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Volume 3, No. 4 - April 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.

Charging for Certificates of Coverage Not Permissible

The Department is receiving an increase in inquiries and seeing more violations in regard to agents and agencies charging their customers for issuing certificates of coverage. There are several fees that are permitted by statute that can be charged, such as policy fees by the managing general agent, motor vehicle report fees, and inspection fees; however, fees for issuing certificates of coverage is not one of them. If you charge for this service, you could be facing administrative penalties for violating subparagraph 626.9541(1)(o), F.S., which is illegal dealings in premium, excess or reduced charges. We will still hold the licensee responsible even if they delegated the issuance of the certificates to a third party who charges the customer.

We realize the time and expense involved issuing numerous certificates for some customers could become significant, but the licensee is expected to absorb these service costs based upon current laws.

[See subparagraph 626.9541(1)(o), Florida Statutes]

Requiring Ancillary Coverages/Products Prohibited a.k.a. "Sliding"

It is a violation of the Florida Insurance Code to represent to applicants and insureds that a specific ancillary coverage or product, (i. e., accidental death and dismemberment, towing and rental, motor club, etc.), is required by law in conjunction with the purchase of motor vehicle insurance when such coverage is not required.

It is also a violation to represent to applicants and insureds that the specific ancillary coverage or product is included in the motor vehicle policy without an additional charge when, in fact, an additional charge is applied. Such misrepresentations of ancillary coverages/products constitute "sliding" and these transactions are considered an unfair trade practice.

Additionally, agents and customer representatives must ensure that applicants and insureds understand the purpose for the forms they are signing when purchasing coverages, including any ancillary coverages, products or services.

If it is documented that agents and customer representatives are "sliding" an ancillary coverage or product to applicants and insureds, the Department will take the appropriate administrative action against the licensee. Licensees involved in these types of transactions may also be subject to administrative penalty including suspension or revocation of their license.

[See subparagraph 626.9541(1)(z), Florida Statutes]

Title Agents and Title Agencies: Records Retention

The title insurer must have evidence of the determination of insurability and the reasonable title search or search of the records of a Uniform Commercial Code filing office and retained in its files or in the files of its title insurance agent or agency for a period of not less than seven years after the title insurance commitment, title insurance policy, or guarantee of title was issued. The title insurance agent or agency must produce the evidence required to be maintained at its offices upon the demand of the Office of Insurance Regulation (OIR). Instead of retaining the original evidence, the title insurance agent or agency may retain it by any electronic means, which accurately reproduces the original.

The title insurance agent or agency must maintain a record of the actual premium charged for issuance of the policy and any endorsements in its files for a period of not less than seven years. The title insurance agent or agency must produce the record at its office upon demand of the OIR or the Department of Financial Services.

Every licensed title insurance agent must maintain a monthly reconciliation of every escrow account required to be maintained and must, on a monthly basis, report such reconciliation together with appropriate supporting documentation to each title insurer which appointed the agent during the reconciliation period. The reconciliation must be supported by appropriate documentation, including a monthly bank statement, a list of all outstanding checks as of the date of the reconciliation which are not shown on the monthly bank statement, and a trial balance of the escrow ledger records required to be maintained. Licensed title insurance agents must provide a copy of the monthly escrow account reconciliation to the OIR or the Department upon request. Such records shall be maintained by the title insurer for a period of five years.

Every licensed title insurance agent must maintain a separate ledger card for each real estate closing transaction for which funds are received in escrow. The ledger card must contain chronological entries of dates and amounts of monies received and disbursed including the name of the remitter and payee and each check number issued on such escrow account. Such records shall be maintained by the title insurance agent for a period of three years. The ledger card may be maintained in computer storage with a print-out available upon request of a title insurer or the OIR.

The requirement to submit the reconciliations monthly to each underwriter the agency represents is still required even if the agent or agency utilizes bank accounts facilitating electronic recordings.

[See Sections 626.561, 626.8473, and 627.7845, Florida Statutes, and Rule 69O-186.009, Florida Administrative Code]