The Florida Senate

497.425  Alternatives to deposits under s. 497.417.--

(1)(a)  As an alternative to the requirements of s. 497.417 that relate to trust funds, a certificateholder may purchase a surety bond in an amount not less than the aggregate value of outstanding liabilities on undelivered preneed contracts for merchandise and services. For the purpose of this section, the term "outstanding liabilities" means the gross replacement or wholesale value of the preneed merchandise and services. The bond shall be made payable to the State of Florida for the benefit of the board and all purchasers of preneed cemetery merchandise or services. The bond must be approved by the board.

(b)  The amount of the bond shall be based on a report documenting the outstanding liabilities of the certificateholder and shall be prepared by the certificateholder using generally accepted accounting principles and signed by the certificateholder's chief financial officer.

(c)  The report shall be compiled as of the end of the certificateholder's fiscal year and updated annually. The amount of the bond shall be increased or decreased as necessary to correlate with changes in the outstanding liabilities.

(d)  If a certificateholder fails to maintain a bond pursuant to this section, the certificateholder shall cease the sale of preneed merchandise and services.

(2)  Upon prior approval by the board, the certificateholder may file a letter of credit with the board in lieu of a surety bond. Such letter of credit must be in a form, and is subject to terms and conditions, prescribed by the board. It may be revoked only with the express approval of the board.

(3)(a)  A buyer of preneed merchandise or services who does not receive such services or merchandise due to the economic failure, closing, or bankruptcy of the certificateholder must file a claim with the surety as a prerequisite to payment of the claim and, if the claim is not paid, may bring an action based on the bond and recover against the surety. In the case of a letter of credit or cash deposit that has been filed with the board, the buyer may file a claim with the board.

(b)  In order to qualify for recovery on any claim under paragraph (a), the buyer must file the claim no later than 1 year after the date on which the certificateholder closed or bankruptcy was filed.

(c)  The board may file a claim with the surety on behalf of any buyer under paragraph (a). The surety shall pay the amount of the claims to the board for distribution to claimants entitled to restitution and shall be relieved of liability to that extent.

(d)  The liability of the surety under any bond may not exceed the aggregate amount of the bond, regardless of the number or amount of claims filed.

(e)  If the total value of the claims filed exceeds the amount of the bond, the surety shall pay the amount of the bond to the board for distribution to claimants entitled to restitution and shall be relieved of all liability under the bond.

(4)  The certificateholder shall maintain accurate records of the bond and premium payments on it, which records shall be open to inspection by the board.

(5)  For purposes of this section, a preneed contract is a contract calling for the delivery of merchandise and services in the future and entered into before the death of the prospective recipient.

(6)  This act does not relieve the certificateholder or other entity from liability for nonperformance of contractual terms unless the certificateholder cannot deliver the merchandise or services because of a national emergency, strike, or act of God.

(7)  The board may require the holder of any assets of the certificateholder to furnish written verification of the financial report required to be submitted by the certificateholder or other entity.

(8)  Any preneed contract which promises future delivery of merchandise at no cost constitutes a paid-up contract. Merchandise which has been delivered is not covered by the required performance bond or letter of credit even though the contract is not completely paid. The certificateholder may not cancel a contract unless the purchaser is in default according to the terms of the contract. A contract sold, discounted, and transferred to a third party constitutes a paid-up contract for the purposes of the performance bond or letter of credit.

(9)  Each contract must state the type, size, and design of merchandise and the description of service to be delivered or performed.

(10)  A purchaser and a certificateholder who are parties to a preneed contract executed prior to July 2, 1988, may enter into an amended preneed contract which is made subject to this section.

(11)  The board may adopt forms and rules necessary to implement this section, including, but not limited to, rules which ensure that the surety bond and line of credit provide liability coverage for preneed merchandise and services.

History.--ss. 8, 10, ch. 88-227; s. 1, ch. 89-8; s. 34, ch. 91-220; ss. 77, 122, ch. 93-399.

Note.--Former s. 497.0484.