Most Lawyers Professional Liability Insurance policies are written by admitted insurance carriers. Some because of the law firm’s areas of practice, firm makeup or claims/disciplinary activity will not be accepted by an admitted insurance carriers program. These law firms will need their professional liability insurance written by a non-admitted insurance carrier.
Admitted carriers are protected by the state’s insurance fund in case of a financial default of the insurance carrier. There are claim payment limits by state funds and these are usually less than an insured’s Lawyers Professional Liability limits. Non-admitted carriers are not protected by these state funds.
Admitted carriers are required to file their rates and forms with the state insurance department, non-admitted insurance carriers do not have this requirement. When using an Surplus lines carriers, it is a good idea to find out if the carrier is on the state’s “White List.” These are carriers that have been “approved” by the state as meeting financial requirements of the state. Surplus lines carriers while having to be “approved” by the state insurance department are generally not regulated by the state insurance department. Surplus lines carriers have the ability to charge for individual risk exposures where an admitted carrier must follow its filed rates and forms. This gives a surplus lines carrier the ability to cover more diverse unique risks. In the event of a dispute the state insurance department will likely not be of much help.
Admitted carriers pay their premium taxes directly to the state, where surplus lines carriers, have the surplus lines taxes and fees collected by a surplus lines agent that remits these to the state.
Generally Surplus Lines carriers have AM Best rating as high if not higher than many of the admitted carriers. In fact Surplus Lines carriers for most states have higher capital financial requirements than an admitted carrier for that state. Many admitted carriers having surplus lines affiliates for placing risks that are outside of the admitted carriers program.
So having your Lawyers Professional Liability Insurance policy placed with a non-admitted carrier is not a bad thing. But you should do some extra due diligence into the carrier’s financial strength prior to placing.