Placement, Policy Documentation, and Required Disclosures to Insureds
Required disclosures
The insured must receive a clear, conspicuous written notice that the insurer is not authorized in North Carolina and that the policy is not protected by the North Carolina Insurance Guaranty Association. The notice should identify the surplus lines insurer and explain the licensee's role. It must be given in connection with the placement, not buried in an unrelated document.
Policy documentation
- The policy or binder should name the surplus lines insurer and the licensee.
- The disclosure should appear on or with the policy; a binder-only notice is weak.
- The licensee must deliver the policy promptly and maintain proof of delivery.
- The insured should understand that surplus lines is not a substitute for the authorized market and that coverage terms may differ.
- Any certificate or evidence of coverage must not imply that the insurer is authorized or guaranty-fund protected.
Worked example
An agent gives the insured a one-page quote showing only the surplus lines insurer's name and a lower premium. The policy later arrives with the nonadmitted notice in 6-point type on the back. Reasoning: the disclosure is not conspicuous and was not clearly given at placement; the file is exposed. The agent should provide a stand-alone notice and document receipt.
Traps
Do not say "your policy is protected by the state guaranty fund." Do not hide the notice in a footer. Do not let a certificate imply admitted status. Do not use the insured's signature on a generic application as proof of the surplus lines disclosure.