The June Policy That Appeared in July
Keystone Risk Partners is a Pennsylvania surplus lines brokerage. On June 24, 2025, broker Marlene binds a commercial property policy for a Lebanon County manufacturer with an eligible surplus lines insurer. Annual premium is $72,000; coverage is effective July 1, 2025. The carrier does not issue the policy number until July 3, and the agency's billing system opens the account on the issue date. Marlene's assistant prepares the June surplus lines monthly report on July 14 and files it July 15, but the Lebanon policy is not on it. The premium tax for the policy is also not remitted. On August 6, the Department sends a notice asking why the bound June transaction is absent from the June report. Marlene's compliance calendar says only "monthly report due the 15th." The policy remains in force and no claim has been filed. Marlene asks whether she should add the policy to the July report or amend June.
1. Which month's surplus lines report should include the policy, and what filing and tax obligations were missed? Explain the reasoning.
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The policy belongs on the June report, not July. The controlling event is the procurement or binding of the surplus lines coverage in June, not the carrier's later policy issuance. Pennsylvania's surplus lines law requires surplus lines brokers to report transactions monthly and remit the applicable premium tax by the 15th day of the following month. The June report was due July 15. Because the policy was bound in June, it was required to appear on that report and the tax was due with it.
The July report, due August 15, covers July transactions. Adding the Lebanon policy there would not cure the June omission; it would misstate the month of procurement and would likely make the tax late. The policy number is an internal accounting artifact. The binder, effective date, premium collection, and delivery of coverage in June control. The broker should treat this as an omitted June transaction, calculate tax on the gross premium, and correct the June filing.
2. What corrective steps and supporting documentation should Marlene provide, and what arguments should she avoid?
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Corrective steps should be prompt and documented:
- File an amended June report showing the policy, premium, insurer, and effective date.
- Remit the premium tax and any interest or penalty the Department calculates.
- Send a cover letter identifying the clerical cause, the date the error was discovered, and the control change made.
- Attach the binder, invoice, carrier confirmation, and evidence that the agency system used the carrier issue date rather than the bind date.
- Implement a reconciliation of bound surplus lines policies to the monthly report, with a second reviewer.
Arguments to avoid include blaming the carrier, saying no report was due because the policy was "not issued" until July, or arguing that reporting in July is harmless. Those positions misstate the legal trigger. Instead, emphasize prompt self-correction, no consumer harm, no claims, and a first-occurrence clerical error. If a penalty is proposed, request consideration based on the small number of transactions and the remedial controls.