Placement and Procurement of Surplus Lines Coverage
Who may place
The placement must go through a Michigan-licensed surplus lines agent. The insured cannot simply buy directly from an unauthorized insurer. The agent selects a currently eligible insurer, confirms the coverage matches the documented search, and ensures the policy is issued and delivered. The agent is also responsible for the surplus lines notice, premium tax, and required reports.
Placement sequence
A defensible sequence is: identify the risk and home state; conduct and document the authorized-market search; confirm the selected insurer is on the DIFS list; bind and place only with that eligible insurer; deliver the policy with the required unauthorized-insurer notice; retain the file; and report and pay tax on the gross premium. If the insurer becomes ineligible before binding, the placement cannot proceed.
Scope must match the search
Do not use a declination for a limited property quote to place a broad package policy with liability, auto, and cyber coverage. The file should show that the authorized market could not provide the coverage actually placed. Expanding the scope after the search is a classic documentation failure.
Worked example
An agent documents two authorized declinations and one restricted quote for a restaurant’s property risk. The agent then places property and general liability with an eligible surplus lines insurer. Because the search addressed only property, the liability placement is not supported. The agent must either document a separate search for liability or place liability in the admitted market.
Traps that cost marks
Binding before checking eligibility; placing coverage broader than the search; using an unlicensed producer to procure the risk; failing to deliver the notice; and assuming the insurer’s own certificate is enough without the DIFS list.