Florida Governor Rick Scott Signs Insurer Insolvency Bill (CS/HB 1007); Requests ‘Meaningful’ Title Insurer Data Call and Prevails Upon Cabinet To Lower Title Insurance Rates Commensurate With $25 Assessment

Jun 28, 2011

 

Among other bills, Florida Governor Governor Rick Scott signed CS/HB 1007 relating to Insurer Insolvency on June 24, 2011. 

For CS/HB 1007, Governor Scott issued a transmittal letter to Florida Secretary of State Kurt Browning, in which he stated that, “While I support most of the provisions of HB 1007, I am opposed to the provision that allows the (Florida) Department of Financial Services to pass on a $25 assessment to future title insurance policies to pay for claims from the insurer that became insolvent.  Since the title insurance premiums are promulgated by the Florida Cabinet, I therefore call on the Chief Financial Officer and my fellow Cabinet members to support me in lowering title insurance premiums commensurate with the assessment mechanism established in HB 1007, which will provide for claims coverage on title defects, regardless of future insolvencies.”

In his CS/HB 1007 transmittal letter, Governor Scott also indicated that he is requesting the Florida Office of Insurance Regulation to conduct a “meaningful” data call from all title insurers to ”  . . . provide assurance there will be no further insolvencies.”

In addition to a summary of CS/HB 1007, summaries of the following insurance-related and other significant bills are included below:

A copy of Governor Scott’s CS/HB 1007 transmittal letter is attached for review.

 

CS/HB 1007 relating to Insurer Insolvency

Originally sponsored by State Representative Mack Benard and effective July 1, 2011, CS/HB 1007 contains numerous insurance-related provisions.  They are listed by section of reference below:

Relating to the State Board of Administration

  • CS/HB 1007 allows an insurer to request that the State Board of Administration renegotiate the terms of a surplus note issued before January 1, 2011 under the Insurance Capital Build-Up Incentive Program.
  • It also increases the surplus requirements from $100 million to $250 million for foreign insurers in order to receive credit for reinsurance ceded to these foreign insurers.
  • The list of nationally recognized statistical rating organizations that may be utilized to provide a secure financial rating is expanded through CS/HB 1007.

Relating to Title Insurers

  • CS/HB 1007 requires that, after an order of rehabilitation has been entered for a title insurer, a receiver shall review the condition of the insurer and file a plan of rehabilitation for approval with the court.
  • Policies on Florida real property issued by the title insurer in rehabilitation shall remain in force unless the receiver determines the assessment capacity provided by this section is insufficient to pay claims in the ordinary course of business.
  • Policies on real property located outside of Florida may be canceled as of a date provided by the receiver and approved by the court, if the state in which the property is located does not have statutory provisions to pay future losses on those policies.
  • A claims filing deadline can be established for policies on real property located outside of Florida that have been canceled.
  • Receivers are required to establish a proposed percentage of the remaining estate assets to fund out-of-state claims when policies have been canceled, with any unused funds being returned to the general assets of the estate.
  • Receivers are required to establish a proposed percentage of the remaining estate assets to fund out-of-state claims where policies remain in force.
  • Funds allocated to pay claims on policies located outside of Florida shall be based on the pro rata share of premiums written in each state over each of the five calendar years preceding the date of an order of rehabilitation.
  • Each title insurer is required to be liable for an assessment to pay all unpaid title insurance claims and expenses of administering and settling those claims on real property in this state for any title insurer that is ordered into rehabilitation.
  • The Florida Office of Insurance Regulation (“OIR”) shall order an assessment if requested by the receiver on an annual basis in an amount that the receiver deems sufficient for the payment of known claims, loss adjustment expenses and the cost of administration of the rehabilitation expenses. The receiver shall consider the remaining assets of the insurer in receivership when making its request to the office. Annual assessments may be made until no more policies of the title insurer in rehabilitation are in force or the potential future liability has been satisfied. The OIR may exempt or limit the assessment of a title insurer if such assessment would result in a reduction to surplus as to policyholders below the minimum required to maintain the insurer’s certificate of authority in any state.
  • Assessments shall be based on the total of the direct title insurance premiums written in Florida as reported to the OIR for the most recent calendar year. Each title insurer doing business in Florida shall be assessed on a pro rata share basis of the total direct title insurance premiums written in this state.
  • CS/HB 1007 requires that assessments be paid to the receiver within 90 days after notice of the assessment or pursuant to a quarterly installment plan approved by the receiver. Any insurer that elects to pay an assessment on an installment plan shall also pay a financing charge to be determined by the receiver.
  • The OIR shall order an emergency assessment if requested by the receiver. The total of any emergency assessment, when added to any annual assessment in a single calendar year, may not exceed three percent of an insurer’s surplus to policyholders as of the end of the previous calendar year or more than 10 percent of its surplus to policyholders over any consecutive five-year period.
  • The 10 percent limitation shall be calculated as the sum of the percentages of surplus to policyholders assessed in each of those five years.
  • The receiver is allowed to use the proceeds of an assessment to acquire reinsurance or otherwise provide for the assumption of policy obligations by another insurer.
  • Receivers are required to make available information regarding unpaid claims on a quarterly basis.
  • A title insurer in rehabilitation may not be released from rehabilitation until all of the assessed insurers have recovered the amount assessed either through surcharges collected or payments from the insurer in rehabilitation.
  • CS/HB 1007 prohibits a title insurer in rehabilitation, for which an assessment has been ordered, from issuing any new policies until the insurer has been released from rehabilitation and has received approval from the office to resume issuing policies.
  • It also prohibits officers, directors, and shareholders of a title insurer ordered into rehabilitation or liquidation from serving as an officer, director, or shareholder of another insurer authorized in Florida unless the officer, director, or shareholder demonstrates to the office for a two-year period immediately preceding the receivership that: his or her personal actions or omissions were not a significant contributing cause to the receivership; he or she did not willfully violate any order of the office; he or she did not receive directly or indirectly any distribution of funds from the insurer in excess of amounts authorized in writing by the office; the financial statements filed with the office were true and correct statements of the title insurer’s financial contrition; he or she did not engage in any business practices which were hazardous to the policyholders, creditors, or the public; and he or she at all times acted in the best interests of the title insurer.
  • Upon the making of any assessment, the OIR shall order a surcharge on each title insurance policy issued thereafter that insures an interest in real property in this state. The OIR shall set the per transaction surcharge at an amount estimated to generate sufficient funds to recover the amount assessed over a period of not more than seven years. The amount of the surcharge ordered under this section may not exceed $25 per transaction for each impaired title insurer. If additional surcharges are occasioned by additional title insurers becoming impaired, the OIR shall order an increase in the amount of the surcharge to reflect the aggregate surcharge.
  • The party responsible for payment of title insurance premium, unless otherwise agreed between the parties, shall be responsible for the payment of the surcharge. No surcharge will be due or owing as to any policy of title insurance issued at the simultaneous issue rate. For all other purposes, the surcharge will be considered a governmental assessment to be separately stated on any settlement statement. The surcharge is not subject to premium tax or reserve requirements.
  • A title insurer doing business in Florida that wrote no premiums in the prior calendar year shall collect the same per transaction surcharge. Such surcharge collected shall be paid to the receiver within 60 days after receipt from the title agent or agency.
  • Each title insurance agent, agency, or direct title operation shall collect the surcharge as to each title insurance policy written and remit those surcharges along with the policies and premiums within 60 days to the title insurer on whom the policy was written.
  • A title insurer is prohibited from retaining more in surcharges for an ordered assessment than the amount of assessment that title insurer paid.
  • Each title insurer collecting surcharges is required to promptly notify the OIR when it has collected surcharges equal to the amount of the assessments paid. The OIR shall notify all companies, including those collecting surcharges to cease collecting surcharges when notified that all assessments have been recovered.
  • When filing each quarterly financial statement, a title insurer shall provide the office with an accounting of assessments paid and surcharges collected during the period. Any surcharges collected in excess of the amount assessed shall be paid to the Insurance Regulatory Trust Fund.

Relating to the Florida Department of Financial Services

  • CS/HB 1007 allows the Florida Department of Financial Services (“DFS”) to be named as an ancillary receiver of a non-Florida domiciled company in order to obtain records to adjudicate covered claims of Florida policyholders.
  • The bill provides for the State Risk Management Trust Fund to cover employees, officers and agents at the DFS for liability under 31 U.S.C. s. 3713, relating to priority of claims paid by the DFS while acting as a receiver.
  • The Insurance Regulation Trust Fund must cover all unreimbursed costs when opening ancillary delinquency proceedings for the purposes of obtaining records.
  • CS/HB 1007 further clarifies the DFS’s power to obtain records from third-party administrators.

Relating to Florida’s Insurance Guaranty Associations

  • CS/HB 1007 makes changes to the Florida Insurance Guaranty Association (“FIGA”) and Florida Workers’ Compensation Insurance Guaranty Association (“FWCIGA”) statutes relating to the definition of “covered claims” rejected by another state’s guaranty fund.
  • Qualifications are amended for FIGA and FWCIGA board members representing, or employed by, an insurer in receivership.
  • The bill clarifies FIGA’s obligation to pay valid claims after an independent review of policies and claims has been presented to it.

 

CS/CS/CS /HB 993 relating to Rulemaking

Effective immediately upon having been signed into law by Governor Scott on June 24, 2011, CS/CS/CS/HB 993 relating to Rulemaking amends agency rulemaking procedures under Florida’s Administrative Procedure Act and revises various provisions to align with legislative ratification requirements enacted in 2010.  It also:

  • Requires agencies to include in each notice of rulemaking whether a proposed Rule requires legislative ratification;
  • Expressly includes legislative ratification in the description of factors controlling when an adopted Rule takes effect;
  • Resolves a timing conflict created by Chapter 2010-279, L.O.F. by restoring certain time deadlines to their pre-2010 provisions;
  • Exempts emergency rulemaking, Rules adopting federal standards, Rules adjusting certain tolls and Rules implementing the 2011 Student Success Act from the requirements to prepare a statement of estimated regulatory costs and submission for legislative ratification;
  • Provides a procedure for agencies to withdraw rules prior to becoming effective if a rule is invalidated by a final order, or is submitted to the Legislature in a timely manner, but not ratified during a regular legislative session;
  • Excludes the triennial update of the Florida Building Code and the triennial update of the Florida Fire Prevention Code from the ratification requirement;
  • Creates a one-time process requiring all agencies to undertake a comprehensive review of the economic impact of their respective rules that were effective on, or before November 16, 2010;
  • Shifts the burden of proof in certain administrative proceedings to the nonapplicant third party petitioner;
  • Permits the Legislature to conduct an Internet-based public survey about the impact of regulations.

 

CS /HB  7185 relating to Corporate Income Tax

  • CS/HB 7185 updates the Florida Income Tax Code to adopt the federal Internal Revenue Code in effect on January 1, 2011, but expressly excludes the increases in depreciation and expensing deductions provided in federal legislation adopted in 2010.
  • For the increased deductions, the bill allows Florida corporations to get the benefit by spreading the deductions over a seven-year period.
  • The bill also increases the corporate income tax exemption from $5,000 to $25,000.
  • Except as otherwise provided, the bill became effective with Governor Scott’s signature on June 24, 2011.

 

CS/SB 1676 – Sovereign Immunity

  • Effective upon having been signed by Governor Scott on June 24, 2011, CS/SB 1676 establishes legislative findings that nonprofit independent private colleges and universities located and chartered in Florida, which own or operate medical schools, and which permit their employees or agents to provide patient services in teaching hospitals pursuant to an affiliation agreement or other contract, should be afforded sovereign immunity protections under s.768.28, F.S.
  • Additionally, the Florida Legislature declares that there is an overwhelming public necessity for extending the state’s sovereign immunity to such entities and that there is no alternative method of meeting such public necessity.
  • Under the bill, any nonprofit independent college or university located and chartered in Florida, which owns or operates an accredited medical school, or any of its employees or agents, and which has agreed by affiliation agreement or other contract to provide, or to permit its employees or agents to provide, patient services as agents of a teaching hospital, is considered an agent of the teaching hospital while acting within the scope of and pursuant to guidelines established in the affiliation contract.
  • The contract must provide for the indemnification of the teaching hospital, up to certain limits, by the agent for any liability incurred which was caused by the negligence of the college or university or its employees or agents. It also must provide that those limited portions of the college, university or medical school that are directly providing services pursuant to the contract and which are considered an agent of the teaching hospital, are deemed to be acting on behalf of a public agency for purposes of public records laws.
  • Notice must be provided to each patient, or the patient’s legal representative, that the exclusive remedy for injury or damage suffered as the result of any act or omission of the teaching hospital, the college or university, or the employees or agents of the college or university, while acting within the scope of duties pursuant to the contract with the teaching hospital, is by commencement of an action under the State’s limited waiver of sovereign immunity pursuant to s. 768.28, F.S. This notice requirement may be met by posting the notice in a place conspicuous to all persons.
  • The bill does not designate any employee providing contracted patient services in a teaching hospital as an employee or agent of the State for purposes of workers’ compensation insurance.
  • The provisions take effect and apply to all claims accruing on or after June 24, 2011.

 

CS/CS/CS HB 849  relating to Building Construction and Inspection

  • Effective July 1, 2011, CS/CS/CS/HB 849 exempts Florida Building Code and the Florida Fire Prevention Code (“Code”)-related rules that adopt federal standards, and certain updates or amendments to these Codes from the requirements of a statement of estimated regulatory costs. It also requires that proposed amendments to the foundation of these Codes demonstrate a need for incorporation.
  • As a result of this bill, products advertised as hurricane windstorm or impact protection from wind-borne debris are required to be approved as such under Florida’s product approval program and the Florida Building Commission is prohibited from adopting rules that limit any of the statutory exceptions or exemptions to coastal construction control and erosion projection requirements.
  • Code amendments or modifications relating to the wind-resistance design of buildings and structures in the high-velocity hurricane zone of Miami-Dade and Broward Counties shall not expire and shall be carried forward to the next edition of the Code.
  • The bill redefines the term “sustainable building rating or national model building code” to include the International Green Construction Code and amends the membership composition requirements for the Florida Building Commission. It also expands the categories of persons who may be certified as qualified for licensure by endorsement as a home inspector and requires at least two hours of hurricane mitigation training to be included as part of a home inspector’s continuing education requirements.
  • The bill repeals the exemption that permits Division I contractors to perform both the inspection and repairs on a home and authorizes individuals who are licensed as a landscape architect to submit landscape design plans to government agencies for approval.
  • This bill replaces one of the public lodging industry seats on the Florida Department of Health Advisory Review Board with a county or local building official.
  • It also clarifies that the Habitat for Humanity exemption applies to the rehabilitation of certain family residences.
  • Part II of ch. 533, F.S. relating to the accessibility requirements for handicapped persons is amended in order to revise references to the current 2010 Americans with Disabilities Act Standards for Accessible Design Standards and to conform the Florida-specific provisions to those Standards.
  • A license classification for “glass and glazing contractor” is created.
  • The bill provides for state agency compliance with the 2011 version of the National Fire Protection Association standard (NFPA 58) for LP gas tank separation and replaces specific references to energy efficiency requirements with a reference to the Florida Energy Efficiency Code for Building Construction.

CS/CS/CS/HB 849 repeals current statutory provisions relating to requirements for scheduled increases in the energy performance of buildings subject to the Florida Energy Efficiency Code for Building Construction and requires certain public swimming pools and spas to be equipped with specified safety features.

 

CS /HB 437 relating to Motor Vehicle Licenses (Governor allowed to become law without his signature)

Effective July 1, 2011, CS/HB 437 amends s. 320.6992, F.S. to provide that the application of ss. 320.60-320.70, F.S., “including any amendments to ss. 320.60-320.70, F.S.,” applies to all existing or subsequently-established motor vehicle distribution systems in Florida, unless such application would impair valid contractual agreements in violation of the State or Federal Constitution.

The bill also amends s. 320.6992, F.S. to provide that ss. 320.60-320.70, F.S., “including any amendments to ss. 320.60-320.70, F.S., which have been, or may be from time to time adopted unless the amendment specifically provides otherwise,” shall govern all agreements renewed, amended or entered into subsequent to October 1, 1988.

The bill amends s. 320.60(14), F.S. to revise the term “line-make vehicles” to provide an exception that motor vehicles sold or leased under multiple brand names or marks constitute a single line-make when:

  • They are included in single franchise agreement; and
  • Every motor vehicle dealer in Florida authorized to sell or lease any such vehicles has been offered the right to sell or lease all of the multiple brand names or marks covered by the single franchise agreement.

The definition provides that such multiple brand names or marks shall be considered individual franchises for purposes of s. 320.64(36), F.S. relating to licensee “buy-backs” of dealer equipment upon termination of a franchise contract.

 

 

Should you have any questions or comments, please contact Colodny Fass.

 

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