What is surplus lines insurance on professional liability policy for an architect/engineer?
Surplus lines insurance companies will insure a firm that is considered higher risk and a policy that admitted carriers (i.e. Travelers or Hartford) won’t take on.
Surplus lines insurance companies are not licensed by the Division of Insurance, but rather are approved as a surplus lines company. As such, premiums are subject to a state tax that will vary by each State. Also, as a surplus lines insurer there is no protection under the provisions of the Insurance Guaranty Association Act, which assists insurers when a company becomes insolvent. However, surplus lines insurance companies are rated by AM Best’s rating.
The advantages of a surplus lines insurance company are that they will commonly insure your firm if you have had adverse claims experience, perform high risk services or have projects that admitted insurance companies will not insured. Typically, a surplus lines insurance company will also provide prior acts coverage, which is important for a design professional. Additionally, some surplus lines companies will have familiar names such as Lloyds of London.
The minuses of a surplus lines insurance company are that they are not backed by each state, there is an additional tax for the premium, and the policies are not as comprehensive as an admitted insurance company. The surplus lines policy may have more exclusions and not as broad of coverage as an admitted insurance company.
The key to the surplus lines insurance, don’t get a policy because it seems cheaper, it probably has less coverage than an admitted carrier and at the time of a claim that will be realized. If your firm has questions about the surplus lines insurance policies please call, or email, your Professional Underwriter agent for assistance.