of another, any nonadmitted insurer in the solicitation, negotiation, procurement or effectuation of insurance, or renewals thereof, or forwarding of applications, or delivery of policies or contracts or inspection of risks, or fixing of rates, or investigation or adjustment of claims or losses, or collection or forwarding of premiums, or in any other manner represent or assist such insurer in the transaction of insurance.
(b) If the nonadmitted insurer is not an eligible surplus lines insurer and fails to pay a claim or loss within the provisions of the insurance contract, a person who assisted or in any manner aided, directly or indirectly, in the procurement of the insurance contract shall be liable to the insured for the full amount payable under the provisions of the insurance contract.
(c) This section does not apply to any of the following:
(1) Surplus lines insurance if it is effected and written pursuant to this article.
(2) Insurance effected with a nonadmitted insurer pursuant to sections 1606 and 1610.
(3) Transactions for which a certificate of authority to do business is not required of an insurer under the insurance laws of this Commonwealth.
(5) Wet marine and transportation insurance.
(6) Transactions subsequent to issuance of a policy in which this Commonwealth becomes the home state.
(7) Transactions involving risk retention groups chartered and licensed outside of this Commonwealth.
Insurance may be procured through a surplus lines licensee from nonadmitted insurers if the following requirements are met:
(1) Each insurer is an eligible surplus lines insurer.
(2) The placement satisfies the criteria set forth in at least one of the following subparagraphs:
(i) The full amount or kind of insurance cannot be obtained from admitted insurers. Such full amount or kind of insurance or any portion thereof may be procured from eligible surplus lines insurers, provided that a diligent search is made among the admitted insurers who are writing, in this Commonwealth, coverage comparable to the coverage being sought.
(ii) The full amount or kind of insurance cannot be obtained from any admitted insurers because coverage comparable to the coverage being sought generally is not available in the authorized market.
(iii) The kind of insurance sought to be obtained from admitted insurers requires a unique form of coverage not available in the admitted market.
(3) With respect to personal lines policies or contract forms, the policy or contract form used by the insurer does not differ materially from policies or contracts customarily used by admitted insurers for the kind of insurance involved. Personal lines coverage may be placed in an eligible surplus lines insurer using a unique form or policy designed for the kind of insurance only if a copy of such form is first filed with the department by the surplus lines licensee desiring to use it. The form shall be deemed approved by the commissioner unless, within ten (10) days after receipt of the same, the commissioner shall find that the use of such form will be contrary to law or public policy.
(4) All other requirements of this article are met.
(a) No surplus lines licensee shall place any coverage with a nonadmitted insurer unless, at the time of placement, such nonadmitted insurer qualifies under one of the following:
(1) (i) is authorized to write the type of insurance in its domiciliary jurisdiction; and
(ii) has capital and surplus or its equivalent under the laws of its domiciliary jurisdiction which is greater than or equal to fifteen million ($15,000,000) dollars. The requirement of this subparagraph may be satisfied by an insurer's possessing less than the minimum capital and surplus upon an affirmative finding of acceptability by the commissioner. The finding shall be based upon such factors as quality of management, capital and surplus of any parent company, company underwriting profit and investment income trends, market availability and company record and reputation within the industry. In no event shall the commissioner make an affirmative finding of acceptability when the nonadmitted insurer's capital and surplus is less than four million five hundred thousand ($4,500,000) dollars.
(2) If domiciled outside the United States, is listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the National Association of Insurance Commissioners.
(b) In addition to meeting the requirements in subsection (a), a nonadmitted insurer shall be an eligible surplus lines insurer if it appears on the most recent list of eligible surplus lines insurers published by the department from time to time but at least annually. Nothing in this section shall require the department to place or maintain the name of any nonadmitted insurer on the list of eligible surplus lines insurers.
Only that portion, not to exceed twenty-five per centum (25%), of any risk eligible for export for which the full amount of coverage is not procurable from either admitted insurers or eligible surplus lines insurers may be placed with any other nonadmitted insurer which does not appear on the list of eligible surplus lines insurers published by the department pursuant to section 1605(b) but nonetheless meets the requirements set forth in section 1605(a) and any regulations of the department. The surplus lines licensee providing coverage through a nonadmitted insurer which is not an eligible surplus lines insurer shall make a filing specifying the amount and percentage of each risk along with a full explanation of why the risk could not be placed with admitted or eligible surplus lines insurers and naming the nonadmitted insurer with which placement was made. At the time of presenting a quotation to the insured, the surplus lines licensee shall present to the insured or to the writing produer written notice that a portion of the insurance will be placed with such nonadmitted insurer.
If at any time the department has reason to believe that an eligible surplus lines insurer:
(1) is in unsound financial condition;
(2) is no longer eligible under section 1605;
(3) has wilfully violated the laws of this Commonwealth; or
(4) does not make reasonably prompt payment of just losses and claims in this Commonwealth or elsewhere;
the department may declare it ineligible.
The department shall promptly mail notice of all such declarations to each surplus lines licensee and, in the event the department's action is based upon paragraph (4), the notice shall be issued at least thirty (30) days prior to the effective date of the withdrawal of eligibility.
Section 1608. Surplus lines licensee's
duty to notify insured
At the time of presenting a quotation to the insured, the surplus lines licensee shall present to the insured or to the writing producer written notice that the insurance or a portion thereof involves placement with nonadmitted insurers. The surplus lines licensee shall, either directly or through the writing producer, give notice to the insured that:
(1) the insurer with which the licensee places the insurance is not licensed by the department and is subject to its limited regulation; and
(2) in the event of the insolvency of an eligible surplus lines insurer, losses will not be paid by the Pennsylvania Property and Casualty Insurance Guaranty Association.
(a) In the case of each placement of insurance in accordance with this article:
(1) Within thirty (30) days after the surplus lines licensee has placed insurance with an eligible surplus lines insurer, the writing producer must execute and forward to the surplus lines licensee a written statement, in a form prescribed by the department, declaring that:
(i) A diligent effort to procure the desired coverage from admitted insurers was made.
(ii) The insured was expressly advised in writing prior to placement of the insurance that:
(A) the insurer with whom the insurance is to be placed is not admitted to transact business in this Commonwealth and is subject to limited regulation by the department; and
(B) in the event of the insolvency of the insurer, losses will not be paid by the Pennsylvania Property and Casualty Insurance Guaranty Association. This written declaration shall be open to public inspection.
(2) Within forty-five (45) days after insurance has been placed in an eligible surplus lines insurer, the surplus lines licensee shall file with the department a written declaration of his lack of knowledge of how the coverage could have been procured from admitted insurers. The surplus lines licensee shall simultaneously file the written declaration of the writing producer, as set forth in paragraph (1).
(3) In a particular transaction where the writing producer and surplus lines licensee are one in the same entity, the writing producer or surplus lines licensee shall execute both declarations.
(b) Subsection (a) shall not apply to any insurance which has been placed continuously with an eligible surplus lines insurer for a period of at least three (3) consecutive years immediately preceding the current placement. However, within forty-five (45) days after insurance has been placed with an eligible surplus lines insurer, the surplus lines licensee shall file with the department his written declaration on a form prescribed by the department.
(a) Deleted by 2011, June 30, P.L. 194, No. 28, § 3, imd. effective.
(a.1) The diligent search requirements of section 1604(2), the reporting requirements of section 1609(a) and the twenty-five per centum (25%) limitation of section 1606 shall not apply to placements of insurance with nonadmitted insurers for an exempt commercial purchaser if:
(1) the surplus lines licensee procuring or placing the surplus lines insurance has disclosed to the exempt commercial purchaser that the insurance may be available from the admitted market that may provide greater protection with more regulatory oversight; and
(2) the exempt commercial purchaser has subsequently requested in writing the surplus lines licensee to procure or place the insurance from a nonadmitted insurer.
(i) Risks of members of a purchasing group established under the Risk Retention Amendments of 1986 (Public Law 99-563, 100 Stat. 3170) if all of the insured members of the purchasing group are covered under its group policy or if the members are additional named insureds under the group's policy.
(ii) Risks of members of a risk retention group established under the Risk Retention Amendments of 1986.
(2) Within forty-five (45) days after insurance has been placed with an eligible surplus lines insurer for members of a purchasing group or risk retention groups by a surplus lines licensee, the licensee shall file with the department his written declaration, reporting the transaction on a form prescribed by the department.
(1) The person employs or retains a qualified risk manager to negotiate insurance coverage.
(2) The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of one hundred thousand ($100,000) dollars in the immediately preceding twelve (12) months.
(3) (i) The person meets at least one of the following criteria:
(A) The person possesses a net worth in excess of twenty million ($20,000,000) dollars, as adjusted under subparagraph (ii).
(B) The person generates annual revenues in excess of fifty million ($50,000,000) dollars, as adjusted under subparagraph (ii).
(C) The person employs more than five hundred (500) full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than one thousand (1,000) employees in the aggregate.
(D) The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least thirty million ($30,000,000) dollars, as adjusted under subparagraph (ii).
(E) The person is a municipality with a population in excess of fifty thousand (50,000) persons.
(ii) Beginning January 1, 2015 and every five years thereafter, the amounts under clauses (A), (B) and (D) shall be adjusted to reflect the percentage change for the five-year period in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor and Industry.
(1) The person is an employee of, or third-party consultant retained by, the commercial policyholder.
(2) The person provides skilled services in loss prevention, loss reduction or risk and insurance coverage analysis and purchase of insurance.
(3) The person:
(i) (A) has a bachelor's degree or higher from an accredited college or university in risk management, business administration, finance, economics or any other field determined by the commissioner to demonstrate minimum competence in risk management; and
(B) (I) has three (3) years of experience in risk financing, claims administration, loss prevention, risk and insurance analysis or purchasing commercial lines of insurance; or
(a) a designation as a Chartered Property and Casualty Underwriter issued by the American Institute for Chartered Property and Casualty Underwriter and Insurance Institute of America;
(b) a designation as an Associate in Risk Management issued by the American Institute for Chartered Property and Casualty Underwriter and Insurance Institute of America;
(c) a designation as Certified Risk Manager issued by the National Alliance for Insurance Education & Research;
(d) a designation as a RIMS Fellow issued by the Global Risk Management Institute; or
(e) any other designation, certification or license determined by the commissioner to demonstrate minimum competency in risk management;
(ii) (A) has at least seven (7) years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis or purchasing commercial lines of insurance; and
(B) has any one of the designations specified under clauses (a), (b), (c), (d) and (e);
(iii) has at least ten (10) years of experience in risk financing, claims administration, loss prevention, risk and insurance coverage analysis or purchasing commercial lines of insurance; or
(iv) has a graduate degree from an accredited college or university in risk management, business administration, finance, economics or any other field determined by the commissioner to demonstrate minimum competence in risk management.
(a) A surplus lines advisory organization of surplus lines licensees may be formed to:
(1) Facilitate and encourage compliance by surplus lines licensees with the laws of this Commonwealth and the rules and regulations of the department relative to surplus lines insurance.
(2) Provide means for the examination, which shall remain confidential, of all surplus lines coverages written by surplus lines licensees to determine whether such coverages comply with such laws and regulations.
(3) Communicate with organizations of admitted insurers with respect to the proper use of the surplus lines market.
(4) Receive and disseminate to surplus lines licensees information relative to surplus lines insurance.
(b) The functions of the organization shall in no way supplant or delegate current regulatory authority of the department to administer the provisions of this article.
(c) An advisory organization shall file with the department for approval:
(1) A copy of its constitution, its articles of agreement or association or its certificate of incorporation.
(2) A copy of its bylaws, rules and regulations governing its activities.
(3) Deleted by 2010 March 22, P.L. 147, No. 14, effective in 180 days [Sept. 20, 2010].
(4) The name and address of a resident of this Commonwealth upon whom notices or orders of the department or processes issued at its direction may be served.
(5) An agreement that the department may examine such advisory organization in accordance with the provisions of this section.
(d) The department may, as necessary, make or cause to be made an examination of each such advisory organization. The reasonable cost of any such examination shall be paid by the advisory organization upon presentation to it by the department of a detailed account of each cost. The officers, directors, managers, agents and employes of such advisory organization may be examined at any time, under oath, and shall exhibit all books, records, accounts, documents or agreements governing its method of operation. The department shall furnish two copies of the examination report to the advisory organization examined and shall notify such organization that it may, within twenty (20) days thereof, request a hearing on the report or on any facts or recommendations therein. If the department finds such advisory organization or any member thereof to be in violation of this article, it may issue a cease and desist order requiring the discontinuance of such violation and may impose any other penalties as set forth in this article.
(e) The department may contract with a surplus lines advisory organization to render advice and assistance in carrying out the purposes of this article. The services performed by the advisory organization pursuant to such contract may be funded by a stamping fee assessed on each surplus lines policyholder whose policy is submitted to the advisory organization. The stamping fee shall be established by the board of governors of the advisory organization, from time to time, and shall be subject to approval by the department.
(f) The advisory organization may submit reports and make recommendations to the department regarding the financial condition of any eligible surplus lines insurer. These reports and recommendations shall not be considered to be public information or subject to any Federal or state freedom of information law. There shall be no liability on the part of nor shall any cause of action of any nature be sustained against eligible surplus lines insurers, the advisory organization or its members, agents, employes, officers or directors or the department or authorized representatives of the department for statements and any reports or recommendations made by them in good faith under this section.
(g) By order of the department, a surplus lines licensee may be compelled to attend educational seminars as a condition of continued licensure under this article.
(a) Upon placing surplus lines insurance, the surplus lines licensee shall deliver to the insured or the writing producer the contract of insurance. If the contract of insurance is not immediately available, a cover note, binder or other evidence of insurance shall be delivered by the surplus lines licensee to the insured or the writing producer and shall, at a minimum, show the description and location of the subject of insurance, coverages, including any material limitations other than those in standard forms, the premium and rate charged and taxes to be collected from the insured, the name and address of the insured and the eligible surplus lines insurer and other nonadmitted insurer involved under section 1606 and proportion of the risk assumed by each, and the name of the surplus lines licensee.
(b) No surplus lines licensee shall bind or provide evidence of insurance unless he has authority from the eligible surplus lines insurer or other nonadmitted insurer to bind the risk or has received information from the insurer in the regular course of business that it has assumed the risk.
(c) If, after delivery of any such evidence of insurance, there is any change in the identity of the eligible surplus lines insurer, or the proportion of the risk assumed by any nonadmitted insurer, or any other material change in coverage as stated in the surplus lines licensee's original evidence of insurance, or any other material change as to the insurance coverage so evidenced, the surplus lines licensee shall promptly issue and deliver to the insured or to the original writing producer an appropriate substitute for or endorsement of the original document accurately showing the current status of the coverage and the insurer responsible thereunder.
(d) Every evidence of insurance negotiated, placed or procured under the provisions of this article issued by the surplus lines licensee shall bear the name of the licensee and the following legend in 10-point type: "The insurer which has issued this insurance is not licensed by the Pennsylvania Insurance Department and is subject to limited regulation. This insurance is NOT covered by the Pennsylvania Property and Casualty Insurance Guaranty Association."
Contracts of insurance procured under this article shall be valid and enforceable as to all parties. Nothing in this article shall be interpreted to prevent an insured from enforcing his rights under the terms and conditions of a contract of insurance entered into in violation of this article.
Section 1614. Effect of payment to
surplus lines licensee
A payment of premium to the writing producer or to a surplus lines licensee acting for a person other than himself in negotiating, continuing or reviewing any contract of insurance under this article shall be deemed to be payment to the insurer, whatever conditions or stipulations may be inserted in the contract notwithstanding.
(a) For insureds whose home state is this Commonweath, no insurance producer licensed by the department shall transact surplus lines insurance with any nonadmitted insurer unless the insurance producer possesses a valid surplus lines producer's license issued by the department.
(b) The department shall issue a surplus lines producer's license to any resident of this Commonwealth or to a nonresident who is a qualified holder of a current Pennsylvania property and casualty insurance producer's license, but only when the insurance producer has complied with the following:
(1) Remitted the surplus lines producer license fee to the department.
(2) Submitted a properly completed surplus lines producer license application on a form supplied by the department.
(3) Passed a qualifying examination approved by the department, except that all holders of a license prior to the effective date of this article shall be deemed to have passed such an examination.
(c) Business entities that are licensed as Pennsylvania insurance producers shall be eligible to be surplus lines licensees, if the business entities do all of the following:
(1) Designate one or more officers or partners licensed under this article to be responsible for compliance with all reporting and recordkeeping required by this article.
(2) Provide to the department a list of all surplus lines licensees associated with and placing surplus lines business through the business entity. The business entity shall provide to the department an updated list of licensees within five (5) business days of a change in association of any licensee. The list shall be available at all times for inspection by the department.
(c.1) A nonresident person whose home state issues surplus lines licenses to residents of Pennsylvania on the same basis and who is licensed in Pennsylvania as a property and casualty producer may be licensed as a surplus lines producer if the person does all of the following:
(1) Is currently licensed as a surplus lines producer and is in good standing in its home state.
(2) Has submitted a complete application for a surplus lines license and has paid the required fees.
(3) Has submitted or transmitted to the department the application for a surplus lines license submitted in its home state or a completed uniform application that complies with Section 610-A of the Act of May 17, 1921 (P.L.789, No.285), known as “The Insurance Department Act of 1921.”
(4) Has complied with all of the provisions of Article VI-A of “The Insurance Department Act of 1921.”
(c.2) The commissioner may participate with the National Association of Insurance Commissioners or its affiliates in a centralized insurance producer registry for the purpose of submitting or obtaining information on insurance producers, surplus lines producers and other licensees, including licensing history, lines of authority and regulatory actions.
(d) Each surplus lines license shall be:
(1) Issued as follows:
(i) Only in the name of the individual applicant or business entity. A licensee doing business under a fictitious name other than the name appearing on the license shall be required to notify the department in writing prior to use of the fictitious name for the department’s consent to use of the name.
(ii) In paper or electronic form.
(iii) For a period not to exceed two (2) years. The following shall apply:
(A) The surplus lines license of a natural person shall expire on the last day of the birth month of the licensee. The initial license cycle may vary to coincide with the expiration cycle of the birth month.
(B) The surplus lines license of a business entity shall expire on the last day of the month in which the license was originally issued.
(e) A nonrefundable two hundred dollar ($200) fee shall accompany an application or renewal for a surplus lines license, unless modified by the department by regulation.
(f) The following shall apply:
(1) A surplus lines licensee that allows the licensee’s license to lapse by failing to timely renew the license or by failing to pay the fee required by this act may, within one year of the license renewal date, request the department to reinstate the license. Persons requesting reinstatement shall pay a fee of two times the fee required by this act and may be subject to other penalties as provided by law before the license will be renewed.
(2) Persons requesting reinstatement of a lapsed license shall submit a completed renewal form and the fee required by this act.
(3) The department shall reinstate a license under this subsection retroactively, with the reinstatement effective on the date the license lapsed, if the department receives a requeset for reinstatement together with a completed renewal application and payment of the lapsed license fee within sixty (60) days after the license lapsed.
(4) The department shall reinstate a license under this subsection prospectively, with reinstatement effective on the date that the license is reinstated, if the department receives a request for reinstatement of a lapsed license more than sixty (60) after the license lapsed but within one year after the license lapsed.
(5) If a person applies for reinstatement more than one year after the lapse date, the person must reapply for the license under this act.
(g) As used in subsection (c.1), the term "home state" for an insurance producer or surplus lines producer shall be as defined as in section 601-A of the act of May 17, 1921 (P.L.789, No.285), known as "The Insurance Department Act of 1921."
A surplus lines licensee may originate surplus lines insurance or accept such insurance from an insurance producer duly licensed as to the kind or kinds of insurance involved, and the surplus lines licensee may compensate the insurance producer.
(a) When two or more surplus lines licensees are involved in a transaction subject to this article, the surplus lines licensee dealing directly with or closest to the insured is responsible for compliance with sections 1604, 1608, 1609, 1612, 1619 and 1621.
(b) This provision shall not serve to relieve any surplus lines licensee involved in any transaction subject to this article from compliance with any other section of this article.
Any surplus lines licensee who is granted binding or underwriting authority by an eligible surplus lines insurer shall be subject to regulations and rules promulgated, from time to time, by the department.
(a) Each surplus lines licensee shall keep in its office a full and true record of each surplus lines insurance contract placed by or through it, including a copy of the policy, certificate, cover note or other evidence of insurance, showing such of the following items as may be applicable:
(1) Amount of the insurance and perils insured.
(2) Brief description of the risk insured and its location.
(3) Gross premium charged.
(4) Any return premium paid.
(5) Rate of premium charged for each risk insured.
(6) Effective date and terms of the contract.
(7) Name and address of the insured.
(8) Name and address of the eligible surplus lines insurer and any nonadmitted insured involved pursuant to section 1606.
(9) Amount of tax and other sums to be collected from the insured.
(10) Identity of the writing producer, any confirming correspondence from the insurer or its representative and the application.
(11) A copy of the written notice required by section 1608.
(b) The record of each contract shall be kept open at all reasonable times to examination by the department without notice for a period of not less than five (5) years following termination of the contract.
(c) If the surplus lines licensee is a natural person who is associated with a business entity which is a valid surplus lines licensee, the business entity with which the licensee is associated shall retain the records which are required by this section to be kept by each surplus lines licensee.
Within thirty (30) days following the end of each month, each surplus lines licensee shall file with the department, on forms prescribed by the department, a verified report of all surplus lines insurance transacted during the preceding month.
(a) (1) There is hereby levied a tax of three per centum (3%) on all premiums charged for insurance which is placed with either an eligible surplus lines insurer, other than a risk retention group, or other nonadmitted insurer in accordance with this article, such taxes to be based on the gross premiums charged less any return premiums. This tax shall be in addition to the full amount of the gross premium charged by the insurer for the insurance. The tax on any unearned portion of the premium shall be returned to the insured.
(2) In the event that a placement of insurance involves subjects of insurance resident, located or to be performed in one or more states other than this Commonwealth, then the premium taxes provided for in this section shall be levied:
(i) For policies placed before July 1, 2011, only on that portion of the premium reasonably ascribable to that portion of the risk situated in this Commonwealth.
(ii) For policies placed after June 30, 2011, upon the gross premium charged less any return premiums where this Commonwealth is the home state of the insured.
(b) to (d) Deleted by 2011, June 30, P.L. 194, No. 28, § 6, imd. effective.
(d.1) (1) Each surplus lines licensee shall, on or before January 31 of each year, file a report of all premiums transacted from the placement of insurance with either an eligible surplus lines insurer or other nonadmitted insurers during the previous calendar year. The report shall be filed as prescribed by the Department of Revenue with any payment. A full copy of the report shall be filed with the department by the surplus lines licensee.
(2) The report described under this subsection shall set forth the name of the insured, the home state of the insured, if required by the department, identification of the insurer, the type of insurance, gross premiums charged less any return premiums allowed, the tax due as provided in this section and any other information as required by the Department of Revenue. A surplus lines licensee that is a business entity licensee which files the annual premium tax return with the Department of Revenue shall include in its return the premium taxes generated during the year subject to reporting by all licensees associated with said business entity during the reporting period. The report shall be made on forms prescribed by the Department of Revenue.
(3) The remittance for the taxes due shall accompany the report described under this subsection. Neither the surplus lines licensee nor the writing producer shall pay directly or indirectly the tax or any portion of the tax, either as an inducement to the insured to purchase the insurance or for any other reason. The surplus lines licensee shall collect from the insured or the writing producer the amount of the tax at the time of delivery of the initial policy, cover note or other evidence of insurance or at the time thereafter as is reasonably consistent with normal credit terms customary in the business.
(4) A penalty shall be imposed for failure to file the report required under this subsection on or before the due date in accordance with the rules of section 403(d) of the act of March 4, 1971 (P.L.6, No.2), known as the "Tax Reform Code of 1971."
(e) With respect to insurance placed with or issued by a risk retention group which is an eligible surplus lines insurer, there is hereby levied a tax of two per centum (2%) on all premiums charged for risks resident, located or to be performed in this Commonwealth. The risk retention group shall be responsible for the payment of the taxes levied in this article in accordance with procedures set forth in Article XV.
(f) The assessment of taxes imposed by this article, including the granting of extensions of time to file reports and the rights of the taxpayers to present and prosecute a petition for assessment, a petition for review or an appeal to court or to file a petition for refund and the imposition of interest and penalties, shall be governed by the provisions of the act of March 4, 1971 (P.L.6, No.2), known as the "Tax Reform Code of 1971," as approved in the case of corporate net income tax.
(a) (1) The tax provided by section 1621(a) is imposed upon an insured whose home state is this Commonwealth who independently procures insurance from a nonadmitted insurer or continues or renews such independently procured insurance.
(2) If the independently procured insurance covers risks resident, located or to be performed in one or more states other than this Commonwealth, the premium taxes shall be payable as computed in accordance with section 1621(a).
(b) The insured shall, within thirty (30) days after the last day of the month in which the insurance was independently procured, continued or renewed, report the transaction on the forms and in the manner prescribed by the Department of Revenue. The report shall set forth the information required of surplus lines licensees as required in any report described under section 1621. The tax of three per centum (3%) shall be paid on the date the report is due as provided under this section. The insured shall file a copy of the report with the department upon its request.
(c) A penalty shall be imposed for failure to file the report required under this section on or before the due date in accordance with the rules of section 403(d) of the act of March 4, 1971 (P.L.6, No.2), known as the "Tax Reform Code of 1971."
The department may suspend, revoke or refuse to renew the license of a surplus lines licensee after notice and a hearing, as provided under the applicable provision of the laws of this Commonwealth, upon any one or more of the following grounds:
(1) and (2) Deleted by 2002, July 10, P.L. 749, No. 110, § 8, effective in 60 days.
(3) Closing of the surplus lines licensee's office for a period of more than thirty (30) business days, unless permission is granted by the department.
(4) Failure to make and file required reports.
(5) Failure to collect or transmit required tax on surplus lines premiums.
(6) Deleted by 2002, July 10, P.L. 749, No. 110, § 8, effective in 60 days.
(7) Failure to remit premiums due insurers or return premiums due insureds in the normal course of business and within reasonable time limits.
(8) Violation of any provision of this act.
(9) For any other cause for which an insurance producer's license could be denied, revoked or suspended or refused upon renewal.
(a) An eligible surplus lines insurer may be sued upon any cause of action arising in this Commonwealth under any surplus lines insurance contract made by it or evidence of insurance issued or delivered by the surplus lines licensee. Service of process shall be made pursuant to the procedures provided by 42 Pa.C.S. Ch. 53 Subch. B (relating to interstate and international procedure). Any such surplus lines insurance contract or evidence of insurance delivered by the surplus lines licensee shall contain a provision stating the substance of this section and designating the person to whom process shall be mailed.
(b) Each nonadmitted insurer accepting surplus lines insurance shall be deemed thereby to have subjected itself to accepting service of process under 42 Pa.C.S. Ch. 53 Subch. B.
(c) The service of process procedures provided in this section are in addition to any other methods provided by law for service of process upon insurers.
(a) Any surplus lines licensee who, in this Commonwealth, represents or aids a nonadmitted insurer in violation of this article commits a misdemeanor of the third degree and shall, upon conviction, be sentenced to pay a fine of not more than two thousand ($2,000) dollars.
(b) In addition to any other penalty provided for in subsection (a) or otherwise provided by law, including any suspension, revocation or refusal to renew a license, any person violating any provision of this article shall be liable to a civil penalty not exceeding two thousand ($2,000) dollars for the first offense and not exceeding four thousand ($4,000) dollars for each succeeding offense.
(c) The penalties in this section are not exclusive remedies. Penalties may also be assessed under the act of July 22, 1974 (P.L. 589, No. 205), known as the "Unfair Insurance Practices Act," and any other applicable statute.
Nothing in this act shall relieve a surplus lines licensee involved in any transaction from compliance with this act or its predecessor acts.