PRIOR PRINTER'S NO. 1737

PRINTER'S NO.  2389

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

HOUSE BILL

 

No.

1415

Session of

2009

  

  

INTRODUCED BY BOYLE, DeLUCA, JOSEPHS, MURPHY AND YOUNGBLOOD, MAY 4, 2009

  

  

AS AMENDED ON SECOND CONSIDERATION, HOUSE OF REPRESENTATIVES, JULY 6, 2009   

  

  

  

AN ACT

  

1

Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An

2

act relating to insurance; amending, revising, and

3

consolidating the law providing for the incorporation of

4

insurance companies, and the regulation, supervision, and

5

protection of home and foreign insurance companies, Lloyds

6

associations, reciprocal and inter-insurance exchanges, and

7

fire insurance rating bureaus, and the regulation and

8

supervision of insurance carried by such companies,

9

associations, and exchanges, including insurance carried by

10

the State Workmen's Insurance Fund; providing penalties; and

11

repealing existing laws," further providing for definitions,

12

for acting for or aiding nonadmitted insurers, for

13

requirements for eligible surplus lines insurers, for other

14

nonadmitted insurers, for surplus lines licensee's duty to

15

notify insured, for declarations, for surplus lines advisory

16

organizations, for evidence of insurance, for licensing of

17

surplus lines licensee, for surplus lines licensee's

18

acceptance of business from brokers, for records of surplus

19

lines licensees, for monthly reports, for surplus lines tax,

20

for tax on independently procured insurance, for suspension,

21

revocation or nonrenewal of surplus lines licensee's license

22

and for penalties; and providing for compliance.

23

The General Assembly of the Commonwealth of Pennsylvania

24

hereby enacts as follows:

25

Section 1.  Section 1602 of the act of May 17, 1921 (P.L.682,

26

No.284), known as The Insurance Company Law of 1921, amended or

27

added December 18, 1992 (P.L.1519, No.178) and July 10, 2002

 


1

(P.L.749, No.110), is amended to read:

2

Section 1602.  Definitions.--As used in this article the

3

following words and phrases shall have the meanings given to

4

them in this section:

5

"Admitted insurer."  An insurer licensed to do an insurance

6

business in this Commonwealth.

7

"Business entity."  A corporation, a partnership, a limited

8

liability company, a limited liability partnership, a business

9

trust or any other entity doing business other than as a natural

10

person.

11

"Capital."  The term, as used in the financial requirements

12

of section 1605, means funds paid for stock or other evidence of

13

ownership.

14

"Commissioner."  The Insurance Commissioner of the

15

Commonwealth.

16

"Department."  The Insurance Department of the Commonwealth.

17

"Eligible surplus lines insurer."  A nonadmitted insurer with

18

which a surplus lines licensee may place surplus lines insurance

19

under section 1604.

20

"Export."  To place surplus lines insurance with either a

21

nonadmitted insurer or an eligible surplus lines insurer in

22

accordance with this article.

23

"Independently procured insurance."  Any insurance which a

24

resident of this Commonwealth directly negotiates with and

25

purchases, continues or renews from a nonadmitted insurer

26

without securing the services of an insurance [agent, broker]

27

producer or surplus lines licensee[, whether the agent or broker

28

holds a resident or nonresident license issued by the

29

department].

30

"Insurance producer."  A person that is licensed to sell,

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1

solicit or negotiate contracts of insurance with admitted

2

insurers.

3

"Kind of insurance."  One of the types of insurance required

4

to be reported in the annual statement which must be filed with

5

the department by admitted insurers.

6

"Nonadmitted insurer."  An insurer not authorized and not

7

licensed to do an insurance business in this Commonwealth. The

8

term includes insurance exchanges as authorized under the laws

9

of various states.

10

"Person."  A natural person or business entity.

11

["Producing broker."  The broker dealing directly with the

12

party seeking insurance.]

13

"Purchasing group."  An entity formed to purchase liability

14

insurance under the Risk Retention Amendments of 1986 (Public

15

Law 99-563, 100 Stat. 3170).

16

"Risk retention group."  An insurer organized to do business

17

under the Risk Retention Amendments of 1986 (Public Law 99-563,

18

100 Stat. 3170).

19

"Surplus."  The term, as used in the financial requirements

20

of section 1605, means funds over and above liabilities and

21

capital of the company for the protection of its policyholders.

22

"Surplus lines insurance."  Any insurance of risks resident,

23

located or to be performed in this Commonwealth, permitted to be

24

placed through a surplus lines licensee with a nonadmitted

25

insurer eligible to accept such insurance, other than

26

reinsurance, wet marine and transportation insurance,

27

independently procured insurance, life [and health] insurance

28

and annuities and coverage obtained from risk retention groups

29

under the Risk Retention Amendments of 1986 (Public Law 99-563,

30

100 Stat. 3170).

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1

"Surplus lines licensee."  [An individual, partnership or

2

corporation] A person licensed as a surplus lines producer under

3

section 1615 to place surplus lines insurance with nonadmitted

4

insurers eligible to accept such insurance.

5

"Wet marine and transportation insurance."  Any of the

6

following:

7

(1)  Insurance upon vessels, crafts or hulls and of interests

8

therein or with relation thereto.

9

(2)  Insurance of marine builder's risks, marine war risks

10

and contracts of marine protection and indemnity insurance.

11

(3)  Insurance of freights and disbursements pertaining to a

12

subject of insurance coming within this definition.

13

(4)  Insurance of personal property and interest therein, in

14

the course of exportation from or importation into any country,

15

or in the course of transportation coastwise or on inland

16

waters, including transportation by land, water or air from

17

point of origin to final destination, in connection with any and

18

all risks or perils of navigation, transit or transportation,

19

and while being prepared for and while awaiting shipment, and

20

during any delays, transshipment or reshipment. Insurance of

21

personal property and interests therein shall not be considered

22

wet marine and transportation insurance if:

23

(i)  the property has been transported solely by land;

24

(ii)  the property has reached its final destination as

25

specified in the bill of lading or other shipping document; or

26

(iii)  the insured no longer has an insurable interest in the

27

property.

28

(5)  Any insurance associated with transportation of property

29

listed under this definition.

30

"Writing producer."  The insurance producer which brings

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1

about or negotiates contracts of insurance directly on behalf of

2

the consumer seeking insurance.

3

Section 2.  Section 1603 of the act, added December 18, 1992

4

(P.L.1519, No.178), is amended to read:

5

Section 1603.  Acting for or Aiding Nonadmitted Insurers.--

6

(a)  No person in this Commonwealth shall directly or indirectly

7

act as [agent] a producer for, or otherwise represent or aid on

8

behalf of another, any nonadmitted insurer in the solicitation,

9

negotiation, procurement or effectuation of insurance, or

10

renewals thereof, or forwarding of applications, or delivery of

11

policies or contracts or inspection of risks, or fixing of

12

rates, or investigation or adjustment of claims or losses, or

13

collection or forwarding of premiums, or in any other manner

14

represent or assist such insurer in the transaction of

15

insurance.

16

(b)  If the nonadmitted insurer is not an eligible surplus

17

lines insurer and fails to pay a claim or loss within the

18

provisions of the insurance contract, a person who assisted or

19

in any manner aided, directly or indirectly, in the procurement

20

of the insurance contract shall be liable to the insured for the

21

full amount payable under the provisions of the insurance

22

contract.

23

(c)  This section does not apply to any of the following:

24

(1)  Surplus lines insurance if it is effected and written

25

pursuant to this article.

26

(2)  Insurance effected with a nonadmitted insurer pursuant

27

to sections 1606 and 1610.

28

(3)  Transactions for which a certificate of authority to do

29

business is not required of an insurer under the insurance laws

30

of this Commonwealth.

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1

(4)  Reinsurance.

2

(5)  Wet marine and transportation insurance.

3

(6)  Transactions subsequent to issuance of a policy not

4

covering domestic risks at time of issuance and lawfully

5

solicited, written or delivered outside of this Commonwealth.

6

(7)  Transactions involving risk retention groups chartered

7

and licensed outside of this Commonwealth.

8

Section 3.  Section 1605 of the act, amended July 10, 2002

9

(P.L.749, No.110), is amended to read:

10

Section 1605.  Requirements for Eligible Surplus Lines

11

Insurers.--(a)  No surplus lines licensee shall place any

12

coverage with a nonadmitted insurer unless, at the time of

13

placement, such nonadmitted insurer:

14

(1)  Is of good repute and financial integrity.

15

(2)  Qualifies under any of the following subparagraphs:

16

(i)  Has policyholder surplus equal to or greater than two

17

times the minimum capital and surplus required to be fully

18

licensed in this Commonwealth. Two (2) years from the effective

19

date of this article is granted to allow those nonadmitted

20

insurers which are eligible surplus lines insurers on the

21

effective date of this article to achieve this capital and

22

surplus requirement. If an alien insurer, as defined by the act

23

of December 10, 1974 (P.L.804, No.266), referred to as the Alien

24

Insurer Domestication Law, it shall maintain in the United

25

States an irrevocable trust fund in either a national bank or a

26

member of the Federal Reserve System, in an amount not less than

27

that currently required by the National Association of Insurance

28

Commissioners' International Insurers Department or its

29

successor for the protection of all of its policyholders in the

30

United States, and such trust fund consists of cash, securities,

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1

letters of credit or investments of substantially the same

2

character and quality as those which are eligible investments

3

for admitted insurers authorized to write like kinds of

4

insurance in this Commonwealth. Such trust fund will be in

5

addition to the capital and surplus required in this

6

subparagraph and shall have an expiration date which at no time

7

shall be less than five (5) years.

8

(ii)  Is any Lloyd's or other similar group of insurers which

9

includes unincorporated individual insurers that maintains a

10

trust fund of not less than fifty million ($50,000,000) dollars

11

as security to the full amount thereof for all policyholders and

12

creditors in the United States of each member of the group. Such

13

trust funds shall likewise comply with the terms and conditions

14

established in subparagraph (i) for alien insurers.

15

(iii)  Is an insurance exchange created by the laws of

16

individual states that maintains capital and surplus or the

17

substantial equivalent thereof of not less than fifteen million

18

($15,000,000) dollars in the aggregate. For insurance exchanges

19

which maintain funds for the protection of all insurance

20

exchange policyholders, each individual syndicate shall maintain

21

minimum capital and surplus or the substantial equivalent

22

thereof of not less than one million five hundred thousand

23

($1,500,000) dollars. In the event the insurance exchange does

24

not maintain funds for the protection of all insurance exchange

25

policyholders, each individual syndicate shall meet the minimum

26

capital and surplus requirements of subparagraph (i).

27

(3)  Has provided to the department a copy of its current

28

annual financial statement certified by such insurer, such

29

statement to be provided no more than thirty (30) days after the

30

date required for filing an annual financial statement in its

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1

domiciliary jurisdiction and which is either:

2

(i)  certified by the regulatory authority in the domicile of

3

the insurer; or

4

(ii)  certified by an accounting or auditing firm licensed in

5

the jurisdiction of the insurer's domicile.

6

In the case of an insurance exchange, the statement may be an

7

aggregate statement of all underwriting syndicates operating

8

during the period reported.

9

(b)  In addition to meeting the requirements in subsection

10

(a), a nonadmitted insurer shall be an eligible surplus lines

11

insurer if it appears on the most recent list of eligible

12

surplus lines insurers published by the department from time to

13

time but at least [semiannually] annually. Nothing in this

14

section shall require the department to place or maintain the

15

name of any nonadmitted insurer on the list of eligible surplus

16

lines insurers.

17

Section 4.  Section 1606 of the act, added December 18, 1992

18

(P.L.1519, No.178), is amended to read:

19

Section 1606.  Other Nonadmitted Insurers.--Only that

20

portion, not to exceed twenty-five per centum (25%), of any risk

21

eligible for export for which the full amount of coverage is not

22

procurable from either admitted insurers or eligible surplus

23

lines insurers may be placed with any other nonadmitted insurer

24

which does not appear on the list of eligible surplus lines

25

insurers published by the department pursuant to section 1605(b)

26

but nonetheless meets the requirements set forth in section

27

1605(a) and any regulations of the department. The surplus lines

28

licensee [seeking to provide] providing coverage through a

29

nonadmitted insurer which is not an eligible surplus lines

30

insurer shall make a filing specifying the amount and percentage

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1

of each risk along with a full explanation of why the risk could

2

not be placed with admitted or eligible surplus lines insurers

3

and naming the nonadmitted insurer with which placement [is

4

intended] was made. At the time of presenting a quotation to the

5

insured, the surplus lines licensee shall present to the insured

6

or to the [producing broker] writing producer written notice

7

that a portion of the insurance will be placed with such

8

nonadmitted insurer.

9

Section 5.  Sections 1608 and 1609 of the act, amended July

10

10, 2002 (P.L.749, No.110), are amended to read:

11

Section 1608.  Surplus Lines Licensee's Duty to Notify

12

Insured.--At the time of presenting a quotation to the insured,

13

the surplus lines licensee shall present to the insured or to

14

the [producing broker] writing producer written notice that the

15

insurance or a portion thereof involves placement with

16

nonadmitted insurers. The surplus lines licensee shall, either

17

directly or through the [producing broker] writing producer,

18

give notice to the insured that:

19

(1)  the insurer with which the licensee places the insurance

20

is not licensed by the Pennsylvania Insurance Department and is

21

subject to its limited regulation; and

22

(2)  in the event of the insolvency of an eligible surplus

23

lines insurer, losses will not be paid by the Pennsylvania

24

Property and Casualty Insurance Guaranty Association.

25

Section 1609.  Declarations.--(a)  In the case of each

26

placement of insurance in accordance with this article:

27

(1)  Within thirty (30) days after the surplus lines licensee

28

has placed insurance with an eligible surplus lines insurer, the

29

[producing broker] writing producer must execute and forward to

30

the surplus lines licensee a written statement, in a form

- 9 -

 


1

prescribed by the department, declaring that:

2

(i)  A diligent effort to procure the desired coverage from

3

admitted insurers was made.

4

(ii)  The insured was expressly advised in writing prior to

5

placement of the insurance that:

6

(A)  the insurer with whom the insurance is to be placed is

7

not admitted to transact business in this Commonwealth and is

8

subject to limited regulation by the department; and

9

(B)  in the event of the insolvency of the insurer, losses

10

will not be paid by the Pennsylvania Property and Casualty

11

Insurance Guaranty Association.

12

This written declaration shall be open to public inspection.

13

(2)  Within forty-five (45) days after insurance has been

14

placed in an eligible surplus lines insurer, the surplus lines

15

licensee shall file with the department a written declaration of

16

his lack of knowledge of how the coverage could have been

17

procured from admitted insurers. The surplus lines licensee

18

shall simultaneously file the written declaration of the

19

[producing broker] writing producer, as set forth in paragraph

20

(1).

21

(3)  In a particular transaction where the [producing broker]

22

writing producer and surplus lines licensee are one in the same

23

entity, [he] the writing producer or surplus lines licensee 

24

shall execute both declarations.

25

(b)  Subsection (a) shall not apply to any insurance which

26

has been placed continuously with an eligible surplus lines

27

insurer for a period of at least three (3) consecutive years

28

immediately preceding the current placement. However, within

29

forty-five (45) days after insurance has been placed with an

30

eligible surplus lines insurer, the surplus lines licensee shall

- 10 -

 


1

file with the department his written declaration on a form

2

prescribed by the department.

3

Section 6.  Sections 1611, 1612 and 1614 of the act, added

4

December 18, 1992 (P.L.1519, No.178), are amended to read:

5

Section 1611.  Surplus Lines Advisory Organizations.--(a)  A

6

surplus lines advisory organization of surplus lines licensees

7

may be formed to:

8

(1)  Facilitate and encourage compliance by [its members]

9

surplus lines licensees with the laws of this Commonwealth and

10

the rules and regulations of the department relative to surplus

11

lines insurance.

12

(2)  Provide means for the examination, which shall remain

13

confidential, of all surplus lines coverages written by [its

14

members] surplus lines licensees to determine whether such

15

coverages comply with such laws and regulations.

16

(3)  Communicate with organizations of admitted insurers with

17

respect to the proper use of the surplus lines market.

18

(4)  Receive and disseminate to [its members] surplus lines

19

licensees information relative to surplus lines insurance.

20

(b)  The functions of the organization shall in no way

21

supplant or delegate current regulatory authority of the

22

department to administer the provisions of this article.

23

(c)  [Each such] An advisory organization shall file with the

24

department for approval:

25

(1)  A copy of its constitution, its articles of agreement or

26

association or its certificate of incorporation.

27

(2)  A copy of its bylaws, rules and regulations governing

28

its activities.

29

[(3)  A current list of its members.]

30

(4)  The name and address of a resident of this Commonwealth

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1

upon whom notices or orders of the department or processes

2

issued at its direction may be served.

3

(5)  An agreement that the department may examine such

4

advisory organization in accordance with the provisions of this

5

section.

6

(d)  The department [shall, at least once every four (4)

7

years] may, as necessary, make or cause to be made an

8

examination of each such advisory organization. The reasonable

9

cost of any such examination shall be paid by the advisory

10

organization upon presentation to it by the department of a

11

detailed account of each cost. The officers, directors, 

12

managers, agents and employes of such advisory organization may

13

be examined at any time, under oath, and shall exhibit all

14

books, records, accounts, documents or agreements governing its

15

method of operation. The department shall furnish two copies of

16

the examination report to the advisory organization examined and

17

shall notify such organization that it may, within twenty (20)

18

days thereof, request a hearing on the report or on any facts or

19

recommendations therein. If the department finds such advisory

20

organization or any member thereof to be in violation of this

21

article, it may issue a cease and desist order requiring the

22

discontinuance of such violation and may impose any other

23

penalties as set forth in this article.

24

(e)  The department may contract with a surplus lines

25

advisory organization to render advice and assistance in

26

carrying out the purposes of this article. The services

27

performed by the advisory organization pursuant to such contract

28

may be funded by a stamping fee assessed on each surplus lines

29

policyholder whose policy is submitted to the advisory

30

organization. The stamping fee shall be established by the board

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1

of governors of the advisory organization, from time to time,

2

and shall be subject to approval by the department.

3

(f)  The advisory organization may submit reports and make

4

recommendations to the department regarding the financial

5

condition of any eligible surplus lines insurer. These reports

6

and recommendations shall not be considered to be public

7

information or subject to any Federal or State freedom of

8

information law. There shall be no liability on the part of nor

9

shall any cause of action of any nature be sustained against

10

eligible surplus lines insurers, the advisory organization or

11

its members, agents, employes, officers or directors or the

12

department or authorized representatives of the department for

13

statements and any reports or recommendations made by them in

14

good faith under this section.

15

(g)  By order of the department, a surplus lines licensee may

16

be compelled to [join the membership division of an advisory

<--

17

organization] and attend educational seminars as a condition of

<--

18

continued licensure under this article.

19

Section 1612.  Evidence of Insurance.--(a)  Upon placing

20

surplus lines insurance, the surplus lines licensee shall

21

deliver to the insured or the [producing broker] writing

22

producer the contract of insurance. If the contract of insurance

23

is not immediately available, a cover note, binder or other

24

evidence of insurance shall be delivered by the surplus lines

25

licensee to the insured or the [producing broker] writing

26

producer and shall, at a minimum, show the description and

27

location of the subject of insurance, coverages, including any

28

material limitations other than those in standard forms, the

29

premium and rate charged and taxes to be collected from the

30

insured, the name and address of the insured and the eligible

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1

surplus lines insurer and other nonadmitted insurer involved

2

under section 1606 and proportion of the risk assumed by each,

3

and the name of the surplus lines licensee.

4

(b)  No surplus lines licensee shall bind or provide evidence

5

of insurance unless he has authority from the eligible surplus

6

lines insurer or other nonadmitted insurer to bind the risk or

7

has received information from the insurer in the regular course

8

of business that it has assumed the risk.

9

(c)  If, after delivery of any such evidence of insurance,

10

there is any change in the identity of the eligible surplus

11

lines insurer, or the proportion of the risk assumed by any

12

nonadmitted insurer, or any other material change in coverage as

13

stated in the surplus lines licensee's original evidence of

14

insurance, or any other material change as to the insurance

15

coverage so evidenced, the surplus lines licensee shall promptly

16

issue and deliver to the insured or to the original [producing

17

broker] writing producer an appropriate substitute for or

18

endorsement of the original document accurately showing the

19

current status of the coverage and the insurer responsible

20

thereunder.

21

(d)  Every evidence of insurance negotiated, placed or

22

procured under the provisions of this article issued by the

23

surplus lines licensee shall bear the name of the licensee and

24

the following legend in 10-point type: "The insurer which has

25

issued this insurance is not licensed by the Pennsylvania

26

Insurance Department and is subject to limited regulation. This

27

insurance is NOT covered by the Pennsylvania Property and

28

Casualty Insurance Guaranty Association."

29

Section 1614.  Effect of Payment to Surplus Lines Licensee.--

30

A payment of premium to the [producing broker] writing producer 

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1

or to a surplus lines licensee acting for a person other than

2

himself in negotiating, continuing or reviewing any contract of

3

insurance under this article shall be deemed to be payment to

4

the insurer, whatever conditions or stipulations may be inserted

5

in the contract notwithstanding.

6

Section 7.  Section 1615 of the act, amended July 10, 2002

7

(P.L.749, No.110), is amended to read:

8

Section 1615.  Licensing of Surplus Lines Licensee.--(a)  No

9

[agent or broker] insurance producer licensed by the department

10

shall transact surplus lines insurance with any nonadmitted

11

insurer unless [such agent or broker] the insurance producer 

12

possesses a valid surplus lines [agent's] producer's license

13

issued by the department.

14

(b)  The department shall issue a surplus lines [agent's]

15

producer's license to any resident [or nonresident] of this

16

Commonwealth or to a nonresident who is a qualified holder of a

17

current Pennsylvania property and casualty [broker's] insurance

18

producer's license, but only when the [broker] insurance

19

producer has complied with the following:

20

(1)  Remitted the surplus lines producer license fee to the

21

department.

22

(2)  Submitted a properly completed surplus lines producer 

23

license application on a form supplied by the department.

24

(3)  Passed a qualifying examination approved by the

25

department, except that all holders of a license prior to the

26

effective date of this article shall be deemed to have passed

27

such an examination.

28

(c)  [Corporations and partnerships shall be eligible to be

29

resident or nonresident surplus lines licensees, upon the

30

following conditions:

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1

(1)  The corporation or partnership licensee shall list all

2

employes, including at least one active officer or partner, who

3

have satisfied the requirements of this article to become

4

surplus lines licensees.

5

(2)  Only those employes holding a certificate of eligibility

6

may transact surplus lines insurance.] Business entities that

7

are licensed as Pennsylvania insurance producers shall be

8

eligible to be surplus lines licensees, if the business entities

9

do all of the following:

10

(1)  Designate one or more officers or partners licensed

11

under this article to be responsible for compliance with all

12

reporting and recordkeeping required by this article.

13

(2)  Provide to the department a list of all surplus lines

14

licensees associated with and placing surplus lines business

15

through the business entity. The business entity shall provide

16

to the department an updated list of licensees within five (5)

17

business days of a change in association of any licensee. The

18

list shall be available at all times for inspection by the

19

department.

20

(c.1)  A nonresident person whose home state issues surplus

21

lines licenses to residents of Pennsylvania on the same basis

22

and who is licensed in Pennsylvania as a property and casualty

23

producer may be licensed as a surplus lines producer if the

24

person does all of the following:

25

(1)  Is currently licensed as a surplus lines producer and is

26

in good standing in its home state.

27

(2)  Has submitted a complete application for a surplus lines

28

license and has paid the required fees.

29

(3)  Has submitted or transmitted to the department the

30

application for a surplus lines license submitted in its home

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1

state or a completed uniform application that complies with

2

section 610-A of the act of May 17, 1921 (P.L.789, No.285),

3

known as "The Insurance Department Act of 1921."

4

(4)  Has complied with all of the provisions of Article VI-A

5

of "The Insurance Department Act of 1921."

6

(d)  Each surplus lines license shall [expire on the last day

7

of February of each year and shall be renewed before March 1 of

8

each year upon payment of the annual fee, in compliance with

9

other provisions of this section. Any surplus lines licensee who

10

fails to apply for renewal of a license before expiration of the

11

current license shall pay a penalty of two times the license fee

12

and be subject to other penalties as provided by law before his

13

license will be renewed.] be:

14

(1)  Issued as follows:

15

(i)  Only in the name of the individual applicant or business

16

entity. A licensee doing business under a fictitious name other

17

than the name appearing on the license shall be required to

18

notify the department in writing prior to use of the fictitious

19

name for the department's consent to use of the name.

20

(ii)  In paper or electronic form.

21

(iii)  For a period not to exceed two (2) years. The

22

following shall apply:

23

(A)  The surplus lines license of a natural person shall

24

expire on the last day of the birth month of the licensee. The

25

initial license cycle may vary to coincide with the expiration

26

cycle of the birth month.

27

(B)  The surplus lines license of a business entity shall

28

expire on the last day of the month in which the license was

29

originally issued.

30

(2)  Nontransferable.

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1

(e)  A nonrefundable two hundred dollar ($200) fee shall

2

accompany an application or renewal for a surplus lines license,

3

unless modified by the department by regulation.

4

(f)  The following shall apply:

5

(1)  A surplus lines licensee that allows the licensee's

6

license to lapse by failing to timely renew the license or by

7

failing to pay the fee required by this act may, within one year

8

of the license renewal date, request the department to reinstate

9

the license. Persons requesting reinstatement shall pay a fee of

10

two times the fee required by this act and may be subject to

11

other penalties as provided by law before the license will be

12

renewed.

13

(2)  Persons requesting reinstatement of a lapsed license

14

shall submit a completed renewal form and the fee required by

15

this act.

16

(3)  The department shall reinstate a license under this

17

subsection retroactively, with the reinstatement effective on

18

the date the license lapsed, if the department receives a

19

request for reinstatement together with a completed renewal

20

application and payment of the lapsed license fee within sixty

21

(60) days after the license lapsed.

22

(4)  The department shall reinstate a license under this

23

subsection prospectively, with reinstatement effective on the

24

date that the license is reinstated, if the department receives

25

a request for reinstatement of a lapsed license more than sixty

26

(60) days after the license lapsed but within one year after the

27

license lapsed.

28

(5)  If a person applies for reinstatement more than one year

29

after the lapse date, the person must reapply for the license

30

under this act.

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1

Section 8.  Section 1616 of the act, added December 18, 1992

2

(P.L.1519, No.178), is amended to read:

3

Section 1616.  Surplus Lines Licensees May Accept Business

4

from [Brokers] Insurance Producer.--A surplus lines licensee may

5

originate surplus lines insurance or accept such insurance from

6

[any broker] an insurance producer duly licensed as to the kind

7

or kinds of insurance involved, and the surplus lines licensee

8

may compensate [such broker therefor] the insurance producer.

9

Section 9.  Section 1619 of the act, amended July 10, 2002

10

(P.L.749, No.110), is amended to read:

11

Section 1619.  Records of Surplus Lines Licensee.--(a)  Each

12

surplus lines licensee shall keep in its office a full and true

13

record of each surplus lines insurance contract placed by or

14

through it, including a copy of the policy, certificate, cover

15

note or other evidence of insurance, showing such of the

16

following items as may be applicable:

17

(1)  Amount of the insurance and perils insured.

18

(2)  Brief description of the risk insured and its location.

19

(3)  Gross premium charged.

20

(4)  Any return premium paid.

21

(5)  Rate of premium charged for each risk insured.

22

(6)  Effective date and terms of the contract.

23

(7)  Name and address of the insured.

24

(8)  Name and address of the eligible surplus lines insurer

25

and any nonadmitted insured involved pursuant to section 1606.

26

(9)  Amount of tax and other sums to be collected from the

27

insured.

28

(10)  Identity of the [producing broker] writing producer,

29

any confirming correspondence from the insurer or its

30

representative and the application.

- 19 -

 


1

(11)  A copy of the written notice required by section [1408]

2

1608.

3

(b)  The record of each contract shall be kept open at all

4

reasonable times to examination by the department without notice

5

for a period of not less than five (5) years following

6

termination of the contract.

7

(c)  If the surplus lines licensee is a natural person who is

8

associated with a business entity which is a valid surplus lines

9

licensee, the business entity with which the licensee is

10

associated shall retain the records which are required by this

11

section to be kept by each surplus lines licensee.

12

Section 10.  Sections 1620, 1621 and 1622 of the act, added

13

December 18, 1992 (P.L.1519, No.178), are amended to read:

14

Section 1620.  Monthly Reports.--Within thirty (30) days

15

following the end of each month, each surplus lines licensee

16

shall file with the department, on forms prescribed by the

17

department, a verified report [in duplicate] of all surplus

18

lines insurance transacted during the preceding month.

19

Section 1621.  Surplus Lines Tax.--(a)  There is hereby

20

levied a tax of three per centum (3%) on all premiums charged

21

for insurance which is placed with either an eligible surplus

22

lines insurer, other than a risk retention group, or other

23

nonadmitted insurer in accordance with this article, such taxes

24

to be based on the gross premiums charged less any return

25

premiums. This tax shall be in addition to the full amount of

26

the gross premium charged by the insurer for the insurance. The

27

tax on any unearned portion of the premium shall be returned to

28

the insured.

29

(b)  Neither the surplus lines licensee nor the [producing

30

broker] writing producer shall pay directly or indirectly such

- 20 -

 


1

tax or any portion thereof, either as an inducement to the

2

insured to purchase the insurance or for any other reason.

3

(c)  The surplus lines licensee shall collect from the

4

insured or the [producing broker] writing producer the amount of

5

the tax at the time of delivery of the initial policy, cover

6

note or other evidence of insurance or at such time thereafter

7

as is reasonably consistent with normal credit terms customary

8

in the business. Each surplus lines licensee shall, on or before

9

January 31 of each year, file with the Department of Revenue a

10

report of all transactions involving the placement of insurance

11

with either an eligible surplus lines insurer or other

12

nonadmitted insurers during the previous calendar year. The

13

report shall set forth the name of the insured, identification

14

of the insurer, the type of insurance, gross premiums charged

15

less any return premiums allowed and the tax due as provided in

16

this section. The remittance for the taxes due shall accompany

17

this report. Such report shall be made on forms prescribed and

18

furnished by the Department of Revenue. A copy of the report

19

shall be filed with the [commissioner] department by the surplus

20

lines licensee. A surplus lines licensee that is a business

21

entity licensee which files the annual premium tax return with

22

the Department of Revenue shall include in its return the

23

premium taxes generated during the year subject to reporting by

24

all licensees associated with said business entity during the

25

reporting period.

26

(d)  In the event that a placement of insurance involves

27

subjects of insurance resident, located or to be performed in

28

one or more states other than this Commonwealth, then the

29

premium taxes provided for in this section shall be levied only

30

on that portion of the premium reasonably ascribable to that

- 21 -

 


1

portion of the risk situated in this Commonwealth.

2

(e)  With respect to insurance placed with or issued by a

3

risk retention group which is an eligible surplus lines insurer,

4

there is hereby levied a tax of two per centum (2%) on all

5

premiums charged for risks resident, located or to be performed

6

in this Commonwealth. The risk retention group shall be

7

responsible for the payment of the taxes levied in this article

8

in accordance with procedures set forth in Article XV.

9

(f)  The settlement and resettlement of taxes imposed by this

10

article, including the granting of extensions of time to file

11

reports and the rights of the taxpayers to present and prosecute

12

a petition for resettlement, a petition for review or an appeal

13

to court or to file a petition for refund and the imposition of

14

interest and penalties, shall be governed by the provisions of

15

the act of March 4, 1971 (P.L.6, No.2), known as the "Tax Reform

16

Code of 1971," as approved in the case of capital stock and

17

franchise taxes.

18

Section 1622.  Tax on Independently Procured Insurance.--The

19

tax provided by section 1621(a) is imposed upon an insured who

20

independently procures insurance on a subject of insurance

21

resident, located or to be performed in this Commonwealth from a

22

nonadmitted insurer or continues or renews such independently

23

procured insurance. The insured shall, within thirty (30) days

24

after the date when such insurance was independently procured,

25

continued or renewed, report such transaction on forms

26

prescribed by the Department of Revenue. This report shall set

27

forth the information required of surplus lines licensees as

28

required in section 1621(c). The tax of three per centum (3%)

29

shall be paid on the date the report is due as provided in this

30

section. If the independently procured insurance covers risks

- 22 -

 


1

resident, located or to be performed in one or more states other

2

than this Commonwealth, the premium taxes shall be prorated in

3

accordance with provisions in section 1621(d). A copy of such

4

report shall be filed with the [commissioner] department by the

5

insured.

6

Section 11.  Section 1623 of the act, amended July 10, 2002

7

(P.L.749, No.110), is amended to read:

8

Section 1623.  Suspension, Revocation or Nonrenewal of

9

Surplus Lines Licensee's License.--The department may suspend,

10

revoke or refuse to renew the license of a surplus lines

11

licensee after notice and a hearing, as provided under the

12

applicable provision of the laws of this Commonwealth, upon any

13

one or more of the following grounds:

14

(3)  Closing of the surplus lines licensee's office for a

15

period of more than thirty (30) business days, unless permission

16

is granted by the department.

17

(4)  Failure to make and file required reports.

18

(5)  Failure to transmit required tax on surplus lines

19

premiums.

20

(7)  Failure to remit premiums due insurers or return

21

premiums due insureds in the normal course of business and

22

within reasonable time limits.

23

(8)  Violation of any provision of this article.

24

(9)  For any other cause for which an insurance [agent's or

25

broker's] producer's license could be denied, revoked or

26

suspended or refused upon renewal.

27

Section 12.  Section 1625 of the act, added December 18, 1992

28

(P.L.1519, No.178), is amended to read:

29

Section 1625.  Penalties.--(a)  Any surplus lines licensee

30

who, in this Commonwealth, represents or aids a nonadmitted

- 23 -

 


1

insurer in violation of this article commits a misdemeanor of

2

the third degree and shall, upon conviction, be sentenced to pay

3

a fine of not more than [one thousand ($1,000)] two thousand

4

($2,000) dollars.

5

(b)  In addition to any other penalty provided for in

6

subsection (a) or otherwise provided by law, including any

7

suspension, revocation or refusal to renew a license, any

8

person[, firm, association or corporation] violating any

9

provision of this article shall be liable to a civil penalty not

10

exceeding [one thousand ($1,000)] two thousand ($2,000) dollars

11

for the first offense and not exceeding [two thousand ($2,000)]

12

four thousand ($4,000) dollars for each succeeding offense.

13

(c)  The penalties in this section are not exclusive

14

remedies. Penalties may also be assessed under the act of July

15

22, 1974 (P.L.589, No.205), known as the "Unfair Insurance

16

Practices Act," and any other applicable statute.

17

Section 13.  The act is amended by adding a section to read:

18

Section 1626.  Compliance.--Nothing in this act shall relieve

19

a surplus lines licensee involved in any transaction from

20

compliance with this act or its predecessor acts.

21

Section 14.  This act shall take effect in 60 days.

- 24 -