The Suplus Lines insurers, or non-admitted carriers, are an important because they offer coverages that cannot be procured through the traditional admitted carrier market. Epitomized by Lloyd’s of London, this market can conduct business legally as long as that business is conducted within the parameters put forth by the state. Additionally, many states publish an approved list of approved Surplus Lines carriers for their state. In the case of Lloyd’s, it is an approved list of syndicates.
Although these parameters can vary from state to state, in general, three conditions must be met:
a) The policy must be obtained through a licensed Surplus Lines Carrier.
b) It must be determined through a diligent search that the needed insurance cannot be obtained through an admitted carrier.
c) Coverage cannot be obtained for the sole purpose of getting a lower premium or better contract than what was offered by an admitted carrier.
In general, DIC (or Difference in Conditions) coverage wraps around an existing special perils policy. It adds or extends special coverage such as earthquake, flood, landslide or wind. Basically, DIC insurance provides coverage designed to close specific gaps in standard insurance policies and is ideal for large commercial or hard to insure entities.
DIC can also be an endorsement that is added to a contractor’s builders risk insurance policy. Again, it is used to fill the gaps- this time between the policy provided by the project owner and the policy provided by the contractor. When a project owner elects to provide the builders risk coverage for all parties with an insurable interest, theproject is normally removed from coverage under the contractor’s policy. A DIC endorsement typically states that, to the extent a loss is not covered under the owner-provided policy, but would be covered under the contractor’s policy, coverage will apply on an excess basis.
