COMMON AND CONTRACT CARRIERS; INSURANCE; 'SURPLUS LINE' COVERAGE

COMMON AND CONTRACT CARRIERS; INSURANCE; "SURPLUS LINE" COVERAGE.

An insurance policy from an unauthorized insurer meeting the conditions and provisions of chapter 48.15 RCW as surplus line coverage constitutes compliance with the requirements of RCW 81.80.190.

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                                                                   March 18, 1955

Washington Public Service
Commission
Insurance Building
Olympia, Washington                                                                                                                Cite as:  AGO 55-57 No. 43

 Attention:  Mr. Joseph Starin, Commissioner

 Gentlemen:

            This is to acknowledge your letter of March 9, 1955, wherein you request the opinion of this office on the following question:

           "Would an insurance filing of an unauthorized company other than Lloyds of London under the provisions of RCW 48.15.040 be a compliance with the requirements of RCW 81.80.190?"

             For the purposes of this opinion, we have taken the liberty of paraphrasing your questions as follows:

             "Would an insurance policy from an unauthorized insurer meeting the conditions and provisions of chapter 48.15 RCW as surplus line coverage constitute compliance with the requirements of RCW 81.80.190?"

             In our opinion the answer is yes.

              [[Orig. Op. Page 2]]

                                                                     ANALYSIS

             RCW 81.80.190, insofar as it relates to the instant inquiry, provides as follows:

             "The commission shall in granting permits to 'common carriers' and 'contract carriers' require such carriers to either procure and file liability and property damage insurance from a company licensed to write such insurance in the state, or deposit security, for such limits of liability and upon such terms and conditions as the commission shall determine to be necessary for the reasonable protection of the public against damage and injury for which such carrier may be liable by reason of the operation of any motor vehicle."

             * * *

             The above section is a part of the Public Service Commission laws and applicable to common carriers and contract carriers.  Your inquiry raises the question as to whether an insurance policy issued by a company not licensed to write insurance in this State but meeting the conditions and provisions of chapter 48.15 RCW would constitute compliance with the above quoted public service law and thus acceptable for filing with the commission.

             Chapter 48.15. RCW is part of the Insurance Code.  In RCW 48.15.040, it is provided that if certain insurance coverages cannot be procured from authorized insurers, such coverages, hereinafter described as "surplus lines", may be procured from unauthorized insurers subject to the following conditions:

             "(1) The insurance must be procured through a licensed surplus line broker.

             "(2) The insurance must not be procurable, after diligent effort has been made to do so from among a majority of the insurers authorized  [[Orig. Op. Page 3]] to transact that kind of insurance in this state and placing the insurance in an unauthorized insurer must not be for the purpose of securing a lower premium rate than would be accepted by any authorized insurer.

             "(3) At the time of the procuring of any such insurance an affidavit setting forth the facts referred to in subdivision (2) of this section must be executed by the surplus line broker.  Such affidavit shall be filed with the commission within thirty days after the insurance is procured."

             RCW 48.15.060 provides:

             "Insurance contracts procured as surplus line coverage from unauthorized insurers in accordance with this chapter shall be fully valid and enforceable as to all parties, and shall be given recognition in all matters and respects to the same effect as like contracts issued by authorized insurers."  (Underscoring supplied)

             RCW 48.15.070 sets forth provisions for the licensing of surplus line brokers.

             It is our opinion from the above provisions of the Insurance Code, and in particular RCW 48.15.060, supra, if the insurance commissioner has authorized surplus line coverage upon a showing of compliance with the provisions of 48.15.040,supra, and appropriate proof of compliance is furnished the Commission, that an insurance contract approved as surplus line coverage must be given recognition in all matters as like contracts issued by authorized insurers, and accordingly such contracts would meet the requirements of RCW 81.80.190 of the public service laws.

             RCW 48.15.060, supra, was enacted into law by Chapter 79 of the Laws of 1947.  Neither this provision nor its predecessor, Section 1, Chapter 164, Laws of 1947, were in effect at the time of the opinions from this office dated September 19, 1933 and March 12, 1940.  These two opinions, to which you have made reference in your letter of March 9th, appear in conflict with  [[Orig. Op. Page 4]] each other and, insofar as they are inconsistent with the views expressed herein, are to be considered as overruled by the conclusion expressed above.

 Very truly yours,
DON EASTVOLD
Attorney General 

ROBERT L. SIMPSON
Assistant Attorney General