September 19, 2020
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HB 1937

A bill to be entitled
2An act relating to property insurance; amending s.
3627.062, F.S.; limiting an insurer's recoupment of
4reimbursement premium; providing limitations; amending s.
5627.0628, F.S.; limiting use of certain methodologies in
6determining hurricane loss factors for reimbursement
7premium rates in certain rate filings; creating s.
8627.06281, F.S.; requiring certain insurers and
9organizations to develop, maintain, and update a public
10hurricane loss projection model; providing reporting
11requirements for insurers; protecting trade secret
12information; amending s. 627.0629, F.S.; tightening a
13limitation on rate filings based on computer models under
14certain circumstances; amending s. 627.351, F.S.;
15providing additional legislative intent relating to the
16Citizens Property Insurance Corporation; specifying a
17limitation on dwelling limits for personal lines policies;
18revising appointment authority for members of the board of
19governors of the corporation; requiring creation of a
20Market Accountability Advisory Committee to assist the
21corporation for certain purposes; providing for
22appointment of committee members; providing for terms;
23requiring reports to the corporation; revising
24requirements for the plan of operation of the corporation;
25requiring the corporation to pay bonuses to carriers
26removing policies by assumption; providing for calculation
27of the bonus amount; providing eligibility for carriers to
28receive bonuses; deleting limitations on certain person
29lines residential wind-only policies; deleting an obsolete
30reporting requirement; specifying nonapplication of
31certain policy requirements in counties lacking reasonable
32degrees of competition for certain policies under certain
33circumstances; authorizing the commission to adopt rules;
34deleting an obsolete rate methodology panel reporting
35requirement provision; amending s. 627.411, F.S.; revising
36grounds for office disapproval of certain forms; amending
37s. 627.7015, F.S.; revising purpose and scope provisions
38relating to an alternative procedure for resolution of
39disputed property insurance claims; providing an
40additional criterion for excusing an insured from being
41required to submit to certain loss appraisal processes;
42amending s. 627.702, F.S.; providing legislative intent;
43limiting an insurer's loss liability under certain
44circumstances; amending s. 627.706, F.S.; revising
45definitions relating to sinkholes; creating s. 627.7065,
46F.S.; providing legislative findings; requiring the
47Department of Financial Services and the Office of the
48Insurance Consumer Advocate to consult with the Florida
49Geological Survey and the Department of Environmental
50Protection to implement a statewide automated database of
51sinkholes and related activity; providing requirements for
52the form and content of the database; authorizing the
53Department of Financial Services to require insurers to
54provide certain information; providing for management of
55the database; requiring the department to investigate
56sinkhole activity reports and include findings and
57investigations in the database; requiring the Department
58of Environmental Protection to report on the database to
59the Governor, Legislature, and Chief Financial Officer;
60authorizing the Department of Financial services to adopt
61implementing rules; requiring the Auditor General to
62perform an operational audit of the Citizens Property
63Insurance Corporation; specifying audit requirements;
64requiring a report; requiring the board of governors of
65the Citizens Property Insurance Corporation to submit a
66report to the Legislature relating to property and
67casualty insurance; specifying report requirements;
68providing for contingent effect; providing effective
71Be It Enacted by the Legislature of the State of Florida:
73     Section 1.  Subsection (5) of section 627.062, Florida
74Statutes, is amended to read:
75     627.062  Rate standards.--
76     (5)  With respect to a rate filing involving coverage of
77the type for which the insurer is required to pay a
78reimbursement premium to the Florida Hurricane Catastrophe Fund,
79the insurer may fully recoup in its property insurance premiums
80any reimbursement premiums paid to the Florida Hurricane
81Catastrophe Fund, together with reasonable costs of other
82reinsurance, but may not recoup reinsurance costs that duplicate
83coverage provided by the Florida Hurricane Catastrophe Fund. An
84insurer may not recoup more than one year of reimbursement
85premium at a time. Any under-recoupment from the prior year may
86be added to the following year's reimbursement premium and any
87over-recoupment shall be subtracted from the following year's
88reimbursement premium.
89     Section 2.  Paragraph (c) of subsection (1) and paragraph
90(c) of subsection (3) of section 627.0628, Florida Statutes, are
91amended to read:
92     627.0628  Florida Commission on Hurricane Loss Projection
95     (c)  It is the intent of the Legislature to create the
96Florida Commission on Hurricane Loss Projection Methodology as a
97panel of experts to provide the most actuarially sophisticated
98guidelines and standards for projection of hurricane losses
99possible, given the current state of actuarial science. It is
100the further intent of the Legislature that such standards and
101guidelines must be used by the State Board of Administration in
102developing reimbursement premium rates for the Florida Hurricane
103Catastrophe Fund, and, subject to paragraph (3)(c), may be used
104by insurers in rate filings under s. 627.062 unless the way in
105which such standards and guidelines were applied by the insurer
106was erroneous, as shown by a preponderance of the evidence.
108     (c)  With respect to a rate filing under s. 627.062, an
109insurer may employ actuarial methods, principles, standards,
110models, or output ranges found by the commission to be accurate
111or reliable to determine hurricane loss factors for use in a
112rate filing under s. 627.062. Such, which findings and factors
113are admissible and relevant in consideration of a rate filing by
114the office or in any arbitration or administrative or judicial
115review only if the office and the consumer advocate appointed
116pursuant to s. 627.0613 have access to all of the assumptions
117and factors that were used in developing the actuarial methods,
118principles, standards, models, or output ranges and are not
119precluded from disclosing such information in a rate proceeding.
120     Section 3.  Section 627.06281, Florida Statutes, is created
121to read:
122     627.06281  Public hurricane loss projection model;
123reporting of data by insurers.--Within 30 days after a written
124request for loss data and associated exposure data by the office
125or a type I center within the State University System
126established to study mitigation, residential property insurers
127and licensed rating and advisory organizations that compile
128residential property insurance loss data shall provide loss data
129and associated exposure data for residential property insurance
130policies to the office or to a type I center within the State
131University System established to study mitigation, as directed
132by the office, for the purposes of developing, maintaining, and
133updating a public model for hurricane loss projections. The loss
134data and associated exposure data provided shall be in writing.
135Any loss data and associated exposure data provided pursuant to
136this section that constitutes a trade secret as defined in s.
137812.081, and as provided in s. 815.04(3), shall be subject to
138the provisions of s. 815.045.
139     Section 4.  Subsection (7) of section 627.0629, Florida
140Statutes, is amended to read:
141     627.0629  Residential property insurance; rate filings.--
142     (7)  Any rate filing that is based in whole or part on data
143from a computer model may not exceed 15 25 percent unless there
144is a public hearing.
145     Section 5.  Paragraphs (a), (c), and (d) of subsection (6)
146of section 627.351, Florida Statutes, are amended to read:
147     627.351  Insurance risk apportionment plans.--
149     (a)1.  The Legislature finds that actual and threatened
150catastrophic losses to property in this state from hurricanes
151have caused insurers to be unwilling or unable to provide
152property insurance coverage to the extent sought and needed. It
153is in the public interest and a public purpose to assist in
154assuring that property in the state is insured so as to
155facilitate the remediation, reconstruction, and replacement of
156damaged or destroyed property in order to reduce or avoid the
157negative effects otherwise resulting to the public health,
158safety, and welfare; to the economy of the state; and to the
159revenues of the state and local governments needed to provide
160for the public welfare. It is necessary, therefore, to provide
161property insurance to applicants who are in good faith entitled
162to procure insurance through the voluntary market but are unable
163to do so. The Legislature intends by this subsection that
164property insurance be provided and that it continues, as long as
165necessary, through an entity organized to achieve efficiencies
166and economies, while providing service to policyholders,
167applicants, and agents that is no less than the quality
168generally provided in the voluntary market, all toward the
169achievement of the foregoing public purposes. Because it is
170essential for the corporation to have the maximum financial
171resources to pay claims following a catastrophic hurricane, it
172is the intent of the Legislature that the income of the
173corporation be exempt from federal income taxation and that
174interest on the debt obligations issued by the corporation be
175exempt from federal income taxation.
176     2.  The Residential Property and Casualty Joint
177Underwriting Association originally created by this statute
178shall be known, as of July 1, 2002, as the Citizens Property
179Insurance Corporation. The corporation shall provide insurance
180for residential and commercial property, for applicants who are
181in good faith entitled, but are unable, to procure insurance
182through the voluntary market. The corporation shall operate
183pursuant to a plan of operation approved by order of the office.
184The plan is subject to continuous review by the office. The
185office may, by order, withdraw approval of all or part of a plan
186if the office determines that conditions have changed since
187approval was granted and that the purposes of the plan require
188changes in the plan. For the purposes of this subsection,
189residential coverage includes both personal lines residential
190coverage, which consists of the type of coverage provided by
191homeowner's, mobile home owner's, dwelling, tenant's,
192condominium unit owner's, and similar policies, and commercial
193lines residential coverage, which consists of the type of
194coverage provided by condominium association, apartment
195building, and similar policies.
196     3.  It is the intent of the Legislature that policyholders,
197applicants, and agents of the corporation receive service and
198treatment of the highest possible level but never less than that
199generally provided in the voluntary market. It also is intended
200that the corporation be held to service standards no less than
201those applied to insurers in the voluntary market by the office
202with respect to responsiveness, timeliness, customer courtesy,
203and overall dealings with policyholders, applicants, or agents
204of the corporation.
205     (c)  The plan of operation of the corporation:
206     1.  Must provide for adoption of residential property and
207casualty insurance policy forms and commercial residential and
208nonresidential property insurance forms, which forms must be
209approved by the office prior to use. The corporation shall adopt
210the following policy forms:
211     a.  Standard personal lines policy forms that are
212comprehensive multiperil policies providing full coverage of a
213residential property equivalent to the coverage provided in the
214private insurance market under an HO-3, HO-4, or HO-6 policy.
215     b.  Basic personal lines policy forms that are policies
216similar to an HO-8 policy or a dwelling fire policy that provide
217coverage meeting the requirements of the secondary mortgage
218market, but which coverage is more limited than the coverage
219under a standard policy.
220     c.  Commercial lines residential policy forms that are
221generally similar to the basic perils of full coverage
222obtainable for commercial residential structures in the admitted
223voluntary market.
224     d.  Personal lines and commercial lines residential
225property insurance forms that cover the peril of wind only. The
226forms are applicable only to residential properties located in
227areas eligible for coverage under the high-risk account referred
228to in sub-subparagraph (b)2.a.
229     e.  Commercial lines nonresidential property insurance
230forms that cover the peril of wind only. The forms are
231applicable only to nonresidential properties located in areas
232eligible for coverage under the high-risk account referred to in
233sub-subparagraph (b)2.a.
235The dwelling limits for any personal lines policy in both the
236personal lines account and the high-risk account may not exceed
237$1 million.
238     2.a.  Must provide that the corporation adopt a program in
239which the corporation and authorized insurers enter into quota
240share primary insurance agreements for hurricane coverage, as
241defined in s. 627.4025(2)(a), for eligible risks, and adopt
242property insurance forms for eligible risks which cover the
243peril of wind only. As used in this subsection, the term:
244     (I)  "Quota share primary insurance" means an arrangement
245in which the primary hurricane coverage of an eligible risk is
246provided in specified percentages by the corporation and an
247authorized insurer. The corporation and authorized insurer are
248each solely responsible for a specified percentage of hurricane
249coverage of an eligible risk as set forth in a quota share
250primary insurance agreement between the corporation and an
251authorized insurer and the insurance contract. The
252responsibility of the corporation or authorized insurer to pay
253its specified percentage of hurricane losses of an eligible
254risk, as set forth in the quota share primary insurance
255agreement, may not be altered by the inability of the other
256party to the agreement to pay its specified percentage of
257hurricane losses. Eligible risks that are provided hurricane
258coverage through a quota share primary insurance arrangement
259must be provided policy forms that set forth the obligations of
260the corporation and authorized insurer under the arrangement,
261clearly specify the percentages of quota share primary insurance
262provided by the corporation and authorized insurer, and
263conspicuously and clearly state that neither the authorized
264insurer nor the corporation may be held responsible beyond its
265specified percentage of coverage of hurricane losses.
266     (II)  "Eligible risks" means personal lines residential and
267commercial lines residential risks that meet the underwriting
268criteria of the corporation and are located in areas that were
269eligible for coverage by the Florida Windstorm Underwriting
270Association on January 1, 2002.
271     b.  The corporation may enter into quota share primary
272insurance agreements with authorized insurers at corporation
273coverage levels of 90 percent and 50 percent.
274     c.  If the corporation determines that additional coverage
275levels are necessary to maximize participation in quota share
276primary insurance agreements by authorized insurers, the
277corporation may establish additional coverage levels. However,
278the corporation's quota share primary insurance coverage level
279may not exceed 90 percent.
280     d.  Any quota share primary insurance agreement entered
281into between an authorized insurer and the corporation must
282provide for a uniform specified percentage of coverage of
283hurricane losses, by county or territory as set forth by the
284corporation board, for all eligible risks of the authorized
285insurer covered under the quota share primary insurance
287     e.  Any quota share primary insurance agreement entered
288into between an authorized insurer and the corporation is
289subject to review and approval by the office. However, such
290agreement shall be authorized only as to insurance contracts
291entered into between an authorized insurer and an insured who is
292already insured by the corporation for wind coverage.
293     f.  For all eligible risks covered under quota share
294primary insurance agreements, the exposure and coverage levels
295for both the corporation and authorized insurers shall be
296reported by the corporation to the Florida Hurricane Catastrophe
297Fund. For all policies of eligible risks covered under quota
298share primary insurance agreements, the corporation and the
299authorized insurer shall maintain complete and accurate records
300for the purpose of exposure and loss reimbursement audits as
301required by Florida Hurricane Catastrophe Fund rules. The
302corporation and the authorized insurer shall each maintain
303duplicate copies of policy declaration pages and supporting
304claims documents.
305     g.  The corporation board shall establish in its plan of
306operation standards for quota share agreements which ensure that
307there is no discriminatory application among insurers as to the
308terms of quota share agreements, pricing of quota share
309agreements, incentive provisions if any, and consideration paid
310for servicing policies or adjusting claims.
311     h.  The quota share primary insurance agreement between the
312corporation and an authorized insurer must set forth the
313specific terms under which coverage is provided, including, but
314not limited to, the sale and servicing of policies issued under
315the agreement by the insurance agent of the authorized insurer
316producing the business, the reporting of information concerning
317eligible risks, the payment of premium to the corporation, and
318arrangements for the adjustment and payment of hurricane claims
319incurred on eligible risks by the claims adjuster and personnel
320of the authorized insurer. Entering into a quota sharing
321insurance agreement between the corporation and an authorized
322insurer shall be voluntary and at the discretion of the
323authorized insurer.
324     3.  May provide that the corporation may employ or
325otherwise contract with individuals or other entities to provide
326administrative or professional services that may be appropriate
327to effectuate the plan. The corporation shall have the power to
328borrow funds, by issuing bonds or by incurring other
329indebtedness, and shall have other powers reasonably necessary
330to effectuate the requirements of this subsection. The
331corporation may, but is not required to, seek judicial
332validation of its bonds or other indebtedness under chapter 75.
333The corporation may issue bonds or incur other indebtedness, or
334have bonds issued on its behalf by a unit of local government
335pursuant to subparagraph (g)2., in the absence of a hurricane or
336other weather-related event, upon a determination by the
337corporation, subject to approval by the office, that such action
338would enable it to efficiently meet the financial obligations of
339the corporation and that such financings are reasonably
340necessary to effectuate the requirements of this subsection. The
341corporation is authorized to take all actions needed to
342facilitate tax-free status for any such bonds or indebtedness,
343including formation of trusts or other affiliated entities. The
344corporation shall have the authority to pledge assessments,
345projected recoveries from the Florida Hurricane Catastrophe
346Fund, other reinsurance recoverables, market equalization and
347other surcharges, and other funds available to the corporation
348as security for bonds or other indebtedness. In recognition of
349s. 10, Art. I of the State Constitution, prohibiting the
350impairment of obligations of contracts, it is the intent of the
351Legislature that no action be taken whose purpose is to impair
352any bond indenture or financing agreement or any revenue source
353committed by contract to such bond or other indebtedness.
354     4.a.  Must require that the corporation operate subject to
355the supervision and approval of a board of governors consisting
356of 8 7 individuals who are residents of this state, from
357different geographical areas of this state, appointed by the
358Chief Financial Officer. The Governor, the Chief Financial
359Officer, the President of the Senate, and the Speaker of the
360House of Representatives shall each appoint two members of the
361board, effective August 1, 2005. The Chief Financial Officer
362shall designate one of the appointees as chair. All board
363members serve at the pleasure of the appointing officer Chief
364Financial Officer. All board members, including the chair, must
365be appointed to serve for 3-year terms beginning annually on a
366date designated by the plan. Any board vacancy shall be filled
367for the unexpired term by the appointing officer Chief Financial
368Officer. The Chief Financial Officer shall appoint a technical
369advisory group to provide information and advice to the board of
370governors in connection with the board's duties under this
371subsection. The executive director and senior managers of the
372corporation shall be engaged by the board, as recommended by the
373Chief Financial Officer and serve at the pleasure of the board
374Chief Financial Officer. The executive director is responsible
375for employing other staff as the corporation may require,
376subject to review and concurrence by the board and office of the
377Chief Financial Officer.
378     b.  The board shall create a Market Accountability Advisory
379Committee to assist the corporation in developing awareness of
380its rates and its customer and agent service levels in
381relationship to the voluntary market insurers writing similar
382coverage. The members of the advisory committee shall consist of
383the following ten persons, one of whom must be elected chair by
384the members of the committee: one representative appointed by
385each of the three largest property and casualty insurance agents
386independent trade associations in this state; three
387representatives appointed by the insurers with the three highest
388voluntary market share of residential property insurance
389business in the state; one representative from the Office of
390Insurance Regulation; one consumer appointed by the board who is
391insured by the corporation at the time of appointment to the
392committee; one representative appointed by the Florida
393Association of Realtors; and one representative appointed by the
394Florida Bankers Association. All members must serve for 3-year
395terms and may serve for consecutive terms. The committee shall
396report to the corporation at each board meeting on insurance
397market issues which may include rates and rate competition with
398the voluntary market; service, including policy issuance, claims
399processing, and general responsiveness to policyholders,
400applicants, and agents; and matters relating to depopulation.
401     5.  Must provide a procedure for determining the
402eligibility of a risk for coverage, as follows:
403     a.  Subject to the provisions of s. 627.3517, with respect
404to personal lines residential risks, if the risk is offered
405coverage from an authorized insurer at the insurer's approved
406rate under either a standard policy including wind coverage or,
407if consistent with the insurer's underwriting rules as filed
408with the office, a basic policy including wind coverage, the
409risk is not eligible for any policy issued by the corporation.
410If the risk is not able to obtain any such offer, the risk is
411eligible for either a standard policy including wind coverage or
412a basic policy including wind coverage issued by the
413corporation; however, if the risk could not be insured under a
414standard policy including wind coverage regardless of market
415conditions, the risk shall be eligible for a basic policy
416including wind coverage unless rejected under subparagraph 8.
417The corporation shall determine the type of policy to be
418provided on the basis of objective standards specified in the
419underwriting manual and based on generally accepted underwriting
421     (I)  If the risk accepts an offer of coverage through the
422market assistance plan or an offer of coverage through a
423mechanism established by the corporation before a policy is
424issued to the risk by the corporation or during the first 30
425days of coverage by the corporation, and the producing agent who
426submitted the application to the plan or to the corporation is
427not currently appointed by the insurer, the insurer shall:
428     (A)  Pay to the producing agent of record of the policy,
429for the first year, an amount that is the greater of the
430insurer's usual and customary commission for the type of policy
431written or a fee equal to the usual and customary commission of
432the corporation; or
433     (B)  Offer to allow the producing agent of record of the
434policy to continue servicing the policy for a period of not less
435than 1 year and offer to pay the agent the greater of the
436insurer's or the corporation's usual and customary commission
437for the type of policy written.
439If the producing agent is unwilling or unable to accept
440appointment, the new insurer shall pay the agent in accordance
441with sub-sub-sub-subparagraph (A).
442     (II)  When the corporation enters into a contractual
443agreement for a take-out plan, the producing agent of record of
444the corporation policy is entitled to retain any unearned
445commission on the policy, and the insurer shall:
446     (A)  Pay to the producing agent of record of the
447corporation policy, for the first year, an amount that is the
448greater of the insurer's usual and customary commission for the
449type of policy written or a fee equal to the usual and customary
450commission of the corporation; or
451     (B)  Offer to allow the producing agent of record of the
452corporation policy to continue servicing the policy for a period
453of not less than 1 year and offer to pay the agent the greater
454of the insurer's or the corporation's usual and customary
455commission for the type of policy written.
457If the producing agent is unwilling or unable to accept
458appointment, the new insurer shall pay the agent in accordance
459with sub-sub-sub-subparagraph (A).
460     b.  With respect to commercial lines residential risks, if
461the risk is offered coverage under a policy including wind
462coverage from an authorized insurer at its approved rate, the
463risk is not eligible for any policy issued by the corporation.
464If the risk is not able to obtain any such offer, the risk is
465eligible for a policy including wind coverage issued by the
467     (I)  If the risk accepts an offer of coverage through the
468market assistance plan or an offer of coverage through a
469mechanism established by the corporation before a policy is
470issued to the risk by the corporation or during the first 30
471days of coverage by the corporation, and the producing agent who
472submitted the application to the plan or the corporation is not
473currently appointed by the insurer, the insurer shall:
474     (A)  Pay to the producing agent of record of the policy,
475for the first year, an amount that is the greater of the
476insurer's usual and customary commission for the type of policy
477written or a fee equal to the usual and customary commission of
478the corporation; or
479     (B)  Offer to allow the producing agent of record of the
480policy to continue servicing the policy for a period of not less
481than 1 year and offer to pay the agent the greater of the
482insurer's or the corporation's usual and customary commission
483for the type of policy written.
485If the producing agent is unwilling or unable to accept
486appointment, the new insurer shall pay the agent in accordance
487with sub-sub-sub-subparagraph (A).
488     (II)  When the corporation enters into a contractual
489agreement for a take-out plan, the producing agent of record of
490the corporation policy is entitled to retain any unearned
491commission on the policy, and the insurer shall:
492     (A)  Pay to the producing agent of record of the
493corporation policy, for the first year, an amount that is the
494greater of the insurer's usual and customary commission for the
495type of policy written or a fee equal to the usual and customary
496commission of the corporation; or
497     (B)  Offer to allow the producing agent of record of the
498corporation policy to continue servicing the policy for a period
499of not less than 1 year and offer to pay the agent the greater
500of the insurer's or the corporation's usual and customary
501commission for the type of policy written.
503If the producing agent is unwilling or unable to accept
504appointment, the new insurer shall pay the agent in accordance
505with sub-sub-sub-subparagraph (A).
506     6.  Must include rules for classifications of risks and
507rates therefor.
508     7.  Must provide that if premium and investment income for
509an account attributable to a particular calendar year are in
510excess of projected losses and expenses for the account
511attributable to that year, such excess shall be held in surplus
512in the account. Such surplus shall be available to defray
513deficits in that account as to future years and shall be used
514for that purpose prior to assessing assessable insurers and
515assessable insureds as to any calendar year.
516     8.  Must provide objective criteria and procedures to be
517uniformly applied for all applicants in determining whether an
518individual risk is so hazardous as to be uninsurable. In making
519this determination and in establishing the criteria and
520procedures, the following shall be considered:
521     a.  Whether the likelihood of a loss for the individual
522risk is substantially higher than for other risks of the same
523class; and
524     b.  Whether the uncertainty associated with the individual
525risk is such that an appropriate premium cannot be determined.
527The acceptance or rejection of a risk by the corporation shall
528be construed as the private placement of insurance, and the
529provisions of chapter 120 shall not apply.
530     9.  Must provide that the corporation shall make its best
531efforts to procure catastrophe reinsurance at reasonable rates,
532to cover its projected 100-year probable maximum loss as
533determined by the board of governors.
534     10.  Must provide that in the event of regular deficit
535assessments under sub-subparagraph (b)3.a. or sub-subparagraph
536(b)3.b., in the personal lines account, the commercial lines
537residential account, or the high-risk account, the corporation
538shall levy upon corporation policyholders in its next rate
539filing, or by a separate rate filing solely for this purpose, a
540market equalization surcharge arising from a regular assessment
541in such account in a percentage equal to the total amount of
542such regular assessments divided by the aggregate statewide
543direct written premium for subject lines of business for the
544prior calendar year. Market equalization surcharges under this
545subparagraph are not considered premium and are not subject to
546commissions, fees, or premium taxes; however, failure to pay a
547market equalization surcharge shall be treated as failure to pay
549     11.  The policies issued by the corporation must provide
550that, if the corporation or the market assistance plan obtains
551an offer from an authorized insurer to cover the risk at its
552approved rates, the risk is no longer eligible for renewal
553through the corporation.
554     12.  Corporation policies and applications must include a
555notice that the corporation policy could, under this section, be
556replaced with a policy issued by an authorized insurer that does
557not provide coverage identical to the coverage provided by the
558corporation. The notice shall also specify that acceptance of
559corporation coverage creates a conclusive presumption that the
560applicant or policyholder is aware of this potential.
561     13.  May establish, subject to approval by the office,
562different eligibility requirements and operational procedures
563for any line or type of coverage for any specified county or
564area if the board determines that such changes to the
565eligibility requirements and operational procedures are
566justified due to the voluntary market being sufficiently stable
567and competitive in such area or for such line or type of
568coverage and that consumers who, in good faith, are unable to
569obtain insurance through the voluntary market through ordinary
570methods would continue to have access to coverage from the
571corporation. When coverage is sought in connection with a real
572property transfer, such requirements and procedures shall not
573provide for an effective date of coverage later than the date of
574the closing of the transfer as established by the transferor,
575the transferee, and, if applicable, the lender.
576     14.  Must provide that, with respect to the high-risk
577account, any assessable insurer with a surplus as to
578policyholders of $25 million or less writing 25 percent or more
579of its total countrywide property insurance premiums in this
580state may petition the office, within the first 90 days of each
581calendar year, to qualify as a limited apportionment company. In
582no event shall a limited apportionment company be required to
583participate in the portion of any assessment, within the high-
584risk account, pursuant to sub-subparagraph (b)3.a. or sub-
585subparagraph (b)3.b. in the aggregate which exceeds $50 million
586after payment of available high-risk account funds in any
587calendar year. However, a limited apportionment company shall
588collect from its policyholders any emergency assessment imposed
589under sub-subparagraph (b)3.d. The plan shall provide that, if
590the office determines that any regular assessment will result in
591an impairment of the surplus of a limited apportionment company,
592the office may direct that all or part of such assessment be
593deferred as provided in subparagraph (g)4. However, there shall
594be no limitation or deferment of an emergency assessment to be
595collected from policyholders under sub-subparagraph (b)3.d.
596     15.  Must provide that the corporation appoint as its
597licensed agents only those agents who also hold an appointment
598as defined in s. 626.015(3) with an insurer who at the time of
599the agent's initial appointment by the corporation is authorized
600to write and is actually writing personal lines residential
601property coverage, commercial residential property coverage, or
602commercial nonresidential property coverage within the state.
603     16.  Must provide that for each carrier removing policies
604by assumption from the personal lines account of the corporation
605that carrier shall receive a minimum per policy bonus equal to
60612.5 percent of written premium for a minimum of 10,000 policies
607removed with wind coverage in coastal counties, 15 percent of
608written premium for a minimum of 30,000 policies removed with
609wind coverage in coastal counties, and 17.5 percent of written
610premium for a minimum of 50,000 policies removed with wind
611coverage in coastal counties. In order to be eligible for such
612per-policy bonus, the carrier must offer to issue and renew the
613carrier's policy for a period of 3 years subsequent to the
614expiration of the assumed policy. The carrier shall nonetheless
615be eligible for such per-policy bonus if the policy is
616voluntarily terminated by the insured at any time subsequent to
617the insured's initial acceptance of coverage from the carrier.
618Cancellation of a policy for nonpayment of premium by the
619insured shall be deemed a voluntary termination by the insured.
620Failure of the insured to accept the carrier's offer of renewal,
621if such renewal is in accordance with the corporation's plan of
622operations, shall be deemed a voluntary termination by the
624     (d)1.  It is the intent of the Legislature that the rates
625for coverage provided by the corporation be actuarially sound
626and not competitive with approved rates charged in the admitted
627voluntary market, so that the corporation functions as a
628residual market mechanism to provide insurance only when the
629insurance cannot be procured in the voluntary market. Rates
630shall include an appropriate catastrophe loading factor that
631reflects the actual catastrophic exposure of the corporation.
632     2.  For each county, the average rates of the corporation
633for each line of business for personal lines residential
634policies excluding rates for wind-only policies shall be no
635lower than the average rates charged by the insurer that had the
636highest average rate in that county among the 20 insurers with
637the greatest total direct written premium in the state for that
638line of business in the preceding year, except that with respect
639to mobile home coverages, the average rates of the corporation
640shall be no lower than the average rates charged by the insurer
641that had the highest average rate in that county among the 5
642insurers with the greatest total written premium for mobile home
643owner's policies in the state in the preceding year.
644     3.  Rates for personal lines residential wind-only policies
645must be actuarially sound and not competitive with approved
646rates charged by authorized insurers. However, for personal
647lines residential wind-only policies issued or renewed between
648July 1, 2002, and June 30, 2003, the maximum premium increase
649must be no greater than 10 percent of the Florida Windstorm
650Underwriting Association premium for that policy in effect on
651June 30, 2002, as adjusted for coverage changes and seasonal
652occupancy surcharges. For personal lines residential wind-only
653policies issued or renewed between July 1, 2003, and June 30,
6542004, the corporation shall use its existing filed and approved
655wind-only rating and classification plans, provided, however,
656that the maximum premium increase must be no greater than 20
657percent of the premium for that policy in effect on June 30,
6582003, as adjusted for coverage changes and seasonal occupancy
659surcharges. Corporation rate manuals shall include a rate
660surcharge for seasonal occupancy. To ensure that personal lines
661residential wind-only rates effective on or after July 1, 2004,
662are not competitive with approved rates charged by authorized
663insurers, the corporation, in conjunction with the office, shall
664develop a wind-only ratemaking methodology, which methodology
665shall be contained in each a rate filing made by the corporation
666with the office by January 1, 2004. If the office thereafter
667determines that the wind-only rates or rating factors filed by
668the corporation fail to comply with the wind-only ratemaking
669methodology provided for in this subsection, it shall so notify
670the corporation and require the corporation to amend its rates
671or rating factors to come into compliance within 90 days of
672notice from the office. The office shall report to the Speaker
673of the House of Representatives and the President of the Senate
674on the provisions of the wind-only ratemaking methodology by
675January 31, 2004.
676     4.  The provisions of subparagraph 2. do not apply to
677coverage provided by the corporation in any county for which the
678office determines that a reasonable degree of competition does
679not exist for personal lines residential policies. The
680provisions of subparagraph 3. do not apply to coverage provided
681by the corporation in any county for which the office determines
682that a reasonable degree of competition does not exist for
683personal lines residential policies in the area of that county
684which is eligible for wind-only coverage. In such counties, the
685rates for personal lines residential coverage shall be
686actuarially sound and not excessive, inadequate, or unfairly
687discriminatory and are subject to the other provisions of the
688paragraph and s. 627.062. The commission may adopt rules
689establishing the criteria for determining whether a reasonable
690degree of competition exists for personal lines residential
691policies. Beginning October 1, 2005, and each 6 months
692thereafter, the office shall determine and identify those
693counties for which a reasonable degree of competition does not
694exist for purposes of subparagraphs 2. and 3., respectively.
695     5.4.  Rates for commercial lines coverage shall not be
696subject to the requirements of subparagraph 2., but shall be
697subject to all other requirements of this paragraph and s.
699     6.5.  Nothing in this paragraph shall require or allow the
700corporation to adopt a rate that is inadequate under s. 627.062.
701     7.6.  The corporation shall certify to the office at least
702twice annually that its personal lines rates comply with the
703requirements of this paragraph subparagraphs 1. and 2. If any
704adjustment in the rates or rating factors of the corporation is
705necessary to ensure such compliance, the corporation shall make
706and implement such adjustments and file its revised rates and
707rating factors with the office. If the office thereafter
708determines that the revised rates and rating factors fail to
709comply with the provisions of this paragraph subparagraphs 1.
710and 2., it shall notify the corporation and require the
711corporation to amend its rates or rating factors in conjunction
712with its next rate filing. The office must notify the
713corporation by electronic means of any rate filing it approves
714for any insurer among the insurers referred to in subparagraph
716     8.7.  In addition to the rates otherwise determined
717pursuant to this paragraph, the corporation shall impose and
718collect an amount equal to the premium tax provided for in s.
719624.509 to augment the financial resources of the corporation.
720     9.8.a.  To assist the corporation in developing additional
721ratemaking methods to assure compliance with this paragraph
722subparagraphs 1. and 4., the corporation shall appoint a rate
723methodology panel consisting of one person recommended by the
724Florida Association of Insurance Agents, one person recommended
725by the Professional Insurance Agents of Florida, one person
726recommended by the Florida Association of Insurance and
727Financial Advisors, one person recommended by the insurer with
728the highest voluntary market share of residential property
729insurance business in the state, one person recommended by the
730insurer with the second-highest voluntary market share of
731residential property insurance business in the state, one person
732recommended by an insurer writing commercial residential
733property insurance in this state, one person recommended by the
734Office of Insurance Regulation, and one board member designated
735by the board chairman, who shall serve as chairman of the panel.
736     b.  By January 1, 2004, the rate methodology panel shall
737provide a report to the corporation of its findings and
738recommendations for the use of additional ratemaking methods and
739procedures, including the use of a rate equalization surcharge
740in an amount sufficient to assure that the total cost of
741coverage for policyholders or applicants to the corporation is
742sufficient to comply with subparagraph 1.
743     c.  Within 30 days after such report, the corporation shall
744present to the President of the Senate, the Speaker of the House
745of Representatives, the minority party leaders of each house of
746the Legislature, and the chairs of the standing committees of
747each house of the Legislature having jurisdiction of insurance
748issues, a plan for implementing the additional ratemaking
749methods and an outline of any legislation needed to facilitate
750use of the new methods.
751     d.  The plan must include a provision that producer
752commissions paid by the corporation shall not be calculated in
753such a manner as to include any rate equalization surcharge.
754However, without regard to the plan to be developed or its
755implementation, producer commissions paid by the corporation for
756each account, other than the quota share primary program, shall
757remain fixed as to percentage, effective rate, calculation, and
758payment method until January 1, 2004.
759     10.9.  By January 1, 2004, The corporation shall develop a
760notice to policyholders or applicants that the rates of Citizens
761Property Insurance Corporation are intended to be higher than
762the rates of any admitted carrier except when the provisions of
763subparagraph 4. apply and providing other information the
764corporation deems necessary to assist consumers in finding other
765voluntary admitted insurers willing to insure their property.
766     Section 6.  Subsection (1) of section 627.411, Florida
767Statutes, is amended to read:
768     627.411  Grounds for disapproval.--
769     (1)  The office shall disapprove any form filed under s.
770627.410, or withdraw any previous approval thereof, only if the
772     (a)  Is in any respect in violation of, or does not comply
773with, this code.
774     (b)  Contains or incorporates by reference, where such
775incorporation is otherwise permissible, any inconsistent,
776ambiguous, or misleading clauses, or exceptions and conditions
777which deceptively affect the risk purported to be assumed in the
778general coverage of the contract.
779     (c)  Has any title, heading, or other indication of its
780provisions which is misleading.
781     (d)  Is printed or otherwise reproduced in such manner as
782to render any material provision of the form substantially
784     (e)  Contains provisions that are unfair or inequitable or
785contrary to the public policy of this state or that encourage
787     (f)(e)  Is for health insurance, and:
788     1.  Provides benefits that are unreasonable in relation to
789the premium charged.;
790     2.  Contains provisions that are unfair or inequitable or
791contrary to the public policy of this state or that encourage
793     2.3.  Contains provisions that apply rating practices that
794result in unfair discrimination pursuant to s. 626.9541(1)(g)2.
795     (g)(f)  Excludes coverage for human immunodeficiency virus
796infection or acquired immune deficiency syndrome or contains
797limitations in the benefits payable, or in the terms or
798conditions of such contract, for human immunodeficiency virus
799infection or acquired immune deficiency syndrome which are
800different than those which apply to any other sickness or
801medical condition.
802     Section 7.  Subsections (1) and (7) of section 627.7015,
803Florida Statutes, are amended to read:
804     627.7015  Alternative procedure for resolution of disputed
805property insurance claims.--
806     (1)  PURPOSE AND SCOPE.--This section sets forth a
807nonadversarial alternative dispute resolution procedure for a
808mediated claim resolution conference prompted by the need for
809effective, fair, and timely handling of property insurance
810claims. There is a particular need for an informal,
811nonthreatening forum for helping parties who elect this
812procedure to resolve their claims disputes because most
813homeowner's and commercial residential insurance policies
814obligate insureds to participate in a potentially expensive and
815time-consuming adversarial appraisal process prior to
816litigation. The procedure set forth in this section is designed
817to bring the parties together for a mediated claims settlement
818conference without any of the trappings or drawbacks of an
819adversarial process. Before resorting to these procedures,
820insureds and insurers are encouraged to resolve claims as
821quickly and fairly as possible. This section is available with
822respect to claims under personal lines and commercial
823residential policies for all claimants and insurers prior to
824commencing the appraisal process, or commencing litigation. If
825requested by the insured, participation by legal counsel shall
826be permitted. Mediation under this section is also available to
827litigants referred to the department by a county court or
828circuit court. This section does not apply to commercial
829coverages, to private passenger motor vehicle insurance
830coverages, or to disputes relating to liability coverages in
831policies of property insurance.
832     (7)  If the insurer fails to comply with subsection (2) by
833failing to notify a first-party claimant of its right to
834participate in the mediation program under this section or if
835the insurer requests the mediation, and the mediation results
836are rejected by either party, the insured shall not be required
837to submit to or participate in any contractual loss appraisal
838process of the property loss damage as a precondition to legal
839action for breach of contract against the insurer for its
840failure to pay the policyholder's claims covered by the policy.
841     Section 8.  Effective upon this act becoming a law,
842subsection (1) of section 627.702, Florida Statutes, is amended
843to read:
844     627.702  Valued policy law.--
845     (1)(a)  In the event of the total loss of any building,
846structure, mobile home as defined in s. 320.01(2), or
847manufactured building as defined in s. 553.36(12), located in
848this state and insured by any insurer as to a covered peril, in
849the absence of any change increasing the risk without the
850insurer's consent and in the absence of fraudulent or criminal
851fault on the part of the insured or one acting in her or his
852behalf, the insurer's liability, if any, under the policy for
853such total loss shall be in the amount of money for which such
854property was so insured as specified in the policy and for which
855a premium has been charged and paid.
856     (b)  The legislative intent of this subsection is not to
857require an insurer to pay for a loss other than one caused by
858the covered peril or one resulting from a covered peril. In
859furtherance of such legislative intent, when a loss was caused
860in part by or resulting from a covered peril and in part by a
861noncovered peril, the insurer's liability under this section
862shall be limited to the amount of the loss caused by or
863resulting from the covered peril.
864     Section 9.  Section 627.706, Florida Statutes, is amended
865to read:
866     627.706  Sinkhole insurance; definitions.--
867     (1)  Every insurer authorized to transact property
868insurance in this state shall make available coverage for
869insurable sinkhole losses on any structure, including contents
870of personal property contained therein, to the extent provided
871in the form to which the sinkhole coverage attaches.
872     (2)  As used in this section and s. 627.7065, and as used
873in connection with any policy providing coverage for sinkhole
875     (a)  "Sinkhole" means a landform created by subsidence of
876soil, sediment, or rock as underlying strata are dissolved by
877ground water. A sinkhole may form by collapse into subterranean
878voids created by dissolution of limestone or dolostone or by
879subsidence as these strata are dissolved.
880     (b)  "Sinkhole loss" means structural damage to a the
881building caused by sinkhole activity. Contents coverage shall
882apply only if there is structural damage to the building caused
883by sinkhole activity. Building coverage shall apply only to the
884reasonable costs to stabilize the land and building if necessary
885and to repair the damage to the foundation, subject to the
886coverage and terms of the policy.
887     (c)(3)  "Sinkhole activity loss" means actual physical
888damage to the covered property covered arising out of or caused
889by sudden settlement or collapse of the earth supporting such
890property only when such settlement or collapse results from
891movement or raveling of soils, sediments, or rock materials from
892the surface into subterranean voids created by the effect action
893of water on a limestone or similar rock formation.
894     (3)(4)  Every insurer authorized to transact property
895insurance in this state shall make a proper filing with the
896office for the purpose of extending the appropriate forms of
897property insurance to include coverage for insurable sinkhole
899     Section 10.  Section 627.7065, Florida Statutes, is created
900to read:
901     627.7065  Database of information relating to sinkholes;
902the Department of Financial Services and the Department of
903Environmental Protection.--
904     (1)  The Legislature finds that there has been a dramatic
905increase in the number of sinkholes and insurance claims for
906sinkhole damage in the state during the past 10 years.
907Accordingly, the Legislature recognizes the need to track
908current and past sinkhole activity and to make the information
909available for prevention and remediation activities. The
910Legislature further finds that the Florida Geological Survey of
911the Department of Environmental Protection has created a partial
912database of some sinkholes identified in Florida, although the
913database is not reflective of all sinkholes or insurance claims
914for sinkhole damage. The Legislature determines that creating a
915complete electronic database of sinkhole activity serves an
916important purpose in protecting the public and in studying
917property claims activities in the insurance industry.
918     (2)  The Department of Financial Services, including the
919employee of the Division of Consumer Services designated as the
920primary contact for consumers on issues relating to sinkholes,
921and the Office of the Insurance Consumer Advocate shall consult
922with the Florida Geological Survey and the Department of
923Environmental Protection to implement a statewide automated
924database of sinkholes and related activity identified in the
926     (3)  Representatives of the Department of Financial
927Services, with the agreement of the Department of Environmental
928Protection, shall determine the form and content of the
929database. The content may include standards for reporting and
930investigating sinkholes for inclusion in the database and
931requirements for insurers to report to the departments the
932receipt of claims involving sinkhole loss and other similar
933activities. The Department of Financial Services may require
934insurers to report present and past data of sinkhole claims. The
935database also may include information of damage due to ground
936settling and other subsidence activity.
937     (4)  The Department of Financial Services may manage the
938database or may contract for its management and maintenance. The
939Department of Environmental Protection shall investigate reports
940of sinkhole activity and include its findings and investigations
941in the database.
942     (5)  The Department of Environmental Protection, in
943consultation with the Department of Financial Services, shall
944present a report of activities relating to the sinkhole
945database, including recommendations regarding the database and
946similar matters, to the Governor, the Speaker of the House of
947Representatives, the President of the Senate, and the Chief
948Financial Officer by December 31, 2005. The report may consider
949the need for the Legislature to create an entity to study the
950increase in sinkhole activity in the state and other similar
951issues relating to sinkhole damage, including recommendations
952and costs for staffing the entity. The report may include other
953information, as appropriate.
954     (6)  The Department of Financial Services, in consultation
955with the Department of Environmental Protection, may adopt rules
956to implement the provisions of this section.
957     Section 11.  The Auditor General shall perform an
958operational audit, as defined in s. 11.45(1), Florida Statutes,
959of Citizens Property Insurance Corporation created under s.
960627.351(6), Florida Statutes. The scope of the audit shall also
962     (1)  An analysis of the corporation's infrastructure,
963customer service, claims handling, accessibility of policyholder
964information to the agent of record, take-out programs, take-out
965bonuses, and financing arrangements.
966     (2)  An evaluation of costs associated with the
967administration and servicing of the policies issued by the
968corporation to determine alternatives by which costs can be
969reduced, customer service improved, and claims handling
971The audit shall contain policy alternatives for the Legislature
972to consider. The Auditor General shall submit a report to the
973Governor, the President of the Senate, and the Speaker of the
974House of Representatives no later than February 1, 2006.
975     Section 12.  The board of governors of Citizens Property
976Insurance Corporation created by section 627.351(6), Florida
977Statutes, shall, by February 1, 2006, submit a report to the
978President of the Senate, the Speaker of the House of
979Representatives, the minority party leaders of the Senate and
980the House of Representatives, and the chairs of the standing
981committees of the Senate and the House of Representatives having
982jurisdiction over matters relating to property and casualty
983insurance. The report shall include the board's findings and
984recommendations on the following issues:
985     (1)  The number of policies and the aggregate premium of
986Citizens Property Insurance Corporation, before and after
987enactment of this act, and projections for future policy and
988premium growth.
989     (2)  Increases or decreases in availability of residential
990property coverage in the voluntary market and the effectiveness
991of this act in improving the availability of residential
992property coverage in the voluntary market in the state.
993     (3)  The board's efforts to depopulate the corporation and
994the willingness of insurers in the voluntary market to avail
995themselves of depopulation incentives.
996     (4)  Further actions that could be taken by the Legislature
997to improve availability of residential property coverage in the
998voluntary and residual markets.
999     (5)  Actions that the board has taken to restructure the
1000corporation and recommendations for legislative action to
1001restructure the corporation, including, but not limited to,
1002actions relating to claims handling and customer service.
1003     (6)  Projected surpluses or deficits and possible means of
1004providing funding to ensure the continued solvency of the
1006     (7)  The corporation's efforts to procure catastrophe
1007reinsurance to cover its projected 100-year probable maximum
1008loss with specification as to what best efforts were made by the
1009corporation to procure such reinsurance.
1010     (8)  Such other issues as the board determines are worthy
1011of the Legislature's consideration.
1012     Section 13.  (1)  Section 2 of this act shall take effect
1013on the same date that House Bill 1939 or similar legislation
1014takes effect, if such legislation is adopted in the same
1015legislative session or an extension thereof and becomes a law.
1016     (2)  Section 3 of this act shall take effect on the same
1017date that House Bill 1939 or similar legislation takes effect,
1018if such legislation is adopted in the same legislative session
1019or an extension thereof and becomes a law.
1020     Section 14.  Except as otherwise provided herein, this act
1021shall take effect July 1, 2005.

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