Opinion Number

Dear Mr. Karns:

This office is in receipt of your opinion request of recent date wherein you ask whether or not an unauthorized insurer may write automobile insurance coverage in the State of Louisiana.

You also request an opinion as to whether LSA R.S. 22:1263.1 prevents automobile insurance coverage from being provided by an unauthorized, or surplus lines company in the State of Louisiana. Also, you requested our office give an opinion on what constitutes diligent efforts on the part of the agent or broker under 22:1263.1.

In response to your first question, whether or not an authorized insurer may write automobile insurance coverage in Louisiana, the answer is yes under very limited circumstances. Louisiana Revised Statute 22:1257 states:

"If certain insurance coverage cannot be procured from authorized insurers, such coverage, hereinafter designated as "surplus lines", may be procured from unauthorized insurers provided that the insurance is procured through a licensed surplus line broker."

Therefore, surplus line coverage for automobile insurance may be written by surplus line brokers duly licensed in the State of Louisiana where coverage cannot be obtained from authorized insurers.

In response to your question regarding whether Louisiana Revised Statute 22:1263.1 prevents automobile coverage from being provided by an unauthorized insurer, it does not.

The statute reads as follows:

"Any licensed surplus lines broker that procures a surplus lines contract shall obtain from the duly licensed submitting agent or broker at the time of application an affidavit on a standardized form promulgated by the commissioner of insurance which shall be maintained by the licensed surplus lines broker that attests to the diligent efforts of the agent or broker to place insurance coverage with admitted insurers and the results thereof. The affidavit shall affirm that the insured applicant for insurance was expressly advised prior to placement of insurance that the surplus lines insurer with whom the insurance is being placed is an unauthorized, but approved, insurer, and that in the event of insolvency of the insurer, losses shall not be paid by the state insurance guaranty fund, and that the coverage is being procured through a duly licensed Louisiana surplus liens broker." (emphasis added)

This statute outlines the procedure and contents of the affidavit which must be submitted to the broker procuring coverage with an authorized insurer.

The issue of what would constitute diligent efforts on behalf of a broker would generally be decided on a case by case basis.

Blacks Law Dictionary defines diligent inquiry as "Such inquiry as a diligent man, intent upon ascertaining a fact would ordinarily make and it is an inquiry made with diligence and good faith to ascertain the truth, and must be an inquiry as full as the circumstances of the situation will permit." The term diligent efforts has also been defined as "using whatever commercially reasonable means as are relevant or appropriate." 832 PLI/CORP 175,181.

Although these definitions may be used as a guideline, each contract for surplus line insurance will have to be reviewed on a case by case basis to determine if in that particular situation a diligent effort was made to place the insurance coverage with an admitted insurer.

Very truly yours,

RICHARD P. IEYOUB ATTORNEY GENERAL

By: __________________________ ARLENE D. KNIGHTEN ASSISTANT ATTORNEY GENERAL