Hospital Alliance Seeks Florida Office of Insurance Regulation Determination of Surplus Lines Status for Property Insurance Purposes
Mar 11, 2010
On February 15, 2010, Safety-Net Hospital Alternative Risk Pool, LLC (“Safety-Net”) filed a petition for a declaratory statement with the Florida Office of Insurance Regulation (“OIR”) seeking to determine whether hospital alliances formed for the purpose of securing property insurance under applicable law are subject to the Florida Insurance Code, which requires the payment of taxes and service fees on surplus lines policies.
Section 395.106, Fla. Stat. authorizes licensed Florida hospitals to form an alliance for the purpose of pooling and spreading the liabilities of alliance members relating to property exposure, implementation of self-insurance coverage for its members, or securing of property insurance for the benefit of its members, provided the alliance meets other requirements. In 2007, several hospitals formed Safety-Net for the purpose of securing property insurance coverage through a surplus lines insurer in accordance with this section.
The Florida Surplus Lines Service Office has taken the position that Safety-Net is required to pay the surplus lines policy tax and service fee pursuant to sections 626.932 and 626.9325, Fla. Stat. when Safety-Net purchases surplus lines property insurance coverage through a surplus lines agent or broker.
Section 395.106(3), Fla. Stat. provides that “[a]n alliance that meets the requirements of this section is not subject to any provision of the insurance code.” However, Section 624.01 clarifies that Chapter 626, which includes the requirement for the payment of surplus lines taxes and fees, is part of the Florida Insurance Code.
Safety-Net asserts that it is not required to pay the surplus lines tax or service fee found in Chapter 626 because of the express language found in section 395.106 that exempts alliances such as Safety-Net from the Florida Insurance Code.
Safety-Net has requested that the OIR issue a declaratory statement on this issue. In accordance with section 120.565, Fla. Stat., the OIR has 90 days after the filing of the petition in which to issue a declaratory statement or render a final order denying the petition.
Colodny Fass will continue to monitor this proceeding and report on any significant developments as they occur. Should you have any questions or comments, please contact our office.
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