Florida Surplus Lines Fees and Diligent Effort Laws Amended
Oct 3, 2019
During the 2019 session, the Florida Legislature passed CS/CS/CS/HB 301. The bill reduces the number of declinations that an agent must receive from admitted carriers before exporting a residential property policy to the surplus lines market for structures with a dwelling replacement cost of $700,000 or more. The bill also removes the $35 per-policy fee cap that surplus lines agents may charge for each policy and allows retail agents to charge a “reasonable” per-policy fee, also uncapped, for placement of a surplus lines policy. The Governor signed the bill on June 18, 2019, and it has been codified as chapter 2019-108, Laws of Florida. The bill became effective July 1, 2019.
The Surplus Lines Law requires that the producing agent make a diligent effort to procure the coverage from authorized insurers before exporting the coverage to the surplus lines market. “Diligent effort” means seeking coverage from and being rejected by at least three authorized insurers or seeking coverage from and being rejected by one authorized insurer if the risk is a residential structure with a dwelling replacement cost of $1 million or more. The new law, which became effective July 1, 2019, allows the agent to seek coverage from and be rejected by only one authorized insurer if the risk is a residential structure with a dwelling replacement cost of $700,000 or more.
Prior to July 1, 2019, the Surplus Lines Law allowed a surplus lines agent to charge a reasonable per-policy fee, not to exceed $35, for each policy certified for export. The $35 fee cap has been in place since 2001. The bill removed the $35 fee cap. It requires that the fee be “reasonable” and that it be itemized separately to the customer before purchase and enumerated in the policy.
The bill further allows the retail agent to charge a reasonable per-policy fee. The bill does not create a statutory fee cap, so the only limitation is that the fee be “reasonable.” The retail agent’s fee must also be itemized separately to the customer before purchase.
The bill did not provide any guidance regarding how to determine whether a particular per-policy fee is “reasonable.” The Florida Department of Financial Services has not released any guidance regarding this issue. In the absence of formal guidance from the Department, agents should consider documenting the methodology used when determining the amount of per-policy fees that are charged to surplus lines insureds, including a description of the particular services that are performed in exchange for such fees.
About the Authors
Wes Strickland is a Shareholder at Colodny Fass and heads the firm’s Insurance Regulatory & Transactions Practice in Tallahassee, Florida. He can be reached at (850) 321-3475 or firstname.lastname@example.org. Michael Billmeier is a Partner in the firm’s Insurance Regulatory & Transactions Practice Group and its Governmental Consulting Practice Group. He can be reached at 850-701-3113 or email@example.com.