What constitutes an "exception" to the diligent search requirement?

The concept of an "exception" to the diligent search requirement in surplus lines insurance pertains to circumstances under which a broker is not required to exhaust all options with admitted insurers before seeking coverage from non-admitted carriers. The correct focus here is on how the terms offered by admitted insurers influence this process.

When terms from an admitted insurer are deemed unacceptable to the insured, it provides a valid basis for the broker to consider non-admitted insurance options. If the insured finds the coverage or terms from an admitted insurer to be insufficient—whether due to factors such as inadequate limits, exclusions, or deductibles—this makes the diligent search requirement less stringent. This means that the broker can promptly seek coverage through a surplis lines market without having to provide quotes from all admitted insurance options, since the offered terms do not meet the insured's needs.

Thus, the choice that accurately reflects what constitutes an "exception" is when the offered terms from admitted insurers are unsuitable, allowing for alternative placement of coverage in the surplus lines market.