Senate Bill 1108c1
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
By the Committee on Banking and Insurance and Senator Williams
311-1789-98
1 A bill to be entitled
2 An act relating to insurance; amending s.
3 627.021, F.S.; providing that the provisions of
4 ch. 627, F.S., do not apply to commercial
5 inland marine insurance; amending ss. 627.0651,
6 627.410, F.S.; making conforming changes to
7 requirements for filing underwriting rules and
8 forms; amending s. 627.311, F.S.; revising the
9 composition of the workers' compensation joint
10 underwriting plan; prohibiting insurers from
11 providing workers' compensation to certain
12 employers; amending s. 627.7295, F.S., relating
13 to minimum down payments for motor vehicle
14 insurance; providing an effective date.
15
16 Be It Enacted by the Legislature of the State of Florida:
17
18 Section 1. Subsection (2) of section 627.021, Florida
19 Statutes, is amended to read:
20 627.021 Scope of this part.--
21 (2) This chapter does not apply to:
22 (a) Reinsurance, except joint reinsurance as provided
23 in s. 627.311.
24 (b) Insurance against loss of or damage to aircraft,
25 their hulls, accessories, or equipment, or against liability,
26 other than workers' compensation and employer's liability,
27 arising out of the ownership, maintenance, or use of aircraft.
28 (c) Insurance of vessels or craft, their cargoes,
29 marine builders' risks, marine protection and indemnity, or
30 other risks commonly insured under marine, as distinguished
31 from inland marine, insurance policies.
1
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 (d) Commercial inland marine insurance.
2 (e)(d) Surplus lines insurance placed under the
3 provisions of ss. 626.913-626.937.
4 Section 2. Subsection (13) of section 627.0651,
5 Florida Statutes, is amended to read:
6 627.0651 Making and use of rates for motor vehicle
7 insurance.--
8 (13)(a) Underwriting rules not contained in rating
9 manuals shall be filed for private passenger automobile
10 insurance and homeowners' insurance.
11 (b) The submission of rates, rating schedules, and
12 rating manuals to the department by a licensed rating
13 organization of which an insurer is a member or subscriber
14 will be sufficient compliance with this subsection for any
15 insurer maintaining membership or subscribership in such
16 organization, to the extent that the insurer uses the rates,
17 rating schedules, and rating manuals of such organization.
18 All such information shall be available for public inspection,
19 upon receipt by the department, during usual business hours.
20 (c) The filing requirements of this subsection do not
21 apply to commercial inland marine risks.
22 Section 3. Subsection (4) of section 627.311, Florida
23 Statutes, is amended to read:
24 627.311 Joint underwriters and joint reinsurers.--
25 (4)(a) Effective upon this act becoming a law, the
26 department shall, after consultation with insurers, approve a
27 joint underwriting plan of insurers which shall operate as a
28 nonprofit entity. For the purposes of this subsection, the
29 term "insurer" includes group self-insurance funds authorized
30 by s. 624.4621, commercial self-insurance funds authorized by
31 s. 624.462, assessable mutual insurers authorized under s.
2
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 628.6011, and insurers licensed to write workers' compensation
2 and employer's liability insurance in this state. The purpose
3 of the plan is to provide workers' compensation and employer's
4 liability insurance to applicants who are required by law to
5 maintain workers' compensation and employer's liability
6 insurance and who are in good faith entitled to but who are
7 unable to purchase such insurance through the voluntary
8 market. The joint underwriting plan shall issue policies
9 beginning January 1, 1994. The plan must have actuarially
10 sound rates that assure that the plan is self-supporting.
11 (b) The operation of the plan is subject to the
12 supervision of a 13-member board of governors. The board of
13 governors shall be comprised of:
14 1. Five of the 20 domestic insurers, as defined in s.
15 624.06(1), having the largest voluntary direct premiums
16 written in this state for workers' compensation and employer's
17 liability insurance, which shall be elected by those 20
18 domestic insurers;
19 2. Five of the 20 foreign insurers as defined in s.
20 624.06(2) having the largest voluntary direct premiums written
21 in this state for workers' compensation and employer's
22 liability insurance, which shall be elected by those 20
23 foreign insurers;
24 3. One person, who shall serve as the chair, appointed
25 by the Insurance Commissioner;
26 4. One person appointed by the largest property and
27 casualty insurance agents' association in this state; and
28 5. The consumer advocate appointed under s. 627.0613
29 or the consumer advocate's designee. 5 domestic insurers, 1 of
30 whom shall be the assessable mutual insurer or other domestic
31 insurer which has the largest voluntary written premium for
3
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 workers' compensation and employer's liability insurance as of
2 December 31, 1993, 1 of whom shall be the commercial
3 self-insurance fund which has the largest voluntary written
4 premium for workers' compensation and employer's liability
5 insurance, as of December 31, 1993, and 3 of whom shall be the
6 3 of the 5 group self-insurers' funds, authorized by s.
7 440.57, which have the largest voluntary written premium for
8 workers' compensation and employer's liability insurance, as
9 of December 31, 1993; and 5 of the 20 foreign insurers which
10 are defined in s. 624.06(2) with the largest voluntary written
11 premium in this state for workers' compensation and employer's
12 liability insurance, for the latest year for which data are
13 available, as selected by those 20 foreign insurers. If the
14 assessable mutual insurer or the commercial self-insurance
15 fund, described in this paragraph, decline to serve on, or
16 resign from, the board of governors, such position on the
17 board of governors shall be filled by appointment by a
18 committee comprised of the 10 assessable mutual insurers,
19 commercial self-insurance funds, and group self-insurers'
20 funds, authorized by s. 440.57, which have the largest
21 voluntary written premium for workers' compensation and
22 employer's liability insurance, as of December 31, 1993.
23
24 Each board member shall serve 4-year terms and may serve
25 consecutive terms. No board member shall be an insurer which
26 provides service to the plan or which has an affiliate which
27 provides services to the plan or which is serviced by a
28 service company or third-party administrator which provides
29 services to the plan or which has an affiliate which provides
30 services to the plan. The board of governors shall have a
31 chair, who shall be named by the Insurance Commissioner. The
4
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 board of governors shall include one representative appointed
2 by the largest property and casualty insurance agents'
3 association in this state. The consumer advocate appointed
4 under s. 627.0613 shall be a member of the board of governors.
5 The minutes, audits, and procedures of the board of governors
6 are subject to chapter 119.
7 (c)(b) The operation of the plan shall be governed by
8 a plan of operation that is prepared at the direction of the
9 board of governors. The plan of operation may be changed at
10 any time by the board of governors or upon request of the
11 department. The plan of operation and all changes thereto are
12 subject to the approval of the department. The plan of
13 operation shall:
14 1. Authorize the board to engage in the activities
15 necessary to implement this subsection, including, but not
16 limited to, borrowing money.
17 2. Develop criteria for eligibility for coverage by
18 the plan, including, but not limited to, documented rejection
19 by at least two insurers which reasonably assures that
20 insureds covered under the plan are unable to acquire coverage
21 in the voluntary market. Any insured may voluntarily elect to
22 accept coverage from an insurer for a premium equal to or
23 greater than the plan premium if the insurer writing the
24 coverage adheres to the provisions of s. 627.171.
25 3. Require notice from the agent to the insured at the
26 time of the application for coverage that the application is
27 for coverage with the plan and that coverage may be available
28 through an insurer, group self-insurers' fund, commercial
29 self-insurance fund, or assessable mutual insurer through
30 another agent at a lower cost.
31
5
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 4. Establish programs to encourage insurers to provide
2 coverage to applicants of the plan in the voluntary market and
3 to insureds of the plan, including, but not limited to:
4 a. Establishing procedures for an insurer to use in
5 notifying the plan of the insurer's desire to provide coverage
6 to applicants to the plan or existing insureds of the plan and
7 in describing the types of risks in which the insurer is
8 interested. The description of the desired risks must be on a
9 form developed by the plan.
10 b. Developing forms and procedures that provide an
11 insurer with the information necessary to determine whether
12 the insurer wants to write particular applicants to the plan
13 or insureds of the plan.
14 c. Developing procedures for notice to the plan and
15 the applicant to the plan or insured of the plan that an
16 insurer will insure the applicant or the insured of the plan,
17 and notice of the cost of the coverage offered; and developing
18 procedures for the selection of an insuring entity by the
19 applicant or insured of the plan.
20 d. Provide for a market-assistance plan to assist in
21 the placement of employers. All applications for coverage in
22 the plan received 45 days before the effective date for
23 coverage shall be processed through the market-assistance
24 plan. A market-assistance plan specifically designed to serve
25 the needs of small good policyholders as defined by the board
26 must be finalized by January 1, 1994.
27 5. Provide for policy and claims services to the
28 insureds of the plan of the nature and quality provided for
29 insureds in the voluntary market.
30
31
6
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 6. Provide for the review of applications for coverage
2 with the plan for reasonableness and accuracy, using any
3 available historic information regarding the insured.
4 7. Provide for procedures for auditing insureds of the
5 plan which are based on reasonable business judgment and are
6 designed to maximize the likelihood that the plan will collect
7 the appropriate premiums.
8 8. Authorize the plan to terminate the coverage of and
9 refuse future coverage for any insured that submits a
10 fraudulent application to the plan or provides fraudulent or
11 grossly erroneous records to the plan or to any service
12 provider of the plan in conjunction with the activities of the
13 plan.
14 9. Establish service standards for agents who submit
15 business to the plan.
16 10. Establish criteria and procedures to prohibit any
17 agent who does not adhere to the established service standards
18 from placing business with the plan or receiving, directly or
19 indirectly, any commissions for business placed with the plan.
20 11. Provide for the establishment of reasonable safety
21 programs for all insureds in the plan. At the direction of the
22 board, the Division of Safety shall provide inspection to
23 insureds and applicants for coverage in the plan identified as
24 high-risk insureds by the board or its designee.
25 12. Authorize the plan to terminate the coverage of
26 and refuse future coverage to any insured who fails to pay
27 premiums or surcharges when due; who, at the time of
28 application, is delinquent in payments of workers'
29 compensation or employer's liability insurance premiums or
30 surcharges owed to an insurer, group self-insurers' fund,
31 commercial self-insurance fund, or assessable mutual insurer
7
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 licensed to write such coverage in this state; or who refuses
2 to substantially comply with any safety programs recommended
3 by the plan.
4 13. Authorize the board of governors to provide the
5 services required by the plan through staff employed by the
6 plan, through reasonably compensated service providers who
7 contract with the plan to provide services as specified by the
8 board of governors, or through a combination of employees and
9 service providers.
10 14. Provide for service standards for service
11 providers, methods of determining adherence to those service
12 standards, incentives and disincentives for service, and
13 procedures for terminating contracts for service providers
14 that fail to adhere to service standards.
15 15. Provide procedures for selecting service providers
16 and standards for qualification as a service provider that
17 reasonably assure that any service provider selected will
18 continue to operate as an ongoing concern and is capable of
19 providing the specified services in the manner required.
20 16. Provide for reasonable accounting and
21 data-reporting practices.
22 17. Provide for annual review of costs associated with
23 the administration and servicing of the policies issued by the
24 plan to determine alternatives by which costs can be reduced.
25 18. Authorize the acquisition of such excess insurance
26 or reinsurance as is consistent with the purposes of the plan.
27 19. Provide for an annual report to the department on
28 a date specified by the department and containing such
29 information as the department reasonably requires.
30 20. Establish multiple rating plans for various
31 classifications of risk which reflect risk of loss, hazard
8
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 grade, actual losses, size of premium, and compliance with
2 loss control. At least one of such plans must be a
3 preferred-rating plan to accommodate small-premium
4 policyholders with good experience as defined in
5 sub-subparagraph 22.a.
6 21. Establish agent commission schedules.
7 22. Establish three subplans as follows:
8 a. Subplan "A" must include those insureds whose
9 annual premium does not exceed $2,500 and who have neither
10 incurred any lost-time claims nor incurred medical-only claims
11 exceeding 50 percent of their premium for the immediate 2
12 years.
13 b. Subplan "B" must include insureds that are
14 employers identified by the board of governors as high-risk
15 employers due solely to the nature of the operations being
16 performed by those insureds and for whom no market exists in
17 the voluntary market, and whose experience modifications are
18 less than 1.00.
19 c. Subplan "C" must include all other insureds within
20 the plan.
21 (d)(c) The plan must be funded through actuarially
22 sound premiums charged to insureds of the plan. The plan may
23 issue assessable policies only to those insureds in subplan
24 "C." Those assessable policies must be clearly identified as
25 assessable by containing, in contrasting color and in not less
26 than 10-point type, the following statements: "This is an
27 assessable policy. If the plan is unable to pay its
28 obligations, policyholders will be required to contribute on a
29 pro rata earned premium basis the money necessary to meet any
30 assessment levied." The plan may issue assessable policies
31 with differing terms and conditions to different groups within
9
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 the plan when a reasonable basis exists for the
2 differentiation. The plan may offer rating, dividend plans,
3 and other plans to encourage loss prevention programs.
4 (e)(d) The plan shall establish and use its rates and
5 rating plans, and the plan may establish and use changes in
6 rating plans at any time, but no more frequently than two
7 times per any rating class for any calendar year. By December
8 1, 1993, and December 1 of each year thereafter, the board
9 shall establish and use actuarially sound rates for use by the
10 plan to assure that the plan is self-funding while those rates
11 are in effect. Such rates and rating plans must be filed with
12 the department within 30 calendar days after their effective
13 dates, and shall be considered a "use and file" filing. Any
14 disapproval by the department must have an effective date that
15 is at least 60 days from the date of disapproval of the rates
16 and rating plan and must have prospective effect only. The
17 plan may not be subject to any order by the department to
18 return to policyholders any portion of the rates disapproved
19 by the department. The department may not disapprove any rates
20 or rating plans unless it demonstrates that such rates and
21 rating plans are excessive, inadequate, or unfairly
22 discriminatory.
23 (f)(e) No later than June 1 of each year, the plan
24 shall obtain an independent actuarial certification of the
25 results of the operations of the plan for prior years, and
26 shall furnish a copy of the certification to the department.
27 If, after the effective date of the plan, the projected
28 ultimate incurred losses and expenses and dividends for prior
29 years exceed collected premiums, accrued net investment
30 income, and prior assessments for prior years, the
31
10
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 certification is subject to review and approval by the
2 department before it becomes final.
3 (g)(f) Whenever a deficit exists, the plan shall,
4 within 90 days, provide the department with a program to
5 eliminate the deficit within a reasonable time. The deficit
6 may be funded both through increased premiums charged to
7 insureds of the plan for subsequent years and through
8 assessments on insureds in the plan if the plan uses
9 assessable policies.
10 (h)(g) Any premium or assessments collected by the
11 plan in excess of the amount necessary to fund projected
12 ultimate incurred losses and expenses of the plan and not paid
13 to insureds of the plan in conjunction with loss prevention or
14 dividend programs shall be retained by the plan for future
15 use.
16 (i)(h) The decisions of the board of governors do not
17 constitute final agency action and are not subject to chapter
18 120.
19 (j)(i) Policies for insureds shall be issued by the
20 plan.
21 (k)(j) The plan created under this subsection is
22 liable only for payment for losses arising under policies
23 issued by the plan with dates of accidents occurring on or
24 after January 1, 1994.
25 (l)(k) Plan losses are the sole and exclusive
26 responsibility of the plan, and payment for such losses must
27 be funded in accordance with this subsection and must not
28 come, directly or indirectly, from insurers or any guaranty
29 association for such insurers.
30 (m)(l) Each joint underwriting plan or association
31 created under this section is not a state agency, board, or
11
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 commission. However, for the purposes of s. 199.183(1) only,
2 the joint underwriting plan is a political subdivision of the
3 state and is exempt from the corporate income tax.
4 (n)(m) Each joint underwriting plan or association may
5 elect to pay premium taxes on the premiums received on its
6 behalf or may elect to have the member insurers to whom the
7 premiums are allocated pay the premium taxes if the member
8 insurer had written the policy. The joint underwriting plan or
9 association shall notify the member insurers and the
10 Department of Revenue by January 15 of each year of its
11 election for the same year. As used in this paragraph, the
12 term "premiums received" means the consideration for
13 insurance, by whatever name called, but does not include any
14 policy assessment or surcharge received by the joint
15 underwriting association as a result of apportioning losses or
16 deficits of the association pursuant to this section.
17 (o)(n) Effective midnight, December 31, 1993, the
18 Florida Workers' Compensation Insurance Plan, administered by
19 the National Council on Compensation Insurance, shall
20 terminate, except with respect to workers' compensation
21 policies issued pursuant to such Florida Workers' Compensation
22 Insurance Plan with inception dates on or before December 31,
23 1993.
24 (p)(o) Neither the plan nor any member of the board of
25 governors is liable for monetary damages to any person for any
26 statement, vote, decision, or failure to act, regarding the
27 management or policies of the plan, unless:
28 1. The member breached or failed to perform her or his
29 duties as a member; and
30 2. The member's breach of, or failure to perform,
31 duties constitutes:
12
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 a. A violation of the criminal law, unless the member
2 had reasonable cause to believe her or his conduct was
3 unlawful. A judgment or other final adjudication against a
4 member in any criminal proceeding for violation of the
5 criminal law estops that member from contesting the fact that
6 her or his breach, or failure to perform, constitutes a
7 violation of the criminal law; but does not estop the member
8 from establishing that she or he had reasonable cause to
9 believe that her or his conduct was lawful or had no
10 reasonable cause to believe that her or his conduct was
11 unlawful;
12 b. A transaction from which the member derived an
13 improper personal benefit, either directly or indirectly; or
14 c. Recklessness or any act or omission that was
15 committed in bad faith or with malicious purpose or in a
16 manner exhibiting wanton and willful disregard of human
17 rights, safety, or property. For purposes of this
18 sub-subparagraph, the term "recklessness" means the acting, or
19 omission to act, in conscious disregard of a risk:
20 (I) Known, or so obvious that it should have been
21 known, to the member; and
22 (II) Known to the member, or so obvious that it should
23 have been known, to be so great as to make it highly probable
24 that harm would follow from such act or omission.
25 (q)(p) The provisions of this subsection shall be
26 reviewed by the Legislature before July 1, 1996.
27 (r) No insurer shall provide workers' compensation and
28 employer's liability insurance to any person who is delinquent
29 in the payment of premiums, assessments, penalties, or
30 surcharges owed to the plan.
31
13
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 Section 4. Subsection (1) of section 627.410, Florida
2 Statutes, is amended to read:
3 627.410 Filing, approval of forms.--
4 (1) No basic insurance policy or annuity contract
5 form, or application form where written application is
6 required and is to be made a part of the policy or contract,
7 or group certificates issued under a master contract delivered
8 in this state, or printed rider or endorsement form or form of
9 renewal certificate, shall be delivered or issued for delivery
10 in this state, unless the form has been filed with the
11 department at its offices in Tallahassee by or in behalf of
12 the insurer which proposes to use such form and has been
13 approved by the department. This provision does not apply to
14 surety bonds or to specially rated inland marine risks, nor to
15 policies, riders, endorsements, or forms of unique character
16 which are designed for and used with relation to insurance
17 upon a particular subject (other than as to health insurance),
18 or which relate to the manner of distribution of benefits or
19 to the reservation of rights and benefits under life or health
20 insurance policies and are used at the request of the
21 individual policyholder, contract holder, or
22 certificateholder. As to group insurance policies effectuated
23 and delivered outside this state but covering persons resident
24 in this state, the group certificates to be delivered or
25 issued for delivery in this state shall be filed with the
26 department for information purposes only.
27 Section 5. Subsection (7) of section 627.7295, Florida
28 Statutes, is amended to read:
29 627.7295 Motor vehicle insurance contracts.--
30 (7) A policy of private passenger motor vehicle
31 insurance or a binder for such a policy may be initially
14
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 issued in this state only if the insurer or agent has
2 collected from the insured an amount equal to 2 months'
3 premium. An insurer, agent, or premium finance company may
4 not directly or indirectly take any action resulting in the
5 insured having paid from the insured's own funds an amount
6 less than the 2 months' premium required by this subsection.
7 This subsection applies without regard to whether the premium
8 is financed by a premium finance company or is paid pursuant
9 to a periodic payment plan of an insurer or an insurance
10 agent. This subsection does not apply if an insured or member
11 of the insured's family is renewing or replacing a policy or a
12 binder for such policy written by the same insurer or a member
13 of the same insurer group. This subsection does not apply to
14 an insurer that issues private passenger motor vehicle
15 coverage primarily to active duty or former military personnel
16 or their dependents. This subsection does not apply if the
17 policy is paid pursuant to a payroll deduction plan or an
18 automatic electronic funds transfer payment plan. This
19 subsection and subsection (4) do not apply if an insured has
20 had a policy in effect for at least 6 months, the insured's
21 agent is terminated by the insurer that issued the policy, and
22 the insured obtains coverage on the policy's renewal date with
23 a new company through the terminated agent.
24 Section 6. This act shall take effect July 1, 1998.
25
26
27
28
29
30
31
15
CODING: Words stricken are deletions; words underlined are additions.
Florida Senate - 1998 CS for SB 1108
311-1789-98
1 STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
COMMITTEE SUBSTITUTE FOR
2 Senate Bill 1108
3
4 Exempts commercial inland marine policies from regulation
under ch. 627, F.S.
5
Changes the composition of the Board of Governors of the
6 Florida Workers' Compensation Joint Underwriting Association
to be comprised of five representatives elected by the twenty
7 largest domestic insurers, five representatives elected by the
twenty largest foreign insurers, an appointee of the Insurance
8 Commissioner to serve as chair, one representative appointed
by the largest property and casualty insurance agents'
9 association, and the Insurance Consumer Advocate. Under s.
624.06, F.S., a domestic insurer is one formed under the laws
10 of this state.
11 Provides that no insurer shall provide workers' compensation
and employer's liability insurance to any person who is
12 delinquent in the payment of premiums, assessments, penalties
or surcharges owed to the Florida Workers' Compensation Joint
13 Underwriting Association.
14 Exempts payroll deduction plans or electronic funds transfer
payment plans from the requirement that private passenger
15 motor vehicle insurance policies may be initially issued only
if the insurer has collected from the insured an amount equal
16 to 2 months premium.
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
16