Florida Legislation Will Essentially Prohibit Adding Optional Coverage by Notice of Change in Policy Terms
Jun 19, 2015
Above: Colodny Fass Shareholder Wes Strickland Notes New Florida Law Will Essentially Prohibit Adding Optional Coverage by Notice of Change in Policy Terms
On June 16, 2015, Governor Rick Scott signed into law legislation that will essentially prohibit the ability of insurance companies to use a notice of change in policy terms when the insurer seeks to add optional coverage to a policy at renewal. This provision was included in Committee Substitute for House Bill 273, which was codified as Chapter 2015-170, Laws of Florida and becomes effective on July 1, 2015.
Prior to enactment of this legislation, Section 627.43141, Florida Statutes allowed an insurer to make a change in policy terms without nonrenewing those policyholders that the insurer wished to continue insuring. A “change in policy terms” is defined in pertinent part as “the modification, addition, or deletion of any term, coverage, duty, or condition from the previous policy.” Receipt of the premium payment for the renewal policy by the insurer is deemed to be acceptance of the new policy terms by the insured.
Under the new law, an insurer may not use a notice of change in policy terms at renewal to add “optional coverage” that increases the premiums to a policyholder, unless the policyholder affirmatively indicates to the insurer or agent that the policyholder approves the addition of the optional coverage.
A definition of the term “optional coverage” has been added to Section 627.43143, Florida Statutes as follows: “‘Optional coverage’ means the addition of new insurance coverage that has not previously been requested or approved by the policyholder but that does not include any change to the base policy or a deductible or an insurance limit.”
This definition of “optional coverage” does not apply to changes to the base policy, deductibles or insurance limits. Accordingly, a notice of change in policy terms may continue to be used by insurers when making changes to the base policy or modifying deductibles or limits already included in coverages under the policy.
The restriction on using the notice of change in policy terms appears to be limited to situations where an insurer is seeking to add a new coverage at renewal, but presumably a policy change that would increase or decrease a deductible or coverage limit already in a policy is still permitted under a notice of change in policy terms without requiring affirmative approval of the policyholder.
The new requirement for an insurer to obtain affirmative approval for addition of optional coverage at renewal means that some indication of approval must be obtained from the policyholder other than the insurer’s receipt of the renewal premium. The new statute does not indicate whether affirmative policyholder approval is required to be in writing or may be obtained verbally. In either event, an insurer should ensure that such approval is recorded and retained to demonstrate compliance with the statute.
It should be noted that the prohibition on using the notice of change in policy terms for adding optional coverage only applies where the premium is increased. If the addition of an optional coverage would result in a premium decrease, it does not appear affirmative policyholder approval is required. It is unclear whether a notice of change in policy terms could be used to add optional coverage where the policyholder is charged additional premium for the optional coverage but the policyholder is otherwise receiving an overall premium decrease at renewal.
In addition to the changes to Section 627.43141, Florida Statutes noted above, a notice of change in policy terms may be sent to the named insured separately from the notice of renewal premium if separate notice is sent within the timeframe required for provision of a notice of nonrenewal for the line of insurance covered under the policy. The insurer will also be required to provide a sample copy of the notice to the named insured’s insurance agent before or at the same time that notice is provided to the named insured.
Should you have any questions or comments, please contact Wes Strickland at wstrickland@ColodnyFass.com or +1 850 321 3475.
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