Florida Surplus Lines Service Office Hosts Webinar on Courtesy Filing, Legislative Updates and Policy Fees

The Florida Surplus Lines Service Office (“FSLSO”) held a Members’ Forum Webinar, entitled “Courtesy Filing, Legislative Updates and More on Policy Fees,” on May 9, 2013. 

FSLSO Insurance Analyst Brian Bogner began the Webinar by introducing Tom Terfinko, FSLSO Assistant Director of Agent Relations and Felicia Meredith, FSLSO Compliance Outreach Coordinator.

The speakers related that, since holding the most recent FSLSO Webinar, they had received some questions about the imposition of certain fees on surplus lines policies-inspection fees in particular.

The question was asked whether inspections may be ordered by a surplus lines agent instead of the insurance company, and whether the cost may be paid back in the form of a fee.  Mr. Terfinko responded that this issue arises as a result of how the marketplace produces business.  Flood and other types of policies often require verification of the risk as part of the underwriting process, he explained. 

Sometimes, managing general agents and brokers take on the responsibilities of an insurance company in ordering inspections, which are required to issue policies, and would be permitted to be reimbursed for related underwriting costs, such as inspection fees, Mr. Terfinko said. 

Ms. Meredith added that, for compliance review purposes, agents should maintain verification of inspection payment.

The next question addressed was whether it is allowable for a broker to charge fees on a policy in addition to the $35 per policy fee permitted by section 626.916(4), F.S.  Mr. Terfinko indicated that this was not permissible, and that it could be a violation of section 626.9541(1)(o) , F.S. prohibiting illegal dealings in premium.

Ms. Meredith explained that, if the insurance company is charging a fee, all charges passed on to the insured should be indicated on the policy declarations page.  In its compliance reviews, the FSLSO would “follow the money” to determine if the fee charged to the insured was submitted to the insurance company, or whether it was kept by the agent as additional income, which would be impermissible.  Agents must keep documentation of this fee payment information for compliance review purposes.  Ms. Meredith also reminded participants that fees are considered to be premium and are subject to taxes and assessments.

For inspection fees that are charged by an insurance company, the FSLSO would expect to see a copy of the inspection and the inspection fee invoice as part of its compliance review.  If the agent did not have that documentation, or the fee charged to the insured was more than the actual fee of the inspection, the agent would be instructed to refund the money to the insured.  If a pattern of this activity was identified in a compliance review, the agent would be referred to the Florida Department of Financial Services. 

Fees may not be charged by agents for the expenses they incur in processing paperwork.  Section 626.916(4), F.S. provides exclusively for the $35 per policy fee, so regardless of whether this is considered to be adequate compensation or not, it is the only fee that is authorized by Florida law.

The filing of “courtesy filings” is a hot topic about which the FSLSO receives many questions.  There are many newly licensed agents in Florida each year who may not be aware of what they are, or whether they are allowed. 

A hypothetical example was given involving a Florida licensed surplus lines agent with an agency that also has offices in other states.  In the example, the agency’s California office does not have Florida-licensed surplus lines agent.  A California-licensed agent placed a Florida surplus lines policy and then asked the Florida-licensed agency to file it with the FSLSO.  This type of activity is illegal under Florida law.  A Florida-licensed agent must be actively involved in the application process and must bind the coverage.  Florida Statutes sections 626.913(2) and 626.915(3) provide that eligible coverage must be placed with a Florida-licensed surplus lines agent.

Section 626.929, F.S. provides that a licensed surplus lines agent may originate surplus lines business and accept surplus lines business from any other originating Florida-licensed general lines agent appointed and licensed as to the kinds of insurance involved.  However, only Florida-licensed surplus lines agents may place eligible coverage.

Ms. Meredith gave some tips to agents to help prevent them from running afoul of this law.  If requested to do so, agents should not file, pay taxes for, or countersign policies that they were not actively involved in placing, but instead should refer the requesting agent to the FSLSO to discuss how to handle the placement, she said.  Agents should contact the FSLSO or review the FSLSO Agents’ Procedure Manual if they need further clarification.

Next, Mr. Terfinko provided an update on new Florida legislation that may affect FSLSO members.  A proposed omnibus insurance bill, House Bill 635, did not pass, which was disheartening, he said.  This bill would have removed the requirement that surplus lines agents file an affidavit on a quarterly basis.

Senate Bill 1832, which would have repealed the salary tax credit for insurance companies, was added to HB 635 as an amendment in the last hours of the recently concluded 2013 Legislative Session.  As a result, HB 635, which would have had a positive impact on certain insurance issues, did not ultimately pass.  Mr. Terfinko indicated that the FSLSO is looking forward to advancing some of those issues next year.

Another provision extending the exemption from Florida Hurricane Catastrophe Fund assessments until 2016 for medical malpractice insurance passed in both SB 1770 and SB 468.

Agents should continue to file with the FSLSO’s Surplus Lines Insurance Portal (SLIP), which will be updated as necessary.

It was further discussed that SB 468 added two lines of coverage to the list of lines set forth in section 627.062(3)(d), F.S. that qualify for the provision of a disclosure statement in lieu of a diligent effort requirement.   SB 468 also added medical malpractice insurance for facilities that are not hospitals to this list of coverages, which is mostly composed of commercial lines.  If Florida Governor Rick Scott signs the bill or allows it to become law without his signature, it would become effective on July 1, 2013.

Senate Bill 1770 also passed, which created a clearinghouse “keep out” program within Florida’s Citizens Property Insurance Corporation.  However, surplus lines insurers are not allowed to participate in the program

With that information, the call was ended, and Mr. Terfinko indicated that agents can always contact the FSLSO or refer to the FSLSO Website (www.FSLSO.com) for further information.

 

 

 

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