2009 Florida Insurance Legislation Summaries

A number of insurance-related bills were successfully passed during the recently-concluded 2009 Florida Regular Legislative Session and will become law if not vetoed by Florida Governor Charlie Crist within 60 days of their passage (most of which occurred on, or about May 1, 2009).  From these bills, the law and governmental consulting firm of Colodny Fass has compiled summaries of significant legislation impacting property and casualty, surplus lines, workers’ compensation and other areas of the insurance industry.

A separate analysis of HB 1495 can be viewed by clicking here.

To view individual bill information on Florida’s Legislative Web site, click on the respective bill number in the section titles below.

 

CS/CS/CS/HB 1495 relating to Property Casualty Insurance (the “Omnibus Property Insurance Bill”)

• For a complete summary of HB 1495, the 2009 Florida property insurance accord, click here.

Senate OKs House Property Insurance Package As Amended; Bill Headed To Governor Next

By a vote of 32-6, the Florida Senate took up and passed HB 1495, the property insurance legislative package as amended by the House of Representatives on May 1, 2009.  HB 1495 now will be certified by legislative leadership and presented to Florida Governor Charlie Crist for action.

As a product of House and Senate negotiations during the past 24 hours on the details of the 2009 property insurance legislative package (HB 1495 by State Representative Bryan Nelson, the bill’s original sponsor), a strike-all amendment by Representative Nelson was passed onto HB 1495 by the Florida House of Representatives today, May 1, 2009.

Following are the main differences effectuated by Representative Nelson’s strike-all amendment, as compared to the bill that initially passed out of the House on April 24 (prior to further amendment by the Senate):

• The Florida Hurricane Catastrophe Fund’s (“FHCF’s”) Temporary Increase in Coverage Limits (“TICL”) layer has been expanded in some ways and reduced in others;
• Citizens Property Insurance Corporation (“Citizens”) can buy TICL coverage;
• A 10 percent maximum flat increase per Citizens policyholder is provided;
• “Flex rating” has been removed and certain types of expedited rate filings are contemplated instead;
• There are no provisions for the renewal of the My Safe Florida Home program;
• The public records exemptions currently extended to confidential documents related to rate filings are removed.

 

CS/CS/HB 1171 relating to Residential Property Insurance Policies (Non-Assessable Residential Property Insurance Policies)

‘Open Rating’ Bill Passes Senate 27-9; HB 1171 Ready For Governor’s Approval

HB 1171, which authorizes certain insurers to use a rate in excess of an otherwise-applicable filed rate and prohibits the consideration of certain policies by insurers when making a specified calculation, was passed by the Florida Senate with a vote of 27-9 on third reading today, May 1, 2009. 

The Senate had previously substituted HB 1171 for CS/SB 2036 during second reading yesterday (April 30).  With today’s vote, the bills are now identical and ready to be sent to Florida Governor Charlie Crist for approval.

HB 1171, also known as the “open rating” bill because it contains deregulation provisions for large insurers, also would preserve the Florida Office of Insurance Regulation’s authority to disapprove rates as inadequate, or disapprove a rate filing for using an unlawful rating factor.

The bill would create a new section of Florida law that permits property insurers to offer residential property insurance policies covering the perils of windstorm or hurricane to use a rate in excess of the insurer’s filed rate, if, among other provisions, the following apply:

• The insurer is authorized to write property insurance in Florida;
• The insurer has, at the time of policy issuance or first renewal: (i) a surplus as to policyholders equal or greater than $500 million; (ii) a surplus of $200 million and a ratio of the insurer’s net written premium to surplus that does not exceed two to one; or (iii) a surplus of at least $150 million and a primary purpose of offering insurance as a service or benefit to members of a nonprofit corporation; and
• The insurer does not purchase Temporary Increase in Coverage Limit coverage pursuant to s. 215.555(17), F.S., from the Florida Hurricane Catastrophe Fund.

 

CS/CS/CS/HB 569 Relating to Financial Instruments (includes the FHCF)

$10 million Drop-Down Layer Included in Financial Bill

After unanimous passage by the Florida House of Representatives on April 27, House Bill 569 was substituted for its identical counterpart, Senate Bill 732, and passed by the Senate on third reading today, April 29, 2009.  The bill now goes to Florida Governor Charlie Crist for action.

An insurance-related amendment offered by State Representative Bryan Nelson and adopted during the April 27 House passage of HB 569 included the reauthorization of the Florida Hurricane Catastrophe Fund (“FCHF”) $10 million drop-down layer for certain companies. 

As part of the final bill passed today by the Senate, the amendment’s provisions extend the availability of an additional amount of FHCF reimbursement coverage up to $10 million until December 31, 2011 for limited apportionment companies, insurers that purchased such coverage in 2008, and for insurers that qualified for Florida’s Insurance Capital Build-Up Incentive Program.  Without this extension, the availability of this coverage would cease on May 31, 2009. 

The insurance portion of HB 569 also specifies that the optional coverage retention as provided for limited apportionment insurers and others will be triggered prior to the mandatory coverage under the FHCF reimbursement contract; however, once the limit of the optional coverage is exhausted, the insurer’s retention under the mandatory coverage will apply.

Of note:  Similar coverage was offered in 2006, 2007, and 2008 that reimburses an insurer for up to $10 million in losses for each of two hurricanes during those years.  As it has been in past years, under HB 569 this coverage will be priced at a 50 percent rate on line (e.g., $5 million premium for $10 million in coverage) with a free reinstatement for a second event.  An insurer’s retention for such coverage remains at 30 percent of its surplus.

The non-insurance provisions of HB 569 expand the scope of the applicable Florida law by providing an option for state and local government funds to be deposited into money market deposit accounts and other financial instruments insured by the Federal Deposit Insurance Corporation.  The bill also removes a limitation on the conditions under which local governments can deposit surplus public funds in certain depository institutions.  As a result, the range of depository institutions available is increased.

To view complete bill information on HB 569, click here.

 

CS/SB 742 relating Sinkhole Mitigation

SB 742 Will Allow Insurers To Convert Pasco and Hernando Policyholders’ Sinkhole Coverage for Ground Cover Collapse Alternative

SB 742 relating to Sinkhole Losses passed the Florida House of Representatives unanimously on April 29, 2009 during third reading.  With the House version, HB 351, having been substituted for SB 742 during second reading on the previous day, the bills became identical.  SB 742 is now ready to be presented to Florida Governor Charlie Crist for approval. 

SB 742, which becomes law on January 1, 2010 if signed by the Governor, would allow insurers to non-renew policies in Pasco and Hernando counties and offer renewals that exclude sinkhole coverage to those policyholders, but include “catastrophic ground cover collapse.”  The bill also would require insurers to consider local ordinances relating to sinkhole mitigation when setting insurance rates.  These ordinances will be subject to a Florida Building Commission review over a four-year period.

This bill creates section 627.7063, F.S., which mandates the creation of a building code grading schedule that evaluates the effectiveness of sinkhole loss prevention ordinances in reducing the number of sinkholes and the severity of sinkhole losses.

Note:  “Catastrophic ground cover collapse” coverage was created during Special Session 2007-A as an alternative to sinkhole insurance, which had become increasingly costly in areas of the state with high exposure to sinkholes and related claims.  Catastrophic ground cover collapse coverage does not provide reimbursement for losses due to the mere settling or cracking of a foundation, structure or building.  It is defined as a geological activity that:

• Results in the abrupt collapse of the ground cover that is clearly visible to the naked eye;
• Results in structural damage to the building and its foundation; and
• Results in the insured structure being condemned and ordered to be vacated by the appropriate governmental agency.

 

CS/CS/SB 714 relating to Condominium Associations

SB 714 To Require Residential Condo Policies To Include $2,000 For Certain Loss Assessment Coverage, Upon Governor’s OK

Before its final passage in the Florida House of Representatives on April 29, 2009, by a vote of 114 to 2, the language of Senate Bill 714 relating to Condominiums was substituted by that of House Bill 419 on April 28.  One day prior to that, SB 714 had passed unanimously and unrevised in the Senate after previously being amended as a committee substitute by the Senate General Government Appropriations and Regulated Industries Committees.

Originally sponsored by Senator Dennis L. Jones (R-Seminole), SB 714 revises and clarifies the property insurance requirements of condominium associations and condominium unit owners under Chapter 718, Florida Statutes, which is also known as the Condominium Act. The bill also corrects inconsistencies with terms used under the Florida Insurance Code. 

SB 714 repeals certain requirements placed on condominium unit owners, including the mandate to maintain property insurance coverage, and the requirement that the condominium association must be a named insured and loss payee on policies issued to unit owners.  SB 714 also repeals the provision that a condominium association may purchase property insurance at the expense of a unit owner who does not provide proof of insurance. 

This bill, which takes effect upon signature into law by Florida Governor Charlie Crist, substantially amends s. 718.111, F.S, and creates s. 627.714, F.S.

 

HB 741 relating to Insurance Premium Financing

HB 741 relating to Insurance Premium Financing was passed by the Florida House of Representatives on March 31, 2009, and the Senate on April 16, 2009. 

This bill specifies that a discount provided to a policyholder when premium payment is made in full at the beginning of the policy term is not prohibited by Florida’s premium financing statutes.  HB 741  further states that such discount is not considered a component of premium financing, as long as the discount is approved and found to be actuarially justified by the OIR.  The act provides for an effective date of July 1, 2009.

Previously, statutorily-regulated premium financing charges could be imposed on a policyholder by premium finance companies, insurance companies or subsidiaries, or insurance agents or agencies, when insurance premium funds were advanced to an insurance company or agent on behalf of the policyholder.  On the other hand, some insurance companies provided a “paid in full” discount to a policyholder who pays the premium in full at the beginning of the policy term, and in the form of a lower insurance rate.  This rate would be included in the insurer’s required rate filing with the OIR. 

At least one class action lawsuit had been brought against an insurer by a policyholder who argued that the difference in the premium charged to a policyholder paying the premium in full upfront and receiving a discount, and the premium charged to a policyholder who does not receive the discount, and who also incurs premium financing charges, amounted to a premium financing charge that was in excess of the amount permitted by the premium financing statutes.

 

CS/HB 853 relating to Surplus Lines Insurers

Senate Passes Surplus Lines Bill Unanimously; HB 853 On Its Way To Governor’s Office

The Florida Senate took up and passed the House Bill 853 relating to Surplus Lines insurers,  which provides that Chapter 627, F.S. does not apply to surplus lines insurers unless specifically stated.  During debate this afternoon, May 1, 2009, the Senate substituted SB 1864 with HB 853, after which CS/HB 853 passed unanimously.  HB 853 now will be sent to Florida Governor Charlie Crist for approval.

Two recent cases, Essex v. Zota, currently pending in the U.S. District Court for the Southern District of Florida, and CNL Hotels & Resorts, Inc. v. Twin City Fire Insurance Co., in the U.S. District Court for the Middle District of Florida, have changed the landscape of Florida surplus lines regulation by apparently requiring the filing of surplus lines policy forms with the OIR for review and approval, pursuant to the provisions of Part II of Chapter 627, F.S..  From a regulatory standpoint, the OIR is not currently requiring surplus lines insurers to submit form filings.  In fact, the OIR has provided amicus briefs and affidavits in pending cases, stating that the form filings required of admitted insurers have never been required of surplus lines carriers. 

CS/HB 853 is considered the “legislative fix” to these judicial decisions.  As originally introduced, the bill provides that Chapter 627 does not apply to surplus lines insurers unless specifically stated, and provides for retroactive application. 

Historically, surplus lines insurance companies have not abided by the same insurance regulatory requirements in chapter 627, F.S., as admitted market insurance companies due to s. 627.021(2), F.S., which states:  “This chapter does not apply to: . . . (e) surplus lines insurance placed under the provisions of ss. 626.913-626.937.”  Additionally, the OIR has not regulated surplus lines insurers to the same extent as admitted market insurers due to this exemption.

 

CS/CS/HB 845 relating to Self-Insurance Funds

HB 845 To Authorize Unregulated Electric Cooperatives’ Workers Comp Self-Insurance Funds

After substituting its own version for that of the House of Representatives’, the Florida Senate unanimously passed House Bill 845 relating to Self-Insurance on April 29, 2009.

HB 845, which was revised twice during the committee hearing process and later amended several times on the House Floor, was originally sponsored by State Representative Brad Drake (R-DeFuniak Springs) and, with the signature of Florida Governor Charlie Crist, will become law on July 1, 2009.

The bill clarifies that independent educational institution self-insurance funds, a type of self-insurance authorized under current law, are exempt from the Florida Workers’ Compensation Insurance Guaranty Association (“FWCIGA”).  Because these funds have never participated in FWCIGA, nor will an electric cooperative self-insurance fund authorized by HB 845, future fund members will not be able to have any workers’ compensation claims against the fund paid by FWCIGA if the fund becomes insolvent.

Further, if the aforementioned electric cooperatives form the type of self-insurance fund authorized in HB 845, the Florida Office of Insurance Regulation (“OIR”) no longer will have regulatory responsibility for it.  Thus, any expenses incurred by the OIR relating to regulation of the existing electric cooperative self-insurance fund will be avoided.  

These electric cooperatives may have decreased costs if they choose to form the self-insurance fund authorized by the bill.  Any savings to the cooperatives then can be passed on to the cooperative’s consumer members. 

HB 845 bears no fiscal impact on Florida’s Workers’ Compensation Administration Trust Fund and the Special Disability Trust Funds, because the electric cooperative self-insurance fund authorized by the bill must pay assessments to these trust funds, just as the currently-operating electric cooperative self-insurance fund does.

 

HB 7039 relating to Open Government Sunset Review /Insurance Claim Data Exchange Information

Insurer/Past-Due Child Support Data Match System Gets One-Year Public Records Extension To Assist Federal Program Implementation

House Bill 7039 relating to Open Government Sunset Review/ Insurance Claim Data Exchange Information was passed unanimously by the Florida Senate on April 29, 2009.

If signed by Florida Governor Charlie Crist, the bill will secure another year of public records exemption for certain records obtained by the Florida Department of Revenue (“DOR”) under Florida’s Insurance Claim Data Exchange System (“ICDE”), which identifies noncustodial parents who owe past-due child support, and who also have a claim with an insurer.  This process allows insurers to voluntarily provide the DOR with the name, address, and if known, date of birth and social security number or other taxpayer identification number for each noncustodial parent identified as having a claim.  The data provided can be used only for purposes of child support enforcement.

HB 7039 extends the ICDE repeal date under the Open Government Sunset Review Act from October 2, 2009, to October 2, 2010, thereby reenacting the public records exemption for information obtained by the DOR pursuant to the ICDE.

However, the DOR currently does not match data files with insurance companies using the Insurance Claim Data Exchange statute.   Rather, according to the DOR, it had taken steps to implement the statute by contacting most of Florida’s top 25 insurers.  During this time, insurers were responding to claims resulting from damage caused during the 2004 hurricane season.  Therefore, the DOR decided to postpone working on the ICDE initiative at the request of those insurers. The DOR did not re-initiate contact with the insurers, nor did it attempt to resume implementation activities due to its resources being otherwise dedicated.

In February 2006, the Deficit Reduction Act of 2005 (“the Act”) was enacted by Congress.  The Act amended federal law to authorize the Federal Department of Health and Human Services (“HHS”) to compare information concerning individuals owing past-due child support with information maintained by insurers concerning insurance claims, settlements, awards, and payments. The Act further allowed HHS to furnish information resulting from the data matches to state agencies responsible for child support. 

Rather than re-engage insurers in the implementation of ICDE, Florida’s DOR chose to monitor the results of a federal workgroup charged with implementing the nationwide insurance data match program in other states before implementing the federal program in Florida.

Armed with the extension, the DOR reports it should be able to determine the success of the federal program by January, 2010.

The Open Government Sunset Review Act requires the Florida Legislature to review each public record and each public meeting exemption five years after enactment.  If the Legislature does not reenact the exemption, it automatically repeals on October 2 of the fifth year after enactment.

HB 7039 is effective upon becoming a law.

 

CS/CS/HB 453 relating to Tax Credits for Contributions to Nonprofit Scholarship-Funding Organizations (Insurance Premium Tax)

Florida’s Corporate Income Tax Credit Scholarship Program To Include Insurance Premium Tax Credits With Governor’s OK of HB 453

CS/CS/HB 453, a bill that expands and renames Florida’s Corporate Income Tax Credit Scholarship Program (“CTC”) and includes provision for insurance premium tax credits was passed on third reading by the Senate on April 28, 2009 after having been substituted for SB 1310 on April 23.   With the signature of Florida Governor Charlie Crist, CS/CS/HB 453 would become law on July 1, 2009.

Originally sponsored by State Representative Will Weatherford (R-Wesley Chapel), CS/CS/HB 453 allows insurance companies to receive a credit of 100 percent of an eligible contribution to an eligible scholarship-funding organization (“SFO”) against premium tax due for a taxable year.  However, the credit may not exceed 75 percent of the tax due after the deduction of allowable credits for other taxes and assessments paid by the insurer.

CS/CS/HB 453 further provides that an insurer claiming a credit against premium tax liability is not required to pay any additional retaliatory tax and insurance companies are not eligible to receive a credit against the corporate income tax authorized under the Florida Tax Credit Scholarship Program.

Under the provisions of CS/CS/HB 453, an insurance company that made eligible contributions under the CTC program for tax years beginning in 2006, 2007 or 2008, but did not receive a dollar-for-dollar benefit because of the interaction between the corporate income tax and the insurance premium tax, may apply to the Florida Department of Revenue (“DOR”) by July 31, 2009, to take a credit against its 2009 corporate tax liability. Credits taken pursuant to this provision will be counted toward a $118 million cap in fiscal year 2009-10. These credits will be treated as corporate taxes paid for purposes of computing the corporate tax credit against the insurance premium tax. 

The bill clarifies that the $118 million cap on tax credits authorized under the CTC is the total amount of corporate income tax credits and insurance premium tax credits that may be granted each state fiscal year.

Through the CTC source of funding, children in grades K-12 are provided an opportunity to attend private schools that meet the state’s eligibility requirements.

 

CS/CS/SB 2252 relating to Professional Liability Claims 

SB 2252 Ready for Governor’s Signature; Bill Expected to Simplify Liability Insurance Claims Reporting

After unanimous passage by the Florida Senate on April 23, the Florida House of Representatives also unanimously passed SB 2252 relating to Professional Liability Claims on April 29, 2009 after substituting its version, HB 511, for that of the Senate’s.   

SB 2252, which is expected to simplify regulation of liability insurance claims reporting by eliminating duplicate and frivolous claims reports, will now proceed to Florida Governor Charlie Crist, where, with his signature, it will become law on July 1, 2009.

Originally sponsored by State Senator Carey Baker (R-Eustis), SB 2252 clarifies existing law regarding closed claim reporting by defining the term “claim” and specifying circumstances when a claim will be considered “closed.”  

SB 2252 substantially amends section 627.912, Florida Statutes, in which it changes the conditions under which a claim against professional liability insurance must be reported to the State.  The bill provides a statutory definition for when a claim exists and creates a new set of reporting criteria for entities that must report claims activity to the Florida Office of Insurance Regulation (“OIR”). 

According to the OIR, the changes effected by the passage of SB 2252 will improve the quality of data it collects, as well as the OIR’s regulation of the affected parties at no additional cost. 

 

CS/HB 903 relating to Attorney’s Fees in Workers’ Compensation Cases

Senate Passes Workers’ Comp Attorney’s Fee Bill; HB 903 To Be Presented For Governor’s Approval

The Florida Senate took up and passed House Bill 903 relating to Attorney’s Fees in Workers’ Compensation Cases this afternoon, May 1, 2009.   The bill, which passed by a vote of 22-16, previously had been amended by the Senate by substituting the language of SB 2072.  However, when the House refused to concur on specific points of the Senate language, those items were removed, which brought the two Chambers to an agreement today.

HB 903 now proceeds to Florida Governor Charlie Crist for approval.

With an effective date of July 1, 2009, HB 903 amends s. 440.34, F.S., to remove all statutory language providing for a “reasonable” attorney’s fee in workers’ compensation cases and specifies that fee awards cannot exceed the amount authorized by a statutory attorney’s fee schedule.  Thus, claimant’s attorney’s fees in workers’ compensation would be calculated in the manner they had been from the effective date of 2003 Florida workers’ compensation reform legislation, up to the 2008 Florida Supreme Court decision in Murray v. Mariner Health.   

 

CS/SB 2282 relating to First-Responder Services (“Accident Tax Fees”)

Motor Vehicle Accident Response Fees To Be Banned in Florida With Governor’s Approval of SB 2282

As many as two dozen Florida municipalities and counties that currently charge fees for costs incurred for services provided by first-responders to motor vehicle accidents will not be able to do so after the passage of CS/SB 2282, today, May 1, 2009, by a vote of 102 to 15 in the Florida House of Representatives.   

With approval from Florida Governor Charlie Crist, the bill will ban Florida counties and cities from imposing fees or obtaining reimbursement for costs incurred for services provided by first-responders to a motor vehicle accident beginning July 1, 2009. An exemption is made in the bill for transportation and treatment provided by ambulance services and, as previously amended during the committee process, for the clean-up of certain hazardous materials.

Originally sponsored by State Senator Mike Bennett, CS/SB 2282 defines “first-responders” as law enforcement officers, firefighters, emergency medical technicians, paramedics and volunteer first-responders. 

Florida counties and municipalities are afforded broad constitutional and statutory home rule powers with expansive legislative and service delivery authority.  During 2008, Senate Committee on Banking and Insurance legislative staff studied the issue of local governments imposing fees for providing police and fire services to persons involved in motor vehicle accidents and published a report entitled: Cities and Counties Charging “Accident Response” Fees to Drivers and Insurers (Issue Brief 2009-303). 

This report found that, in an effort to balance budgets and continue vital services while not raising taxes, about two to three dozen Florida counties and cities had begun imposing “accident response fees” on drivers and their insurers for the delivery of police and fire services, which included personnel, supplies and equipment at the scene of auto accidents within their jurisdictions.

Local governments generally take the position that these fees are not taxes, but rather, “user fees” charged in exchange for services that benefit the party paying the fee, i.e., the driver involved in an accident, and are applied solely to pay for the cost of the services.

In Florida, average police response fees range from $180 to $200 per accident, while fees range from $600 to $800 for fire service responses.  The amounts collected are normally placed into a special fund used exclusively for the personnel, supplies, and equipment for the police or fire services provided.

Florida local governments either administer the billing and collection of accident response fees or utilize the administrative services of third-party vendors who may charge up to ten percent of the collections.  

Local governments in Florida imposing accident response fees justify the practice by stating that fire and police services provided for auto accidents are outside the scope of core law enforcement and fire duties, and that traffic crashes are civil situations caused by negligent drivers.  They further qualify this rationale by saying that the attendant services provided by fire and police do not benefit local taxpayers. Government officials assert that providing accident response services detracts from the ability of fire and police officers to serve and protect their own taxpayers or residents.

According to representatives with Cost Recovery Corp., a company specializing in police and fire department billing, 56 percent of auto insurers nationwide pay accident response fees.

In its 2008 Interim Project Report on the subject, the Florida Senate reported that, given the lack of statutory direction and the lack of clear case law, most auto insurers they contacted had not adopted a consistent approach on the issue.  Some insurers evaluate whether to pay the fees on a case-by-case basis based on the specific circumstances of the accident, the language in the local ordinance and the policy provisions.  Many large insurers question the validity of the fees and refuse to pay them, arguing they are improper user fees because local residents already pay for these services through property taxes.  Responding to, and investigating auto accidents has traditionally been handled by local police and fire departments and such responses have never been covered in insurance policies.

Under Florida’s no-fault law, personal injury protection (“PIP”), covers reasonable medical expenses, including ambulance transportation, but expenses related to accident responses are not covered.  Liability coverage pays for damages caused by the insured to another person’s vehicle or property (property damage liability), or for injury to others (bodily injury liability) if the insured is legally liable.  Insurers contacted by Senate professional staff generally assert that accident response fees are not covered under liability policies.  Company representatives argue that if insurers were to start paying these fees, insurance premiums will increase.