Alabama 2024 Regular Session

Alabama Senate Bill SB46 Compare Versions

Version 1 (Old)

Version 2 (New)

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1		-	~~SB46ENROLLED~~
	1	+	SB46INTRODUCED
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3	3		SB46
4		-	N4Y3TJ8-2
	4	+	N4Y3TJ8-1
5	5		By Senator Shelnutt
6	6		RFD: Banking and Insurance
7	7		First Read: 06-Feb-24
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12		-	5 ~~SB46 Enrolled~~
	12	+	5 N4Y3TJ8-1 02/02/2024 FC (L)ma 2024-293
13	13		Page 1
14	14		First Read: 06-Feb-24
15		-	Enrolled, An Act,
16		-	Relating to the Department of Insurance; to amend
17		-	Sections 27-10-1 and 27-10-2 of the Code of Alabama 1975,
18		-	relating to unauthorized insurers and exceptions; to amend
19		-	Sections 27-10-20 through 27-10-26, 27-10-30, and 27-10-31 of
20		-	the Code of Alabama 1975, relating to surplus line brokers and
21		-	surplus line insurance; and to repeal Chapter 61 of Title 27,
22		-	Code of Alabama 1975, providing for membership by this state
23		-	in the Surplus Lines Insurance Multi-State Compliance Compact
24		-	Act.
25		-	BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
26		-	Section 1. Sections 27-10-1 and 27-10-2 of the Code of
27		-	Alabama 1975, are amended to read as follows:
28		-	"§27-10-1
29		-	(a) No In this state, no person shall in this state,
30		-	directly or indirectly, act as agent for, or otherwise
31		-	represent, directly or indirectly, or aid on behalf of
32		-	another, any insurer not then authorized to transact such
33		-	insurance in this state in the solicitation, negotiation, or
34		-	effectuation of insurance or annuity contracts, forwarding of
35		-	applications, delivery of policies or contracts, inspection of
36		-	risks, fixing of rates, investigation or adjustment of losses,
37		-	collection of premiums, or in any other manner in the
38		-	transaction of insurance with respect to subjects of insurance
39		-	resident, located or to be performed in this state.
	15	+	SYNOPSIS:
	16	+	Under existing law, a person may not act as an
	17	+	agent for an insurance company unless the agent is
	18	+	licensed. The law allows an exception for surplus line
	19	+	brokers who issue policies under certain conditions
	20	+	when policies may not be available for certain
	21	+	coverages.
	22	+	This bill would update the laws relating to
	23	+	surplus line brokers to adopt revisions to the
	24	+	Nonadmitted Insurance Model Act by the National
	25	+	Association of Insurance Commissioners (NAIC).
	26	+	This bill would also adopt the federal exemption
	27	+	requirement for diligent search efforts, allow surplus
	28	+	line brokers to file reports on placed coverage
	29	+	quarterly rather than on a 30 day rolling basis, ensure
	30	+	nonresident surplus line brokers comply with the same
	31	+	requirements as resident surplus line brokers, codify
	32	+	broker fees while requiring disclosure in the policy
	33	+	for consumer protection, eliminate zero premium
	34	+	reporting, adopt the federal definition of home state,
	35	+	and repeal the Surplus Lines Insurance Multi-State
	36	+	Compliance Compact Act in this state.
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	64	+	28 SB46 INTRODUCED
68	65		Page 2
	66	+	A BILL
	67	+	TO BE ENTITLED
	68	+	AN ACT
	69	+	Relating to the Department of Insurance; to amend
	70	+	Sections 27-10-1 and 27-10-2 of the Code of Alabama 1975,
	71	+	relating to unauthorized insurers and exceptions; to amend
	72	+	Sections 27-10-20 through 27-10-26, 27-10-30, and 27-10-31 of
	73	+	the Code of Alabama 1975, relating to surplus line brokers and
	74	+	surplus line insurance; and to repeal Chapter 61 of Title 27,
	75	+	Code of Alabama 1975, providing for membership by this state
	76	+	in the Surplus Lines Insurance Multi-State Compliance Compact
	77	+	Act.
	78	+	BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
	79	+	Section 1. Sections 27-10-1 and 27-10-2 of the Code of
	80	+	Alabama 1975, are amended to read as follows:
	81	+	"§27-10-1
	82	+	(a) No In this state, no person shall in this state,
	83	+	directly or indirectly, act as agent for, or otherwise
	84	+	represent, directly or indirectly, or aid on behalf of
	85	+	another, any insurer not then authorized to transact such
	86	+	insurance in this state in the solicitation, negotiation, or
	87	+	effectuation of insurance or annuity contracts, forwarding of
	88	+	applications, delivery of policies or contracts, inspection of
	89	+	risks, fixing of rates, investigation or adjustment of losses,
	90	+	collection of premiums, or in any other manner in the
	91	+	transaction of insurance with respect to subjects of insurance
	92	+	resident, located or to be performed in this state.
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69	122		resident, located or to be performed in this state.
70	123		(b) This section shall not apply to:
71	124		(1) Acceptance of service of process by the
72	125		commissioner under Section 27-10-52;
73	126		(2) Surplus lines insurance or coverage specified in
74	127		Section 27-10-34 and other transactions as to which a
75	128		certificate of authority is not required of an insurer ;
76	129		(3) Adjustment of losses as authorized in Section
77	130		27-10-35;
78	131		(4) Transactions for which a certificate of authority
79	132		to do business is not required of an insurer under the laws of
80	133		this state;
81	134		(5) Reinsurance effectuated in accordance with this
82	135		title; or
83	136		(6) The property and operations of the shipbuilding
84	137		and/or ship repair industry engaged in interstate or foreign
85	138		commerce and vessels, cargoes, watercraft, piers, wharves,
86	139		graven docks, dry docks, marine railways , and building ways,
87	140		commonly known as wet marine.
88	141		(c) This section shall not be deemed to render invalid,
89	142		as between the parties thereto, any insurance contract entered
90	143		into in violation of this section No insurance contract entered
91	144		into in violation of this section shall preclude the insured
92	145		from enforcing his or her rights under the contract in
93	146		accordance with the terms and provisions of the contract and
94	147		the laws of this state to the same degree those rights would
95	148		have been enforceable had the contract been lawfully
96	149		procured."
97	150		"§27-10-2
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127	180		"§27-10-2
128	181		(a) Any person who in this state willfully represents
129	182		or aids an unauthorized insurer in violation of Section
130	183		27-10-1 shall, in addition to any other applicable penalty,
131	184		shall be liable for the full amount of any loss sustained by
132	185		the insured under any such contract and for the amount of any
133	186		premium taxes which may be payable under Section 27-10-35 by
134	187		reason of such contract.
135	188		(b) Any independent adjuster who, directly or
136	189		indirectly, enters into an investigation investigates or
137	190		adjustment of any loss arising under a contract of an
138	191		insurance or annuity contract issued by an unauthorized
139	192		insurer and covering at time of issuance a subject of
140	193		insurance resident, located or to be performed in this state
141	194		shall be liable for the full amount of any loss suffered by
142	195		the insured under such contract. The commissioner may, after a
143	196		hearing, may revoke the license of such an independent
144	197		adjuster. This subsection does not apply as to surplus lines
145	198		contracts lawfully written under this chapter, or exempted
146	199		under Section 27-10-34, or to insurance contracts procured by
147	200		the insured on his or her own behalf and on which the tax is
148	201		paid as required by Section 27-10-35 , or to transactions as to
149	202		which the insurer is not required to have a certificate of
150	203		authority."
151	204		Section 2. Sections 27-10-20 through 27-10-26,
152	205		27-10-30, and 27-10-31 of the Code of Alabama 1975, are
153	206		amended to read as follows:
154	207		"§27-10-20
155	208		If certain insurance coverages cannot be procured on
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185	238		If certain insurance coverages cannot be procured on
186	239		terms acceptable to the insureds from authorized insurers,
187	240		such coverages, designated "surplus lines," may be procured
188	241		from unauthorized insurers subject to the terms and conditions
189	242		of either subdivisions (1) or (2) of this section:
190	243		(1)a. The insurance must be procured through a licensed
191	244		surplus line broker;
192	245		b. The full amount of insurance required must not be
193	246		procurable, after diligent effort has been made to do so, from
194	247		among the insurers authorized to transact and actually
195	248		transacting that kind and class of insurance in this state or
196	249		has been procured to the full extent such insurers are willing
197	250		to insure;
198	251		c. A surplus line transaction conducted in accordance
199	252		with 15 U.S.C. § 8205 may be exempt from the diligent effort
200	253		requirement;
201	254		c.d. The insurance must not be procured for the purpose
202	255		of securing advantages as to a lower premium rate than would
203	256		be accepted by an authorized insurer; and
204	257		d.e. This section, and this surplus line law, does not
205	258		apply as to life insurance or disability insurance.
206	259		(2) The insurance contracts of insurance are issued to
207	260		an industrial insured, defined as an insured:
208	261		a. Which procures the insurance of any risk by use of
209	262		services of a full-time employee acting as an insurance
210	263		manager or buyer or the services of a regularly and
211	264		continuously retained, qualified insurance consultant;
212	265		b. Whose aggregate annual premiums for insurance on all
213	266		risks other than workmen's compensation and group insurance
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243	296		risks other than workmen's compensation and group insurance
244	297		total at least twenty-five thousand dollars ( $25,000.00); and
245	298		c. Which has at least 25 employees."
246	299		"§27-10-21
247	300		Within 30 days after the effective date of any such
248	301		insurance, If surplus line insurance was transacted in the
249	302		preceding calendar quarter, the surplus line broker shall file
250	303		a written quarterly report with as prescribed by the
251	304		commissioner setting forth facts from which it can be
252	305		determined whether under Section 27-10-20 the coverage has
253	306		been lawfully placed as a surplus line. If so required by the
254	307		commissioner, the report shall be in the form of the broker's
255	308		affidavit. If so required by the commissioner, the report
256	309		shall be accompanied by a written statement signed by the
257	310		insured to the effect that acknowledging the coverage was
258	311		placed in with an unauthorized insurer with the insured's
259	312		knowledge and consent."
260	313		"§27-10-22
261	314		Every insurance contract procured and delivered as a
262	315		surplus line coverage pursuant to this article shall be
263	316		initialed by, or bear the name and license number of , the
264	317		surplus line broker who procured it and shall have stamped
265	318		upon it the following:
266	319		"This contract is registered and delivered as a surplus
267	320		line coverage under the Alabama Surplus Line Insurance Law."
268	321		"§27-10-23
269	322		Insurance contracts procured as "surplus line"
270	323		coverages from unauthorized insurers in accordance with this
271	324		article shall be fully valid and enforceable as to all parties
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301	354		article shall be fully valid and enforceable as to all parties
302	355		and shall be given acceptance and recognition recognized in
303	356		all matters and respects to the same effect and extent as like
304	357		contracts issued by authorized insurers."
305	358		"§27-10-24
306	359		(a) Any person, while licensed as a resident insurance
307	360		producer in this state for the property and casualty lines of
308	361		authority and who is deemed by the commissioner to have had
309	362		sufficient sufficiently experience experienced in the
310	363		insurance business to be competent for the purpose may be
311	364		licensed as a surplus line broker for the same types and kinds
312	365		of insurance that he or she as a resident producer is
313	366		currently licensed to handle as follows:
314	367		(1) Application to the commissioner for the license
315	368		shall be made on forms as designated and furnished by the
316	369		commissioner.
317	370		(2) License fee in the amount stated in required by
318	371		Section 27-4-2 shall be paid to the commissioner. The license
319	372		shall expire on December 31 next after its issue.
320	373		(3) Prior to the issuance of the license, the applicant
321	374		shall file with the commissioner , and thereafter for as long
322	375		as any license remains in effect he or she shall keep in force
323	376		and unimpaired, a bond in favor of the State of Alabama in the
324	377		penal sum of at least fifty thousand dollars ($50,000),
325	378		aggregate liability, with authorized corporate sureties
326	379		approved by the commissioner to remain in force for the
327	380		duration of the license or any renewal . The amount of the bond
328	381		may be increased if deemed necessary by the commissioner,
329	382		considering the amount of surplus lines tax paid in previous
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359	412		considering the amount of surplus lines tax paid in previous
360	413		years. The bond shall be conditioned that the broker will
361	414		conduct business under the license in accordance with the
362	415		provisions of the surplus line insurance law and that he or
363	416		she will promptly remit the taxes as provided by the law. No
364	417		bond shall be terminated unless at least 30 days' prior
365	418		written notice thereof is given to the broker and the
366	419		commissioner.
367	420		(b) A business entity acting as a surplus line broker
368	421		shall designate each licensed individual producer acting under
369	422		the license, each of whom shall be responsible for the
370	423		business entity's compliance with the insurance laws, rules,
371	424		and regulations of this state. A separate fee shall be paid
372	425		for each individual producer acting under a business entity
373	426		license as surplus line broker, as set forth in Section
374	427		27-4-2.
375	428		(c) A nonresident person may be licensed as a surplus
376	429		line broker for the same types of insurance that he or she is
377	430		currently licensed in good standing to handle in his or her
378	431		domiciled state, as follows:
379	432		(1) The nonresident shall comply with the requirements
380	433		established in subsection (a).
381	434		(c)(1)(2) Each licensed nonresident surplus line broker
382	435		shall be considered to have performed acts equivalent to and
383	436		constituting an appointment of the commissioner as his or her
384	437		attorney to receive service of legal process issued against
385	438		the nonresident in this state upon causes of action arising
386	439		within this state out of transactions under the nonresident's
387	440		surplus line broker license. Service upon the commissioner as
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417	470		surplus line broker license. Service upon the commissioner as
418	471		such attorney shall constitute effective legal service upon
419	472		the nonresident.
420	473		(2)(3) The appointment shall be irrevocable for as long
421	474		as there may be any such cause of action in this state against
422	475		the nonresident.
423	476		(3)(4) Service of process under this section shall be
424	477		made by leaving three copies of the summons and complaint, or
425	478		other process, with the commissioner, along with payment of
426	479		the fee prescribed in Section 27-4-2, and the service shall be
427	480		sufficient service upon the nonresident if notice of the
428	481		service and a copy of the summons and complaint or other
429	482		process are sent by registered or certified mail to the
430	483		defendant by the commissioner; and the defendant's return and
431	484		the certificate of the commissioner certifying compliance
432	485		herewith shall be filed in the office of the clerk of court,
433	486		or in the court or tribunal wherein the action is pending. The
434	487		certificate of the commissioner shall show the date of the
435	488		mailing by registered or certified mail of the notice of the
436	489		service and copy of the summons and complaint, or other
437	490		process, to the nonresident defendant and the date of the
438	491		receipt of the return card and shall be signed by the
439	492		commissioner. The commissioner may give the nonresident
440	493		defendant notice of the service upon him or her, in lieu of
441	494		the notice of service provided for herein to be given by
442	495		registered or certified mail, in the following manner:
443	496		a. By having a notice of service and a copy of the
444	497		summons and complaint, or other process, served upon the
445	498		nonresident defendant, if found within the State of Alabama,
446		-	~~197~~
447		-	~~198~~
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473		-	~~224~~ SB46 ~~Enrolled~~
474		-	Page 9
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475	528		nonresident defendant, if found within the State of Alabama,
476	529		by any officer duly qualified to serve legal process within
477	530		the State of Alabama or, if the nonresident defendant is found
478	531		to be outside of the State of Alabama, by a sheriff, deputy
479	532		sheriff, or United States marshal or deputy United States
480	533		marshal, or any duly constituted officer qualified to serve
481	534		like process in the state or the jurisdiction where the
482	535		nonresident defendant is found.
483	536		b. The officer's return showing service, when made,
484	537		shall be filed in the office of the clerk of the court, or in
485	538		the court or tribunal wherein the action is pending, on or
486	539		before the return day of the process or as the court or
487	540		tribunal may allow, and the court or tribunal in which the
488	541		action is pending may order a continuance, or continuances, as
489	542		may be necessary to afford the nonresident defendant
490	543		reasonable opportunity to defend the action.
491	544		(4)(5) The commissioner shall keep on file for a period
492	545		of not less than three years a copy of the summons and
493	546		complaint or other process served upon the commissioner,
494	547		together with a record of all such process and of the day,
495	548		hour, and manner of service."
496	549		"§27-10-25
497	550		(a) A licensed surplus line broker may accept and place
498	551		surplus line business for any insurance producer licensed in
499	552		this state for the kind and class of insurance involved and
500	553		may compensate the producer therefor. No producer shall
501	554		knowingly misrepresent to the broker any material fact
502	555		involved in any insurance or in the eligibility thereof for
503	556		placement with an unauthorized insurer.
504		-	~~225~~
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531		-	~~252~~ SB46 ~~Enrolled~~
532		-	Page 10
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533	586		placement with an unauthorized insurer.
534	587		(b) Notwithstanding Section 27-12-17(b), a reasonable
535	588		fee for each policy may be charged by the filing surplus lines
536	589		broker for each policy placed in lawful compliance with
537	590		Section 27-10-20. This per-policy fee shall be itemized
538	591		separately to the customer before purchase, enumerated in the
539	592		policy or a notice delivered with the policy, and is subject
540	593		to the surplus line broker tax required under Section
541	594		27-10-31."
542	595		"§27-10-26
543	596		(a) A surplus line broker shall not knowingly place
544	597		surplus line insurance with an insurer that is unsound
545	598		financially, or that is ineligible under this section. The
546	599		broker shall ascertain the financial condition of the
547	600		unauthorized insurer before placing insurance therewith.
548	601		(b) The broker shall not so insure may only place
549	602		insurance with any an insurer meeting one of the following:
550	603		(1) With anyAn insurer which is not an authorized
551	604		insurer in at least one state of the United States for the
552	605		kind of insurance involved, and with capital or surplus, or
553	606		both, amounting to at least five million dollars ($5,000,000);
554	607		or guaranteed trust fund amounting to at least five million
555	608		dollars ($5,000,000).
556	609		(2) With anAn alien insurer not authorized to transact
557	610		insurance in at least one state of the United States , or an
558	611		unauthorized insurer listed on the Quarterly Listing of Alien
559	612		Insurers maintained by the International Insurers Department
560	613		of the National Association of Insurance Commissioners and
561	614		unless the insurer shall have established an effective trust
562		-	~~253~~
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589		-	~~280~~ SB46 ~~Enrolled~~
590		-	Page 11
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591	644		unless the insurer shall have established an effective trust
592	645		fund of at least two million five hundred thousand dollars
593	646		($2,500,000) within the United States administered by a
594	647		recognized financial institution and held for the benefit of
595	648		all its policyholders or policyholders and creditors in the
596	649		United States, and with capital or surplus, or both, amounting
597	650		to at least fifteen million dollars ($15,000,000).
598	651		(3) With aA foreign or alien insurer which has
599	652		transacted insurance as an authorized insurer in its domicile
600	653		state or country of domicile for not less than five years,
601	654		unless it is a wholly owned subsidiary of an insurer
602	655		authorized to transact insurance in this state or unless it
603	656		makes a deposit in this state as may be permitted under
604	657		subsection (c).
605	658		(4) With anAn insurer the voting control of which is
606	659		held controlled, in whole or substantial part , by any
607	660		government or governmental agency.
608	661		(5) In anyAny insurer made ineligible as a surplus line
609	662		insurer by order of the commissioner received by or known to
610	663		the broker. The commissioner may issue an order of
611	664		ineligibility if he or she finds that the insurer:
612	665		a. Does not meet the financial requirements of this
613	666		section;
614	667		b. Has without just cause refused to pay valid claims
615	668		arising under its contracts in this state or has otherwise
616	669		conducted its affairs in a manner as to result in injury or
617	670		loss to the insuring public of this state; or
618	671		c. Has conducted its affairs in a manner as to result
619	672		in the avoidance of payment of tax as required by Sections
620		-	~~281~~
621		-	~~282~~
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646		-	~~307~~
647		-	~~308~~ SB46 ~~Enrolled~~
648		-	Page 12
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649	702		in the avoidance of payment of tax as required by Sections
650	703		27-10-31 and 27-10-35.
651	704		(c) When it appears after a search of surplus lines
652	705		insurers that any particular insurance risk which is eligible
653	706		to be placed in accordance with the surplus line law but on
654	707		which insurance coverage, in whole or in part, is not
655	708		procurable from foreign or alien insurers meeting all of the
656	709		requirements of subsection (b) but is procurable from a
657	710		foreign or alien insurer meeting all of the requirements of
658	711		subsection (b) except for paragraph subdivision (3), then the
659	712		surplus line broker may file a supplemental signed statement
660	713		setting forth the facts and advising the department that the
661	714		part of the risk as shall be unprocurable, as aforesaid, is
662	715		being placed with named unauthorized insurers which meet all
663	716		of the requirements of subsection (b) except for paragraph
664	717		subdivision (3), in the amounts and percentages set forth in
665	718		the statement. These named unauthorized insurers, before
666	719		accepting any risk in this state, shall deposit with the
667	720		department cash or securities acceptable to the commissioner
668	721		and with a market value of not less than one million dollars
669	722		($1,000,000), which deposit shall be held by the department
670	723		for the benefit of Alabama policyholders only. The deposit
671	724		shall be held in the same manner as other deposits as
672	725		described in Section 27-3-11. The commissioner may adopt
673	726		reasonable rules for the implementation and administration of
674	727		this section."
675	728		"§27-10-30
676	729		(a) Each surplus line broker shall, on or before the
677	730		first day of March of each year, file with the commissioner a
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704		-	~~335~~
705		-	~~336~~ SB46 ~~Enrolled~~
706		-	Page 13
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707	760		first day of March of each year, file with the commissioner a
708	761		verified statement of all surplus line insurance transacted by
709	762		him or her during the preceding calendar year. If no surplus
710	763		line insurance was transacted in the preceding calendar year,
711	764		no statement is required.
712	765		(b) The statement shall be on forms as prescribed and
713	766		furnished by the commissioner and shall show:
714	767		(1) Gross amount of each kind of insurance transacted;
715	768		(2) Aggregate gross premiums charged, exclusive of sums
716	769		collected to cover state or federal taxes;
717	770		(3) Aggregate of returned premiums and taxes paid to
718	771		insureds;
719	772		(4) Aggregate of net premiums; and
720	773		(5) Additional information as required by the
721	774		commissioner."
722	775		"§27-10-31
723	776		(a) On or before the first day of March each year, the
724	777		surplus line broker shall remit to the State Treasurer through
725	778		the commissioner, as a tax imposed for the privilege of
726	779		transacting business as a surplus line broker in this state, a
727	780		tax of six percent on the direct premiums, less return
728	781		premiums and exclusive of sums collected to cover state or
729	782		federal taxes, on surplus line insurance issued to insureds
730	783		whose home state is this state as the term "home state" is
731	784		defined in 15 U.S.C. § 8206, subject to tax transacted by the
732	785		broker during the preceding calendar year as shown by the
733	786		annual statement filed with the commissioner.
734	787		(b) The tax under the provisions of this section shall
735	788		be subject to deduction of the full amount of all expenses of
736		-	~~337~~
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738		-	~~339~~
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764		-	Page 14
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765	818		be subject to deduction of the full amount of all expenses of
766	819		examination of the surplus line broker by the commissioner in
767	820		the same manner as that allowed for domestic insurers for
768	821		examination expenses under the provisions of subdivision (5)
769	822		of subsection (c) of Section 27-4A-3. All taxes collected
770	823		under this section shall be deposited in the State Treasury to
771	824		the credit of the State General Fund.
772	825		(c) This section shall not be effective if the Surplus
773	826		Lines Insurance Multi-State Compliance Compact is not enacted
774	827		into law by two compacting states. "
775	828		Section 3. Chapter 61 of Title 27 of the Code of
776	829		Alabama 1975, is repealed.
777	830		Section 4. This act shall become effective on July 1,
778	831		2024.
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793		-	2024.
794		-	________________________________________________
795		-	President and Presiding Officer of the Senate
796		-	________________________________________________
797		-	Speaker of the House of Representatives
798		-	SB46
799		-	Senate 27-Feb-24
800		-	I hereby certify that the within Act originated in and passed
801		-	the Senate.
802		-	Patrick Harris,
803		-	Secretary.
804		-	House of Representatives
805		-	Passed: 02-Apr-24
806		-	By: Senator Shelnutt
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