Diligent Effort

About Diligent Effort


According to F.S. 626.914, diligent effort is defined as 'seeking coverage from and having been rejected by at least three authorized insurers currently writing this type of coverage and documenting these rejections. However, if the residential structure has a dwelling replacement cost of $700,000 or more, the term means seeking coverage from and having been rejected by at least one authorized insurer currently writing this type of coverage and documenting this rejection.'

According to F.S. 626.916, surplus lines agents must verify that a diligent effort has been made by requiring a properly documented statement of diligent effort from the retail or producing agent. However, to be in compliance with the diligent effort requirement, the surplus lines agent’s reliance must be reasonable under the particular circumstances surrounding the export of that particular risk.

Reasonableness shall be assessed by taking into account factors which include, but are not limited to, a regularly conducted program of verification of the information provided by the retail or producing agent. Declinations must be documented on a risk-by-risk basis. If it is not possible to obtain the full amount of insurance required by layering the risk, it is permissible to export the full amount.

Read the complete Eligibility to Export law.

 


Disclosure Form & Diligent Effort Matrix

Certain commercial lines of coverage are exempt from the diligent effort search requirement. A Surplus Lines Disclosure form is required in place of the diligent effort form. Refer to our Diligent Effort / Disclosure Matrix for a concise view of the coverage categories.

A number of coverages still require the diligent effort and include, but are not limited to, residential property, residential multi-peril and commercial residential.


 

Frequently Asked Questions

What is a Diligent Effort?

Diligent effort means seeking coverage from and having been rejected by at least three admitted insurers currently writing the type of coverage documented in the rejections.

The only exception is in the case of a residential structure that has a dwelling replacement cost of $700,000 or more. In this case, you would only need to seek coverage from and be rejected by at least one admitted insurer currently writing the type of coverage requested and documenting the rejection.

Surplus lines agents must maintain, as part of each insured’s file, a copy of the producing agent’s documentation of a diligent effort search, if applicable. It is the responsibility of the surplus lines agent to verify that the producing agent has made a diligent effort to place the coverage with an admitted insurer. The surplus lines agent must be able to reasonably rely on the efforts made by the producing agent by taking into account such factors as conducting a program to verify the diligent effort process meets the requirements outlined in F.S. 626.916.
When is a Diligent Effort required or exempt?

Per F.S. 626.916, some commercial coverages are exempt from the diligent effort search but require a surplus lines disclosure instead. By statute, obtaining and maintaining an accurate and complete surplus lines disclosure form is the sole responsibility of the retail/producing agent, not the surplus lines agent. To help determine which form is required for each line of coverage, please review the Diligent Effort/Disclosure Matrix.

Surplus lines agents will only be required to obtain a surplus lines disclosure when acting in both a retail/producing agent and surplus lines agent capacity. 

For more information, send an email to agent.services@fslso.com
Can I complete the diligent effort form in place of a signed disclosure?

Execution of a diligent effort search does not take the place of a disclosure statement signed by the named insured on exempt coverages. For coverages that are statutorily exempt from the diligent effort requirement, the retail or producing agent is required to keep a disclosure statement signed by the named insured.

Surplus lines agents are not required to keep a copy of the disclosure form; however, it would be beneficial to keep a copy if needed to resolve any dispute with the insured regarding the placement of the surplus lines coverage. Please note: the surplus lines agent is required to maintain a copy of the disclosure form if they are also acting as the retail/producing agent.

Who must sign the disclosure form?
The disclosure form must be signed by the insured or a designee of the insured. Under Florida law, the producing agent is not required to sign the disclosure statement.
When does the surplus lines agent keep a copy of the disclosure form?
According to Florida law, obtaining and maintaining an accurate and complete surplus lines disclosure is the sole responsibility of the retail/producing agent, not the surplus lines agent. Surplus lines agents are only required to obtain a disclosure when acting in both a producing and surplus lines capacity.
When can I apply the one declination under F.S. 626.914(4)?
Here are some sample questions and answers that will help you understand the declination exemption under F.S. 626.914(4):

Q: If the total dwelling replacement cost of residential structures insured by one policy totals $700,000  or more, but not one individual structure has a dwelling replacement cost of $700,000 or more, would the exemption requiring only one declination apply?  (For example, if there were three separate condominium structures each with a dwelling replacement cost of $400,000 covered under one policy for a total of $1.2 million.)

A: No, the exemption requiring only one declination will not apply if there is no single residential structure with a dwelling replacement cost of $700,000 or more. Even though one policy will be issued to cover all of the buildings included in a single condominium association, an agent cannot use the aggregate replacement cost value of the buildings to reach the threshold. This is because the language in the statute specifically refers to “the residential structure.” The agent will only need one declination if any residential structure has a dwelling replacement cost of $700,000 or more, but the qualifying structure must be “residential.” It must have dwelling units and cannot be solely a pool, commercial unit, or other common area.

Q: If an individual coverage such as liability was written on a residential structure with a dwelling replacement cost of $700,000 or more, would the one declination exemption apply?

A: Yes. So long as the residential structure has a dwelling replacement cost of $700,000 or more, any type of coverage that requires a diligent effort would require only the one declination. Section 626.914(4), Florida Statutes, does not limit the type of coverage sought to a property policy. It specifically states: “diligent effort means seeking coverage from and having been rejected by at least one authorized insurer currently writing this type of coverage and documenting this rejection."
What coverages fall under the E&O category?
When professions require E&O type coverage, many of the products include E&O in a package commonly referred to as a “professional liability” policy. On October 1, 2011, the Office of Insurance Regulation stated that professional liability could be considered E&O insurance. Thus, only a disclosure form is necessary when professional liability coverage is purchased.

*This does not include medical malpractice or professional liability for a licensed medical facility or personnel.
Do exempt coverages include any personal lines?
As of July 1, 2021, except for personal lines flood, no personal lines coverages are exempt from the diligent search requirement.
What are highly protected risks?
"Highly Protected Risk" is the name given to substantial commercial properties with extensive protection systems and superior construction, and involves sophisticated risk management and loss control. Rating these risks using traditional manual rating is not feasible given the large size and complexity of the risk.
Who do I contact if I have additional questions about Eligibility to Export/Diligent Effort?
If you have additional questions about Eligibility to Export/Diligent Effort, please contact Agent Services at 800-562-4496, option 1 or email agent.services@fslso.com.