When the Surplus Lines Insurer Loses Its Eligibility Mid-Term
Savannah Port Logistics, LLC has a $75,000 annual premium commercial general liability policy with Commonwealth Specialty Insurance Company, an eligible surplus lines insurer, effective January 1, 2025. On July 15, 2025, the Georgia Commissioner of Insurance removes Commonwealth from the eligible surplus lines insurer list because its risk-based capital falls below the required threshold. The broker, Lowcountry Risk Advisors, learns of the removal on July 20. The policy has five and a half months left, and the insured's port operations are ongoing. Lowcountry has not yet told the insured. It has found one authorized carrier willing to quote at $140,000, but the insured says it cannot afford that. Lowcountry asks whether it can simply let the Commonwealth policy run to expiration and then decide what to do.
1. What must Lowcountry do upon learning that Commonwealth is no longer eligible?
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Lowcountry must promptly notify the insured in writing that Commonwealth is no longer an eligible surplus lines insurer, explain the consequences, and document the notice. Georgia law allows a surplus lines broker to place business only with eligible surplus lines insurers. The existing policy is not automatically void, but Lowcountry must not write new or renewal coverage with Commonwealth and should promptly seek replacement with an authorized or eligible surplus lines insurer. If replacement is not immediately available, Lowcountry should document the market search and advise the insured of the risk of continuing with an ineligible insurer. It should also determine whether any report to the Department is required.
2. Can Lowcountry renew the policy at expiration if the insured prefers the lower premium?
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No. At expiration, Commonwealth is not an eligible surplus lines insurer, so Lowcountry cannot renew or extend the policy with Commonwealth merely because the insured prefers the $75,000 premium. It must place the renewal with an authorized insurer or an eligible surplus lines insurer, or document that no eligible market is available and advise the insured. The $140,000 authorized quote is not a reason to use an ineligible insurer. If the insured chooses to go bare or use another lawful option, Lowcountry should document that advice and the insured's decision.
3. What are the consequences if Lowcountry delays notification and the insurer fails?
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If Lowcountry delays notification and Commonwealth fails, the insured may argue that it lost the chance to replace coverage. Lowcountry could face a Department market-conduct or licensing action, and the insured could bring an errors-and-omissions claim. The broker's file should show timely notice, a replacement search, and the insured's informed decision. Silence is the worst position: it looks like the broker concealed the insurer's ineligibility to protect the commission.