Volume 3, No. 6 - June 2014

In The Know

- Keeping you informed is what it's all about

2014 Florida Legislative Summary Follow-up

The legislative bills mentioned below were passed during this year's legislative session and have an impact on those that we regulate. These bills were signed and approved by the Governor on June 13, 2014. Many parts of these bills have an effective date of July 1, 2014. The summaries below are not intended to be comprehensive. We encourage you to read the linked enacted law text for a comprehensive review of the legislation.

CS/CS/HB 633 - Division of Insurance Agent & Agency Services

The bill makes changes to the Florida Insurance Code below:

General - Effective July 1, 2014.

  • Creates a new type of insurance agent - an unaffiliated insurance agent. This is a licensed insurance agent (excluding limited lines agents) who is self appointed and who practices as an independent consultant in the business of analyzing or abstracting insurance policies, providing insurance advice or counseling, or making specific recommendations or comparisons of insurance products for a fee established in advance by written contract signed by the parties. An unaffiliated insurance agent may not be affiliated with an insurer, insurer-appointed insurance agent, or insurance agency contracted with or employing insurer-appointed insurance agents. In other words, an unaffiliated insurance agent must be on his/her own and not working for or appointed by another insurance entity, which is why they are called unaffiliated insurance agents. An unaffiliated insurance agent may continue to receive commissions for sales that took place before the license was converted to an unaffiliated insurance agent as long as those commissions are disclosed when the unaffiliated insurance agent makes recommendations or evaluates products for a client that involve products from the entity paying those commissions. An unaffiliated insurance agent may not:
    • Hold any appointment from an insurer for any license he/she holds.
    • Transact, solicit or service an insurance contract on behalf of an insurer.
    • Interfere with the commissions received by an insurer-appointed agent.
    • Receive any compensation or any other thing of value from an insurer, appointed agent, or agency.
  • Requires the Department of Financial Services (DFS) to immediately suspend a license or appointment of a licensee who is charged with 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. The suspension will continue if the licensee is found guilty, pleads guilty or no contest to the crime, regardless of whether a judgment or conviction is entered, and during an appeal. A person may not transact insurance after his/her license is suspended.
  • Bars applicants for licensure with sealed or expunged criminal history records from denying or failing to acknowledge arrests covered by these records.
  • Exempts members of the United States Armed Forces, their spouses, and veterans who have retired within 24 months from the application filing fee for licenses.
  • Requires agents who recommend the surrender of an annuity or life insurance contract for any reason and the proceeds are not used to fund the purchase of a new life insurance or annuity contract, the agent must provide the consumer with information about the contract being surrendered. This section will also apply to any others performing the insurance agent activities pursuant to an exemption provided in this part, such as an unaffiliated insurance agent. The information to be provided will be specified in a rule adopted by the department and will include at a minimum:
    • Amount of surrender charge.
    • Loss of interest rate guarantees.
    • Tax consequences of the transaction.
    • Amount of any forfeited death benefits.
    • Value of any other investment performance guarantees being lost.
  • Provides that the department will deny an application, suspend or revoke a certification of a neutral evaluator if one or more of the following exist:
    • Lack of a required qualification.
    • Material misstatement, misrepresentation, or fraud in obtaining the certification.
    • Demonstrating a lack of fitness or trustworthiness to act as a neutral evaluator.
    • Fraudulent or dishonest practices in the conduct of an evaluation or in the financial services business.
    • Violating any part of the insurance code, or aiding, instructing or encouraging another to do so.
  • Provides that a mediator must possess an active certification as a Florida Supreme Court certified circuit court mediator, or be a department mediator as of July 1, 2014 and have conducted at least one mediation on the department's behalf. The department will deny an application, suspend or revoke its approval if one or more of the following exist:
    • Lack of a required qualification.
    • Material misstatement, misrepresentation, or fraud in obtaining the certification.
    • Demonstrating a lack of fitness or trustworthiness to act as a mediator.
    • Fraudulent or dishonest practices in the conduct of an evaluation or in the financial services business.
    • Violating any part of the insurance code, violation of the Florida Rules of Certified and Court Appointed Mediators, or aiding, instructing or encouraging another to do so.
  • Further clarifies that a neutral evaluator is an engineer licensed under chapter 471 who is experienced in sinkhole activity and other causes of structural damage, who has completed a course in alternative dispute resolution, and who is eligible for certification.
  • Authorizes DFS to investigate improper conduct of mediators, neutral evaluators, and navigators and permits DFS to share investigative information with any regulatory agency.
  • Eliminates the examination requirement for nonresident surplus lines agent license applicants for those residents of states which require an equivalent surplus lines examination. Otherwise, the applicant must still take the Florida exam (click here to see which home states require an exam). The past requirement of coursework (pre-licensing education) or experience for nonresident surplus lines agent license applicants will no longer be required.
  • Adds the requirement that the risk retention nonresident agent placing surplus lines business must be licensed and appointed as a nonresident surplus lines agent in this state.
  • No more limited customer representative licenses will be issued.
  • Authorizes additional methods for service of process in certain administrative actions.
  • Deletes requirement that applicants who take a licensure examination in Spanish must pay all associated costs.
  • Licenses issued to businesses that rent vehicles will cover the office, branch office, employee, or authorized representative located at the location.

Insurance Agencies - Effective January 1, 2015.

  • An insurance agency that is owned and operated by a single licensed agent (sole proprietor) conducting business in his/her individual name only, is exempt from requiring the office location to be licensed as an agency. If there is more than one licensee at the location, it must be licensed as an insurance agency. Having administrative staff that are not licensed would not require the agent to obtain an agency license.
  • Applications for insurance agency licensure must be signed by a listed member of the agency required to be disclosed on the application. These include the agency owner, partner, officer, director, president, senior vice president, secretary, treasurer, and limited liability member who directs or participates in the management or control of the agency. The agency application must also provide the physical address of each location of the agency, along with the e-mail address, phone number; date the location began transacting insurance business, as well as the name of the licensed and appointed agent who will be the agent in charge of the location. The application process will include obtaining the fingerprints of each individual listed on the application and any other person who participates in the management or control of the agency unless they are exempt from the fingerprinting requirement (e.g. currently licensed and appointed agents).
  • Allows third parties to sign agency applications for licensure. The insurance agency is responsible for ensuring that the information on the application is true and correct and is accountable for any misstatements or misrepresentations.
  • Branch locations of insurance agencies are not required to each be licensed as an insurance agency as long as the branch locations:
    • Transact insurance under the same name and federal identification number as the main or parent location;
    • Notify the Department of the address and phone number of the location via the parent location's MyProfile account, and;
    • An agent in charge has been properly designated for each location via the agency's MyProfile account.
  • Branch agency locations will not have to submit fingerprints for owners and officers when adding new locations as long as the ones listed for the parent agency location remain as the current ones. If there are new owners and officers of an agency, then the agency must notify the Department and submit those fingerprints as it has been under current law.
  • Insurance agencies will no longer be able to obtain a registration in lieu of a license. Also, all agency registrations will be converted to licenses by October 1, 2015.
  • Eliminates the three-year expiration period for agency licenses. Agency licenses will be perpetual as long as there is a designated agent in charge.
  • Provides for agency licenses to automatically expire if the agency does not designate a new agent in charge with the DFS within 90 days after the agent in charge on record has left the agency or no longer is qualified to act as an agent in charge (i.e. their license is suspended or revoked).
  • Specifies that an employee or an authorized representative of an agent or agency may not bind insurance coverage, initiate contact for the purpose of soliciting insurance unless licensed and appointed as an agent or customer representative. Each place of business must be in the active full-time charge of an agent who is licensed and appointed to transact the lines of business being handled at that location. A person designated as the agent in charge of one location may also be designated as the agent in charge of other locations as long as no insurance is transacted at any of the locations when there is not a licensed and appointed agent physically present at that location. The agent in charge of an agency is designated by the agency within 30 days of any change through the agency's MyProfile account. The agent in charge is responsible for the supervision of all individuals within an insurance agency location. The agent in charge is accountable for misconduct or violations of the insurance code committed by anyone at the agency, however, this does not mean the agent in charge will automatically be held criminally liable for an act unless he/she knew or should have known of the act and the facts surrounding the criminal activity. An insurance agency may not conduct insurance business unless an agent in charge is designated for that location. Changes to the agent in charge must be made by the insurance agency within 30 days of the change.

[See Chapter 2014-123, Laws of Florida]

CS/CS/SB 708 - Insurance Claims

CS/CS/SB 708 revises the law relating to property insurance claims. The bill gives the Department of Financial Services (DFS) the ability to investigate mediators and neutral evaluators in a manner similar to how it investigates agents and agencies. It allows the DFS and the Office of Insurance Regulation (OIR) to share information with other regulatory bodies while any investigation is ongoing. The bill gives the DFS increased power to take disciplinary action against mediators and neutral evaluators.

The bill prohibits insurers from denying claims or canceling an insurance policy or contract based on credit information available in the public record if the insurance policy or contract has been in effect for more than 90 days.

Insurance contracts often contain an appraisal provision allowing parties who agree that there is a covered loss to use an umpire to determine the amount of the loss. This bill allows parties to disqualify an umpire for specified conflicts of interest such as where the umpire is related to one of the parties or has been employed by one of the parties.

The bill creates a "Homeowner Claim Bill of Rights," describing some of the rights held by insurance policyholders and requires the insurer to provide a copy to the policyholder within 14 days of a claim. It does not create a new civil cause of action.

This bill creates new requirements for agreements between insureds and providers of services needed to mitigate the damage caused by fire, water, or catastrophic events.

The effective date of this bill is July 1, 2014, except as otherwise provided.

[See Chapter 2014-86, Laws of Florida]

CS/CS/SB 1672 - Property Insurance

CS/CS/SB 1672 enacts the following changes to property insurance laws, primarily relating to Citizens Property Insurance Corporation (Citizens). The bill:

  • Prohibits an insurance agent, managing general agent, adjuster, customer or service representative from directly or indirectly accepting any compensation, inducement, or reward from an inspector for the referral of the owner of the inspected property to the inspector or inspection company. This prohibition applies to an inspection intended for submission to an insurer in order to obtain property insurance coverage or establish the applicable property insurance premium.
  • Prohibits a public adjuster, apprentice or associate from accepting a power of attorney that vests to the right to select the person that will perform repairs on an adjusted property.
  • Prohibits Citizens Property Insurance Corporation (Citizens) from writing new commercial residential multi-peril policies in the Coastal Account as of July 1, 2014; however, current commercial-residential multi-peril policies will be allowed to be renewed going forward. Citizens will continue to offer new, separate commercial residential wind-only and all-other perils policies in the Coastal Account.
  • Requires all procurement protests within Citizens to be decided by the Division of Administrative Hearings.
  • Requires Citizens to issue an annual report of its estimated bonding capacity, estimated claims paying capacity, and estimated year-end cash balance.
  • Prohibits an authorized mitigation inspector from paying any referral fees or other forms of compensation to an insurance agent, insurance agency, customer representative, or insurance agency employee that recommends the inspector's services to an insured.
  • Prohibits an insurance agent, insurance agency, customer representative, or insurance agency employee from accepting any referral fees or other forms of compensation from an authorized mitigation inspector.
  • Allows an insurer to exempt from independent verification, a uniform mitigation verification form completed by an authorized mitigation inspector that has a quality assurance program approved by the insurer.
  • Provides that a uniform mitigation verification form provided to Citizens and completed by an authorized mitigation inspector with a quality assurance program approved by Citizens is not subject to independent verification or re-inspection if there has been no material changes to the structure.
  • Prohibits contractors, or persons acting on behalf of a contractor, from paying, waiving, or rebating all or part of an insurance deductible applicable to payment to the contractor for repairs to property covered by a property insurance policy, making such acts a 3rd degree felony.

The effective date of this bill is July 1, 2014, except as otherwise provided.

[See Chapter 2014-104, Laws of Florida]

CS/CS/CS/SB 542 - Flood Insurance

CS/CS/SB 542 creates laws governing the sale of private flood insurance policies, contracts, and endorsements by authorized insurers with the exception of commercial lines risks policies that provide coverage in excess of an underlying policy.

The bill also:

  • Allows authorized insurers to sell four different types of flood insurance products:
    1. Standard coverage, which covers only losses from the peril of flood as defined in the bill, which is the definition used by the National Flood Insurance Program (NFIP). The policy must be the same as coverage offered from the NFIP regarding the definition of flood, coverage, deductibles, and loss adjustment.
    2. Preferred coverage, which includes the same coverage as standard flood insurance and also must cover flood losses caused by water intrusion from outside the structure that are not otherwise covered under the definition of flood in the bill.
    3. Customized coverage, which is coverage that is broader than standard flood coverage.
    4. Supplemental coverage, which supplements an NFIP flood policy or a standard or preferred policy from a private market insurer. Supplemental coverage may provide coverage for jewelry, art, deductibles, and additional living expenses. It does not include excess flood coverage over other flood policies.
  • Requires insurance agents that receive a flood insurance application to obtain a signed acknowledgement from the applicant stating that the full risk rate for flood insurance may apply to the property if flood insurance is later obtained under the NFIP.
  • Creates s. 627.715, F.S., governing the sale of personal lines, residential flood insurance.
  • Allows surplus lines agents to export flood insurance without making a diligent effort to seek coverage from three or more authorized insurers. (Expires July 1, 2017.)
  • Allows flood rates filed before October 1, 2019, to be established through a rate filing with the Office of Insurance Regulation (OIR) that is not required to be reviewed by the OIR before implementation of the rate ("file and use" review) or shortly after implementation of the rate ("use and file" review).
  • Allows projected flood losses for personal residential property insurance to be a rating factor. Flood losses may be estimated using a model or straight average of models found reliable by the Florida Commission on Hurricane Loss Projection Methodology.
  • Requires prominent notice on the policy declarations or face page of deductibles and any other limitations on flood coverage or policy limits.
  • Insurers that write flood coverage must notify the OIR at least 30 days before doing so in this state and file a plan of operation, financial projections, and revisions with the OIR.
  • Provides that the provisions of section 627.715, Florida Statutes, supersede any conflicting provisions in the insurance code.
  • Specifies that the OIR commissioner may provide a certification required by federal law or federal rule as a condition of qualifying for private flood insurance or disaster relief. The certification is not subject to review under ch. 120, F.S.
  • Citizens Property Insurance Corporation is prohibited from providing flood insurance.
  • The Florida Hurricane Catastrophe Fund is prohibited from reimbursing flood losses.

The bill became law on June 13, 2014.

[See Chapter 2014-80, Laws of Florida]

CS/CS/HB 1089 - Citizens Property Insurance Corporation

The bill provides changes to Citizens Property Insurance Corporation (Citizens).

Citizens Property Insurance Corporation (Citizens) is a state-created, not-for-profit, tax-exempt governmental entity whose public purpose is to provide property insurance coverage to those unable to find affordable coverage in the voluntary admitted market. It is not a private insurance company. Current law provides an eligibility restriction for insurance in Citizens based on the location of the property. Major structures for which a building permit for new construction is applied for on or after July 1, 2014 or for which a building permit for a substantial improvement of the structure is applied for on or after July 1, 2014, and which is located seaward of the coastal construction control line or within the Coastal Barrier Resources System (CBRS) are ineligible for insurance in Citizens.

The bill delays implementation of the current law for Citizens' eligibility based on location of the property for one year. Thus, major structures for which a building permit for new construction is applied for on or after July 1, 2015, rather than July 1, 2014, or for which a building permit for a substantial improvement of the structure is applied for on or after July 1, 2015, rather than July 1, 2014, and which is located seaward of the coastal construction control line or within the CBRS will be ineligible for insurance in Citizens.

Starting July 1, 2014, the bill also prohibits residential condominium associations from obtaining commercial residential property insurance from Citizens that covers damage only from wind if 50 percent or more of the condominiums in the association are rented more than eight times a year for a period of less than 30 days. These condominium associations are still able to obtain property insurance from Citizens that covers damage from multiple perils, including wind.

Owners of structures in certain coastal areas will be able to obtain or keep insurance in Citizens if they substantially improve their structure or build new construction before July 1, 2015.

The effective date of this bill is July 1, 2014.

[See Chapter 2014-140, Laws of Florida]