When can a broker be held liable for a policy sold from an unlicensed insurer?

A broker can be held liable for a policy sold from an unlicensed insurer primarily if they do not comply with state provisions. In the context of surplus lines insurance, states have specific regulations that govern which insurers are permitted to operate and what requirements must be met for brokers selling policies from these insurers.

If a broker sells a policy from an unlicensed insurer, they violate these state provisions, which can lead to liability because they are failing to ensure that the insurance product is sold within the regulatory framework set forth. This could expose the broker to legal repercussions if the policyholder experiences issues related to that insurance, such as an inability to resolve claims due to the insurer's unlicensed status.

The other scenarios presented do not establish a direct link to the broker's obligation under the law regarding licensed insurers. Therefore, compliance with state provisions is essential to protect not only the interests of the policyholder but also the integrity of the insurance market.