When could a Louisiana parish buy property and casualty insurance through a surplus line broker?

Plain-English summary

Terrebonne Parish's president asked about selecting property and casualty insurance for the parish. In Opinion 03-0009, the Louisiana Attorney General said surplus line coverage could be placed through a duly licensed broker only when the coverage could not be obtained from an insurer authorized to write insurance in Louisiana. The opinion quoted La. R.S. 22:1257 and relied on an attached 1974 AG opinion that had reached the same conclusion.

The AG also cited La. R.S. 22:1256 for the consequence of a contract made contrary to the rule: he said it was voidable, except by the insurer. His answer concerned the availability of coverage from authorized insurers, not simply a parish's preference for a particular broker or carrier.

Currency note

This opinion was issued in 2003. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant at issuance

Parish officials buying insurance

The opinion treated inability to obtain the required coverage from authorized insurers as the condition for using the surplus line route. It applied that condition to Terrebonne Parish's property and casualty insurance question.

Surplus line brokers and insurers

The AG said a licensed surplus line broker could place coverage with an approved unauthorized insurer under the statutory definitions he quoted, but only when authorized insurers could not provide the coverage. The opinion did not treat broker licensure alone as enough to open the surplus line route.

People reviewing a challenged contract

The AG described a contract contrary to the surplus line rule as voidable under La. R.S. 22:1256, except by the insurer. The opinion did not decide the validity of any identified Terrebonne contract.

Common questions

Q: Could a parish choose a surplus line insurer while an authorized insurer could supply the coverage? A: The AG said no under the statute he discussed. He limited surplus line placement to coverage unavailable from companies authorized to write insurance in Louisiana.

Q: Did using a licensed broker alone make surplus line coverage permissible? A: No. The opinion required both the licensed-broker route and the inability to obtain the coverage from an authorized insurer.

Q: What did the AG say about a contract that violated the rule? A: He said La. R.S. 22:1256 made such a contract voidable, except by the insurer. He did not adjudicate a particular contract.

Q: Why was an older opinion attached? A: The 2003 letter attached Opinion 74-475, which had explained the same limit on obtaining surplus line coverage when authorized insurers could supply it.

Background and statutory framework

The opinion quoted La. R.S. 22:1257's rule for coverage unavailable from authorized insurers and La. R.S. 22:5's definitions of authorized insurers, approved unauthorized insurers, and surplus line insurance. It referred to La. R.S. 22:1262.1 in the definition and to La. R.S. 22:1256 for a contract made contrary to the rule. The PDF extract includes the 1974 attachment after the 2003 letter. Its first-page date stamp is too garbled for an exact issue date, so that field is blank.

Citations and references

Authorities in the opinion: La. R.S. 22:1257; La. R.S. 22:5; La. R.S. 22:1262.1; La. R.S. 22:1256; attached Op. Atty. Gen. No. 74-475.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/03-0009

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

~tate. o~ ~oui~iaaa
One American Place
DEPARTMENT OF JUSTICE
301 Mmn Street, Suite 600
P,O Box q4005
CIVIL DIVISION
TEL. (504) 342-7013
BATON ROUGE
FAX: (504) 342-2090
RICHARD P. IEYOUB
70804-9095
ATTORNEY GENFRAL

JA 7 Z003
OPINION N~II~BER 03-0009
54 INSURANCE
90-A POLITICAL SUBDIVISIONS
90-A-1 PUBLIC FUNDS & CONTRACTS
LA. R.S. 22:1257
Robert J. Bergeron
LA. R.S. 22:5
Parish President
LA. R.S. 22:2071
LA. R.S. 22:1262.1
Terrebonne Parish Consolidated Government LA. R.S. 22:1256
P.O. Box 6097
Op.Atty.Gen., No. 74-475
=Surplus line" insurance coverage may be written or placed by duly
Houma, Louisiana 70361
licensed brokers in this State only in those instances where coverage
cannot be obtained from approved authorized insurance compames.
If coverage from an approved authonzed insurer could have been
Dear Mr. Bergeron: obtained, any contract with an unauthorized insurer is voidable, except
by the insurer.

You have requested an opinion from our office concerning the process in selecting suitable property and casualty insurance for Terrebonne Parish. The requirements that La. R.S. 22:1257 places on the procurement of insurance coverage are explained in Attorney General Opinion 74-475 (attached). The statute itself clearly states that, "[i]f certain insurance coverages cannot be procured from authorized insurers, such coverages, hereinafter designated as "surplus lines", may be procured from unauthorized insurers provided that the insurance is procured through a licensed surplus line broker."

In defining types of insurers, La. R.S. 22:5 states that, "[a]uthorized insurer means an insurer with a certificate of authority or license issued under provisions of this Code or otherwise qualified under La. R.S. 22:2071 et seq." La. R.S. 22:5 further explains that, "[a]pproved unauthorized insurer means an insurer without a certificate of authority, or otherwise qualified under the provisions of this Code, and which is on the list of approved unauthorized insurers under the provisions of La. R.S. 22:1262.1, and from which a licensed surplus line broker may procure insurance under provisions of La. R.S.
22:1257." The same statute also defines surplus line insurance as, "any property and casualty insurance in this state on properties, risks, or exposures, located or to be performed in this state, permitted to be placed through a licensed surplus line broker with an approved unauthorized insurer."

In compliance with the unambiguous language of La. R.S. 22:1257 and in accordance with Atty. Gen. Op. No. 74-475, it is the opinion of this office that "surplus line" insurance coverage may be written or placed by duly licensed brokers in this State only in those instances where coverage cannot be obtained from companies authorized to write insurance in Louisiana. Furthermore, according to La. R.S. 22:1256, any contract formed to the contrary shall be voidable, except by the insurer.

OPINION NUMBER 03-0009
Robert J. Bergeron
Page - 2 -

We trust that this answers your inquiry. Please contact our office if you have any further questions or concerns.

Very truly yours,

RICHARD P. IEYOUB
ATTORNEY GENERAL

By:
CHARLES H. BRAUD Jr.
Assistant Attorney General

RPI/CHB:mjb
Attachment

DEPARTMENT OF" JUSTICE

March 28, 1974
Opinion No. 74-475

~r. Edward A. Anderson
Assistant Property Insdrance Manager
Division of Administration
Post Office Box 44095
Baton Rouge, Louisiana 70804
Dear Mr. Anderson:
Your letter of March 22, 1974 addressed to Mr. Kenneth DeJean, Assistant Attorney General, has been referred to the undersigned for attention and reply.
You request an opinion as to the legality of the State procuring insurance coverage from a sur- plus line insurer.
Cenerally, only those insurance companies, either domestfc or foreign, to which Certificates of Authority have been issued by.the State under the provisions of R.S.22:31 et seq. and R.S.22:981 etseq. are allowed to engage in the business of writing in- surance in this State. These companies are delineated ~.s "authorized insurers" and generally place insurance contracts ~irectly or through licensed agents.
However, there are instances set out in the Revised Statutes tha~--allow unauthorized insurers to provide insurance policies in the State. R.S.22:1257 provides in part:
"§&257. - ’Surplus line’ insurance in unauthorized insurers
I~ certain insurance coverage can- not be procured from authorized insurers, such coverage, hereinafter designated as

~]:. Edward A. Anderson
M~rch 28, 1974
Page -2-

’surplus lines’ may be procured from unauthorized insurers subject to the following conditions:
(i) The insurance must be pro- cured through a licensed surplus line broker. i!

In our opinion this statute would allow "surplus lines" coverage to be written only in the limited instances where the coverage could not be procured from authorized insurers.
Parigraph 2 of the General Conditions attached to your request has the foll~wing provisions:
"Only Capital Stock Companies authorized to do business in the
State of Louisiana will be Gonsidered for direct policy writing." (Emphasis added) -
Additionally, you indicated "responsible bidder" applies only to licensed agents. You also indicated that surplus line brokers have questioned their exclusion from bidding because of the case of Gray and Co. v. Stiles and Irwin & Co., Inc. v. Stiles, 221 So. 2d 832.
The 6bvious intent of the conditions referred to is to have authorized companies bid either directly or through a licensed agent. There is nothing in the cited case that would alte~ this procedure.
The Court, in the 9ray & Irwin cases recognized that ~ompanles writing "surplus lines" coverage were "unauthorized insurance companies" doing specifically what the law allowed them to do. i.e., Write coverage when it was not obtainable from authorized insurers.

I would like to point out that R.S.22:1269 exempts reinsurance and certain other types of insurance f~om the

]~dward A. Anderson
28, 1974
-3-

L:sJcns ordinarily applicable to "surplus lines" coverage do not think that the exemptions have any application question you presented."
T~erefore, it is our opinion that "surplus iZne" ...::ance coverage may be written or placed by duly licensed L~.,~ers in this State only in those instances where coverage c::~not be obtained from companies authorized to write insur- ance in Louisiana. Further, insurance companies providing "surplus lines" coverage are not "authorized to do business" in this State as required by your bidding specification but are al!owed to do business in this State under the limited areas defined in L.R.S. 22:1257 et seq.
If I may be of further assistance, please advise.
Very truly yours,
WILLIAM J. GUSTE, JR.
ATTORNEY GENERAL

By :
WILLIAM R. CARRUTH, JR.
Assistant Ahtorney General.
WRC,Jr:fcd

APR 2 i’374