Can surplus lines insurance cover risks that are illegal or contrary to public policy?

Surplus lines insurance is specifically designed to cover risks that standard insurance markets may not be able or willing to insure. However, it is important to note that surplus lines insurance cannot cover risks that are illegal or contrary to public policy. This principle ensures that insurance does not facilitate or endorse activities that are prohibited by law or that would undermine societal norms and regulations.

Coverage that would support illegal activities or violate public policy would undermine the integrity of the insurance system and could lead to adverse legal and ethical consequences. Insurers, including those in the surplus lines market, must adhere to these fundamental legal principles when offering coverage, ensuring they are operating within the bounds of the law. This reflects a broader commitment in the industry to promote responsible risk management and discourage activities deemed harmful or unlawful. Therefore, the assertion that surplus lines cannot cover illegal risks aligns with overarching legal and ethical standards in insurance practice.