California rules settlement agreement not precedential
April 30, 2007/For Immediate Release---------------Release No. 05-07
Kansas City, MO - Officials with the National Association of Professional Surplus Lines Offices say they support a decision by the State of California Office of Administrative Law that a settlement agreement involving the California Department of Insurance and an insurance company cannot be viewed as a precedential decision and thereby used as the basis for penalties in other cases.

“We believe this is a positive decision for the brokerage industry as it does not add another level of regulation,” said NAPSLO President William H. Newton [Mr. Newton is also President of Lemac Associates of Los Angeles]. “Allowing such settlement agreements to be used as a precedent that would result in underground regulation, which circumvents the rulemaking process, and the OLA agreed.”

The decision follows a suit filed by the Independent Brokers and Agents of the West, which NAPSLO supported with written objections, to the Department’s contention that a settlement in a 2006 case with American Reliable Insurance Company could be used as the basis for fines in other cases. 

The settlement agreement included language concluding that a broker was a producer for a company and it included a fine for the company. The department apparently intended to fine other companies over the conduct of a broker, based on this settlement agreement with American Reliable.

In the review, the Office of Administrative Law agreed that a settlement agreement could not become a precedential decision because the decision had not been adjudicated and the state's Administrative Procedure Act (APA) had not been followed. State Agencies are prohibited from issuing rules unless the rules comply with the APA.

BACKGROUND
NAPSLO is a national trade association based in Kansas City, MO, which represents the surplus lines insurance industry.  Surplus lines is a specialized segment of the insurance business that is also referred to as nonadmitted, specialty and/or excess lines.  Risks are placed in this market when they cannot be placed in the admitted/licensed market. 

NAPSLO represents surplus lines insurance agents/brokers and surplus lines insurance companies.  NAPSLO has over 1,500 member offices in the United States, Canada, Germany, and England. Acting as a source of information, NAPSLO spends a great deal of time identifying and explaining the vital role surplus lines plays in the insurance industry, including tracking and informing members on current state and federal regulations. NAPSLO also provides networking and educational programs for its members and scholarship and internship programs for qualified students interested in careers in the insurance industry.