Two Declinations and a Non-Renewal: Is the Diligent Effort File Enough?
Ridgeline Logistics runs 42 tractors statewide. Its admitted carrier issued a non-renewal effective in 30 days, citing two at-fault accidents and a deteriorating DOT safety rating, on $1,000,000 CSL auto liability. The retail agent submits to three admitted carriers: one declines in writing citing commodity and radius; one says by phone "we're not writing new trucking accounts"; one never responds. The agency's own affiliated admitted carrier also declines after reviewing loss runs. The insured says, "Skip the rest, my cousin got a surplus lines quote in two days last year for less." The account also includes $250,000 of physical damage on 12 trailers not yet on the schedule, and about 30% of the fleet runs into New Mexico. The surplus lines broker wants to file by Friday.
1. Evaluate the quality of this diligent effort file as it stands.
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Score each submission on two tests: is the carrier authorized, and does it actually write this class?
- Written declination (commodity/radius): strong. It is specific, documented, and from a carrier that could have written the risk.
- Phone declination ("not writing new trucking"): usable only if confirmed in writing. As it stands it is undocumented and depends on a market-condition statement that may not be true of the carrier's current appetite.
- No response: not a declination. It supports the file only if the submission and follow-up attempts are documented with dates.
- Affiliated carrier's declination: counts, but is the weakest evidence of a market search because a reasonable reader will ask whether the independent market was tested at all.
The Texas standard is a documented good-faith effort, not a magic count. Here the file is thin for a mainstream class traded by multiple admitted trucking markets. Add documented submissions to specialty admitted transportation carriers and confirm the phone declination in writing before filing.
2. The insured wants to skip further marketing, and the broker wants to file Friday. What do price, urgency, and any exemption change?
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Nothing about urgency or the cousin's cheaper quote changes the analysis.
- Price is not a trigger. "My cousin got it for less" is a comparison with another nonadmitted quote. The required comparison is with the authorized market.
- Urgency is not a trigger. A 30-day non-renewal gives time to run the search properly; if the clock truly runs out, document the timeline rather than backfilling the file.
- Exemptions must be checked, not assumed. Confirm whether the specific coverage appears on TDI's export list. Primary auto liability for a 42-unit trucking fleet is not the kind of specialty line that is typically exempt, and "trucking is exempt" is a common and expensive assumption.
- Declinations must reflect the current market. A declination letter from last year's renewal does not support this placement.
If the search cannot be completed, the surplus lines broker should say so in writing rather than file a package that will not survive examination.
3. How do the trailers and the New Mexico exposure affect the placement and the reporting?
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- The 12 trailers are a separate exposure currently uninsured. Physical damage must be added by endorsement with its own limit and premium; it cannot be handled informally or left off the schedule because a binder was issued for auto liability.
- The endorsement is a reportable transaction to the stamping office, with the additional premium included in the tax base for the period in which it takes effect. Do not roll it into the next renewal's report.
- The 30% New Mexico exposure does not change the diligent-effort analysis (the search is conducted in the authorized market generally) and does not change the home-state tax treatment if the insured's principal place of business is Texas, in which case the full premium is Texas premium.
- Keep the declinations, the submissions, and the follow-up in the file available for examination; the surplus lines broker is the party expected to produce them, and the retail agent's originals should be retained as well.