As an agent who represents Illinois Casualty Company (ICC), you may come across proposals using Excess and Surplus (E&S) lines markets. This is most likely to occur with liquor liability insurance and non-owned auto with a delivery exposure. In those situations, it is important for the agent and the policyholder to understand the differences between a standard company, such as Illinois Casualty Company, and an E&S or non-admitted carrier.
Agents may place coverage through E&S or non-admitted carriers when a standard insurance market cannot be found. ICC is a standard market and an admitted carrier in every one of our thirteen states. We are bound by each state’s rate and form requirements and are subject to regulations intended to protect policyholders from illegal and unethical practices. An excess and surplus lines company is not held to the same stringent standards that admitted carriers are. They are not required to file their rates and forms with the Department of Insurance.
Non-admitted carriers also do not contribute to the state guaranty fund and therefore, the guaranty fund is not available to their policyholders in the event of a financial default. Because of these limitations, many states require that a risk be rejected by three different admitted carriers before coverage may be placed with a non-admitted carrier.
Because E&S companies in our niche often greatly restrict coverage, it is not unusual for a quote from a non-admitted carrier to be less expensive than ICC’s quote. While this is counter to the philosophy of a non-standard market, it is usually easy to find the explanation. When competing against a policy from a non-admitted company, the agent should look for warranty and exclusion endorsements.
A warranty in an insurance policy is a promise by the insured that certain statements, which affect the validity of the insurance contract, are accurate. Here is a sample of an actual warranty endorsement:
As a condition of coverage, the insured agrees to maintain the following warranties during the term of this policy and any renewals thereof:
- Employees or other persons are not permitted to consume alcohol during their hours of employment or service
- Alcohol sales cease by 2:00 AM
- General liability insurance is carried by the insured at limits equal to or greater than the Liquor Liability limits of this policy
A breached warranty statement allows the insurance company to void the contract. We often see non-admitted companies include a warranty endorsement in their policy.
It is also important to review the exclusions that restrict coverage. Some examples of exclusions used by non-admitted carriers are:
- A variety of assault and battery exclusions and limitations
- Firearms exclusion that denies coverage for any claim involving a firearm. ICC has experienced large claims involving patrons using firearms at the insured’s premises. There would be no coverage and NO DEFENSE if a firearms exclusion was on the policy.
- Entertainer exclusion that denies coverage for any claim involving an injury to the entertainer. This is a significant exposure in our niche, due to the potential for injuries from a fall, altercation, or any other type of injury.
ICC is committed to providing a comprehensive insurance product at an affordable price for the food and beverage industry. When presented with a competing policy from a non-admitted carrier, be sure to point out the significant differences presented by that type of policy. If a quote from an E&S market is less than our quote, it is likely there are significant coverage differences.
There is a place for E&S carriers in our niche for the price sensitive customer that does not consider value. It is our job to help the client understand what they are buying. For more information, reach out to your ICC agent. To locate a list of agents in your area, use our Find an Agent search.
