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The Florida Senate

2017 Florida Statutes

Title XXXVII INSURANCE
Chapter 631 INSURER INSOLVENCY; GUARANTY OF PAYMENT Entire Chapter
SECTION 191
Special deposit claims; secured claims; administration of workers’ compensation large deductible policies and insured collateral.
F.S. 631.191
631.191 Special deposit claims; secured claims; administration of workers’ compensation large deductible policies and insured collateral.—
(1) SPECIAL DEPOSIT CLAIMS.—The owners of special deposit claims against an insurer against which a liquidation order has been entered in this or any other state shall be given priority against their several special deposits in accordance with the provisions of the statutes governing the creation and maintenance of such deposits. If there is a deficiency in any such deposit so that the claims secured thereby are not fully discharged therefrom, the claimants may share in the general assets, but such sharing shall be deferred until general creditors, and also claimants against other special deposits who have received smaller percentages from their respective special deposits, have been paid percentages of their claims equal to the percentage paid from the special deposit.
(2) SECURED CLAIMS.—
(a) The owner of a secured claim against an insurer against which a liquidation order has been entered in this or any other state may surrender her or his security and file her or his claim as a general creditor, or the claim may be discharged by resort to the security, in which case the deficiency, if any, shall be treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors. If the amount of the deficiency has been adjudicated in ancillary proceedings as provided in this chapter, or if it has been adjudicated by a court of competent jurisdiction in a proceeding in which the domiciliary receiver has had notice and an opportunity to be heard, such amount shall be conclusive; otherwise the amount shall be determined in the delinquency proceeding in the domiciliary state.
(b) The value of any security held by a secured creditor shall be determined under supervision of the court by:
1. Converting the same into money according to the terms of the agreement pursuant to which the security was delivered to such creditor; or
2. If no such agreement exists, the court shall determine the value in the event the creditor and the receiver cannot agree upon same.
(3) ADMINISTRATION OF WORKERS’ COMPENSATION LARGE DEDUCTIBLE POLICIES AND INSURED COLLATERAL.—
(a) Definitions.—As used in this subsection, the term:
1. “Collateral” means cash, a letter of credit, a surety bond, or any other form of security posted by the insured, or by a captive insurer or reinsurer, to secure the insured’s obligation under a large deductible policy to pay deductible claims or to reimburse the insurer for deductible claim payments. Collateral may also secure an insured’s obligation to reimburse or pay the insurer as may be required for other secured obligations.
2. “Deductible claim” means any claim that is within the deductible under a large deductible policy, including a claim for loss and defense and cost containment expense, unless such expense is excluded by the terms of the policy.
3.a. “Large deductible policy” means a combination of one or more workers’ compensation policies and endorsements issued to an insured, and contracts or security agreements entered into between an insured and the insurer, in which the insured has agreed with the insurer to:
(I) Pay directly the initial portion of any claim under the policy up to a specified dollar amount or the expenses related to any claim; or
(II) Reimburse the insurer for its payment of any claim or related expenses under the policy up to the specified dollar amount of the deductible.
b. The term also includes policies that contain an aggregate limit on the insured’s liability for all deductible claims in addition to a per-claim deductible limit. A policy must meet the current guidelines for large deductible workers’ compensation filings as defined by the office, including the eligibility standards regarding the minimum standard premium and the minimum deductible to be deemed a large deductible policy.
c. The term does not include policies, endorsements, or agreements providing that the initial portion of any covered claim must be self-insured and that the insurer has no payment obligation within the self-insured retention.
d. The term does not include policies that provide for retrospectively rated premium payments by the insured or reinsurance arrangements or agreements, except to the extent such arrangements or agreements assume, secure, or pay the policyholder’s large deductible obligations.
4. “Other secured obligations” means obligations of an insured to an insurer other than those under a large deductible policy, such as those under a reinsurance agreement or other agreement involving retrospective premium obligations, the performance of which is secured by collateral that also secures an insured’s obligations under a large deductible policy.
(b) Applicability.—
1. This subsection applies to workers’ compensation large deductible policies issued by an insurer that is subject to delinquency proceedings under this chapter. This subsection does not apply to first-party claims, or to covered claims funded by a guaranty association above the deductible unless paragraph (c) applies. Large deductible policies must be administered in accordance with the terms of the policy, except to the extent such terms conflict with this subsection.
2. This subsection applies to all delinquency proceedings that commence on or after July 1, 2017.
(c) Handling of large deductible claims.—Unless otherwise agreed to by the responsible guaranty association, all large deductible claims that are also covered claims as defined by an applicable guaranty association law, including those that may have been funded by an insured before liquidation, must be turned over to the guaranty association for handling. To the extent the insured funds or pays the deductible claim pursuant to an agreement by the guaranty fund or otherwise, the insured’s funding or payment of a deductible claim extinguishes the obligations, if any, of the receiver and any guaranty association to pay such claim. A charge may not be made against the receiver or a guaranty association on the basis of an insured’s funding or payment of a deductible claim.
(d) Deductible claims paid by a guaranty association.—
1. To the extent a guaranty association pays any deductible claim for which an insurer would have been entitled to reimbursement from an insured, a guaranty association is entitled to the amount of reimbursements received or collateral available, subject to paragraph (g). Reimbursements paid to the guaranty association pursuant to this paragraph may not be treated as distributions under s. 631.271 or as early access payments under s. 631.397(1).
2. To the extent that a guaranty association pays a deductible claim that is not reimbursed from collateral or by insured payments, or the guaranty association incurred expenses in connection with large deductible policies that are not reimbursed under this subsection, the guaranty association is entitled to assert a claim for those amounts in the delinquency proceeding.
3. This paragraph does not limit any right of the receiver or a guaranty association which may otherwise exist under applicable law to obtain reimbursement from insureds for claims payments made by the guaranty association under policies of the insurer or for the guaranty association’s related expenses.
(e) Collections.—
1. The receiver may collect reimbursements owed for deductible claims as provided in this paragraph, and must use reasonable efforts to collect such reimbursements from the insured or the party that is obligated to pay the deductible as specified in the large deductible policy or other agreement. The receiver may bill insureds and others for reimbursement of deductible claims that are:
a. Paid by the insurer before the commencement of delinquency proceedings;
b. Paid by a guaranty association upon receipt by the receiver of notice from a guaranty association of reimbursable payments; or
c. Paid or allowed by the receiver.
2. If the insured or other party does not make payment within the time specified in the large deductible policy, or, if no time is specified, within a reasonable time after the date of billing, the receiver may take reasonable steps to collect any reimbursements owed.
3. The insolvency of the insurer or its inability to perform any of its obligations under the large deductible policy may not be a defense to the insured’s reimbursement obligation under the large deductible policy.
4. An allegation of improper handling or payment of a deductible claim by the receiver or a guaranty association may not be a defense to the insured’s reimbursement obligations under the large deductible policy.
(f) Collateral.—
1. Subject to this paragraph, the receiver shall use collateral, when available, to secure the insured’s obligation to fund or reimburse deductible claims or other secured obligations or payment obligations. A guaranty association is entitled to collateral as provided for in this paragraph to the extent needed to reimburse a guaranty association for the payment of a deductible claim. Any distributions made to a guaranty association pursuant to this paragraph may not be treated as distributions under s. 631.271 or as early access payments under s. 631.397(1).
2. The receiver shall draw down collateral to the extent necessary in the event the insured fails to:
a. Perform its funding or payment obligations under any large deductible policy;
b. Pay deductible claim reimbursements within the time specified in the large deductible policy, or, if no time is specified, within 60 days after the date of the billing;
c. Pay amounts due to the estate for preliquidation obligations;
d. Timely fund any other secured obligation; or
e. Timely pay expenses.
3. Claims that are validly asserted against the collateral must be satisfied in the order in which such claims are received by the receiver. However, if more than one creditor has a valid claim against the same collateral and the available collateral, along with billing collection efforts and to the extent that the collateral is subject to other known secured obligations, are together insufficient to pay each creditor in full, the receiver may prorate payments based on the ratio of the amount of claims each creditor has to the total claims paid by all such creditors.
4. Excess collateral may be returned to the insured, as determined by the receiver, after a periodic review of claims paid, outstanding case reserves, and a factor for claims that were incurred but not reported.
(g) Receiver’s expenses.—The receiver is entitled to deduct from the collateral or from the deductible reimbursements reasonable and actual expenses incurred in connection with the collection of the collateral and deductible reimbursements as provided pursuant to s. 631.271.
(h) Construction.—This subsection does not limit or adversely affect any rights or powers a guaranty association may have under applicable state law to obtain reimbursement from certain classes of policyholders for claims payments made by the guaranty association under policies of the insolvent insurer, or for related expenses the guaranty association incurs.
History.—s. 735, ch. 59-205; s. 809(1st), ch. 82-243; s. 13, ch. 83-38; s. 9, ch. 89-360; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 402, ch. 97-102; s. 10, ch. 2017-143.