The ACORD 189 Excess and Surplus Lines Notice to Applicant is the disclosure form provided to insureds when their coverage is being placed in the excess and surplus (E&S) lines market rather than through an admitted carrier. Most states require insureds to acknowledge in writing that they understand their policy is being placed in the non-admitted market and what that means for their protections.
The ACORD 189 is required whenever coverage is placed in the E&S market: • Accounts that don't qualify for admitted market coverage • Specialty risks not written by admitted carriers (certain contractors, entertainment, cannabis, etc.) • High-limit placements that exceed admitted market capacity • Accounts with significant loss history that standard markets won't write • Unique or unusual operations for which admitted rates are not filed • Umbrella/excess placements above admitted market limits
The ACORD 189 notifies the insured that:
• Their coverage is being placed with a non-admitted insurer • Non-admitted carriers are not subject to state rate and form regulation in the same way admitted carriers are • If the non-admitted carrier becomes insolvent, the state guaranty fund may NOT cover the claim (in most states) • The policy terms may differ from standard admitted market policies • The insured had the right to seek coverage from the admitted market and was unable to obtain it (or chose not to)
In many states, the insured must sign the ACORD 189 before the surplus lines policy can be bound. This signature is a regulatory requirement, not just a best practice.
Agents placing coverage in the E&S market must make sure clients understand the key differences:
Admitted carriers are licensed in the state, file their rates and forms with the insurance department, and are covered by the state guaranty fund if they become insolvent.
Non-admitted (surplus lines) carriers are not licensed in the state, but are authorized to do business there through the surplus lines regulatory structure. They are NOT covered by the state guaranty fund.
The guaranty fund protection is the most important difference to communicate. If a major admitted carrier becomes insolvent, the state guaranty fund covers claims up to a per-claim limit. If a surplus lines carrier becomes insolvent, policyholders generally have no guaranty fund protection and may recover little or nothing.
In most states, coverage may only be placed in the surplus lines market after the agent or broker has made a "diligent search" of the admitted market and been unable to obtain the coverage there. The diligent search requirement protects the admitted market by ensuring surplus lines is a market of last resort, not first resort.
The number of admitted market declinations required before surplus lines placement is authorized varies by state — typically 3 admitted market declinations. Some states have "export lists" of risk types that automatically qualify for surplus lines without a diligent search.
Agents must document their diligent search in the file. Placing coverage in the surplus lines market without a documented diligent search (in states that require it) is a regulatory violation.
Not obtaining the insured's signature on the ACORD 189 before binding the surplus lines policy
Not explaining the guaranty fund limitation to the insured — this is the most material difference from admitted coverage
Not documenting the diligent search before placing in the surplus lines market
Not including the surplus lines tax on the client invoice — surplus lines policies are subject to state surplus lines tax paid by the insured
Confusing eligible non-admitted carriers with ineligible carriers — only eligible surplus lines carriers can be used
Send your client a plain-English intake link. When they finish, the completed ACORD 189 and all required companion forms are generated and ready to submit.