Can surplus lines policies be written for coverages that may violate public policy?

Surplus lines policies are designed to provide coverage for risks that standard insurance markets typically cannot or will not insure. However, even though surplus lines insurers are not subject to the same regulations as admitted carriers, they still operate under the framework of public policy. This means that any coverage provided must not contravene established legal principles or violate public policy.

Public policy typically encompasses various state and federal laws aimed at protecting the interests of the community and maintaining order. For example, insurance for illegal activities or risks that could harm public safety would not be permissible. Thus, while surplus lines insurers have more flexibility in terms of the risks they underwrite, any policies written must still adhere to overarching legal standards that reflect public policy.

This understanding emphasizes the importance of compliance with legal limitations, ensuring that even alternative insurance solutions respect broader societal norms and regulations.