The Florida Senate

497.462  Other alternatives to deposits under s. 497.458.--

(1)(a)  As an alternative to the requirements of s. 497.458 that relate to trust funds for contracts written prior to July 1, 2001, or that relate to trust funds for contracts written prior to December 31, 2004, by any preneed licensee authorized to do business in this state that has total bonded liability exceeding $100 million as of July 1, 2001, and subject to the other restrictions of this section, a preneed licensee may purchase a surety bond for funds not held in trust as of July 1, 2001, 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 licensing authority and all purchasers of preneed cemetery merchandise or services. The bond must be approved by the licensing authority.

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

(c)  The report shall be compiled as of the end of the preneed licensee'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 preneed licensee fails to maintain a bond pursuant to this section, the preneed licensee shall cease the sale of preneed merchandise and services.

(2)  Upon prior approval by the licensing authority, the preneed licensee may file a letter of credit with the licensing authority 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 licensing authority.

(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 preneed licensee 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 licensing authority, the buyer may file a claim with the licensing authority.

(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 preneed licensee closed or bankruptcy was filed.

(c)  The licensing authority 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 licensing authority 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 licensing authority for distribution to claimants entitled to restitution and shall be relieved of all liability under the bond.

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

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

(6)  The licensing authority may require the holder of any assets of the preneed licensee to furnish written verification of the financial report required to be submitted by the preneed licensee or other entity.

(7)  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 preneed licensee may not cancel a contract unless the purchaser is in default according to the terms of the contract and subject to the requirements of s. 497.459 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.

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

(9)  A purchaser and a preneed licensee 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. On and after January 1, 2006, this subsection may no longer be used to make any additional contracts subject to a bond under this section, provided that contracts already amended and made subject to a bond as of December 31, 2005, may remain under such bond.

(10)  The licensing authority 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.

(11)  Preneed licensees may utilize the bonding alternatives to s. 497.458 provided in this section only for contracts written prior to July 1, 2001, for funds not held in trust as of July 1, 2001, or for contracts written prior to December 31, 2004, by any preneed licensee authorized to do business in this state that has total bonded liability exceeding $100 million as of July 1, 2001, for funds not held in trust as of July 1, 2001.

History.--ss. 8, 10, ch. 88-227; s. 1, ch. 89-8; s. 34, ch. 91-220; ss. 77, 122, ch. 93-399; s. 10, ch. 2001-120; s. 111, ch. 2004-301.

Note.--Former s. 497.0484; s. 497.425.