Year
Following
Enactment
Trust Fund Requirement
1 15% of U.S. surplus lines liabilities, excluding aviation, wet marine and transportation insurance, with a maximum of $30,000,000.
2 30% of U.S. surplus lines liabilities, excluding aviation, wet marine and transportation insurance, with a maximum of $60,000,000.

(G) The commissioner shall have the authority to adjust, in response to inflation, the trust fund amounts required by paragraph (E) of this subdivision.
(3) In addition to all of the other requirements of this subsection, an insurer not domiciled in the United States or its territories shall be listed on the NAIC's quarterly listing of alien insurers. The commissioner may waive the requirement in subdivision (3) of this paragraph or the requirements of subparagraph (ii), paragraph (E), subdivision (2), subsection (c) of this section may be satisfied by an insurer's possessing less than the trust fund amount specified in subparagraph (ii), paragraph (E), subdivision (2), subsection (c) of this section upon an affirmative finding of acceptability by the commissioner if the commissioner is satisfied that the placement of insurance with the insurer is necessary and will not be detrimental to the public and the policyholder. In determining whether business may be placed with the insurer, the commissioner may consider such factors as:
(A) The interests of the public and policyholders;
(B) The length of time the insurer has been authorized in its domiciliary jurisdiction and elsewhere;
(C) Unavailability of particular coverages from authorized insurers or unauthorized insurers meeting the requirements of this section;
(D) The size of the company as measured by its assets, capital and surplus, reserves, premium writings, insurance in force or other appropriate criteria;
(E) The kinds of business the company writes, its net exposure and the extent to which the company's business is diversified among several lines of insurance and geographic locations; and
(F) The past and projected trend in the size of the company's capital and surplus considering such factors as premium growth, operating history, loss and expense ratios, or other appropriate criteria; and
(4) Has caused to be provided to the commissioner a copy of its current annual statement certified by the insurer and an actuarial opinion as to the adequacy of, and methodology used to determine, the insurer's loss reserves. The statement shall be provided at the same time it is provided to the insurer's domicile, but in no event more than eight months after the close of the period reported upon, and shall be certified as a true and correct copy by an accounting or auditing firm licensed in the jurisdiction of the insurer's domicile and certified by a senior officer of the nonadmitted insurer as a true and correct copy of the statement filed with the regulatory authority in the domicile of the nonadmitted insurer. In the case of an insurance exchange qualifying under paragraph (B), subdivision (2) of this subsection, the statement may be an aggregate combined statement of all underwriting syndicates operating during the period reported; and
(5) In addition to meeting the requirements in subdivisions (1) to (4) of this subsection an insurer shall be an eligible surplus lines insurer if it appears on the most recent list of eligible surplus lines insurers published by the commissioner from time to time but at least annually. Nothing in this subdivision shall require the commissioner to place or maintain the name of any nonadmitted insurer on the list of eligible surplus lines insurers.
(6) Notwithstanding subsection (a) of this section, only that portion of any risk eligible for export for which the full amount of coverage is not procurable from listed eligible surplus lines insurers may be placed with any other nonadmitted insurer which does not appear on the list of eligible surplus lines insurers published by the commissioner pursuant to subdivision (5) of this subsection but nonetheless meets the requirements set forth in subdivisions (1) and (2), subsection (c) of this section and any regulations of the commissioner. The surplus lines licensee seeking to provide coverage through an unlisted nonadmitted insurer shall make a filing specifying the amounts and percentages of each risk to be placed, and naming the nonadmitted insurers with which placement is intended. Within thirty days after placing the coverage, the surplus lines licensee shall also send written notice to the insured that the insurance, or a portion thereof, has been placed with the nonadmitted insurer.
(d) Insurance procured under this section shall be valid and enforceable as to all parties.
(e) Withdrawal of eligibility as a surplus lines insurer.
If at any time the commissioner has reason to believe that a surplus lines insurer:
(1) Is in unsound financial condition or has acted in an untrustworthy manner;
(2) No longer meets standards set forth in subsection (c) of this section;
(3) Has willfully violated the laws of this state; or
(4) Does not conduct a proper claims practice; the commissioner may declare it ineligible. The commissioner shall promptly mail notice of all such declarations to each surplus lines licensee.
(f) Surplus lines tax.
(1) In addition to the full amount of gross premiums charged by the insurer for the insurance, every person licensed pursuant to subsection (h), section five of this article shall collect and pay to the commissioner a sum equal to four percent of the gross premiums and gross fees charged, less any return premiums, for surplus lines insurance provided by the licensee pursuant to the license. Where the insurance covers properties, risks or exposures located or to be performed both in and out of this state, the sum payable shall be computed on that portion of the gross premiums allocated to this state pursuant to subdivision (4) of this subsection less the amount of gross premiums allocated to this state and returned to the insured due to cancellation of policy. The tax on any portion of the premium unearned at termination of insurance having been credited by the state to the licensee shall be returned to the policyholder directly by the surplus lines licensee or through the producing broker, if any.
(2) The surplus lines broker may not:
(A) Pay directly or indirectly the tax or any portion thereof, either as an inducement to the policyholder to purchase the insurance or for any other reason; or
(B) Rebate all or part of the tax or the surplus lines licensee's commission, either as an inducement to the policyholder to purchase the insurance or for any reason.
(3) The surplus lines licensee may charge the prospective policyholder a fee for the cost of underwriting, issuing, processing, inspecting, service or auditing the policy for placement with the surplus lines insurer if:
(A) The service is required by the surplus lines insurer;
(B) The service is actually provided by the surplus lines broker or the cost of the service is actually incurred by the surplus lines licensee; and
(C) The provision or cost of the service is reasonable, documented and verifiable.
(4) The surplus lines licensee shall make a clear and conspicuous written disclosure to the policyholder of:
(A) The total amount of premium for the policy;
(B) Any fee charged;
(C) The total amount of any fee charged; and
(D) The total amount of tax on the premium and fee.
(5) The clear and conspicuous written disclosure required by subdivision (4) of this subsection is subject to the record maintenance requirements of section eight of this article.
(6) This tax is imposed for the purpose of providing additional revenue for municipal policemen's and firemen's pension and relief funds and additional revenue for volunteer and part volunteer fire companies and departments. This tax is required to be paid and remitted, on a calendar year basis and in quarterly estimated installments due and payable on or before the twenty-fifth day of the month succeeding the close of the quarter in which they accrued, except for the fourth quarter, in respect of which taxes shall be due and payable and final computation of actual total liability for the prior calendar year shall be made, less credit for the three quarterly estimated payments prior made, and filed with the annual return to be made on or before the first day of March of the succeeding year. Provisions of this chapter relating to the levy, imposition and collection of the regular premium tax are applicable to the levy, imposition and collection of this tax to the extent that the provisions are not in conflict with this section.
All taxes remitted to the commissioner pursuant to this subsection shall be paid by him or her into a special account in the state treasury, designated "municipal pensions and protection fund," and after appropriation by the Legislature, shall be distributed in accordance with the provisions of subsection (c), section fourteen-d, article three of this chapter. The surplus lines licensee shall return to the policyholder the tax on any unearned portion of the premium returned to the policyholder because of cancellation of policy.
(7) If a surplus lines policy procured through a surplus lines licensee covers properties, risks or exposures only partially located or to be performed in this state, the tax due shall be computed on the portions of the premiums which are attributable to the properties, risks or exposures located or to be performed in this state. In determining the amount of premiums taxable in this state, all premiums written, procured or received in this state shall be considered written on properties, risks or exposures located or to be performed in this state, except premiums which are properly allocated or apportioned and reported as taxable premiums of a reciprocal state. In no event shall the tax payable to this state be less than the tax due pursuant to subdivision (8) of this subsection; provided, however, in the event that the amount of tax due under this provision is less than fifty dollars in any jurisdiction, it shall be payable in the jurisdiction in which the affidavit required in subsection (k) of this section is filed. The commissioner shall, at least annually furnish to the commissioner of a reciprocal state, as defined in subsection (l), section three of this article, a copy of all filings reporting an allocation of taxes as required by this subsection.
(8) In determining the amount of gross premiums taxable in this state for a placement of surplus lines insurance covering properties, risks or exposures only partially located or to be performed in this state, the tax due shall be computed on the portions of the premiums which are attributable to properties, risks or exposures located or to be performed in this state and which relates to the kinds of insurance being placed as determined by reference to the model allocation schedule and reporting form.
(A) If a policy covers more than one classification:
(i) For any portion of the coverage identified by a classification on the allocation schedule, the tax shall be computed by using the allocation schedule for the corresponding portion of the premium;
(ii) For any portion of the coverage not identified by a classification on the allocation schedule, the tax shall be computed by using an alternative equitable method of allocation for the property or risk;
(iii) For any portion of the coverage where the premium is indivisible, the tax shall be computed by using the method of allocation which pertains to the classification describing the predominant coverage.
(B) If the information provided by the surplus lines licensee is insufficient to substantiate the method of allocation used by the surplus lines licensee, or if the commissioner determines that the licensee's method is incorrect, the commissioner shall determine the equitable and appropriate amount of tax due to this state as follows:
(i) By use of the allocation schedule where the risk is appropriately identified in the schedule;
(ii) Where the allocation schedule does not identify a classification appropriate to the coverage, the commissioner may give significant weight to documented evidence of the underwriting bases and other criteria used by the insurer. The commissioner may also consider other available information to the extent sufficient and relevant, including the percentage of the insured's physical assets in this state, the percentage of the insured's sales in this state, the percentage of income or resources derived from this state, and the amount of premium tax paid to another jurisdiction for the policy.
(g) Collection of tax.
If the tax owed by a surplus lines licensee under this section has been collected and is not paid within the time prescribed, the same shall be recoverable in a suit brought by the commissioner against the surplus lines licensee. The commissioner may charge interest for any unpaid tax, fee, financial assessment or penalty, or portion thereof: Provided, That interest may not be charged on interest. Interest shall be calculated using the annual rates which are established by the tax commissioner pursuant to section seventeen-a of article ten, chapter eleven of this code, and shall accrue daily.
(h) Surplus lines licenses:
(1) A person shall not procure a contract of surplus lines insurance with a nonadmitted insurer unless the person possesses a current surplus lines insurance license issued by the commissioner;
(2) The commissioner may issue a surplus lines license to a qualified holder of a current property and casualty individual insurance producer's license but only when the individual insurance producer has:
(A) Remitted the two hundred dollar annual fee to the commissioner, of which all fees so collected are to be used for the purposes set forth in section thirteen, article three of this chapter;
(B) Submitted a completed license application on a form supplied by the commissioner;
(C) Passed a qualifying examination approved by the commissioner, except that all holders of a license prior to the effective date of this article shall be considered to have passed such an examination; and
(D) If a resident, established and continues to maintain an office in this state.
(3) If the commissioner determines that a surplus lines licensee of another state is competent, trustworthy and meets the licensing requirements of this state, the commissioner may, in his or her discretion, issue a nonresident surplus lines license. A license shall not be issued unless the prospective licensee furnishes the commissioner with the name and address of a resident of this state upon whom notices or orders of the commissioner or process affecting the nonresident surplus lines licensee may be served. The licensee shall promptly notify the commissioner in writing of every change in its designated agent for service of process, and the change shall not become effective until acknowledged by the commissioner.
(4) Each surplus lines license shall expire at midnight on the thirty-first day of May next following the date of issuance, and an application for renewal shall be filed before the first day of May of each year upon payment of the annual fee and compliance with other provisions of this section. A surplus lines licensee who fails to apply for renewal of the license before the first day of May shall pay a penalty of one hundred dollars and be subject to penalties provided by law before the license will be renewed.
(i) Suspension, revocation or nonrenewal of surplus lines licensee's license.
(1) The commissioner may examine and investigate the business affairs of every individual applying for or holding a surplus lines insurance license to determine whether such individual has been or is engaged in unfair or deceptive practices in any state.
(2) The commissioner may place on probation, suspend, revoke or refuse to issue or renew the license of a surplus lines licensee or may levy a civil penalty in a sum not to exceed five thousand dollars or any combination of actions after notice and hearing pursuant to section thirteen, article two of this chapter upon one or more of the following grounds:
(A) Removal of the resident surplus lines licensee's office from this state;
(B) Removal of the resident surplus lines licensee's office accounts and records from this state during the period during which the accounts and records are required to be maintained under subsection (q) of this section;
(C) Closing of the surplus lines licensee's office for a period of more than thirty business days, unless permission is granted by the commissioner;
(D) Failure to make and file required reports;
(E) Failure to transmit required tax on surplus lines premiums to this state or a reciprocal state to which a tax is owing;
(F) Violation of any provision of this article; or
(G) For any cause for which an insurance license could be denied, revoked, suspended or renewal refused pursuant to section twenty-four, article twelve of this chapter.
(j) Actions against eligible surplus lines insurers transacting surplus lines business.
(1) An eligible surplus lines insurer may be sued upon a cause of action arising in this state under a surplus lines insurance contract made by it or evidence of insurance issued or delivered by the surplus lines licensee. A policy issued by the eligible surplus lines insurer shall contain a provision stating the substance of this section and designating the person to whom the commissioner shall mail process.
(2) The remedies provided in this section are in addition to any other methods provided by law for service of process upon insurers.
(k) Duty to file evidence of insurance and affidavits.
Within thirty days after the placing of any surplus lines insurance, each producing broker shall execute and each surplus lines licensee shall execute where appropriate, and file a written report regarding the insurance which shall be kept confidential by the commissioner, including the following:
(1) The name and address of the insured;
(2) The identity of the insurer or insurers;
(3) A description of the subject and location of the risk and the risk insured against;
(4) Return premium paid, if any;
(5) The amount of gross premium charged for the insurance;
(6) The amount of the insurance;
(7) Such other pertinent information as the commissioner may reasonably require; and
(8) An affidavit on a standardized form promulgated by the commissioner, as to the diligent efforts to place the coverage with admitted insurers and the results of that effort. The affidavit shall be open to public inspection. The affidavit shall affirm that the insured was expressly advised in writing prior to placement of the insurance that:
(A) The surplus lines insurer with whom the insurance was to be placed is not licensed in this state and is not subject to its supervision; and
(B) In the event of the insolvency of the surplus lines insurer, losses will not be paid by the state insurance guaranty fund.
(l) Evidence of the insurance and subsequent changes to the insurance.
(1) Upon placing surplus lines insurance, the surplus lines licensee shall promptly deliver to the insured the policy, or if the policy is not then available, a certificate as described in subdivision (4) of this subsection, cover note, binder or other evidence of insurance. The certificate described in subdivision (4) of this subsection, cover note, binder or other evidence of insurance shall be executed by the surplus lines licensee and shall show the description and location of the subject of the insurance, coverages including any material limitations other than those in standard forms, a general description of the coverages of the insurance, the premium and rate charged and taxes to be collected from the insured, and the name and address of the insured and surplus lines insurer or insurers and proportion of the entire risk assumed by each, and the name of the surplus lines licensee and the licensee's license number.
(2) A surplus lines licensee shall not issue or deliver any evidence of insurance or purport to insure or represent that insurance will be or has been written by any eligible surplus lines insurer, or a nonadmitted insurer pursuant to subdivision (4), subsection (c) of this section, unless the licensee has authority from the insurer to cause the risk to be insured, or has received information from the insurer in the regular course of business that the insurance has been granted.
(3) If, after delivery of any evidence of insurance, there is any change in the identity of the insurers, or the proportion of the risk assumed by any insurer, or any other material change in coverage as stated in the surplus lines licensee's original evidence of insurance, or in any other material as to the insurance coverage so evidenced, the surplus lines licensee shall promptly issue and deliver to the insured or the original producing broker an appropriate substitute for, or endorsement of the original document, accurately showing the current status of the coverage and the insurers responsible for the coverage.
(4) As soon as reasonably possible after the placement of the insurance, the surplus lines licensee shall deliver a copy of the policy or, if not available, a certificate of insurance to the insured to replace any evidence of insurance previously issued. Each certificate or policy of insurance shall contain or have attached a complete record of all policy insuring agreements, conditions, exclusions, clauses, endorsements or any other material facts that would regularly be included in the policy.
(5) A surplus lines licensee who fails to comply with the requirements of this subsection shall be subject to the penalties provided in this article.
(6) The surplus lines licensee shall give the following consumer notice to every person applying for insurance with a nonadmitted insurer. The notice shall be printed in sixteen-point type on a separate document affixed to the application. The applicant shall sign and date a copy of the notice to acknowledge receiving it. The surplus lines licensee shall maintain the signed notice in its file for a period of ten years from expiration of the policy. The surplus lines licensee shall tender a copy of the signed notice to the insured at the time of delivery of each policy the licensee transacts with a nonadmitted insurer. The copy shall be a separate document affixed to the policy.
"Notice: 1. An insurer that is not licensed in this state is issuing the insurance policy that you have applied to purchase. These companies are called "nonadmitted" or "surplus lines" insurers. 2. The insurer is not subject to the financial solvency regulation and enforcement that applies to licensed insurers in this state. 3. These insurers generally do not participate in insurance guaranty funds created by state law. These guaranty funds will not pay your claims or protect your assets if the insurer becomes insolvent and is unable to make payments as promised. 4. Some states maintain lists of approved or eligible surplus lines insurers and surplus lines brokers may use only insurers on the lists. Some states issue orders that particular surplus lines insurers cannot be used. 5. For additional information about the above matters and about the insurer, you should ask questions of your insurance agent or surplus lines broker. You may also contact your insurance department consumer help line."
(m) Licensee's duty to notify insured.
No contract of insurance placed by a surplus lines licensee under this article shall be binding upon the insured and no premium or fee charged shall be due and payable until the surplus lines licensee shall have notified the insured in writing, in a form acceptable to the commissioner, a copy of which shall be maintained by the licensee with the records of the contract and available for possible examination, that:
(1) The insurer with which the licensee places the insurance is not licensed by this state and is not subject to its supervision; and
(2) In the event of the insolvency of the surplus lines insurer, losses will not be paid by the state insurance guaranty fund.
Nothing herein contained shall nullify any agreement by any insurer to provide insurance.
(n) Effect of payment to surplus lines licensee.
A payment of premium to a surplus lines licensee acting for a person other than itself in procuring, continuing or renewing any policy of insurance procured under this section shall be considered to be payment to the insurer, whatever conditions or stipulations may be inserted in the policy or contract notwithstanding.
(o) Surplus lines licensees may accept business from other producers.
A surplus lines licensee may originate surplus lines insurance or accept such insurance from any other individual insurance producer duly licensed as to the kinds of insurance involved, and the surplus lines licensee may compensate the individual insurance producer for the business. The surplus lines license shall have the right to receive from the insurer the customary commission.
(p) Records of surplus lines licensee.
Each surplus lines licensee shall keep in this state a full and true record of each surplus lines insurance contract placed by or through the licensee, including a copy of the policy, certificate, cover note or other evidence of insurance showing each of the following items applicable:
(1) Amount of the insurance, risks and perils insured;
(2) Brief description of the property insured and its location;
(3) Gross premium charged;
(4) Any return premium paid;
(5) Rate of premium charged upon the several items of property;
(6) Effective date and terms of the contract;
(7) Name and address of the insured;
(8) Name and address of the insurer;
(9) Amount of tax and other sums to be collected from the insured;
(10) Allocation of taxes by state as referred to in subsection (f) of this section; and
(11) Identity of the producing broker, any confirming correspondence from the insurer or its representative, and the application.
The record of each contract shall be kept open at all reasonable times to examination by the commissioner without notice for a period not less than ten years following termination of the contract. In lieu of maintaining offices in this state, each nonresident surplus lines licensee shall make available to the commissioner any and all records that the commissioner deems necessary for examination.
(q) Reports - summary of exported business.
On or before the first day of May, two thousand four, and on or before the first day of May thereafter, the end of the month following each year, each surplus lines licensee shall file with the commissioner, on forms prescribed by the commissioner, a verified report in duplicate of all surplus lines insurance transacted during the preceding period, showing:
(1) Aggregate gross premiums written;
(2) Aggregate return premiums;
(3) Amount of aggregate tax remitted to this state; and
(4) Amount of aggregate tax due or remitted to each other state for which an allocation is made pursuant to subsection (f) of this section.
§33-12C-6. Penalties.
(a) A person who in this state represents or aids a nonadmitted insurer in violation of this article is guilty of a felony and, upon conviction thereof, may be fined not more than twenty thousand dollars per each act or sentenced to not less than one nor more than five years in a state correctional facility, or both fined and imprisoned.
(b) In addition to any other penalty provided herein or otherwise provided by law, including any suspension, revocation or refusal to renew a license, any person, firm, association or corporation violating any provision of this article shall be liable to a civil penalty not exceeding ten thousand dollars for the first offense, and not exceeding twenty thousand dollars for each succeeding offense.
(c) The above penalties are not exclusive remedies. Penalties may also be assessed under article eleven of this chapter.
§33-12C-7. Violations.
Whenever the commissioner believes, from evidence satisfactory to him or her, that a person is violating or about to violate the provisions of this article, the commissioner may cause a complaint to be filed in the circuit court of Kanawha County for restitution and to enjoin and restrain the person from continuing the violation or engaging in or doing any act in furtherance thereof. The court shall have jurisdiction of the proceeding and shall have the power to make and enter an order of judgment awarding such preliminary or final injunctive relief and restitution as in its judgment is proper.
§33-12C-8. Service of process.
(a) Any act of transacting insurance by an unauthorized person or a nonadmitted insurer is equivalent to and shall constitute an irrevocable appointment by the unauthorized person or insurer, binding upon it, its executor or administrator, or successor in interest of the secretary of state or his or her successor in office, to be the true and lawful attorney of the unauthorized person or insurer upon whom may be served all lawful process in any action, suit or proceeding in any court by the commissioner or by the state and upon whom may be served any notice, order, pleading or process in any proceeding before the commissioner and which arises out of transacting insurance in this state by the unauthorized person or insurer. Any act of transacting insurance in this state by a nonadmitted insurer shall signify its acceptance of its agreement that any lawful process in such court action, suit or proceeding and any notice, order, pleading or process in such administrative proceeding before the commissioner so served shall be of the same legal force and validity as personal service of process in this state upon the unauthorized person or insurer.
(b) Service of process in the action shall be made by delivering to and leaving with the secretary of state, or some person in apparent charge of the office, two copies thereof and by payment to the secretary of state of the fee prescribed by law. Service upon the secretary of state as attorney shall be service upon the principal.
(c) The secretary of state shall forward by certified mail one of the copies of the process or notice, order, pleading or process in proceedings before the commissioner to the defendant in the court proceeding or to whom the notice, order, pleading or process in the administrative proceeding is addressed or directed at its last known principal place of business and shall keep a record of all process so served on the commissioner which shall show the day and hour of service. Service is sufficient, provided:
(1) Notice of service and a copy of the court process or the notice, order, pleading or process in the administrative proceeding are sent within fifteen days by certified mail by the plaintiff or the plaintiff's attorney in the court proceeding or by the commissioner in the administrative proceeding to the defendant in the court proceeding or to whom the notice, order, pleading or process in the administrative proceeding is addressed or directed at the last known principal place of business of the defendant in the court or administrative proceeding; and
(2) The defendant's receipt or receipts issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person or insurer to whom the letter is addressed, and an affidavit of the plaintiff or the plaintiff's attorney in a court proceeding or of the commissioner in an administrative proceeding, showing compliance are filed with the clerk of the court in which the action, suit or proceeding is pending or with the commissioner in administrative proceedings, on or before the date the defendant in the court or administrative proceeding is required to appear or respond, or within such further time as the court or commissioner may allow.
(d) A plaintiff shall not be entitled to a judgment or a determination by default in any court or administrative proceeding in which court process or notice, order, pleading or process in proceedings before the commissioner is served under this section until the expiration of forty-five days from the date of filing of the affidavit of compliance.
(e) Nothing in this section shall limit or affect the right to serve any process, notice, order or demand upon any person or insurer in any other manner now or hereafter permitted by law.
(f) Each nonadmitted insurer assuming insurance in this state, or relative to property, risks or exposures located or to be performed in this state, shall be considered to have subjected itself to this article.
(g) Notwithstanding conditions or stipulations in the policy or contract, a nonadmitted insurer may be sued upon any cause of action arising in this state, or relative to property, risks or exposures located or to be performed in this state, under any insurance contract made by it.
(h) Notwithstanding conditions or stipulations in the policy or contract, a nonadmitted insurer subject to arbitration or other alternative dispute resolution mechanism arising in this state or relative to property, risks or exposures located or to be performed in this state under an insurance contract made by it shall conduct the arbitration or other alternative dispute resolution mechanism in this state.
(i) A policy or contract issued by the nonadmitted insurer or one which is otherwise valid and contains a condition or provision not in compliance with the requirements of this article is not thereby rendered invalid but shall be construed and applied in accordance with the conditions and provisions which would have applied had the policy or contract been issued or delivered in full compliance with this article.
§33-12C-9. Legal or administrative procedures.
(a) Before any nonadmitted insurer files or causes to be filed any pleading in any court action, suit or proceeding or in any notice, order, pleading or process in an administrative proceeding before the commissioner instituted against the person or insurer, by services made as provided in this article, the insurer shall either:
(1) Deposit with the clerk of the court in which the action, suit or proceeding is pending, or with the commissioner of insurance in administrative proceedings before the commissioner, cash or securities, or file with the clerk or commissioner a bond with good and sufficient sureties, to be approved by the clerk or commissioner in an amount to be fixed by the court or commissioner sufficient to secure the payment of any final judgment which may be rendered in the action or administrative proceeding; or
(2) Procure a certificate of authority to transact the business of insurance in this state. In considering the application of an insurer for a certificate of authority, for the purposes of this paragraph the commissioner need not assert the provisions of section sixteen, article three of this chapter against the insurer with respect to its application if the commissioner determines that the company would otherwise comply with the requirements for a certificate of authority.
(b) The commissioner of insurance, in any administrative proceeding in which service is made as provided in this article, may in the commissioner's discretion, order such postponement as may be necessary to afford the defendant reasonable opportunity to comply with the provisions of subsection (a) of this section and to defend the action.
(c) Nothing in subsection (a) of this section shall be construed to prevent a nonadmitted insurer from filing a motion to quash a writ or to set aside service thereof made in the manner provided in this article, on the ground that the nonadmitted insurer has not done any of the acts enumerated in the pleadings.
(d) Nothing in subsection (a) of this section shall apply to placements of insurance which were lawful in the state in which the placement took place and which were not unlawful placements under the laws of this state. Without limiting the generality of the foregoing, nothing in subsection (a) of this section shall apply to a placement made pursuant to section five of this article.
§33-12C-10. Enforcement.
The commissioner shall have the authority to proceed in the courts of this state or any other United States jurisdiction to enforce an order or decision in any court proceeding or in any administrative proceeding before the commissioner of insurance.
(a) Filing and status of foreign decrees.
A copy of a foreign decree authenticated in accordance with the statutes of this state may be filed in the office of the clerk of any circuit court of this state. The clerk, upon verifying with the commissioner that the decree or order qualifies as a "foreign decree" shall treat the foreign decree in the same manner as a decree of a circuit court of this state. A foreign decree so filed has the same effect and shall be deemed a decree of a Circuit Court of this state, and is subject to the same procedures, defenses and proceedings for reopening, vacating or staying as a decree of a circuit court of this state and may be enforced or satisfied in like manner.
(b) Notice of filing.
(1) At the time of the filing of the foreign decree, the plaintiff shall make and file with the clerk of the court an affidavit setting forth the name and last known post-office address of the defendant.
(2) Promptly upon the filing of the foreign decree and the affidavit, the clerk shall mail notice of the filing of the foreign decree to the defendant at the address given and to the commissioner of this state and shall make a note of the mailing in the docket. In addition, the plaintiff may mail a notice of the filing of the foreign decree to the defendant and to the commissioner of this state and may file proof of mailing with the clerk. Lack of mailing notice of filing by the clerk shall not affect the enforcement proceedings if proof of mailing by the plaintiff has been filed.
(3) No execution or other process for enforcement of a foreign decree filed hereunder may issue until thirty days after the date the decree is filed.
(c) Stay of the foreign decree.
(1) If the defendant shows the circuit court that an appeal from the foreign decree is pending or will be taken, or that a stay of execution has been granted, the court shall stay enforcement of the foreign decree until the appeal is concluded, the time for appeal expires, or the stay of execution expires or is vacated, upon proof that the defendant has furnished the security for the satisfaction of the decree required by the state in which it was rendered.
(2) If the defendant shows the circuit court any ground upon which enforcement of a decree of any circuit court of this state would be stayed, the court shall stay enforcement of the foreign decree for an appropriate period, upon requiring the same security for satisfaction of the decree which is required in this state.
(d) It shall be the policy of this state that the insurance commissioner shall cooperate with regulatory officials in other United States jurisdictions to the greatest degree reasonably practicable in enforcing lawfully issued orders of such other officials subject to public policy and the insurance laws of the state. Without limiting the generality of the foregoing, the commissioner may enforce an order lawfully issued by other officials provided the order does not violate the laws or public policy of this state.
§33-12C-11. Suits by nonadmitted insurers.
A nonadmitted insurer may not commence or maintain an action in law or equity, including arbitration or any other dispute resolution mechanism, in this state to enforce any right arising out of any insurance transaction except with respect to:
(a) Claims under policies lawfully written in this state;
(b) Liquidation of assets and liabilities of the insurer (other than collection of new premium), resulting from its former authorized operations in this state;
(c) Transactions subsequent to issuance of a policy not covering domestic risks at the time of issuance, and lawfully procured under the laws of the jurisdiction where the transaction took place;
(d) Surplus lines insurance placed by a licensee under authority of section five of this article;
(e) Reinsurance placed under the authority of article thirty-eight of this chapter;
(f) The continuation and servicing of life insurance, health insurance policies or annuity contracts remaining in force as to residents of this state where the formerly authorized insurer has withdrawn from the state and is not transacting new insurance in the state;
(g) Servicing of policies written by an admitted insurer in a state to which the insured has moved but in which the company does not have a certificate of authority until the term expires;
(h) Claims under policies covering wet marine and transportation insurance;
(i) Placements of insurance which were lawful in the jurisdiction in which the transaction took place and which were not unlawful placements under the laws of this state.
§33-12C-12. Countersignature requirements.
Surplus lines insurance shall be countersigned by a duly licensed resident surplus lines licensee.
§33-12C-13. Fees.
The commissioner shall receive the following fees from surplus lines licensees: For letters of certification, five dollars; for letters of clearance, ten dollars; for duplicate license, five dollars. All fees and moneys so collected shall be used for the purposes set forth in section thirteen, article three of this chapter.
§33-12C-14. Coverage must be placed in solvent insurer.
No surplus lines licensee may knowingly place any coverage in an insolvent insurer.
§33-12C-15. Change of address.
A surplus lines licensee shall notify the commissioner of any change in his or her mailing address within thirty days of such change. The commissioner shall maintain the mailing address of each surplus lines licensee on file. Failure to timely inform the insurance commissioner of a change in legal name or address may result in a penalty pursuant to section twenty-four, article twelve of this chapter.
§33-12C-16. Separability provisions.
If any provisions of this article, or the application of the provision to any person or circumstance, shall be held invalid, the remainder of the article and the application of the provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.
§33-12C-17. Hearings.
(a) When conducting any hearing authorized by section thirteen, article two of this chapter which concerns any surplus lines licensee, the commissioner shall give notice of the hearing and the matters to be determined therein to the surplus lines licensee by certified mail, return receipt requested, sent to the last address filed by a person or entity pursuant to subsection (h), section five of this article.
(b) If a surplus lines licensee fails to appear at the hearing, the hearing may proceed, at which time the commissioner shall establish that notice was sent to the person pursuant to this section prior to the entry of any orders adverse to the interests of a surplus lines licensee based upon the allegations against the person which were set forth in the notice of hearing. Certified copies of all orders entered by the commissioner shall be sent to the person affected therein by certified mail, return receipt requested, at the last address filed by a person with the commissioner.
(c) A surplus lines licensee who fails to appear at a hearing of which notice has been provided pursuant to this section, and who has had an adverse order entered by the commissioner against them as a result of their failure to so appear may, within thirty calendar days of the entry of an adverse order, file with the commissioner a written verified appeal with any relevant documents attached thereto, which demonstrates good and reasonable cause for the person's failure to appear, and may request reconsideration of the matter and a new hearing. The commissioner in his or her discretion, and upon a finding that the surplus lines licensee has shown good and reasonable cause for his or her failure to appear, shall issue an order that the previous order be rescinded, that the matter be reconsidered, and that a new hearing be set.
(d) Orders entered pursuant to this section are subject to the judicial review provisions of section fourteen, article two of this chapter.




NOTE: The purpose of this bill is to amend article twelve-c, chapter thirty-three to modernize the regulation of surplus lines insurers by enactment of the NAIC nonadmitted insurance model act. The insurance commission is concerned that there is currently no limitation of access to this state by nonadmitted insurers to the surplus lines market and no financial responsibility requirements for nonadmitted insurers.

This article is entirely rewritten, therefore, strike-throughs and underscoring have been omitted.