4.3 Paying Premiums & Claims and Disclosing Liability Coverage
Key Takeaways
Surplus lines premiums must be paid in cash, check, money order, card, electronic funds transfer, or payroll deduction (s. 626.9371(1)).
Electronic claim payments need the recipient's written authorization unless identity is verified and no fee is charged (s. 626.9371(2)(b)).
If an electronic surplus lines claim payment is misdirected, the insurer remains liable for the claim (s. 626.9371(2)).
A surplus lines liability insurer must provide an officer's coverage statement within 60 days after a claimant's written request (s. 626.9372(1)).
A liability coverage disclosure statement must be amended within 60 days after discovering facts requiring amendment (s. 626.9372(2)).
Two short statutes cover money moving in each direction on a surplus lines policy. Section 626.9371 governs how premiums are paid and how claims are paid. Section 626.9372 gives liability claimants a right to learn what coverage exists. Both apply to surplus lines policies issued on or after October 1, 2009, and both came from Chapter 2009-166, which extended several consumer protections to the surplus lines market.
Paying Premiums: s. 626.9371(1)
Premiums for surplus lines contracts issued on or after October 1, 2009, in Florida or covering Florida risks, must be paid:
- in cash, meaning coins, currency, checks, or money orders; or
- by debit card, credit card, automatic electronic funds transfer, or payroll deduction plan.
Premium may therefore be paid by ordinary modern methods, but not by barter, services, or other noncash consideration. The rule ties to the definition of nonpayment in s. 626.9201: a dishonored premium check is nonpayment, and a dishonored first-premium check can void the contract unless it is cured in time.
Paying Claims: s. 626.9371(2)
Claim payments made in Florida under surplus lines contracts issued on or after October 1, 2009 must be made:
| Method | Conditions |
|---|---|
| Cash: coins, currency, checks, drafts, or money orders | A check or draft must comply with Federal Reserve standards for cash items so it can be sorted, routed, and machine-processed |
| Debit card or other electronic transfer | Must be authorized in writing by the recipient or the recipient's representative. Any fees or costs charged to the recipient must be disclosed in writing at the time of authorization |
Waiver of written authorization. The recipient or representative may waive the written-authorization requirement if the insurer verifies the identity of the insured or recipient and charges no fee for the transaction.
Misdirected funds. If electronic funds are misdirected, the insurer remains liable for the claim. The risk of a wrong account falls on the insurer, not the claimant.
Disclosing Liability Coverage: s. 626.9372
Plaintiffs and their attorneys often need to know what insurance stands behind a defendant before they can value or settle a claim. Section 626.9372 creates a disclosure duty for surplus lines liability insurers.
The insurer's duty
Each insurer that provides, or may provide, liability coverage to pay all or part of a claim under surplus lines policies issued on or after October 1, 2009 must provide, within 60 days after the claimant's written request, a statement by a corporate officer or the insurer's claims manager or superintendent setting out, for each known policy, including excess or umbrella coverage:
- the name of the insurer;
- the name of each insured;
- the limits of the liability coverage;
- a statement of any policy or coverage defense the insurer reasonably believes is available at the time of filing the statement; and
- a copy of the policy.
The insured's and agent's duty
On written request from the claimant or the claimant's attorney, the insured, or the insured's insurance agent, must disclose the name and coverage of each known insurer to the claimant and forward the request to all affected insurers. Each insurer then supplies the required information to the claimant within 60 days after it receives the request.
Keeping it current
The statement must be amended within 60 days after discovering facts that make an amendment necessary, for example learning of an additional excess layer or a new coverage defense.
Related Part VIII Rule: Loss Runs (s. 626.9202)
Loss runs are not a separate outline item, but they come up in practice. Within 15 calendar days after receiving an insured's written request, an insurer must provide a loss run statement: policy number, coverage period, number of claims, paid losses, and date of each loss, covering generally the last 5 years. For personal lines, the insurer may instead explain how to obtain one free from a consumer reporting agency. The insurer is treated as compliant if the surplus lines agent provides it on the insurer's behalf, and one loss run a year must be provided free.
Worked Scenarios
Scenario 1. A contractor's surplus lines insurer pays a $42,000 property claim by wire to an account the adjuster typed incorrectly. The funds go to a stranger. The insurer remains liable and must pay the claim again to the right recipient.
Scenario 2. A claimant's attorney sends a written request to a trucking company's surplus lines liability insurer on March 1. The insurer must respond by about April 30, which is within 60 days, with an officer's or claims manager's statement listing the insurer, the insureds, the limits, any coverage defenses it reasonably believes it has, and a copy of each known policy, including the umbrella.
Scenario 3. The same attorney writes to the trucking company's retail agent. The agent must disclose each known insurer's name and coverage and forward the request to every affected insurer.
Scenario 4. Two months after responding, the insurer discovers a reservation-of-rights issue. It must amend its statement within 60 days of discovering that fact.
A surplus lines insurer wants to pay a claim by electronic transfer and charge the claimant a small processing fee. What does s. 626.9371 require?
Written authorization from the recipient, with the fee disclosed in writing at the time of authorization
Only verbal consent recorded by the adjuster
Approval from the FSLSO before each transfer
Nothing, because electronic payments are always permitted
Within what time must a surplus lines liability insurer answer a claimant's written request for coverage information under s. 626.9372?
Within 10 days after the written request
Within 30 days after the lawsuit is filed
Within 60 days after the written request
Within 90 days after the loss occurs
Which item must be included in the insurer's s. 626.9372 disclosure statement?
The insured's complete loss history for 10 years
A statement of any policy or coverage defense the insurer reasonably believes is available
The surplus lines agent's commission rate
The amount of the insurer's loss reserve on the claim
Sections you finish are checked off in the contents.