Disclosure Statement

The disclosure statement should be provided on a separate page in 16-point bold font.

As long as the form conforms to the specifications, a broker may create their own version of the form.

The D-1 statement contains wording specified by statute that notifies the applicant that the insurance he or she is applying to purchase is with an insurer not licensed by the state of California. The disclosure statement must be signed by the applicant at the time the producer accepts an application for any insurance policy issued by a surplus lines insurer, other than to renew a policy.

In addition, the applicant is given five days after receiving a copy of the D-1 form to cancel coverage.

New versions can be used immediately; they are required for any application taken after the new effective date. Transactions issued with an outdated notice must be updated by the surplus line broker.

The surplus line broker must send the insured the updated notice of the form accompanied by a cover note advising that the new form replaces the original form received.

There is no grace period. The broker will need to go back and have the new version of the D-1 statement signed.

No. The D-1 text is set in statute.

It is not necessary for a surplus line broker to file a copy of the D-1 statement with the SLA.

There are two exemptions:

1. The D-1 form is not required if the insured qualifies as an Industrial Insured.
2. Policies renewed with the same carrier only require a signed D-1 form when the original policy is bound.

*NOTE: A Commercial Insured (Exempt Commercial Purchaser) is not exempt and must sign the D-1 Form.

An industrial insured is an insured that does both of the following:

1. The insured employs at least 25 employees on average during the prior 12 months.

2. The insured has aggregate annual premiums for insurance for all risks other than workers' compensation and health coverage totaling no less than twenty-five thousand dollars ($25,000), or obtains insurance through the services of a full-time employee acting as an insurance manager or a continuously retained insurance consultant. A "continuously retained insurance consultant" does not include:
     (i) an agent or broker through whom the insurance is being placed,
     (ii) a subagent or subproducer involved in the transaction, or
     (iii) an agent or broker that is a business organization employing or contracting with a person mentioned in clauses (i) and (ii).

An industrial insured is not required to sign the D-1 statement per CIC Section 1764.1(c). A D-2 statement is still required.

The agent, broker, or surplus line broker who received the originally signed D-1 statement from the insured must maintain the original in his or her records for a period of at least five years and send copies of the D-1 to all agents, brokers, or surplus line brokers involved in the transaction.

Scanned copies will meet the recordkeeping requirements of Sections 2190 to 2190.7 of the California Code of Regulations. The scanned copies must be a full replica of the document, clearly legible, and in a format that does not allow editing. Refer to Bulletin #1127.

The forms must be retained for 5 years after the cancellation or expiration date of the policy.

No. The original signed D-1 form is still valid.

The form must be signed by the insurance applicant.

The D-1 form can be signed by individuals who directly or indirectly possess the power to control the affairs of the business entity. Typically, this would be any partner, member, officer, director, manager, controlling person or shareholder owning 10 % or more interest in the business entity.

A corporate stamp is not acceptable as the signature for the D-1 form.

No. A typed signature is not acceptable as the signature for the D-1 form.

Digital signatures authorized by a digital signature certification authority are acceptable.

As noted on the California Secretary of State’s website, a digital signature is defined as “an electronic identifier, created by computer, intended by the party using it to have the same force and effect as the use of a manual signature.”

Digital signatures must be:

1. Specific to the person using it.
2. Verifiable.
3. Under the exclusive control of the person using it.
4. Linked to data so that if information on a signed form are changed, the digital signature becomes invalid.
5. Conforms to all other regulations adopted by the Secretary of State, as found on their website: https://www.sos.ca.gov/business-programs/business-entities/faqs/#top.

Examples:

It is acceptable for the insured to sign a copy of the D-2 form in lieu of the D-1 form if the agent presents the D-2 form in the quote packet.

The risk cannot be placed in the nonadmitted market if the applicant refuses to sign the D-1 form.