Homeowners Bill of Rights Goes to Governor

May 1, 2008


The Senate just passed the Insurance Legislation with no amendments (33 yeas/ 5 nays – Hill, Lawson, Oelrich, Ring, Siplin) – CS/CS/CS SB 2860 relating to Insurance by Senator Jeff Atwater.

Senator Atwater explained the bill and Senator Steve Geller made some comments regarding the public model language and transparency.  Senator Joyner had some building codes questions and inquired as to what provisions  were no longer in the senate bill.  Senator Atwater explained the differences and said the bill was still a “consumer friendly” bill.  

Senator Larcenia Bullard asked about the Florida Hurricane Catastrophe Fund provisions in the bill.  Senator Atwater explained the limited apportionment provision.

Senator Lawson, again, stressed his concern about the State (especially in North Florida) subsidizing million dollar homes.   Senator Lawson noted that $2 million dollar homes are stronger homes and pay a higher premium.  Senator Lawson questioned the “consumer friendliness” of the bill and why other options were not considered.   Senator Lawson also was concerned about companies having to compete with Citizens Property Insurance Corporation (“Citizens”). 

Senator Lynn asked if the legislation would lower rates.  Senator Atwater’s answer concentrated on the Citizens rate freeze (i.e., that artificially suppressed would keep rates low).

Senator Geller responded by focusing on arbitration, approved models, and the profit factor.  He said these provisions would decrease rates.

Senator Evelynn Lynn asked if the legislation would impact liability for Floridians.

Senator Charlie Dean questioned the take out policy of the legislation.

Afer discussing the bill for a half hour the bill passed.

Below is a summary of the bill as it passed the Senate. 

Insurance. (CS/SB 2860 & 1196)

Insurance Capital Build Up Program

• Extends the program for another year (requires insurers to apply for the loan by 10/1/08).
• Specifies minimum premium-to-surplus ratios (phased in to at least 2-to-1 net or 6-to-1 gross).
• The insurer must commit that at least 15% of its premium for new policies is attributable to policies taken out of Citizens.
• The insurer must commit to maintaining a level of surplus or reinsurance sufficient to cover at least its 100-year probable maximum loss.
Market Conduct Exams, Filing of claims handling practices with OIR –
• Allows OIR to require an insurer to file its claims-handling practices and procedures, based on the findings of a market conduct exam that an insurer has exhibited a pattern or practice of willful unfair insurance trade practices violations as prohibited by 626.9541(1)(i) (unfair claims settlement practices).
• Claims handling practices and procedures filed with OIR are public records to be held by OIR for a 36-month period and are not trade secrets.
• An insurer can be required to file its claims handling practices only pursuant to an order under chapter 120.
Administrative Fines in lieu of suspension or revocation –
• Doubles the amounts of existing fines and doubles the existing caps on fines.

Trade Secret Documents

• If a person who is required to submit documents or information to OIR claims trade secret protection, the person must file a notice of trade secret or the trade secret protection is waived.
• Each page or specific portion of the document or information must be marked “trade secret,” and all trade secret information must be separated from non-trade-secret information.
• The submission must be accompanied by an affidavit under oath, stating, among other things, that the owner of the information has taken steps to protect the trade secret, that the information is not reasonably available without the owner’s consent by legitimate means, and that the information is not publicly available elsewhere.
• Provides a process for an insurer to defend the trade secret status of its documents. OIR will notify the insurer of a public records request, and the insurer has 30 days to file an action in circuit court seeking a determination of the trade secret status of the documents.
• OIR may share claimed trade secret documents with other governmental agencies.

Residential nonrenewals

• An insurer planning to nonrenew more than 10,000 residential policies within a 12-month period must provide 90 days’ advance notice to OIR for informational purposes, including its reasons for the nonrenewals, effective dates, and arrangements to offer other coverage to affected policyholders.

Penalties for unfair insurance trade practices

• Doubles the amounts of existing fines and doubles the existing caps on fines.

Unfair Insurance Trade Practices

• Prohibits an insurer from failing to pay undisputed amounts of full or partial benefits under first-party property insurance policies within 90 days after the insurer receives notice of a residential claim, determines the amount of benefits, and agrees to coverage, subject to specified exceptions. Exceptions: payment of undisputed benefits is prevented by an act of God, prevented by the impossibility of performance, or due to actions by the insured or claimant that constitute fraud, lack of cooperation, or misrepresentation regarding the claim.

Administrative proceedings in rate determinations

• Provides that in an administrative proceeding on property insurance rates, findings on the following matters are considered findings of fact:
1.        Whether factors used by the insurer or OIR are consistent with actuarial standards or otherwise based on reasonable actuarial judgment.
2.        Whether the profit and contingency factor is reasonable or excessive.
3.        Whether the cost of reinsurance is reasonable or excessive.
• In an administrative proceeding on property insurance rates, a recommended order may approve, modify, or reject the requested rate change.

Rate Standards

• Extends for another year the prohibition on use-and-file rates for property insurance.
• Permanently repeals rate arbitration.
• Provides that OIR may not disapprove a rate as excessive solely because the insurer obtained catastrophic reinsurance to cover its 250-year probable maximum loss or a lower level of loss.
• Projected hurricane losses must be estimated using a commission-approved model.
• Repeals the provision allowing a reasonable rate of return commensurate with risk for companies that expose their surplus to catastrophic losses in lieu of reinsurance.
• Provides for expedited DOAH review of OIR rate filing actions and expedited appellate review of DOAH rate filing action.

Florida Commission on Hurricane Loss Projection Methodology

• Provides legislative findings that the commission’s activities are not final agency action and are not subject to chapter 120.
• Requires the commission to adopt findings with respect to the accuracy or reliability of models for the purpose of projecting probable maximum losses.
• Requires insurers to use, without modification or adjustment, commission-approved models in determining PMLs; this requirement applies only with respect to a rate filing made more than 60 days after  the commission adopts findings with respect to the accuracy or reliability of models related to the calculation of PMLs .
• Removes provision relating to the admissibility and relevance of modeled findings and factors and requirement for OIR and Consumer Advocate access to a model’s assumptions and factors.
Residential property rate filings –
• Requires OIR to develop a methodology by 2/1/2011 for mitigation discounts and credits correlated to the numerical mitigation score on the uniform home grading scale.
• Requires rulemaking by 10/1/2011 to require insurers to apply the uniform methodology.

Citizens Property Insurance Corporation

• Removes distinctions between homestead and non-homestead property.
• Provides that, effective 1/1/2009, a personal lines residential property valued at $2 million or more (instead of $1 million or more) is ineligible for Citizens coverage.
• Provides that, effective 1/1/2011, eligibility restrictions on non-mitigated properties in the wind-borne debris region apply to properties valued at $500,000 or more. (Current law applies this restriction, effective 1/1/2009, to properties valued at $750,000 or more.)
• Lowers the maximum percentage for regular assessments (and the trigger for emergency assessments) to 6% of statewide premium for subject lines of business (instead of 10%).
• Removes the immediate Citizens policyholder surcharge, but allows for surcharges upon renewal or issuance of policies, and increases the maximum policyholder surcharge upon renewal or issuance of a policy to 15%.
• Requires Citizens to make a new recommended actuarially sound rate filing beginning 7/15/2009 and annually thereafter. The 2009 rate filing may not take effect prior to 1/1/2010.
• Repeals forced-purchase of Citizens bonds.
• Amends provisions relating to confidentiality of Citizens’ files to allow Citizens to release underwriting files to other governmental agencies, to provide that a policyholder has a right to discovery of the contents of his or her claims file, and to provide that, pursuant to subpoena, a third party has the right to discovery of underwriting and claims files.

Notice of cancellation, nonrenewal, or renewal of premium

• Requires 180 days’ advance notice of nonrenewal, cancellation, or termination of a personal lines or commercial residential policy (except for nonpayment or for cancellations during the first 90 days after initial issuance). The new 180-day notice requirement applies only to a named insured whose structure has been insured by the insurer or an affiliate for at least 5 years.

Sale of residential property; disclosure of windstorm mitigation rating

• Effective 1/1/2011, requires the seller of residential property to disclose the property’s windstorm mitigation rating to the buyer.

Funding for Insurance Capital Build Up Incentive Program

• Requires Citizens to transfer $250 million to the General Revenue Fund by 12/15/2008, provided the combined surplus of each Citizens account exceeds $1 billion. Repayments of surplus notes funded by Citizens, including interest, will be transferred to Citizens.
• Citizens may not use the funding of the Insurance Capital Build-Up Incentive Program as a justification for rate increases or assessment increases.

Effective date – July 1, 2008, except as otherwise provided.



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