September 19, 2020
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_h1937e1
HB 1937

1
A bill to be entitled
2An act relating to property insurance; creating s.
3489.1285, F.S.; specifying certain consumer protection
4measures relating to roofing construction to be in effect
5following certain executive orders; specifying certain
6requirements to be complied with relating to roof repair
7or reroofing; amending s. 627.062, F.S.; limiting an
8insurer's recoupment of reimbursement premium; providing
9limitations; amending s. 627.0628, F.S.; limiting use of
10certain methodologies in determining hurricane loss
11factors for reimbursement premium rates in certain rate
12filings; creating s. 627.06281, F.S.; requiring certain
13insurers and organizations to develop, maintain, and
14update a public hurricane loss projection model; providing
15reporting requirements for insurers; protecting trade
16secret information; amending s. 627.0629, F.S.; tightening
17a limitation on rate filings based on computer models
18under certain circumstances; amending s. 627.351, F.S.;
19providing additional legislative intent relating to the
20Citizens Property Insurance Corporation; specifying a
21limitation on dwelling limits for personal lines policies;
22requiring the corporation to offer wind-only policies in
23certain areas for new personal residential risks;
24providing requirements and limitations; authorizes the
25corporation to issue bonds and incur indebtedness for
26certain purposes; requiring creation of a Market
27Accountability Advisory Committee to assist the
28corporation for certain purposes; providing for
29appointment of committee members; providing for terms;
30requiring reports to the corporation; revising
31requirements for the plan of operation of the corporation;
32requiring a plan for removing personal lines policies from
33coverage by the corporation which includes the development
34and implementation of a take-out bonus strategy; deleting
35limitations on certain personal lines residential wind-
36only policies; deleting an obsolete reporting requirement;
37specifying nonapplication of certain policy requirements
38in counties lacking reasonable degrees of competition for
39certain policies under certain circumstances; requiring
40the commission to adopt rules; deleting an obsolete rate
41methodology panel reporting requirement provision;
42requiring the corporation to require the securing of flood
43insurance as a condition of coverage under certain
44circumstances; providing requirements and limitations;
45amending s. 627.411, F.S.; revising grounds for office
46disapproval of certain forms; amending s. 627.7011, F.S.;
47specifying payment requirements for insurers for covered
48losses to a dwelling; limiting payment to actual cost to
49repair or replace the dwelling; amending s. 627.7011,
50F.S.; requiring insurers to offer coverage for additional
51costs of repair due to laws and ordinances; requiring
52certain homeowner's insurance policies to contain a
53specified statement; providing intent; amending s.
54627.7015, F.S.; revising purpose and scope provisions
55relating to an alternative procedure for resolution of
56disputed property insurance claims; providing an
57additional criterion for excusing an insured from being
58required to submit to certain loss appraisal processes;
59amending s. 627.702, F.S.; specifying intent; providing
60nonapplication of certain insurer liability requirements
61under certain circumstances; limiting an insurer's
62liability to certain loss covered by a covered peril;
63providing legislative intent relating to application;
64amending s. 627.706, F.S.; revising definitions relating
65to sinkholes; providing additional definitions; creating
66s. 627.7065, F.S.; providing legislative findings;
67requiring the Department of Financial Services and the
68Office of the Insurance Consumer Advocate to consult with
69the Florida Geological Survey and the Department of
70Environmental Protection to implement a statewide
71automated database of sinkholes and related activity;
72providing requirements for the form and content of the
73database; authorizing the Department of Financial Services
74to require insurers to provide certain information;
75providing for management of the database; requiring the
76department to investigate sinkhole activity reports and
77include findings and investigations in the database;
78requiring the Department of Environmental Protection to
79report on the database to the Governor, Legislature, and
80Chief Financial Officer; authorizing the Department of
81Financial Services to adopt implementing rules; amending
82s. 627.707, F.S.; revising standards for investigations of
83sinkhole claims by insurers; requiring an insurer to
84engage an engineer and professional geologist for certain
85purposes; requiring a report under certain circumstances;
86requiring an insurer to provide written notice to a
87policyholder disclosing certain information; authorizing
88an insurer to deny a claim under certain circumstances;
89authorizing a policyholder to demand certain testing;
90providing requirements; specifying required activities for
91insurers if a sinkhole loss is verified; specifying
92payment requirements for insurers; providing limitations;
93requiring the insurer to pay fees of the engineer and
94geologist; authorizing an insurer to engage a structural
95engineer for certain purposes; creating s. 627.7072, F.S.;
96specifying requirements for sinkhole testing by engineers
97and geologists; creating s. 627.7073, F.S.; providing
98reporting requirements for engineers and geologists after
99testing for sinkholes; specifying a presumption of
100correctness of certain findings; requiring an insurer
101paying a sinkhole loss claim to file a report and
102certification with the county property appraiser;
103requiring the property appraiser to record the report and
104certification; requiring the insurer to bear the cost of
105filing and recording; requiring a seller of certain
106property to make certain disclosures to property buyers
107under certain circumstances; requiring the Auditor General
108to perform an operational audit of the Citizens Property
109Insurance Corporation; specifying audit requirements;
110requiring a report; requiring the board of governors of
111the Citizens Property Insurance Corporation to submit a
112report to the Legislature relating to property and
113casualty insurance; specifying report requirements;
114requiring insurers to review and acknowledge receipt of
115certain communications relating to claims; providing an
116exception; providing a definition; providing for
117nonapplication to certain claimants; providing procedures
118and requirements relating to such acknowledgements;
119requiring an insurer to conduct certain investigations
120under certain circumstances; providing for contingent
121effect; providing effective dates.
122
123Be It Enacted by the Legislature of the State of Florida:
124
125     Section 1.  Section 489.1285, Florida Statutes, is created
126to read:
127     489.1285  Consumer protections; contract limitations.--
128Subsequent to the issuance of an executive order by the Office
129of the Governor declaring the existence of a state of emergency
130as a result and consequence of a serious threat posed to the
131public health, safety, and property in this state, in which
132damage to property has occurred and for which property insurance
133claims have been filed, the following consumer protection
134measures shall be in effect:
135     (1)  A contract for the repair or reroofing of a
136residential structure that has been agreed to in writing by the
137parties to the contract shall be a valid and binding agreement.
138A roofing contractor licensed pursuant to this chapter who is a
139party to a contract for the repair or reroofing of a residential
140structure shall be bound by the qualifications for licensure and
141the job scope specified in this chapter for a roofing contractor
142to provide timely and professional services.
143     (2)  If a contract is agreed to for the repair of a roof or
144reroofing of a residential structure, which repair is necessary
145as a result of damage caused by an emergency situation
146designated by executive order, the damages must be confirmed by
147a third party who is independent from the parties to the
148contract that the damages are a direct result of a designated
149emergency situation. Third-party confirmation must be attested
150to by an insurance adjuster, emergency management personnel,
151local building official, or other similar authority.
152     (3)(a)  A contract for services shall not be valid after 60
153calendar days after the date the contract agreement was signed
154by the parties to the contract. The contract may not provide for
155an automatic extension of time for the provisions of the
156contract. After the 60 days have expired, the contract shall be
157null and void by operation of law.
158     (b)  Within 10 calendar days after the period of time for
159expiration of the contract, the parties to the contract may
160agree in writing, as a separate contract to the original
161contract, to an additional period of 60 calendar days beyond the
162time period specified in the original contract to complete the
163roofing services. If the performance of services under the
164contract by the roofing contractor have not been completed, the
165contract shall be null and void with no further responsibilities
166or duties on the part of the parties to the contract except as
167provided in this paragraph and subsection (4).
168     (c)  The subsequent contract may be extended beyond the
169additional 60 days pursuant to a written agreement between the
170parties and signed as an addendum or supplement to the contract.
171The delay or extension of services may only be agreed to if the
172delay in providing the contractual services is due to the
173unavailability, beyond the control of the roofing contractor, of
174roofing materials necessary for the completion of the repair or
175reroofing of the residence. The contracted price of the services
176may not be changed from the agreed to cost specified in the
177subsequent contract.
178     (4)  Subsequent to the expiration of the contract or
179contracts specified in subsection (3), the contractor shall
180refund and pay in full, upon demand, any and all remuneration
181received in the form of a prepayment, up-front fee, deposit, or
182other consideration already paid to the contractor.
183     (5)  The provisions of this section apply to registered, as
184well as certified, roofing contractors.
185     Section 2.  Subsection (5) of section 627.062, Florida
186Statutes, is amended to read:
187     627.062  Rate standards.--
188     (5)  With respect to a rate filing involving coverage of
189the type for which the insurer is required to pay a
190reimbursement premium to the Florida Hurricane Catastrophe Fund,
191the insurer may fully recoup in its property insurance premiums
192any reimbursement premiums paid to the Florida Hurricane
193Catastrophe Fund, together with reasonable costs of other
194reinsurance, but may not recoup reinsurance costs that duplicate
195coverage provided by the Florida Hurricane Catastrophe Fund. An
196insurer may not recoup more than one year of reimbursement
197premium at a time. Any under-recoupment from the prior year may
198be added to the following year's reimbursement premium and any
199over-recoupment shall be subtracted from the following year's
200reimbursement premium.
201     Section 3.  Paragraph (c) of subsection (1) and paragraph
202(c) of subsection (3) of section 627.0628, Florida Statutes, are
203amended to read:
204     627.0628  Florida Commission on Hurricane Loss Projection
205Methodology.--
206     (1)  LEGISLATIVE FINDINGS AND INTENT.--
207     (c)  It is the intent of the Legislature to create the
208Florida Commission on Hurricane Loss Projection Methodology as a
209panel of experts to provide the most actuarially sophisticated
210guidelines and standards for projection of hurricane losses
211possible, given the current state of actuarial science. It is
212the further intent of the Legislature that such standards and
213guidelines must be used by the State Board of Administration in
214developing reimbursement premium rates for the Florida Hurricane
215Catastrophe Fund, and, subject to paragraph (3)(c), may be used
216by insurers in rate filings under s. 627.062 unless the way in
217which such standards and guidelines were applied by the insurer
218was erroneous, as shown by a preponderance of the evidence.
219     (3)  ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.--
220     (c)  With respect to a rate filing under s. 627.062, an
221insurer may employ actuarial methods, principles, standards,
222models, or output ranges found by the commission to be accurate
223or reliable to determine hurricane loss factors for use in a
224rate filing under s. 627.062. Such, which findings and factors
225are admissible and relevant in consideration of a rate filing by
226the office or in any arbitration or administrative or judicial
227review only if the office and the consumer advocate appointed
228pursuant to s. 627.0613 have access to all of the assumptions
229and factors that were used in developing the actuarial methods,
230principles, standards, models, or output ranges and are not
231precluded from disclosing such information in a rate proceeding.
232     Section 4.  Section 627.06281, Florida Statutes, is created
233to read:
234     627.06281  Public hurricane loss projection model;
235reporting of data by insurers.--Within 30 days after a written
236request for loss data and associated exposure data by the office
237or a type I center within the State University System
238established to study mitigation, residential property insurers
239and licensed rating and advisory organizations that compile
240residential property insurance loss data shall provide loss data
241and associated exposure data for residential property insurance
242policies to the office or to a type I center within the State
243University System established to study mitigation, as directed
244by the office, for the purposes of developing, maintaining, and
245updating a public model for hurricane loss projections. The loss
246data and associated exposure data provided shall be in writing.
247Any loss data and associated exposure data provided pursuant to
248this section that constitutes a trade secret as defined in s.
249812.081, and as provided in s. 815.04(3), shall be subject to
250the provisions of s. 815.045.
251     Section 5.  Subsection (7) of section 627.0629, Florida
252Statutes, is amended to read:
253     627.0629  Residential property insurance; rate filings.--
254     (7)  Any rate filing that is based in whole or part on data
255from a computer model may not exceed 15 25 percent unless there
256is a public hearing.
257     Section 6.  Paragraphs (a), (c), (d), and (q) of subsection
258(6) of section 627.351, Florida Statutes, are amended to read:
259     627.351  Insurance risk apportionment plans.--
260     (6)  CITIZENS PROPERTY INSURANCE CORPORATION.--
261     (a)1.  The Legislature finds that actual and threatened
262catastrophic losses to property in this state from hurricanes
263have caused insurers to be unwilling or unable to provide
264property insurance coverage to the extent sought and needed. It
265is in the public interest and a public purpose to assist in
266assuring that property in the state is insured so as to
267facilitate the remediation, reconstruction, and replacement of
268damaged or destroyed property in order to reduce or avoid the
269negative effects otherwise resulting to the public health,
270safety, and welfare; to the economy of the state; and to the
271revenues of the state and local governments needed to provide
272for the public welfare. It is necessary, therefore, to provide
273property insurance to applicants who are in good faith entitled
274to procure insurance through the voluntary market but are unable
275to do so. The Legislature intends by this subsection that
276property insurance be provided and that it continues, as long as
277necessary, through an entity organized to achieve efficiencies
278and economies, while providing service to policyholders,
279applicants, and agents that is no less than the quality
280generally provided in the voluntary market, all toward the
281achievement of the foregoing public purposes. Because it is
282essential for the corporation to have the maximum financial
283resources to pay claims following a catastrophic hurricane, it
284is the intent of the Legislature that the income of the
285corporation be exempt from federal income taxation and that
286interest on the debt obligations issued by the corporation be
287exempt from federal income taxation.
288     2.  The Residential Property and Casualty Joint
289Underwriting Association originally created by this statute
290shall be known, as of July 1, 2002, as the Citizens Property
291Insurance Corporation. The corporation shall provide insurance
292for residential and commercial property, for applicants who are
293in good faith entitled, but are unable, to procure insurance
294through the voluntary market. The corporation shall operate
295pursuant to a plan of operation approved by order of the office.
296The plan is subject to continuous review by the office. The
297office may, by order, withdraw approval of all or part of a plan
298if the office determines that conditions have changed since
299approval was granted and that the purposes of the plan require
300changes in the plan. For the purposes of this subsection,
301residential coverage includes both personal lines residential
302coverage, which consists of the type of coverage provided by
303homeowner's, mobile home owner's, dwelling, tenant's,
304condominium unit owner's, and similar policies, and commercial
305lines residential coverage, which consists of the type of
306coverage provided by condominium association, apartment
307building, and similar policies.
308     3.  It is the intent of the Legislature that policyholders,
309applicants, and agents of the corporation receive service and
310treatment of the highest possible level but never less than that
311generally provided in the voluntary market. It also is intended
312that the corporation be held to service standards no less than
313those applied to insurers in the voluntary market by the office
314with respect to responsiveness, timeliness, customer courtesy,
315and overall dealings with policyholders, applicants, or agents
316of the corporation.
317     (c)  The plan of operation of the corporation:
318     1.  Must provide for adoption of residential property and
319casualty insurance policy forms and commercial residential and
320nonresidential property insurance forms, which forms must be
321approved by the office prior to use. The corporation shall adopt
322the following policy forms:
323     a.  Standard personal lines policy forms that are
324comprehensive multiperil policies providing full coverage of a
325residential property equivalent to the coverage provided in the
326private insurance market under an HO-3, HO-4, or HO-6 policy.
327     b.  Basic personal lines policy forms that are policies
328similar to an HO-8 policy or a dwelling fire policy that provide
329coverage meeting the requirements of the secondary mortgage
330market, but which coverage is more limited than the coverage
331under a standard policy.
332     c.  Commercial lines residential policy forms that are
333generally similar to the basic perils of full coverage
334obtainable for commercial residential structures in the admitted
335voluntary market.
336     d.  Personal lines and commercial lines residential
337property insurance forms that cover the peril of wind only. The
338forms are applicable only to residential properties located in
339areas eligible for coverage under the high-risk account referred
340to in sub-subparagraph (b)2.a.
341     e.  Commercial lines nonresidential property insurance
342forms that cover the peril of wind only. The forms are
343applicable only to nonresidential properties located in areas
344eligible for coverage under the high-risk account referred to in
345sub-subparagraph (b)2.a.
346
347For new personal residential risks written by the corporation on
348or after May 7, 2005, in areas eligible for coverage in the
349high-risk account, the corporation shall offer, subject to
350reasonable underwriting guidelines, a wind only policy with
351building coverage valued at up to $1 million. For such new
352personal residential risks covering properties valued at more
353than $1 million, the corporation shall offer a wind-only policy
354of up to $1 million of building coverage without any penalty or
355reduction in coverage for underinsurance or the purchase of
356other insurance, provided the insured property owner maintains
357insurance coverage for the value of the building in excess of $1
358million. Coverage for property other than the building and any
359attached structures shall be offered by the corporation in
360addition to the $1 million limit of building coverage. For all
361existing high-risk account policies in effect on May 7, 2005,
362the corporation shall continue to offer coverage for the full
363value of the building and property without limitation.
364     2.a.  Must provide that the corporation adopt a program in
365which the corporation and authorized insurers enter into quota
366share primary insurance agreements for hurricane coverage, as
367defined in s. 627.4025(2)(a), for eligible risks, and adopt
368property insurance forms for eligible risks which cover the
369peril of wind only. As used in this subsection, the term:
370     (I)  "Quota share primary insurance" means an arrangement
371in which the primary hurricane coverage of an eligible risk is
372provided in specified percentages by the corporation and an
373authorized insurer. The corporation and authorized insurer are
374each solely responsible for a specified percentage of hurricane
375coverage of an eligible risk as set forth in a quota share
376primary insurance agreement between the corporation and an
377authorized insurer and the insurance contract. The
378responsibility of the corporation or authorized insurer to pay
379its specified percentage of hurricane losses of an eligible
380risk, as set forth in the quota share primary insurance
381agreement, may not be altered by the inability of the other
382party to the agreement to pay its specified percentage of
383hurricane losses. Eligible risks that are provided hurricane
384coverage through a quota share primary insurance arrangement
385must be provided policy forms that set forth the obligations of
386the corporation and authorized insurer under the arrangement,
387clearly specify the percentages of quota share primary insurance
388provided by the corporation and authorized insurer, and
389conspicuously and clearly state that neither the authorized
390insurer nor the corporation may be held responsible beyond its
391specified percentage of coverage of hurricane losses.
392     (II)  "Eligible risks" means personal lines residential and
393commercial lines residential risks that meet the underwriting
394criteria of the corporation and are located in areas that were
395eligible for coverage by the Florida Windstorm Underwriting
396Association on January 1, 2002.
397     b.  The corporation may enter into quota share primary
398insurance agreements with authorized insurers at corporation
399coverage levels of 90 percent and 50 percent.
400     c.  If the corporation determines that additional coverage
401levels are necessary to maximize participation in quota share
402primary insurance agreements by authorized insurers, the
403corporation may establish additional coverage levels. However,
404the corporation's quota share primary insurance coverage level
405may not exceed 90 percent.
406     d.  Any quota share primary insurance agreement entered
407into between an authorized insurer and the corporation must
408provide for a uniform specified percentage of coverage of
409hurricane losses, by county or territory as set forth by the
410corporation board, for all eligible risks of the authorized
411insurer covered under the quota share primary insurance
412agreement.
413     e.  Any quota share primary insurance agreement entered
414into between an authorized insurer and the corporation is
415subject to review and approval by the office. However, such
416agreement shall be authorized only as to insurance contracts
417entered into between an authorized insurer and an insured who is
418already insured by the corporation for wind coverage.
419     f.  For all eligible risks covered under quota share
420primary insurance agreements, the exposure and coverage levels
421for both the corporation and authorized insurers shall be
422reported by the corporation to the Florida Hurricane Catastrophe
423Fund. For all policies of eligible risks covered under quota
424share primary insurance agreements, the corporation and the
425authorized insurer shall maintain complete and accurate records
426for the purpose of exposure and loss reimbursement audits as
427required by Florida Hurricane Catastrophe Fund rules. The
428corporation and the authorized insurer shall each maintain
429duplicate copies of policy declaration pages and supporting
430claims documents.
431     g.  The corporation board shall establish in its plan of
432operation standards for quota share agreements which ensure that
433there is no discriminatory application among insurers as to the
434terms of quota share agreements, pricing of quota share
435agreements, incentive provisions if any, and consideration paid
436for servicing policies or adjusting claims.
437     h.  The quota share primary insurance agreement between the
438corporation and an authorized insurer must set forth the
439specific terms under which coverage is provided, including, but
440not limited to, the sale and servicing of policies issued under
441the agreement by the insurance agent of the authorized insurer
442producing the business, the reporting of information concerning
443eligible risks, the payment of premium to the corporation, and
444arrangements for the adjustment and payment of hurricane claims
445incurred on eligible risks by the claims adjuster and personnel
446of the authorized insurer. Entering into a quota sharing
447insurance agreement between the corporation and an authorized
448insurer shall be voluntary and at the discretion of the
449authorized insurer.
450     3.  May provide that the corporation may employ or
451otherwise contract with individuals or other entities to provide
452administrative or professional services that may be appropriate
453to effectuate the plan. The corporation shall have the power to
454borrow funds, by issuing bonds or by incurring other
455indebtedness, and shall have other powers reasonably necessary
456to effectuate the requirements of this subsection, including
457without limitation, the power to issue bonds and incur other
458indebtedness in order to refinance outstanding bonds or other
459indebtedness. The corporation may, but is not required to, seek
460judicial validation of its bonds or other indebtedness under
461chapter 75. The corporation may issue bonds or incur other
462indebtedness, or have bonds issued on its behalf by a unit of
463local government pursuant to subparagraph (g)2., in the absence
464of a hurricane or other weather-related event, upon a
465determination by the corporation, subject to approval by the
466office, that such action would enable it to efficiently meet the
467financial obligations of the corporation and that such
468financings are reasonably necessary to effectuate the
469requirements of this subsection. The corporation is authorized
470to take all actions needed to facilitate tax-free status for any
471such bonds or indebtedness, including formation of trusts or
472other affiliated entities. The corporation shall have the
473authority to pledge assessments, projected recoveries from the
474Florida Hurricane Catastrophe Fund, other reinsurance
475recoverables, market equalization and other surcharges, and
476other funds available to the corporation as security for bonds
477or other indebtedness. In recognition of s. 10, Art. I of the
478State Constitution, prohibiting the impairment of obligations of
479contracts, it is the intent of the Legislature that no action be
480taken whose purpose is to impair any bond indenture or financing
481agreement or any revenue source committed by contract to such
482bond or other indebtedness.
483     4.a.  Must require that the corporation operate subject to
484the supervision and approval of a board of governors consisting
485of 7 individuals who are residents of this state, from different
486geographical areas of this state, appointed by the Chief
487Financial Officer. The Chief Financial Officer shall designate
488one of the appointees as chair. All board members serve at the
489pleasure of the Chief Financial Officer. All board members,
490including the chair, must be appointed to serve for 3-year terms
491beginning annually on a date designated by the plan. Any board
492vacancy shall be filled for the unexpired term by the Chief
493Financial Officer. The Chief Financial Officer shall appoint a
494technical advisory group to provide information and advice to
495the board of governors in connection with the board's duties
496under this subsection. The executive director and senior
497managers of the corporation shall be engaged by the Chief
498Financial Officer and serve at the pleasure of the Chief
499Financial Officer. The executive director is responsible for
500employing other staff as the corporation may require, subject to
501review and concurrence by the office of the Chief Financial
502Officer.
503     b.  The board shall create a Market Accountability Advisory
504Committee to assist the corporation in developing awareness of
505its rates and its customer and agent service levels in
506relationship to the voluntary market insurers writing similar
507coverage. The members of the advisory committee shall consist of
508the following 11 persons, one of whom must be elected chair by
509the members of the committee: four representatives, one
510appointed by the Florida Association of Insurance Agents, one by
511the Florida Association of Insurance and Financial Advisors, one
512by the Professional Insurance Agents of Florida, and one by the
513Latin American Association of Insurance Agencies; three
514representatives appointed by the insurers with the three highest
515voluntary market share of residential property insurance
516business in the state; one representative from the Office of
517Insurance Regulation; one consumer appointed by the board who is
518insured by the corporation at the time of appointment to the
519committee; one representative appointed by the Florida
520Association of Realtors; and one representative appointed by the
521Florida Bankers Association. All members must serve for 3-year
522terms and may serve for consecutive terms. The committee shall
523report to the corporation at each board meeting on insurance
524market issues which may include rates and rate competition with
525the voluntary market; service, including policy issuance, claims
526processing, and general responsiveness to policyholders,
527applicants, and agents; and matters relating to depopulation.
528     5.  Must provide a procedure for determining the
529eligibility of a risk for coverage, as follows:
530     a.  Subject to the provisions of s. 627.3517, with respect
531to personal lines residential risks, if the risk is offered
532coverage from an authorized insurer at the insurer's approved
533rate under either a standard policy including wind coverage or,
534if consistent with the insurer's underwriting rules as filed
535with the office, a basic policy including wind coverage, the
536risk is not eligible for any policy issued by the corporation.
537If the risk is not able to obtain any such offer, the risk is
538eligible for either a standard policy including wind coverage or
539a basic policy including wind coverage issued by the
540corporation; however, if the risk could not be insured under a
541standard policy including wind coverage regardless of market
542conditions, the risk shall be eligible for a basic policy
543including wind coverage unless rejected under subparagraph 8.
544The corporation shall determine the type of policy to be
545provided on the basis of objective standards specified in the
546underwriting manual and based on generally accepted underwriting
547practices.
548     (I)  If the risk accepts an offer of coverage through the
549market assistance plan or an offer of coverage through a
550mechanism established by the corporation before a policy is
551issued to the risk by the corporation or during the first 30
552days of coverage by the corporation, and the producing agent who
553submitted the application to the plan or to the corporation is
554not currently appointed by the insurer, the insurer shall:
555     (A)  Pay to the producing agent of record of the policy,
556for the first year, an amount that is the greater of the
557insurer's usual and customary commission for the type of policy
558written or a fee equal to the usual and customary commission of
559the corporation; or
560     (B)  Offer to allow the producing agent of record of the
561policy to continue servicing the policy for a period of not less
562than 1 year and offer to pay the agent the greater of the
563insurer's or the corporation's usual and customary commission
564for the type of policy written.
565
566If the producing agent is unwilling or unable to accept
567appointment, the new insurer shall pay the agent in accordance
568with sub-sub-sub-subparagraph (A).
569     (II)  When the corporation enters into a contractual
570agreement for a take-out plan, the producing agent of record of
571the corporation policy is entitled to retain any unearned
572commission on the policy, and the insurer shall:
573     (A)  Pay to the producing agent of record of the
574corporation policy, for the first year, an amount that is the
575greater of the insurer's usual and customary commission for the
576type of policy written or a fee equal to the usual and customary
577commission of the corporation; or
578     (B)  Offer to allow the producing agent of record of the
579corporation policy to continue servicing the policy for a period
580of not less than 1 year and offer to pay the agent the greater
581of the insurer's or the corporation's usual and customary
582commission for the type of policy written.
583
584If the producing agent is unwilling or unable to accept
585appointment, the new insurer shall pay the agent in accordance
586with sub-sub-sub-subparagraph (A).
587     b.  With respect to commercial lines residential risks, if
588the risk is offered coverage under a policy including wind
589coverage from an authorized insurer at its approved rate, the
590risk is not eligible for any policy issued by the corporation.
591If the risk is not able to obtain any such offer, the risk is
592eligible for a policy including wind coverage issued by the
593corporation.
594     (I)  If the risk accepts an offer of coverage through the
595market assistance plan or an offer of coverage through a
596mechanism established by the corporation before a policy is
597issued to the risk by the corporation or during the first 30
598days of coverage by the corporation, and the producing agent who
599submitted the application to the plan or the corporation is not
600currently appointed by the insurer, the insurer shall:
601     (A)  Pay to the producing agent of record of the policy,
602for the first year, an amount that is the greater of the
603insurer's usual and customary commission for the type of policy
604written or a fee equal to the usual and customary commission of
605the corporation; or
606     (B)  Offer to allow the producing agent of record of the
607policy to continue servicing the policy for a period of not less
608than 1 year and offer to pay the agent the greater of the
609insurer's or the corporation's usual and customary commission
610for the type of policy written.
611
612If the producing agent is unwilling or unable to accept
613appointment, the new insurer shall pay the agent in accordance
614with sub-sub-sub-subparagraph (A).
615     (II)  When the corporation enters into a contractual
616agreement for a take-out plan, the producing agent of record of
617the corporation policy is entitled to retain any unearned
618commission on the policy, and the insurer shall:
619     (A)  Pay to the producing agent of record of the
620corporation policy, for the first year, an amount that is the
621greater of the insurer's usual and customary commission for the
622type of policy written or a fee equal to the usual and customary
623commission of the corporation; or
624     (B)  Offer to allow the producing agent of record of the
625corporation policy to continue servicing the policy for a period
626of not less than 1 year and offer to pay the agent the greater
627of the insurer's or the corporation's usual and customary
628commission for the type of policy written.
629
630If the producing agent is unwilling or unable to accept
631appointment, the new insurer shall pay the agent in accordance
632with sub-sub-sub-subparagraph (A).
633     6.  Must include rules for classifications of risks and
634rates therefor.
635     7.  Must provide that if premium and investment income for
636an account attributable to a particular calendar year are in
637excess of projected losses and expenses for the account
638attributable to that year, such excess shall be held in surplus
639in the account. Such surplus shall be available to defray
640deficits in that account as to future years and shall be used
641for that purpose prior to assessing assessable insurers and
642assessable insureds as to any calendar year.
643     8.  Must provide objective criteria and procedures to be
644uniformly applied for all applicants in determining whether an
645individual risk is so hazardous as to be uninsurable. In making
646this determination and in establishing the criteria and
647procedures, the following shall be considered:
648     a.  Whether the likelihood of a loss for the individual
649risk is substantially higher than for other risks of the same
650class; and
651     b.  Whether the uncertainty associated with the individual
652risk is such that an appropriate premium cannot be determined.
653
654The acceptance or rejection of a risk by the corporation shall
655be construed as the private placement of insurance, and the
656provisions of chapter 120 shall not apply.
657     9.  Must provide that the corporation shall make its best
658efforts to procure catastrophe reinsurance at reasonable rates,
659to cover its projected 100-year probable maximum loss as
660determined by the board of governors.
661     10.  Must provide that in the event of regular deficit
662assessments under sub-subparagraph (b)3.a. or sub-subparagraph
663(b)3.b., in the personal lines account, the commercial lines
664residential account, or the high-risk account, the corporation
665shall levy upon corporation policyholders in its next rate
666filing, or by a separate rate filing solely for this purpose, a
667market equalization surcharge arising from a regular assessment
668in such account in a percentage equal to the total amount of
669such regular assessments divided by the aggregate statewide
670direct written premium for subject lines of business for the
671prior calendar year. Market equalization surcharges under this
672subparagraph are not considered premium and are not subject to
673commissions, fees, or premium taxes; however, failure to pay a
674market equalization surcharge shall be treated as failure to pay
675premium.
676     11.  The policies issued by the corporation must provide
677that, if the corporation or the market assistance plan obtains
678an offer from an authorized insurer to cover the risk at its
679approved rates, the risk is no longer eligible for renewal
680through the corporation.
681     12.  Corporation policies and applications must include a
682notice that the corporation policy could, under this section, be
683replaced with a policy issued by an authorized insurer that does
684not provide coverage identical to the coverage provided by the
685corporation. The notice shall also specify that acceptance of
686corporation coverage creates a conclusive presumption that the
687applicant or policyholder is aware of this potential.
688     13.  May establish, subject to approval by the office,
689different eligibility requirements and operational procedures
690for any line or type of coverage for any specified county or
691area if the board determines that such changes to the
692eligibility requirements and operational procedures are
693justified due to the voluntary market being sufficiently stable
694and competitive in such area or for such line or type of
695coverage and that consumers who, in good faith, are unable to
696obtain insurance through the voluntary market through ordinary
697methods would continue to have access to coverage from the
698corporation. When coverage is sought in connection with a real
699property transfer, such requirements and procedures shall not
700provide for an effective date of coverage later than the date of
701the closing of the transfer as established by the transferor,
702the transferee, and, if applicable, the lender.
703     14.  Must provide that, with respect to the high-risk
704account, any assessable insurer with a surplus as to
705policyholders of $25 million or less writing 25 percent or more
706of its total countrywide property insurance premiums in this
707state may petition the office, within the first 90 days of each
708calendar year, to qualify as a limited apportionment company. In
709no event shall a limited apportionment company be required to
710participate in the portion of any assessment, within the high-
711risk account, pursuant to sub-subparagraph (b)3.a. or sub-
712subparagraph (b)3.b. in the aggregate which exceeds $50 million
713after payment of available high-risk account funds in any
714calendar year. However, a limited apportionment company shall
715collect from its policyholders any emergency assessment imposed
716under sub-subparagraph (b)3.d. The plan shall provide that, if
717the office determines that any regular assessment will result in
718an impairment of the surplus of a limited apportionment company,
719the office may direct that all or part of such assessment be
720deferred as provided in subparagraph (g)4. However, there shall
721be no limitation or deferment of an emergency assessment to be
722collected from policyholders under sub-subparagraph (b)3.d.
723     15.  Must provide that the corporation appoint as its
724licensed agents only those agents who also hold an appointment
725as defined in s. 626.015(3) with an insurer who at the time of
726the agent's initial appointment by the corporation is authorized
727to write and is actually writing personal lines residential
728property coverage, commercial residential property coverage, or
729commercial nonresidential property coverage within the state.
730     16.  Must provide a plan for removing personal lines
731policies from coverage by the corporation which includes the
732development and implementation of a take-out bonus strategy
733determining, at a minimum, the necessity and application of
734financial and regulatory incentives.
735     (d)1.  It is the intent of the Legislature that the rates
736for coverage provided by the corporation be actuarially sound
737and not competitive with approved rates charged in the admitted
738voluntary market, so that the corporation functions as a
739residual market mechanism to provide insurance only when the
740insurance cannot be procured in the voluntary market. Rates
741shall include an appropriate catastrophe loading factor that
742reflects the actual catastrophic exposure of the corporation.
743     2.  For each county, the average rates of the corporation
744for each line of business for personal lines residential
745policies excluding rates for wind-only policies shall be no
746lower than the average rates charged by the insurer that had the
747highest average rate in that county among the 20 insurers with
748the greatest total direct written premium in the state for that
749line of business in the preceding year, except that with respect
750to mobile home coverages, the average rates of the corporation
751shall be no lower than the average rates charged by the insurer
752that had the highest average rate in that county among the 5
753insurers with the greatest total written premium for mobile home
754owner's policies in the state in the preceding year.
755     3.  Rates for personal lines residential wind-only policies
756must be actuarially sound and not competitive with approved
757rates charged by authorized insurers. However, for personal
758lines residential wind-only policies issued or renewed between
759July 1, 2002, and June 30, 2003, the maximum premium increase
760must be no greater than 10 percent of the Florida Windstorm
761Underwriting Association premium for that policy in effect on
762June 30, 2002, as adjusted for coverage changes and seasonal
763occupancy surcharges. For personal lines residential wind-only
764policies issued or renewed between July 1, 2003, and June 30,
7652004, the corporation shall use its existing filed and approved
766wind-only rating and classification plans, provided, however,
767that the maximum premium increase must be no greater than 20
768percent of the premium for that policy in effect on June 30,
7692003, as adjusted for coverage changes and seasonal occupancy
770surcharges. Corporation rate manuals shall include a rate
771surcharge for seasonal occupancy. To ensure that personal lines
772residential wind-only rates effective on or after July 1, 2004,
773are not competitive with approved rates charged by authorized
774insurers, the corporation, in conjunction with the office, shall
775develop a wind-only ratemaking methodology, which methodology
776shall be contained in each a rate filing made by the corporation
777with the office by January 1, 2004. If the office thereafter
778determines that the wind-only rates or rating factors filed by
779the corporation fail to comply with the wind-only ratemaking
780methodology provided for in this subsection, it shall so notify
781the corporation and require the corporation to amend its rates
782or rating factors to come into compliance within 90 days of
783notice from the office. The office shall report to the Speaker
784of the House of Representatives and the President of the Senate
785on the provisions of the wind-only ratemaking methodology by
786January 31, 2004.
787     4.  The provisions of subparagraph 2. do not apply to
788coverage provided by the corporation in any county for which the
789office determines that a reasonable degree of competition does
790not exist for personal lines residential policies. The
791provisions of subparagraph 3. do not apply to coverage provided
792by the corporation in any county for which the office determines
793that a reasonable degree of competition does not exist for
794personal lines residential policies in the area of that county
795which is eligible for wind-only coverage. In such counties, the
796rates for personal lines residential coverage shall be
797actuarially sound and not excessive, inadequate, or unfairly
798discriminatory and are subject to the other provisions of the
799paragraph and s. 627.062. The commission shall adopt rules
800establishing the criteria for determining whether a reasonable
801degree of competition exists for personal lines residential
802policies. Beginning October 1, 2005, and each 6 months
803thereafter, the office shall determine and identify those
804counties for which a reasonable degree of competition does not
805exist for purposes of subparagraphs 2. and 3., respectively.
806     5.4.  Rates for commercial lines coverage shall not be
807subject to the requirements of subparagraph 2., but shall be
808subject to all other requirements of this paragraph and s.
809627.062.
810     6.5.  Nothing in this paragraph shall require or allow the
811corporation to adopt a rate that is inadequate under s. 627.062.
812     7.6.  The corporation shall certify to the office at least
813twice annually that its personal lines rates comply with the
814requirements of this paragraph subparagraphs 1. and 2. If any
815adjustment in the rates or rating factors of the corporation is
816necessary to ensure such compliance, the corporation shall make
817and implement such adjustments and file its revised rates and
818rating factors with the office. If the office thereafter
819determines that the revised rates and rating factors fail to
820comply with the provisions of this paragraph subparagraphs 1.
821and 2., it shall notify the corporation and require the
822corporation to amend its rates or rating factors in conjunction
823with its next rate filing. The office must notify the
824corporation by electronic means of any rate filing it approves
825for any insurer among the insurers referred to in subparagraph
8262.
827     8.7.  In addition to the rates otherwise determined
828pursuant to this paragraph, the corporation shall impose and
829collect an amount equal to the premium tax provided for in s.
830624.509 to augment the financial resources of the corporation.
831     9.8.a.  To assist the corporation in developing additional
832ratemaking methods to assure compliance with this paragraph
833subparagraphs 1. and 4., the corporation shall appoint a rate
834methodology panel consisting of one person recommended by the
835Florida Association of Insurance Agents, one person recommended
836by the Professional Insurance Agents of Florida, one person
837recommended by the Florida Association of Insurance and
838Financial Advisors, one person recommended by the insurer with
839the highest voluntary market share of residential property
840insurance business in the state, one person recommended by the
841insurer with the second-highest voluntary market share of
842residential property insurance business in the state, one person
843recommended by an insurer writing commercial residential
844property insurance in this state, one person recommended by the
845Office of Insurance Regulation, and one board member designated
846by the board chairman, who shall serve as chairman of the panel.
847     b.  By January 1, 2004, the rate methodology panel shall
848provide a report to the corporation of its findings and
849recommendations for the use of additional ratemaking methods and
850procedures, including the use of a rate equalization surcharge
851in an amount sufficient to assure that the total cost of
852coverage for policyholders or applicants to the corporation is
853sufficient to comply with subparagraph 1.
854     c.  Within 30 days after such report, the corporation shall
855present to the President of the Senate, the Speaker of the House
856of Representatives, the minority party leaders of each house of
857the Legislature, and the chairs of the standing committees of
858each house of the Legislature having jurisdiction of insurance
859issues, a plan for implementing the additional ratemaking
860methods and an outline of any legislation needed to facilitate
861use of the new methods.
862     d.  The plan must include a provision that producer
863commissions paid by the corporation shall not be calculated in
864such a manner as to include any rate equalization surcharge.
865However, without regard to the plan to be developed or its
866implementation, producer commissions paid by the corporation for
867each account, other than the quota share primary program, shall
868remain fixed as to percentage, effective rate, calculation, and
869payment method until January 1, 2004.
870     10.9.  By January 1, 2004, The corporation shall develop a
871notice to policyholders or applicants that the rates of Citizens
872Property Insurance Corporation are intended to be higher than
873the rates of any admitted carrier except when the provisions of
874subparagraph 4. apply and providing other information the
875corporation deems necessary to assist consumers in finding other
876voluntary admitted insurers willing to insure their property.
877     (q)  The corporation shall not require the securing of
878flood insurance as a condition of coverage if the property risk
879of the insured or applicant is located in a Special Flood Hazard
880Area as defined by the Federal Emergency Management Agency for
881the National Flood Insurance Program. executes a form approved
882by the office affirming that Flood insurance is not provided by
883the corporation and that if flood insurance is not secured by
884the applicant or insured in addition to coverage by the
885corporation, the risk will not be covered for flood damage. A
886corporation policyholder that does electing not to secure flood
887insurance and makes a claim executing a form as provided herein
888making a claim for water damage against the corporation shall
889have the burden of proving the damage was not caused by
890flooding. Notwithstanding other provisions of this subsection,
891the corporation may deny coverage or refuse to issue or renew a
892policy to an applicant or insured who refuses to purchase flood
893insurance as required by this subsection to execute the form
894described herein.
895     Section 7.  Subsection (1) of section 627.411, Florida
896Statutes, is amended to read:
897     627.411  Grounds for disapproval.--
898     (1)  The office shall disapprove any form filed under s.
899627.410, or withdraw any previous approval thereof, only if the
900form:
901     (a)  Is in any respect in violation of, or does not comply
902with, this code.
903     (b)  Contains or incorporates by reference, where such
904incorporation is otherwise permissible, any inconsistent,
905ambiguous, or misleading clauses, or exceptions and conditions
906which deceptively affect the risk purported to be assumed in the
907general coverage of the contract.
908     (c)  Has any title, heading, or other indication of its
909provisions which is misleading.
910     (d)  Is printed or otherwise reproduced in such manner as
911to render any material provision of the form substantially
912illegible.
913     (e)  Is for residential property insurance and contains
914provisions that are unfair or inequitable or encourage
915misrepresentation.
916     (f)(e)  Is for health insurance, and:
917     1.  Provides benefits that are unreasonable in relation to
918the premium charged.;
919     2.  Contains provisions that are unfair or inequitable or
920contrary to the public policy of this state or that encourage
921misrepresentation.;
922     3.  Contains provisions that apply rating practices that
923result in unfair discrimination pursuant to s. 626.9541(1)(g)2.
924     (g)(f)  Excludes coverage for human immunodeficiency virus
925infection or acquired immune deficiency syndrome or contains
926limitations in the benefits payable, or in the terms or
927conditions of such contract, for human immunodeficiency virus
928infection or acquired immune deficiency syndrome which are
929different than those which apply to any other sickness or
930medical condition.
931     Section 8.  Subsection (3) of section 627.7011, Florida
932Statutes, is renumbered as subsection (4), and a new subsection
933(3) is added to said section, to read:
934     627.7011  Homeowners' policies; offer of replacement cost
935coverage and law and ordinance coverage.--
936     (3)  In the event of a covered loss to the dwelling, the
937insurer shall pay no less than the actual cash value of the
938damaged part of the dwelling at the time of the loss, subject to
939the limits of coverage and terms contained in the policy. Once
940the dwelling is repaired or replaced, the insurer shall pay the
941remainder of the repair or replacement costs, subject to limits
942of coverage and terms contained in the policy. The insurer is
943not required to pay more than the actual cost to repair or
944replace the dwelling.
945     (4)(3)  Nothing in this section shall be construed to apply
946to policies not considered to be "homeowners' policies," as that
947term is commonly understood in the insurance industry. This
948section specifically does not apply to mobile home policies.
949Nothing in this section shall be construed as limiting the
950ability of any insurer to reject or nonrenew any insured or
951applicant on the grounds that the structure does not meet
952underwriting criteria applicable to replacement cost or law and
953ordinance policies or for other lawful reasons.
954     Section 9.  Effective October 1, 2005, subsection (1) of
955section 627.7011, Florida Statutes, is amended, and subsection
956(4) is added to said section, to read:
957     627.7011  Homeowners' policies; offer of replacement cost
958coverage and law and ordinance coverage.--
959     (1)  Prior to issuing a homeowner's insurance policy on or
960after October 1, 2005 June 1, 1994, or prior to the first
961renewal of a homeowner's insurance policy on or after October 1,
9622005 June 1, 1994, the insurer must offer each of the following:
963     (a)  A policy or endorsement providing that any loss which
964is repaired or replaced will be adjusted on the basis of
965replacement costs not exceeding policy limits as to the
966dwelling, rather than actual cash value, but not including costs
967necessary to meet applicable laws and ordinances regulating the
968construction, use, or repair of any property or requiring the
969tearing down of any property, including the costs of removing
970debris.
971     (b)  A policy or endorsement providing that, subject to
972other policy provisions, any loss which is repaired or replaced
973at any location will be adjusted on the basis of replacement
974costs not exceeding policy limits as to the dwelling, rather
975than actual cash value, and also including costs necessary to
976meet applicable laws and ordinances regulating the construction,
977use, or repair of any property or requiring the tearing down of
978any property, including the costs of removing debris; however,
979such additional costs necessary to meet applicable laws and
980ordinances may be limited to either 25 percent or 50 percent of
981the dwelling limit, as selected by the policyholder, and such
982coverage shall apply only to repairs of the damaged portion of
983the structure unless the total damage to the structure exceeds
98450 percent of the replacement cost of the structure.
985
986An insurer is not required to make the offers required by this
987subsection with respect to the issuance or renewal of a
988homeowner's policy that contains the provisions specified in
989paragraph (b) for law and ordinance coverage limited to 25
990percent of the dwelling limit, except that the insurer must
991offer the law and ordinance coverage limited to 50 percent of
992the dwelling limit. This subsection does not prohibit the offer
993of a guaranteed replacement cost policy.
994     (4)  Any homeowner's insurance policy issued or renewed on
995or after October 1, 2005, must include in bold type no smaller
996than 18 points the following statement:
997"LAW AND ORDINANCE COVERAGE IS AN IMPORTANT COVERAGE THAT
998YOU MAY WISH TO PURCHASE. YOU MAY ALSO NEED TO CONSIDER
999THE PURCHASE OF FLOOD INSURANCE FROM THE NATIONAL FLOOD
1000INSURANCE PROGRAM. WITHOUT THIS COVERAGE, YOU MAY HAVE
1001UNCOVERED LOSSES. PLEASE DISCUSS THESE COVERAGES WITH
1002YOUR INSURANCE AGENT."
1003The intent of this subsection is to encourage policyholders to
1004purchase sufficient coverage to protect them in case events
1005excluded from the standard homeowners policy, such as law and
1006ordinance enforcement and flood, combine with covered events to
1007produce damage or loss to the insured property. The intent is
1008also to encourage policyholders to discuss these issues with
1009their insurance agent.
1010     Section 10.  Subsections (1) and (7) of section 627.7015,
1011Florida Statutes, are amended to read:
1012     627.7015  Alternative procedure for resolution of disputed
1013property insurance claims.--
1014     (1)  PURPOSE AND SCOPE.--This section sets forth a
1015nonadversarial alternative dispute resolution procedure for a
1016mediated claim resolution conference prompted by the need for
1017effective, fair, and timely handling of property insurance
1018claims. There is a particular need for an informal,
1019nonthreatening forum for helping parties who elect this
1020procedure to resolve their claims disputes because most
1021homeowner's and commercial residential insurance policies
1022obligate insureds to participate in a potentially expensive and
1023time-consuming adversarial appraisal process prior to
1024litigation. The procedure set forth in this section is designed
1025to bring the parties together for a mediated claims settlement
1026conference without any of the trappings or drawbacks of an
1027adversarial process. Before resorting to these procedures,
1028insureds and insurers are encouraged to resolve claims as
1029quickly and fairly as possible. This section is available with
1030respect to claims under personal lines and commercial
1031residential policies for all claimants and insurers prior to
1032commencing the appraisal process, or commencing litigation. If
1033requested by the insured, participation by legal counsel shall
1034be permitted. Mediation under this section is also available to
1035litigants referred to the department by a county court or
1036circuit court. This section does not apply to commercial
1037coverages, to private passenger motor vehicle insurance
1038coverages, or to disputes relating to liability coverages in
1039policies of property insurance.
1040     (7)  If the insurer fails to comply with subsection (2) by
1041failing to notify a first-party claimant of its right to
1042participate in the mediation program under this section or if
1043the insurer requests the mediation, and the mediation results
1044are rejected by either party, the insured shall not be required
1045to submit to or participate in any contractual loss appraisal
1046process of the property loss damage as a precondition to legal
1047action for breach of contract against the insurer for its
1048failure to pay the policyholder's claims covered by the policy.
1049     Section 11.  Effective upon this act becoming a law,
1050subsection (1) of section 627.702, Florida Statutes, is amended
1051to read:
1052     627.702  Valued policy law.--
1053     (1)(a)  In the event of the total loss of any building,
1054structure, mobile home as defined in s. 320.01(2), or
1055manufactured building as defined in s. 553.36(12), located in
1056this state and insured by any insurer as to a covered peril, in
1057the absence of any change increasing the risk without the
1058insurer's consent and in the absence of fraudulent or criminal
1059fault on the part of the insured or one acting in her or his
1060behalf, the insurer's liability, if any, under the policy for
1061such total loss, if caused by a covered peril, shall be in the
1062amount of money for which such property was so insured as
1063specified in the policy and for which a premium has been charged
1064and paid.
1065     (b)  The intent of this subsection is not to deprive an
1066insurer of any proper defense under the policy, to create new or
1067additional coverage under the policy, or to require an insurer
1068to pay for a loss caused by a peril other than the covered
1069peril. In furtherance of such legislative intent, when a loss
1070was caused in part by a covered peril and in part by a
1071noncovered peril, paragraph (a) does not apply. In such
1072circumstances, the insurer's liability under this section shall
1073be limited to the amount of the loss caused by the covered
1074peril.
1075     (c)  It is the intent of the Legislature that the amendment
1076to this section shall not be applied retroactively and shall
1077apply only to claims filed after effective date of such
1078amendment.
1079     Section 12.  Section 627.706, Florida Statutes, is amended
1080to read:
1081     627.706  Sinkhole insurance; definitions.--
1082     (1)  Every insurer authorized to transact property
1083insurance in this state shall make available coverage for
1084insurable sinkhole losses on any structure, including contents
1085of personal property contained therein, to the extent provided
1086in the form to which the sinkhole coverage attaches.
1087     (2)  As used in ss. 627.706-627.7074, and as used in
1088connection with any policy providing coverage for sinkhole
1089losses:
1090     (a)  "Sinkhole" means a landform created by subsidence of
1091soil, sediment, or rock as underlying strata are dissolved by
1092ground water. A sinkhole may form by collapse into subterranean
1093voids created by dissolution of limestone or dolostone or by
1094subsidence as these strata are dissolved.
1095     (b)  "Sinkhole loss" means structural damage to a the
1096building caused by sinkhole activity. Contents coverage shall
1097apply only if there is structural damage to the building caused
1098by sinkhole activity.
1099     (c)(3)  "Sinkhole activity loss" means actual physical
1100damage to the property covered arising out of or caused by
1101sudden settlement or systematic weakening collapse of the earth
1102supporting such property only when such settlement or systematic
1103weakening collapse results from movement or raveling of soils,
1104sediments, or rock materials into subterranean voids created by
1105the effect action of water on a limestone or similar rock
1106formation.
1107     (d)  "Engineer" means a person, as defined in s. 471.005,
1108who has a bachelor's degree or higher in engineering with a
1109specialty in the geotechnical engineering field. An engineer
1110must have geotechnical experience and expertise in the
1111identification of sinkhole activity as well as other potential
1112causes of damage to the structure.
1113     (e)  "Professional geologist" means a person, as defined by
1114s. 492.102, who has a bachelor's degree or higher in geology or
1115a related earth science with expertise in the geology of this
1116state. A professional geologist must have geological experience
1117and expertise in the identification of sinkhole activity as well
1118as other potential causes of damage to the structure.
1119     (3)(4)  Every insurer authorized to transact property
1120insurance in this state shall make a proper filing with the
1121office for the purpose of extending the appropriate forms of
1122property insurance to include coverage for insurable sinkhole
1123losses.
1124     Section 13.  Section 627.7065, Florida Statutes, is created
1125to read:
1126     627.7065  Database of information relating to sinkholes;
1127the Department of Financial Services and the Department of
1128Environmental Protection.--
1129     (1)  The Legislature finds that there has been a dramatic
1130increase in the number of sinkholes and insurance claims for
1131sinkhole damage in the state during the past 10 years.
1132Accordingly, the Legislature recognizes the need to track
1133current and past sinkhole activity and to make the information
1134available for prevention and remediation activities. The
1135Legislature further finds that the Florida Geological Survey of
1136the Department of Environmental Protection has created a partial
1137database of some sinkholes identified in Florida, although the
1138database is not reflective of all sinkholes or insurance claims
1139for sinkhole damage. The Legislature determines that creating a
1140complete electronic database of sinkhole activity serves an
1141important purpose in protecting the public and in studying
1142property claims activities in the insurance industry.
1143     (2)  The Department of Financial Services, including the
1144employee of the Division of Consumer Services designated as the
1145primary contact for consumers on issues relating to sinkholes,
1146and the Office of the Insurance Consumer Advocate shall consult
1147with the Florida Geological Survey and the Department of
1148Environmental Protection to implement a statewide automated
1149database of sinkholes and related activity identified in the
1150state.
1151     (3)  Representatives of the Department of Financial
1152Services, with the agreement of the Department of Environmental
1153Protection, shall determine the form and content of the
1154database. The content may include standards for reporting and
1155investigating sinkholes for inclusion in the database and
1156requirements for insurers to report to the departments the
1157receipt of claims involving sinkhole loss and other similar
1158activities. The Department of Financial Services may require
1159insurers to report present and past data of sinkhole claims. The
1160database also may include information of damage due to ground
1161settling and other subsidence activity.
1162     (4)  The Department of Financial Services may manage the
1163database or may contract for its management and maintenance. The
1164Department of Environmental Protection shall investigate reports
1165of sinkhole activity and include its findings and investigations
1166in the database.
1167     (5)  The Department of Environmental Protection, in
1168consultation with the Department of Financial Services, shall
1169present a report of activities relating to the sinkhole
1170database, including recommendations regarding the database and
1171similar matters, to the Governor, the Speaker of the House of
1172Representatives, the President of the Senate, and the Chief
1173Financial Officer by December 31, 2005. The report may consider
1174the need for the Legislature to create an entity to study the
1175increase in sinkhole activity in the state and other similar
1176issues relating to sinkhole damage, including recommendations
1177and costs for staffing the entity. The report may include other
1178information, as appropriate.
1179     (6)  The Department of Financial Services, in consultation
1180with the Department of Environmental Protection, may adopt rules
1181to implement the provisions of this section.
1182     Section 14.  Section 627.707, Florida Statutes, is amended
1183to read:
1184     627.707  Minimum Standards for investigation of sinkhole
1185claims by insurers; nonrenewals.--
1186     (1)  Upon receipt of a claim for a sinkhole loss, an
1187insurer must meet the following minimum standards in
1188investigating a claim:
1189     (1)(a)  Upon receipt of a claim for a sinkhole loss, The
1190insurer must make an inspection of the insured's premises to
1191determine if there has been physical damage to the structure
1192which may might be the result of sinkhole activity.
1193     (b)  If, upon the investigation pursuant to paragraph (a),
1194the insurer discovers damage to a structure which is consistent
1195with sinkhole activity or if the structure is located in close
1196proximity to a structure in which sinkhole damage has been
1197verified, then prior to denying a claim, the insurer must obtain
1198a written certification from an individual qualified to
1199determine the existence of sinkhole activity, stating that the
1200cause of the claim is not sinkhole activity, and that the
1201analysis conducted was of sufficient scope to eliminate sinkhole
1202activity as the cause of damage within a reasonable professional
1203probability. The written certification must also specify the
1204professional discipline and professional licensure or
1205registration under which the analysis was conducted.
1206     (2)  Following the insurer's initial inspection, the
1207insurer shall engage an engineer and a professional geologist to
1208conduct testing as provided in s. 627.7072 to determine the
1209cause of the loss within a reasonable professional probability
1210and issue a report as provided in s. 627.7073, if:
1211     (a)  The insurer is unable to identify a valid cause of the
1212damage or discovers damage to the structure which is consistent
1213with sinkhole loss; or
1214     (b)  The policyholder demands testing in accordance with
1215this section or s. 627.7072.
1216     (3)  Following the initial inspection of the insured
1217premises, the insurer shall provide written notice to the
1218policyholder disclosing the following information:
1219     (a)  What the insurer has determined to be the cause of
1220damage, if the insurer has made such a determination.
1221     (b)  A statement of the circumstances under which the
1222insurer is required to engage an engineer and a professional
1223geologist to verify or eliminate sinkhole loss and to make
1224recommendations regarding land and building stabilization and
1225foundation repair.
1226     (c)  A statement regarding the right of the policyholder to
1227request testing by an engineer and a professional geologist and
1228the circumstances under which the policyholder may demand
1229certain testing.
1230     (4)  If the insurer determines that there is no sinkhole
1231loss, the insurer may deny the claim. If the insurer denies the
1232claim, without performing testing under s. 627.7072, the
1233policyholder may demand testing by the insured under s.
1234627.7072. The policyholder's demand for testing must be
1235communicated to the insurer in writing after the policyholder's
1236receipt of the insurer's denial of the claim.
1237     (5)(a)  Subject to paragraph (b), if a sinkhole loss is
1238verified, the insurer shall pay to stabilize the land and
1239building and repair the foundation in accordance with the
1240recommendations of the engineer and the professional geologist
1241as provided under s. 627.7073, and in consultation with the
1242policyholder, subject to the coverage and terms of the policy.
1243The insurer shall pay for other repairs to the structure and
1244contents in accordance with the terms of the policy.
1245     (b)  The insurer may limit its payment to the actual cash
1246value of the sinkhole loss until such time as expenses related
1247to land and building stabilization and foundation repairs are
1248incurred.
1249     (6)  Except as provided in subsection (7), the fees and
1250costs of the engineer or the professional geologist shall be
1251paid by the insurer.
1252     (7)(c)  If the insurer obtains, pursuant to s. 627.7073
1253paragraph (b), written certification that there is no sinkhole
1254loss or that the cause of the damage claim was not sinkhole
1255activity, and if the policyholder has submitted the sinkhole
1256claim without good faith grounds for submitting such claim, the
1257policyholder shall reimburse the insurer for 50 percent of the
1258actual costs cost of the analyses and services provided analysis
1259under ss. 627.7072 and 627.7073 paragraph (b); however, a
1260policyholder is not required to reimburse an insurer more than
1261$2,500 with respect to any claim. A policyholder is required to
1262pay reimbursement under this subsection paragraph only if the
1263insurer, prior to ordering the analysis under s. 627.7072
1264paragraph (b), informs the policyholder in writing of the
1265policyholder's potential liability for reimbursement and gives
1266the policyholder the opportunity to withdraw the claim.
1267     (8)(2)  No insurer shall nonrenew any policy of property
1268insurance on the basis of filing of claims for partial loss
1269caused by sinkhole damage or clay shrinkage as long as the total
1270of such payments does not exceed the current policy limits of
1271coverage for property damage, and provided the insured has
1272repaired the structure in accordance with the engineering
1273recommendations upon which any payment or policy proceeds were
1274based.
1275     (9)  The insurer may engage a structural engineer to make
1276recommendations as to the repair of the structure.
1277     Section 15.  Section 627.7072, Florida Statutes, is created
1278to read:
1279     627.7072  Testing standards for sinkholes.--
1280     (1)  The engineer and professional geologist shall perform
1281such tests as sufficient, in their professional opinion, to
1282determine the presence or absence of sinkhole loss or other
1283cause of damage within reasonable professional probability and
1284to make recommendations regarding necessary building
1285stabilization and foundation repair.
1286     (2)  Testing shall be conducted in compliance with the
1287Florida Geological Survey Special Publication No. 57 (2005).
1288     Section 16.  Section 627.7073, Florida Statutes, is created
1289to read:
1290     627.7073  Sinkhole reports.--
1291     (1)  Upon completion of testing as provided in s. 627.7072,
1292the engineer and professional geologist shall issue a report and
1293certification to the insurer and the policyholder as provided in
1294this section.
1295     (a)  Sinkhole loss is verified if, based upon tests
1296performed in accordance with s. 627.7072, an engineer and a
1297professional geologist issue a written report and certification
1298stating:
1299     1.  That the cause of the actual physical and structural
1300damage is sinkhole activity within a reasonable professional
1301probability.
1302     2.  That the analyses conducted were of sufficient scope to
1303identify sinkhole activity as the cause of damage within a
1304reasonable professional probability.
1305     3.  A description of the tests performed.
1306     4.  A recommendation of methods for stabilizing the land
1307and building and for making repairs to the foundation.
1308     (b)  If sinkhole activity is eliminated as the cause of
1309damage to the structure, the engineer and professional geologist
1310shall issue a written report and certification to the
1311policyholder and the insurer stating:
1312     1.  That the cause of the damage is not sinkhole activity
1313within a reasonable professional probability.
1314     2.  That the analyses and tests conducted were of
1315sufficient scope to eliminate sinkhole activity as the cause of
1316damage within a reasonable professional probability.
1317     3.  A statement of the cause of the damage within a
1318reasonable professional probability.
1319     4.  A description of the tests performed.
1320     (c)  The respective findings, opinions, and recommendations
1321of the engineer and professional geologist as to the
1322verification of a sinkhole loss, land and building
1323stabilization, foundation repair, and elimination of sinkhole
1324loss shall be presumed correct.
1325     (2)  Any insurer that has paid a claim for a sinkhole loss
1326shall file a copy of the report and certification, prepared
1327pursuant to subsection (1), with the county property appraiser
1328who shall record the report and certification with the parcel
1329number. The insurer shall bear the cost of filing and recording
1330the report and certification. There shall be no cause of action
1331or liability against an insurer for compliance with this
1332section. The seller of real property upon which a sinkhole claim
1333has been made shall disclose to the buyer of such property that
1334a claim has been paid and whether or not the full amount of the
1335proceeds were used to repair the sinkhole damage.
1336     Section 17.  Notwithstanding that revenues of Citizens
1337Property Insurance Corporation are not state revenues, the
1338Auditor General shall perform an operational audit, as defined
1339in s. 11.45(1), Florida Statutes, of the Citizens Property
1340Insurance Corporation created under s. 627.351(6), Florida
1341Statutes. The scope of the audit shall also include:
1342     (1)  An analysis of the corporation's infrastructure,
1343customer service, claims handling, accessibility of policyholder
1344information to the agent of record, take-out programs, take-out
1345bonuses, and financing arrangements.
1346     (2)  An evaluation of costs associated with the
1347administration and servicing of the policies issued by the
1348corporation to determine alternatives by which costs can be
1349reduced, customer service improved, and claims handling
1350improved.
1351
1352The audit shall contain policy alternatives for the Legislature
1353to consider. The Auditor General shall submit a report to the
1354Governor, the President of the Senate, and the Speaker of the
1355House of Representatives no later than February 1, 2006.
1356     Section 18.  The board of governors of the Citizens
1357Property Insurance Corporation created under section 627.351(6),
1358Florida Statutes, shall, by February 1, 2006, submit a report to
1359the President of the Senate, the Speaker of the House of
1360Representatives, the minority party leaders of the Senate and
1361the House of Representatives, and the chairs of the standing
1362committees of the Senate and the House of Representatives having
1363jurisdiction over matters relating to property and casualty
1364insurance. The report shall include the board's findings and
1365recommendations on the following issues:
1366     (1)  The number of policies and the aggregate premium of
1367the Citizens Property Insurance Corporation, before and after
1368enactment of this act, and projections for future policy and
1369premium growth.
1370     (2)  Increases or decreases in availability of residential
1371property coverage in the voluntary market and the effectiveness
1372of this act in improving the availability of residential
1373property coverage in the voluntary market in the state.
1374     (3)  The board's efforts to depopulate the corporation and
1375the willingness of insurers in the voluntary market to avail
1376themselves of depopulation incentives.
1377     (4)  Further actions that could be taken by the Legislature
1378to improve availability of residential property coverage in the
1379voluntary and residual markets.
1380     (5)  Actions that the board has taken to restructure the
1381corporation and recommendations for legislative action to
1382restructure the corporation, including, but not limited to,
1383actions relating to claims handling and customer service.
1384     (6)  Projected surpluses or deficits and possible means of
1385providing funding to ensure the continued solvency of the
1386corporation.
1387     (7)  The corporation's efforts to procure catastrophe
1388reinsurance to cover its projected 100-year probable maximum
1389loss with specification as to what best efforts were made by the
1390corporation to procure such reinsurance.
1391     (8)  Such other issues as the board determines are worthy
1392of the Legislature's consideration.
1393     Section 19.  (1) Upon an insurer's receiving a
1394communication with respect to a claim, the insurer shall, within
139514 calendar days, review and acknowledge receipt of such
1396communication unless payment is made within that period of time
1397or unless the failure to acknowledge is caused by factors beyond
1398the control of the insurer which reasonably prevent such
1399acknowledgement. If the acknowledgement is not in writing, a
1400notification indicating acknowledgement shall be made in the
1401insurer's claim file and dated. A communication made to or by an
1402agent of an insurer with respect to a claim shall constitute
1403communication to or by the insurer. As used in this subsection,
1404the term "agent" means any person to whom an insurer has granted
1405authority or responsibility to receive or make such
1406communications with respect to claims on behalf of the insurer.
1407This subsection shall not apply to claimants represented by
1408counsel beyond those communications necessary to provide forms
1409and instructions.
1410     (2)  Such acknowledgement shall be responsive to the
1411communication. If the communication constitutes a notification
1412of a claim, unless the acknowledgement reasonably advises the
1413claimant that the claim appears not to be covered by the
1414insurer, the acknowledgement shall provide necessary claim
1415forms, and instructions, including an appropriate telephone
1416number.
1417     (3)  Unless otherwise provided by the policy of insurance
1418or by law, within 10 working days after an insurer receives
1419proof of loss statements the insurer shall begin such
1420investigation as is reasonably necessary unless the failure to
1421begin such investigation is caused by factors beyond the control
1422of the insurer which reasonably prevent the commencement of such
1423investigation.
1424     Section 20.  Sections 3 and 4 of this act shall take effect
1425on the same date that House Bill 1939 or similar legislation
1426takes effect, if such legislation is adopted in the same
1427legislative session or an extension thereof and becomes a law.
1428     Section 21.  Except as otherwise provided herein, this act
1429shall take effect July 1, 2005.


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