September 19, 2020
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HB 1937CS


1The Commerce Council recommends the following:
3     Council/Committee Substitute
4     Remove the entire bill and insert:
A bill to be entitled
6An act relating to property insurance; creating s.
7489.1285, F.S.; specifying certain consumer protection
8measures relating to roofing construction to be in effect
9following certain executive orders; specifying certain
10requirements to be complied with relating to roof repair
11or reroofing; amending s. 627.062, F.S.; limiting an
12insurer's recoupment of reimbursement premium; providing
13limitations; amending s. 627.0628, F.S.; limiting use of
14certain methodologies in determining hurricane loss
15factors for reimbursement premium rates in certain rate
16filings; creating s. 627.06281, F.S.; requiring certain
17insurers and organizations to develop, maintain, and
18update a public hurricane loss projection model; providing
19reporting requirements for insurers; protecting trade
20secret information; amending s. 627.0629, F.S.; tightening
21a limitation on rate filings based on computer models
22under certain circumstances; amending s. 627.351, F.S.;
23providing additional legislative intent relating to the
24Citizens Property Insurance Corporation; specifying a
25limitation on dwelling limits for personal lines policies;
26requiring the corporation to offer wind-only policies in
27certain areas for new personal residential risks;
28providing requirements and limitations; requiring creation
29of a Market Accountability Advisory Committee to assist
30the corporation for certain purposes; providing for
31appointment of committee members; providing for terms;
32requiring reports to the corporation; revising
33requirements for the plan of operation of the corporation;
34requiring a plan for removing personal lines policies from
35coverage by the corporation which includes the development
36and implementation of a take-out bonus strategy; deleting
37limitations on certain personal lines residential wind-
38only policies; deleting an obsolete reporting requirement;
39specifying nonapplication of certain policy requirements
40in counties lacking reasonable degrees of competition for
41certain policies under certain circumstances; requiring
42the commission to adopt rules; deleting an obsolete rate
43methodology panel reporting requirement provision;
44requiring the corporation to require the securing of flood
45insurance as a condition of coverage under certain
46circumstances; providing requirements and limitations;
47amending s. 627.411, F.S.; revising grounds for office
48disapproval of certain forms; amending s. 627.7015, F.S.;
49revising purpose and scope provisions relating to an
50alternative procedure for resolution of disputed property
51insurance claims; providing an additional criterion for
52excusing an insured from being required to submit to
53certain loss appraisal processes; amending s. 627.702,
54F.S.; specifying intent; providing nonapplication of
55certain insurer liability requirements under certain
56circumstances; limiting an insurer's liability to certain
57loss covered by a covered peril; amending s. 627.706,
58F.S.; revising definitions relating to sinkholes;
59providing additional definitions; creating s. 627.7065,
60F.S.; providing legislative findings; requiring the
61Department of Financial Services and the Office of the
62Insurance Consumer Advocate to consult with the Florida
63Geological Survey and the Department of Environmental
64Protection to implement a statewide automated database of
65sinkholes and related activity; providing requirements for
66the form and content of the database; authorizing the
67Department of Financial Services to require insurers to
68provide certain information; providing for management of
69the database; requiring the department to investigate
70sinkhole activity reports and include findings and
71investigations in the database; requiring the Department
72of Environmental Protection to report on the database to
73the Governor, Legislature, and Chief Financial Officer;
74authorizing the Department of Financial Services to adopt
75implementing rules; amending s. 627.707, F.S.; revising
76standards for investigations of sinkhole claims by
77insurers; requiring an insurer to engage an engineer and
78professional geologist for certain purposes; requiring a
79report under certain circumstances; requiring an insurer
80to provide written notice to a policyholder disclosing
81certain information; authorizing an insurer to deny a
82claim under certain circumstances; authorizing a
83policyholder to demand certain testing; providing
84requirements; specifying required activities for insurers
85if a sinkhole loss is verified; specifying payment
86requirements for insurers; providing limitations;
87requiring the insurer to pay fees of the engineer and
88geologist; authorizing an insurer to engage a structural
89engineer for certain purposes; creating s. 627.7072, F.S.;
90specifying requirements for sinkhole testing by engineers
91and geologists; creating s. 627.7073, F.S.; providing
92reporting requirements for engineers and geologists after
93testing for sinkholes; specifying a presumption of
94correctness of certain findings; requiring an insurer
95paying a sinkhole loss claim to file a report and
96certification with the county property appraiser;
97requiring the property appraiser to record the report and
98certification; requiring the insurer to bear the cost of
99filing and recording; requiring a seller of certain
100property to make certain disclosures to property buyers
101under certain circumstances; requiring the Auditor General
102to perform an operational audit of the Citizens Property
103Insurance Corporation; specifying audit requirements;
104requiring a report; requiring the board of governors of
105the Citizens Property Insurance Corporation to submit a
106report to the Legislature relating to property and
107casualty insurance; specifying report requirements;
108providing for contingent effect; providing effective
111Be It Enacted by the Legislature of the State of Florida:
113     Section 1.  Section 489.1285, Florida Statutes, is created
114to read:
115     489.1285  Consumer protections; contract limitations.--
116Subsequent to the issuance of an executive order by the Office
117of the Governor declaring the existence of a state of emergency
118as a result and consequence of a serious threat posed to the
119public health, safety, and property in this state, in which
120damage to property has occurred and for which property insurance
121claims have been filed, the following consumer protection
122measures shall be in effect:
123     (1)  A contract for the repair or reroofing of a
124residential structure that has been agreed to in writing by the
125parties to the contract shall be a valid and binding agreement.
126A roofing contractor licensed pursuant to this chapter who is a
127party to a contract for the repair or reroofing of a residential
128structure shall be bound by the qualifications for licensure and
129the job scope specified in this chapter for a roofing contractor
130to provide timely and professional services.
131     (2)  If a contract is agreed to for the repair of a roof or
132reroofing of a residential structure, which repair is necessary
133as a result of damage caused by an emergency situation
134designated by executive order, the damages must be confirmed by
135a third party who is independent from the parties to the
136contract that the damages are a direct result of a designated
137emergency situation. Third-party confirmation must be attested
138to by an insurance adjuster, emergency management personnel,
139local building official, or other similar authority.
140     (3)(a)  A contract for services shall not be valid after 60
141calendar days after the date the contract agreement was signed
142by the parties to the contract. The contract may not provide for
143an automatic extension of time for the provisions of the
144contract. After the 60 days have expired, the contract shall be
145null and void by operation of law.
146     (b)  Within 10 calendar days after the period of time for
147expiration of the contract, the parties to the contract may
148agree in writing, as a separate contract to the original
149contract, to an additional period of 60 calendar days beyond the
150time period specified in the original contract to complete the
151roofing services. If the performance of services under the
152contract by the roofing contractor have not been completed, the
153contract shall be null and void with no further responsibilities
154or duties on the part of the parties to the contract except as
155provided in this paragraph and subsection (4).
156     (c)  The subsequent contract may be extended beyond the
157additional 60 days pursuant to a written agreement between the
158parties and signed as an addendum or supplement to the contract.
159The delay or extension of services may only be agreed to if the
160delay in providing the contractual services is due to the
161unavailability, beyond the control of the roofing contractor, of
162roofing materials necessary for the completion of the repair or
163reroofing of the residence. The contracted price of the services
164may not be changed from the agreed to cost specified in the
165subsequent contract.
166     (4)  Subsequent to the expiration of the contract or
167contracts specified in subsection (3), the contractor shall
168refund and pay in full, upon demand, any and all remuneration
169received in the form of a prepayment, up-front fee, deposit, or
170other consideration already paid to the contractor.
171     (5)  The provisions of this section apply to registered, as
172well as certified, roofing contractors.
173     Section 2.  Subsection (5) of section 627.062, Florida
174Statutes, is amended to read:
175     627.062  Rate standards.--
176     (5)  With respect to a rate filing involving coverage of
177the type for which the insurer is required to pay a
178reimbursement premium to the Florida Hurricane Catastrophe Fund,
179the insurer may fully recoup in its property insurance premiums
180any reimbursement premiums paid to the Florida Hurricane
181Catastrophe Fund, together with reasonable costs of other
182reinsurance, but may not recoup reinsurance costs that duplicate
183coverage provided by the Florida Hurricane Catastrophe Fund. An
184insurer may not recoup more than one year of reimbursement
185premium at a time. Any under-recoupment from the prior year may
186be added to the following year's reimbursement premium and any
187over-recoupment shall be subtracted from the following year's
188reimbursement premium.
189     Section 3.  Paragraph (c) of subsection (1) and paragraph
190(c) of subsection (3) of section 627.0628, Florida Statutes, are
191amended to read:
192     627.0628  Florida Commission on Hurricane Loss Projection
195     (c)  It is the intent of the Legislature to create the
196Florida Commission on Hurricane Loss Projection Methodology as a
197panel of experts to provide the most actuarially sophisticated
198guidelines and standards for projection of hurricane losses
199possible, given the current state of actuarial science. It is
200the further intent of the Legislature that such standards and
201guidelines must be used by the State Board of Administration in
202developing reimbursement premium rates for the Florida Hurricane
203Catastrophe Fund, and, subject to paragraph (3)(c), may be used
204by insurers in rate filings under s. 627.062 unless the way in
205which such standards and guidelines were applied by the insurer
206was erroneous, as shown by a preponderance of the evidence.
208     (c)  With respect to a rate filing under s. 627.062, an
209insurer may employ actuarial methods, principles, standards,
210models, or output ranges found by the commission to be accurate
211or reliable to determine hurricane loss factors for use in a
212rate filing under s. 627.062. Such, which findings and factors
213are admissible and relevant in consideration of a rate filing by
214the office or in any arbitration or administrative or judicial
215review only if the office and the consumer advocate appointed
216pursuant to s. 627.0613 have access to all of the assumptions
217and factors that were used in developing the actuarial methods,
218principles, standards, models, or output ranges and are not
219precluded from disclosing such information in a rate proceeding.
220     Section 4.  Section 627.06281, Florida Statutes, is created
221to read:
222     627.06281  Public hurricane loss projection model;
223reporting of data by insurers.--Within 30 days after a written
224request for loss data and associated exposure data by the office
225or a type I center within the State University System
226established to study mitigation, residential property insurers
227and licensed rating and advisory organizations that compile
228residential property insurance loss data shall provide loss data
229and associated exposure data for residential property insurance
230policies to the office or to a type I center within the State
231University System established to study mitigation, as directed
232by the office, for the purposes of developing, maintaining, and
233updating a public model for hurricane loss projections. The loss
234data and associated exposure data provided shall be in writing.
235Any loss data and associated exposure data provided pursuant to
236this section that constitutes a trade secret as defined in s.
237812.081, and as provided in s. 815.04(3), shall be subject to
238the provisions of s. 815.045.
239     Section 5.  Subsection (7) of section 627.0629, Florida
240Statutes, is amended to read:
241     627.0629  Residential property insurance; rate filings.--
242     (7)  Any rate filing that is based in whole or part on data
243from a computer model may not exceed 15 25 percent unless there
244is a public hearing.
245     Section 6.  Paragraphs (a), (c), (d), and (q) of subsection
246(6) of section 627.351, Florida Statutes, are amended to read:
247     627.351  Insurance risk apportionment plans.--
249     (a)1.  The Legislature finds that actual and threatened
250catastrophic losses to property in this state from hurricanes
251have caused insurers to be unwilling or unable to provide
252property insurance coverage to the extent sought and needed. It
253is in the public interest and a public purpose to assist in
254assuring that property in the state is insured so as to
255facilitate the remediation, reconstruction, and replacement of
256damaged or destroyed property in order to reduce or avoid the
257negative effects otherwise resulting to the public health,
258safety, and welfare; to the economy of the state; and to the
259revenues of the state and local governments needed to provide
260for the public welfare. It is necessary, therefore, to provide
261property insurance to applicants who are in good faith entitled
262to procure insurance through the voluntary market but are unable
263to do so. The Legislature intends by this subsection that
264property insurance be provided and that it continues, as long as
265necessary, through an entity organized to achieve efficiencies
266and economies, while providing service to policyholders,
267applicants, and agents that is no less than the quality
268generally provided in the voluntary market, all toward the
269achievement of the foregoing public purposes. Because it is
270essential for the corporation to have the maximum financial
271resources to pay claims following a catastrophic hurricane, it
272is the intent of the Legislature that the income of the
273corporation be exempt from federal income taxation and that
274interest on the debt obligations issued by the corporation be
275exempt from federal income taxation.
276     2.  The Residential Property and Casualty Joint
277Underwriting Association originally created by this statute
278shall be known, as of July 1, 2002, as the Citizens Property
279Insurance Corporation. The corporation shall provide insurance
280for residential and commercial property, for applicants who are
281in good faith entitled, but are unable, to procure insurance
282through the voluntary market. The corporation shall operate
283pursuant to a plan of operation approved by order of the office.
284The plan is subject to continuous review by the office. The
285office may, by order, withdraw approval of all or part of a plan
286if the office determines that conditions have changed since
287approval was granted and that the purposes of the plan require
288changes in the plan. For the purposes of this subsection,
289residential coverage includes both personal lines residential
290coverage, which consists of the type of coverage provided by
291homeowner's, mobile home owner's, dwelling, tenant's,
292condominium unit owner's, and similar policies, and commercial
293lines residential coverage, which consists of the type of
294coverage provided by condominium association, apartment
295building, and similar policies.
296     3.  It is the intent of the Legislature that policyholders,
297applicants, and agents of the corporation receive service and
298treatment of the highest possible level but never less than that
299generally provided in the voluntary market. It also is intended
300that the corporation be held to service standards no less than
301those applied to insurers in the voluntary market by the office
302with respect to responsiveness, timeliness, customer courtesy,
303and overall dealings with policyholders, applicants, or agents
304of the corporation.
305     (c)  The plan of operation of the corporation:
306     1.  Must provide for adoption of residential property and
307casualty insurance policy forms and commercial residential and
308nonresidential property insurance forms, which forms must be
309approved by the office prior to use. The corporation shall adopt
310the following policy forms:
311     a.  Standard personal lines policy forms that are
312comprehensive multiperil policies providing full coverage of a
313residential property equivalent to the coverage provided in the
314private insurance market under an HO-3, HO-4, or HO-6 policy.
315     b.  Basic personal lines policy forms that are policies
316similar to an HO-8 policy or a dwelling fire policy that provide
317coverage meeting the requirements of the secondary mortgage
318market, but which coverage is more limited than the coverage
319under a standard policy.
320     c.  Commercial lines residential policy forms that are
321generally similar to the basic perils of full coverage
322obtainable for commercial residential structures in the admitted
323voluntary market.
324     d.  Personal lines and commercial lines residential
325property insurance forms that cover the peril of wind only. The
326forms are applicable only to residential properties located in
327areas eligible for coverage under the high-risk account referred
328to in sub-subparagraph (b)2.a.
329     e.  Commercial lines nonresidential property insurance
330forms that cover the peril of wind only. The forms are
331applicable only to nonresidential properties located in areas
332eligible for coverage under the high-risk account referred to in
333sub-subparagraph (b)2.a.
335The dwelling limits for any personal lines policy in both the
336personal lines account and the high-risk account may not exceed
337$1 million. For new personal residential risks written by the
338corporation on or after May 7, 2005, in areas eligible for
339coverage in the high-risk account, the corporation shall offer,
340subject to reasonable underwriting guidelines, a wind only
341policy with building coverage valued at up to $1 million. For
342such new personal residential risks covering properties valued
343at more than $1 million, the corporation shall offer a wind-only
344policy of up to $1 million of building coverage without any
345penalty or reduction in coverage for underinsurance or the
346purchase of other insurance, provided the insured property owner
347maintains insurance coverage for the value of the building in
348excess of $1 million. Coverage for property other than the
349building and any attached structures shall be offered by the
350corporation in addition to the $1 million limit of building
351coverage. For all existing high-risk account policies in effect
352on May 7, 2005, the corporation shall continue to offer coverage
353for the full value of the building and property without
355     2.a.  Must provide that the corporation adopt a program in
356which the corporation and authorized insurers enter into quota
357share primary insurance agreements for hurricane coverage, as
358defined in s. 627.4025(2)(a), for eligible risks, and adopt
359property insurance forms for eligible risks which cover the
360peril of wind only. As used in this subsection, the term:
361     (I)  "Quota share primary insurance" means an arrangement
362in which the primary hurricane coverage of an eligible risk is
363provided in specified percentages by the corporation and an
364authorized insurer. The corporation and authorized insurer are
365each solely responsible for a specified percentage of hurricane
366coverage of an eligible risk as set forth in a quota share
367primary insurance agreement between the corporation and an
368authorized insurer and the insurance contract. The
369responsibility of the corporation or authorized insurer to pay
370its specified percentage of hurricane losses of an eligible
371risk, as set forth in the quota share primary insurance
372agreement, may not be altered by the inability of the other
373party to the agreement to pay its specified percentage of
374hurricane losses. Eligible risks that are provided hurricane
375coverage through a quota share primary insurance arrangement
376must be provided policy forms that set forth the obligations of
377the corporation and authorized insurer under the arrangement,
378clearly specify the percentages of quota share primary insurance
379provided by the corporation and authorized insurer, and
380conspicuously and clearly state that neither the authorized
381insurer nor the corporation may be held responsible beyond its
382specified percentage of coverage of hurricane losses.
383     (II)  "Eligible risks" means personal lines residential and
384commercial lines residential risks that meet the underwriting
385criteria of the corporation and are located in areas that were
386eligible for coverage by the Florida Windstorm Underwriting
387Association on January 1, 2002.
388     b.  The corporation may enter into quota share primary
389insurance agreements with authorized insurers at corporation
390coverage levels of 90 percent and 50 percent.
391     c.  If the corporation determines that additional coverage
392levels are necessary to maximize participation in quota share
393primary insurance agreements by authorized insurers, the
394corporation may establish additional coverage levels. However,
395the corporation's quota share primary insurance coverage level
396may not exceed 90 percent.
397     d.  Any quota share primary insurance agreement entered
398into between an authorized insurer and the corporation must
399provide for a uniform specified percentage of coverage of
400hurricane losses, by county or territory as set forth by the
401corporation board, for all eligible risks of the authorized
402insurer covered under the quota share primary insurance
404     e.  Any quota share primary insurance agreement entered
405into between an authorized insurer and the corporation is
406subject to review and approval by the office. However, such
407agreement shall be authorized only as to insurance contracts
408entered into between an authorized insurer and an insured who is
409already insured by the corporation for wind coverage.
410     f.  For all eligible risks covered under quota share
411primary insurance agreements, the exposure and coverage levels
412for both the corporation and authorized insurers shall be
413reported by the corporation to the Florida Hurricane Catastrophe
414Fund. For all policies of eligible risks covered under quota
415share primary insurance agreements, the corporation and the
416authorized insurer shall maintain complete and accurate records
417for the purpose of exposure and loss reimbursement audits as
418required by Florida Hurricane Catastrophe Fund rules. The
419corporation and the authorized insurer shall each maintain
420duplicate copies of policy declaration pages and supporting
421claims documents.
422     g.  The corporation board shall establish in its plan of
423operation standards for quota share agreements which ensure that
424there is no discriminatory application among insurers as to the
425terms of quota share agreements, pricing of quota share
426agreements, incentive provisions if any, and consideration paid
427for servicing policies or adjusting claims.
428     h.  The quota share primary insurance agreement between the
429corporation and an authorized insurer must set forth the
430specific terms under which coverage is provided, including, but
431not limited to, the sale and servicing of policies issued under
432the agreement by the insurance agent of the authorized insurer
433producing the business, the reporting of information concerning
434eligible risks, the payment of premium to the corporation, and
435arrangements for the adjustment and payment of hurricane claims
436incurred on eligible risks by the claims adjuster and personnel
437of the authorized insurer. Entering into a quota sharing
438insurance agreement between the corporation and an authorized
439insurer shall be voluntary and at the discretion of the
440authorized insurer.
441     3.  May provide that the corporation may employ or
442otherwise contract with individuals or other entities to provide
443administrative or professional services that may be appropriate
444to effectuate the plan. The corporation shall have the power to
445borrow funds, by issuing bonds or by incurring other
446indebtedness, and shall have other powers reasonably necessary
447to effectuate the requirements of this subsection. The
448corporation may, but is not required to, seek judicial
449validation of its bonds or other indebtedness under chapter 75.
450The corporation may issue bonds or incur other indebtedness, or
451have bonds issued on its behalf by a unit of local government
452pursuant to subparagraph (g)2., in the absence of a hurricane or
453other weather-related event, upon a determination by the
454corporation, subject to approval by the office, that such action
455would enable it to efficiently meet the financial obligations of
456the corporation and that such financings are reasonably
457necessary to effectuate the requirements of this subsection. The
458corporation is authorized to take all actions needed to
459facilitate tax-free status for any such bonds or indebtedness,
460including formation of trusts or other affiliated entities. The
461corporation shall have the authority to pledge assessments,
462projected recoveries from the Florida Hurricane Catastrophe
463Fund, other reinsurance recoverables, market equalization and
464other surcharges, and other funds available to the corporation
465as security for bonds or other indebtedness. In recognition of
466s. 10, Art. I of the State Constitution, prohibiting the
467impairment of obligations of contracts, it is the intent of the
468Legislature that no action be taken whose purpose is to impair
469any bond indenture or financing agreement or any revenue source
470committed by contract to such bond or other indebtedness.
471     4.a.  Must require that the corporation operate subject to
472the supervision and approval of a board of governors consisting
473of 7 individuals who are residents of this state, from different
474geographical areas of this state, appointed by the Chief
475Financial Officer. The Chief Financial Officer shall designate
476one of the appointees as chair. All board members serve at the
477pleasure of the Chief Financial Officer. All board members,
478including the chair, must be appointed to serve for 3-year terms
479beginning annually on a date designated by the plan. Any board
480vacancy shall be filled for the unexpired term by the Chief
481Financial Officer. The Chief Financial Officer shall appoint a
482technical advisory group to provide information and advice to
483the board of governors in connection with the board's duties
484under this subsection. The executive director and senior
485managers of the corporation shall be engaged by the Chief
486Financial Officer and serve at the pleasure of the Chief
487Financial Officer. The executive director is responsible for
488employing other staff as the corporation may require, subject to
489review and concurrence by the office of the Chief Financial
491     b.  The board shall create a Market Accountability Advisory
492Committee to assist the corporation in developing awareness of
493its rates and its customer and agent service levels in
494relationship to the voluntary market insurers writing similar
495coverage. The members of the advisory committee shall consist of
496the following 11 persons, one of whom must be elected chair by
497the members of the committee: four representatives, one
498appointed by the Florida Association of Insurance Agents, one by
499the Florida Association of Insurance and Financial Advisors, one
500by the Professional Insurance Agents of Florida, and one by the
501Latin American Association of Insurance Agencies; three
502representatives appointed by the insurers with the three highest
503voluntary market share of residential property insurance
504business in the state; one representative from the Office of
505Insurance Regulation; one consumer appointed by the board who is
506insured by the corporation at the time of appointment to the
507committee; one representative appointed by the Florida
508Association of Realtors; and one representative appointed by the
509Florida Bankers Association. All members must serve for 3-year
510terms and may serve for consecutive terms. The committee shall
511report to the corporation at each board meeting on insurance
512market issues which may include rates and rate competition with
513the voluntary market; service, including policy issuance, claims
514processing, and general responsiveness to policyholders,
515applicants, and agents; and matters relating to depopulation.
516     5.  Must provide a procedure for determining the
517eligibility of a risk for coverage, as follows:
518     a.  Subject to the provisions of s. 627.3517, with respect
519to personal lines residential risks, if the risk is offered
520coverage from an authorized insurer at the insurer's approved
521rate under either a standard policy including wind coverage or,
522if consistent with the insurer's underwriting rules as filed
523with the office, a basic policy including wind coverage, the
524risk is not eligible for any policy issued by the corporation.
525If the risk is not able to obtain any such offer, the risk is
526eligible for either a standard policy including wind coverage or
527a basic policy including wind coverage issued by the
528corporation; however, if the risk could not be insured under a
529standard policy including wind coverage regardless of market
530conditions, the risk shall be eligible for a basic policy
531including wind coverage unless rejected under subparagraph 8.
532The corporation shall determine the type of policy to be
533provided on the basis of objective standards specified in the
534underwriting manual and based on generally accepted underwriting
536     (I)  If the risk accepts an offer of coverage through the
537market assistance plan or an offer of coverage through a
538mechanism established by the corporation before a policy is
539issued to the risk by the corporation or during the first 30
540days of coverage by the corporation, and the producing agent who
541submitted the application to the plan or to the corporation is
542not currently appointed by the insurer, the insurer shall:
543     (A)  Pay to the producing agent of record of the policy,
544for the first year, an amount that is the greater of the
545insurer's usual and customary commission for the type of policy
546written or a fee equal to the usual and customary commission of
547the corporation; or
548     (B)  Offer to allow the producing agent of record of the
549policy to continue servicing the policy for a period of not less
550than 1 year and offer to pay the agent the greater of the
551insurer's or the corporation's usual and customary commission
552for the type of policy written.
554If the producing agent is unwilling or unable to accept
555appointment, the new insurer shall pay the agent in accordance
556with sub-sub-sub-subparagraph (A).
557     (II)  When the corporation enters into a contractual
558agreement for a take-out plan, the producing agent of record of
559the corporation policy is entitled to retain any unearned
560commission on the policy, and the insurer shall:
561     (A)  Pay to the producing agent of record of the
562corporation policy, for the first year, an amount that is the
563greater of the insurer's usual and customary commission for the
564type of policy written or a fee equal to the usual and customary
565commission of the corporation; or
566     (B)  Offer to allow the producing agent of record of the
567corporation policy to continue servicing the policy for a period
568of not less than 1 year and offer to pay the agent the greater
569of the insurer's or the corporation's usual and customary
570commission for the type of policy written.
572If the producing agent is unwilling or unable to accept
573appointment, the new insurer shall pay the agent in accordance
574with sub-sub-sub-subparagraph (A).
575     b.  With respect to commercial lines residential risks, if
576the risk is offered coverage under a policy including wind
577coverage from an authorized insurer at its approved rate, the
578risk is not eligible for any policy issued by the corporation.
579If the risk is not able to obtain any such offer, the risk is
580eligible for a policy including wind coverage issued by the
582     (I)  If the risk accepts an offer of coverage through the
583market assistance plan or an offer of coverage through a
584mechanism established by the corporation before a policy is
585issued to the risk by the corporation or during the first 30
586days of coverage by the corporation, and the producing agent who
587submitted the application to the plan or the corporation is not
588currently appointed by the insurer, the insurer shall:
589     (A)  Pay to the producing agent of record of the policy,
590for the first year, an amount that is the greater of the
591insurer's usual and customary commission for the type of policy
592written or a fee equal to the usual and customary commission of
593the corporation; or
594     (B)  Offer to allow the producing agent of record of the
595policy to continue servicing the policy for a period of not less
596than 1 year and offer to pay the agent the greater of the
597insurer's or the corporation's usual and customary commission
598for the type of policy written.
600If the producing agent is unwilling or unable to accept
601appointment, the new insurer shall pay the agent in accordance
602with sub-sub-sub-subparagraph (A).
603     (II)  When the corporation enters into a contractual
604agreement for a take-out plan, the producing agent of record of
605the corporation policy is entitled to retain any unearned
606commission on the policy, and the insurer shall:
607     (A)  Pay to the producing agent of record of the
608corporation policy, for the first year, an amount that is the
609greater of the insurer's usual and customary commission for the
610type of policy written or a fee equal to the usual and customary
611commission of the corporation; or
612     (B)  Offer to allow the producing agent of record of the
613corporation policy to continue servicing the policy for a period
614of not less than 1 year and offer to pay the agent the greater
615of the insurer's or the corporation's usual and customary
616commission for the type of policy written.
618If the producing agent is unwilling or unable to accept
619appointment, the new insurer shall pay the agent in accordance
620with sub-sub-sub-subparagraph (A).
621     6.  Must include rules for classifications of risks and
622rates therefor.
623     7.  Must provide that if premium and investment income for
624an account attributable to a particular calendar year are in
625excess of projected losses and expenses for the account
626attributable to that year, such excess shall be held in surplus
627in the account. Such surplus shall be available to defray
628deficits in that account as to future years and shall be used
629for that purpose prior to assessing assessable insurers and
630assessable insureds as to any calendar year.
631     8.  Must provide objective criteria and procedures to be
632uniformly applied for all applicants in determining whether an
633individual risk is so hazardous as to be uninsurable. In making
634this determination and in establishing the criteria and
635procedures, the following shall be considered:
636     a.  Whether the likelihood of a loss for the individual
637risk is substantially higher than for other risks of the same
638class; and
639     b.  Whether the uncertainty associated with the individual
640risk is such that an appropriate premium cannot be determined.
642The acceptance or rejection of a risk by the corporation shall
643be construed as the private placement of insurance, and the
644provisions of chapter 120 shall not apply.
645     9.  Must provide that the corporation shall make its best
646efforts to procure catastrophe reinsurance at reasonable rates,
647to cover its projected 100-year probable maximum loss as
648determined by the board of governors.
649     10.  Must provide that in the event of regular deficit
650assessments under sub-subparagraph (b)3.a. or sub-subparagraph
651(b)3.b., in the personal lines account, the commercial lines
652residential account, or the high-risk account, the corporation
653shall levy upon corporation policyholders in its next rate
654filing, or by a separate rate filing solely for this purpose, a
655market equalization surcharge arising from a regular assessment
656in such account in a percentage equal to the total amount of
657such regular assessments divided by the aggregate statewide
658direct written premium for subject lines of business for the
659prior calendar year. Market equalization surcharges under this
660subparagraph are not considered premium and are not subject to
661commissions, fees, or premium taxes; however, failure to pay a
662market equalization surcharge shall be treated as failure to pay
664     11.  The policies issued by the corporation must provide
665that, if the corporation or the market assistance plan obtains
666an offer from an authorized insurer to cover the risk at its
667approved rates, the risk is no longer eligible for renewal
668through the corporation.
669     12.  Corporation policies and applications must include a
670notice that the corporation policy could, under this section, be
671replaced with a policy issued by an authorized insurer that does
672not provide coverage identical to the coverage provided by the
673corporation. The notice shall also specify that acceptance of
674corporation coverage creates a conclusive presumption that the
675applicant or policyholder is aware of this potential.
676     13.  May establish, subject to approval by the office,
677different eligibility requirements and operational procedures
678for any line or type of coverage for any specified county or
679area if the board determines that such changes to the
680eligibility requirements and operational procedures are
681justified due to the voluntary market being sufficiently stable
682and competitive in such area or for such line or type of
683coverage and that consumers who, in good faith, are unable to
684obtain insurance through the voluntary market through ordinary
685methods would continue to have access to coverage from the
686corporation. When coverage is sought in connection with a real
687property transfer, such requirements and procedures shall not
688provide for an effective date of coverage later than the date of
689the closing of the transfer as established by the transferor,
690the transferee, and, if applicable, the lender.
691     14.  Must provide that, with respect to the high-risk
692account, any assessable insurer with a surplus as to
693policyholders of $25 million or less writing 25 percent or more
694of its total countrywide property insurance premiums in this
695state may petition the office, within the first 90 days of each
696calendar year, to qualify as a limited apportionment company. In
697no event shall a limited apportionment company be required to
698participate in the portion of any assessment, within the high-
699risk account, pursuant to sub-subparagraph (b)3.a. or sub-
700subparagraph (b)3.b. in the aggregate which exceeds $50 million
701after payment of available high-risk account funds in any
702calendar year. However, a limited apportionment company shall
703collect from its policyholders any emergency assessment imposed
704under sub-subparagraph (b)3.d. The plan shall provide that, if
705the office determines that any regular assessment will result in
706an impairment of the surplus of a limited apportionment company,
707the office may direct that all or part of such assessment be
708deferred as provided in subparagraph (g)4. However, there shall
709be no limitation or deferment of an emergency assessment to be
710collected from policyholders under sub-subparagraph (b)3.d.
711     15.  Must provide that the corporation appoint as its
712licensed agents only those agents who also hold an appointment
713as defined in s. 626.015(3) with an insurer who at the time of
714the agent's initial appointment by the corporation is authorized
715to write and is actually writing personal lines residential
716property coverage, commercial residential property coverage, or
717commercial nonresidential property coverage within the state.
718     16.  Must provide a plan for removing personal lines
719policies from coverage by the corporation which includes the
720development and implementation of a take-out bonus strategy
721determining, at a minimum, the necessity and application of
722financial and regulatory incentives.
723     (d)1.  It is the intent of the Legislature that the rates
724for coverage provided by the corporation be actuarially sound
725and not competitive with approved rates charged in the admitted
726voluntary market, so that the corporation functions as a
727residual market mechanism to provide insurance only when the
728insurance cannot be procured in the voluntary market. Rates
729shall include an appropriate catastrophe loading factor that
730reflects the actual catastrophic exposure of the corporation.
731     2.  For each county, the average rates of the corporation
732for each line of business for personal lines residential
733policies excluding rates for wind-only policies shall be no
734lower than the average rates charged by the insurer that had the
735highest average rate in that county among the 20 insurers with
736the greatest total direct written premium in the state for that
737line of business in the preceding year, except that with respect
738to mobile home coverages, the average rates of the corporation
739shall be no lower than the average rates charged by the insurer
740that had the highest average rate in that county among the 5
741insurers with the greatest total written premium for mobile home
742owner's policies in the state in the preceding year.
743     3.  Rates for personal lines residential wind-only policies
744must be actuarially sound and not competitive with approved
745rates charged by authorized insurers. However, for personal
746lines residential wind-only policies issued or renewed between
747July 1, 2002, and June 30, 2003, the maximum premium increase
748must be no greater than 10 percent of the Florida Windstorm
749Underwriting Association premium for that policy in effect on
750June 30, 2002, as adjusted for coverage changes and seasonal
751occupancy surcharges. For personal lines residential wind-only
752policies issued or renewed between July 1, 2003, and June 30,
7532004, the corporation shall use its existing filed and approved
754wind-only rating and classification plans, provided, however,
755that the maximum premium increase must be no greater than 20
756percent of the premium for that policy in effect on June 30,
7572003, as adjusted for coverage changes and seasonal occupancy
758surcharges. Corporation rate manuals shall include a rate
759surcharge for seasonal occupancy. To ensure that personal lines
760residential wind-only rates effective on or after July 1, 2004,
761are not competitive with approved rates charged by authorized
762insurers, the corporation, in conjunction with the office, shall
763develop a wind-only ratemaking methodology, which methodology
764shall be contained in each a rate filing made by the corporation
765with the office by January 1, 2004. If the office thereafter
766determines that the wind-only rates or rating factors filed by
767the corporation fail to comply with the wind-only ratemaking
768methodology provided for in this subsection, it shall so notify
769the corporation and require the corporation to amend its rates
770or rating factors to come into compliance within 90 days of
771notice from the office. The office shall report to the Speaker
772of the House of Representatives and the President of the Senate
773on the provisions of the wind-only ratemaking methodology by
774January 31, 2004.
775     4.  The provisions of subparagraph 2. do not apply to
776coverage provided by the corporation in any county for which the
777office determines that a reasonable degree of competition does
778not exist for personal lines residential policies. The
779provisions of subparagraph 3. do not apply to coverage provided
780by the corporation in any county for which the office determines
781that a reasonable degree of competition does not exist for
782personal lines residential policies in the area of that county
783which is eligible for wind-only coverage. In such counties, the
784rates for personal lines residential coverage shall be
785actuarially sound and not excessive, inadequate, or unfairly
786discriminatory and are subject to the other provisions of the
787paragraph and s. 627.062. The commission shall adopt rules
788establishing the criteria for determining whether a reasonable
789degree of competition exists for personal lines residential
790policies. Beginning October 1, 2005, and each 6 months
791thereafter, the office shall determine and identify those
792counties for which a reasonable degree of competition does not
793exist for purposes of subparagraphs 2. and 3., respectively.
794     5.4.  Rates for commercial lines coverage shall not be
795subject to the requirements of subparagraph 2., but shall be
796subject to all other requirements of this paragraph and s.
798     6.5.  Nothing in this paragraph shall require or allow the
799corporation to adopt a rate that is inadequate under s. 627.062.
800     7.6.  The corporation shall certify to the office at least
801twice annually that its personal lines rates comply with the
802requirements of this paragraph subparagraphs 1. and 2. If any
803adjustment in the rates or rating factors of the corporation is
804necessary to ensure such compliance, the corporation shall make
805and implement such adjustments and file its revised rates and
806rating factors with the office. If the office thereafter
807determines that the revised rates and rating factors fail to
808comply with the provisions of this paragraph subparagraphs 1.
809and 2., it shall notify the corporation and require the
810corporation to amend its rates or rating factors in conjunction
811with its next rate filing. The office must notify the
812corporation by electronic means of any rate filing it approves
813for any insurer among the insurers referred to in subparagraph
815     8.7.  In addition to the rates otherwise determined
816pursuant to this paragraph, the corporation shall impose and
817collect an amount equal to the premium tax provided for in s.
818624.509 to augment the financial resources of the corporation.
819     9.8.a.  To assist the corporation in developing additional
820ratemaking methods to assure compliance with this paragraph
821subparagraphs 1. and 4., the corporation shall appoint a rate
822methodology panel consisting of one person recommended by the
823Florida Association of Insurance Agents, one person recommended
824by the Professional Insurance Agents of Florida, one person
825recommended by the Florida Association of Insurance and
826Financial Advisors, one person recommended by the insurer with
827the highest voluntary market share of residential property
828insurance business in the state, one person recommended by the
829insurer with the second-highest voluntary market share of
830residential property insurance business in the state, one person
831recommended by an insurer writing commercial residential
832property insurance in this state, one person recommended by the
833Office of Insurance Regulation, and one board member designated
834by the board chairman, who shall serve as chairman of the panel.
835     b.  By January 1, 2004, the rate methodology panel shall
836provide a report to the corporation of its findings and
837recommendations for the use of additional ratemaking methods and
838procedures, including the use of a rate equalization surcharge
839in an amount sufficient to assure that the total cost of
840coverage for policyholders or applicants to the corporation is
841sufficient to comply with subparagraph 1.
842     c.  Within 30 days after such report, the corporation shall
843present to the President of the Senate, the Speaker of the House
844of Representatives, the minority party leaders of each house of
845the Legislature, and the chairs of the standing committees of
846each house of the Legislature having jurisdiction of insurance
847issues, a plan for implementing the additional ratemaking
848methods and an outline of any legislation needed to facilitate
849use of the new methods.
850     d.  The plan must include a provision that producer
851commissions paid by the corporation shall not be calculated in
852such a manner as to include any rate equalization surcharge.
853However, without regard to the plan to be developed or its
854implementation, producer commissions paid by the corporation for
855each account, other than the quota share primary program, shall
856remain fixed as to percentage, effective rate, calculation, and
857payment method until January 1, 2004.
858     10.9.  By January 1, 2004, The corporation shall develop a
859notice to policyholders or applicants that the rates of Citizens
860Property Insurance Corporation are intended to be higher than
861the rates of any admitted carrier except when the provisions of
862subparagraph 4. apply and providing other information the
863corporation deems necessary to assist consumers in finding other
864voluntary admitted insurers willing to insure their property.
865     (q)  The corporation shall not require the securing of
866flood insurance as a condition of coverage if the property risk
867of the insured or applicant is located in a Special Flood Hazard
868Area as defined by the Federal Emergency Management Agency for
869the National Flood Insurance Program. executes a form approved
870by the office affirming that Flood insurance is not provided by
871the corporation and that if flood insurance is not secured by
872the applicant or insured in addition to coverage by the
873corporation, the risk will not be covered for flood damage. A
874corporation policyholder that does electing not to secure flood
875insurance and makes a claim executing a form as provided herein
876making a claim for water damage against the corporation shall
877have the burden of proving the damage was not caused by
878flooding. Notwithstanding other provisions of this subsection,
879the corporation may deny coverage or refuse to issue or renew a
880policy to an applicant or insured who refuses to purchase flood
881insurance as required by this subsection to execute the form
882described herein.
883     Section 7.  Subsection (1) of section 627.411, Florida
884Statutes, is amended to read:
885     627.411  Grounds for disapproval.--
886     (1)  The office shall disapprove any form filed under s.
887627.410, or withdraw any previous approval thereof, only if the
889     (a)  Is in any respect in violation of, or does not comply
890with, this code.
891     (b)  Contains or incorporates by reference, where such
892incorporation is otherwise permissible, any inconsistent,
893ambiguous, or misleading clauses, or exceptions and conditions
894which deceptively affect the risk purported to be assumed in the
895general coverage of the contract.
896     (c)  Has any title, heading, or other indication of its
897provisions which is misleading.
898     (d)  Is printed or otherwise reproduced in such manner as
899to render any material provision of the form substantially
901     (e)  Is for property insurance and contains provisions that
902are unfair or inequitable or contrary to the public policy of
903this state or that encourage misrepresentation.
904     (f)(e)  Is for health insurance, and:
905     1.  Provides benefits that are unreasonable in relation to
906the premium charged.;
907     2.  Contains provisions that are unfair or inequitable or
908contrary to the public policy of this state or that encourage
910     3.  Contains provisions that apply rating practices that
911result in unfair discrimination pursuant to s. 626.9541(1)(g)2.
912     (g)(f)  Excludes coverage for human immunodeficiency virus
913infection or acquired immune deficiency syndrome or contains
914limitations in the benefits payable, or in the terms or
915conditions of such contract, for human immunodeficiency virus
916infection or acquired immune deficiency syndrome which are
917different than those which apply to any other sickness or
918medical condition.
919     Section 8.  Subsections (1) and (7) of section 627.7015,
920Florida Statutes, are amended to read:
921     627.7015  Alternative procedure for resolution of disputed
922property insurance claims.--
923     (1)  PURPOSE AND SCOPE.--This section sets forth a
924nonadversarial alternative dispute resolution procedure for a
925mediated claim resolution conference prompted by the need for
926effective, fair, and timely handling of property insurance
927claims. There is a particular need for an informal,
928nonthreatening forum for helping parties who elect this
929procedure to resolve their claims disputes because most
930homeowner's and commercial residential insurance policies
931obligate insureds to participate in a potentially expensive and
932time-consuming adversarial appraisal process prior to
933litigation. The procedure set forth in this section is designed
934to bring the parties together for a mediated claims settlement
935conference without any of the trappings or drawbacks of an
936adversarial process. Before resorting to these procedures,
937insureds and insurers are encouraged to resolve claims as
938quickly and fairly as possible. This section is available with
939respect to claims under personal lines and commercial
940residential policies for all claimants and insurers prior to
941commencing the appraisal process, or commencing litigation. If
942requested by the insured, participation by legal counsel shall
943be permitted. Mediation under this section is also available to
944litigants referred to the department by a county court or
945circuit court. This section does not apply to commercial
946coverages, to private passenger motor vehicle insurance
947coverages, or to disputes relating to liability coverages in
948policies of property insurance.
949     (7)  If the insurer fails to comply with subsection (2) by
950failing to notify a first-party claimant of its right to
951participate in the mediation program under this section or if
952the insurer requests the mediation, and the mediation results
953are rejected by either party, the insured shall not be required
954to submit to or participate in any contractual loss appraisal
955process of the property loss damage as a precondition to legal
956action for breach of contract against the insurer for its
957failure to pay the policyholder's claims covered by the policy.
958     Section 9.  Effective upon this act becoming a law,
959subsection (1) of section 627.702, Florida Statutes, is amended
960to read:
961     627.702  Valued policy law.--
962     (1)(a)  In the event of the total loss of any building,
963structure, mobile home as defined in s. 320.01(2), or
964manufactured building as defined in s. 553.36(12), located in
965this state and insured by any insurer as to a covered peril, in
966the absence of any change increasing the risk without the
967insurer's consent and in the absence of fraudulent or criminal
968fault on the part of the insured or one acting in her or his
969behalf, the insurer's liability, if any, under the policy for
970such total loss, if caused by a covered peril, shall be in the
971amount of money for which such property was so insured as
972specified in the policy and for which a premium has been charged
973and paid.
974     (b)  The intent of this subsection is not to deprive an
975insurer of any proper defense under the policy, to create new or
976additional coverage under the policy, or to require an insurer
977to pay for a loss caused by a peril other than the covered
978peril. In furtherance of such legislative intent, when a loss
979was caused in part by a covered peril and in part by a
980noncovered peril, paragraph (a) does not apply. In such
981circumstances, the insurer's liability under this section shall
982be limited to the amount of the loss caused by the covered
984     Section 10.  Section 627.706, Florida Statutes, is amended
985to read:
986     627.706  Sinkhole insurance; definitions.--
987     (1)  Every insurer authorized to transact property
988insurance in this state shall make available coverage for
989insurable sinkhole losses on any structure, including contents
990of personal property contained therein, to the extent provided
991in the form to which the sinkhole coverage attaches.
992     (2)  As used in ss. 627.706-627.7074, and as used in
993connection with any policy providing coverage for sinkhole
995     (a)  "Sinkhole" means a landform created by subsidence of
996soil, sediment, or rock as underlying strata are dissolved by
997ground water. A sinkhole may form by collapse into subterranean
998voids created by dissolution of limestone or dolostone or by
999subsidence as these strata are dissolved.
1000     (b)  "Sinkhole loss" means structural damage to a the
1001building caused by sinkhole activity. Contents coverage shall
1002apply only if there is structural damage to the building caused
1003by sinkhole activity.
1004     (c)(3)  "Sinkhole activity loss" means actual physical
1005damage to the property covered arising out of or caused by
1006sudden settlement or systematic weakening collapse of the earth
1007supporting such property only when such settlement or systematic
1008weakening collapse results from movement or raveling of soils,
1009sediments, or rock materials into subterranean voids created by
1010the effect action of water on a limestone or similar rock
1012     (d)  "Engineer" means a person, as defined in s. 471.005,
1013who has a bachelor's degree or higher in engineering with a
1014specialty in the geotechnical engineering field. An engineer
1015must have geotechnical experience and expertise in the
1016identification of sinkhole activity as well as other potential
1017causes of damage to the structure.
1018     (e)  "Professional geologist" means a person, as defined by
1019s. 492.102, who has a bachelor's degree or higher in geology or
1020a related earth science with expertise in the geology of this
1021state. A professional geologist must have geological experience
1022and expertise in the identification of sinkhole activity as well
1023as other potential causes of damage to the structure.
1024     (3)(4)  Every insurer authorized to transact property
1025insurance in this state shall make a proper filing with the
1026office for the purpose of extending the appropriate forms of
1027property insurance to include coverage for insurable sinkhole
1029     Section 11.  Section 627.7065, Florida Statutes, is created
1030to read:
1031     627.7065  Database of information relating to sinkholes;
1032the Department of Financial Services and the Department of
1033Environmental Protection.--
1034     (1)  The Legislature finds that there has been a dramatic
1035increase in the number of sinkholes and insurance claims for
1036sinkhole damage in the state during the past 10 years.
1037Accordingly, the Legislature recognizes the need to track
1038current and past sinkhole activity and to make the information
1039available for prevention and remediation activities. The
1040Legislature further finds that the Florida Geological Survey of
1041the Department of Environmental Protection has created a partial
1042database of some sinkholes identified in Florida, although the
1043database is not reflective of all sinkholes or insurance claims
1044for sinkhole damage. The Legislature determines that creating a
1045complete electronic database of sinkhole activity serves an
1046important purpose in protecting the public and in studying
1047property claims activities in the insurance industry.
1048     (2)  The Department of Financial Services, including the
1049employee of the Division of Consumer Services designated as the
1050primary contact for consumers on issues relating to sinkholes,
1051and the Office of the Insurance Consumer Advocate shall consult
1052with the Florida Geological Survey and the Department of
1053Environmental Protection to implement a statewide automated
1054database of sinkholes and related activity identified in the
1056     (3)  Representatives of the Department of Financial
1057Services, with the agreement of the Department of Environmental
1058Protection, shall determine the form and content of the
1059database. The content may include standards for reporting and
1060investigating sinkholes for inclusion in the database and
1061requirements for insurers to report to the departments the
1062receipt of claims involving sinkhole loss and other similar
1063activities. The Department of Financial Services may require
1064insurers to report present and past data of sinkhole claims. The
1065database also may include information of damage due to ground
1066settling and other subsidence activity.
1067     (4)  The Department of Financial Services may manage the
1068database or may contract for its management and maintenance. The
1069Department of Environmental Protection shall investigate reports
1070of sinkhole activity and include its findings and investigations
1071in the database.
1072     (5)  The Department of Environmental Protection, in
1073consultation with the Department of Financial Services, shall
1074present a report of activities relating to the sinkhole
1075database, including recommendations regarding the database and
1076similar matters, to the Governor, the Speaker of the House of
1077Representatives, the President of the Senate, and the Chief
1078Financial Officer by December 31, 2005. The report may consider
1079the need for the Legislature to create an entity to study the
1080increase in sinkhole activity in the state and other similar
1081issues relating to sinkhole damage, including recommendations
1082and costs for staffing the entity. The report may include other
1083information, as appropriate.
1084     (6)  The Department of Financial Services, in consultation
1085with the Department of Environmental Protection, may adopt rules
1086to implement the provisions of this section.
1087     Section 12.  Section 627.707, Florida Statutes, is amended
1088to read:
1089     627.707  Minimum Standards for investigation of sinkhole
1090claims by insurers; nonrenewals.--
1091     (1)  Upon receipt of a claim for a sinkhole loss, an
1092insurer must meet the following minimum standards in
1093investigating a claim:
1094     (1)(a)  Upon receipt of a claim for a sinkhole loss, The
1095insurer must make an inspection of the insured's premises to
1096determine if there has been physical damage to the structure
1097which may might be the result of sinkhole activity.
1098     (b)  If, upon the investigation pursuant to paragraph (a),
1099the insurer discovers damage to a structure which is consistent
1100with sinkhole activity or if the structure is located in close
1101proximity to a structure in which sinkhole damage has been
1102verified, then prior to denying a claim, the insurer must obtain
1103a written certification from an individual qualified to
1104determine the existence of sinkhole activity, stating that the
1105cause of the claim is not sinkhole activity, and that the
1106analysis conducted was of sufficient scope to eliminate sinkhole
1107activity as the cause of damage within a reasonable professional
1108probability. The written certification must also specify the
1109professional discipline and professional licensure or
1110registration under which the analysis was conducted.
1111     (2)  Following the insurer's initial inspection, the
1112insurer shall engage an engineer and a professional geologist to
1113conduct testing as provided in s. 627.7072 to determine the
1114cause of the loss within a reasonable professional probability
1115and issue a report as provided in s. 627.7073, if:
1116     (a)  The insurer is unable to identify a valid cause of the
1117damage or discovers damage to the structure which is consistent
1118with sinkhole loss; or
1119     (b)  The policyholder demands testing in accordance with
1120this section or s. 627.7072.
1121     (3)  Following the initial inspection of the insured
1122premises, the insurer shall provide written notice to the
1123policyholder disclosing the following information:
1124     (a)  What the insurer has determined to be the cause of
1125damage, if the insurer has made such a determination.
1126     (b)  A statement of the circumstances under which the
1127insurer is required to engage an engineer and a professional
1128geologist to verify or eliminate sinkhole loss and to make
1129recommendations regarding land and building stabilization and
1130foundation repair.
1131     (c)  A statement regarding the right of the policyholder to
1132request testing by an engineer and a professional geologist and
1133the circumstances under which the policyholder may demand
1134certain testing.
1135     (4)  If the insurer determines that there is no sinkhole
1136loss, the insurer may deny the claim. If the insurer denies the
1137claim, without performing testing under s. 627.7072, the
1138policyholder may demand testing by the insured under s.
1139627.7072. The policyholder's demand for testing must be
1140communicated to the insurer in writing after the policyholder's
1141receipt of the insurer's denial of the claim.
1142     (5)(a)  Subject to paragraph (b), if a sinkhole loss is
1143verified, the insurer shall pay to stabilize the land and
1144building and repair the foundation in accordance with the
1145recommendations of the engineer and the professional geologist
1146as provided under s. 627.7073, and in consultation with the
1147policyholder, subject to the coverage and terms of the policy.
1148The insurer shall pay for other repairs to the structure and
1149contents in accordance with the terms of the policy.
1150     (b)  The insurer may limit its payment to the actual cash
1151value of the sinkhole loss until such time as expenses related
1152to land and building stabilization and foundation repairs are
1154     (6)  Except as provided in subsection (7), the fees and
1155costs of the engineer or the professional geologist shall be
1156paid by the insurer.
1157     (7)(c)  If the insurer obtains, pursuant to s. 627.7073
1158paragraph (b), written certification that there is no sinkhole
1159loss or that the cause of the damage claim was not sinkhole
1160activity, and if the policyholder has submitted the sinkhole
1161claim without good faith grounds for submitting such claim, the
1162policyholder shall reimburse the insurer for 50 percent of the
1163actual costs cost of the analyses and services provided analysis
1164under ss. 627.7072 and 627.7073 paragraph (b); however, a
1165policyholder is not required to reimburse an insurer more than
1166$2,500 with respect to any claim. A policyholder is required to
1167pay reimbursement under this subsection paragraph only if the
1168insurer, prior to ordering the analysis under s. 627.7072
1169paragraph (b), informs the policyholder in writing of the
1170policyholder's potential liability for reimbursement and gives
1171the policyholder the opportunity to withdraw the claim.
1172     (8)(2)  No insurer shall nonrenew any policy of property
1173insurance on the basis of filing of claims for partial loss
1174caused by sinkhole damage or clay shrinkage as long as the total
1175of such payments does not exceed the current policy limits of
1176coverage for property damage, and provided the insured has
1177repaired the structure in accordance with the engineering
1178recommendations upon which any payment or policy proceeds were
1180     (9)  The insurer may engage a structural engineer to make
1181recommendations as to the repair of the structure.
1182     Section 13.  Section 627.7072, Florida Statutes, is created
1183to read:
1184     627.7072  Testing standards for sinkholes.--
1185     (1)  The engineer and professional geologist shall perform
1186such tests as sufficient, in their professional opinion, to
1187determine the presence or absence of sinkhole loss or other
1188cause of damage within reasonable professional probability and
1189to make recommendations regarding necessary building
1190stabilization and foundation repair.
1191     (2)  Testing shall be conducted in compliance with the
1192Florida Geological Survey Special Publication No. 57 (2005).
1193     Section 14.  Section 627.7073, Florida Statutes, is created
1194to read:
1195     627.7073  Sinkhole reports.--
1196     (1)  Upon completion of testing as provided in s. 627.7072,
1197the engineer and professional geologist shall issue a report and
1198certification to the insurer and the policyholder as provided in
1199this section.
1200     (a)  Sinkhole loss is verified if, based upon tests
1201performed in accordance with s. 627.7072, an engineer and a
1202professional geologist issue a written report and certification
1204     1.  That the cause of the actual physical and structural
1205damage is sinkhole activity within a reasonable professional
1207     2.  That the analyses conducted were of sufficient scope to
1208identify sinkhole activity as the cause of damage within a
1209reasonable professional probability.
1210     3.  A description of the tests performed.
1211     4.  A recommendation of methods for stabilizing the land
1212and building and for making repairs to the foundation.
1213     (b)  If sinkhole activity is eliminated as the cause of
1214damage to the structure, the engineer and professional geologist
1215shall issue a written report and certification to the
1216policyholder and the insurer stating:
1217     1.  That the cause of the damage is not sinkhole activity
1218within a reasonable professional probability.
1219     2.  That the analyses and tests conducted were of
1220sufficient scope to eliminate sinkhole activity as the cause of
1221damage within a reasonable professional probability.
1222     3.  A statement of the cause of the damage within a
1223reasonable professional probability.
1224     4.  A description of the tests performed.
1225     (c)  The respective findings, opinions, and recommendations
1226of the engineer and professional geologist as to the
1227verification of a sinkhole loss, land and building
1228stabilization, foundation repair, and elimination of sinkhole
1229loss shall be presumed correct.
1230     (2)  Any insurer that has paid a claim for a sinkhole loss
1231shall file a copy of the report and certification, prepared
1232pursuant to subsection (1), with the county property appraiser
1233who shall record the report and certification with the parcel
1234number. The insurer shall bear the cost of filing and recording
1235the report and certification. There shall be no cause of action
1236or liability against an insurer for compliance with this
1237section. The seller of real property upon which a sinkhole claim
1238has been made shall disclose to the buyer of such property that
1239a claim has been paid and whether or not the full amount of the
1240proceeds were used to repair the sinkhole damage.
1241     Section 15.  The Auditor General shall perform an
1242operational audit, as defined in s. 11.45(1), Florida Statutes,
1243of the Citizens Property Insurance Corporation created under s.
1244627.351(6), Florida Statutes. The scope of the audit shall also
1246     (1)  An analysis of the corporation's infrastructure,
1247customer service, claims handling, accessibility of policyholder
1248information to the agent of record, take-out programs, take-out
1249bonuses, and financing arrangements.
1250     (2)  An evaluation of costs associated with the
1251administration and servicing of the policies issued by the
1252corporation to determine alternatives by which costs can be
1253reduced, customer service improved, and claims handling
1256The audit shall contain policy alternatives for the Legislature
1257to consider. The Auditor General shall submit a report to the
1258Governor, the President of the Senate, and the Speaker of the
1259House of Representatives no later than February 1, 2006.
1260     Section 16.  The board of governors of the Citizens
1261Property Insurance Corporation created under section 627.351(6),
1262Florida Statutes, shall, by February 1, 2006, submit a report to
1263the President of the Senate, the Speaker of the House of
1264Representatives, the minority party leaders of the Senate and
1265the House of Representatives, and the chairs of the standing
1266committees of the Senate and the House of Representatives having
1267jurisdiction over matters relating to property and casualty
1268insurance. The report shall include the board's findings and
1269recommendations on the following issues:
1270     (1)  The number of policies and the aggregate premium of
1271the Citizens Property Insurance Corporation, before and after
1272enactment of this act, and projections for future policy and
1273premium growth.
1274     (2)  Increases or decreases in availability of residential
1275property coverage in the voluntary market and the effectiveness
1276of this act in improving the availability of residential
1277property coverage in the voluntary market in the state.
1278     (3)  The board's efforts to depopulate the corporation and
1279the willingness of insurers in the voluntary market to avail
1280themselves of depopulation incentives.
1281     (4)  Further actions that could be taken by the Legislature
1282to improve availability of residential property coverage in the
1283voluntary and residual markets.
1284     (5)  Actions that the board has taken to restructure the
1285corporation and recommendations for legislative action to
1286restructure the corporation, including, but not limited to,
1287actions relating to claims handling and customer service.
1288     (6)  Projected surpluses or deficits and possible means of
1289providing funding to ensure the continued solvency of the
1291     (7)  The corporation's efforts to procure catastrophe
1292reinsurance to cover its projected 100-year probable maximum
1293loss with specification as to what best efforts were made by the
1294corporation to procure such reinsurance.
1295     (8)  Such other issues as the board determines are worthy
1296of the Legislature's consideration.
1297     Section 17.  Sections 3 and 4 of this act shall take effect
1298on the same date that House Bill 1939 or similar legislation
1299takes effect, if such legislation is adopted in the same
1300legislative session or an extension thereof and becomes a law.
1301     Section 18.  Except as otherwise provided herein, this act
1302shall take effect July 1, 2005.

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