§431:8-301  Insurance placed with unauthorized insurer permitted.  (a)  In addition to section 431:8-205, insurance may be procured from an unauthorized insurer; provided that:

     (1)  The insurance is procured through a surplus lines broker licensed in the insured's home state;

     (2)  The full amount or kind of insurance cannot be obtained from insurers who are authorized to do business in this State; provided that a diligent search is made among the insurers who are authorized to transact and are actually writing the particular kind and class of insurance in this State each time the insurance is placed or renewed;

     (3)  The surplus lines insurance procured is in addition to or in excess of the amount and coverage which can be procured from the authorized insurers; and

     (4)  The insurance is not procured at a rate lower than the lowest rate that is generally acceptable to authorized insurers transacting that kind of business and providing insurance affording substantially the same protection.

     (b)  A surplus lines broker is not required to make a due diligence search to determine whether the full amount or type of insurance can be obtained from authorized insurers when the broker is seeking to procure or place unauthorized insurance for an exempt commercial purchaser; provided that:

     (1)  The broker procuring or placing the surplus lines insurance has disclosed to the exempt commercial purchaser that the insurance may or may not be available from the admitted market which may provide greater protection with more regulatory oversight; and

     (2)  The exempt commercial purchaser has subsequently requested in writing for the broker to procure or place the insurance from an unauthorized insurer. [L 1987, c 347, pt of §2; am L 2011, c 68, §8]

Case Notes

  District court held that plaintiffs, insured homeowners, had plausibly alleged unfair and deceptive acts or trade practices violations against defendants, surplus lines insurance brokers and underwriters, who knew or should have known plaintiffs needed lava coverage because they lived in a high-risk lava zone.  Defendants acted unfairly by issuing and selling policies that contained lava exclusions, without advising plaintiffs of other coverage available in the market, and failed to perform the requisite diligent search of other insurance available, such as through the Hawaii Property Insurance Association (HPIA).  Plaintiffs argued that they suffered catastrophic losses that would have been covered had they been issued policies without lava exclusions or policies through HPIA.  465 F. Supp. 3d 1088 (2020).

  District court held that plaintiffs, insured homeowners, had pleaded a cognizable claim of bad faith against defendants, surplus lines insurance brokers and underwriters, who knew or should have known plaintiffs needed lava coverage because they lived in a high-risk lava zone.  Underwriters violated common law and statutory good faith obligations stemming from their ongoing contractual relationship by issuing and selling policies that contained lava exclusions, without advising plaintiffs of other coverage available in the market, and failed to perform the requisite diligent search of other insurance available, such as through the Hawaii Property Insurance Association.  465 F. Supp. 3d 1088 (2020).

  Discussed:  406 F. Supp. 3d 884 (2019); 407 F. Supp. 3d 978 (2019); 407 F. Supp. 3d 1016 (2019); and 407 F. Supp. 3d 1051 (2019).