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A person who in any manner assists directly or indirectly in the procurement of the unauthorized insurance contract could be held strictly liable to the insured for the full amount of a claim or loss under the terms of the contract if the unauthorized insurer fails to pay the claim or loss.
However, exceptional risks can be insured with unauthorized insurer, provided prior approval is obtained from Naicom.
In addition to New York's prohibitions against doing an insurance business without a license (and aiding an unauthorized insurer), unauthorized foreign and alien insurers and those acting on their behalf in New York should also be aware of Insurance law section 2122(a) (2).
Under the proposed budget, the fine for acting without a license and aiding an unauthorized insurer would have jumped from $500 to $10,000.
Any company that qualifies under the industrial insured exemption can procure insurance from an unauthorized insurer without leaving the state or following surplus lines procedural requirements.
ELANY points out that New York insurance law, in addition to filing requirements imposed on insurers, requires brokers to use "due care" in selecting the unauthorized insurer.
In Oregon, a statute was enacted that, in many cases, disqualified coverage purchased from an unauthorized insurer. This includes insurers that are not members of the state's insurance guaranty association, which means even the most financially sound RRG still could not meet Oregon's financial responsibility requirement (National Warranty v.
An unauthorized insurer writing insurance or an insurer writing noninsurance only subjects the insurer to regulatory penalties.
State law requires that when risk is insured in Washington, it be done through an admitted insurer or through an unauthorized insurer placed through a licensed surplus line broker.
More substantial fines (up to $15,000 to one respondent) were issued in connection with failing to properly file excess line broker affidavits and others ($2,000, $9,100, and $63,000 respectively) involved the solicitation, negotiation and or delivery in New York of annuity contracts issued by an unauthorized insurer. The disparity of the fines suggests they may have been calculated based upon a percentage of the premiums written and/or the number of statutory violations.
Nonetheless, most states also have provided some insurance regulatory exemption for direct procurement, i.e., direct access to an unlicensed, unauthorized insurer. Unlike surplus lines laws, the thrust of self procurement laws is not to regulate the transaction but to tax the transaction after the fact
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