Diligent Effort

Diligent effort means seeking coverage from and having been rejected by at least three authorized insurers currently writing this type of coverage and documenting these 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 authorized insurer currently writing the requested coverage and documenting the rejection.

All personal lines coverages require a diligent effort and a Surplus Lines Disclosure Form.  Most commercial coverages no longer require a diligent effort but require the Surplus Lines Disclosure Form instead.  Wet marine, aviation, and transportation risks are exempt from both. To determine if a diligent effort is required, please review the Diligent Effort/Disclosure Matrix.

No. 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.  

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 no single residential structure has a dwelling replacement cost of $700,000 or more. Even though one policy will be issued to cover all the buildings included in a single condominium association, an agent cannot use the aggregate replacement cost value of the buildings to reach the threshold. 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: Does the one declination exemption apply if an individual coverage such as liability was written on a residential structure with a dwelling replacement cost of $700,000 or more?

 A: Yes. So long as the residential structure has a replacement cost of $700,000 or more, any coverage requiring a diligent effort would need only one declination. Section 626.914(4), Florida Statutes, does not limit the type of coverage sought to a property policy. It states explicitly: "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."

When professions require E&O coverage, many 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 purchasing professional liability coverage.