California Surplus Line Placement and Filing Procedures

What is Filed?
All new and renewal policies and endorsements, including all non-money endorsements, for surplus line placement in California with the Surplus Line Association (SLA). All documents to be filed should be mailed to:

The Surplus Line Association of California
50 California Street, 18th Floor
San Francisco, California 94111.

For all new and renewal policies, the following documentation must be provided within 60 days of placing the insurance with a nonadmitted insurer:

For all endorsements, except extension endorsements, the following documentation must be provided:

For all extension endorsements the following documentation must be provided:

Endorsements extending the policy term for any length of time are treated as renewals and must include a completed SL-1 form and SL-2 form (when applicable).

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How to File
Filings should be submitted in batches of no more than 75 documents, with a cover sheet. If filings exceed 100 items monthly it is recommended batches be filed weekly or at least twice monthly.

The batch cover sheet should include the following information: the assigned SLA broker number, name of the insured, policy number, premium amount and stamping fee for each item in the batch and a grand total of items being filed. The listing should be in the same order as the documents in the batch.

The SLA would appreciate it if the following information was also included on the cover sheet: the type of document being filed, (i.e., new, renewal, endorsement, cancellation, extension endorsement or offset) and the total number of items in the batch.

The state surplus line tax and stamping fee must be shown separately on the filing document.

The invoice date must be included for each policy and endorsement filed. The date invoiced can be shown on your coversheet; declarations page; or attach a copy of the invoice to the policy or endorsement. See SLA Bulletin #1061

*Please note, the batch filing requirements do not apply to those batches submitted as non-money endorsements.

The documents within a batch filing should be submitted in the following order: new and renewal policies, endorsements, cancellation endorsements and non-money endorsements. Documents for each new or renewal policy should be submitted in the following order: the declaration page, cover note or binder, followed by forms or attachments to the policy if there are any, the SL-1 form, and SL-2 form (when applicable).

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When the Association Receives Filings
Each batch of filings received at the SLA is assigned a broker control sheet which consists of the following information: the broker’s name, the broker’s assigned SLA number, date received, postmark date, a batch number, total number of items in the batch and the total premium amount to be filed. This information is recorded in our database.

All filings and forms are reviewed for completeness and accuracy in accordance with the Commissioner’s instructions.

The pertinent policy information is coded and recorded in our database. Refer to Exhibit III for a listing of this policy information.

The filing surplus line broker is notified of any errors, inaccuracies or problems in the filed documents. This notification process is known as tagging. If violations are not resolved in a specified amount of time, as outlined in the tagging procedures, it is reported to the Commissioner. Refer to Exhibit IV for tagging procedures.

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Confidentiality
All documents filed with the SLA as required by law are the property of the DOI and will be divulged, or open to inspection, only as authorized by the DOI. The SLA treats all such documents as confidential. The DOI has only authorized the SLA to make such documents available, on request, to the surplus line broker who filed them and to the insured and insurer(s) on whose behalf the documents were filed. The SLA shall not release them to any other person, except statements filed under CIC section 1763 which the Commissioner has determined in writing that the public interest or the welfare of the filing broker necessitates release. Refer to Section I.C. of Plan of Operation for additional details.

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Additional Explanations and Definitions

Standard Industrial Classification Codes
In 1996 the SLA began assigning the Standard Industrial Classification (SIC) codes to all new and renewal policies. These codes were originally developed to classify establishments by the type of business they were engaged in. The purpose behind the SLA’s collection of this data was to provide legislators with a more accurate scope of the broad range of businesses that utilize the surplus line market.

The SIC codes are found in the Standard Industrial Classification Manual. This manual classifies a variety of economic activities. The contents are categorize into eleven divisions: agriculture, mining, construction, etc. Each division is subdivided into major groups, with a more detailed description of the activity. For the SLA’s purposes, we only consider the first two digits from the major groups and add two zeros to accommodate the four-digit field in our database. To accommodate personal lines of coverage, which are not included in the manual, four additional codes were created by the SLA. Refer to Exhibit V for SLA’s list of SIC codes.

Export List
The Export List itemizes the types of insurance coverage or risk for which the Commissioner has determined there is not a reasonable or adequate market among admitted insurers. Types of insurance on the Export List may be placed with eligible surplus line insurers without the need for a Diligent Search Report, although surplus line brokers must continue to file a Confidential Report of Placement. Effective 1/1/97 the DOI issued the first official California Export List. Refer to CIC Section 1763.1 for additional information on the Export List and SLA Bulletin #913 for a copy of the Export List coverage codes.

Lloyd’s Syndicate Placements
For Lloyd’s syndicate placements effective 1/1/97, the surplus line broker is required to identify the syndicates used on all new, renewal policies and extension endorsements. Each policy must identify each syndicate by number along with the respective percentage of participation of the risk. Each Lloyd’s syndicate used on a placement must be listed on the List of Eligible Surplus Line Insurers.

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Surplus Line Insurer
A "surplus line insurer" is an insurance company or syndicate licensed in at least one state or country but not in California. Also known as a "nonadmitted" insurer. Surplus line insurers domiciled in the United States are called "foreign" insurers and those domiciled in another country are "alien" insurers.

LESLI Company
A "LESLI company" is a surplus line insurer on the LESLI List. LESLI stands for "List of Eligible Surplus Line Insurers," which is a list of nonadmitted insurers approved by the Commissioner for placements of surplus line risks by California surplus line brokers.

Unlisted Company
An "unlisted company" is a nonadmitted insurer that has not been approved by the Commissioner for placements of surplus line risks by California surplus line brokers and is not on the LESLI List.

Objected Company
An "objected company" is a nonadmitted insurer found by the Insurance Commissioner to be unacceptable for use and not appearing on the LESLI List.

Gap Insurer
A "gap insurer" is a nonadmitted insurer that is not on the LESLI List, but can be used for placements of California surplus line risks on a limited basis if certain conditions are met. Refer to CIC Section 1765.1(k) for Gap placement conditions and requirements.

(The following section is for information purposes only. It is not necessary to file the Disclosure Statements with the Surplus Line Association.)

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D-1 Freestanding Disclosure Statement
The D-1 statement is a freestanding document in 16-point bold type, which must be signed by the insured at the time the producer accepts an application for an insurance policy issued by a nonadmitted insurer, other than a renewal of that policy. The agent, broker, or surplus line broker who received the originally signed D-1 statement from the insured must maintain the original in his or her records for a period of at least five years and send copies of the D-1 to all agents, brokers, or surplus line brokers involved in the transaction. [NOTE: From recent discussions with the CDI, we understand that the requirement to send copies of the D-1 to all other agents, brokers or surplus line brokers will be considered satisfied if the surplus line broker obtains and maintains a copy of the signed D-1.] Refer to Exhibit VI for a sample of the D-1 statement.

D-2 Disclosure Statement
The D-2 statement is a disclosure statement, which contains substantially the same wording as the D-1 statement but does not require a signature by the insured. Every policy issued by a nonadmitted insurer and every certificate evidencing the placement of insurance must contain or have affixed on its front by the insurer or surplus line broker this disclosure statement, in 16-point bold type. Refer to Exhibit VII for a sample of the D-2 statement.

Industrial Insured Exemption
When a contract is issued to an industrial insured the D-1 statement is not required. The mandatory D-2 statement is still require to be contained or affixed to the policy, certificate or binder, whichever the insured receives first.

The surplus line broker is responsible to ensure that the applicant is an industrial insured as provided in paragraph (a) or (b) below:

The insured employs at least 25 employees on average during the prior 12 months and the aggregate annual premiums for insurance for all risks other than workers’ compensation and health coverage totaling no less than $25,000.00.

The insured obtains its insurance through a full-time employee acting as insurance manager or a continuously retained insurance consultant (but such consultant may not be an insurance producer or sub-producer involved in the placement).

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