Florida Surplus Lines cheat sheet

Pure risk involves only chance of loss or no loss; speculative risk involves chance of gain and is generally not insurable.

Insurable interest for property-casualty insurance must exist at the time of loss; for life insurance it must exist at policy inception.

A peril is the cause of loss (fire, wind, theft); a hazard is a condition that increases the likelihood or severity of loss.

Hazard types include physical, moral, and morale hazards; moral hazard involves dishonest intent, while morale hazard involves carelessness.

The indemnity principle restores the insured to approximately the pre-loss financial position without creating profit.

Coinsurance formula for reduced claims: (amount carried ÷ amount required) × loss, subject to the policy limit.

Deductibles reduce the payable claim by a fixed dollar amount or percentage before the insurer pays.

Adverse selection is the tendency of higher-risk insureds to seek or retain coverage, which can raise insurer costs.

Declarations identify the insured, policy period, limits, deductible, and subject matter insured.

The insuring agreement states the insurer’s promise to pay; exclusions remove coverage; conditions state duties of each party.

A binder provides temporary evidence of coverage until the policy is issued or a stated date is reached.

A representation is a statement believed true to the applicant’s knowledge; a warranty is a statement or condition that must be literally true.

Material misrepresentation or concealment can give the insurer grounds to rescind or deny coverage if relied upon.

Ambiguous policy language is construed against the drafter under the rule of contra proferentem.

Subrogation gives the insurer the right to pursue a third party after paying the insured’s covered loss.

Cancellation ends a policy midterm, while nonrenewal ends coverage at the expiration date.

Florida’s insurance statutes are mainly in Title XXXVII and Chapters 624 through 632 of the Florida Statutes.

Chapter 626 governs insurance agents, trade practices, and surplus lines in Part VIII.

Florida agent licenses are biennial and expire on the last day of the licensee’s birth month.

Insurers must appoint licensed agents before those agents may represent the insurer.

Prohibited unfair trade practices include misrepresentation, false advertising, coercion, and unfair discrimination.

Rebating-offering part of commission or value to induce a sale-is generally prohibited unless a specific exception applies.

The Florida Insurance Guaranty Association covers certain claims of insolvent authorized insurers and does not cover surplus lines insurers.

The Florida Surplus Lines Service Office tracks surplus lines policies and collects applicable premium taxes and fees.

Surplus lines insurance is placed with an unauthorized insurer after authorized insurers decline the risk.

For non-exportable risks, Florida generally requires documented declinations from three authorized insurers actually writing that type of insurance in Florida.

Coverages on Florida’s exportable list may be placed with surplus lines insurers without the usual three-declination search.

A surplus lines insurer must be an eligible unauthorized insurer permitted to accept Florida surplus lines business.

The insured must receive written disclosure that the insurer is unauthorized and not protected by FIGA.

Florida surplus lines premium tax is generally 5% of gross premium, reported through the FSLSO along with its service fee.

A surplus lines agent must hold a Florida surplus lines license in addition to the applicable underlying agent license.

Surplus lines policies must be reported to the FSLSO so premium tax and service fees can be collected and records maintained.