Insight from Carlton Fields

Transcription

1 Insight frm Carltn Fields May 2011 Capitl Reprt: Flrida Prperty Insurance Law (Part I) By Kelly Cruz-Brwn Capital Build-Up Incentive Prgram Effective July 1, 2011, Cmmittee Substitute fr Senate Bill 1087 (CS/HB 1087) allws an insurer that btained a surplus nte thrugh the Capital Build-Up Incentive Prgram that was issued prir t January 1, 2011 t request a renegtiatin f the terms f the surplus nte. As a cnditin t the renegtiatin f terms, the insurer may be exempt frm certain premium-t-surplus ratis as determined by the Flrida Office f Insurance Regulatin (FOIR) in certain circumstances. The deadline an insurer must submit its request t renegtiate the surplus nte t the Flrida State Bard f Administratin is January 1, Credit fr Reinsurance Effective July 1, 2011, Cmmittee Substitute fr Senate Bill 1087 (CS/HB 1087) increases the surplus requirements frm 100 millin t 250 millin fr assuming insurers in cnnectin with reinsurance credits and reductin in cllateral requirements. The bill further specifies the rating agencies that may rate such assuming insurers. De-Regulatin f Cmmercial Insurance Rates The Flrida Legislature has passed Cmmittee Substitute fr Cmmittee Substitute Huse Bill 99 (CS/CS HB 99) t expand the types r kinds f cmmercial insurance exempt frm Flrida s rate filing and apprval prcess in Flrida. Upn becming law, effective Octber 1, 2011, the lines types r kinds f cmmercial insurance exempt frm Flrida s rate filing and apprval requirements are: Fiduciary liability General liability Nnresidential prperty, except fr cllateral prtectin insurance as defined in sectin , Fla. Stat. Nnresidential multi peril Excess prperty Burglary and theft All cmmercial mtr vehicle Hwever, an insurer writing these lines f business must ntify the Flrida Office f Insurance Regulatin (FOIR) f any changes t the rates fr insurance and risks described abve n later than 30 days after the effective date f the change. The ntice must include the name f the insurer, the type r kind f insurance subject t rate change f insurance, and the average statewide percentage change in rates. Insurers will be required t maintain actuarial data cncerning the kind r type f insurance fr 2 years after the effective date f changes t thse rates. The insurer s actuarial data is subject t examinatin by the FOIR and the FOIR may require the insurer t incur the csts as Carltn Fields, PA. All rights reserved. Carltn Fields publicatins shuld nt be cnstrued as legal advice n any specific facts r circumstances. The cntents are intended fr general infrmatin purpses nly and may nt be quted r referred t in any ther publicatin r prceeding withut the prir written cnsent f the Firm, t be given r withheld at ur discretin. T request reprint permissin fr any f ur publicatins, please use ur Cntact Us frm, which can be fund n ur website at The distributin f this publicatin is nt intended t create, and receipt f it des nt cnstitute, an attrney-client relatinship. The views set frth herein are the persnal views f the authr and d nt necessarily reflect thse f the Firm. 1

2 Capitl Reprt: Flrida Prperty sciated with an examinatin. Upn examinatin, the FOIR shall, in accrdance with generally accepted and reasnable actuarial techniques, cnsider the statutry rate factrs and standards set frth in the Flrida Insurance Cde t determine if the rate is excessive, inadequate, r unfairly discriminatry. Discriminatry Taxes - Reinsurance Senate Memrial 484 wuld infrm the 112th Cngress f the impacts Flrida may face if a new tax, intrduced by the 111th Cngress as H.R. 3424, were impsed n the grss revenues f freign based reinsurance cmpanies. Disqualificatin frm Licensure in the Financial Services Business Upn becming law, Cmmittee Substitute fr Huse Bill 1087 (CS HB 1087) bars a persn wh cmmits a first degree felny, capital felny, a felny invlving mney laundering, fraud, r embezzlement, r a felny directly related t the financial services business frm applying fr licensure under the Flrida Insurance Cde. The term Financial services business is defined t mean any financial activity regulated by the Flrida Department f Financial Services (FDFS), the Flrida Office f Insurance Regulatin (FOIR), r the Office f Financial Regulatin (OFR). Furthermre, certain waiting perids fr licensure are specified fr ther crimes: Fifteen (15) years fr felnies invlving mral turpitude; Seven (7) years fr all ther felnies; and, Seven (7) years fr misdemeanrs related t the financial services business. The FDFS is authrized t adpt rules fr additinal waiting perids, which must prvide fr mitigating and aggravating factrs. The applicatin f mitigating factrs may nt reduce a waiting perid t less than seven (7) years. The applicable waiting perid begins upn the applicant s final release frm supervisin r cmpletin f the criminal sentence impsed. Upn cnclusin f the waiting perid, the applicant bears the burden f demnstrating that he r she has been rehabilitated, des nt pse a risk t the insurance-buying public, and is qualified fr licensure. The permanent bar and waiting perids are nt subject t sectin , Fla. Stat., which prvides that prir cnvictins are nt a bar t certain emplyment with the state and that persns whse civil rights have been restred are nt barred frm engaging in an ccupatin, prfessin, r business fr which a license, permit, r certificate is required. Exemptin f Nn-U.S. Insurers frm Certificate f Authrity Requirements Effective July 1, 2011, Cmmittee Substitute fr Huse Bill 1087 (CS HB 1087) exempts any insurer dmiciled utside f the U.S. and cvering nly persns wh, at the time f issuance r renewal, are nnresidents f the U.S. frm the requirement t btain a Certificate f Authrity. Under the bill, a nnresident is defined as a persn wh resides in and maintains a physical place f dmicile in a cuntry ther than the U.S., and which (s) he intends t maintain as her r his permanent hme. T be eligible fr the exceptin, the insurer must: Nt slicit business frm residents f the U.S.; Register with the Flrida Office f Insurance Regulatin (FOIR) via letter upn Atlanta Miami Orland St. Petersburg Tallahassee Tampa West Palm Beach 2

3 Capitl Reprt: Flrida Prperty ntificatin upn cmmencing business frm Flrida; Annually, by March 1st, must prvide the FOIR: Names f the wners, fficers and directrs and number f emplyees. Lines f insurance and types f prducts ffered; A statement frm the applicable regulatry bdy f the insurer s dmicile certifying that the insurer is licensed r registered in that dmicile; and, A cpy f filings required by the insurer s dmicile. The exempt insurer must include a disclsure n all certificates issued in Flrida reflecting that the plicy has nt been apprved by the FOIR. The insurer may nt slicit, sell, r accept applicatin fr any insurance plicy r cntract fr issue r delivery t any U.S. resident. Fr purpses f this bill, the term resident means a persn wh has had her r his principal place f dmicile in the United States fr 180 days r mre in the 365 days prir t issuance r renewal f the plicy; registered t vte in any state; made a statement f dmicile in any state; r, filed fr hmestead tax exemptin n prperty in any state. The bill impses penalties upn nn-u.s./alien insurers that fail t cmply with its requirements. Insurer Annual Statements Effective July 1, 2011, Cmmittee Substitute fr Huse Bill 1087 (CS HB 1087), revises the limits n the number f years the same accuntant r partner f an accunting firm may be used in preparing an insurer s audited financial reprt. The 7-year limitatin n using the same accuntant is reduced t a perid f 5 years; hwever, the current 2-year waiting perid the perid that the same accuntant r partner f an accunting firm must wait until he r she may resume preparing the insurer s audited financial reprt after the 5 year perid is increased t 5 years. Mtr Vehicle Service Warranty Agreements Effective July 1, 2011, Cmmittee Substitute fr Huse Bill 1087 (CS HB 1087) allws a cnsumer t purchase a mtr vehicle service agreement fr a premium amunt negtiated by the salespersn, ntwithstanding current restrictins n discriminatry pricing fr mtr vehicle service agreements. Hwever, the salespersn is nt empwered t change ther terms r cnditins f the service agreement. Payment f Wrkers Cmpensatin Benefits Effective July 1, 2011, Cmmittee Substitute fr Huse Bill 1087 (CS HB 1087) allws wrkers cmpensatin benefits t be paid n a prepaid card, if authrized by the injured emplyee. When payment is made n a prepaid card, the emplyee must be prvided with: At least ne means f accessing their entire cmpensatin payment nce per week withut incurring fees; The ability t make pint-f-sale purchases withut incurring fees frm the financial institutin issuing the prepaid card; and, The terms and cnditins f the prepaid card prgram. The carrier s bligatin t pay cmpensatin is satisfied when it directly depsits Atlanta Miami Orland St. Petersburg Tallahassee Tampa West Palm Beach 3

4 Capitl Reprt: Flrida Prperty cmpensatin nt the prepaid card, and cmpensatin is cnsidered paid n the date the funds becme available fr withdrawal by the emplyee. Carriers are required t keep recrds f all payments made. The Flrida Department f Financial Services (FDFS) is delegated rulemaking authrity relating t the payment f benefits n a prepaid card. Persns Designated t Receive Insurer Ntices Effective July 1, 2011, Cmmittee Substitute fr Huse Bill 1087 (CS HB 1087) adpts the previus industry practice f delivering certain required plicy ntices t nly the party with administrative authrity n the plicy, the first named insured. The bill requires the fllwing plicy ntices t be delivered t nly the first named insured rather than all named insured(s): Ntices f nnrenewal r renewal premium fr wrkers cmpensatin, emplyer s liability, prperty, and casualty insurance; Ntices f cancellatin r terminatin fr prperty and casualty insurance; Ntices f renewal premium, nnrenewal, cancellatin, r terminatin fr any persnal lines r cmmercial residential prperty insurance plicy, including, but nt limited t, hmewner s, mbile hme wner s, farmwner s, cndminium assciatin, cndminium unit wner s, and apartment building; and, Ntices f renewal premium, cancellatin, intent nt t renew, intent t transfer, and eligibility fr insurance thrugh the Autmbile Jint Underwriting Assciatin in plicies prviding mtr vehicle insurance. Receiverships Ancillary Prceedings Effective July 1, 2011, Cmmittee Substitute fr Senate Bill 1087 (CS/HB 1087) authrizes the Flrida Department f Financial Services (FDFS) t be appinted an ancillary receiver t an ut-f-state insurer when it is necessary t btain recrds t adjudicate the cvered claims f Flrida plicyhlders. The bill als apprpriates funds sufficient t cver the unreimbursed csts fr ancillary prceedings pened fr the purpse f btaining recrds necessary t adjudicate the cvered claims f Flrida plicyhlders. Finally, individuals with cntrl ver the affairs f the insurer in receivership prceedings, reliable fr penalties, fines, r ther csts assessed against a guaranty assciatin r the receiver that result frm the individuals refusal r delay in prviding recrds. Receiverships Guaranty Funds Effective July 1, 2011, Cmmittee Substitute fr Senate Bill 1087 (CS/HB 1087) amends prvisins relating t the Flrida Insurance Guaranty Assciatin (FIGA) and the Flrida Wrkers Cmpensatin Insurance Guaranty Assciatin (FWCIGA) cncerning the definitin f the term cvered claims. The bill deletes the specific exclusin frm cverage f a claim rejected by anther state s guaranty based n the grunds that an insured s net wrth is greater than that allwed under that states guaranty law. The bill als excludes any claim that wuld therwise be a cvered claim that has been rejected r denied by any ther state guaranty fund based upn that state s statutry exclusins including, but nt limited t, thse based n cverage, plicy type, r an insured s net wrth. Receiverships Payment f Claims by the Atlanta Miami Orland St. Petersburg Tallahassee Tampa West Palm Beach 4

5 Capitl Reprt: Flrida Prperty Flrida Department f Financial Services Effective July 1, 2011, Cmmittee Substitute fr Senate Bill 1087 (CS/HB 1087) prvides cverage by the State Risk Management Trust Fund t specified fficers and emplyees f the Flrida Department f Financial Services (FDFS) fr any liability under the federal act relating t pririty f claims, U.S.C. s. 3713, fr any actin taken by such persns in the perfrmance f their receivership duties. It is believed that extending cverage t prtect FDFS emplyees frm this persnal liability wuld allw thse emplyees t timely administer and distribute an estate withut fear that a federal claim will arise at a later date subjecting them t persnal liability fr having paid such claims. Receiverships Title Insurers Effective July 1, 2011, Cmmittee Substitute fr Senate Bill 1087 (CS/HB 1087) requires the receiver f a title insurer in rehabilitatin t file a rehabilitatin plan that prvides fr the fllwing: Title insurance plicies n real prperty in Flrida are t remain in frce, unless assessments n ther title insurers wuld be insufficient t pay the insurer s claims; Title insurance plicies n real prperty in ther states ( ut-f-state plicies ) that d nt statutrily prvide fr payment f future lsses f title insurers in receivership may be cancelled as f a date apprved by the curt, with a claims filing deadline established; and, Separate allcatins f remaining estate assets t fund claims made n ut-f-state plicies that, respectively, have been cancelled r remain in frce, and a frmula fr determining funds t be allcated t these claims. When a title insurer is rdered int rehabilitatin, all remaining title insurers are liable fr an assessment t pay utstanding claims n the insurer s plicies cvering real prperty in Flrida and assciated administrative expenses. Upn the receiver s request, the Flrida Office f Insurance Regulatin (FOIR) is required t rder an annual assessment sufficient t pay such amunts, and an annual assessment in subsequent years until specified criteria are met. Assessments are t be based n each title insurer s pr-rata share f direct title insurance premiums written in Flrida in the previus calendar year, and cannt exceed specified levels. When an assessment has been rdered, the insurer in rehabilitatin cannt issue new plicies and cannt be released frm rehabilitatin until all assessments have been repaid. T reimburse insurers fr assessments paid, the FOIR is required t rder a surcharge n all subsequently issued title insurance plicies n Flrida real prperty. The surcharge cannt exceed $25 per transactin fr each impaired title insurer and must be sufficient t repay all assessments within 7 years. When a freign title insurer with Flrida plicies is placed in receivership by its dmiciliary state, the Flrida Department f Financial Services (FDFS) is authrized t apply fr a curt rder appinting it ancillary receiver fr purpses f making assessments n the insurer s Flrida plicies. Service Warranty Cmpanies Effective July 1, 2011, Cmmittee Substitute fr Huse Bill 1087 (CS HB 1087) creates new exemptins t the licensure requirements fr service warranty entities. A service warranty entity is exempt frm licensure requirements if the service warranties it ffers are nly ffered, marketed, r sld t nnresidents f this state. The exempt service warranty entity must t file a letter f ntificatin with the Flrida Atlanta Miami Orland St. Petersburg Tallahassee Tampa West Palm Beach 5

6 Capitl Reprt: Flrida Prperty Office f Insurance Regulatin (FOIR) stating that it is licensed r therwise nt required t be regulated in the state in which the entity transacts business. The ntificatin letter must include the hme ffice address and cntact infrmatin; infrmatin abut the entity s wnership and emplyees; and states in which business is transacted. The entity must als ntify the FOIR within 30 days f ceasing business in Flrida. Unlicensed entities ffering service warranty agreements t Flrida residents may be charged with a criminal misdemeanr f the first degree. Surplus Lines Insurance law requires mnthly payments. The fee will be cmputed n the grss premium when the surplus lines plicy cvers risks that are nly partially in Flrida, and Flrida is the hme state as defined by the NRRA. The Flrida Department f Financial Services (FDFS) and the Flrida Office f Insurance Regulatin (FOIR) are authrized t enter int cperative reciprcal agreements with ther states t cllect and allcate nnadmitted insurance taxes fr multistate risks pursuant t the NRRA. The agreements are authrized t create a cmprehensive system fr reprting, cllecting, and allcating these taxes. The agreement may: Cmmittee Substitute fr Cmmittee Substitute fr Cmmittee Substitute fr Senate Bill 1816 (CS/CS/ CS SB 1816) amends varius prvisins f Flrida s Surplus Lines Law t cmply with the Nnadmitted and Reinsurance Refrm Act f 2010 (NRRA) passed by the 111th Cngress. The bill becmes effective upn becming law and requires that: Create a clearinghuse t receive and disburse nnadmitted insurance taxes; Create reprting requirements; Determine the methds fr cllecting and fr warding taxes t the apprpriate state; Surplus lines agents must file within 45 days after the end f the calendar quarter an affidavit with the Flrida Surplus Lines Office (FSLSO) stating that the agent has submitted all f the agent s surplus lines transactins t the FSLSO. Current law requires the affidavit t be filed n r befre the end f the mnth after the end f the quarter. The surplus lines tax must be cmputed n the grss premium when the surplus lines plicy cvers risks that are nly partially in Flrida and Flrida is the hme state as defined by the NRRA. The tax rate is limited t the tax rate where an insured risk is lcated. The surplus lines agents have 45 days fllwing each calendar quarter t pay t the FSLSO all service fees related t plicies reprted during the previus quarter. Current Atlanta Miami Orland St. Petersburg Tallahassee Tampa West Palm Beach Develp a premium tax allcatin frmula fr multi-state nnadmitted risks; Prvide fr audits and exchanging infrmatin; Facilitate the reasnable administratin f the cperative reciprcal agreement; and, Prvide fr a service fee f up t 0.3 percent f grss premium n transactins prcessed by the clearinghuse t fund the peratins f the clearinghuse. The FSLSO is authrized t cllect the ttal tax impsed n a multi-state risk nnadmitted insurance premium and must implement the cperative reciprcal agreement. 6

7 Capitl Reprt: Flrida Prperty The OIR and the DFS are granted rulemaking authrity t administer agreements reached with ther states. The Legislature is authrized t review any cperative reciprcal agreement, and, if the Legislature determines that the cperative agreement is nt in the best interest f the state, it shall instruct the Chief Financial Officer t withdraw frm the agreement. After the executin f a cperative reciprcal agreement, the FDFS is directed t reprt t the President f the Senate and Speaker f the Huse f Representatives n the terms f the agreement. The reprt must include: The bill requires insureds btaining independently prcured cverage t pay the independently prcured premium tax and the service fee t the FSLSO within 45 days fllwing each calendar quarter in which the insurance was prcured. Current law requires payment within 30 days after the insurance is prcured. This tax will be cmputed n the grss premium when the independently prcured plicy cvers risks that are nly partially in Flrida and Flrida is the hme state as defined by the NRRA. The tax rate is limited t the tax rate where an insured risk is lcated. Fr mre infrmatin, please cntact: Kelly Cruz-Brwn kcruz-brwn@carltnfields.cm The actual and prjected cllectins and allcatins f nnadmitted insurance premium taxes fr multistate risk fr each participating state; A detailed descriptin f the administrative structure f the agreement; The tax rates f any participating state; and, The status f ther cperative reciprcal agreements established thrughut the cuntry, including a state-by-state listing f passed r pending legislatin respnding t the NRRA As f this writing, sme f the bills reprted are awaiting review by the Gvernr and are subject t his vet authrity. The reader is encuraged t check the ultimate status f any bill by visiting the Legislature s web site ( Please select the Enrlled (ER) versin f the bill. This reprt was cmpiled in substantial part using public recrds data frm the Flrida Senate and the Flrida Huse f Representatives. Atlanta Miami Orland St. Petersburg Tallahassee Tampa West Palm Beach 7