The Florida Senate

497.423  Evidence of financial responsibility as alternative to trust deposit.--

(1)  In lieu of depositing funds into a trust as required by s. 497.417(1) or s. 497.429, a certificateholder may elect annually, at its discretion, to comply with this section by filing annually a written request with, and receiving annual approval from, the board.

(2)  No certificateholder shall utilize this section unless it has filed annually a written request with, and received approval by, the board.

(3)  The certificateholder receiving approval from the board to comply with this section shall maintain compliance with this section at all times during the period this election is in effect.

(4)  The certificateholder's request to be governed by this section shall be in the form prescribed by the board and shall be accompanied by, in addition to other information that the board may require by rule, the surety bond, the audited financial statements, and proof of the other requirements specified in this section, all as described in this section.

(5)  For each 12-month period, or any part thereof, in which this section is applicable, the electing certificateholder shall maintain a bond, issued by a surety company admitted to do business in this state, in an amount at least equal to the sum of all amounts not currently in trust, an amount equal to the total purchase price for all installed preneed contracts where the total purchase price has not been collected, excluding those amounts already in trust, all amounts the certificateholder intends to remove from trust if the board approves the certificateholder's request to comply with this section, and an amount equal to 70 percent of the total purchase price for each preneed contract the certificateholder expects to sell in the year for which the certificateholder is electing to comply with this section. The surety bond shall be conditioned in such a manner to secure the faithful performance of all conditions of any preneed contracts for which the certificateholder was required to have covered by the amount of the bond, including refunds requested pursuant to ss. 497.419 and 497.421 The surety bond shall also guarantee the financial responsibility of such certificateholder against its default arising out of any of its preneed contracts. The terms of the surety bond shall cover liabilities arising from all moneys received by the electing certificateholder from preneed contracts for which the certificateholder was required to have covered by the amount of the bond during the time the bond is in effect, and the liability of the surety shall continue until the contracts thereunder are fulfilled. The bond shall be in favor of the state for the benefit of any person damaged as a result of purchasing a preneed contract from the certificateholder. The aggregate liability of the surety to all persons for all breaches of the conditions of the bonds shall in no event exceed the amount of the bond. The per preneed contract liability shall not exceed the amount of the funds received by the certificateholder per preneed contract during the effective period in which the bond is issued. The bond shall be filed and maintained with the board.

(6)  The amount of the surety bond shall, upon order of the board, be increased if, in the board's discretion, it finds such increase to be warranted by the volume of preneed contracts handled, or expected to be handled, by the certificateholder. The surety bond shall be in a form to be approved by the board, and the board shall have the right to disapprove any bond which does not provide assurance as provided in, and required by, this section.

(7)  The bond shall be maintained unimpaired for as long as the certificateholder continues in business in this state and continues to utilize this section. Whenever the certificateholder notifies the board that it no longer desires to be governed by this section and furnishes to the board satisfactory proof that it has discharged or otherwise adequately provided for all of its obligations to its preneed contract purchasers covered by the bond, such as by evidence satisfactory to the board demonstrating that s. 497.417 or s. 497.429 has been complied with, the board shall release the bond to the entitled parties, provided said parties acknowledge receipt of same.

(8)  No surety bond used to comply with this section shall be canceled or subject to cancellation unless at least 60 days' advance notice thereof, in writing, is filed with the board, by the surety company. The cancellation of the bond shall not relieve the obligation of the surety company for claims arising out of contracts issued or otherwise covered before cancellation of the bond. In the event that notice of termination of the bond is filed with the board, the certificateholder insured thereunder shall, within 30 days of the filing of the notice of termination with the board, provide the board with a replacement bond or with evidence which is satisfactory to the board demonstrating that s. 497.417 or s. 497.429 has been fully complied with. If within 30 days of filing of the notice of termination with the board no replacement bond acceptable to the board or no evidence satisfactory to the board demonstrating that s. 497.417 or s. 497.429 has been complied with is filed with the board, the board shall suspend the license of the certificateholder until the certificateholder files a replacement bond acceptable to the board or demonstrates to the satisfaction of the board that it has complied with s. 497.417 or s. 497.429

(9)  In lieu of the surety bond, the board may provide by rule for other forms of security or insurance.

(10)  Every certificateholder electing to be governed by this section shall have its financial statements, submitted to the department pursuant to s. 497.407, audited by an independent public accountant certified pursuant to chapter 473. The financial statements shall contain, in accordance with generally accepted accounting principles, for two or more consecutive annual periods, the following:

(a)  The certified public accountant's unqualified opinion or, in the case of a qualified opinion, a qualified opinion acceptable to the board, and:

1.  A balance sheet;

2.  A statement of income and expenses; and

3.  A statement of changes in financial position.

(b)  Notes to the financial statements considered customary or necessary for full disclosure and adequate understanding of the financial statements, financial condition, and operation of the certificateholder. The notes shall include a schedule, based upon statutory accounting principles, indicating that the certificateholder which has held a certificate pursuant to this chapter for less than 10 years has a current ratio of no less than 3 to 1 of current assets to current liabilities and net assets of at least $600,000 or that the certificateholder which has held a certificate pursuant to this chapter for 10 years or more has a current ratio of no less than 2 to 1 of current assets to current liabilities and net assets of at least $400,000.

(c)  An indication that the certificateholder has sufficient funds available to perform the obligations under all its preneed contracts.

(11)  The board may require that the audited financial statements be prepared on a calendar-year basis.

(12)  The electing certificateholder shall provide the board interim unaudited financial statements on a quarterly basis demonstrating financial compliance with this section.

(13)  In lieu of subsections (4)-(11), a certificateholder with net assets of at least $25,000 may request to comply with this section by providing a written guarantee from a qualified guaranteeing organization. If the certificateholder so elects, the certificateholder's requests to be governed by this section shall be in the form prescribed by the board and shall be accompanied by, in addition to other information the board may require by rule, a written guarantee approved by the board as meeting the requirements of this section from a qualified guaranteeing organization, acceptable to the board, which:

(a)  Is either a certificateholder or servicing agent.

(b)  Is a corporation formed under the laws of this state or of another state, district, territory, or possession of the United States.

(c)  Has been in operation for 10 or more years.

(d)  Submits to the board its annual financial statements audited by an independent public accountant certified pursuant to chapter 473. The financial statements shall contain, in accordance with generally accepted accounting principles, for two or more consecutive annual periods, the following:

1.  The certified public accountant's unqualified opinion or, in the case of a qualified opinion, a qualified opinion acceptable to the board, and:

a.  A balance sheet;

b.  A statement of income and expenses; and

c.  A statement of changes in financial position.

2.  Notes to the financial statements considered customary or necessary for full disclosure and adequate understanding of the financial statements, financial condition, and operation of the certificateholder. The notes shall include a schedule, based upon statutory accounting principles, indicating that the guaranteeing organization has a current ratio of no less than 2 to 1 of current assets to current liabilities and net assets of at least $250,000.

(e)  Has sufficient funds available to perform the obligations under its guarantees.

(f)  Has complied with subsections (5), (6), (7), and (8), except that the bond shall be maintained by the guaranteeing organization in the minimum aggregate principal amount of $1 million.

(g)  Has principals, including directors, officers, stockholders, employees, and agents that are of good moral character and have reputations for fair dealing in business matters, both as determined by the board.

History.--ss. 12, 17, ch. 88-139; ss. 101, 122, ch. 93-399.

Note.--Former s. 639.145.