September 23, 2020
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HB 1937CS

CHAMBER ACTION




1The State Administration Appropriations Committee recommends the
2following:
3
4     Council/Committee Substitute
5     Remove the entire bill and insert:
6
A bill to be entitled
7An act relating to property insurance; amending s.
8627.062, F.S.; limiting an insurer's recoupment of
9reimbursement premium; providing limitations; amending s.
10627.0628, F.S.; limiting use of certain methodologies in
11determining hurricane loss factors for reimbursement
12premium rates in certain rate filings; creating s.
13627.06281, F.S.; requiring certain insurers and
14organizations to develop, maintain, and update a public
15hurricane loss projection model; providing reporting
16requirements for insurers; protecting trade secret
17information; amending s. 627.0629, F.S.; tightening a
18limitation on rate filings based on computer models under
19certain circumstances; amending s. 627.351, F.S.;
20providing additional legislative intent relating to the
21Citizens Property Insurance Corporation; specifying a
22limitation on dwelling limits for personal lines policies;
23revising appointment authority for members of the board of
24governors of the corporation; requiring creation of a
25Market Accountability Advisory Committee to assist the
26corporation for certain purposes; providing for
27appointment of committee members; providing for terms;
28requiring reports to the corporation; revising
29requirements for the plan of operation of the corporation;
30requiring the corporation to pay bonuses to carriers
31removing policies by assumption; providing for calculation
32of the bonus amount; providing eligibility for carriers to
33receive bonuses; deleting limitations on certain person
34lines residential wind-only policies; deleting an obsolete
35reporting requirement; specifying nonapplication of
36certain policy requirements in counties lacking reasonable
37degrees of competition for certain policies under certain
38circumstances; authorizing the commission to adopt rules;
39deleting an obsolete rate methodology panel reporting
40requirement provision; amending s. 627.411, F.S.; revising
41grounds for office disapproval of certain forms; amending
42s. 627.7015, F.S.; revising purpose and scope provisions
43relating to an alternative procedure for resolution of
44disputed property insurance claims; providing an
45additional criterion for excusing an insured from being
46required to submit to certain loss appraisal processes;
47amending s. 627.706, F.S.; revising definitions relating
48to sinkholes; creating s. 627.7065, F.S.; providing
49legislative findings; requiring the Department of
50Financial Services and the Office of the Insurance
51Consumer Advocate to consult with the Florida Geological
52Survey and the Department of Environmental Protection to
53implement a statewide automated database of sinkholes and
54related activity; providing requirements for the form and
55content of the database; authorizing the Department of
56Financial Services to require insurers to provide certain
57information; providing for management of the database;
58requiring the department to investigate sinkhole activity
59reports and include findings and investigations in the
60database; requiring the Department of Environmental
61Protection to report on the database to the Governor,
62Legislature, and Chief Financial Officer; authorizing the
63Department of Financial services to adopt implementing
64rules; requiring the Auditor General to perform an
65operational audit of the Citizens Property Insurance
66Corporation; specifying audit requirements; requiring a
67report; requiring the board of governors of the Citizens
68Property Insurance Corporation to submit a report to the
69Legislature relating to property and casualty insurance;
70specifying report requirements; providing for contingent
71effect; providing effective dates.
72
73Be It Enacted by the Legislature of the State of Florida:
74
75     Section 1.  Subsection (5) of section 627.062, Florida
76Statutes, is amended to read:
77     627.062  Rate standards.--
78     (5)  With respect to a rate filing involving coverage of
79the type for which the insurer is required to pay a
80reimbursement premium to the Florida Hurricane Catastrophe Fund,
81the insurer may fully recoup in its property insurance premiums
82any reimbursement premiums paid to the Florida Hurricane
83Catastrophe Fund, together with reasonable costs of other
84reinsurance, but may not recoup reinsurance costs that duplicate
85coverage provided by the Florida Hurricane Catastrophe Fund. An
86insurer may not recoup more than one year of reimbursement
87premium at a time. Any under-recoupment from the prior year may
88be added to the following year's reimbursement premium and any
89over-recoupment shall be subtracted from the following year's
90reimbursement premium.
91     Section 2.  Paragraph (c) of subsection (1) and paragraph
92(c) of subsection (3) of section 627.0628, Florida Statutes, are
93amended to read:
94     627.0628  Florida Commission on Hurricane Loss Projection
95Methodology.--
96     (1)  LEGISLATIVE FINDINGS AND INTENT.--
97     (c)  It is the intent of the Legislature to create the
98Florida Commission on Hurricane Loss Projection Methodology as a
99panel of experts to provide the most actuarially sophisticated
100guidelines and standards for projection of hurricane losses
101possible, given the current state of actuarial science. It is
102the further intent of the Legislature that such standards and
103guidelines must be used by the State Board of Administration in
104developing reimbursement premium rates for the Florida Hurricane
105Catastrophe Fund, and, subject to paragraph (3)(c), may be used
106by insurers in rate filings under s. 627.062 unless the way in
107which such standards and guidelines were applied by the insurer
108was erroneous, as shown by a preponderance of the evidence.
109     (3)  ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.--
110     (c)  With respect to a rate filing under s. 627.062, an
111insurer may employ actuarial methods, principles, standards,
112models, or output ranges found by the commission to be accurate
113or reliable to determine hurricane loss factors for use in a
114rate filing under s. 627.062. Such, which findings and factors
115are admissible and relevant in consideration of a rate filing by
116the office or in any arbitration or administrative or judicial
117review only if the office and the consumer advocate appointed
118pursuant to s. 627.0613 have access to all of the assumptions
119and factors that were used in developing the actuarial methods,
120principles, standards, models, or output ranges and are not
121precluded from disclosing such information in a rate proceeding.
122     Section 3.  Section 627.06281, Florida Statutes, is created
123to read:
124     627.06281  Public hurricane loss projection model;
125reporting of data by insurers.--Within 30 days after a written
126request for loss data and associated exposure data by the office
127or a type I center within the State University System
128established to study mitigation, residential property insurers
129and licensed rating and advisory organizations that compile
130residential property insurance loss data shall provide loss data
131and associated exposure data for residential property insurance
132policies to the office or to a type I center within the State
133University System established to study mitigation, as directed
134by the office, for the purposes of developing, maintaining, and
135updating a public model for hurricane loss projections. The loss
136data and associated exposure data provided shall be in writing.
137Any loss data and associated exposure data provided pursuant to
138this section that constitutes a trade secret as defined in s.
139812.081, and as provided in s. 815.04(3), shall be subject to
140the provisions of s. 815.045.
141     Section 4.  Subsection (7) of section 627.0629, Florida
142Statutes, is amended to read:
143     627.0629  Residential property insurance; rate filings.--
144     (7)  Any rate filing that is based in whole or part on data
145from a computer model may not exceed 15 25 percent unless there
146is a public hearing.
147     Section 5.  Paragraphs (a), (c), and (d) of subsection (6)
148of section 627.351, Florida Statutes, are amended to read:
149     627.351  Insurance risk apportionment plans.--
150     (6)  CITIZENS PROPERTY INSURANCE CORPORATION.--
151     (a)1.  The Legislature finds that actual and threatened
152catastrophic losses to property in this state from hurricanes
153have caused insurers to be unwilling or unable to provide
154property insurance coverage to the extent sought and needed. It
155is in the public interest and a public purpose to assist in
156assuring that property in the state is insured so as to
157facilitate the remediation, reconstruction, and replacement of
158damaged or destroyed property in order to reduce or avoid the
159negative effects otherwise resulting to the public health,
160safety, and welfare; to the economy of the state; and to the
161revenues of the state and local governments needed to provide
162for the public welfare. It is necessary, therefore, to provide
163property insurance to applicants who are in good faith entitled
164to procure insurance through the voluntary market but are unable
165to do so. The Legislature intends by this subsection that
166property insurance be provided and that it continues, as long as
167necessary, through an entity organized to achieve efficiencies
168and economies, while providing service to policyholders,
169applicants, and agents that is no less than the quality
170generally provided in the voluntary market, all toward the
171achievement of the foregoing public purposes. Because it is
172essential for the corporation to have the maximum financial
173resources to pay claims following a catastrophic hurricane, it
174is the intent of the Legislature that the income of the
175corporation be exempt from federal income taxation and that
176interest on the debt obligations issued by the corporation be
177exempt from federal income taxation.
178     2.  The Residential Property and Casualty Joint
179Underwriting Association originally created by this statute
180shall be known, as of July 1, 2002, as the Citizens Property
181Insurance Corporation. The corporation shall provide insurance
182for residential and commercial property, for applicants who are
183in good faith entitled, but are unable, to procure insurance
184through the voluntary market. The corporation shall operate
185pursuant to a plan of operation approved by order of the office.
186The plan is subject to continuous review by the office. The
187office may, by order, withdraw approval of all or part of a plan
188if the office determines that conditions have changed since
189approval was granted and that the purposes of the plan require
190changes in the plan. For the purposes of this subsection,
191residential coverage includes both personal lines residential
192coverage, which consists of the type of coverage provided by
193homeowner's, mobile home owner's, dwelling, tenant's,
194condominium unit owner's, and similar policies, and commercial
195lines residential coverage, which consists of the type of
196coverage provided by condominium association, apartment
197building, and similar policies.
198     3.  It is the intent of the Legislature that policyholders,
199applicants, and agents of the corporation receive service and
200treatment of the highest possible level but never less than that
201generally provided in the voluntary market. It also is intended
202that the corporation be held to service standards no less than
203those applied to insurers in the voluntary market by the office
204with respect to responsiveness, timeliness, customer courtesy,
205and overall dealings with policyholders, applicants, or agents
206of the corporation.
207     (c)  The plan of operation of the corporation:
208     1.  Must provide for adoption of residential property and
209casualty insurance policy forms and commercial residential and
210nonresidential property insurance forms, which forms must be
211approved by the office prior to use. The corporation shall adopt
212the following policy forms:
213     a.  Standard personal lines policy forms that are
214comprehensive multiperil policies providing full coverage of a
215residential property equivalent to the coverage provided in the
216private insurance market under an HO-3, HO-4, or HO-6 policy.
217     b.  Basic personal lines policy forms that are policies
218similar to an HO-8 policy or a dwelling fire policy that provide
219coverage meeting the requirements of the secondary mortgage
220market, but which coverage is more limited than the coverage
221under a standard policy.
222     c.  Commercial lines residential policy forms that are
223generally similar to the basic perils of full coverage
224obtainable for commercial residential structures in the admitted
225voluntary market.
226     d.  Personal lines and commercial lines residential
227property insurance forms that cover the peril of wind only. The
228forms are applicable only to residential properties located in
229areas eligible for coverage under the high-risk account referred
230to in sub-subparagraph (b)2.a.
231     e.  Commercial lines nonresidential property insurance
232forms that cover the peril of wind only. The forms are
233applicable only to nonresidential properties located in areas
234eligible for coverage under the high-risk account referred to in
235sub-subparagraph (b)2.a.
236
237The dwelling limits for any personal lines policy in both the
238personal lines account and the high-risk account may not exceed
239$1 million.
240     2.a.  Must provide that the corporation adopt a program in
241which the corporation and authorized insurers enter into quota
242share primary insurance agreements for hurricane coverage, as
243defined in s. 627.4025(2)(a), for eligible risks, and adopt
244property insurance forms for eligible risks which cover the
245peril of wind only. As used in this subsection, the term:
246     (I)  "Quota share primary insurance" means an arrangement
247in which the primary hurricane coverage of an eligible risk is
248provided in specified percentages by the corporation and an
249authorized insurer. The corporation and authorized insurer are
250each solely responsible for a specified percentage of hurricane
251coverage of an eligible risk as set forth in a quota share
252primary insurance agreement between the corporation and an
253authorized insurer and the insurance contract. The
254responsibility of the corporation or authorized insurer to pay
255its specified percentage of hurricane losses of an eligible
256risk, as set forth in the quota share primary insurance
257agreement, may not be altered by the inability of the other
258party to the agreement to pay its specified percentage of
259hurricane losses. Eligible risks that are provided hurricane
260coverage through a quota share primary insurance arrangement
261must be provided policy forms that set forth the obligations of
262the corporation and authorized insurer under the arrangement,
263clearly specify the percentages of quota share primary insurance
264provided by the corporation and authorized insurer, and
265conspicuously and clearly state that neither the authorized
266insurer nor the corporation may be held responsible beyond its
267specified percentage of coverage of hurricane losses.
268     (II)  "Eligible risks" means personal lines residential and
269commercial lines residential risks that meet the underwriting
270criteria of the corporation and are located in areas that were
271eligible for coverage by the Florida Windstorm Underwriting
272Association on January 1, 2002.
273     b.  The corporation may enter into quota share primary
274insurance agreements with authorized insurers at corporation
275coverage levels of 90 percent and 50 percent.
276     c.  If the corporation determines that additional coverage
277levels are necessary to maximize participation in quota share
278primary insurance agreements by authorized insurers, the
279corporation may establish additional coverage levels. However,
280the corporation's quota share primary insurance coverage level
281may not exceed 90 percent.
282     d.  Any quota share primary insurance agreement entered
283into between an authorized insurer and the corporation must
284provide for a uniform specified percentage of coverage of
285hurricane losses, by county or territory as set forth by the
286corporation board, for all eligible risks of the authorized
287insurer covered under the quota share primary insurance
288agreement.
289     e.  Any quota share primary insurance agreement entered
290into between an authorized insurer and the corporation is
291subject to review and approval by the office. However, such
292agreement shall be authorized only as to insurance contracts
293entered into between an authorized insurer and an insured who is
294already insured by the corporation for wind coverage.
295     f.  For all eligible risks covered under quota share
296primary insurance agreements, the exposure and coverage levels
297for both the corporation and authorized insurers shall be
298reported by the corporation to the Florida Hurricane Catastrophe
299Fund. For all policies of eligible risks covered under quota
300share primary insurance agreements, the corporation and the
301authorized insurer shall maintain complete and accurate records
302for the purpose of exposure and loss reimbursement audits as
303required by Florida Hurricane Catastrophe Fund rules. The
304corporation and the authorized insurer shall each maintain
305duplicate copies of policy declaration pages and supporting
306claims documents.
307     g.  The corporation board shall establish in its plan of
308operation standards for quota share agreements which ensure that
309there is no discriminatory application among insurers as to the
310terms of quota share agreements, pricing of quota share
311agreements, incentive provisions if any, and consideration paid
312for servicing policies or adjusting claims.
313     h.  The quota share primary insurance agreement between the
314corporation and an authorized insurer must set forth the
315specific terms under which coverage is provided, including, but
316not limited to, the sale and servicing of policies issued under
317the agreement by the insurance agent of the authorized insurer
318producing the business, the reporting of information concerning
319eligible risks, the payment of premium to the corporation, and
320arrangements for the adjustment and payment of hurricane claims
321incurred on eligible risks by the claims adjuster and personnel
322of the authorized insurer. Entering into a quota sharing
323insurance agreement between the corporation and an authorized
324insurer shall be voluntary and at the discretion of the
325authorized insurer.
326     3.  May provide that the corporation may employ or
327otherwise contract with individuals or other entities to provide
328administrative or professional services that may be appropriate
329to effectuate the plan. The corporation shall have the power to
330borrow funds, by issuing bonds or by incurring other
331indebtedness, and shall have other powers reasonably necessary
332to effectuate the requirements of this subsection. The
333corporation may, but is not required to, seek judicial
334validation of its bonds or other indebtedness under chapter 75.
335The corporation may issue bonds or incur other indebtedness, or
336have bonds issued on its behalf by a unit of local government
337pursuant to subparagraph (g)2., in the absence of a hurricane or
338other weather-related event, upon a determination by the
339corporation, subject to approval by the office, that such action
340would enable it to efficiently meet the financial obligations of
341the corporation and that such financings are reasonably
342necessary to effectuate the requirements of this subsection. The
343corporation is authorized to take all actions needed to
344facilitate tax-free status for any such bonds or indebtedness,
345including formation of trusts or other affiliated entities. The
346corporation shall have the authority to pledge assessments,
347projected recoveries from the Florida Hurricane Catastrophe
348Fund, other reinsurance recoverables, market equalization and
349other surcharges, and other funds available to the corporation
350as security for bonds or other indebtedness. In recognition of
351s. 10, Art. I of the State Constitution, prohibiting the
352impairment of obligations of contracts, it is the intent of the
353Legislature that no action be taken whose purpose is to impair
354any bond indenture or financing agreement or any revenue source
355committed by contract to such bond or other indebtedness.
356     4.a.  Must require that the corporation operate subject to
357the supervision and approval of a board of governors consisting
358of 8 7 individuals who are residents of this state, from
359different geographical areas of this state, appointed by the
360Chief Financial Officer. The Governor, the Chief Financial
361Officer, the President of the Senate, and the Speaker of the
362House of Representatives shall each appoint two members of the
363board, effective August 1, 2005. The Chief Financial Officer
364shall designate one of the appointees as chair. All board
365members serve at the pleasure of the appointing officer Chief
366Financial Officer. All board members, including the chair, must
367be appointed to serve for 3-year terms beginning annually on a
368date designated by the plan. Any board vacancy shall be filled
369for the unexpired term by the appointing officer Chief Financial
370Officer. The Chief Financial Officer shall appoint a technical
371advisory group to provide information and advice to the board of
372governors in connection with the board's duties under this
373subsection. The executive director and senior managers of the
374corporation shall be engaged by the board, as recommended by the
375Chief Financial Officer and serve at the pleasure of the board
376Chief Financial Officer. The executive director is responsible
377for employing other staff as the corporation may require,
378subject to review and concurrence by the board and office of the
379Chief Financial Officer.
380     b.  The board shall create a Market Accountability Advisory
381Committee to assist the corporation in developing awareness of
382its rates and its customer and agent service levels in
383relationship to the voluntary market insurers writing similar
384coverage. The members of the advisory committee shall consist of
385the following ten persons, one of whom must be elected chair by
386the members of the committee: one representative appointed by
387each of the three largest property and casualty insurance agents
388independent trade associations in this state; three
389representatives appointed by the insurers with the three highest
390voluntary market share of residential property insurance
391business in the state; one representative from the Office of
392Insurance Regulation; one consumer appointed by the board who is
393insured by the corporation at the time of appointment to the
394committee; one representative appointed by the Florida
395Association of Realtors; and one representative appointed by the
396Florida Bankers Association. All members must serve for 3-year
397terms and may serve for consecutive terms. The committee shall
398report to the corporation at each board meeting on insurance
399market issues which may include rates and rate competition with
400the voluntary market; service, including policy issuance, claims
401processing, and general responsiveness to policyholders,
402applicants, and agents; and matters relating to depopulation.
403     5.  Must provide a procedure for determining the
404eligibility of a risk for coverage, as follows:
405     a.  Subject to the provisions of s. 627.3517, with respect
406to personal lines residential risks, if the risk is offered
407coverage from an authorized insurer at the insurer's approved
408rate under either a standard policy including wind coverage or,
409if consistent with the insurer's underwriting rules as filed
410with the office, a basic policy including wind coverage, the
411risk is not eligible for any policy issued by the corporation.
412If the risk is not able to obtain any such offer, the risk is
413eligible for either a standard policy including wind coverage or
414a basic policy including wind coverage issued by the
415corporation; however, if the risk could not be insured under a
416standard policy including wind coverage regardless of market
417conditions, the risk shall be eligible for a basic policy
418including wind coverage unless rejected under subparagraph 8.
419The corporation shall determine the type of policy to be
420provided on the basis of objective standards specified in the
421underwriting manual and based on generally accepted underwriting
422practices.
423     (I)  If the risk accepts an offer of coverage through the
424market assistance plan or an offer of coverage through a
425mechanism established by the corporation before a policy is
426issued to the risk by the corporation or during the first 30
427days of coverage by the corporation, and the producing agent who
428submitted the application to the plan or to the corporation is
429not currently appointed by the insurer, the insurer shall:
430     (A)  Pay to the producing agent of record of the policy,
431for the first year, an amount that is the greater of the
432insurer's usual and customary commission for the type of policy
433written or a fee equal to the usual and customary commission of
434the corporation; or
435     (B)  Offer to allow the producing agent of record of the
436policy to continue servicing the policy for a period of not less
437than 1 year and offer to pay the agent the greater of the
438insurer's or the corporation's usual and customary commission
439for the type of policy written.
440
441If the producing agent is unwilling or unable to accept
442appointment, the new insurer shall pay the agent in accordance
443with sub-sub-sub-subparagraph (A).
444     (II)  When the corporation enters into a contractual
445agreement for a take-out plan, the producing agent of record of
446the corporation policy is entitled to retain any unearned
447commission on the policy, and the insurer shall:
448     (A)  Pay to the producing agent of record of the
449corporation policy, for the first year, an amount that is the
450greater of the insurer's usual and customary commission for the
451type of policy written or a fee equal to the usual and customary
452commission of the corporation; or
453     (B)  Offer to allow the producing agent of record of the
454corporation policy to continue servicing the policy for a period
455of not less than 1 year and offer to pay the agent the greater
456of the insurer's or the corporation's usual and customary
457commission for the type of policy written.
458
459If the producing agent is unwilling or unable to accept
460appointment, the new insurer shall pay the agent in accordance
461with sub-sub-sub-subparagraph (A).
462     b.  With respect to commercial lines residential risks, if
463the risk is offered coverage under a policy including wind
464coverage from an authorized insurer at its approved rate, the
465risk is not eligible for any policy issued by the corporation.
466If the risk is not able to obtain any such offer, the risk is
467eligible for a policy including wind coverage issued by the
468corporation.
469     (I)  If the risk accepts an offer of coverage through the
470market assistance plan or an offer of coverage through a
471mechanism established by the corporation before a policy is
472issued to the risk by the corporation or during the first 30
473days of coverage by the corporation, and the producing agent who
474submitted the application to the plan or the corporation is not
475currently appointed by the insurer, the insurer shall:
476     (A)  Pay to the producing agent of record of the policy,
477for the first year, an amount that is the greater of the
478insurer's usual and customary commission for the type of policy
479written or a fee equal to the usual and customary commission of
480the corporation; or
481     (B)  Offer to allow the producing agent of record of the
482policy to continue servicing the policy for a period of not less
483than 1 year and offer to pay the agent the greater of the
484insurer's or the corporation's usual and customary commission
485for the type of policy written.
486
487If the producing agent is unwilling or unable to accept
488appointment, the new insurer shall pay the agent in accordance
489with sub-sub-sub-subparagraph (A).
490     (II)  When the corporation enters into a contractual
491agreement for a take-out plan, the producing agent of record of
492the corporation policy is entitled to retain any unearned
493commission on the policy, and the insurer shall:
494     (A)  Pay to the producing agent of record of the
495corporation policy, for the first year, an amount that is the
496greater of the insurer's usual and customary commission for the
497type of policy written or a fee equal to the usual and customary
498commission of the corporation; or
499     (B)  Offer to allow the producing agent of record of the
500corporation policy to continue servicing the policy for a period
501of not less than 1 year and offer to pay the agent the greater
502of the insurer's or the corporation's usual and customary
503commission for the type of policy written.
504
505If the producing agent is unwilling or unable to accept
506appointment, the new insurer shall pay the agent in accordance
507with sub-sub-sub-subparagraph (A).
508     6.  Must include rules for classifications of risks and
509rates therefor.
510     7.  Must provide that if premium and investment income for
511an account attributable to a particular calendar year are in
512excess of projected losses and expenses for the account
513attributable to that year, such excess shall be held in surplus
514in the account. Such surplus shall be available to defray
515deficits in that account as to future years and shall be used
516for that purpose prior to assessing assessable insurers and
517assessable insureds as to any calendar year.
518     8.  Must provide objective criteria and procedures to be
519uniformly applied for all applicants in determining whether an
520individual risk is so hazardous as to be uninsurable. In making
521this determination and in establishing the criteria and
522procedures, the following shall be considered:
523     a.  Whether the likelihood of a loss for the individual
524risk is substantially higher than for other risks of the same
525class; and
526     b.  Whether the uncertainty associated with the individual
527risk is such that an appropriate premium cannot be determined.
528
529The acceptance or rejection of a risk by the corporation shall
530be construed as the private placement of insurance, and the
531provisions of chapter 120 shall not apply.
532     9.  Must provide that the corporation shall make its best
533efforts to procure catastrophe reinsurance at reasonable rates,
534to cover its projected 100-year probable maximum loss as
535determined by the board of governors.
536     10.  Must provide that in the event of regular deficit
537assessments under sub-subparagraph (b)3.a. or sub-subparagraph
538(b)3.b., in the personal lines account, the commercial lines
539residential account, or the high-risk account, the corporation
540shall levy upon corporation policyholders in its next rate
541filing, or by a separate rate filing solely for this purpose, a
542market equalization surcharge arising from a regular assessment
543in such account in a percentage equal to the total amount of
544such regular assessments divided by the aggregate statewide
545direct written premium for subject lines of business for the
546prior calendar year. Market equalization surcharges under this
547subparagraph are not considered premium and are not subject to
548commissions, fees, or premium taxes; however, failure to pay a
549market equalization surcharge shall be treated as failure to pay
550premium.
551     11.  The policies issued by the corporation must provide
552that, if the corporation or the market assistance plan obtains
553an offer from an authorized insurer to cover the risk at its
554approved rates, the risk is no longer eligible for renewal
555through the corporation.
556     12.  Corporation policies and applications must include a
557notice that the corporation policy could, under this section, be
558replaced with a policy issued by an authorized insurer that does
559not provide coverage identical to the coverage provided by the
560corporation. The notice shall also specify that acceptance of
561corporation coverage creates a conclusive presumption that the
562applicant or policyholder is aware of this potential.
563     13.  May establish, subject to approval by the office,
564different eligibility requirements and operational procedures
565for any line or type of coverage for any specified county or
566area if the board determines that such changes to the
567eligibility requirements and operational procedures are
568justified due to the voluntary market being sufficiently stable
569and competitive in such area or for such line or type of
570coverage and that consumers who, in good faith, are unable to
571obtain insurance through the voluntary market through ordinary
572methods would continue to have access to coverage from the
573corporation. When coverage is sought in connection with a real
574property transfer, such requirements and procedures shall not
575provide for an effective date of coverage later than the date of
576the closing of the transfer as established by the transferor,
577the transferee, and, if applicable, the lender.
578     14.  Must provide that, with respect to the high-risk
579account, any assessable insurer with a surplus as to
580policyholders of $25 million or less writing 25 percent or more
581of its total countrywide property insurance premiums in this
582state may petition the office, within the first 90 days of each
583calendar year, to qualify as a limited apportionment company. In
584no event shall a limited apportionment company be required to
585participate in the portion of any assessment, within the high-
586risk account, pursuant to sub-subparagraph (b)3.a. or sub-
587subparagraph (b)3.b. in the aggregate which exceeds $50 million
588after payment of available high-risk account funds in any
589calendar year. However, a limited apportionment company shall
590collect from its policyholders any emergency assessment imposed
591under sub-subparagraph (b)3.d. The plan shall provide that, if
592the office determines that any regular assessment will result in
593an impairment of the surplus of a limited apportionment company,
594the office may direct that all or part of such assessment be
595deferred as provided in subparagraph (g)4. However, there shall
596be no limitation or deferment of an emergency assessment to be
597collected from policyholders under sub-subparagraph (b)3.d.
598     15.  Must provide that the corporation appoint as its
599licensed agents only those agents who also hold an appointment
600as defined in s. 626.015(3) with an insurer who at the time of
601the agent's initial appointment by the corporation is authorized
602to write and is actually writing personal lines residential
603property coverage, commercial residential property coverage, or
604commercial nonresidential property coverage within the state.
605     16.  Must provide that for each carrier removing policies
606by assumption from the personal lines account of the corporation
607that carrier shall receive a minimum per policy bonus equal to
60812.5 percent of written premium for a minimum of 10,000 policies
609removed with wind coverage in coastal counties, 15 percent of
610written premium for a minimum of 30,000 policies removed with
611wind coverage in coastal counties, and 17.5 percent of written
612premium for a minimum of 50,000 policies removed with wind
613coverage in coastal counties. In order to be eligible for such
614per-policy bonus, the carrier must offer to issue and renew the
615carrier's policy for a period of 3 years subsequent to the
616expiration of the assumed policy. The carrier shall nonetheless
617be eligible for such per-policy bonus if the policy is
618voluntarily terminated by the insured at any time subsequent to
619the insured's initial acceptance of coverage from the carrier.
620Cancellation of a policy for nonpayment of premium by the
621insured shall be deemed a voluntary termination by the insured.
622Failure of the insured to accept the carrier's offer of renewal,
623if such renewal is in accordance with the corporation's plan of
624operations, shall be deemed a voluntary termination by the
625insured.
626     (d)1.  It is the intent of the Legislature that the rates
627for coverage provided by the corporation be actuarially sound
628and not competitive with approved rates charged in the admitted
629voluntary market, so that the corporation functions as a
630residual market mechanism to provide insurance only when the
631insurance cannot be procured in the voluntary market. Rates
632shall include an appropriate catastrophe loading factor that
633reflects the actual catastrophic exposure of the corporation.
634     2.  For each county, the average rates of the corporation
635for each line of business for personal lines residential
636policies excluding rates for wind-only policies shall be no
637lower than the average rates charged by the insurer that had the
638highest average rate in that county among the 20 insurers with
639the greatest total direct written premium in the state for that
640line of business in the preceding year, except that with respect
641to mobile home coverages, the average rates of the corporation
642shall be no lower than the average rates charged by the insurer
643that had the highest average rate in that county among the 5
644insurers with the greatest total written premium for mobile home
645owner's policies in the state in the preceding year.
646     3.  Rates for personal lines residential wind-only policies
647must be actuarially sound and not competitive with approved
648rates charged by authorized insurers. However, for personal
649lines residential wind-only policies issued or renewed between
650July 1, 2002, and June 30, 2003, the maximum premium increase
651must be no greater than 10 percent of the Florida Windstorm
652Underwriting Association premium for that policy in effect on
653June 30, 2002, as adjusted for coverage changes and seasonal
654occupancy surcharges. For personal lines residential wind-only
655policies issued or renewed between July 1, 2003, and June 30,
6562004, the corporation shall use its existing filed and approved
657wind-only rating and classification plans, provided, however,
658that the maximum premium increase must be no greater than 20
659percent of the premium for that policy in effect on June 30,
6602003, as adjusted for coverage changes and seasonal occupancy
661surcharges. Corporation rate manuals shall include a rate
662surcharge for seasonal occupancy. To ensure that personal lines
663residential wind-only rates effective on or after July 1, 2004,
664are not competitive with approved rates charged by authorized
665insurers, the corporation, in conjunction with the office, shall
666develop a wind-only ratemaking methodology, which methodology
667shall be contained in each a rate filing made by the corporation
668with the office by January 1, 2004. If the office thereafter
669determines that the wind-only rates or rating factors filed by
670the corporation fail to comply with the wind-only ratemaking
671methodology provided for in this subsection, it shall so notify
672the corporation and require the corporation to amend its rates
673or rating factors to come into compliance within 90 days of
674notice from the office. The office shall report to the Speaker
675of the House of Representatives and the President of the Senate
676on the provisions of the wind-only ratemaking methodology by
677January 31, 2004.
678     4.  The provisions of subparagraph 2. do not apply to
679coverage provided by the corporation in any county for which the
680office determines that a reasonable degree of competition does
681not exist for personal lines residential policies. The
682provisions of subparagraph 3. do not apply to coverage provided
683by the corporation in any county for which the office determines
684that a reasonable degree of competition does not exist for
685personal lines residential policies in the area of that county
686which is eligible for wind-only coverage. In such counties, the
687rates for personal lines residential coverage shall be
688actuarially sound and not excessive, inadequate, or unfairly
689discriminatory and are subject to the other provisions of the
690paragraph and s. 627.062. The commission may adopt rules
691establishing the criteria for determining whether a reasonable
692degree of competition exists for personal lines residential
693policies. Beginning October 1, 2005, and each 6 months
694thereafter, the office shall determine and identify those
695counties for which a reasonable degree of competition does not
696exist for purposes of subparagraphs 2. and 3., respectively.
697     5.4.  Rates for commercial lines coverage shall not be
698subject to the requirements of subparagraph 2., but shall be
699subject to all other requirements of this paragraph and s.
700627.062.
701     6.5.  Nothing in this paragraph shall require or allow the
702corporation to adopt a rate that is inadequate under s. 627.062.
703     7.6.  The corporation shall certify to the office at least
704twice annually that its personal lines rates comply with the
705requirements of this paragraph subparagraphs 1. and 2. If any
706adjustment in the rates or rating factors of the corporation is
707necessary to ensure such compliance, the corporation shall make
708and implement such adjustments and file its revised rates and
709rating factors with the office. If the office thereafter
710determines that the revised rates and rating factors fail to
711comply with the provisions of this paragraph subparagraphs 1.
712and 2., it shall notify the corporation and require the
713corporation to amend its rates or rating factors in conjunction
714with its next rate filing. The office must notify the
715corporation by electronic means of any rate filing it approves
716for any insurer among the insurers referred to in subparagraph
7172.
718     8.7.  In addition to the rates otherwise determined
719pursuant to this paragraph, the corporation shall impose and
720collect an amount equal to the premium tax provided for in s.
721624.509 to augment the financial resources of the corporation.
722     9.8.a.  To assist the corporation in developing additional
723ratemaking methods to assure compliance with this paragraph
724subparagraphs 1. and 4., the corporation shall appoint a rate
725methodology panel consisting of one person recommended by the
726Florida Association of Insurance Agents, one person recommended
727by the Professional Insurance Agents of Florida, one person
728recommended by the Florida Association of Insurance and
729Financial Advisors, one person recommended by the insurer with
730the highest voluntary market share of residential property
731insurance business in the state, one person recommended by the
732insurer with the second-highest voluntary market share of
733residential property insurance business in the state, one person
734recommended by an insurer writing commercial residential
735property insurance in this state, one person recommended by the
736Office of Insurance Regulation, and one board member designated
737by the board chairman, who shall serve as chairman of the panel.
738     b.  By January 1, 2004, the rate methodology panel shall
739provide a report to the corporation of its findings and
740recommendations for the use of additional ratemaking methods and
741procedures, including the use of a rate equalization surcharge
742in an amount sufficient to assure that the total cost of
743coverage for policyholders or applicants to the corporation is
744sufficient to comply with subparagraph 1.
745     c.  Within 30 days after such report, the corporation shall
746present to the President of the Senate, the Speaker of the House
747of Representatives, the minority party leaders of each house of
748the Legislature, and the chairs of the standing committees of
749each house of the Legislature having jurisdiction of insurance
750issues, a plan for implementing the additional ratemaking
751methods and an outline of any legislation needed to facilitate
752use of the new methods.
753     d.  The plan must include a provision that producer
754commissions paid by the corporation shall not be calculated in
755such a manner as to include any rate equalization surcharge.
756However, without regard to the plan to be developed or its
757implementation, producer commissions paid by the corporation for
758each account, other than the quota share primary program, shall
759remain fixed as to percentage, effective rate, calculation, and
760payment method until January 1, 2004.
761     10.9.  By January 1, 2004, The corporation shall develop a
762notice to policyholders or applicants that the rates of Citizens
763Property Insurance Corporation are intended to be higher than
764the rates of any admitted carrier except when the provisions of
765subparagraph 4. apply and providing other information the
766corporation deems necessary to assist consumers in finding other
767voluntary admitted insurers willing to insure their property.
768     Section 6.  Subsection (1) of section 627.411, Florida
769Statutes, is amended to read:
770     627.411  Grounds for disapproval.--
771     (1)  The office shall disapprove any form filed under s.
772627.410, or withdraw any previous approval thereof, only if the
773form:
774     (a)  Is in any respect in violation of, or does not comply
775with, this code.
776     (b)  Contains or incorporates by reference, where such
777incorporation is otherwise permissible, any inconsistent,
778ambiguous, or misleading clauses, or exceptions and conditions
779which deceptively affect the risk purported to be assumed in the
780general coverage of the contract.
781     (c)  Has any title, heading, or other indication of its
782provisions which is misleading.
783     (d)  Is printed or otherwise reproduced in such manner as
784to render any material provision of the form substantially
785illegible.
786     (e)  Contains provisions that are unfair or inequitable or
787contrary to the public policy of this state or that encourage
788misrepresentation.
789     (f)(e)  Is for health insurance, and:
790     1.  Provides benefits that are unreasonable in relation to
791the premium charged.;
792     2.  Contains provisions that are unfair or inequitable or
793contrary to the public policy of this state or that encourage
794misrepresentation;
795     2.3.  Contains provisions that apply rating practices that
796result in unfair discrimination pursuant to s. 626.9541(1)(g)2.
797     (g)(f)  Excludes coverage for human immunodeficiency virus
798infection or acquired immune deficiency syndrome or contains
799limitations in the benefits payable, or in the terms or
800conditions of such contract, for human immunodeficiency virus
801infection or acquired immune deficiency syndrome which are
802different than those which apply to any other sickness or
803medical condition.
804     Section 7.  Subsections (1) and (7) of section 627.7015,
805Florida Statutes, are amended to read:
806     627.7015  Alternative procedure for resolution of disputed
807property insurance claims.--
808     (1)  PURPOSE AND SCOPE.--This section sets forth a
809nonadversarial alternative dispute resolution procedure for a
810mediated claim resolution conference prompted by the need for
811effective, fair, and timely handling of property insurance
812claims. There is a particular need for an informal,
813nonthreatening forum for helping parties who elect this
814procedure to resolve their claims disputes because most
815homeowner's and commercial residential insurance policies
816obligate insureds to participate in a potentially expensive and
817time-consuming adversarial appraisal process prior to
818litigation. The procedure set forth in this section is designed
819to bring the parties together for a mediated claims settlement
820conference without any of the trappings or drawbacks of an
821adversarial process. Before resorting to these procedures,
822insureds and insurers are encouraged to resolve claims as
823quickly and fairly as possible. This section is available with
824respect to claims under personal lines and commercial
825residential policies for all claimants and insurers prior to
826commencing the appraisal process, or commencing litigation. If
827requested by the insured, participation by legal counsel shall
828be permitted. Mediation under this section is also available to
829litigants referred to the department by a county court or
830circuit court. This section does not apply to commercial
831coverages, to private passenger motor vehicle insurance
832coverages, or to disputes relating to liability coverages in
833policies of property insurance.
834     (7)  If the insurer fails to comply with subsection (2) by
835failing to notify a first-party claimant of its right to
836participate in the mediation program under this section or if
837the insurer requests the mediation, and the mediation results
838are rejected by either party, the insured shall not be required
839to submit to or participate in any contractual loss appraisal
840process of the property loss damage as a precondition to legal
841action for breach of contract against the insurer for its
842failure to pay the policyholder's claims covered by the policy.
843     Section 8.  Section 627.706, Florida Statutes, is amended
844to read:
845     627.706  Sinkhole insurance; definitions.--
846     (1)  Every insurer authorized to transact property
847insurance in this state shall make available coverage for
848insurable sinkhole losses on any structure, including contents
849of personal property contained therein, to the extent provided
850in the form to which the sinkhole coverage attaches.
851     (2)  As used in this section and s. 627.7065, and as used
852in connection with any policy providing coverage for sinkhole
853losses:
854     (a)  "Sinkhole" means a landform created by subsidence of
855soil, sediment, or rock as underlying strata are dissolved by
856ground water. A sinkhole may form by collapse into subterranean
857voids created by dissolution of limestone or dolostone or by
858subsidence as these strata are dissolved.
859     (b)  "Sinkhole loss" means structural damage to a the
860building caused by sinkhole activity. Contents coverage shall
861apply only if there is structural damage to the building caused
862by sinkhole activity. Building coverage shall apply only to the
863reasonable costs to stabilize the land and building if necessary
864and to repair the damage to the foundation, subject to the
865coverage and terms of the policy.
866     (c)(3)  "Sinkhole activity loss" means actual physical
867damage to the covered property covered arising out of or caused
868by sudden settlement or collapse of the earth supporting such
869property only when such settlement or collapse results from
870movement or raveling of soils, sediments, or rock materials from
871the surface into subterranean voids created by the effect action
872of water on a limestone or similar rock formation.
873     (3)(4)  Every insurer authorized to transact property
874insurance in this state shall make a proper filing with the
875office for the purpose of extending the appropriate forms of
876property insurance to include coverage for insurable sinkhole
877losses.
878     Section 9.  Section 627.7065, Florida Statutes, is created
879to read:
880     627.7065  Database of information relating to sinkholes;
881the Department of Financial Services and the Department of
882Environmental Protection.--
883     (1)  The Legislature finds that there has been a dramatic
884increase in the number of sinkholes and insurance claims for
885sinkhole damage in the state during the past 10 years.
886Accordingly, the Legislature recognizes the need to track
887current and past sinkhole activity and to make the information
888available for prevention and remediation activities. The
889Legislature further finds that the Florida Geological Survey of
890the Department of Environmental Protection has created a partial
891database of some sinkholes identified in Florida, although the
892database is not reflective of all sinkholes or insurance claims
893for sinkhole damage. The Legislature determines that creating a
894complete electronic database of sinkhole activity serves an
895important purpose in protecting the public and in studying
896property claims activities in the insurance industry.
897     (2)  The Department of Financial Services, including the
898employee of the Division of Consumer Services designated as the
899primary contact for consumers on issues relating to sinkholes,
900and the Office of the Insurance Consumer Advocate shall consult
901with the Florida Geological Survey and the Department of
902Environmental Protection to implement a statewide automated
903database of sinkholes and related activity identified in the
904state.
905     (3)  Representatives of the Department of Financial
906Services, with the agreement of the Department of Environmental
907Protection, shall determine the form and content of the
908database. The content may include standards for reporting and
909investigating sinkholes for inclusion in the database and
910requirements for insurers to report to the departments the
911receipt of claims involving sinkhole loss and other similar
912activities. The Department of Financial Services may require
913insurers to report present and past data of sinkhole claims. The
914database also may include information of damage due to ground
915settling and other subsidence activity.
916     (4)  The Department of Financial Services may manage the
917database or may contract for its management and maintenance. The
918Department of Environmental Protection shall investigate reports
919of sinkhole activity and include its findings and investigations
920in the database.
921     (5)  The Department of Environmental Protection, in
922consultation with the Department of Financial Services, shall
923present a report of activities relating to the sinkhole
924database, including recommendations regarding the database and
925similar matters, to the Governor, the Speaker of the House of
926Representatives, the President of the Senate, and the Chief
927Financial Officer by December 31, 2005. The report may consider
928the need for the Legislature to create an entity to study the
929increase in sinkhole activity in the state and other similar
930issues relating to sinkhole damage, including recommendations
931and costs for staffing the entity. The report may include other
932information, as appropriate.
933     (6)  The Department of Financial Services, in consultation
934with the Department of Environmental Protection, may adopt rules
935to implement the provisions of this section.
936     Section 10.  The Auditor General shall perform an
937operational audit, as defined in s. 11.45(1), Florida Statutes,
938of Citizens Property Insurance Corporation created under s.
939627.351(6), Florida Statutes. The scope of the audit shall also
940include:
941     (1)  An analysis of the corporation's infrastructure,
942customer service, claims handling, accessibility of policyholder
943information to the agent of record, take-out programs, take-out
944bonuses, and financing arrangements.
945     (2)  An evaluation of costs associated with the
946administration and servicing of the policies issued by the
947corporation to determine alternatives by which costs can be
948reduced, customer service improved, and claims handling
949improved.
950
951The audit shall contain policy alternatives for the Legislature
952to consider. The Auditor General shall submit a report to the
953Governor, the President of the Senate, and the Speaker of the
954House of Representatives no later than February 1, 2006.
955     Section 11.  The board of governors of Citizens Property
956Insurance Corporation created by section 627.351(6), Florida
957Statutes, shall, by February 1, 2006, submit a report to the
958President of the Senate, the Speaker of the House of
959Representatives, the minority party leaders of the Senate and
960the House of Representatives, and the chairs of the standing
961committees of the Senate and the House of Representatives having
962jurisdiction over matters relating to property and casualty
963insurance. The report shall include the board's findings and
964recommendations on the following issues:
965     (1)  The number of policies and the aggregate premium of
966Citizens Property Insurance Corporation, before and after
967enactment of this act, and projections for future policy and
968premium growth.
969     (2)  Increases or decreases in availability of residential
970property coverage in the voluntary market and the effectiveness
971of this act in improving the availability of residential
972property coverage in the voluntary market in the state.
973     (3)  The board's efforts to depopulate the corporation and
974the willingness of insurers in the voluntary market to avail
975themselves of depopulation incentives.
976     (4)  Further actions that could be taken by the Legislature
977to improve availability of residential property coverage in the
978voluntary and residual markets.
979     (5)  Actions that the board has taken to restructure the
980corporation and recommendations for legislative action to
981restructure the corporation, including, but not limited to,
982actions relating to claims handling and customer service.
983     (6)  Projected surpluses or deficits and possible means of
984providing funding to ensure the continued solvency of the
985corporation.
986     (7)  The corporation's efforts to procure catastrophe
987reinsurance to cover its projected 100-year probable maximum
988loss with specification as to what best efforts were made by the
989corporation to procure such reinsurance.
990     (8)  Such other issues as the board determines are worthy
991of the Legislature's consideration.
992     Section 12.  (1)  Section 2 of this act shall take effect
993on the same date that House Bill 1939 or similar legislation
994takes effect, if such legislation is adopted in the same
995legislative session or an extension thereof and becomes a law.
996     (2)  Section 3 of this act shall take effect on the same
997date that House Bill 1939 or similar legislation takes effect,
998if such legislation is adopted in the same legislative session
999or an extension thereof and becomes a law.
1000     Section 13.  Except as otherwise provided herein, this act
1001shall take effect July 1, 2005.


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