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AGO 1983 No. 29 - December 09, 1983
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Ken Eikenberry | 1981-1992 | Attorney General of Washington

INSURANCE ‑- LICENSES ‑- REVOCATION OR SUSPENSION OF SURPLUS LINE INSURANCE BROKER'S LICENSE

A surplus line broker licensed in Washington under chapter 48.15 RCW may be subject to a fine and possible suspension or revocation of his surplus line broker's license as provided by subsection (3) of RCW 48.15.020.

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                                                                December 9, 1983 

Honorable Paul Sanders
St. Rep., 48th District
2680 169th Avenue S.E.
Bellevue, WA 98008

 Cite as: AGO 1983 No. 29                                                                                                                

 Dear Representative Sanders:

             By recent letter you requested our opinion on the following question:

             "Since a Washington State licensed surplus line broker can represent unauthorized insurers in this State, can a surplus line broker licensed in Washington be subject to a fine and possible suspension or revocation of his surplus line broker's license as provided by subparagraph (3) of RCW 48.15.020?"

             We answer your question in the affirmative.

                                                                     ANALYSIS

             RCW 48.15.020, part of the state insurance code, relates to the solicitation of insurance business by unauthorized insurance companies.  The full text of that statute reads as follows:

             "(1) An insurer not thereunto authorized by the commissioner shall not solicit insurance business in this state, nor transact insurance business in this state except as provided in this chapter.

              [[Orig. Op. Page 2]]

            "(2) No person shall, in this state, represent an unauthorized insurer except as provided in this chapter.  This provision shall not apply to any adjuster or attorney at law representing such an insurer from time to time in this state in his professional capacity.

             (3) Each violation of this section shall constitute a separate offense punishable by a fine of not more than twenty-five thousand dollars, and the commissioner, at the commissioner's discretion, may order replacement of policies improperly placed with an unauthorized insurer with policies issued by an authorized insurer.  Violations may result in suspension or revocation of a license."  (Emphasis supplied)

             Notably, the above‑underscored final sentence of this statute was added by a 1983 amendment.  See, § 3, chapter 32, Laws of 1983, 1st Ex. Sess. (SSB 139).

             Certain circumstances, however, permit insurance coverages‑-called "surplus lines"‑-to be obtained from companies not authorized to do business in Washington.  In that regard, RCW 48.15.040 provides:

             "If certain insurance coverages cannot be procured from authorized insurers, such coverages, hereinafter designated as 'surplus lines,' may be procured fromunauthorized 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 to transact that kind of insurance in this state.

             "(3) Coverage shall not be procured from an unauthorized insurer for the purpose of securing a lower premium rate than would be accepted by any authorized insurer nor to secure other competitive advantage.

             "(4) The commissioner may by regulation establish the degree of effort required to comply with subsections (2) and (3) of this section.

              [[Orig. Op. Page 3]]

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

             Also to be noted is RCW 48.15.070 which provides for the licensing of surplus line brokers by the state insurance commissioner.   The opening paragraph of that statute reads:

             "Any individual while a resident of this state, or any firm or any corporation that has in its employ a qualified individual who is a resident of this state and who is authorized to exercise the powers of the firm or corporation, deemed by the commissioner to be competent and trustworthy, and while maintaining an office at a designated location in this state, may be licensed as a surplus line broker in accordance with this section."

             The remainder of chapter 48.15 RCW regulates the conduct of such licensed surplus line brokers.  In simplest terms, in order for an individual to offer surplus line coverages he or she (a) must have obtained a surplus line broker's license and (b) must thereafter operate in compliance with the provisions of chapter 48.15 RCW which will then apply.  If the particular broker violates, or fails to comply with, some provision of chapter 48.15 RCW the above‑quoted language of RCW 48.15.020(2) will then come into play; i.e.,

             "No person shall, in this state, represent an unauthorized insurerexcept as provided in this chapter.  . . ."

             With the foregoing in mind we now turn, directly, to your question.  Repeated for ease of reference you ask:

             "Since a Washington State licensed surplus line broker can represent unauthorized insurers in this State, can a surplus line broker licensed in Washington be subject to a fine and possible suspension or revocation of his surplus line broker's license as provided by subparagraph (3) of RCW 48.15.020?"

             In our opinion, whatever doubt there may have previously been  [[Orig. Op. Page 4]] on that count has been eliminated by the amendment contained in § 3, chapter 32, Laws of 1983, 1st Ex. Sess.,supra, which, as above noted, added the following sentence to RCW 48.15.020(3):

             ". . . Violations may result in suspension or revocation of a license."

             That amendment dictates the conclusion that RCW 48.15.020 now refers not only to the unlicensed conduct of a surplus line broker's business but, as well, to any violation of chapter 48.15 RCW by a person licensed thereunder as a surplus line broker.  An unlicensed person will obviously have no license to be suspended or revoked.  Accordingly, the inclusion of that possible penalty in subsection (3), as amended, seems clearly to manifest a legislative intent that the statute apply to current licensees under chapter 48.15 RCW as well as to persons acting without the required license.

             In so concluding, we have considered the possibility that the last sentence of subsection (3) was meant only to authorize the "suspension or revocation of a license" of an agent or ordinary broker who conducts a surplus line broker's business without having obtained the additional license needed for that activity.  However, if that were the case, the amendment would have been superfluous, since RCW 48.17.530(1)(i) already permitted an agent's or normal broker's license to be revoked or suspended for dealing in insurance "outside the scope of his licenses."  It must be presumed that the legislature does not engage in meaningless acts; and therefore, a statute should be interpreted so that no portion of it is superfluous.  State v. Wanrow, 88 Wn.2d 221, 559 P.2d 548 (1977).

             Conclusion:

             In direct answer to your question, it therefore follows that if a licensed surplus line broker represents an unauthorized insurer in a manner which constitutes a violation of some provision of chapter 48.15 RCW, that broker is now liable for a fine up to $25,000; in addition, his or her surplus line broker's license may be suspended or revoked by the insurance commissioner.1/  [[Orig. Op. Page 5]]

             We trust that the foregoing will be of assistance to you.

 Very truly yours,
 KENNETH O. EIKENBERRY
Attorney General 

EDWARD H. SOUTHON
Assistant Attorney General

                                                         ***   FOOTNOTES   ***

 1/We also note that two other sections of chapter 48.15 RCW provide for more particular penalties.  See RCW 48.15.090, concerning placement of insurance with financially unsound insurers and the failure to maintain required evidence of unauthorized insurers' financial conditions; and RCW 48.15.030, concerning the failure to submit the required annual statement or to remit the required taxes when due.

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