Louisiana Surplus Lines cheat sheet

The Louisiana Department of Insurance (LDI) is headed by the Commissioner of Insurance, an elected official who serves a four-year term; the Commissioner administers the Insurance Code (La. R.S. Title 22).

A surplus lines producer must hold a current Louisiana property and casualty (or applicable) producer license; the surplus lines authority is added to that license and must be maintained by continuing education and renewal.

Louisiana requires producers to complete 24 credit hours of continuing education every two years, including at least 3 hours in ethics; surplus lines authority holders must also satisfy any LDI-prescribed surplus lines-specific requirement.

Licensees must report administrative actions, criminal prosecutions, and changes of address to the LDI within statutory timeframes; failure to report is itself a violation subject to fine or license action.

The Commissioner may examine insurers and producers, issue cease-and-desist orders, levy fines, suspend or revoke licenses, and impose restitution for violations of Title 22.

Louisiana's insurance fraud statute (La. R.S. 22:1921 et seq.) makes intentional misrepresentation on an insurance application or claim a crime; insurers must maintain fraud-prevention plans and report suspected fraud.

Premium tax on surplus lines business is collected through the surplus lines producer and remitted to the state; Louisiana also assesses a stamping fee administered by the surplus lines association designated by the Commissioner.

The Louisiana Insurance Guaranty Association (LIGA) covers claims of insolvent admitted insurers; surplus lines insurers are not LIGA members, so surplus lines policies carry no guaranty-fund protection.

Surplus lines placement requires a diligent search: the producer must first attempt to place the risk with authorized (admitted) insurers writing that class of business in Louisiana and document the declinations.

Eligibility rule: a risk may go to a surplus lines insurer only if the full amount of coverage cannot be procured from authorized insurers; the producer must retain evidence of the search.

The surplus lines insurer must be an unauthorized insurer that is listed as an eligible/approved surplus lines carrier in Louisiana, or otherwise meets the Commissioner's eligibility standards (capital, surplus, and reporting requirements).

Louisiana requires the surplus lines producer to file a verified statement or report of each surplus lines transaction with the Commissioner (or the designated stamping office) within the statutory period, typically 30 days of placement.

Surplus lines policies must bear a conspicuous notice stating the insurer is not licensed in Louisiana, is not subject to the state's rate and form filing requirements, and is not protected by the guaranty fund.

Surplus lines producers may not place business with an unauthorized insurer that is not an eligible surplus lines insurer except under limited statutory exceptions (e.g., independently procured coverage by the insured).

The surplus lines producer is responsible for collecting and remitting the applicable premium tax and stamping fee; failure to remit can result in license discipline and personal liability for the tax.

Surplus lines insurers and producers are generally exempt from Louisiana rate and policy-form filing requirements, but remain subject to market-conduct examination, unfair trade practice laws, and claim-handling standards.

Insurable interest requires that the insured suffer a pecuniary loss from the destruction of the subject matter; in property insurance it must exist at the time of loss, in life insurance at inception.

Indemnity principle: property insurance restores the insured to approximately the pre-loss financial position, subject to policy limits, deductibles, and valuation method (ACV vs. replacement cost).

Utmost good faith imposes a duty of disclosure on both parties; material misrepresentation or concealment on an application can permit rescission of the policy.

Adhesion contract: the insurer drafts the policy, so ambiguities in coverage are generally construed against the insurer (contra proferentem).

Aleatory contract: performance by the parties is unequal and dependent on chance; the insured pays a fixed premium while the insurer's payout depends on a contingent event.

Coinsurance in property insurance is a contractual penalty mechanism: if the insured carries less than the stated percentage of value, recovery is reduced proportionally by (limit carried / limit required).

Subrogation transfers the insured's right of recovery against a negligent third party to the insurer after the insurer pays the claim, preventing double recovery.

Proximate cause is the dominant, efficient cause that sets in motion an unbroken chain of events producing the loss; it determines coverage when multiple perils contribute.

HO-3 (special form) covers the dwelling and other structures on an open-peril basis and personal property on a named-peril basis; HO-5 covers both on an open-peril basis.

Standard homeowners deductibles are often a flat dollar amount, but wind/hail deductibles in coastal Louisiana are commonly expressed as a percentage of the Coverage A dwelling limit.

Commercial property policies use coinsurance clauses (commonly 80%, 90%, or 100%) and may include agreed-value endorsements to waive the coinsurance penalty.

Business income (time-element) coverage replaces lost net income plus continuing normal operating expenses during the period of restoration, following a covered physical loss.

CGL Coverage A covers bodily injury and property damage for which the insured is legally liable; Coverage B covers personal and advertising injury; Coverage C covers medical payments regardless of fault.

Occurrence vs. claims-made: occurrence policies respond to injury/damage occurring during the policy period; claims-made policies respond when the claim is made during the policy period, subject to retroactive date.

Workers' compensation in Louisiana is a no-fault statutory system; Part One provides unlimited statutory benefits to employees, Part Two provides employer's liability coverage.

Umbrella and excess liability policies sit above underlying limits; umbrellas may drop down to cover gaps in the underlying coverage, while excess policies generally follow form and do not drop down.