Alabama 2024 Regular Session

Alabama House Bill HB142 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	HB142INTRODUCED
2	2	Page 0
3	3	HB142
4	4	RRT1YNN-1
5	5	By Representative Ellis
6	6	RFD: Insurance
7	7	First Read: 07-Feb-24
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12	12	5 RRT1YNN-1 02/02/2024 FC (L)ma 2024-494
13	13	Page 1
14	14	First Read: 07-Feb-24
15	15	SYNOPSIS:
16	16	Under existing law, a person may not act as an
17	17	agent for an insurance company unless the agent is
18	18	licensed. The law allows an exception for surplus line
19	19	brokers who issue policies under certain conditions
20	20	when policies may not be available for certain
21	21	coverages.
22	22	This bill would update the laws relating to
23	23	surplus line brokers to adopt revisions to the
24	24	Nonadmitted Insurance Model Act by the National
25	25	Association of Insurance Commissioners (NAIC).
26	26	This bill would also adopt the federal exemption
27	27	requirement for diligent search efforts, allow surplus
28	28	line brokers to file reports on placed coverage
29	29	quarterly rather than on a 30 day rolling basis, ensure
30	30	nonresident surplus line brokers comply with the same
31	31	requirements as resident surplus line brokers, codify
32	32	broker fees while requiring disclosure in the policy
33	33	for consumer protection, eliminate zero premium
34	34	reporting, adopt the federal definition of home state,
35	35	and repeal the Surplus Lines Insurance Multi-State
36	36	Compliance Compact Act in this state.
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64	64	28 HB142 INTRODUCED
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66	66	A BILL
67	67	TO BE ENTITLED
68	68	AN ACT
69	69	Relating to the Department of Insurance; to amend
70	70	Sections 27-10-1 and 27-10-2 of the Code of Alabama 1975,
71	71	relating to unauthorized insurers and exceptions; to amend
72	72	Sections 27-10-20 through 27-10-26, 27-10-30, and 27-10-31 of
73	73	the Code of Alabama 1975, relating to surplus line brokers and
74	74	surplus line insurance; and to repeal Chapter 61 of Title 27,
75	75	Code of Alabama 1975, providing for membership by this state
76	76	in the Surplus Lines Insurance Multi-State Compliance Compact
77	77	Act.
78	78	BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
79	79	Section 1. Sections 27-10-1 and 27-10-2 of the Code of
80	80	Alabama 1975, are amended to read as follows:
81	81	"§27-10-1
82	82	(a) No In this state, no person shall in this state,
83	83	directly or indirectly, act as agent for, or otherwise
84	84	represent, directly or indirectly, or aid on behalf of
85	85	another, any insurer not then authorized to transact such
86	86	insurance in this state in the solicitation, negotiation, or
87	87	effectuation of insurance or annuity contracts, forwarding of
88	88	applications, delivery of policies or contracts, inspection of
89	89	risks, fixing of rates, investigation or adjustment of losses,
90	90	collection of premiums, or in any other manner in the
91	91	transaction of insurance with respect to subjects of insurance
92	92	resident, located or to be performed in this state.
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122	122	resident, located or to be performed in this state.
123	123	(b) This section shall not apply to:
124	124	(1) Acceptance of service of process by the
125	125	commissioner under Section 27-10-52;
126	126	(2) Surplus lines insurance or coverage specified in
127	127	Section 27-10-34 and other transactions as to which a
128	128	certificate of authority is not required of an insurer ;
129	129	(3) Adjustment of losses as authorized in Section
130	130	27-10-35;
131	131	(4) Transactions for which a certificate of authority
132	132	to do business is not required of an insurer under the laws of
133	133	this state;
134	134	(5) Reinsurance effectuated in accordance with this
135	135	title; or
136	136	(6) The property and operations of the shipbuilding
137	137	and/or ship repair industry engaged in interstate or foreign
138	138	commerce and vessels, cargoes, watercraft, piers, wharves,
139	139	graven docks, dry docks, marine railways , and building ways,
140	140	commonly known as wet marine.
141	141	(c) This section shall not be deemed to render invalid,
142	142	as between the parties thereto, any insurance contract entered
143	143	into in violation of this section No insurance contract entered
144	144	into in violation of this section shall preclude the insured
145	145	from enforcing his or her rights under the contract in
146	146	accordance with the terms and provisions of the contract and
147	147	the laws of this state to the same degree those rights would
148	148	have been enforceable had the contract been lawfully
149	149	procured."
150	150	"§27-10-2
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180	180	"§27-10-2
181	181	(a) Any person who in this state willfully represents
182	182	or aids an unauthorized insurer in violation of Section
183	183	27-10-1 shall, in addition to any other applicable penalty,
184	184	shall be liable for the full amount of any loss sustained by
185	185	the insured under any such contract and for the amount of any
186	186	premium taxes which may be payable under Section 27-10-35 by
187	187	reason of such contract.
188	188	(b) Any independent adjuster who, directly or
189	189	indirectly, enters into an investigation investigates or
190	190	adjustment of any loss arising under a contract of an
191	191	insurance or annuity contract issued by an unauthorized
192	192	insurer and covering at time of issuance a subject of
193	193	insurance resident, located or to be performed in this state
194	194	shall be liable for the full amount of any loss suffered by
195	195	the insured under such contract. The commissioner may, after a
196	196	hearing, may revoke the license of such an independent
197	197	adjuster. This subsection does not apply as to surplus lines
198	198	contracts lawfully written under this chapter, or exempted
199	199	under Section 27-10-34, or to insurance contracts procured by
200	200	the insured on his or her own behalf and on which the tax is
201	201	paid as required by Section 27-10-35 , or to transactions as to
202	202	which the insurer is not required to have a certificate of
203	203	authority."
204	204	Section 2. Sections 27-10-20 through 27-10-26,
205	205	27-10-30, and 27-10-31 of the Code of Alabama 1975, are
206	206	amended to read as follows:
207	207	"§27-10-20
208	208	If certain insurance coverages cannot be procured on
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238	238	If certain insurance coverages cannot be procured on
239	239	terms acceptable to the insureds from authorized insurers,
240	240	such coverages, designated "surplus lines," may be procured
241	241	from unauthorized insurers subject to the terms and conditions
242	242	of either subdivisions (1) or (2) of this section:
243	243	(1)a. The insurance must be procured through a licensed
244	244	surplus line broker;
245	245	b. The full amount of insurance required must not be
246	246	procurable, after diligent effort has been made to do so, from
247	247	among the insurers authorized to transact and actually
248	248	transacting that kind and class of insurance in this state or
249	249	has been procured to the full extent such insurers are willing
250	250	to insure;
251	251	c. A surplus line transaction conducted in accordance
252	252	with 15 U.S.C. § 8205 may be exempt from the diligent effort
253	253	requirement;
254	254	c.d. The insurance must not be procured for the purpose
255	255	of securing advantages as to a lower premium rate than would
256	256	be accepted by an authorized insurer; and
257	257	d.e. This section, and this surplus line law, does not
258	258	apply as to life insurance or disability insurance.
259	259	(2) The insurance contracts of insurance are issued to
260	260	an industrial insured, defined as an insured:
261	261	a. Which procures the insurance of any risk by use of
262	262	services of a full-time employee acting as an insurance
263	263	manager or buyer or the services of a regularly and
264	264	continuously retained, qualified insurance consultant;
265	265	b. Whose aggregate annual premiums for insurance on all
266	266	risks other than workmen's compensation and group insurance
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296	296	risks other than workmen's compensation and group insurance
297	297	total at least twenty-five thousand dollars ( $25,000.00); and
298	298	c. Which has at least 25 employees."
299	299	"§27-10-21
300	300	Within 30 days after the effective date of any such
301	301	insurance, If surplus line insurance was transacted in the
302	302	preceding calendar quarter, the surplus line broker shall file
303	303	a written quarterly report with as prescribed by the
304	304	commissioner setting forth facts from which it can be
305	305	determined whether under Section 27-10-20 the coverage has
306	306	been lawfully placed as a surplus line. If so required by the
307	307	commissioner, the report shall be in the form of the broker's
308	308	affidavit. If so required by the commissioner, the report
309	309	shall be accompanied by a written statement signed by the
310	310	insured to the effect that acknowledging the coverage was
311	311	placed in with an unauthorized insurer with the insured's
312	312	knowledge and consent."
313	313	"§27-10-22
314	314	Every insurance contract procured and delivered as a
315	315	surplus line coverage pursuant to this article shall be
316	316	initialed by, or bear the name and license number of , the
317	317	surplus line broker who procured it and shall have stamped
318	318	upon it the following:
319	319	"This contract is registered and delivered as a surplus
320	320	line coverage under the Alabama Surplus Line Insurance Law."
321	321	"§27-10-23
322	322	Insurance contracts procured as "surplus line"
323	323	coverages from unauthorized insurers in accordance with this
324	324	article shall be fully valid and enforceable as to all parties
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354	354	article shall be fully valid and enforceable as to all parties
355	355	and shall be given acceptance and recognition recognized in
356	356	all matters and respects to the same effect and extent as like
357	357	contracts issued by authorized insurers."
358	358	"§27-10-24
359	359	(a) Any person, while licensed as a resident insurance
360	360	producer in this state for the property and casualty lines of
361	361	authority and who is deemed by the commissioner to have had
362	362	sufficient sufficiently experience experienced in the
363	363	insurance business to be competent for the purpose may be
364	364	licensed as a surplus line broker for the same types and kinds
365	365	of insurance that he or she as a resident producer is
366	366	currently licensed to handle as follows:
367	367	(1) Application to the commissioner for the license
368	368	shall be made on forms as designated and furnished by the
369	369	commissioner.
370	370	(2) License fee in the amount stated in required by
371	371	Section 27-4-2 shall be paid to the commissioner. The license
372	372	shall expire on December 31 next after its issue.
373	373	(3) Prior to the issuance of the license, the applicant
374	374	shall file with the commissioner , and thereafter for as long
375	375	as any license remains in effect he or she shall keep in force
376	376	and unimpaired, a bond in favor of the State of Alabama in the
377	377	penal sum of at least fifty thousand dollars ($50,000),
378	378	aggregate liability, with authorized corporate sureties
379	379	approved by the commissioner to remain in force for the
380	380	duration of the license or any renewal . The amount of the bond
381	381	may be increased if deemed necessary by the commissioner,
382	382	considering the amount of surplus lines tax paid in previous
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412	412	considering the amount of surplus lines tax paid in previous
413	413	years. The bond shall be conditioned that the broker will
414	414	conduct business under the license in accordance with the
415	415	provisions of the surplus line insurance law and that he or
416	416	she will promptly remit the taxes as provided by the law. No
417	417	bond shall be terminated unless at least 30 days' prior
418	418	written notice thereof is given to the broker and the
419	419	commissioner.
420	420	(b) A business entity acting as a surplus line broker
421	421	shall designate each licensed individual producer acting under
422	422	the license, each of whom shall be responsible for the
423	423	business entity's compliance with the insurance laws, rules,
424	424	and regulations of this state. A separate fee shall be paid
425	425	for each individual producer acting under a business entity
426	426	license as surplus line broker, as set forth in Section
427	427	27-4-2.
428	428	(c) A nonresident person may be licensed as a surplus
429	429	line broker for the same types of insurance that he or she is
430	430	currently licensed in good standing to handle in his or her
431	431	domiciled state, as follows:
432	432	(1) The nonresident shall comply with the requirements
433	433	established in subsection (a).
434	434	(c)(1)(2) Each licensed nonresident surplus line broker
435	435	shall be considered to have performed acts equivalent to and
436	436	constituting an appointment of the commissioner as his or her
437	437	attorney to receive service of legal process issued against
438	438	the nonresident in this state upon causes of action arising
439	439	within this state out of transactions under the nonresident's
440	440	surplus line broker license. Service upon the commissioner as
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470	470	surplus line broker license. Service upon the commissioner as
471	471	such attorney shall constitute effective legal service upon
472	472	the nonresident.
473	473	(2)(3) The appointment shall be irrevocable for as long
474	474	as there may be any such cause of action in this state against
475	475	the nonresident.
476	476	(3)(4) Service of process under this section shall be
477	477	made by leaving three copies of the summons and complaint, or
478	478	other process, with the commissioner, along with payment of
479	479	the fee prescribed in Section 27-4-2, and the service shall be
480	480	sufficient service upon the nonresident if notice of the
481	481	service and a copy of the summons and complaint or other
482	482	process are sent by registered or certified mail to the
483	483	defendant by the commissioner; and the defendant's return and
484	484	the certificate of the commissioner certifying compliance
485	485	herewith shall be filed in the office of the clerk of court,
486	486	or in the court or tribunal wherein the action is pending. The
487	487	certificate of the commissioner shall show the date of the
488	488	mailing by registered or certified mail of the notice of the
489	489	service and copy of the summons and complaint, or other
490	490	process, to the nonresident defendant and the date of the
491	491	receipt of the return card and shall be signed by the
492	492	commissioner. The commissioner may give the nonresident
493	493	defendant notice of the service upon him or her, in lieu of
494	494	the notice of service provided for herein to be given by
495	495	registered or certified mail, in the following manner:
496	496	a. By having a notice of service and a copy of the
497	497	summons and complaint, or other process, served upon the
498	498	nonresident defendant, if found within the State of Alabama,
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528	528	nonresident defendant, if found within the State of Alabama,
529	529	by any officer duly qualified to serve legal process within
530	530	the State of Alabama or, if the nonresident defendant is found
531	531	to be outside of the State of Alabama, by a sheriff, deputy
532	532	sheriff, or United States marshal or deputy United States
533	533	marshal, or any duly constituted officer qualified to serve
534	534	like process in the state or the jurisdiction where the
535	535	nonresident defendant is found.
536	536	b. The officer's return showing service, when made,
537	537	shall be filed in the office of the clerk of the court, or in
538	538	the court or tribunal wherein the action is pending, on or
539	539	before the return day of the process or as the court or
540	540	tribunal may allow, and the court or tribunal in which the
541	541	action is pending may order a continuance, or continuances, as
542	542	may be necessary to afford the nonresident defendant
543	543	reasonable opportunity to defend the action.
544	544	(4)(5) The commissioner shall keep on file for a period
545	545	of not less than three years a copy of the summons and
546	546	complaint or other process served upon the commissioner,
547	547	together with a record of all such process and of the day,
548	548	hour, and manner of service."
549	549	"§27-10-25
550	550	(a) A licensed surplus line broker may accept and place
551	551	surplus line business for any insurance producer licensed in
552	552	this state for the kind and class of insurance involved and
553	553	may compensate the producer therefor. No producer shall
554	554	knowingly misrepresent to the broker any material fact
555	555	involved in any insurance or in the eligibility thereof for
556	556	placement with an unauthorized insurer.
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586	586	placement with an unauthorized insurer.
587	587	(b) Notwithstanding Section 27-12-17(b), a reasonable
588	588	fee for each policy may be charged by the filing surplus lines
589	589	broker for each policy placed in lawful compliance with
590	590	Section 27-10-20. This per-policy fee shall be itemized
591	591	separately to the customer before purchase, enumerated in the
592	592	policy or a notice delivered with the policy, and is subject
593	593	to the surplus line broker tax required under Section
594	594	27-10-31."
595	595	"§27-10-26
596	596	(a) A surplus line broker shall not knowingly place
597	597	surplus line insurance with an insurer that is unsound
598	598	financially, or that is ineligible under this section. The
599	599	broker shall ascertain the financial condition of the
600	600	unauthorized insurer before placing insurance therewith.
601	601	(b) The broker shall not so insure may only place
602	602	insurance with any an insurer meeting one of the following:
603	603	(1) With anyAn insurer which is not an authorized
604	604	insurer in at least one state of the United States for the
605	605	kind of insurance involved, and with capital or surplus, or
606	606	both, amounting to at least five million dollars ($5,000,000);
607	607	or guaranteed trust fund amounting to at least five million
608	608	dollars ($5,000,000).
609	609	(2) With anAn alien insurer not authorized to transact
610	610	insurance in at least one state of the United States , or an
611	611	unauthorized insurer listed on the Quarterly Listing of Alien
612	612	Insurers maintained by the International Insurers Department
613	613	of the National Association of Insurance Commissioners and
614	614	unless the insurer shall have established an effective trust
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644	644	unless the insurer shall have established an effective trust
645	645	fund of at least two million five hundred thousand dollars
646	646	($2,500,000) within the United States administered by a
647	647	recognized financial institution and held for the benefit of
648	648	all its policyholders or policyholders and creditors in the
649	649	United States, and with capital or surplus, or both, amounting
650	650	to at least fifteen million dollars ($15,000,000).
651	651	(3) With aA foreign or alien insurer which has
652	652	transacted insurance as an authorized insurer in its domicile
653	653	state or country of domicile for not less than five years,
654	654	unless it is a wholly owned subsidiary of an insurer
655	655	authorized to transact insurance in this state or unless it
656	656	makes a deposit in this state as may be permitted under
657	657	subsection (c).
658	658	(4) With anAn insurer the voting control of which is
659	659	held controlled, in whole or substantial part , by any
660	660	government or governmental agency.
661	661	(5) In anyAny insurer made ineligible as a surplus line
662	662	insurer by order of the commissioner received by or known to
663	663	the broker. The commissioner may issue an order of
664	664	ineligibility if he or she finds that the insurer:
665	665	a. Does not meet the financial requirements of this
666	666	section;
667	667	b. Has without just cause refused to pay valid claims
668	668	arising under its contracts in this state or has otherwise
669	669	conducted its affairs in a manner as to result in injury or
670	670	loss to the insuring public of this state; or
671	671	c. Has conducted its affairs in a manner as to result
672	672	in the avoidance of payment of tax as required by Sections
673	673	309
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675	675	311
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702	702	in the avoidance of payment of tax as required by Sections
703	703	27-10-31 and 27-10-35.
704	704	(c) When it appears after a search of surplus lines
705	705	insurers that any particular insurance risk which is eligible
706	706	to be placed in accordance with the surplus line law but on
707	707	which insurance coverage, in whole or in part, is not
708	708	procurable from foreign or alien insurers meeting all of the
709	709	requirements of subsection (b) but is procurable from a
710	710	foreign or alien insurer meeting all of the requirements of
711	711	subsection (b) except for paragraph subdivision (3), then the
712	712	surplus line broker may file a supplemental signed statement
713	713	setting forth the facts and advising the department that the
714	714	part of the risk as shall be unprocurable, as aforesaid, is
715	715	being placed with named unauthorized insurers which meet all
716	716	of the requirements of subsection (b) except for paragraph
717	717	subdivision (3), in the amounts and percentages set forth in
718	718	the statement. These named unauthorized insurers, before
719	719	accepting any risk in this state, shall deposit with the
720	720	department cash or securities acceptable to the commissioner
721	721	and with a market value of not less than one million dollars
722	722	($1,000,000), which deposit shall be held by the department
723	723	for the benefit of Alabama policyholders only. The deposit
724	724	shall be held in the same manner as other deposits as
725	725	described in Section 27-3-11. The commissioner may adopt
726	726	reasonable rules for the implementation and administration of
727	727	this section."
728	728	"§27-10-30
729	729	(a) Each surplus line broker shall, on or before the
730	730	first day of March of each year, file with the commissioner a
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760	760	first day of March of each year, file with the commissioner a
761	761	verified statement of all surplus line insurance transacted by
762	762	him or her during the preceding calendar year. If no surplus
763	763	line insurance was transacted in the preceding calendar year,
764	764	no statement is required.
765	765	(b) The statement shall be on forms as prescribed and
766	766	furnished by the commissioner and shall show:
767	767	(1) Gross amount of each kind of insurance transacted;
768	768	(2) Aggregate gross premiums charged, exclusive of sums
769	769	collected to cover state or federal taxes;
770	770	(3) Aggregate of returned premiums and taxes paid to
771	771	insureds;
772	772	(4) Aggregate of net premiums; and
773	773	(5) Additional information as required by the
774	774	commissioner."
775	775	"§27-10-31
776	776	(a) On or before the first day of March each year, the
777	777	surplus line broker shall remit to the State Treasurer through
778	778	the commissioner, as a tax imposed for the privilege of
779	779	transacting business as a surplus line broker in this state, a
780	780	tax of six percent on the direct premiums, less return
781	781	premiums and exclusive of sums collected to cover state or
782	782	federal taxes, on surplus line insurance issued to insureds
783	783	whose home state is this state as the term "home state" is
784	784	defined in 15 U.S.C. § 8206, subject to tax transacted by the
785	785	broker during the preceding calendar year as shown by the
786	786	annual statement filed with the commissioner.
787	787	(b) The tax under the provisions of this section shall
788	788	be subject to deduction of the full amount of all expenses of
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818	818	be subject to deduction of the full amount of all expenses of
819	819	examination of the surplus line broker by the commissioner in
820	820	the same manner as that allowed for domestic insurers for
821	821	examination expenses under the provisions of subdivision (5)
822	822	of subsection (c) of Section 27-4A-3. All taxes collected
823	823	under this section shall be deposited in the State Treasury to
824	824	the credit of the State General Fund.
825	825	(c) This section shall not be effective if the Surplus
826	826	Lines Insurance Multi-State Compliance Compact is not enacted
827	827	into law by two compacting states. "
828	828	Section 3. Chapter 61 of Title 27 of the Code of
829	829	Alabama 1975, is repealed.
830	830	Section 4. This act shall become effective on July 1,
831	831	2024.
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