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Volume 3, No. 5 - May 2014

In The Know

- Keeping you informed is what it's all about

2014 Florida Legislative Session Roundup

The legislative bills mentioned below were passed during this year's legislative session and have an impact on those that we regulate. These bills have not yet been sent to the Governor for his signature or veto. Many parts of these bills have an effective date of July 1, 2014. At this time we will briefly highlight parts of the bills and, upon being signed by the Governor, will cover them in more depth in next month's issue of this newsletter. The summaries below are not intended to be comprehensive. We encourage you to read the enrolled bill text for a comprehensive understanding of the legislation.

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

CS/CS/HB 633 passed the House on March 27, 2014, and subsequently passed the Senate on April 25, 2014. The bill amends the insurance agency licensure law. Among other changes, the bill:

  • Eliminates the insurance agency licensing requirement for agencies owned and operated by a single licensed agent under certain conditions;
  • Allows third parties to sign agency applications;
  • Specifies circumstances under which branch agencies do not have to be licensed;
  • Repeals provision allowing insurance agencies to obtain a registration in lieu of a license and converts all agency registrations to licenses;
  • Eliminates the three-year expiration period for agency licenses;
  • Repeals current law governing branch agencies and creates s. 626.0428(4), F.S., to define agent in charge and specifies responsibilities;
  • Provides for agency licenses to automatically expire if the agency does not designate a new agent in charge with the Department of Financial Services (DFS) within 90 days after the agent in charge on record has left the agency;
  • Creates a new type of insurance agent, an unaffiliated insurance agent, and specifies the scope of the license;
  • Requires DFS to immediately suspend the license or appointment of licensees charged with certain crimes;
  • 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 specified licenses;
  • Requires agents who recommend the surrender of an annuity or life insurance policy, for other than the purchase of another insurance policy, to provide financial information to the consumer;
  • Amends eligibility requirements for mediators under alternative dispute resolution programs administered by DFS;
  • Requires DFS to deny an application to be a mediator or neutral evaluator (sinkhole claims) or revoke or suspend a mediator or neutral evaluator in certain circumstances;
  • Amends the definitions of neutral evaluator and professional engineer;
  • Authorizes DFS to investigate improper conduct of mediators, neutral evaluators, and navigators and permits DFS to share investigative information with any regulatory agency;
  • Amends requirements for licensure as a nonresident surplus lines agent;
  • Bars issuance of any new limited customer representative license after September 30, 2014;
  • Authorizes additional methods for service of process in certain administrative actions; and
  • Deletes requirement that applicants who take a licensure examination in Spanish must pay all associated costs.

Subject to the Governor's veto powers, the effective date of this bill is July 1, 2014, except as otherwise provided.

[Click here to read the enrolled bill text.]

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.

Subject to the Governor's veto powers, the effective date of this bill is July 1, 2014, except as otherwise provided.

[Click here to read the enrolled bill text.]

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 accepting referral fees or compensation from an inspection or inspection company related to an inspection used to obtain insurance coverage or establish the 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 from providing deductible rebates to an insured, making such acts a 3rd degree felony.

Subject to the Governor's veto powers, the effective date of this bill is July 1, 2014, except as otherwise provided.

[Click here to read the enrolled bill text.]

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 may 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.

Subject to the Governor's veto powers, the bill is effective upon becoming law.

[Click here to read the enrolled bill text.]

CS/CS/HB 1089 - Citizens Property Insurance Corporation

CS/CS/HB 1089 passed the House on April 25, 2014, and subsequently passed the Senate on April 28, 2014. 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 less than 30 days. These condominium associations are still able to obtain property insurance from Citizens that covers damage from multiple perils, including wind.

The bill has no fiscal impact on state or local governments. 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.

Subject to the Governor's veto powers, the effective date of the bill is July 1, 2014.

[Click here to read the enrolled bill text.]