What must a surplus lines broker do prior to binding coverage?

A surplus lines broker is required to conduct a diligent search for coverage before binding insurance. This requirement ensures that the broker has actively sought to place the insurance with admitted carriers (those insurers that are licensed and regulated by the state) before resorting to surplus lines. The diligent search involves documenting efforts to obtain coverage from at least three authorized insurers and demonstrating that coverage is unavailable through those avenues.

This process protects consumers by ensuring they are provided with options and that the coverage being bound is genuinely excess or surplus in nature—meaning that no adequate alternatives were found through traditional means. The intention behind this mandate is to create a safeguard within the insurance industry, promoting thorough investigation before turning to non-admitted (surplus lines) policies, which may have different regulatory protections.