Volume 2, No. 5 - July 2011

In The Know

- Keeping you informed is what it's all about

2011 Legislative Session Update

HB 1087 - Insurance and HB 99 - Commercial Insurance Rates

Diligent Effort Changes

Effective July 1, 2011, the law changed regarding the surplus lines diligent effort requirement. You are no longer required to perform a diligent effort or complete a diligent effort form prior to quoting or binding surplus lines policies for certain classes of business. In addition, the other requirements listed under section 626.918, Florida Statutes, no longer apply to these classes. You will be required to obtain a consent form to be signed by the insured advising them that the coverage is quoted with a surplus lines carrier.

The classes which this exemption applies to are as follows:

  • Excess or umbrella
  • Surety and fidelity
  • Boiler and machinery and leakage and fire extinguishing equipment
  • Errors and omissions
  • Directors and officers, employment practices and management liability
  • Intellectual property and patent infringement liability
  • Advertising injury and Internet liability insurance
  • Property risks rated under a highly protected risks rating plan

Effective October 1, 2011, the following classes are added to the exemption:

  • Fiduciary liability
  • General liability
  • Nonresidential property, except for collateral protection insurance as defined in s. 624.6085
  • Nonresidential multiperil
  • Excess property
  • Burglary and theft

Classes of business other than those listed above, including property coverage for apartment and condominium buildings and all personal lines continue to be subject to s. 626.918, F.S., and you will still need to go through the diligent effort process including completing a diligent effort form.

A form established by the FSLSO is available at FSLSO.com. You can review their Disclosure Matrix and Sample Surplus Lines Disclosure.

The new law does not reference a specific form but FSLSO developed this one and it is recommended that you use it. Remember, it is the original producing agent's responsibility to obtain the insured's signature and retain the form. For more information on this subject you should review the links to the legislation further down.

Public Adjuster Apprentices

Applicants for a public adjuster apprentice license now have two additional adjuster designations, Certified Adjuster (CA) and Certified Claims Adjuster (CCA), from which to choose in order to qualify for licensure, among other requirements.

Applicants for Licensure with Criminal Histories

Permanent Bar:

Persons who have committed certain felonies are permanently barred from applying for licensure. Other felonies and certain misdemeanors require the applicant to wait for a disqualifying period to lapse prior to applying for licensure. The permanent bar and the disqualifying periods apply regardless of whether adjudication was withheld or an applicant's civil rights have been restored.

  • An applicant who has committed a felony of the first degree, a capital felony, a felony involving money laundering, fraud, or embezzlement, or a felony directly related to the financial services business is permanently barred from applying for a license. This bar applies to convictions, guilty pleas, or nolo contendere pleas, regardless of adjudication, by any applicant, officer, director, majority owner, partner, manager, or other person who manages or controls any applicant.
    • The term "financial services business" means any financial activity regulated by the Florida Department of Financial Services, the Florida Office of Insurance Regulation, or the Florida Office of Financial Regulation.
    • The terms "felony of the first degree" and "capital felony" include all felonies designated as such by the Florida Statutes, as well as any felony so designated in the jurisdiction in which the plea was entered or judgment was rendered.

Disqualifying Periods:

The following disqualifying periods must be met prior to application to be considered for licensure and the disqualifying periods begin upon the applicant's final release from supervision or upon completion of the applicant's criminal sentence:

  • A 15-year disqualifying period exists for all felonies involving moral turpitude that are not specifically included in the permanent bar above.
  • A 7-year disqualifying period exists for all felonies to which neither the permanent bar nor the 15-year disqualifying period applies.
  • A 7-year disqualifying period exists for all misdemeanors directly related to the financial services business.

Please note: Aggravating and mitigating factors can affect the true length of a disqualifying period. However, mitigation may not result in a disqualifying period less than 7 years and may not mitigate the disqualifying periods entirely. The disqualifying periods begin upon the applicant's final release from supervision or upon completion of the applicant's criminal sentence, including payment of fines, restitution, and court costs for the crime for which the disqualifying period applies. After the disqualifying period has been met, the burden is on the applicant to demonstrate that the applicant has been rehabilitated, does not pose a risk to the insurance-buying public, is fit and trustworthy to engage in the business of insurance pursuant to s. 626.611(7), F.S., and is otherwise qualified for licensure.

Meeting the conditions above does not automatically guarantee the applicant will be granted licensure.

[See Chapters 2011-160 and 2011-174, Laws of Florida]

SB 1816 - Surplus Lines Insurance

Florida joins other states around the country in bringing its surplus lines business in line with the federal Nonadmitted and Reinsurance Reform Act (NRRA).

SB 1816 was signed into law authorizing the Florida Office of Insurance Regulation to enter into a multi-state agreement for the collection of non-admitted insurance taxes as outlined by the NRRA.

SB 1816 includes changes that affect Florida's surplus lines agents. With regards to agent invoicing procedures, SB 1816 provides that the billing and payment of the Florida Surplus Lines Service Office fee will be moved to a quarterly basis which aligns it with the current tax and assessment billing cycle. It amends the payment schedule for independently procured coverage policies to quarterly, as well.

Additionally, the bill aligns the filing deadline for Florida surplus lines agents' quarterly report affidavit with the payment of all surplus lines taxes, fees and assessments, requiring the filing to be made on or before the 45th day following each calendar quarter.

For multi-state policies effective on or after July 21, 2011, surplus lines agents will file the total policy premium with the home state of the insured as per the NRRA. SB 1816 provides that for multi-state risks for which Florida is the home state, the total policy premium will be taxed at the rate of the state where the risk or exposure is located. This provision is specific only to taxes; Florida assessments and fees will be charged on the gross premium of the multi-state risk.

The Florida Surplus Lines Service Office has a webinar and other information to assist surplus lines agents in understanding and complying with this new legislation.

[See Chapter 2011-46, Laws of Florida]

Clarification on Public Adjusters, Contractors, and Conflict of Interest

In last month's issue, it was mentioned that legislation passed in SB 408 (Chapter 2011-39, Laws of Florida) requires a licensed contractor to be licensed as a public adjuster in order to adjust a claim on behalf of the insured (effective January 1, 2012). The legislation states in ss. 626.854(16), F.S., that a licensed contractor or subcontractor is prohibited from adjusting a claim on behalf of an insured with regard to residential property insurance policies and condominium unit owner policies if such contractor or subcontractor is not a licensed public adjuster.

A person licensed as both a public adjuster under Chapter 626 and contractor under Chapter 489 may not serve in both capacities for the same loss. Section 626.8795, Florida Statutes, prohibits a public adjuster from participating "directly or indirectly, in the reconstruction, repair, or restoration of damaged property that is the subject of a claim adjusted by the licensee." Further, a public adjuster "may not engage in any other activities that may be reasonably construed as a conflict of interest, including soliciting or accepting any remuneration from, of any kind or nature, directly or indirectly; and may not have a financial interest in any salvage, repair, or any other business entity that obtains business in connection with any claim that the public adjuster has a contract or an agreement to adjust."

 

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