September 19, 2020
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HB 1937

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; requiring the Office of Insurance Regulation to
122submit a report to the Legislature relating to residential
123property insurance; providing report requirements;
124providing effective dates.
126Be It Enacted by the Legislature of the State of Florida:
128     Section 1.  Section 489.1285, Florida Statutes, is created
129to read:
130     489.1285  Consumer protections; contract limitations.--
131Subsequent to the issuance of an executive order by the Office
132of the Governor declaring the existence of a state of emergency
133as a result and consequence of a serious threat posed to the
134public health, safety, and property in this state, in which
135damage to property has occurred and for which property insurance
136claims have been filed, the following consumer protection
137measures shall be in effect:
138     (1)  A contract for the repair or reroofing of a
139residential structure that has been agreed to in writing by the
140parties to the contract shall be a valid and binding agreement.
141A roofing contractor licensed pursuant to this chapter who is a
142party to a contract for the repair or reroofing of a residential
143structure shall be bound by the qualifications for licensure and
144the job scope specified in this chapter for a roofing contractor
145to provide timely and professional services.
146     (2)  If a contract is agreed to for the repair of a roof or
147reroofing of a residential structure, which repair is necessary
148as a result of damage caused by an emergency situation
149designated by executive order, the damages must be confirmed by
150a third party who is independent from the parties to the
151contract that the damages are a direct result of a designated
152emergency situation. Third-party confirmation must be attested
153to by an insurance adjuster, emergency management personnel,
154local building official, or other similar authority.
155     (3)(a)  A contract for services shall not be valid after 60
156calendar days after the date the contract agreement was signed
157by the parties to the contract. The contract may not provide for
158an automatic extension of time for the provisions of the
159contract. After the 60 days have expired, the contract shall be
160null and void by operation of law.
161     (b)  Within 10 calendar days after the period of time for
162expiration of the contract, the parties to the contract may
163agree in writing, as a separate contract to the original
164contract, to an additional period of 60 calendar days beyond the
165time period specified in the original contract to complete the
166roofing services. If the performance of services under the
167contract by the roofing contractor have not been completed, the
168contract shall be null and void with no further responsibilities
169or duties on the part of the parties to the contract except as
170provided in this paragraph and subsection (4).
171     (c)  The subsequent contract may be extended beyond the
172additional 60 days pursuant to a written agreement between the
173parties and signed as an addendum or supplement to the contract.
174The delay or extension of services may only be agreed to if the
175delay in providing the contractual services is due to the
176unavailability, beyond the control of the roofing contractor, of
177roofing materials necessary for the completion of the repair or
178reroofing of the residence. The contracted price of the services
179may not be changed from the agreed to cost specified in the
180subsequent contract.
181     (4)  Subsequent to the expiration of the contract or
182contracts specified in subsection (3), the contractor shall
183refund and pay in full, upon demand, any and all remuneration
184received in the form of a prepayment, up-front fee, deposit, or
185other consideration already paid to the contractor.
186     (5)  The provisions of this section apply to registered, as
187well as certified, roofing contractors.
188     Section 2.  Subsection (5) of section 627.062, Florida
189Statutes, is amended to read:
190     627.062  Rate standards.--
191     (5)  With respect to a rate filing involving coverage of
192the type for which the insurer is required to pay a
193reimbursement premium to the Florida Hurricane Catastrophe Fund,
194the insurer may fully recoup in its property insurance premiums
195any reimbursement premiums paid to the Florida Hurricane
196Catastrophe Fund, together with reasonable costs of other
197reinsurance, but may not recoup reinsurance costs that duplicate
198coverage provided by the Florida Hurricane Catastrophe Fund. An
199insurer may not recoup more than one year of reimbursement
200premium at a time. Any under-recoupment from the prior year may
201be added to the following year's reimbursement premium and any
202over-recoupment shall be subtracted from the following year's
203reimbursement premium.
204     Section 3.  Paragraph (c) of subsection (1) and paragraph
205(c) of subsection (3) of section 627.0628, Florida Statutes, are
206amended to read:
207     627.0628  Florida Commission on Hurricane Loss Projection
210     (c)  It is the intent of the Legislature to create the
211Florida Commission on Hurricane Loss Projection Methodology as a
212panel of experts to provide the most actuarially sophisticated
213guidelines and standards for projection of hurricane losses
214possible, given the current state of actuarial science. It is
215the further intent of the Legislature that such standards and
216guidelines must be used by the State Board of Administration in
217developing reimbursement premium rates for the Florida Hurricane
218Catastrophe Fund, and, subject to paragraph (3)(c), may be used
219by insurers in rate filings under s. 627.062 unless the way in
220which such standards and guidelines were applied by the insurer
221was erroneous, as shown by a preponderance of the evidence.
223     (c)  With respect to a rate filing under s. 627.062, an
224insurer may employ actuarial methods, principles, standards,
225models, or output ranges found by the commission to be accurate
226or reliable to determine hurricane loss factors for use in a
227rate filing under s. 627.062. Such, which findings and factors
228are admissible and relevant in consideration of a rate filing by
229the office or in any arbitration or administrative or judicial
230review only if the office and the consumer advocate appointed
231pursuant to s. 627.0613 have access to all of the assumptions
232and factors that were used in developing the actuarial methods,
233principles, standards, models, or output ranges and are not
234precluded from disclosing such information in a rate proceeding.
235     Section 4.  Section 627.06281, Florida Statutes, is created
236to read:
237     627.06281  Public hurricane loss projection model;
238reporting of data by insurers.--Within 30 days after a written
239request for loss data and associated exposure data by the office
240or a type I center within the State University System
241established to study mitigation, residential property insurers
242and licensed rating and advisory organizations that compile
243residential property insurance loss data shall provide loss data
244and associated exposure data for residential property insurance
245policies to the office or to a type I center within the State
246University System established to study mitigation, as directed
247by the office, for the purposes of developing, maintaining, and
248updating a public model for hurricane loss projections. The loss
249data and associated exposure data provided shall be in writing.
250Any loss data and associated exposure data provided pursuant to
251this section that constitutes a trade secret as defined in s.
252812.081, and as provided in s. 815.04(3), shall be subject to
253the provisions of s. 815.045.
254     Section 5.  Subsection (7) of section 627.0629, Florida
255Statutes, is amended to read:
256     627.0629  Residential property insurance; rate filings.--
257     (7)  Any rate filing that is based in whole or part on data
258from a computer model may not exceed 15 25 percent unless there
259is a public hearing.
260     Section 6.  Paragraphs (a), (c), (d), and (q) of subsection
261(6) of section 627.351, Florida Statutes, are amended to read:
262     627.351  Insurance risk apportionment plans.--
264     (a)1.  The Legislature finds that actual and threatened
265catastrophic losses to property in this state from hurricanes
266have caused insurers to be unwilling or unable to provide
267property insurance coverage to the extent sought and needed. It
268is in the public interest and a public purpose to assist in
269assuring that property in the state is insured so as to
270facilitate the remediation, reconstruction, and replacement of
271damaged or destroyed property in order to reduce or avoid the
272negative effects otherwise resulting to the public health,
273safety, and welfare; to the economy of the state; and to the
274revenues of the state and local governments needed to provide
275for the public welfare. It is necessary, therefore, to provide
276property insurance to applicants who are in good faith entitled
277to procure insurance through the voluntary market but are unable
278to do so. The Legislature intends by this subsection that
279property insurance be provided and that it continues, as long as
280necessary, through an entity organized to achieve efficiencies
281and economies, while providing service to policyholders,
282applicants, and agents that is no less than the quality
283generally provided in the voluntary market, all toward the
284achievement of the foregoing public purposes. Because it is
285essential for the corporation to have the maximum financial
286resources to pay claims following a catastrophic hurricane, it
287is the intent of the Legislature that the income of the
288corporation be exempt from federal income taxation and that
289interest on the debt obligations issued by the corporation be
290exempt from federal income taxation.
291     2.  The Residential Property and Casualty Joint
292Underwriting Association originally created by this statute
293shall be known, as of July 1, 2002, as the Citizens Property
294Insurance Corporation. The corporation shall provide insurance
295for residential and commercial property, for applicants who are
296in good faith entitled, but are unable, to procure insurance
297through the voluntary market. The corporation shall operate
298pursuant to a plan of operation approved by order of the office.
299The plan is subject to continuous review by the office. The
300office may, by order, withdraw approval of all or part of a plan
301if the office determines that conditions have changed since
302approval was granted and that the purposes of the plan require
303changes in the plan. For the purposes of this subsection,
304residential coverage includes both personal lines residential
305coverage, which consists of the type of coverage provided by
306homeowner's, mobile home owner's, dwelling, tenant's,
307condominium unit owner's, and similar policies, and commercial
308lines residential coverage, which consists of the type of
309coverage provided by condominium association, apartment
310building, and similar policies.
311     3.  It is the intent of the Legislature that policyholders,
312applicants, and agents of the corporation receive service and
313treatment of the highest possible level but never less than that
314generally provided in the voluntary market. It also is intended
315that the corporation be held to service standards no less than
316those applied to insurers in the voluntary market by the office
317with respect to responsiveness, timeliness, customer courtesy,
318and overall dealings with policyholders, applicants, or agents
319of the corporation.
320     (c)  The plan of operation of the corporation:
321     1.  Must provide for adoption of residential property and
322casualty insurance policy forms and commercial residential and
323nonresidential property insurance forms, which forms must be
324approved by the office prior to use. The corporation shall adopt
325the following policy forms:
326     a.  Standard personal lines policy forms that are
327comprehensive multiperil policies providing full coverage of a
328residential property equivalent to the coverage provided in the
329private insurance market under an HO-3, HO-4, or HO-6 policy.
330     b.  Basic personal lines policy forms that are policies
331similar to an HO-8 policy or a dwelling fire policy that provide
332coverage meeting the requirements of the secondary mortgage
333market, but which coverage is more limited than the coverage
334under a standard policy.
335     c.  Commercial lines residential policy forms that are
336generally similar to the basic perils of full coverage
337obtainable for commercial residential structures in the admitted
338voluntary market.
339     d.  Personal lines and commercial lines residential
340property insurance forms that cover the peril of wind only. The
341forms are applicable only to residential properties located in
342areas eligible for coverage under the high-risk account referred
343to in sub-subparagraph (b)2.a.
344     e.  Commercial lines nonresidential property insurance
345forms that cover the peril of wind only. The forms are
346applicable only to nonresidential properties located in areas
347eligible for coverage under the high-risk account referred to in
348sub-subparagraph (b)2.a.
350For new personal residential risks written by the corporation on
351or after May 7, 2005, in areas eligible for coverage in the
352high-risk account, the corporation shall offer, subject to
353reasonable underwriting guidelines, a wind only policy with
354building coverage valued at up to $1 million. For such new
355personal residential risks covering properties valued at more
356than $1 million, the corporation shall offer a wind-only policy
357of up to $1 million of building coverage without any penalty or
358reduction in coverage for underinsurance or the purchase of
359other insurance, provided the insured property owner maintains
360insurance coverage for the value of the building in excess of $1
361million. Coverage for property other than the building and any
362attached structures shall be offered by the corporation in
363addition to the $1 million limit of building coverage. For all
364existing high-risk account policies in effect on May 7, 2005,
365the corporation shall continue to offer coverage for the full
366value of the building and property without limitation.
367     2.a.  Must provide that the corporation adopt a program in
368which the corporation and authorized insurers enter into quota
369share primary insurance agreements for hurricane coverage, as
370defined in s. 627.4025(2)(a), for eligible risks, and adopt
371property insurance forms for eligible risks which cover the
372peril of wind only. As used in this subsection, the term:
373     (I)  "Quota share primary insurance" means an arrangement
374in which the primary hurricane coverage of an eligible risk is
375provided in specified percentages by the corporation and an
376authorized insurer. The corporation and authorized insurer are
377each solely responsible for a specified percentage of hurricane
378coverage of an eligible risk as set forth in a quota share
379primary insurance agreement between the corporation and an
380authorized insurer and the insurance contract. The
381responsibility of the corporation or authorized insurer to pay
382its specified percentage of hurricane losses of an eligible
383risk, as set forth in the quota share primary insurance
384agreement, may not be altered by the inability of the other
385party to the agreement to pay its specified percentage of
386hurricane losses. Eligible risks that are provided hurricane
387coverage through a quota share primary insurance arrangement
388must be provided policy forms that set forth the obligations of
389the corporation and authorized insurer under the arrangement,
390clearly specify the percentages of quota share primary insurance
391provided by the corporation and authorized insurer, and
392conspicuously and clearly state that neither the authorized
393insurer nor the corporation may be held responsible beyond its
394specified percentage of coverage of hurricane losses.
395     (II)  "Eligible risks" means personal lines residential and
396commercial lines residential risks that meet the underwriting
397criteria of the corporation and are located in areas that were
398eligible for coverage by the Florida Windstorm Underwriting
399Association on January 1, 2002.
400     b.  The corporation may enter into quota share primary
401insurance agreements with authorized insurers at corporation
402coverage levels of 90 percent and 50 percent.
403     c.  If the corporation determines that additional coverage
404levels are necessary to maximize participation in quota share
405primary insurance agreements by authorized insurers, the
406corporation may establish additional coverage levels. However,
407the corporation's quota share primary insurance coverage level
408may not exceed 90 percent.
409     d.  Any quota share primary insurance agreement entered
410into between an authorized insurer and the corporation must
411provide for a uniform specified percentage of coverage of
412hurricane losses, by county or territory as set forth by the
413corporation board, for all eligible risks of the authorized
414insurer covered under the quota share primary insurance
416     e.  Any quota share primary insurance agreement entered
417into between an authorized insurer and the corporation is
418subject to review and approval by the office. However, such
419agreement shall be authorized only as to insurance contracts
420entered into between an authorized insurer and an insured who is
421already insured by the corporation for wind coverage.
422     f.  For all eligible risks covered under quota share
423primary insurance agreements, the exposure and coverage levels
424for both the corporation and authorized insurers shall be
425reported by the corporation to the Florida Hurricane Catastrophe
426Fund. For all policies of eligible risks covered under quota
427share primary insurance agreements, the corporation and the
428authorized insurer shall maintain complete and accurate records
429for the purpose of exposure and loss reimbursement audits as
430required by Florida Hurricane Catastrophe Fund rules. The
431corporation and the authorized insurer shall each maintain
432duplicate copies of policy declaration pages and supporting
433claims documents.
434     g.  The corporation board shall establish in its plan of
435operation standards for quota share agreements which ensure that
436there is no discriminatory application among insurers as to the
437terms of quota share agreements, pricing of quota share
438agreements, incentive provisions if any, and consideration paid
439for servicing policies or adjusting claims.
440     h.  The quota share primary insurance agreement between the
441corporation and an authorized insurer must set forth the
442specific terms under which coverage is provided, including, but
443not limited to, the sale and servicing of policies issued under
444the agreement by the insurance agent of the authorized insurer
445producing the business, the reporting of information concerning
446eligible risks, the payment of premium to the corporation, and
447arrangements for the adjustment and payment of hurricane claims
448incurred on eligible risks by the claims adjuster and personnel
449of the authorized insurer. Entering into a quota sharing
450insurance agreement between the corporation and an authorized
451insurer shall be voluntary and at the discretion of the
452authorized insurer.
453     3.  May provide that the corporation may employ or
454otherwise contract with individuals or other entities to provide
455administrative or professional services that may be appropriate
456to effectuate the plan. The corporation shall have the power to
457borrow funds, by issuing bonds or by incurring other
458indebtedness, and shall have other powers reasonably necessary
459to effectuate the requirements of this subsection, including
460without limitation, the power to issue bonds and incur other
461indebtedness in order to refinance outstanding bonds or other
462indebtedness. The corporation may, but is not required to, seek
463judicial validation of its bonds or other indebtedness under
464chapter 75. The corporation may issue bonds or incur other
465indebtedness, or have bonds issued on its behalf by a unit of
466local government pursuant to subparagraph (g)2., in the absence
467of a hurricane or other weather-related event, upon a
468determination by the corporation, subject to approval by the
469office, that such action would enable it to efficiently meet the
470financial obligations of the corporation and that such
471financings are reasonably necessary to effectuate the
472requirements of this subsection. The corporation is authorized
473to take all actions needed to facilitate tax-free status for any
474such bonds or indebtedness, including formation of trusts or
475other affiliated entities. The corporation shall have the
476authority to pledge assessments, projected recoveries from the
477Florida Hurricane Catastrophe Fund, other reinsurance
478recoverables, market equalization and other surcharges, and
479other funds available to the corporation as security for bonds
480or other indebtedness. In recognition of s. 10, Art. I of the
481State Constitution, prohibiting the impairment of obligations of
482contracts, it is the intent of the Legislature that no action be
483taken whose purpose is to impair any bond indenture or financing
484agreement or any revenue source committed by contract to such
485bond or other indebtedness.
486     4.a.  Must require that the corporation operate subject to
487the supervision and approval of a board of governors consisting
488of 7 individuals who are residents of this state, from different
489geographical areas of this state, appointed by the Chief
490Financial Officer. The Chief Financial Officer shall designate
491one of the appointees as chair. All board members serve at the
492pleasure of the Chief Financial Officer. All board members,
493including the chair, must be appointed to serve for 3-year terms
494beginning annually on a date designated by the plan. Any board
495vacancy shall be filled for the unexpired term by the Chief
496Financial Officer. The Chief Financial Officer shall appoint a
497technical advisory group to provide information and advice to
498the board of governors in connection with the board's duties
499under this subsection. The executive director and senior
500managers of the corporation shall be engaged by the Chief
501Financial Officer and serve at the pleasure of the Chief
502Financial Officer. The executive director is responsible for
503employing other staff as the corporation may require, subject to
504review and concurrence by the office of the Chief Financial
506     b.  The board shall create a Market Accountability Advisory
507Committee to assist the corporation in developing awareness of
508its rates and its customer and agent service levels in
509relationship to the voluntary market insurers writing similar
510coverage. The members of the advisory committee shall consist of
511the following 11 persons, one of whom must be elected chair by
512the members of the committee: four representatives, one
513appointed by the Florida Association of Insurance Agents, one by
514the Florida Association of Insurance and Financial Advisors, one
515by the Professional Insurance Agents of Florida, and one by the
516Latin American Association of Insurance Agencies; three
517representatives appointed by the insurers with the three highest
518voluntary market share of residential property insurance
519business in the state; one representative from the Office of
520Insurance Regulation; one consumer appointed by the board who is
521insured by the corporation at the time of appointment to the
522committee; one representative appointed by the Florida
523Association of Realtors; and one representative appointed by the
524Florida Bankers Association. All members must serve for 3-year
525terms and may serve for consecutive terms. The committee shall
526report to the corporation at each board meeting on insurance
527market issues which may include rates and rate competition with
528the voluntary market; service, including policy issuance, claims
529processing, and general responsiveness to policyholders,
530applicants, and agents; and matters relating to depopulation.
531     5.  Must provide a procedure for determining the
532eligibility of a risk for coverage, as follows:
533     a.  Subject to the provisions of s. 627.3517, with respect
534to personal lines residential risks, if the risk is offered
535coverage from an authorized insurer at the insurer's approved
536rate under either a standard policy including wind coverage or,
537if consistent with the insurer's underwriting rules as filed
538with the office, a basic policy including wind coverage, the
539risk is not eligible for any policy issued by the corporation.
540If the risk is not able to obtain any such offer, the risk is
541eligible for either a standard policy including wind coverage or
542a basic policy including wind coverage issued by the
543corporation; however, if the risk could not be insured under a
544standard policy including wind coverage regardless of market
545conditions, the risk shall be eligible for a basic policy
546including wind coverage unless rejected under subparagraph 8.
547The corporation shall determine the type of policy to be
548provided on the basis of objective standards specified in the
549underwriting manual and based on generally accepted underwriting
551     (I)  If the risk accepts an offer of coverage through the
552market assistance plan or an offer of coverage through a
553mechanism established by the corporation before a policy is
554issued to the risk by the corporation or during the first 30
555days of coverage by the corporation, and the producing agent who
556submitted the application to the plan or to the corporation is
557not currently appointed by the insurer, the insurer shall:
558     (A)  Pay to the producing agent of record of the policy,
559for the first year, an amount that is the greater of the
560insurer's usual and customary commission for the type of policy
561written or a fee equal to the usual and customary commission of
562the corporation; or
563     (B)  Offer to allow the producing agent of record of the
564policy to continue servicing the policy for a period of not less
565than 1 year and offer to pay the agent the greater of the
566insurer's or the corporation's usual and customary commission
567for the type of policy written.
569If the producing agent is unwilling or unable to accept
570appointment, the new insurer shall pay the agent in accordance
571with sub-sub-sub-subparagraph (A).
572     (II)  When the corporation enters into a contractual
573agreement for a take-out plan, the producing agent of record of
574the corporation policy is entitled to retain any unearned
575commission on the policy, and the insurer shall:
576     (A)  Pay to the producing agent of record of the
577corporation policy, for the first year, an amount that is the
578greater of the insurer's usual and customary commission for the
579type of policy written or a fee equal to the usual and customary
580commission of the corporation; or
581     (B)  Offer to allow the producing agent of record of the
582corporation policy to continue servicing the policy for a period
583of not less than 1 year and offer to pay the agent the greater
584of the insurer's or the corporation's usual and customary
585commission for the type of policy written.
587If the producing agent is unwilling or unable to accept
588appointment, the new insurer shall pay the agent in accordance
589with sub-sub-sub-subparagraph (A).
590     b.  With respect to commercial lines residential risks, if
591the risk is offered coverage under a policy including wind
592coverage from an authorized insurer at its approved rate, the
593risk is not eligible for any policy issued by the corporation.
594If the risk is not able to obtain any such offer, the risk is
595eligible for a policy including wind coverage issued by the
597     (I)  If the risk accepts an offer of coverage through the
598market assistance plan or an offer of coverage through a
599mechanism established by the corporation before a policy is
600issued to the risk by the corporation or during the first 30
601days of coverage by the corporation, and the producing agent who
602submitted the application to the plan or the corporation is not
603currently appointed by the insurer, the insurer shall:
604     (A)  Pay to the producing agent of record of the policy,
605for the first year, an amount that is the greater of the
606insurer's usual and customary commission for the type of policy
607written or a fee equal to the usual and customary commission of
608the corporation; or
609     (B)  Offer to allow the producing agent of record of the
610policy to continue servicing the policy for a period of not less
611than 1 year and offer to pay the agent the greater of the
612insurer's or the corporation's usual and customary commission
613for the type of policy written.
615If the producing agent is unwilling or unable to accept
616appointment, the new insurer shall pay the agent in accordance
617with sub-sub-sub-subparagraph (A).
618     (II)  When the corporation enters into a contractual
619agreement for a take-out plan, the producing agent of record of
620the corporation policy is entitled to retain any unearned
621commission on the policy, and the insurer shall:
622     (A)  Pay to the producing agent of record of the
623corporation policy, for the first year, an amount that is the
624greater of the insurer's usual and customary commission for the
625type of policy written or a fee equal to the usual and customary
626commission of the corporation; or
627     (B)  Offer to allow the producing agent of record of the
628corporation policy to continue servicing the policy for a period
629of not less than 1 year and offer to pay the agent the greater
630of the insurer's or the corporation's usual and customary
631commission for the type of policy written.
633If the producing agent is unwilling or unable to accept
634appointment, the new insurer shall pay the agent in accordance
635with sub-sub-sub-subparagraph (A).
636     6.  Must include rules for classifications of risks and
637rates therefor.
638     7.  Must provide that if premium and investment income for
639an account attributable to a particular calendar year are in
640excess of projected losses and expenses for the account
641attributable to that year, such excess shall be held in surplus
642in the account. Such surplus shall be available to defray
643deficits in that account as to future years and shall be used
644for that purpose prior to assessing assessable insurers and
645assessable insureds as to any calendar year.
646     8.  Must provide objective criteria and procedures to be
647uniformly applied for all applicants in determining whether an
648individual risk is so hazardous as to be uninsurable. In making
649this determination and in establishing the criteria and
650procedures, the following shall be considered:
651     a.  Whether the likelihood of a loss for the individual
652risk is substantially higher than for other risks of the same
653class; and
654     b.  Whether the uncertainty associated with the individual
655risk is such that an appropriate premium cannot be determined.
657The acceptance or rejection of a risk by the corporation shall
658be construed as the private placement of insurance, and the
659provisions of chapter 120 shall not apply.
660     9.  Must provide that the corporation shall make its best
661efforts to procure catastrophe reinsurance at reasonable rates,
662to cover its projected 100-year probable maximum loss as
663determined by the board of governors.
664     10.  Must provide that in the event of regular deficit
665assessments under sub-subparagraph (b)3.a. or sub-subparagraph
666(b)3.b., in the personal lines account, the commercial lines
667residential account, or the high-risk account, the corporation
668shall levy upon corporation policyholders in its next rate
669filing, or by a separate rate filing solely for this purpose, a
670market equalization surcharge arising from a regular assessment
671in such account in a percentage equal to the total amount of
672such regular assessments divided by the aggregate statewide
673direct written premium for subject lines of business for the
674prior calendar year. Market equalization surcharges under this
675subparagraph are not considered premium and are not subject to
676commissions, fees, or premium taxes; however, failure to pay a
677market equalization surcharge shall be treated as failure to pay
679     11.  The policies issued by the corporation must provide
680that, if the corporation or the market assistance plan obtains
681an offer from an authorized insurer to cover the risk at its
682approved rates, the risk is no longer eligible for renewal
683through the corporation.
684     12.  Corporation policies and applications must include a
685notice that the corporation policy could, under this section, be
686replaced with a policy issued by an authorized insurer that does
687not provide coverage identical to the coverage provided by the
688corporation. The notice shall also specify that acceptance of
689corporation coverage creates a conclusive presumption that the
690applicant or policyholder is aware of this potential.
691     13.  May establish, subject to approval by the office,
692different eligibility requirements and operational procedures
693for any line or type of coverage for any specified county or
694area if the board determines that such changes to the
695eligibility requirements and operational procedures are
696justified due to the voluntary market being sufficiently stable
697and competitive in such area or for such line or type of
698coverage and that consumers who, in good faith, are unable to
699obtain insurance through the voluntary market through ordinary
700methods would continue to have access to coverage from the
701corporation. When coverage is sought in connection with a real
702property transfer, such requirements and procedures shall not
703provide for an effective date of coverage later than the date of
704the closing of the transfer as established by the transferor,
705the transferee, and, if applicable, the lender.
706     14.  Must provide that, with respect to the high-risk
707account, any assessable insurer with a surplus as to
708policyholders of $25 million or less writing 25 percent or more
709of its total countrywide property insurance premiums in this
710state may petition the office, within the first 90 days of each
711calendar year, to qualify as a limited apportionment company. In
712no event shall a limited apportionment company be required to
713participate in the portion of any assessment, within the high-
714risk account, pursuant to sub-subparagraph (b)3.a. or sub-
715subparagraph (b)3.b. in the aggregate which exceeds $50 million
716after payment of available high-risk account funds in any
717calendar year. However, a limited apportionment company shall
718collect from its policyholders any emergency assessment imposed
719under sub-subparagraph (b)3.d. The plan shall provide that, if
720the office determines that any regular assessment will result in
721an impairment of the surplus of a limited apportionment company,
722the office may direct that all or part of such assessment be
723deferred as provided in subparagraph (g)4. However, there shall
724be no limitation or deferment of an emergency assessment to be
725collected from policyholders under sub-subparagraph (b)3.d.
726     15.  Must provide that the corporation appoint as its
727licensed agents only those agents who also hold an appointment
728as defined in s. 626.015(3) with an insurer who at the time of
729the agent's initial appointment by the corporation is authorized
730to write and is actually writing personal lines residential
731property coverage, commercial residential property coverage, or
732commercial nonresidential property coverage within the state.
733     16.  Must provide a plan for removing personal lines
734policies from coverage by the corporation which includes the
735development and implementation of a take-out bonus strategy
736determining, at a minimum, the necessity and application of
737financial and regulatory incentives.
738     (d)1.  It is the intent of the Legislature that the rates
739for coverage provided by the corporation be actuarially sound
740and not competitive with approved rates charged in the admitted
741voluntary market, so that the corporation functions as a
742residual market mechanism to provide insurance only when the
743insurance cannot be procured in the voluntary market. Rates
744shall include an appropriate catastrophe loading factor that
745reflects the actual catastrophic exposure of the corporation.
746     2.  For each county, the average rates of the corporation
747for each line of business for personal lines residential
748policies excluding rates for wind-only policies shall be no
749lower than the average rates charged by the insurer that had the
750highest average rate in that county among the 20 insurers with
751the greatest total direct written premium in the state for that
752line of business in the preceding year, except that with respect
753to mobile home coverages, the average rates of the corporation
754shall be no lower than the average rates charged by the insurer
755that had the highest average rate in that county among the 5
756insurers with the greatest total written premium for mobile home
757owner's policies in the state in the preceding year.
758     3.  Rates for personal lines residential wind-only policies
759must be actuarially sound and not competitive with approved
760rates charged by authorized insurers. However, for personal
761lines residential wind-only policies issued or renewed between
762July 1, 2002, and June 30, 2003, the maximum premium increase
763must be no greater than 10 percent of the Florida Windstorm
764Underwriting Association premium for that policy in effect on
765June 30, 2002, as adjusted for coverage changes and seasonal
766occupancy surcharges. For personal lines residential wind-only
767policies issued or renewed between July 1, 2003, and June 30,
7682004, the corporation shall use its existing filed and approved
769wind-only rating and classification plans, provided, however,
770that the maximum premium increase must be no greater than 20
771percent of the premium for that policy in effect on June 30,
7722003, as adjusted for coverage changes and seasonal occupancy
773surcharges. Corporation rate manuals shall include a rate
774surcharge for seasonal occupancy. To ensure that personal lines
775residential wind-only rates effective on or after July 1, 2004,
776are not competitive with approved rates charged by authorized
777insurers, the corporation, in conjunction with the office, shall
778develop a wind-only ratemaking methodology, which methodology
779shall be contained in each a rate filing made by the corporation
780with the office by January 1, 2004. If the office thereafter
781determines that the wind-only rates or rating factors filed by
782the corporation fail to comply with the wind-only ratemaking
783methodology provided for in this subsection, it shall so notify
784the corporation and require the corporation to amend its rates
785or rating factors to come into compliance within 90 days of
786notice from the office. The office shall report to the Speaker
787of the House of Representatives and the President of the Senate
788on the provisions of the wind-only ratemaking methodology by
789January 31, 2004.
790     4.  The provisions of subparagraph 2. do not apply to
791coverage provided by the corporation in any county for which the
792office determines that a reasonable degree of competition does
793not exist for personal lines residential policies. The
794provisions of subparagraph 3. do not apply to coverage provided
795by the corporation in any county for which the office determines
796that a reasonable degree of competition does not exist for
797personal lines residential policies in the area of that county
798which is eligible for wind-only coverage. In such counties, the
799rates for personal lines residential coverage shall be
800actuarially sound and not excessive, inadequate, or unfairly
801discriminatory and are subject to the other provisions of the
802paragraph and s. 627.062. The commission shall adopt rules
803establishing the criteria for determining whether a reasonable
804degree of competition exists for personal lines residential
805policies. Beginning October 1, 2005, and each 6 months
806thereafter, the office shall determine and identify those
807counties for which a reasonable degree of competition does not
808exist for purposes of subparagraphs 2. and 3., respectively.
809     5.4.  Rates for commercial lines coverage shall not be
810subject to the requirements of subparagraph 2., but shall be
811subject to all other requirements of this paragraph and s.
813     6.5.  Nothing in this paragraph shall require or allow the
814corporation to adopt a rate that is inadequate under s. 627.062.
815     7.6.  The corporation shall certify to the office at least
816twice annually that its personal lines rates comply with the
817requirements of this paragraph subparagraphs 1. and 2. If any
818adjustment in the rates or rating factors of the corporation is
819necessary to ensure such compliance, the corporation shall make
820and implement such adjustments and file its revised rates and
821rating factors with the office. If the office thereafter
822determines that the revised rates and rating factors fail to
823comply with the provisions of this paragraph subparagraphs 1.
824and 2., it shall notify the corporation and require the
825corporation to amend its rates or rating factors in conjunction
826with its next rate filing. The office must notify the
827corporation by electronic means of any rate filing it approves
828for any insurer among the insurers referred to in subparagraph
830     8.7.  In addition to the rates otherwise determined
831pursuant to this paragraph, the corporation shall impose and
832collect an amount equal to the premium tax provided for in s.
833624.509 to augment the financial resources of the corporation.
834     9.8.a.  To assist the corporation in developing additional
835ratemaking methods to assure compliance with this paragraph
836subparagraphs 1. and 4., the corporation shall appoint a rate
837methodology panel consisting of one person recommended by the
838Florida Association of Insurance Agents, one person recommended
839by the Professional Insurance Agents of Florida, one person
840recommended by the Florida Association of Insurance and
841Financial Advisors, one person recommended by the insurer with
842the highest voluntary market share of residential property
843insurance business in the state, one person recommended by the
844insurer with the second-highest voluntary market share of
845residential property insurance business in the state, one person
846recommended by an insurer writing commercial residential
847property insurance in this state, one person recommended by the
848Office of Insurance Regulation, and one board member designated
849by the board chairman, who shall serve as chairman of the panel.
850     b.  By January 1, 2004, the rate methodology panel shall
851provide a report to the corporation of its findings and
852recommendations for the use of additional ratemaking methods and
853procedures, including the use of a rate equalization surcharge
854in an amount sufficient to assure that the total cost of
855coverage for policyholders or applicants to the corporation is
856sufficient to comply with subparagraph 1.
857     c.  Within 30 days after such report, the corporation shall
858present to the President of the Senate, the Speaker of the House
859of Representatives, the minority party leaders of each house of
860the Legislature, and the chairs of the standing committees of
861each house of the Legislature having jurisdiction of insurance
862issues, a plan for implementing the additional ratemaking
863methods and an outline of any legislation needed to facilitate
864use of the new methods.
865     d.  The plan must include a provision that producer
866commissions paid by the corporation shall not be calculated in
867such a manner as to include any rate equalization surcharge.
868However, without regard to the plan to be developed or its
869implementation, producer commissions paid by the corporation for
870each account, other than the quota share primary program, shall
871remain fixed as to percentage, effective rate, calculation, and
872payment method until January 1, 2004.
873     10.9.  By January 1, 2004, The corporation shall develop a
874notice to policyholders or applicants that the rates of Citizens
875Property Insurance Corporation are intended to be higher than
876the rates of any admitted carrier except when the provisions of
877subparagraph 4. apply and providing other information the
878corporation deems necessary to assist consumers in finding other
879voluntary admitted insurers willing to insure their property.
880     (q)  The corporation shall not require the securing of
881flood insurance as a condition of coverage if the property risk
882of the insured or applicant is located in a Special Flood Hazard
883Area as defined by the Federal Emergency Management Agency for
884the National Flood Insurance Program. executes a form approved
885by the office affirming that Flood insurance is not provided by
886the corporation and that if flood insurance is not secured by
887the applicant or insured in addition to coverage by the
888corporation, the risk will not be covered for flood damage. A
889corporation policyholder that does electing not to secure flood
890insurance and makes a claim executing a form as provided herein
891making a claim for water damage against the corporation shall
892have the burden of proving the damage was not caused by
893flooding. Notwithstanding other provisions of this subsection,
894the corporation may deny coverage or refuse to issue or renew a
895policy to an applicant or insured who refuses to purchase flood
896insurance as required by this subsection to execute the form
897described herein.
898     Section 7.  Subsection (1) of section 627.411, Florida
899Statutes, is amended to read:
900     627.411  Grounds for disapproval.--
901     (1)  The office shall disapprove any form filed under s.
902627.410, or withdraw any previous approval thereof, only if the
904     (a)  Is in any respect in violation of, or does not comply
905with, this code.
906     (b)  Contains or incorporates by reference, where such
907incorporation is otherwise permissible, any inconsistent,
908ambiguous, or misleading clauses, or exceptions and conditions
909which deceptively affect the risk purported to be assumed in the
910general coverage of the contract.
911     (c)  Has any title, heading, or other indication of its
912provisions which is misleading.
913     (d)  Is printed or otherwise reproduced in such manner as
914to render any material provision of the form substantially
916     (e)  Is for residential property insurance and contains
917provisions that are unfair or inequitable or encourage
919     (f)(e)  Is for health insurance, and:
920     1.  Provides benefits that are unreasonable in relation to
921the premium charged.;
922     2.  Contains provisions that are unfair or inequitable or
923contrary to the public policy of this state or that encourage
925     3.  Contains provisions that apply rating practices that
926result in unfair discrimination pursuant to s. 626.9541(1)(g)2.
927     (g)(f)  Excludes coverage for human immunodeficiency virus
928infection or acquired immune deficiency syndrome or contains
929limitations in the benefits payable, or in the terms or
930conditions of such contract, for human immunodeficiency virus
931infection or acquired immune deficiency syndrome which are
932different than those which apply to any other sickness or
933medical condition.
934     Section 8.  Subsection (3) of section 627.7011, Florida
935Statutes, is renumbered as subsection (4), and a new subsection
936(3) is added to said section, to read:
937     627.7011  Homeowners' policies; offer of replacement cost
938coverage and law and ordinance coverage.--
939     (3)  In the event of a covered loss to the dwelling, the
940insurer shall pay no less than the actual cash value of the
941damaged part of the dwelling at the time of the loss, subject to
942the limits of coverage and terms contained in the policy. Once
943the dwelling is repaired or replaced, the insurer shall pay the
944remainder of the repair or replacement costs, subject to limits
945of coverage and terms contained in the policy. The insurer is
946not required to pay more than the actual cost to repair or
947replace the dwelling.
948     (4)(3)  Nothing in this section shall be construed to apply
949to policies not considered to be "homeowners' policies," as that
950term is commonly understood in the insurance industry. This
951section specifically does not apply to mobile home policies.
952Nothing in this section shall be construed as limiting the
953ability of any insurer to reject or nonrenew any insured or
954applicant on the grounds that the structure does not meet
955underwriting criteria applicable to replacement cost or law and
956ordinance policies or for other lawful reasons.
957     Section 9.  Effective October 1, 2005, subsection (1) of
958section 627.7011, Florida Statutes, is amended, and subsection
959(4) is added to said section, to read:
960     627.7011  Homeowners' policies; offer of replacement cost
961coverage and law and ordinance coverage.--
962     (1)  Prior to issuing a homeowner's insurance policy on or
963after October 1, 2005 June 1, 1994, or prior to the first
964renewal of a homeowner's insurance policy on or after October 1,
9652005 June 1, 1994, the insurer must offer each of the following:
966     (a)  A policy or endorsement providing that any loss which
967is repaired or replaced will be adjusted on the basis of
968replacement costs not exceeding policy limits as to the
969dwelling, rather than actual cash value, but not including costs
970necessary to meet applicable laws and ordinances regulating the
971construction, use, or repair of any property or requiring the
972tearing down of any property, including the costs of removing
974     (b)  A policy or endorsement providing that, subject to
975other policy provisions, any loss which is repaired or replaced
976at any location will be adjusted on the basis of replacement
977costs not exceeding policy limits as to the dwelling, rather
978than actual cash value, and also including costs necessary to
979meet applicable laws and ordinances regulating the construction,
980use, or repair of any property or requiring the tearing down of
981any property, including the costs of removing debris; however,
982such additional costs necessary to meet applicable laws and
983ordinances may be limited to either 25 percent or 50 percent of
984the dwelling limit, as selected by the policyholder, and such
985coverage shall apply only to repairs of the damaged portion of
986the structure unless the total damage to the structure exceeds
98750 percent of the replacement cost of the structure.
989An insurer is not required to make the offers required by this
990subsection with respect to the issuance or renewal of a
991homeowner's policy that contains the provisions specified in
992paragraph (b) for law and ordinance coverage limited to 25
993percent of the dwelling limit, except that the insurer must
994offer the law and ordinance coverage limited to 50 percent of
995the dwelling limit. This subsection does not prohibit the offer
996of a guaranteed replacement cost policy.
997     (4)  Any homeowner's insurance policy issued or renewed on
998or after October 1, 2005, must include in bold type no smaller
999than 18 points the following statement:
1006The intent of this subsection is to encourage policyholders to
1007purchase sufficient coverage to protect them in case events
1008excluded from the standard homeowners policy, such as law and
1009ordinance enforcement and flood, combine with covered events to
1010produce damage or loss to the insured property. The intent is
1011also to encourage policyholders to discuss these issues with
1012their insurance agent.
1013     Section 10.  Subsections (1) and (7) of section 627.7015,
1014Florida Statutes, are amended to read:
1015     627.7015  Alternative procedure for resolution of disputed
1016property insurance claims.--
1017     (1)  PURPOSE AND SCOPE.--This section sets forth a
1018nonadversarial alternative dispute resolution procedure for a
1019mediated claim resolution conference prompted by the need for
1020effective, fair, and timely handling of property insurance
1021claims. There is a particular need for an informal,
1022nonthreatening forum for helping parties who elect this
1023procedure to resolve their claims disputes because most
1024homeowner's and commercial residential insurance policies
1025obligate insureds to participate in a potentially expensive and
1026time-consuming adversarial appraisal process prior to
1027litigation. The procedure set forth in this section is designed
1028to bring the parties together for a mediated claims settlement
1029conference without any of the trappings or drawbacks of an
1030adversarial process. Before resorting to these procedures,
1031insureds and insurers are encouraged to resolve claims as
1032quickly and fairly as possible. This section is available with
1033respect to claims under personal lines and commercial
1034residential policies for all claimants and insurers prior to
1035commencing the appraisal process, or commencing litigation. If
1036requested by the insured, participation by legal counsel shall
1037be permitted. Mediation under this section is also available to
1038litigants referred to the department by a county court or
1039circuit court. This section does not apply to commercial
1040coverages, to private passenger motor vehicle insurance
1041coverages, or to disputes relating to liability coverages in
1042policies of property insurance.
1043     (7)  If the insurer fails to comply with subsection (2) by
1044failing to notify a first-party claimant of its right to
1045participate in the mediation program under this section or if
1046the insurer requests the mediation, and the mediation results
1047are rejected by either party, the insured shall not be required
1048to submit to or participate in any contractual loss appraisal
1049process of the property loss damage as a precondition to legal
1050action for breach of contract against the insurer for its
1051failure to pay the policyholder's claims covered by the policy.
1052     Section 11.  Effective upon this act becoming a law,
1053subsection (1) of section 627.702, Florida Statutes, is amended
1054to read:
1055     627.702  Valued policy law.--
1056     (1)(a)  In the event of the total loss of any building,
1057structure, mobile home as defined in s. 320.01(2), or
1058manufactured building as defined in s. 553.36(12), located in
1059this state and insured by any insurer as to a covered peril, in
1060the absence of any change increasing the risk without the
1061insurer's consent and in the absence of fraudulent or criminal
1062fault on the part of the insured or one acting in her or his
1063behalf, the insurer's liability, if any, under the policy for
1064such total loss, if caused by a covered peril, shall be in the
1065amount of money for which such property was so insured as
1066specified in the policy and for which a premium has been charged
1067and paid.
1068     (b)  The intent of this subsection is not to deprive an
1069insurer of any proper defense under the policy, to create new or
1070additional coverage under the policy, or to require an insurer
1071to pay for a loss caused by a peril other than the covered
1072peril. In furtherance of such legislative intent, when a loss
1073was caused in part by a covered peril and in part by a
1074noncovered peril, paragraph (a) does not apply. In such
1075circumstances, the insurer's liability under this section shall
1076be limited to the amount of the loss caused by the covered
1078     (c)  It is the intent of the Legislature that the amendment
1079to this section shall not be applied retroactively and shall
1080apply only to claims filed after effective date of such
1082     Section 12.  Section 627.706, Florida Statutes, is amended
1083to read:
1084     627.706  Sinkhole insurance; definitions.--
1085     (1)  Every insurer authorized to transact property
1086insurance in this state shall make available coverage for
1087insurable sinkhole losses on any structure, including contents
1088of personal property contained therein, to the extent provided
1089in the form to which the sinkhole coverage attaches.
1090     (2)  As used in ss. 627.706-627.7074, and as used in
1091connection with any policy providing coverage for sinkhole
1093     (a)  "Sinkhole" means a landform created by subsidence of
1094soil, sediment, or rock as underlying strata are dissolved by
1095ground water. A sinkhole may form by collapse into subterranean
1096voids created by dissolution of limestone or dolostone or by
1097subsidence as these strata are dissolved.
1098     (b)  "Sinkhole loss" means structural damage to a the
1099building caused by sinkhole activity. Contents coverage shall
1100apply only if there is structural damage to the building caused
1101by sinkhole activity.
1102     (c)(3)  "Sinkhole activity loss" means actual physical
1103damage to the property covered arising out of or caused by
1104sudden settlement or systematic weakening collapse of the earth
1105supporting such property only when such settlement or systematic
1106weakening collapse results from movement or raveling of soils,
1107sediments, or rock materials into subterranean voids created by
1108the effect action of water on a limestone or similar rock
1110     (d)  "Engineer" means a person, as defined in s. 471.005,
1111who has a bachelor's degree or higher in engineering with a
1112specialty in the geotechnical engineering field. An engineer
1113must have geotechnical experience and expertise in the
1114identification of sinkhole activity as well as other potential
1115causes of damage to the structure.
1116     (e)  "Professional geologist" means a person, as defined by
1117s. 492.102, who has a bachelor's degree or higher in geology or
1118a related earth science with expertise in the geology of this
1119state. A professional geologist must have geological experience
1120and expertise in the identification of sinkhole activity as well
1121as other potential causes of damage to the structure.
1122     (3)(4)  Every insurer authorized to transact property
1123insurance in this state shall make a proper filing with the
1124office for the purpose of extending the appropriate forms of
1125property insurance to include coverage for insurable sinkhole
1127     Section 13.  Section 627.7065, Florida Statutes, is created
1128to read:
1129     627.7065  Database of information relating to sinkholes;
1130the Department of Financial Services and the Department of
1131Environmental Protection.--
1132     (1)  The Legislature finds that there has been a dramatic
1133increase in the number of sinkholes and insurance claims for
1134sinkhole damage in the state during the past 10 years.
1135Accordingly, the Legislature recognizes the need to track
1136current and past sinkhole activity and to make the information
1137available for prevention and remediation activities. The
1138Legislature further finds that the Florida Geological Survey of
1139the Department of Environmental Protection has created a partial
1140database of some sinkholes identified in Florida, although the
1141database is not reflective of all sinkholes or insurance claims
1142for sinkhole damage. The Legislature determines that creating a
1143complete electronic database of sinkhole activity serves an
1144important purpose in protecting the public and in studying
1145property claims activities in the insurance industry.
1146     (2)  The Department of Financial Services, including the
1147employee of the Division of Consumer Services designated as the
1148primary contact for consumers on issues relating to sinkholes,
1149and the Office of the Insurance Consumer Advocate shall consult
1150with the Florida Geological Survey and the Department of
1151Environmental Protection to implement a statewide automated
1152database of sinkholes and related activity identified in the
1154     (3)  Representatives of the Department of Financial
1155Services, with the agreement of the Department of Environmental
1156Protection, shall determine the form and content of the
1157database. The content may include standards for reporting and
1158investigating sinkholes for inclusion in the database and
1159requirements for insurers to report to the departments the
1160receipt of claims involving sinkhole loss and other similar
1161activities. The Department of Financial Services may require
1162insurers to report present and past data of sinkhole claims. The
1163database also may include information of damage due to ground
1164settling and other subsidence activity.
1165     (4)  The Department of Financial Services may manage the
1166database or may contract for its management and maintenance. The
1167Department of Environmental Protection shall investigate reports
1168of sinkhole activity and include its findings and investigations
1169in the database.
1170     (5)  The Department of Environmental Protection, in
1171consultation with the Department of Financial Services, shall
1172present a report of activities relating to the sinkhole
1173database, including recommendations regarding the database and
1174similar matters, to the Governor, the Speaker of the House of
1175Representatives, the President of the Senate, and the Chief
1176Financial Officer by December 31, 2005. The report may consider
1177the need for the Legislature to create an entity to study the
1178increase in sinkhole activity in the state and other similar
1179issues relating to sinkhole damage, including recommendations
1180and costs for staffing the entity. The report may include other
1181information, as appropriate.
1182     (6)  The Department of Financial Services, in consultation
1183with the Department of Environmental Protection, may adopt rules
1184to implement the provisions of this section.
1185     Section 14.  Section 627.707, Florida Statutes, is amended
1186to read:
1187     627.707  Minimum Standards for investigation of sinkhole
1188claims by insurers; nonrenewals.--
1189     (1)  Upon receipt of a claim for a sinkhole loss, an
1190insurer must meet the following minimum standards in
1191investigating a claim:
1192     (1)(a)  Upon receipt of a claim for a sinkhole loss, The
1193insurer must make an inspection of the insured's premises to
1194determine if there has been physical damage to the structure
1195which may might be the result of sinkhole activity.
1196     (b)  If, upon the investigation pursuant to paragraph (a),
1197the insurer discovers damage to a structure which is consistent
1198with sinkhole activity or if the structure is located in close
1199proximity to a structure in which sinkhole damage has been
1200verified, then prior to denying a claim, the insurer must obtain
1201a written certification from an individual qualified to
1202determine the existence of sinkhole activity, stating that the
1203cause of the claim is not sinkhole activity, and that the
1204analysis conducted was of sufficient scope to eliminate sinkhole
1205activity as the cause of damage within a reasonable professional
1206probability. The written certification must also specify the
1207professional discipline and professional licensure or
1208registration under which the analysis was conducted.
1209     (2)  Following the insurer's initial inspection, the
1210insurer shall engage an engineer and a professional geologist to
1211conduct testing as provided in s. 627.7072 to determine the
1212cause of the loss within a reasonable professional probability
1213and issue a report as provided in s. 627.7073, if:
1214     (a)  The insurer is unable to identify a valid cause of the
1215damage or discovers damage to the structure which is consistent
1216with sinkhole loss; or
1217     (b)  The policyholder demands testing in accordance with
1218this section or s. 627.7072.
1219     (3)  Following the initial inspection of the insured
1220premises, the insurer shall provide written notice to the
1221policyholder disclosing the following information:
1222     (a)  What the insurer has determined to be the cause of
1223damage, if the insurer has made such a determination.
1224     (b)  A statement of the circumstances under which the
1225insurer is required to engage an engineer and a professional
1226geologist to verify or eliminate sinkhole loss and to make
1227recommendations regarding land and building stabilization and
1228foundation repair.
1229     (c)  A statement regarding the right of the policyholder to
1230request testing by an engineer and a professional geologist and
1231the circumstances under which the policyholder may demand
1232certain testing.
1233     (4)  If the insurer determines that there is no sinkhole
1234loss, the insurer may deny the claim. If the insurer denies the
1235claim, without performing testing under s. 627.7072, the
1236policyholder may demand testing by the insured under s.
1237627.7072. The policyholder's demand for testing must be
1238communicated to the insurer in writing after the policyholder's
1239receipt of the insurer's denial of the claim.
1240     (5)(a)  Subject to paragraph (b), if a sinkhole loss is
1241verified, the insurer shall pay to stabilize the land and
1242building and repair the foundation in accordance with the
1243recommendations of the engineer and the professional geologist
1244as provided under s. 627.7073, and in consultation with the
1245policyholder, subject to the coverage and terms of the policy.
1246The insurer shall pay for other repairs to the structure and
1247contents in accordance with the terms of the policy.
1248     (b)  The insurer may limit its payment to the actual cash
1249value of the sinkhole loss until such time as expenses related
1250to land and building stabilization and foundation repairs are
1252     (6)  Except as provided in subsection (7), the fees and
1253costs of the engineer or the professional geologist shall be
1254paid by the insurer.
1255     (7)(c)  If the insurer obtains, pursuant to s. 627.7073
1256paragraph (b), written certification that there is no sinkhole
1257loss or that the cause of the damage claim was not sinkhole
1258activity, and if the policyholder has submitted the sinkhole
1259claim without good faith grounds for submitting such claim, the
1260policyholder shall reimburse the insurer for 50 percent of the
1261actual costs cost of the analyses and services provided analysis
1262under ss. 627.7072 and 627.7073 paragraph (b); however, a
1263policyholder is not required to reimburse an insurer more than
1264$2,500 with respect to any claim. A policyholder is required to
1265pay reimbursement under this subsection paragraph only if the
1266insurer, prior to ordering the analysis under s. 627.7072
1267paragraph (b), informs the policyholder in writing of the
1268policyholder's potential liability for reimbursement and gives
1269the policyholder the opportunity to withdraw the claim.
1270     (8)(2)  No insurer shall nonrenew any policy of property
1271insurance on the basis of filing of claims for partial loss
1272caused by sinkhole damage or clay shrinkage as long as the total
1273of such payments does not exceed the current policy limits of
1274coverage for property damage, and provided the insured has
1275repaired the structure in accordance with the engineering
1276recommendations upon which any payment or policy proceeds were
1278     (9)  The insurer may engage a structural engineer to make
1279recommendations as to the repair of the structure.
1280     Section 15.  Section 627.7072, Florida Statutes, is created
1281to read:
1282     627.7072  Testing standards for sinkholes.--
1283     (1)  The engineer and professional geologist shall perform
1284such tests as sufficient, in their professional opinion, to
1285determine the presence or absence of sinkhole loss or other
1286cause of damage within reasonable professional probability and
1287to make recommendations regarding necessary building
1288stabilization and foundation repair.
1289     (2)  Testing shall be conducted in compliance with the
1290Florida Geological Survey Special Publication No. 57 (2005).
1291     Section 16.  Section 627.7073, Florida Statutes, is created
1292to read:
1293     627.7073  Sinkhole reports.--
1294     (1)  Upon completion of testing as provided in s. 627.7072,
1295the engineer and professional geologist shall issue a report and
1296certification to the insurer and the policyholder as provided in
1297this section.
1298     (a)  Sinkhole loss is verified if, based upon tests
1299performed in accordance with s. 627.7072, an engineer and a
1300professional geologist issue a written report and certification
1302     1.  That the cause of the actual physical and structural
1303damage is sinkhole activity within a reasonable professional
1305     2.  That the analyses conducted were of sufficient scope to
1306identify sinkhole activity as the cause of damage within a
1307reasonable professional probability.
1308     3.  A description of the tests performed.
1309     4.  A recommendation of methods for stabilizing the land
1310and building and for making repairs to the foundation.
1311     (b)  If sinkhole activity is eliminated as the cause of
1312damage to the structure, the engineer and professional geologist
1313shall issue a written report and certification to the
1314policyholder and the insurer stating:
1315     1.  That the cause of the damage is not sinkhole activity
1316within a reasonable professional probability.
1317     2.  That the analyses and tests conducted were of
1318sufficient scope to eliminate sinkhole activity as the cause of
1319damage within a reasonable professional probability.
1320     3.  A statement of the cause of the damage within a
1321reasonable professional probability.
1322     4.  A description of the tests performed.
1323     (c)  The respective findings, opinions, and recommendations
1324of the engineer and professional geologist as to the
1325verification of a sinkhole loss, land and building
1326stabilization, foundation repair, and elimination of sinkhole
1327loss shall be presumed correct.
1328     (2)  Any insurer that has paid a claim for a sinkhole loss
1329shall file a copy of the report and certification, prepared
1330pursuant to subsection (1), with the county property appraiser
1331who shall record the report and certification with the parcel
1332number. The insurer shall bear the cost of filing and recording
1333the report and certification. There shall be no cause of action
1334or liability against an insurer for compliance with this
1335section. The seller of real property upon which a sinkhole claim
1336has been made shall disclose to the buyer of such property that
1337a claim has been paid and whether or not the full amount of the
1338proceeds were used to repair the sinkhole damage.
1339     Section 17.  Notwithstanding that revenues of Citizens
1340Property Insurance Corporation are not state revenues, the
1341Auditor General shall perform an operational audit, as defined
1342in s. 11.45(1), Florida Statutes, of the Citizens Property
1343Insurance Corporation created under s. 627.351(6), Florida
1344Statutes. The scope of the audit shall also include:
1345     (1)  An analysis of the corporation's infrastructure,
1346customer service, claims handling, accessibility of policyholder
1347information to the agent of record, take-out programs, take-out
1348bonuses, and financing arrangements.
1349     (2)  An evaluation of costs associated with the
1350administration and servicing of the policies issued by the
1351corporation to determine alternatives by which costs can be
1352reduced, customer service improved, and claims handling
1355The audit shall contain policy alternatives for the Legislature
1356to consider. The Auditor General shall submit a report to the
1357Governor, the President of the Senate, and the Speaker of the
1358House of Representatives no later than February 1, 2006.
1359     Section 18.  The board of governors of the Citizens
1360Property Insurance Corporation created under section 627.351(6),
1361Florida Statutes, shall, by February 1, 2006, submit a report to
1362the President of the Senate, the Speaker of the House of
1363Representatives, the minority party leaders of the Senate and
1364the House of Representatives, and the chairs of the standing
1365committees of the Senate and the House of Representatives having
1366jurisdiction over matters relating to property and casualty
1367insurance. The report shall include the board's findings and
1368recommendations on the following issues:
1369     (1)  The number of policies and the aggregate premium of
1370the Citizens Property Insurance Corporation, before and after
1371enactment of this act, and projections for future policy and
1372premium growth.
1373     (2)  Increases or decreases in availability of residential
1374property coverage in the voluntary market and the effectiveness
1375of this act in improving the availability of residential
1376property coverage in the voluntary market in the state.
1377     (3)  The board's efforts to depopulate the corporation and
1378the willingness of insurers in the voluntary market to avail
1379themselves of depopulation incentives.
1380     (4)  Further actions that could be taken by the Legislature
1381to improve availability of residential property coverage in the
1382voluntary and residual markets.
1383     (5)  Actions that the board has taken to restructure the
1384corporation and recommendations for legislative action to
1385restructure the corporation, including, but not limited to,
1386actions relating to claims handling and customer service.
1387     (6)  Projected surpluses or deficits and possible means of
1388providing funding to ensure the continued solvency of the
1390     (7)  The corporation's efforts to procure catastrophe
1391reinsurance to cover its projected 100-year probable maximum
1392loss with specification as to what best efforts were made by the
1393corporation to procure such reinsurance.
1394     (8)  Such other issues as the board determines are worthy
1395of the Legislature's consideration.
1396     Section 19.  (1) Upon an insurer's receiving a
1397communication with respect to a claim, the insurer shall, within
139814 calendar days, review and acknowledge receipt of such
1399communication unless payment is made within that period of time
1400or unless the failure to acknowledge is caused by factors beyond
1401the control of the insurer which reasonably prevent such
1402acknowledgement. If the acknowledgement is not in writing, a
1403notification indicating acknowledgement shall be made in the
1404insurer's claim file and dated. A communication made to or by an
1405agent of an insurer with respect to a claim shall constitute
1406communication to or by the insurer. As used in this subsection,
1407the term "agent" means any person to whom an insurer has granted
1408authority or responsibility to receive or make such
1409communications with respect to claims on behalf of the insurer.
1410This subsection shall not apply to claimants represented by
1411counsel beyond those communications necessary to provide forms
1412and instructions.
1413     (2)  Such acknowledgement shall be responsive to the
1414communication. If the communication constitutes a notification
1415of a claim, unless the acknowledgement reasonably advises the
1416claimant that the claim appears not to be covered by the
1417insurer, the acknowledgement shall provide necessary claim
1418forms, and instructions, including an appropriate telephone
1420     (3)  Unless otherwise provided by the policy of insurance
1421or by law, within 10 working days after an insurer receives
1422proof of loss statements the insurer shall begin such
1423investigation as is reasonably necessary unless the failure to
1424begin such investigation is caused by factors beyond the control
1425of the insurer which reasonably prevent the commencement of such
1427     Section 20.  Sections 3 and 4 of this act shall take effect
1428on the same date that House Bill 1939 or similar legislation
1429takes effect, if such legislation is adopted in the same
1430legislative session or an extension thereof and becomes a law.
1431     Section 21.   The Office of Insurance Regulation shall, by
1432January 1, 2006, submit a report to the President of the Senate,
1433the Speaker of the House of Representatives, the minority party
1434leaders of the Senate and the House of Representatives, and the
1435chairs of the standing committees of the Senate and the House of
1436Representatives having jurisdiction over matters relating to
1437property and casualty insurance. The report shall include
1438findings and recommendations on requiring residential property
1439insurers to provide law and ordinance coverage for residential
1440property insurance policies, the increase or decrease in
1441insurance costs associated with requiring such coverage, and
1442such other related information as the Office of Insurance
1443Regulation determines is appropriate for the Legislature to
1445     Section 22.  Except as otherwise provided herein, this act
1446shall take effect July 1, 2005.

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