USING A NON-ADMITTED INSURANCE COMPANY IN CALIFORNIA
In the past certain agent, brokers and companies used a non-admitted insurance carrier or com- pany for Laundromat owners who did not keep their Laundromats fully attended. In response to questions from clients about these policies the following has been prepared. A reason you might use a non-admitted insurance company in California is if the coverage needed is not available from an admitted company. There are many admitted companies selling Laundromat insurance in the State of California. Non-admitted carrier should not be your first choice in selecting your Laundromat insurance company. One notable point you should carefully consider is that many California leases may not allow the use of a non-admitted insurance company to fulfill their terms. It would be prudent for you to read your lease provisions to ensure that you are not violat- ing any of the terms of your lease by looking in the insurance requirements section. If you decide to use any non-admitted insurance company, purchased from any broker or agent, you should probably notify your Landlord and receive written permission for this choice. Your Landlord may require you to produce records showing you have been declined by three admitted insurance companies before they will allow any lease modification.
NON-ADMITTED (OR SURPLUS LINES) INSURANCE COMPANIES
An admitted carrier in California must follow the guidelines of the California Department of Insurance. The admitted companies agree to abide by the State of California rules, maintain adequate resources to pay claims, have their policies approved, their rates approved and pay into a special fund which provides protection for the policyholder should the insurance company ever become insolvent. When you use a non-admitted carrier in the State of California your broker or agent should be able to provide you with rejections from three admitted companies. It is reasonable to expect that as a customer you are fully informed of the risks you may encounter when your business has been placed with a non-admitted carrier.
WHY DO SOME BROKERS, AGENTS AND COMPANIES USE A NON-ADMITTED CARRIER?
Sometimes they may not know the laws of California and perhaps because they earn a profit from the sales of insurance, so you should know that they are no better or different than any other insurance agent you deal with for your car, your home or your Laundromat. The more policies they sell, the more money they make for themselves. The use of a non-admitted carrier usually comes about when an agent or broker,finds their admitted carrier has underwriting requirements prohibit- ing the sale to certain risks or that the rates are too expensive to be competitive. One such problem is the attended versus unattended Laundromat in California.
The traditional definition of an attended Laundromat is when your attendant leaves the entrance and exit doors are locked. When an attendant is not present, the store is closed. Laundromat owners have sometimes skated on the edge of risk when they created their own definitions by including “nearly always” and “most of the time” or “she only goes next door for lunch” as adequate for “fully attended.”
The risk is when you have a loss and the application you signed requires your Laundromat to be fully attended. You expose yourself to legal action from your insurance carrier and possibly your Landlord. You need to check your risks before you buy from any sales person and make your own decision on what is best for you.
