The Florida Senate

627.701  Liability of insureds; coinsurance; deductibles.--

(1)  A property insurer may issue an insurance policy or contract covering either real or personal property in this state which contains provisions requiring the insured to be liable as a coinsurer with the insurer issuing the policy for any part of the loss or damage by covered peril to the property described in the policy only if:

(a)  The following words are printed or stamped on the face of the policy, or a form containing the following words is attached to the policy: "Coinsurance contract: The rate charged in this policy is based upon the use of the coinsurance clause attached to this policy, with the consent of the insured.";

(b)  The coinsurance clause in the policy is clearly identifiable; and

(c)  The rate for the insurance with or without the coinsurance clause is furnished the insured upon his or her request.

(2)  Unless the department determines that the deductible provision is clear and unambiguous, a property insurer may not issue an insurance policy or contract covering real property in this state which contains a deductible provision that:

(a)  Applies solely to hurricane losses.

(b)  States the deductible as a percentage rather than as a specific amount of money.

(3)(a)  A policy of residential property insurance shall include a deductible amount applicable to hurricane or wind losses no lower than $500 and no higher than 2 percent of the policy dwelling limits with respect to personal lines residential risks, and no higher than 3 percent of the policy limits with respect to commercial lines residential risks; however, if a risk was covered on August 24, 1992, under a policy having a higher deductible than the deductibles allowed by this paragraph, a policy covering such risk may include a deductible no higher than the deductible in effect on August 24, 1992. Notwithstanding the other provisions of this paragraph, a personal lines residential policy covering a risk valued at $50,000 or less may include a deductible amount attributable to hurricane or wind losses no lower than $250, and a personal lines residential policy covering a risk valued at $100,000 or more may include a deductible amount attributable to hurricane or wind losses no higher than 5 percent of the policy limits unless subject to a higher deductible on August 24, 1992; however, no maximum deductible is required with respect to a personal lines residential policy covering a risk valued at more than $500,000. An insurer may require a higher deductible, provided such deductible is the same as or similar to a deductible program lawfully in effect on June 14, 1995. In addition to the deductible amounts authorized by this paragraph, an insurer may also offer policies with a copayment provision under which, after exhaustion of the deductible, the policyholder is responsible for 10 percent of the next $10,000 of insured hurricane or wind losses.

(b)1.  Except as otherwise provided in this paragraph, prior to issuing a personal lines residential property insurance policy on or after April 1, 1996, or prior to the first renewal of a residential property insurance policy on or after April 1, 1996, the insurer must offer alternative deductible amounts applicable to hurricane or wind losses equal to $500 and 2 percent of the policy dwelling limits, unless the 2 percent deductible is less than $500. The written notice of the offer shall specify the hurricane or wind deductible to be applied in the event that the applicant or policyholder fails to affirmatively choose a hurricane deductible. The insurer must provide such policyholder with notice of the availability of the deductible amounts specified in this paragraph in a form specified by the department in conjunction with each renewal of the policy. The failure to provide such notice constitutes a violation of this code but does not affect the coverage provided under the policy.

2.  This paragraph does not apply with respect to a deductible program lawfully in effect on June 14, 1995, or to any similar deductible program, if the deductible program requires a minimum deductible amount of no less than 2 percent of the policy limits.

3.  With respect to a policy covering a risk with dwelling limits of at least $100,000, but less than $250,000, the insurer may, in lieu of offering a policy with a $500 hurricane or wind deductible as required by subparagraph 1., offer a policy that the insurer guarantees it will not nonrenew for reasons of reducing hurricane loss for one renewal period and that contains up to a 2 percent hurricane or wind deductible as required by subparagraph 1.

4.  With respect to a policy covering a risk with dwelling limits of $250,000 or more, the insurer need not offer the $500 hurricane or wind deductible as required by subparagraph 1., but must, except as otherwise provided in this subsection, offer the 2 percent hurricane or wind deductible as required by subparagraph 1.

(c)  In order to provide for the transition from wind deductibles to hurricane deductibles as required by this subsection, an insurer is required to provide wind deductibles meeting the requirements of this subsection until the effective date of the insurer's first rate filing made after January 1, 1997, and is thereafter required to provide hurricane deductibles meeting the requirements of this subsection.

(4)  Any policy that contains a separate hurricane deductible must on its face include in boldfaced type no smaller than 18 points the following statement: "THIS POLICY CONTAINS A SEPARATE DEDUCTIBLE FOR HURRICANE LOSSES, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU." A policy containing a coinsurance provision applicable to hurricane losses must on its face include in boldfaced type no smaller than 18 points the following statement: "THIS POLICY CONTAINS A CO-PAY PROVISION THAT MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU."

(5)(a)  It is the intent of the Legislature to encourage the use of higher hurricane deductibles as a means of increasing the effective capacity of the hurricane insurance market in this state and as a means of limiting the impact of rapidly changing hurricane insurance premiums. The Legislature finds that the hurricane deductibles specified in this subsection are reasonable when a property owner has made adequate provision for restoration of the property to its full value after a catastrophic loss.

(b)  A personal lines residential insurance policy providing hurricane coverage may, at the mutual option of the insured and insurer, include a secured hurricane deductible as described in paragraph (c) if the applicant presents the insurer a certificate of security as described in paragraph (d). An insurer may not directly or indirectly require a secured deductible under this subsection as a condition of issuing or renewing a policy. A certificate of security is not required with respect to an applicant who owns a 100 percent equity interest in the property.

(c)  A secured hurricane deductible must include the substance of the following:

1.  The first $500 of any claim, regardless of the peril causing the loss, is fully deductible.

2.  With respect to hurricane losses only, the next $5,000 in losses are fully insured, subject only to a copayment requirement of 10 percent.

3.  With respect to hurricane losses only, the remainder of the claim is subject to a deductible equal to a specified percentage of the policy dwelling limits in excess of the deductible allowed under paragraph (3)(a) but no higher than 10 percent of the policy dwelling limits.

4.  The insurer agrees to renew the coverage on a guaranteed basis for a period of years after initial issuance of the secured deductible equal to at least 1 year for each 2 percentage points of deductible specified in subparagraph 3. unless the policy is canceled for nonpayment of premium or the insured fails to maintain the certificate of security. Such renewal shall be at the same premium as the initial policy except for premium changes attributable to changes in the value of the property.

(d)  The department shall draft and formally propose as a rule the form for the certificate of security no later than July 1, 1996. The certificate of security may be issued in any of the following circumstances:

1.  A mortgage lender or other financial institution may issue a certificate of security after granting the applicant a line of credit, secured by equity in real property or other reasonable security, which line of credit may be drawn on only to pay for the deductible portion of insured construction or reconstruction after a hurricane loss. In the sole discretion of the mortgage lender or other financial institution, the line of credit may be issued to an applicant on an unsecured basis.

2.  A licensed insurance agent may issue a certificate of security after obtaining for an applicant a line of credit, secured by equity in real property or other reasonable security, which line of credit may be drawn on only to pay for the deductible portion of insured construction or reconstruction after a hurricane loss. The Florida Hurricane Catastrophe Fund shall negotiate agreements creating a financing consortium to serve as an additional source of lines of credit to secure deductibles. Any licensed insurance agent may act as the agent of such consortium.

3.  Any person qualified to act as a trustee for any purpose may issue a certificate of security secured by a pledge of assets, with the restriction that the assets may be drawn on only to pay for the deductible portion of insured construction or reconstruction after a hurricane loss.

4.  Any insurer, including any admitted insurer or any surplus lines insurer, may issue a certificate of security after issuing the applicant a policy of supplemental insurance that will pay for 100 percent of the deductible portion of insured construction or reconstruction after a hurricane loss.

5.  Any other method approved by the department upon finding that such other method provides a similar level of security as the methods specified in this paragraph and that such other method has no negative impact on residential property insurance catastrophic capacity. The legislative intent of this subparagraph is to provide the flexibility needed to achieve the public policy of expanding property insurance capacity while improving the affordability of property insurance.

(e)  An issuer of a certificate of security may terminate the certificate for failure to honor any of the terms of the underlying financial arrangement. The issuer must provide notice of termination to the insurer within 10 working days after termination. Unless the policyholder obtains a replacement certificate of security within an additional 20 working days after such notice, the deductible provision in the policy must revert to a lower deductible otherwise offered by the insurer and the policyholder is responsible for any additional premium required for a policy with such deductible.

(6)  Prior to issuing a personal lines residential property insurance policy on or after April 1, 1997, or prior to the first renewal of a residential property insurance policy on or after April 1, 1997, the insurer must offer a deductible equal to $500 applicable to losses from perils other than hurricane. The insurer must provide the policyholder with notice of the availability of the deductible specified in this subsection in a form specified by the department at least once every 3 years. The failure to provide such notice constitutes a violation of this code but does not affect the coverage provided under the policy. An insurer may require a higher deductible only as part of a deductible program lawfully in effect on June 1, 1996, or as part of a similar deductible program.

(7)(a)  The Legislature finds that property insurance coverage has become unaffordable for a significant number of mobile home owners, as evidenced by reports that up to 100,000 mobile home owners have terminated their insurance coverage because they cannot afford to pay approved rates charged in the voluntary or residual markets. The Legislature further finds that additional flexibility in available coverages will enable mobile home owners to obtain affordable insurance and increase capacity.

(b)  Notwithstanding the provisions of subsection (3), with respect to mobile home policies:

1.  The deductible for hurricane coverage may not exceed 10 percent of the property value if the property is not subject to any liens and may not exceed 5 percent of the property value if the property is subject to any liens.

2.  The insurer need not make the offers required by paragraph (3)(b).

(8)  Notwithstanding the other provisions of this section or of other law, but only as to hurricane coverage as defined in s. 627.4025 for commercial lines residential coverages, an insurer may offer a deductible in an amount not exceeding 5 percent of the insured value with respect to a condominium association or cooperative association policy, or in an amount not exceeding 10 percent of the insured value with respect to any other commercial lines residential policy, if, at the time of such offer and at each renewal, the insurer also offers to the policyholder a deductible in the amount of 3 percent of the insured value. Nothing in this subsection prohibits any deductible otherwise authorized by this section. All forms by which the offers authorized in this subsection are made or required to be made shall be on forms that are adopted or approved by the department.

History.--s. 605, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 538, 541, 809(2nd), ch. 82-243; s. 79, ch. 82-386; s. 114, ch. 92-318; s. 16, ch. 93-410; s. 13, ch. 95-276; s. 12, ch. 96-194; s. 11, ch. 97-55; s. 26, ch. 97-93; s. 1736, ch. 97-102.