Borrowed Surplus Lines License and a Personal-Lines Dwelling
Priya holds an Oregon resident producer license for property and casualty and is appointed with two admitted carriers. She has 14 months of experience and has not completed the surplus lines exam or applied for surplus lines authority. A client's coastal rental dwelling needs wind coverage; admitted carriers declined because of roof age. Priya's colleague Marcus holds an Oregon surplus lines license but does not want to handle the account. Marcus proposes that Priya solicit the risk, submit it to a nonadmitted insurer, and issue the binder under Marcus's license; they split the commission 60/40. Priya also plans to charge the insured a $250 'surplus lines consulting fee.' The dwelling is personal lines and is not on any export list. The insured has signed an application but has not received any surplus lines notice. Marcus says his license 'covers' Priya because he will review the file after binding.
1. Can Priya lawfully place this dwelling risk under Marcus's surplus lines license? Explain the licensing and authority issues.
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No. Oregon surplus lines authority is personal to the licensee; it is not a umbrella that lets an unlicensed producer solicit, negotiate, bind, or countersign a surplus lines placement. Priya may discuss coverage and submit information, but the licensed surplus lines producer who actually places the risk must be the one who performs the surplus lines functions and assumes the statutory duties: diligent search, insurer eligibility, disclosures, tax remittance, and recordkeeping. Marcus cannot 'review after binding' to cure Priya's lack of authority. Priya must qualify for and obtain surplus lines authority before placing on her own. Until then, the clean options are to refer the client to a properly licensed surplus lines producer who handles the account, or have Marcus place the risk himself in his own name with full documentation. Splitting commission for a placement performed under another person's license creates a prohibited licensing-by-proxy arrangement and can expose both producers to discipline.
2. May Priya charge the $250 consulting fee, and how should it be treated for disclosure and premium tax purposes?
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A separately stated service fee is not automatically prohibited, but it must be disclosed in writing, be reasonably related to a real service, and not be a disguised premium charge or a way to avoid surplus lines tax. If the $250 is consideration for the insurance or is required as a condition of placement, treat it as part of the premium base for tax and disclosure. If it is a genuine separate consulting fee, give the insured a written explanation before payment, show it separately from premium, and retain documentation. The producer must not tell the insured that the fee is a 'tax' or 'stamping fee' if it is not. Because the insured has not received the required surplus lines notice, Priya should not collect any fee until the notice and acknowledgment process is corrected by the licensed surplus lines producer who places the risk.
3. What must happen before this personal-lines dwelling is bound, assuming no admitted insurer will write it?
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Personal lines may be placed surplus lines in Oregon when the admitted market genuinely declines, but the placement still must satisfy the general surplus lines conditions. Before binding, the licensed surplus lines producer must document a diligent search among authorized insurers, confirm the nonadmitted insurer is eligible, and give the insured the required written notice that the insurer is not admitted, that there is no guaranty-fund protection, and that rates and forms are not approved by the Oregon Division of Financial Regulation. The insured should sign an acknowledgment. The export list does not help here because the dwelling is not an export-list coverage and the producer lacks surplus lines authority. Binding first and papering the file later is a market-conduct violation and weakens the producer's position if the insured later claims it did not understand the lack of guaranty-fund protection.