Volume 3, No. 3 - March 2014

Compliance Corner

This section has been created to assist you in keeping your insurance business in compliance. The items are intended as reminders only and are not necessarily the exact text of the Florida Statutes or Florida Administrative Code. The legal cites have been provided for your further reference.

Clarification on Retention for Agent, Adjuster, and Agency Records

In the February 2014 issue of the Insurance Insights, there was an article that briefly discussed records retention and department access to records. There was a little confusion by some our readers on one aspect of retention we want to clarify in addition to reminding other types of licensees about their records retention requirements.

Section 626.748, Florida Statutes, requires agents to keep records of policies transacted. These records include daily reports, applications, change endorsements, or documents signed or initialed by the insured concerning the policies. The records must be available to policyholders and the Department upon request. The records must be maintained in the agent's office or be readily by electronic or photographic means. Since the law does not provide a minimum limit as to how long the policy records must be maintained, it is recommended that they are maintained as long as the agent continues to transact insurance.

Every licensee is also required to preserve books, accounts, and records relating to a premium payment for at least three years after payment, per section 626.561, F.S. The law allows a licensee to maintain premium payment records by electronic or photographic means, as long as they are readily accessible in the licensee's office.

Section 626.875, F.S., states that the records of an adjuster relating to a particular claim or loss shall be retained in the adjuster's place of business for three years after the adjustment is completed.

Public adjusters have an additional specific requirement as to their written estimate for an insured/claimant. Subsection 626.854(12), F.S., states that public adjuster shall retain such written estimate for at least five years and shall make the estimate available to the claimant or insured, the insurer, and the department upon request.

It's always a good idea to maintain a backup copy of all required records in the event that a hurricane or other disaster damages the business. That way, you will be able to access policyholders' records and be able to provide assistance to them.

[See Sections 626.561, 626.748, 626.854, and 626.875, Florida Statutes]

Fingerprinting Requirement of Licensed Firms/Entities Reminder

If there is a change in ownership or control of any entity licensed under Chapter 626, F.S., or if a new partner, officer, or director is employed or appointed, a set of fingerprints of the new owner, partner, officer, or director must be filed with the Department within 30 days after the change. This includes insurance agencies, title insurance agencies, travel agencies holding a travel insurance license, managing general agents, firm reinsurance intermediary brokers, as well as others. The acquisition of 10 percent or more of the voting securities of a licensed entity is considered a change of ownership or control. Please note that for insurance agencies, fingerprints need not be filed for any individual who is currently licensed and appointed.

If you are required to be fingerprinted, you must do so through Florida's vendor, MorphoTrust USA, formerly L-1 Enrollment. You can register, request fingerprint cards to be mailed to you, and pay for fingerprinting by visiting www.L1enrollment.com/FLInsurance or by calling 1-800-528-1358. The fingerprinting fee is $55.50.

[See Section 626.202, Florida Statutes]

Working in the Industry After Being Suspended or Revoked

The Florida Insurance Code clearly states that it is unlawful during the period of suspension or revocation of a license or appointment for the former licensee to engage in or attempt or profess to engage in any transaction or business for which a license or appointment is required. This prohibition extends until the license is reinstated or, if revoked, a new license issued. Furthermore, the former licensee or appointee may not directly or indirectly own, control, or be employed in any manner by an agent, agency, adjuster, or adjusting firm.

Any former licensee or appointee in violation of this law commits a felony of the third degree, subjecting themselves to further action by the Department up to and including criminal prosecution.

Before hiring someone to work at your agency or firm we suggest you check to ensure that their license is not currently suspended or revoked.

[See Sections 626.015 and 626.641, Florida Statutes]

Inducements for Title Insurance

Under the provisions of subparagraph 626.9541(1)(h)3, Florida Statutes, a title insurance agent or agency may not provide any special favor, advantage or monetary consideration to another as an inducement for the sale of title insurance. A title insurance agent or agency that agrees to provide services at a reduced or no cost that are normally required of a real estate agent could be determined to have violated this statute. The minimum penalty for a violation such as this is a fine of $1,500 and one year probation for a first offense.

In addition, Regulation X of the Code of Federal Regulations also states this type of activity could be found to be a violation of the Real Estate Settlement Procedures Act (RESPA) for the title insurance agent and the other party. This regulation clearly states a person may not give or receive any "fee, kickback or other thing of value...incident to or part of a settlement service involving a federally related mortgage loan..."

Regulation X also defines thing of value to include, "without limitation, monies, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, franchise royalties, credits representing monies that may be paid at a future date, the opportunity to participate in a money-making program, retained or increased earnings, increased equity in a parent or subsidiary entity, special bank deposits or accounts, special or unusual banking terms, services of all types at special or free rates, sales or rentals at special prices or rates, lease or rental payments based in whole or in part on the amount of business referred, trips and payment of another person's expenses, or reduction in credit against an existing obligation."

Based on the above, a title insurance agent or agency that sponsors an open house for a real estate agent or pays the expenses for a sales caravan may be found to have provided an illegal inducement. However, it would be acceptable under the federal and state laws for the title insurance agent or agency to set up a table or a booth at an event or open house to market their services. This is different because the title agent and agency are marketing their services and not the services of a third party.

Please note, the Department of Financial Services may investigate high prices for allowed services to determine if they are the result of a referral fee being paid. If the payment bears no reasonable relationship to the market value of the goods or services being provided, then the excess may be found to be the amount of the illegal inducement.

[See Section 626.9541, Florida Statutes, and Regulation X, Code of Federal Regulations]