Senate Bill sb1126er

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  2         An act relating to property insurance plans;

  3         creating the Insurance Policy Holder Protection

  4         Act; amending ss. 627.351, 627.3511, F.S.;

  5         revising certain agent commission payment and

  6         policy servicing procedures and requirements;

  7         adding an area eligible for coverage from the

  8         Florida Windstorm Underwriting Association;

  9         creating s. 627.3517, F.S.; preserving a

10         policyholder's right to select and maintain

11         certain agents; authorizing the Department of

12         Insurance to adopt rules to preserve such

13         right; providing application; providing an

14         effective date.

15

16  Be It Enacted by the Legislature of the State of Florida:

17

18         Section 1.  This act may be cited as the "Insurance

19  Policy Holder Protection Act."

20         Section 2.  Paragraphs (b) and (e) of subsection (2)

21  and paragraph (c) of subsection (6) of section 627.351,

22  Florida Statutes, are amended to read:

23         627.351  Insurance risk apportionment plans.--

24         (2)  WINDSTORM INSURANCE RISK APPORTIONMENT.--

25         (b)  The department shall require all insurers holding

26  a certificate of authority to transact property insurance on a

27  direct basis in this state, other than joint underwriting

28  associations and other entities formed pursuant to this

29  section, to provide windstorm coverage to applicants from

30  areas determined to be eligible pursuant to paragraph (c) who

31  in good faith are entitled to, but are unable to procure, such


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  1  coverage through ordinary means; or it shall adopt a

  2  reasonable plan or plans for the equitable apportionment or

  3  sharing among such insurers of windstorm coverage, which may

  4  include formation of an association for this purpose. As used

  5  in this subsection, the term "property insurance" means

  6  insurance on real or personal property, as defined in s.

  7  624.604, including insurance for fire, industrial fire, allied

  8  lines, farmowners multiperil, homeowners' multiperil,

  9  commercial multiperil, and mobile homes, and including

10  liability coverages on all such insurance, but excluding

11  inland marine as defined in s. 624.607(3) and excluding

12  vehicle insurance as defined in s. 624.605(1)(a) other than

13  insurance on mobile homes used as permanent dwellings. The

14  department shall adopt rules that provide a formula for the

15  recovery and repayment of any deferred assessments.

16         1.  For the purpose of this section, properties

17  eligible for such windstorm coverage are defined as dwellings,

18  buildings, and other structures, including mobile homes which

19  are used as dwellings and which are tied down in compliance

20  with mobile home tie-down requirements prescribed by the

21  Department of Highway Safety and Motor Vehicles pursuant to s.

22  320.8325, and the contents of all such properties. An

23  applicant or policyholder is eligible for coverage only if an

24  offer of coverage cannot be obtained by or for the applicant

25  or policyholder from an admitted insurer at approved rates.

26         2.a.(I)  All insurers required to be members of such

27  association shall participate in its writings, expenses, and

28  losses. Surplus of the association shall be retained for the

29  payment of claims and shall not be distributed to the member

30  insurers. Such participation by member insurers shall be in

31  the proportion that the net direct premiums of each member


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  1  insurer written for property insurance in this state during

  2  the preceding calendar year bear to the aggregate net direct

  3  premiums for property insurance of all member insurers, as

  4  reduced by any credits for voluntary writings, in this state

  5  during the preceding calendar year. For the purposes of this

  6  subsection, the term "net direct premiums" means direct

  7  written premiums for property insurance, reduced by premium

  8  for liability coverage and for the following if included in

  9  allied lines: rain and hail on growing crops; livestock;

10  association direct premiums booked; National Flood Insurance

11  Program direct premiums; and similar deductions specifically

12  authorized by the plan of operation and approved by the

13  department. A member's participation shall begin on the first

14  day of the calendar year following the year in which it is

15  issued a certificate of authority to transact property

16  insurance in the state and shall terminate 1 year after the

17  end of the calendar year during which it no longer holds a

18  certificate of authority to transact property insurance in the

19  state. The commissioner, after review of annual statements,

20  other reports, and any other statistics that the commissioner

21  deems necessary, shall certify to the association the

22  aggregate direct premiums written for property insurance in

23  this state by all member insurers.

24         (II)  The plan of operation shall provide for a board

25  of directors consisting of the Insurance Consumer Advocate

26  appointed under s. 627.0613, 1 consumer representative

27  appointed by the Insurance Commissioner, 1 consumer

28  representative appointed by the Governor, and 12 additional

29  members appointed as specified in the plan of operation. One

30  of the 12 additional members shall be elected by the domestic

31  companies of this state on the basis of cumulative weighted


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  1  voting based on the net direct premiums of domestic companies

  2  in this state. Nothing in the 1997 amendments to this

  3  paragraph terminates the existing board or the terms of any

  4  members of the board.

  5         (III)  The plan of operation shall provide a formula

  6  whereby a company voluntarily providing windstorm coverage in

  7  affected areas will be relieved wholly or partially from

  8  apportionment of a regular assessment pursuant to

  9  sub-sub-subparagraph d.(I) or sub-sub-subparagraph d.(II).

10         (IV)  A company which is a member of a group of

11  companies under common management may elect to have its

12  credits applied on a group basis, and any company or group may

13  elect to have its credits applied to any other company or

14  group.

15         (V)  There shall be no credits or relief from

16  apportionment to a company for emergency assessments collected

17  from its policyholders under sub-sub-subparagraph d.(III).

18         (VI)  The plan of operation may also provide for the

19  award of credits, for a period not to exceed 3 years, from a

20  regular assessment pursuant to sub-sub-subparagraph d.(I) or

21  sub-sub-subparagraph d.(II) as an incentive for taking

22  policies out of the Residential Property and Casualty Joint

23  Underwriting Association.  In order to qualify for the

24  exemption under this sub-sub-subparagraph, the take-out plan

25  must provide that at least 40 percent of the policies removed

26  from the Residential Property and Casualty Joint Underwriting

27  Association cover risks located in Dade, Broward, and Palm

28  Beach Counties or at least 30 percent of the policies so

29  removed cover risks located in Dade, Broward, and Palm Beach

30  Counties and an additional 50 percent of the policies so

31  removed cover risks located in other coastal counties, and


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  1  must also provide that no more than 15 percent of the policies

  2  so removed may exclude windstorm coverage.  With the approval

  3  of the department, the association may waive these geographic

  4  criteria for a take-out plan that removes at least the lesser

  5  of 100,000 Residential Property and Casualty Joint

  6  Underwriting Association policies or 15 percent of the total

  7  number of Residential Property and Casualty Joint Underwriting

  8  Association policies, provided the governing board of the

  9  Residential Property and Casualty Joint Underwriting

10  Association certifies that the take-out plan will materially

11  reduce the Residential Property and Casualty Joint

12  Underwriting Association's 100-year probable maximum loss from

13  hurricanes.  With the approval of the department, the board

14  may extend such credits for an additional year if the insurer

15  guarantees an additional year of renewability for all policies

16  removed from the Residential Property and Casualty Joint

17  Underwriting Association, or for 2 additional years if the

18  insurer guarantees 2 additional years of renewability for all

19  policies removed from the Residential Property and Casualty

20  Joint Underwriting Association.

21         b.  Assessments to pay deficits in the association

22  under this subparagraph shall be included as an appropriate

23  factor in the making of rates as provided in s. 627.3512.

24         c.  The Legislature finds that the potential for

25  unlimited deficit assessments under this subparagraph may

26  induce insurers to attempt to reduce their writings in the

27  voluntary market, and that such actions would worsen the

28  availability problems that the association was created to

29  remedy. It is the intent of the Legislature that insurers

30  remain fully responsible for paying regular assessments and

31  collecting emergency assessments for any deficits of the


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  1  association; however, it is also the intent of the Legislature

  2  to provide a means by which assessment liabilities may be

  3  amortized over a period of years.

  4         d.(I)  When the deficit incurred in a particular

  5  calendar year is 10 percent or less of the aggregate statewide

  6  direct written premium for property insurance for the prior

  7  calendar year for all member insurers, the association shall

  8  levy an assessment on member insurers in an amount equal to

  9  the deficit.

10         (II)  When the deficit incurred in a particular

11  calendar year exceeds 10 percent of the aggregate statewide

12  direct written premium for property insurance for the prior

13  calendar year for all member insurers, the association shall

14  levy an assessment on member insurers in an amount equal to

15  the greater of 10 percent of the deficit or 10 percent of the

16  aggregate statewide direct written premium for property

17  insurance for the prior calendar year for member insurers. Any

18  remaining deficit shall be recovered through emergency

19  assessments under sub-sub-subparagraph (III).

20         (III)  Upon a determination by the board of directors

21  that a deficit exceeds the amount that will be recovered

22  through regular assessments on member insurers, pursuant to

23  sub-sub-subparagraph (I) or sub-sub-subparagraph (II), the

24  board shall levy, after verification by the department,

25  emergency assessments to be collected by member insurers and

26  by underwriting associations created pursuant to this section

27  which write property insurance, upon issuance or renewal of

28  property insurance policies other than National Flood

29  Insurance policies in the year or years following levy of the

30  regular assessments. The amount of the emergency assessment

31  collected in a particular year shall be a uniform percentage


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  1  of that year's direct written premium for property insurance

  2  for all member insurers and underwriting associations,

  3  excluding National Flood Insurance policy premiums, as

  4  annually determined by the board and verified by the

  5  department. The department shall verify the arithmetic

  6  calculations involved in the board's determination within 30

  7  days after receipt of the information on which the

  8  determination was based. Notwithstanding any other provision

  9  of law, each member insurer and each underwriting association

10  created pursuant to this section shall collect emergency

11  assessments from its policyholders without such obligation

12  being affected by any credit, limitation, exemption, or

13  deferment.  The emergency assessments so collected shall be

14  transferred directly to the association on a periodic basis as

15  determined by the association. The aggregate amount of

16  emergency assessments levied under this sub-sub-subparagraph

17  in any calendar year may not exceed the greater of 10 percent

18  of the amount needed to cover the original deficit, plus

19  interest, fees, commissions, required reserves, and other

20  costs associated with financing of the original deficit, or 10

21  percent of the aggregate statewide direct written premium for

22  property insurance written by member insurers and underwriting

23  associations for the prior year, plus interest, fees,

24  commissions, required reserves, and other costs associated

25  with financing the original deficit. The board may pledge the

26  proceeds of the emergency assessments under this

27  sub-sub-subparagraph as the source of revenue for bonds, to

28  retire any other debt incurred as a result of the deficit or

29  events giving rise to the deficit, or in any other way that

30  the board determines will efficiently recover the deficit. The

31  emergency assessments under this sub-sub-subparagraph shall


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  1  continue as long as any bonds issued or other indebtedness

  2  incurred with respect to a deficit for which the assessment

  3  was imposed remain outstanding, unless adequate provision has

  4  been made for the payment of such bonds or other indebtedness

  5  pursuant to the document governing such bonds or other

  6  indebtedness. Emergency assessments collected under this

  7  sub-sub-subparagraph are not part of an insurer's rates, are

  8  not premium, and are not subject to premium tax, fees, or

  9  commissions; however, failure to pay the emergency assessment

10  shall be treated as failure to pay premium.

11         (IV)  Each member insurer's share of the total regular

12  assessments under sub-sub-subparagraph (I) or

13  sub-sub-subparagraph (II) shall be in the proportion that the

14  insurer's net direct premium for property insurance in this

15  state, for the year preceding the assessment bears to the

16  aggregate statewide net direct premium for property insurance

17  of all member insurers, as reduced by any credits for

18  voluntary writings for that year.

19         (V)  If regular deficit assessments are made under

20  sub-sub-subparagraph (I) or sub-sub-subparagraph (II), or by

21  the Residential Property and Casualty Joint Underwriting

22  Association under sub-subparagraph (6)(b)3.a. or

23  sub-subparagraph (6)(b)3.b., the association shall levy upon

24  the association's policyholders, as part of its next rate

25  filing, or by a separate rate filing solely for this purpose,

26  a market equalization surcharge in a percentage equal to the

27  total amount of such regular assessments divided by the

28  aggregate statewide direct written premium for property

29  insurance for member insurers for the prior calendar year.

30  Market equalization surcharges under this sub-sub-subparagraph

31  are not considered premium and are not subject to commissions,


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  1  fees, or premium taxes; however, failure to pay a market

  2  equalization surcharge shall be treated as failure to pay

  3  premium.

  4         e.  The governing body of any unit of local government,

  5  any residents of which are insured under the plan, may issue

  6  bonds as defined in s. 125.013 or s. 166.101 to fund an

  7  assistance program, in conjunction with the association, for

  8  the purpose of defraying deficits of the association. In order

  9  to avoid needless and indiscriminate proliferation,

10  duplication, and fragmentation of such assistance programs,

11  any unit of local government, any residents of which are

12  insured by the association, may provide for the payment of

13  losses, regardless of whether or not the losses occurred

14  within or outside of the territorial jurisdiction of the local

15  government. Revenue bonds may not be issued until validated

16  pursuant to chapter 75, unless a state of emergency is

17  declared by executive order or proclamation of the Governor

18  pursuant to s. 252.36 making such findings as are necessary to

19  determine that it is in the best interests of, and necessary

20  for, the protection of the public health, safety, and general

21  welfare of residents of this state and the protection and

22  preservation of the economic stability of insurers operating

23  in this state, and declaring it an essential public purpose to

24  permit certain municipalities or counties to issue bonds as

25  will provide relief to claimants and policyholders of the

26  association and insurers responsible for apportionment of plan

27  losses. Any such unit of local government may enter into such

28  contracts with the association and with any other entity

29  created pursuant to this subsection as are necessary to carry

30  out this paragraph. Any bonds issued under this

31  sub-subparagraph shall be payable from and secured by moneys


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  1  received by the association from assessments under this

  2  subparagraph, and assigned and pledged to or on behalf of the

  3  unit of local government for the benefit of the holders of

  4  such bonds. The funds, credit, property, and taxing power of

  5  the state or of the unit of local government shall not be

  6  pledged for the payment of such bonds. If any of the bonds

  7  remain unsold 60 days after issuance, the department shall

  8  require all insurers subject to assessment to purchase the

  9  bonds, which shall be treated as admitted assets; each insurer

10  shall be required to purchase that percentage of the unsold

11  portion of the bond issue that equals the insurer's relative

12  share of assessment liability under this subsection. An

13  insurer shall not be required to purchase the bonds to the

14  extent that the department determines that the purchase would

15  endanger or impair the solvency of the insurer. The authority

16  granted by this sub-subparagraph is additional to any bonding

17  authority granted by subparagraph 6.

18         3.  The plan shall also provide that any member with a

19  surplus as to policyholders of $20 million or less writing 25

20  percent or more of its total countrywide property insurance

21  premiums in this state may petition the department, within the

22  first 90 days of each calendar year, to qualify as a limited

23  apportionment company. The apportionment of such a member

24  company in any calendar year for which it is qualified shall

25  not exceed its gross participation, which shall not be

26  affected by the formula for voluntary writings. In no event

27  shall a limited apportionment company be required to

28  participate in any apportionment of losses pursuant to

29  sub-sub-subparagraph 2.d.(I) or sub-sub-subparagraph 2.d.(II)

30  in the aggregate which exceeds $50 million after payment of

31  available plan funds in any calendar year. However, a limited


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  1  apportionment company shall collect from its policyholders any

  2  emergency assessment imposed under sub-sub-subparagraph

  3  2.d.(III). The plan shall provide that, if the department

  4  determines that any regular assessment will result in an

  5  impairment of the surplus of a limited apportionment company,

  6  the department may direct that all or part of such assessment

  7  be deferred. However, there shall be no limitation or

  8  deferment of an emergency assessment to be collected from

  9  policyholders under sub-sub-subparagraph 2.d.(III).

10         4.  The plan shall provide for the deferment, in whole

11  or in part, of a regular assessment of a member insurer under

12  sub-sub-subparagraph 2.d.(I) or sub-sub-subparagraph 2.d.(II),

13  but not for an emergency assessment collected from

14  policyholders under sub-sub-subparagraph 2.d.(III), if, in the

15  opinion of the commissioner, payment of such regular

16  assessment would endanger or impair the solvency of the member

17  insurer. In the event a regular assessment against a member

18  insurer is deferred in whole or in part, the amount by which

19  such assessment is deferred may be assessed against the other

20  member insurers in a manner consistent with the basis for

21  assessments set forth in sub-sub-subparagraph 2.d.(I) or

22  sub-sub-subparagraph 2.d.(II).

23         5.a.  The plan of operation may include deductibles and

24  rules for classification of risks and rate modifications

25  consistent with the objective of providing and maintaining

26  funds sufficient to pay catastrophe losses.

27         b.  The association may require arbitration of a rate

28  filing under s. 627.062(6). It is the intent of the

29  Legislature that the rates for coverage provided by the

30  association be actuarially sound and not competitive with

31  approved rates charged in the admitted voluntary market such


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  1  that the association functions as a residual market mechanism

  2  to provide insurance only when the insurance cannot be

  3  procured in the voluntary market.  The plan of operation shall

  4  provide a mechanism to assure that, beginning no later than

  5  January 1, 1999, the rates charged by the association for each

  6  line of business are reflective of approved rates in the

  7  voluntary market for hurricane coverage for each line of

  8  business in the various areas eligible for association

  9  coverage.

10         c.  The association shall provide for windstorm

11  coverage on residential properties in limits up to $10 million

12  for commercial lines residential risks and up to $1 million

13  for personal lines residential risks. If coverage with the

14  association is sought for a residential risk valued in excess

15  of these limits, coverage shall be available to the risk up to

16  the replacement cost or actual cash value of the property, at

17  the option of the insured, if coverage for the risk cannot be

18  located in the authorized market. The association must accept

19  a commercial lines residential risk with limits above $10

20  million or a personal lines residential risk with limits above

21  $1 million if coverage is not available in the authorized

22  market.  The association may write coverage above the limits

23  specified in this subparagraph with or without facultative or

24  other reinsurance coverage, as the association determines

25  appropriate.

26         d.  The plan of operation must provide objective

27  criteria and procedures, approved by the department, to be

28  uniformly applied for all applicants in determining whether an

29  individual risk is so hazardous as to be uninsurable. In

30  making this determination and in establishing the criteria and

31  procedures, the following shall be considered:


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  1         (I)  Whether the likelihood of a loss for the

  2  individual risk is substantially higher than for other risks

  3  of the same class; and

  4         (II)  Whether the uncertainty associated with the

  5  individual risk is such that an appropriate premium cannot be

  6  determined.

  7

  8  The acceptance or rejection of a risk by the association

  9  pursuant to such criteria and procedures must be construed as

10  the private placement of insurance, and the provisions of

11  chapter 120 do not apply.

12         e.  If the risk accepts an offer of coverage through

13  the market assistance program or through a mechanism

14  established by the association, either before the policy is

15  issued by the association or during the first 30 days of

16  coverage by the association, and the producing agent who

17  submitted the application to the association is not currently

18  appointed by the insurer, the insurer shall:

19         (I)  Pay to the producing agent of record of the

20  policy, for the first year, an amount that is the greater of

21  the insurer's usual and customary commission for the type of

22  policy written or a fee equal to the usual and customary

23  commission of the association; or

24         (II)  Offer to allow the producing agent of record of

25  the policy to continue servicing the policy for a period of

26  not less than 1 year and offer to pay the agent the greater of

27  the insurer's or the association's usual and customary

28  commission for the type of policy written.

29

30  If the producing agent is unwilling or unable to accept

31  appointment, the new insurer shall pay the agent in accordance


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  1  with sub-sub-subparagraph (I). Subject to the provisions of s.

  2  627.3517, the policies issued by the association must provide

  3  that if the association obtains an offer from an authorized

  4  insurer to cover the risk at its approved rates under either a

  5  standard policy including wind coverage or, if consistent with

  6  the insurer's underwriting rules as filed with the department,

  7  a basic policy including wind coverage, the risk is no longer

  8  eligible for coverage through the association. Upon

  9  termination of eligibility, the association shall provide

10  written notice to the policyholder and agent of record stating

11  that the association policy must be canceled as of 60 days

12  after the date of the notice because of the offer of coverage

13  from an authorized insurer. Other provisions of the insurance

14  code relating to cancellation and notice of cancellation do

15  not apply to actions under this sub-subparagraph.

16         f.  When the association enters into a contractual

17  agreement for a take-out plan, the producing agent of record

18  of the association policy is entitled to retain any unearned

19  commission on the policy, and the insurer shall:

20         (I)  Pay to the producing agent of record of the

21  association policy, for the first year, an amount that is the

22  greater of the insurer's usual and customary commission for

23  the type of policy written or a fee equal to the usual and

24  customary commission of the association; or

25         (II)  Offer to allow the producing agent of record of

26  the association policy to continue servicing the policy for a

27  period of not less than 1 year and offer to pay the agent the

28  greater of the insurer's or the association's usual and

29  customary commission for the type of policy written.

30

31


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  1  If the producing agent is unwilling or unable to accept

  2  appointment, the new insurer shall pay the agent in accordance

  3  with sub-sub-subparagraph (I). Association policies and

  4  applications must include a notice that the association policy

  5  could, under this section, be replaced with a policy issued by

  6  an authorized insurer that does not provide coverage identical

  7  to the coverage provided by the association. The notice shall

  8  also specify that acceptance of association coverage creates a

  9  conclusive presumption that the applicant or policyholder is

10  aware of this potential.

11         6.a.  The plan of operation may authorize the formation

12  of a private nonprofit corporation, a private nonprofit

13  unincorporated association, a partnership, a trust, a limited

14  liability company, or a nonprofit mutual company which may be

15  empowered, among other things, to borrow money by issuing

16  bonds or by incurring other indebtedness and to accumulate

17  reserves or funds to be used for the payment of insured

18  catastrophe losses. The plan may authorize all actions

19  necessary to facilitate the issuance of bonds, including the

20  pledging of assessments or other revenues.

21         b.  Any entity created under this subsection, or any

22  entity formed for the purposes of this subsection, may sue and

23  be sued, may borrow money; issue bonds, notes, or debt

24  instruments; pledge or sell assessments, market equalization

25  surcharges and other surcharges, rights, premiums, contractual

26  rights, projected recoveries from the Florida Hurricane

27  Catastrophe Fund, other reinsurance recoverables, and other

28  assets as security for such bonds, notes, or debt instruments;

29  enter into any contracts or agreements necessary or proper to

30  accomplish such borrowings; and take other actions necessary

31  to carry out the purposes of this subsection. The association


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  1  may issue bonds or incur other indebtedness, or have bonds

  2  issued on its behalf by a unit of local government pursuant to

  3  subparagraph (6)(g)2., in the absence of a hurricane or other

  4  weather-related event, upon a determination by the association

  5  subject to approval by the department that such action would

  6  enable it to efficiently meet the financial obligations of the

  7  association and that such financings are reasonably necessary

  8  to effectuate the requirements of this subsection. Any such

  9  entity may accumulate reserves and retain surpluses as of the

10  end of any association year to provide for the payment of

11  losses incurred by the association during that year or any

12  future year. The association shall incorporate and continue

13  the plan of operation and articles of agreement in effect on

14  the effective date of chapter 76-96, Laws of Florida, to the

15  extent that it is not inconsistent with chapter 76-96, and as

16  subsequently modified consistent with chapter 76-96. The board

17  of directors and officers currently serving shall continue to

18  serve until their successors are duly qualified as provided

19  under the plan. The assets and obligations of the plan in

20  effect immediately prior to the effective date of chapter

21  76-96 shall be construed to be the assets and obligations of

22  the successor plan created herein.

23         c.  In recognition of s. 10, Art. I of the State

24  Constitution, prohibiting the impairment of obligations of

25  contracts, it is the intent of the Legislature that no action

26  be taken whose purpose is to impair any bond indenture or

27  financing agreement or any revenue source committed by

28  contract to such bond or other indebtedness issued or incurred

29  by the association or any other entity created under this

30  subsection.

31


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  1         7.  On such coverage, an agent's remuneration shall be

  2  that amount of money payable to the agent by the terms of his

  3  or her contract with the company with which the business is

  4  placed. However, no commission will be paid on that portion of

  5  the premium which is in excess of the standard premium of that

  6  company.

  7         8.  Subject to approval by the department, the

  8  association may establish different eligibility requirements

  9  and operational procedures for any line or type of coverage

10  for any specified eligible area or portion of an eligible area

11  if the board determines that such changes to the eligibility

12  requirements and operational procedures are justified due to

13  the voluntary market being sufficiently stable and competitive

14  in such area or for such line or type of coverage and that

15  consumers who, in good faith, are unable to obtain insurance

16  through the voluntary market through ordinary methods would

17  continue to have access to coverage from the association. When

18  coverage is sought in connection with a real property

19  transfer, such requirements and procedures shall not provide

20  for an effective date of coverage later than the date of the

21  closing of the transfer as established by the transferor, the

22  transferee, and, if applicable, the lender.

23         9.  Notwithstanding any other provision of law:

24         a.  The pledge or sale of, the lien upon, and the

25  security interest in any rights, revenues, or other assets of

26  the association created or purported to be created pursuant to

27  any financing documents to secure any bonds or other

28  indebtedness of the association shall be and remain valid and

29  enforceable, notwithstanding the commencement of and during

30  the continuation of, and after, any rehabilitation,

31  insolvency, liquidation, bankruptcy, receivership,


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  1  conservatorship, reorganization, or similar proceeding against

  2  the association under the laws of this state or any other

  3  applicable laws.

  4         b.  No such proceeding shall relieve the association of

  5  its obligation, or otherwise affect its ability to perform its

  6  obligation, to continue to collect, or levy and collect,

  7  assessments, market equalization or other surcharges,

  8  projected recoveries from the Florida Hurricane Catastrophe

  9  Fund, reinsurance recoverables, or any other rights, revenues,

10  or other assets of the association pledged.

11         c.  Each such pledge or sale of, lien upon, and

12  security interest in, including the priority of such pledge,

13  lien, or security interest, any such assessments, emergency

14  assessments, market equalization or renewal surcharges,

15  projected recoveries from the Florida Hurricane Catastrophe

16  Fund, reinsurance recoverables, or other rights, revenues, or

17  other assets which are collected, or levied and collected,

18  after the commencement of and during the pendency of or after

19  any such proceeding shall continue unaffected by such

20  proceeding.

21         d.  As used in this subsection, the term "financing

22  documents" means any agreement, instrument, or other document

23  now existing or hereafter created evidencing any bonds or

24  other indebtedness of the association or pursuant to which any

25  such bonds or other indebtedness has been or may be issued and

26  pursuant to which any rights, revenues, or other assets of the

27  association are pledged or sold to secure the repayment of

28  such bonds or indebtedness, together with the payment of

29  interest on such bonds or such indebtedness, or the payment of

30  any other obligation of the association related to such bonds

31  or indebtedness.


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  1         e.  Any such pledge or sale of assessments, revenues,

  2  contract rights or other rights or assets of the association

  3  shall constitute a lien and security interest, or sale, as the

  4  case may be, that is immediately effective and attaches to

  5  such assessments, revenues, contract, or other rights or

  6  assets, whether or not imposed or collected at the time the

  7  pledge or sale is made. Any such pledge or sale is effective,

  8  valid, binding, and enforceable against the association or

  9  other entity making such pledge or sale, and valid and binding

10  against and superior to any competing claims or obligations

11  owed to any other person or entity, including policyholders in

12  this state, asserting rights in any such assessments,

13  revenues, contract, or other rights or assets to the extent

14  set forth in and in accordance with the terms of the pledge or

15  sale contained in the applicable financing documents, whether

16  or not any such person or entity has notice of such pledge or

17  sale and without the need for any physical delivery,

18  recordation, filing, or other action.

19         f.  There shall be no liability on the part of, and no

20  cause of action of any nature shall arise against, any member

21  insurer or its agents or employees, agents or employees of the

22  association, members of the board of directors of the

23  association, or the department or its representatives, for any

24  action taken by them in the performance of their duties or

25  responsibilities under this subsection. Such immunity does not

26  apply to actions for breach of any contract or agreement

27  pertaining to insurance, or any willful tort.

28         (e)1.  Notwithstanding the provisions of subparagraph

29  (c)2. or paragraph (d), eligibility shall not be extended to

30  any area that was not eligible on March 1, 1997, except that

31


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  1  the department may act with respect to any petition on which a

  2  hearing was held prior to May 9, 1997.

  3         2.  Notwithstanding the provisions of subparagraph 1.,

  4  the following area is eligible for coverage under this

  5  subsection effective July 1, 2002:  the area within Port

  6  Canaveral which is bordered on the south by the City of Cape

  7  Canaveral, bordered on the west by the Banana River, and

  8  bordered on the north by United States Government property.

  9         (6)  RESIDENTIAL PROPERTY AND CASUALTY JOINT

10  UNDERWRITING ASSOCIATION.--

11         (c)  The plan of operation of the association:

12         1.  May provide for one or more designated insurers,

13  able and willing to provide policy and claims service, to act

14  on behalf of the association to provide such service.  Each

15  licensed agent shall be entitled to indicate the order of

16  preference regarding who will service the business placed by

17  the agent.  The association shall adhere to each agent's

18  preferences unless after consideration of other factors in

19  assigning agents, including, but not limited to, servicing

20  capacity and fee arrangements, the association has reason to

21  believe it is in the best interest of the association to make

22  a different assignment.

23         2.  Must provide for adoption of residential property

24  and casualty insurance policy forms, which forms must be

25  approved by the department prior to use.  The association

26  shall adopt the following policy forms:

27         a.  Standard personal lines policy forms including wind

28  coverage, which are multiperil policies providing what is

29  generally considered to be full coverage of a residential

30  property similar to the coverage provided under an HO-2, HO-3,

31  HO-4, or HO-6 policy.


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  1         b.  Standard personal lines policy forms without wind

  2  coverage, which are the same as the policies described in

  3  sub-subparagraph a. except that they do not include wind

  4  coverage.

  5         c.  Basic personal lines policy forms including wind

  6  coverage, which are policies similar to an HO-8 policy or a

  7  dwelling fire policy that provide coverage meeting the

  8  requirements of the secondary mortgage market, but which

  9  coverage is more limited than the coverage under a standard

10  policy.

11         d.  Basic personal lines policy forms without wind

12  coverage, which are the same as the policies described in

13  sub-subparagraph c. except that they do not include wind

14  coverage.

15         e.  Commercial lines residential policy forms including

16  wind coverage that are generally similar to the basic perils

17  of full coverage obtainable for commercial residential

18  structures in the admitted voluntary market.

19         f.  Commercial lines residential policy forms without

20  wind coverage, which are the same as the policies described in

21  sub-subparagraph e. except that they do not include wind

22  coverage.

23         3.  May provide that the association may employ or

24  otherwise contract with individuals or other entities to

25  provide administrative or professional services that may be

26  appropriate to effectuate the plan.  The association shall

27  have the power to borrow funds, by issuing bonds or by

28  incurring other indebtedness, and shall have other powers

29  reasonably necessary to effectuate the requirements of this

30  subsection. The association may issue bonds or incur other

31  indebtedness, or have bonds issued on its behalf by a unit of


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  1  local government pursuant to subparagraph (g)2., in the

  2  absence of a hurricane or other weather-related event, upon a

  3  determination by the association, subject to approval by the

  4  department, that such action would enable it to efficiently

  5  meet the financial obligations of the association and that

  6  such financings are reasonably necessary to effectuate the

  7  requirements of this subsection.  The association is

  8  authorized to take all actions needed to facilitate tax-free

  9  status for any such bonds or indebtedness, including formation

10  of trusts or other affiliated entities.  The association shall

11  have the authority to pledge assessments, projected recoveries

12  from the Florida Hurricane Catastrophe Fund, other reinsurance

13  recoverables, market equalization and other surcharges, and

14  other funds available to the association as security for bonds

15  or other indebtedness.  In recognition of s. 10, Art. I of the

16  State Constitution, prohibiting the impairment of obligations

17  of contracts, it is the intent of the Legislature that no

18  action be taken whose purpose is to impair any bond indenture

19  or financing agreement or any revenue source committed by

20  contract to such bond or other indebtedness.

21         4.  Must require that the association operate subject

22  to the supervision and approval of a board of governors

23  consisting of 13 individuals, including 1 who is elected as

24  chair. The board shall consist of:

25         a.  The insurance consumer advocate appointed under s.

26  627.0613.

27         b.  Five members designated by the insurance industry.

28         c.  Five consumer representatives appointed by the

29  Insurance Commissioner. Two of the consumer representatives

30  must, at the time of appointment, be holders of policies

31  issued by the association, who are selected with consideration


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  1  given to reflecting the geographic balance of association

  2  policyholders. Two of the consumer members must be individuals

  3  who are minority persons as defined in s. 288.703(3). One of

  4  the consumer members shall have expertise in the field of

  5  mortgage lending.

  6         d.  Two representatives of the insurance industry

  7  appointed by the Insurance Commissioner. Of the two insurance

  8  industry representatives appointed by the Insurance

  9  Commissioner, at least one must be an individual who is a

10  minority person as defined in s. 288.703(3).

11

12  Any board member may be disapproved or removed and replaced by

13  the commissioner at any time for cause. All board members,

14  including the chair, must be appointed to serve for 3-year

15  terms beginning annually on a date designated by the plan.

16         5.  Must provide a procedure for determining the

17  eligibility of a risk for coverage, as follows:

18         a.  Subject to the provisions of s. 627.3517, with

19  respect to personal lines residential risks, if the risk is

20  offered coverage from an authorized insurer at the insurer's

21  approved rate under either a standard policy including wind

22  coverage or, if consistent with the insurer's underwriting

23  rules as filed with the department, a basic policy including

24  wind coverage, the risk is not eligible for any policy issued

25  by the association. If the risk is not able to obtain any such

26  offer, the risk is eligible for either a standard policy

27  including wind coverage or a basic policy including wind

28  coverage issued by the association; however, if the risk could

29  not be insured under a standard policy including wind coverage

30  regardless of market conditions, the risk shall be eligible

31  for a basic policy including wind coverage unless rejected


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  1  under subparagraph 8. The association shall determine the type

  2  of policy to be provided on the basis of objective standards

  3  specified in the underwriting manual and based on generally

  4  accepted underwriting practices.

  5         (I)  If the risk accepts an offer of coverage through

  6  the market assistance plan or an offer of coverage through a

  7  mechanism established by the association before a policy is

  8  issued to the risk by the association or during the first 30

  9  days of coverage by the association, and the producing agent

10  who submitted the application to the plan or to the

11  association is not currently appointed by the insurer, the

12  insurer shall:

13         (A)  Pay to the producing agent of record of the

14  policy, for the first year, an amount that is the greater of

15  the insurer's usual and customary commission for the type of

16  policy written or a fee equal to the usual and customary

17  commission of the association; or

18         (B)  Offer to allow the producing agent of record of

19  the policy to continue servicing the policy for a period of

20  not less than 1 year and offer to pay the agent the greater of

21  the insurer's or the association's usual and customary

22  commission for the type of policy written.

23

24  If the producing agent is unwilling or unable to accept

25  appointment, the new insurer shall pay the agent in accordance

26  with sub-sub-sub-subparagraph (A).

27         (II)  When the association enters into a contractual

28  agreement for a take-out plan, the producing agent of record

29  of the association policy is entitled to retain any unearned

30  commission on the policy, and the insurer shall:

31


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  1         (A)  Pay to the producing agent of record of the

  2  association policy, for the first year, an amount that is the

  3  greater of the insurer's usual and customary commission for

  4  the type of policy written or a fee equal to the usual and

  5  customary commission of the association; or

  6         (B)  Offer to allow the producing agent of record of

  7  the association policy to continue servicing the policy for a

  8  period of not less than 1 year and offer to pay the agent the

  9  greater of the insurer's or the association's usual and

10  customary commission for the type of policy written.

11

12  If the producing agent is unwilling or unable to accept

13  appointment, the new insurer shall pay the agent in accordance

14  with sub-sub-sub-subparagraph (A). either appoint the agent to

15  service the risk or, if the insurer places the coverage

16  through a new agent, require the new agent who then writes the

17  policy to pay not less than 50 percent of the first year's

18  commission to the producing agent who submitted the

19  application to the plan or the association, except that if the

20  new agent is an employee or exclusive agent of the insurer,

21  the new agent shall pay a policy fee of $50 to the producing

22  agent in lieu of splitting the commission.

23

24  If the risk is not able to obtain any such offer, the risk is

25  eligible for either a standard policy including wind coverage

26  or a basic policy including wind coverage issued by the

27  association; however, if the risk could not be insured under a

28  standard policy including wind coverage regardless of market

29  conditions, the risk shall be eligible for a basic policy

30  including wind coverage unless rejected under subparagraph 8.

31  The association shall determine the type of policy to be


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  1  provided on the basis of objective standards specified in the

  2  underwriting manual and based on generally accepted

  3  underwriting practices.

  4         b.  With respect to commercial lines residential risks,

  5  if the risk is offered coverage under a policy including wind

  6  coverage from an authorized insurer at its approved rate, the

  7  risk is not eligible for any policy issued by the association.

  8  If the risk is not able to obtain any such offer, the risk is

  9  eligible for a policy including wind coverage issued by the

10  association.

11         (I)  If the risk accepts an offer of coverage through

12  the market assistance plan or an offer of coverage through a

13  mechanism established by the association before a policy is

14  issued to the risk by the association or during the first 30

15  days of coverage by the association, and the producing agent

16  who submitted the application to the plan or the association

17  is not currently appointed by the insurer, the insurer shall:

18         (A)  Pay to the producing agent of record of the

19  policy, for the first year, an amount that is the greater of

20  the insurer's usual and customary commission for the type of

21  policy written or a fee equal to the usual and customary

22  commission of the association; or

23         (B)  Offer to allow the producing agent of record of

24  the policy to continue servicing the policy for a period of

25  not less than 1 year and offer to pay the agent the greater of

26  the insurer's or the association's usual and customary

27  commission for the type of policy written.

28

29  If the producing agent is unwilling or unable to accept

30  appointment, the new insurer shall pay the agent in accordance

31  with sub-sub-sub-subparagraph (A).


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  1         (II)  When the association enters into a contractual

  2  agreement for a take-out plan, the producing agent of record

  3  of the association policy is entitled to retain any unearned

  4  commission on the policy, and the insurer shall:

  5         (A)  Pay to the producing agent of record of the

  6  association policy, for the first year, an amount that is the

  7  greater of the insurer's usual and customary commission for

  8  the type of policy written or a fee equal to the usual and

  9  customary commission of the association; or

10         (B)  Offer to allow the producing agent of record of

11  the association policy to continue servicing the policy for a

12  period of not less than 1 year and offer to pay the agent the

13  greater of the insurer's or the association's usual and

14  customary commission for the type of policy written.

15

16  If the producing agent is unwilling or unable to accept

17  appointment, the new insurer shall pay the agent in accordance

18  with sub-sub-sub-subparagraph (A). either appoint the agent to

19  service the risk or, if the insurer places the coverage

20  through a new agent, require the new agent who then writes the

21  policy to pay not less than 50 percent of the first year's

22  commission to the producing agent who submitted the

23  application to the plan, except that if the new agent is an

24  employee or exclusive agent of the insurer, the new agent

25  shall pay a policy fee of $50 to the producing agent in lieu

26  of splitting the commission.

27

28  If the risk is not able to obtain any such offer, the risk is

29  eligible for a policy including wind coverage issued by the

30  association.

31


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  1         c.  This subparagraph does not require the association

  2  to provide wind coverage or hurricane coverage in any area in

  3  which such coverage is available through the Florida Windstorm

  4  Underwriting Association.

  5         6.  Must include rules for classifications of risks and

  6  rates therefor.

  7         7.  Must provide that if premium and investment income

  8  attributable to a particular plan year are in excess of

  9  projected losses and expenses of the plan attributable to that

10  year, such excess shall be held in surplus. Such surplus shall

11  be available to defray deficits as to future years and shall

12  be used for that purpose prior to assessing member insurers as

13  to any plan year.

14         8.  Must provide objective criteria and procedures to

15  be uniformly applied for all applicants in determining whether

16  an individual risk is so hazardous as to be uninsurable. In

17  making this determination and in establishing the criteria and

18  procedures, the following shall be considered:

19         a.  Whether the likelihood of a loss for the individual

20  risk is substantially higher than for other risks of the same

21  class; and

22         b.  Whether the uncertainty associated with the

23  individual risk is such that an appropriate premium cannot be

24  determined.

25

26  The acceptance or rejection of a risk by the association shall

27  be construed as the private placement of insurance, and the

28  provisions of chapter 120 shall not apply.

29         9.  Must provide that the association shall make its

30  best efforts to procure catastrophe reinsurance at reasonable

31  rates, as determined by the board of governors.


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  1         10.  Must provide that in the event of regular deficit

  2  assessments under sub-subparagraph (b)3.a. or sub-subparagraph

  3  (b)3.b., or by the Florida Windstorm Underwriting Association

  4  under sub-sub-subparagraph (2)(b)2.d.(I) or

  5  sub-sub-subparagraph (2)(b)2.d.(II), the association shall

  6  levy upon association policyholders in its next rate filing,

  7  or by a separate rate filing solely for this purpose, a market

  8  equalization surcharge in a percentage equal to the total

  9  amount of such regular assessments divided by the aggregate

10  statewide direct written premium for subject lines of business

11  for member insurers for the prior calendar year. Market

12  equalization surcharges under this subparagraph are not

13  considered premium and are not subject to commissions, fees,

14  or premium taxes; however, failure to pay a market

15  equalization surcharge shall be treated as failure to pay

16  premium.

17         11.  The policies issued by the association must

18  provide that, if the association or the market assistance plan

19  obtains an offer from an authorized insurer to cover the risk

20  at its approved rates under either a standard policy including

21  wind coverage or a basic policy including wind coverage, the

22  risk is no longer eligible for coverage through the

23  association. However, if the risk is located in an area in

24  which Florida Windstorm Underwriting Association coverage is

25  available, such an offer of a standard or basic policy

26  terminates eligibility regardless of whether or not the offer

27  includes wind coverage. Upon termination of eligibility, the

28  association shall provide written notice to the policyholder

29  and agent of record stating that the association policy shall

30  be canceled as of 60 days after the date of the notice because

31  of the offer of coverage from an authorized insurer. Other


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  1  provisions of the insurance code relating to cancellation and

  2  notice of cancellation do not apply to actions under this

  3  subparagraph.

  4         12.  Association policies and applications must include

  5  a notice that the association policy could, under this section

  6  or s. 627.3511, be replaced with a policy issued by an

  7  admitted insurer that does not provide coverage identical to

  8  the coverage provided by the association. The notice shall

  9  also specify that acceptance of association coverage creates a

10  conclusive presumption that the applicant or policyholder is

11  aware of this potential.

12         13.  May establish, subject to approval by the

13  department, different eligibility requirements and operational

14  procedures for any line or type of coverage for any specified

15  county or area if the board determines that such changes to

16  the eligibility requirements and operational procedures are

17  justified due to the voluntary market being sufficiently

18  stable and competitive in such area or for such line or type

19  of coverage and that consumers who, in good faith, are unable

20  to obtain insurance through the voluntary market through

21  ordinary methods would continue to have access to coverage

22  from the association. When coverage is sought in connection

23  with a real property transfer, such requirements and

24  procedures shall not provide for an effective date of coverage

25  later than the date of the closing of the transfer as

26  established by the transferor, the transferee, and, if

27  applicable, the lender.

28         Section 3.  Subsection (4) of section 627.3511, Florida

29  Statutes, is amended to read:

30         627.3511  Depopulation of Residential Property and

31  Casualty Joint Underwriting Association.--


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  1         (4)  AGENT BONUS.--When the Residential Property and

  2  Casualty Joint Underwriting Association enters into a

  3  contractual agreement for a take-out plan that provides a

  4  bonus to the insurer, the producing agent of record of the

  5  association policy is entitled to retain any unearned

  6  commission on such policy, and the insurer shall either:

  7         (a)  Pay to the producing agent of record of the

  8  association policy, for the first year, an amount that is the

  9  greater of equal to the insurer's usual and customary

10  commission for the type of policy written or a fee equal to

11  the if the term of the association policy was in excess of 6

12  months, or one-half of such usual and customary commission if

13  the term of the association policy was 6 months or less; or

14         (b)  Offer to allow the producing agent of record of

15  the association policy to continue servicing the policy for a

16  period of not less than 1 year and offer to pay the agent the

17  greater of the insurer's or the association's usual and

18  customary commission for the type of policy written.

19

20  If the producing agent is unwilling or unable to accept

21  appointment, the new insurer shall pay the agent in accordance

22  with paragraph (a). The insurer need not take any further

23  action if the offer is rejected. This subsection does not

24  apply to any reciprocal interinsurance exchange, nonprofit

25  federation, or any subsidiary or affiliate of such

26  organization. This subsection does not apply if the agent is

27  also the agent of record on the new coverage. The requirement

28  of this subsection that the producing agent of record is

29  entitled to retain the unearned commission on an association

30  policy does not apply to a policy for which coverage has been

31  provided in the association for 30 days or less or for which a


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  1  cancellation notice has been issued pursuant to s.

  2  627.351(6)(c)11. during the first 30 days of coverage.

  3         Section 4.  Section 627.3517, Florida Statutes, is

  4  created to read:

  5         627.3517  Consumer choice.--No provision of s. 627.351,

  6  s. 627.3511, or s. 627.3515 shall be construed to impair the

  7  right of any insurance risk apportionment plan policyholder,

  8  upon receipt of any keepout or takeout offer, to retain his or

  9  her current agent, so long as that agent is duly licensed and

10  appointed by the insurance risk apportionment plan or

11  otherwise authorized to place business with the insurance risk

12  apportionment plan. This right shall not be cancelled,

13  suspended, impeded, abridged, or otherwise compromised by any

14  rule, plan of operation, or depopulation plan, whether through

15  keepout, takeout, midterm assumption, or any other means, of

16  any insurance risk apportionment plan or depopulation plan,

17  including, but not limited to, those described in s. 627.351,

18  s. 627.3511, or s. 627.3515. The department shall adopt any

19  rules necessary to cause any insurance risk apportionment plan

20  or market assistance plan under such sections to demonstrate

21  that the operations of the plan do not interfere with,

22  promote, or allow interference with the rights created under

23  this section. If the policyholder's current agent is unable or

24  unwilling to be appointed with the insurer making the takeout

25  or keepout offer, the policyholder shall not be disqualified

26  from participation in the appropriate insurance risk

27  apportionment plan because of an offer of coverage in the

28  voluntary market. An offer of full property insurance coverage

29  by the insurer currently insuring either the ex-wind or

30  wind-only coverage on the policy to which the offer applies

31  shall not be considered a takeout or keepout offer. Any rule,


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    ENROLLED

    2002 Legislature                 CS for SB 1126, 1st Engrossed



  1  plan of operation, or plan of depopulation, through keepout,

  2  takeout, midterm assumption, or any other means, of any

  3  property insurance risk apportionment plan under s. 627.351(2)

  4  or s. 627.351(6) is subject to s. 627.351(2)(b), s.

  5  627.351(6)(c), and s. 627.3511(4).

  6         Section 5.  This act shall take effect upon becoming a

  7  law.

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