Volume 4, No. 10 - October 2015

Compliance Corner

This section has been created to assist you in keeping your insurance business in compliance. The items are intended as reminders only. Note: Division publications may include references to the Florida Statutes and/or the Florida Administrative Code. The laws noted in our publications are/were in effect at the time of publication but may have been repealed, amended or replaced and new laws may have been enacted subsequently.

ins policyCompliance Topic of the Month:
Surplus Lines ~ Exporting Coverage

Surplus Lines - Placing Coverage Properly versus Improperly

One of the Florida Legislature's stated purposes of the Surplus Lines Law is to protect authorized insurers from unwarranted competition by unauthorized insurers who are not subject to the same requirements. Additionally, there is no guaranty fund for unauthorized insurers if one should become insolvent, thus offering no consumer protection. It's for this reason Florida law states that a surplus lines agent cannot export insurance coverage for a risk when the risk is already covered by, or can be covered by, an admitted/authorized insurer. The Department issued a bulletin in 1997 to further remind the industry that doing so is a violation of the Florida Insurance Code, if the policy is procurable from an authorized insurer. General lines agents are reminded that if they are unable to place a risk with an admitted carrier (either a company with whom they are appointed or through another agent appointed by an admitted company), they must utilize a Florida licensed and appointed surplus lines agent if they export the risk to an eligible surplus lines insurer. For example, if an admitted/authorized insurer were willing to issue a condominium's insurance policy excluding wind coverage, then provided all the requirements of s.626.916, F.S. have been fulfilled, the surplus lines agent would be permitted to export the wind coverage, and only the wind coverage. [See sections 626.914 and 626.916, F.S.]

Click here to read the 97-007 bulletin >>

Surplus Lines - Diligent Effort Requirement

Prior to exporting a risk to the surplus lines market, a legitimate diligent effort is required to be conducted by the producing agent of insurers authorized to transact and actually write that kind and class of insurance in Florida. Surplus lines agents must verify that the diligent effort has been made by requiring a properly documented statement of diligent effort from the retail or producing agent. However, to be in compliance with the diligent effort requirement, the surplus lines agent's reliance must be reasonable under the particular circumstances surrounding the export of that particular risk. Reasonableness shall be assessed by taking into account factors which include, but are not limited to, a regularly conducted program of verification of the information provided by the retail or producing agent. Only searching insurers that an agent knows will not place coverage for the risk is a violation of Florida law. Fraudulently completing a diligent effort form (e.g. fake contact names, dates, signatures) is a serious violation and will be prosecuted by the Department.
[See s.626.916, F.S.]

Diligent Effort Form

Lawful Fees and Reimbursements - MGA, General Lines and Surplus Lines Agents

One of the most frequently asked questions by licensees is whether they can charge fees in addition to the premium established by insurer filings through the Florida Office of Insurance Regulation. Following are the only lawful fees a licensee can charge under the Florida Insurance Code:

A general lines agent may:

  • charge a per-policy fee not to exceed $10 to cover the administrative cost associated with selling motor vehicle insurance if the policy coverage is limited to Personal Injury Protection (PIP) and Property Damage (PD) under s.627.7295(5)(a), F.S.
  • seek reimbursement from a consumer for the exact amount charged to the agent or agency for a motor vehicle report (MVR) required to underwrite a motor vehicle policy under s.627.7295(5)(b), F.S.

A Managing General Agent (MGA) may charge:

  • up to a per-policy fee not to exceed $25 in the aggregate, .i.e., if the consumer purchases more than one policy, only one policy fee may be charged under s.626.7451(11), F.S.

A Surplus Lines Agent may charge:

  • up to a $35 policy fee (taxable as premium) per policy under s.626.916(4), F.S.

Any agent or agency accepting premium payments by credit card may seek reimbursement up to the exact amount charged for premium payments made by credit card transaction under s.626.9541(1)(o)2., F.S.

Requirement to Provide Unlimited Access to Records by the Department

In last month's issue, we discussed the Department's right to conduct investigations and attain access to licensee records. We'd like to clarify the Department's authority and our guidelines when Department personnel are seeking access to records in the agency or office setting.

Section 626.748, F.S. requires licensees to maintain records in a "readily accessible" manner, and similarly, s.624.318, F.S., require that insurance records be made readily available to the Department. The statute do not provide licensees with the ability to limit access to records or establish the conditions under which the records will be accessed by Department investigators. The Department is not required to set an appointment to view records, or provide a list of records they wish to review, though they may do so in some circumstances.

In short, Department investigators or other staff are to be provided with free, unfettered access to licensee insurance records. Failure to provide reasonable access is a violation of s.624.15, F.S., a misdemeanor.

Escrow Disbursements - Chapter 69B-186.008, F.A.C. - Adoption of Rule

The new rule in the Florida Administrative Code, 69B-186.008, has been adopted and was effective October 28, 2015. The settlement agent must certify the forms of the transaction have been reviewed and provide the following certification on every title insurance closing conducted in Florida:

“I have reviewed the Closing Disclosure, the settlement statement, the lender’s closing instructions and any and all other forms concerned with the funds held in escrow, including any disclosure of the Florida title insurance premiums being paid, and I agree to disburse the escrow funds in accordance with the terms of this transaction and Florida law.”

The title agency must provide the parties to the transaction with the following information:
• Identity of the settlement agent
• Name and license number of each title agency involved in the transaction
• A written cost comparison of the title insurance costs shown on the Closing Disclosure form and the promulgated premiums being charged, if the amounts differ. The comparison is not needed when the costs listed on the closing Disclosure form are the same as the promulgated premium being charged for each title insurance policy.

The title insurance agency must obtain the authorization of the buyer/borrower and the seller to hold and disburse the escrow funds. The parties must also acknowledge the title agency will disburse the escrow funds to pay the title insurance premiums as required by the Florida Insurance Code, which may be different than the amounts shown on the Closing Disclosure form.

The DFS form adopted under the rule, Form DFS-H1-2146, "Florida Insurance Premium "Disclosure & Settlement Agent Certification" may be used to comply with the requirements of the rule.

Assumed or Fictitious (D/B/A) Names Must be Reported to Us

An assumed or fictitious, "doing business as" business name, is not a separate legal entity and is not required to hold a separate agency or firm license. However, the Department must be informed of the intent to use an alternate name, whether when first applying for an agency license or after a license has been issued.

After an agency license is effective, an agency using a fictitious name must report the name in writing to the Bureau of Licensing and provide evidence that the name has been established by the state agency responsible for maintaining those records - in Florida, fictitious names are filed with the Florida Department of State, Division of Corporations. Include a copy of the fictitious name filing when notifying the Department of the intent to change the agency's business name to include the fictitious or "D/B/A" name. An agency cannot register more than one fictitious name. Request for name changes should be sent to AgentLicensing@MyFloridaCFO.com.

Title Agencies: Update Your Info for the 2016 Administrative Surcharge

Subsection 624.501(27)(e)2, F.S., requires any title insurance agency licensed in Florida on January 1 of each year to remit an administrative surcharge of $200 to the Florida Department of Financial Services. Therefore, we are reminding all title agencies that the 2016 administrative surcharge due date will soon be approaching.

NOTE: This surcharge is not related to the one imposed on each new policy written due to the receiverships of National Title Insurance Company and K.E.L. Title Insurance Group, Inc.

Any title insurance agency licensed in Florida on January 1, 2016, will be emailed a reminder a few days afterward to the agency's email address on file with the Department. To ensure you receive the invoice and avoid failing to pay by the January 30 due date, please log in to the MyProfile account for your title agency and make sure the correct email address is on file. While doing so, we also recommend you do the same for your individual MyProfile account.

Occasionally we discover agencies that were not aware of the reminder because of the retirement or termination of the employee assigned to monitor the email address provided to the Department. Failure to open the email sent by the Department containing the administrative surcharge reminder does not release an agency from the January 30 deadline. Please verify your information soon so this does not happen to you. If you need our assistance, you may contact us at Title@MyFloridaCFO.com to assist you through the steps to update your information. Be proactive; not reactive.

Failure to pay the surcharge on or before January 30, 2016 will result in administrative action which could include a fine, in addition to the original surcharge. Payment must be made securely online via the title agency's MyProfile account. Paper checks are not accepted.

Compliance Information

Department licensees and consumers can access compliance information at the Division's web page Compliance Information. Additional information is available by type of license at our Frequently Asked Questions web page.