Diligent Search
Also known as: Diligent Effort, Diligent Search Affidavit
A diligent search (also called a diligent effort) is the legally required, documented attempt to obtain coverage from admitted insurers before a risk may be placed with a non-admitted carrier in the excess and surplus market. The rule exists because surplus lines is meant to be a market of last resort, not a shortcut around state-regulated carriers. Most states require the producer or surplus lines broker to obtain a set number of declinations — frequently three — from admitted carriers actually writing that class of business, and to record those refusals on an affidavit or diligent-search form filed with the state or the stamping office.
For a small-business buyer, the diligent search is the gatekeeping step that determines whether your surplus-lines placement is even valid. If your risk — say an unusual liability exposure or a heavily loss-burdened account — genuinely cannot be written by admitted carriers, the documented declinations clear the way to bind coverage that would otherwise be unavailable. The requirement protects you as well: it forces the broker to test the admitted market first, where policies carry guaranty fund protection, rather than defaulting you into a non-admitted policy that lacks that backstop and carries a surplus lines tax.
The practical nuance is that many states waive or streamline the diligent-search requirement for risks appearing on an export list (classes officially recognized as unavailable from admitted carriers) or for certain sophisticated "exempt commercial purchasers." Rules on how many declinations count, which carriers qualify, and how long records must be kept vary meaningfully by state, so buyers should expect their broker to explain and document the process. Keep a copy of the completed affidavit — it is your evidence that the surplus-lines placement was compliant, which matters if the policy or the tax filing is ever questioned. In most states the producer must document at least three declinations from admitted carriers before binding surplus-lines coverage, though the federal Nonadmitted and Reinsurance Reform Act (NRRA) exempts qualifying “exempt commercial purchasers.”
Real-world scenario
Neon Harbor Nightclub, a 480-capacity late-night venue in Fort Lauderdale, needed a general liability program with high liquor liability limits before its lease renewal. Its retail agent shopped four standard-market carriers, but every admitted insurer declined the risk: two cited the assault exposure, one capped liquor limits at $50,000, and the fourth simply issued a formal declination. Because the only viable market was a non-admitted excess & surplus insurer, Florida law required the surplus lines broker to complete a diligent search — documenting the three admitted declinations before binding.
With the diligent-search affidavit filed, the broker placed a $1,000,000 per-occurrence / $2,000,000 aggregate policy carrying a $250,000 assault-and-battery sublimit and a $5,000 deductible. The annual premium came to $46,000. On top of that, the club paid a 4.94% Florida surplus lines tax of $2,272, a $28 stamping-office service fee, and a $500 broker fee, bringing the total cost to $48,800. An admitted comparison quote, when finally offered mid-term, was $61,000 with a $100,000 liquor cap — confirming the E&S placement was the better deal.
Eight months later a patron was injured in a fight and sued for $400,000. The insurer paid a $150,000 settlement plus $22,000 in defense costs, all within the $250,000 assault sublimit, after the club absorbed its $5,000 deductible. Because the diligent search was properly documented, the placement stood up cleanly and the claim paid without a coverage dispute.
How it affects your premium
A diligent search itself carries no separate premium — it is a compliance step — but it directly shapes the cost and taxes of the surplus lines policy it unlocks. The following factors drive what a buyer ultimately pays once a diligent search clears the way to a non-admitted market:
- Number of admitted declinations required — most states require documenting 3 rejections from admitted carriers; harder-to-place risks burn more broker time gathering them, which can raise broker fees.
- State surplus lines tax rate — the surplus lines tax (typically 3%–6% of premium) is added only because the diligent search confirmed no admitted market exists.
- Stamping-office fees — states with a surplus lines stamping office add a small per-policy service fee (often 0.04%–0.4%) to review filings.
- Class of business — inherently distressed classes (bars, vacant buildings, cannabis) fail the admitted market more often, so diligent search is routine and premiums run higher.
- Limits and sublimits requested — higher per-occurrence limits and specialty sublimits push the base premium the tax is calculated on.
- Export list status — some states pre-approve certain classes for E&S placement, waiving the search and reducing broker administrative cost.
- Documentation quality — sloppy diligent-search records can trigger fines from the department of insurance, an indirect cost passed through the broker relationship.
Common misconceptions
Myth: A diligent search is a background check on the business owner.
Reality:
It is not about the insured's credit or criminal history. A diligent search documents that a broker genuinely tried and failed to place coverage with admitted carriers before turning to the surplus lines market.
Myth: Any broker can place surplus lines coverage after a quick phone call.
Reality:
Only a licensed surplus lines broker can bind non-admitted coverage, and most states require documented declinations (usually three) before the placement is legal.
Myth: The diligent search adds a big fee to my premium.
Reality:
The search itself has no set charge; what you see added are the state surplus lines tax and any stamping-office fee, which apply to the policy the search made possible.
Frequently asked questions
How many carrier declinations do I need for a diligent search?
Most states require three declinations from admitted carriers, though the exact number and documentation format vary by state. Your broker keeps these on file as an affidavit.
Does my risk still need a diligent search if it's on the state export list?
Usually no. Classes on a state's export (or "white") list are pre-approved for the surplus lines market, so the broker can place coverage without collecting individual declinations.
Who is responsible for completing the diligent search — me or my broker?
Your licensed surplus lines broker completes and files it. As the insured you simply cooperate by allowing the shopping process, but the compliance obligation rests with the broker.
What happens if the diligent search isn't documented properly?
The department of insurance can fine the broker and, in disputes, the placement's validity can be questioned — one reason brokers keep meticulous declination records.
Will a diligent search make my policy more expensive?
The search has no direct charge, but the surplus lines policy it enables carries a state surplus lines tax and often a stamping fee that admitted policies do not.
Sources cited
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