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Committee approves bill allowing nonadmitted insurers to write garage liability to help small dealers
Summary
Senate Bill 18 was advanced by the Senate Banking and Insurance Committee to allow nonadmitted (surplus-lines) carriers to provide garage liability coverage for motor vehicle dealers, supporters said this would expand market options for small dealers who are struggling to find coverage.
Senate Bill 18, approved by the Kentucky Senate Banking and Insurance Committee, would permit nonadmitted (surplus-lines) insurers to offer garage liability coverage required for motor vehicle dealer licenses in Kentucky, supporters said.
Adam Sheridan of Reed Brothers Insurance Services in Somerset told the committee that the marketplace for garage liability has contracted sharply in recent years. "When I started, there were more insurance companies than I could count. Now I tell people I can count on one hand how many insurance companies offer this coverage in the state of Kentucky," Sheridan said. He and sponsor Senator Girdler said the shortage leaves small, community dealers with few or no options to obtain the coverage required to keep a dealer license.
Supporters said allowing nonadmitted carriers would increase competition and access. Senator Girdler explained that nonadmitted carriers (often called surplus lines) already provide tailored risks in other lines, and have been available in Kentucky since the 1970s. Committee members and witnesses discussed consumer protections: nonadmitted carriers are not regulated by the Department of Insurance in the same way as admitted carriers, so agents and brokers have a role in vetting solvency and suitability. Officials noted that agents carry errors-and-omissions coverage and that agents advise clients on carrier financial health.
Committee members asked whether extending the market would preserve consumer protections in the event of insolvency. Witnesses said agents and brokers are the principal safeguard; they also noted surplus-lines carriers register with the department and pay taxes on business written in Kentucky. Committee members emphasized the need to ensure policyholders would not be left uncompensated if a nonadmitted carrier failed.
Adam Sheridan told the committee there are more than 2,500 dealer licenses in Kentucky and that the shortage of garage liability insurers disproportionately affects smaller, community dealers that support local events and youth sports.
On a roll call, the committee passed Senate Bill 18 with a favorable recommendation. Those recorded as voting "aye" included Senator Rocky Adams; Senator Douglas; Senator Elkins; Senator Girdler; Senator Howell; Senator Rawlings; Senator Storm; Senator Yates; and Chair Carpenter (9 ayes). The bill will proceed to the next stages of the legislative process.
