Opinion Number ( 1993 )

Dear Representative Bruneau:

In response to your request, I have researched the issue of whether local governing authorities are exempted from the provisions of LSA-R.S. 22:1257, governing the securing of surplus lines insurance, by virtue of LSA-R.S. 33:3062.

It should be noted that LSA-R.S. 22:1257 was scheduled to be redesignated as LSA-R.S. 22:739 by Act 1031 of the 1991 regular Legislative Session. However, this Act was subsequently repealed in 1992. Therefore, LSA-R.S. 22:1257 remains as it was prior to Act 1031.

LSA-R.S. 22:1257, in its current form, states:

If certain insurance coverages cannot be procured from authorized insurers, such coverages herein designated as `surplus lines,' may be procured from unauthorized insurers provided that the insurance is procured through a licensed surplus line broker.

The Louisiana Insurance Code does not grant any exceptions to this provision to local governing authorities of this State. The local authorities contend that they are exempt by LSA-R.S.33:3062 which states:

A. The governing authority of any municipality, parish, school board or interlocal risk management agency authorized pursuant to R.S. 33:1341, et seq., hereafter referred to in this part as the `governing authority,' may contract for any type of insurance protection for itself or its officers and employees including self insurance and shared risk programs . . .

Section B of this same article exempts self-insurance or shared risk programs from regulation under the Louisiana Insurance Code. This section states:

B. A governing authority participating in a program of self-insurance or shared risk shall not constitute an insurance company or an insurer under the laws of this State, and the development and administration of such a program shall not constitute doing an insurance business. An agreement or contract entered into by any such governing authority providing for the creation and maintenance of self-insurance or shared risk program shall not be deemed to constitute insurance as defined by R.S. 22:5, nor shall such a program be subject to the provisions of Chapter 1 of Title 22 of the Louisiana revised Statutes of 1950.

The intention and effect of R.S. 33:3062 is well illustrated in its title; "Acquisition of Insurance; self-insurance or shared risk programs not insurance." This section clearly permits local governing authorities to obtain insurance protection for itself, its officers and employees. The types of insurance protection which may be obtained include self-insurance or shared risk programs. Section 3062 states that if the governing authority chooses to obtain either self-insurance or shared risk programs, these particular types of programs will not be deemed to be insurance. However, this Section does not provide a general exemption from insurance regulation, including Article 1257, for programs or coverages which do not fall within the definition of self-insurance or shared risk programs.

Therefore, local governing authorities are subject to the provisions of LSA-R.S. 22:1257 and may only purchase surplus lines insurance if other insurance coverage cannot be procured from an insurer authorized to do business in the State of Louisiana.

If I may be of further assistance, please do not hesitate to contact me.

Yours Very Truly,

Richard P. Ieyoub Attorney General

BY: STEPHEN M. WHITLOW Staff Attorney