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Volume 6, No. 1 - January 2017

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 The laws noted in our publications are/were in effect at the time of publication but may have been repealed, amended or replaced and new laws may have been enacted subsequently.

Compliance Topic of the Month: Surplus Lines Export Eligibility

The Department has received numerous questions from agents seeking guidance on how to comply with the export eligibility requirements set forth in sections 626.916(1)(a) – (d), Florida Statutes, while simultaneously meeting the needs and demands of their clients.  Because the Department recognizes the difficulty agents have in understanding the statutory provisions within the surplus lines law with regard to export eligibility, we are providing questions previously addressed by the department and our responses those to questions:

Question 1

Agent A has a condominium association client with a commercial residential policy that Agent A has placed with an admitted insurer. Upon renewal, the client asks Agent A to move its commercial residential policy to a surplus lines insurer, but Agent A refuses and states that he cannot move the policy from an admitted insurer to a surplus lines insurer because he is not able to legally complete a diligent effort form. The client then contacts Agent B and asks Agent B to place its commercial residential policy (at renewal) with a surplus lines insurer. Agent B does not have access to an admitted insurer that is willing to write this risk, and despite Agent B’s knowledge that the risk is currently insured with an admitted insurer, Agent B does not have access to the admitted insurer that currently insures the risk. Thus, Agent B properly completes a diligent effort form (he gets declinations from 3 admitted insurers that he does have access to but who are not willing to write the risk) and then Agent B places this risk with a surplus lines insurer at renewal. Has Agent B followed the law by properly completing a diligent effort form, despite the fact that he has moved a commercial residential policy from the admitted market to the surplus lines market at renewal?

Response

Agent B has followed the law by properly completing and documenting diligent effort, despite the fact that the policy was moved from the admitted market to the surplus lines market. The law does not compel an agent to seek quotes from companies they are not affiliated with. To meet the requirements of the law, the writing agent must seek the required coverage in the admitted market from insurers “actually writing that kind and class of insurance in this state,” and properly document those efforts in accordance with s.626.916, F. S. Failure by Agent B to make the required diligent effort or to properly document that effort could lead to administrative action being taken against the agent. 

Question 2

Agent A has a condominium association client with a commercial residential policy ($70 million total insured value) that Agent A has placed with an admitted insurer. The policy is coming up for renewal and the admitted insurer currently insuring the risk will renew the policy but will not offer full law and ordinance coverage, which for this risk, the agent and client both believe is a necessary coverage since the condominium association buildings were built in the 1970’s and do not comply with current building codes. Agent A cannot find stand-alone law and ordinance coverage for this risk either in the admitted market, or in the non-admitted market. Other than the current admitted insurer that will renew the risk without full law and ordinance coverage, Agent A does not have access to any other admitted insurers that are willing to write this risk at all given the age of the buildings. Agent A completes a diligent effort form listing the current insurer as declining to write the risk with full law and ordinance coverage, and listing two other admitted insurers that are not willing to write the risk due to the age of the buildings. Agent A then places the risk, with full law and ordinance coverage, with a surplus lines insurer. Has Agent A properly complied with the export law? 

Response

Agent A has properly complied with the export law.  In this scenario, the full amount of required insurance was not procurable based on a diligent effort by the agent.  Technically the agent went beyond the requirements of the law in obtaining 3 declinations as s.626.914, F.S. only requires 1 declination for risk where the residential structure has a dwelling replacement cost of $1 million or more.  The agent also attempted to layer the risk as required by law and the diligent effort also established that layering was not an option.  Since full law and ordinance coverage was established as a requirement by the client, the agent was obligated to attempt to procure that coverage.  Given that the documented diligent effort did not result in identifying an admitted insurer willing to write the required coverage, the policy is eligible for export.

Question 3

Agent A has a condominium association client with a commercial residential policy renewal coming up in about 30 days ($40 million total insured value) that Agent A has placed with an E & S insurer. The board is very savvy and has some members who are very familiar and comfortable with the E&S market. The board insists on coverage only from an AM Best “A” rated company with large financial size (policyholder surplus). It is nonnegotiable. They have no problem with E&S and want to stay with current carrier which is offering a renewal. There is no admitted AM Best A rated carrier that will write this risk.

Even though the board has no interest in admitted carriers that do not have an AM Best rating, the admitted carriers are quoting for Agent A and other agents. Hence Agent A is not able to complete a diligent effort search because he has an admitted market willing to write the required coverage.  Agent A asks DFS if he should follow the customer’s instructions and renew the coverage in the E & S market? Or alternatively, does the DFS force the client to insure with a non AM Best rated company against their wishes.

Response

In this scenario the insured has expressed a requirement as to the type of insurer they are willing to accept.  The statute provides for export only to obtain the full amount of insurance required. The rating of the carrier is a preference of the insured, and is unrelated to the amount of insurance required. A consumer cannot be compelled to enter into or continue a contract with an insurer they do not wish to do business with.   However, the agent is still bound by the requirements of the law.  The law does not provide an exception for wishes of the consumer.  Given the information provided, it would not appear this agent could legally export this policy.

Consumers have the option of independently procuring insurance directly from the surplus lines market.  Those who wish to do so should be aware of the requirements set forth in s.626.938, F. S., and can consult with the Independently Procured Coverage (IPC) Procedures Manual located at http://www.fslso.com/Comply/ProceduresManuals.  

In addition to the questions and answers above, Department legal staff has directed our attention to a case which is illustrative of the Department’s interpretation of key provisions of the surplus lines law.  Case No. 99-1914 (DOAH July 7, 2000; DOI Oct. 4, 2000), Dep’t of Ins. v. Bandel, addresses many concerns which might be raised by agents.  https://finalorders.fldfs.com/ViewImage.aspx?disn=86436

Moving forward, the Department will aggregate questions relating to additional hypothetical scenarios and will periodically publish our responses here.  We will not be providing pre-approval of specific transactions for agents.  

To summarize the Department’s position regarding allegations of improper export, we will investigate complaints on a case-by-case basis and take regulatory action where the facts of the specific case warrant action.  Discipline for a violation can range from a letter of guidance, to a monetary penalty, or even suspension or revocation of a license.  Monetary penalties can be assessed commensurate with the amount of premium collected on a per count basis.  If no violation is uncovered, the case will be closed without action and the investigation will remain a confidential record.

Importance of Maintaining Valid E-Mail Addresses in MyProfile

We have noticed that many times agencies will provide an email address in its MyProfile record for someone who is in a supporting role in the agency, and when the employee leaves the agency, it fails to update the address. The email address is immediately invalid and the agency will become non-compliant under s.626.551, F.S. if the address is not updated within 30 days.

It may be a good practice for agencies to use a general or generic email address in its MyProfile account such as "Info@agencydomain.domainextention", making sure the Owner/Agent in Charge has access to the address. It is important that ALL licensees maintain a valid email address because the majority of Department communications are sent via email and all licensees are required to maintain a valid email address.

Title Agencies: 2017 Administrative Surcharge Was Due January 30

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 January 30th deadline for payment of the 2017 has passed.

If your agency has not paid the 2017 surcharge, we encourage you to do so immediately. 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.

Surcharge Sample.jpg

Occasionally we discover agencies were not aware of the reminder due to 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.

Failure to pay the surcharge on or before January 30, 2017 could result in administrative action which could include a fine or a suspension of the agency’s license, in addition to the original surcharge. Payment must be made securely online via the title agency's MyProfile account. Paper checks are not accepted.

Note: To make sure you receive email notices from us, add email addresses Title@dfs.state.fl.us and Title@MyFloridaCFO.com to your email account's "Safe Senders" or other list.

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., which ended December 31, 2016.

Title Agency Data Call 2017

2017 marks the third year title insurance agencies are required to submit information to the Florida Office of Insurance Regulation (OIR) under the data call required by section 627.782(8), Florida Statutes. Title agencies have until June 1, 2017 to make their submission to the OIR. The OIR will send an email to each licensed title agency in Florida to remind them of the new law with instructions on how to complete the process accurately.

The Title Agency Data Call is performed by the title agency by first downloading the template from the OIR website to complete offline. To do this, the agency will need to create an account and subscribe to your agency in the Data Collection and Analysis Modules (DCAM) used by the OIR, which is located at https://apps8.fldfs.com/DCAM/Logon.aspx.
(The user's guide for DCAM is located at: https://apps8.fldfs.com/DCAM/Help/DCAMUserGuide.pdf)

Once the agency's data template form is completed and the agency is ready to certify it is accurate, the agency must upload the form to the OIR before the deadline, June 1, 2017.

The data template has seven tabs or worksheets:

  1. Version: includes the OIR contact information and reporting date reminder
  2. Instructions: data template must be downloaded from DCAM for the purpose of reporting information
  3. Report_Lines: Two columns extend down a series of questions and required responses (enter either text or numeric in the two columns, as shown)
  4. Schedule A: Additional agency information
  5. Schedule B: Agent activities
  6. Schedule C (Residential): Title agent statistical information submission for 1-4 residential units
  7. Schedule C (Commercial): Title agent statistical information submission for commercial units

Each agency's submission must contain a Filing Certification signed by an agency officer (electronic signature accepted), stating the information provided is accurate to the best of their knowledge and belief. A sample copy is available on the OIR's website at: www.floir.com/siteDocuments/CertificationOfTitleDataSubmissionExample.pdf

The agency may include a cover letter, but this is an optional component for the filing.

Each agency is encouraged to include any additional or optional information that is deemed important to the overall submission. These optional items may be uploaded as PDF documents under the "Other Information/Documents" component.

It is important to know that the agency's submission is not considered to be complete until the agency receives an email receipt showing the agency's file log number.

If you have any questions regarding this filing process, please contact the OIR's Market Data Collections Unit at 850-413-3147 or via email: TitleAgencyReporting@floir.com.

Compliance Information

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

 

Note: Some information in archived articles may now be out-of-date or superseded by changes in Florida law. Please be sure you refer to the most current law.