House Bill hb0193c1

CODING: Words stricken are deletions; words underlined are additions.




    Florida House of Representatives - 2002              CS/HB 193

        By the Committee on Insurance and Representatives Gannon
    and Kallinger





  1                      A bill to be entitled

  2         An act relating to insurer rehabilitation and

  3         liquidation; amending s. 626.9541, F.S.;

  4         correcting a cross reference; amending s.

  5         631.001, F.S.; revising construction and

  6         purpose provisions; amending s. 631.011, F.S.;

  7         providing additional definitions; revising

  8         certain definitions; creating s. 631.015, F.S.;

  9         providing for reciprocity; creating s. 631.025,

10         F.S.; specifying application to certain persons

11         and entities; amending s. 631.041, F.S.;

12         correcting a cross reference; creating s.

13         631.042, F.S.; limiting application of certain

14         time restrictions; providing for tolling

15         certain time limitations in certain actions;

16         amending s. 631.141, F.S.; authorizing the

17         Department of Insurance to exercise certain

18         third-party rights; providing an exception;

19         amending s. 631.154, F.S.; including certain

20         assets within provisions authorizing a receiver

21         to take certain actions; including certain

22         costs and expenses of the department in costs

23         and expenses entitled to be recovered by the

24         receiver under certain circumstances; creating

25         s. 631.156, F.S.; providing for investigations

26         by the department; providing department powers;

27         authorizing the department to provide certain

28         information in such investigations; granting

29         the department certain discretionary powers;

30         creating s. 631.157, F.S.; providing for civil

31         actions by receivers; imposing liability on

                                  1

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1         certain persons or entities for certain

  2         actions; specifying amounts of damages;

  3         providing construction; providing costs and

  4         expenses entitled to be recovered by the

  5         receiver under certain circumstances; providing

  6         a time certain for bringing certain actions;

  7         creating s. 631.3915, F.S.; authorizing the

  8         department to pursue actions for damages or

  9         recoveries; amending s. 631.54, F.S.; revising

10         a definition; amending s. 631.57, F.S.; vesting

11         the Florida Insurance Guaranty Association with

12         the defenses of certain insolvent insurers;

13         creating s. 817.2341, F.S.; specifying certain

14         activities relating to false or misleading

15         financial statements or supporting documents as

16         criminal offenses; providing penalties;

17         repealing s. 624.3101, F.S., relating to false

18         or misleading financial statements or

19         supporting documents; providing an effective

20         date.

21

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

23

24         Section 1.  Paragraph (w) of subsection (1) of section

25  626.9541, Florida Statutes, is amended to read:

26         626.9541  Unfair methods of competition and unfair or

27  deceptive acts or practices defined.--

28         (1)  UNFAIR METHODS OF COMPETITION AND UNFAIR OR

29  DECEPTIVE ACTS.--The following are defined as unfair methods

30  of competition and unfair or deceptive acts or practices:

31

                                  2

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1         (w)  Soliciting or accepting new or renewal insurance

  2  risks by insolvent or impaired insurer prohibited; penalty.--

  3         1.  Whether or not delinquency proceedings as to the

  4  insurer have been or are to be initiated, but while such

  5  insolvency or impairment exists, no director or officer of an

  6  insurer, except with the written permission of the Department

  7  of Insurance, shall authorize or permit the insurer to solicit

  8  or accept new or renewal insurance risks in this state after

  9  such director or officer knew, or reasonably should have

10  known, that the insurer was insolvent or impaired. "Impaired"

11  includes impairment of for capital or surplus, as defined in

12  s. 631.011(12)(9) and (13)(10).

13         2.  Any such director or officer, upon conviction of a

14  violation of this paragraph, is guilty of a felony of the

15  third degree, punishable as provided in s. 775.082, s.

16  775.083, or s. 775.084.

17         Section 2.  Section 631.001, Florida Statutes, is

18  amended to read:

19         631.001  Title, construction, and purpose.--

20         (1)  This part constitutes and may be cited as the

21  "Insurers Rehabilitation and Liquidation Act."

22         (2)  This part may not be interpreted to limit the

23  powers granted the Department of Insurance by other provisions

24  of law.

25         (2)(3)  This part shall be liberally construed to

26  effect the purposes of this part purpose stated in subsection

27  (4).

28         (3)(4)  The purposes purpose of this part, which are

29  integral elements of the regulation of the business of

30  insurance and are of vital public interest and concern, are

31  to:

                                  3

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1         (a)  Protect is the protection of the interests of

  2  policyholders insureds, creditors, and other claimants and the

  3  public.

  4         (b)  Provide a comprehensive scheme for administering

  5  insurer receiverships. generally, through:

  6         (c)(a)  Detect Early detection of any potentially

  7  dangerous condition in an insurer and promptly apply prompt

  8  application of appropriate corrective measures. which are

  9  neither unduly harsh nor subject to unwarranted publicity

10  needlessly damaging to the insurer;

11         (d)(b)  Implement improved methods for rehabilitating

12  insurers, which methods involve the cooperation and management

13  expertise of the insurance industry.;

14         (e)(c)  Enhance the Enhanced efficiency and economy of

15  the liquidation process by clarifying through clarification

16  and specification of the law to minimize legal uncertainty and

17  litigation.;

18         (f)(d)  Establish a system to equitably apportion

19  Equitable apportionment of any unavoidable loss.; and

20         (g)(e)  Administer insurer receiverships more

21  efficiently on an interstate and international basis Lessening

22  the problems of interstate rehabilitation and liquidation by

23  facilitating cooperation between states in the liquidation

24  process and by extending extension of the scope of personal

25  jurisdiction over debtors of the insurer outside this state.

26         (h)  Maximize recovery of assets for the benefit of the

27  insurer's estate; policyholders, creditors, and other

28  claimants; and the public.

29         (5)  The Insurers Rehabilitation and Liquidation Act

30  shall be so interpreted and construed as to effectuate its

31  general purpose to make uniform the law of those states which

                                  4

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  in substance and effect enact the Insurers Rehabilitation and

  2  Liquidation Act. To the extent that the provisions of the

  3  Insurers Rehabilitation and Liquidation Act, when applicable,

  4  conflict with other provisions of this chapter, the provisions

  5  of such act shall control.

  6         Section 3.  Section 631.011, Florida Statutes, is

  7  amended to read:

  8         631.011  Definitions.--For the purpose of this part,

  9  the term:

10         (1)  "Affiliate" means any entity which exercises

11  control over or is controlled by the insurer, directly or

12  indirectly through:

13         (a)  Equity ownership of voting securities;

14         (b)  Common managerial control; or

15         (c)  Collusive participation by the management of the

16  insurer and affiliate in the management of the insurer or the

17  affiliate.

18         (2)  "Ancillary state" means, any state other than a

19  domiciliary state.

20         (3)  "Assets," as used in this section subsections

21  (8)-(10), means only allowed assets as defined in chapter 625.

22         (4)  "Bona fide holder for value" means a person who,

23  while not possessing information that would lead a reasonable

24  person similarly situated to believe that the insurer is

25  insolvent or is experiencing an impairment of capital or an

26  impairment of surplus and while unaware of the imminence or

27  pendency of any receivership proceeding against the insurer,

28  has, in the exercise of reasonable business judgment,

29  exchanged his or her own funds, assets, or property for funds,

30  assets, or property of the insurer having an equivalent market

31  value.

                                  5

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1         (5)(4)  "Court" refers to the circuit court in which

  2  the receivership proceeding is pending.

  3         (6)(5)  "Delinquency proceeding" means any proceeding

  4  commenced against an insurer pursuant to this chapter for the

  5  purpose of liquidating, rehabilitating, reorganizing, or

  6  conserving such insurer.

  7         (7)(6)  "Domiciliary state" means the state in which an

  8  insurer is incorporated or organized or, in the case of an

  9  insurer incorporated or organized in a foreign country, the

10  state in which such insurer, having become authorized to do

11  business in such state, has, at the commencement of a

12  delinquency proceeding, the largest amount of its assets held

13  in trust and assets held on deposit for the benefit of its

14  policyholders or policyholders and creditors in the United

15  States; and any such insurer is deemed to be domiciled in such

16  state.

17         (8)  "Fair consideration" means that consideration

18  which is given for property or assets of an insurer when, in

19  exchange for the funds, assets, or property and in good faith,

20  property is conveyed, services are rendered, or an enforceable

21  obligation not invalidated by the receivership proceedings is

22  created having a value to the insurer of not less than the

23  value of the funds, assets, or property given in exchange.

24         (9)(7)  "Foreign country" means territory not in any

25  state.

26         (10)(8)  "General assets" means all property, real,

27  personal, or otherwise, not specifically mortgaged, pledged,

28  deposited, or otherwise encumbered for the security or benefit

29  of specified persons or a limited class or classes of persons,

30  and as to such specifically encumbered property the term

31  includes all such property or its proceeds in excess of the

                                  6

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  amount necessary to discharge the sum or sums secured thereby.

  2  Assets held in trust and assets held on deposit for the

  3  security or benefit of all policyholders or all policyholders

  4  and creditors in the United States shall be deemed general

  5  assets.

  6         (11)  "Good faith" means honesty in fact, including,

  7  but not limited to, the exercise of reasonable business

  8  judgment, in the conduct or transaction concerned, together

  9  with the absence of information that would lead a reasonable

10  person in the same position to know that the insurer is

11  insolvent or is experiencing an impairment of capital or an

12  impairment of surplus and together with the absence of

13  knowledge regarding the imminence or pendency of any

14  receivership proceeding against the insurer.

15         (12)(9)  "Impairment of capital" means that the minimum

16  surplus required to be maintained in s. 624.408 has been

17  dissipated and the insurer is not possessed of assets at least

18  equal to all its liabilities together with its total issued

19  and outstanding capital stock, if a stock insurer, or the

20  minimum surplus or net trust fund required by s. 624.407, if a

21  mutual, reciprocal, or business trust insurer.

22         (13)(10)  "Impairment of surplus" means that the

23  surplus of a stock insurer, the additional surplus of a mutual

24  or reciprocal insurer, or the additional net trust fund of a

25  business trust insurer does not comply with the requirements

26  of s. 624.408.

27         (14)(11)  "Insolvency" means that all the assets of the

28  insurer, if made immediately available, would not be

29  sufficient to discharge all its liabilities or that the

30  insurer is unable to pay its debts as they become due in the

31  usual course of business. When the context of any provision of

                                  7

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  this code so indicates, insolvency also includes and is

  2  defined as "impairment of surplus," as defined in subsection

  3  (13)(9), and "impairment of capital," as defined in subsection

  4  (12)(8).

  5         (15)(12)  "Insurer," in addition to persons so defined

  6  under s. 624.03, also includes persons purporting to be

  7  insurers or organizing, or holding themselves out as

  8  organizing, in this state for the purpose of becoming insurers

  9  and all insurers who have policyholders insureds resident in

10  this state.

11         (16)(13)  "Liabilities," as used in subsections (12)

12  and (14) (8)-(10), means all liabilities, including those

13  specifically required in s. 625.041.

14         (14)  "Person" includes natural persons, corporations,

15  partnerships, trusts, estates, and sole proprietorships.

16         (17)  "Property" includes:

17         (a)  All right, title, and interest of the insolvent

18  entity, whether legal or equitable, tangible or intangible, or

19  choate or inchoate, and includes choses in action, contract

20  rights, and any other interest recognized under the laws of

21  this state.

22         (b)  Entitlements that existed prior to the entry of an

23  order of conservation, rehabilitation, or liquidation and

24  entitlements that may arise by operation of the provisions of

25  this part or other provisions of law allowing the department

26  to avoid prior transfers or assert other rights in its

27  capacity as receiver.

28         (c)  All records and data that are otherwise the

29  property of the insolvent insurer, in whatever form

30  maintained, including, but not limited to, claims and claim

31  files, application files, litigation files, premium records,

                                  8

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  rate books, underwriting manuals, personnel records, or

  2  financial records, or similar records within the possession,

  3  custody, or control of a managing general agent, third-party

  4  administrator, management company, accountant, attorney,

  5  affiliate, or other person.

  6

  7  The term does not include privileged or confidential documents

  8  of an insolvent insurer generated by a third party.

  9         (18)(15)  "Receiver" means a receiver, liquidator,

10  rehabilitator, reorganizer, or conservator, as the context may

11  require.

12         (19)  "Receivership" means the placement of an insurer

13  under the control of a receiver pursuant to a delinquency

14  proceeding under this part.

15         (20)(16)  "Reciprocal state" means any state other than

16  this state in which in substance and effect the provisions of

17  the Insurers Rehabilitation and Liquidation Act are in force,

18  including the provisions requiring that the commissioner of

19  insurance or equivalent insurance supervisory official be the

20  receiver of a delinquent insurer.

21         (21)(17)  "Secured claim" means any claim secured by

22  mortgage, trust deed, pledge, deposit as security, escrow, or

23  otherwise but does not include a special deposit claim, a

24  claim against general assets, or a claim based on mere

25  possession.  The term also includes a claim which more than 4

26  months before the commencement of a delinquency proceeding in

27  the state of the insurer's domicile has become a lien upon

28  specific assets by reason of judicial process.

29         (22)(18)  "Special deposit claim" means any claim

30  secured by a deposit made pursuant to statute for the security

31

                                  9

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  or benefit of a limited class or classes of persons, but not

  2  including any general assets.

  3         (23)(19)  "State" is as defined in s. 624.08.

  4         Section 4.  Section 631.015, Florida Statutes, is

  5  created to read:

  6         631.015  Reciprocity; treatment of

  7  policyholders.--Reciprocity in the treatment of policyholders

  8  in receivership is extended to those states which, in

  9  substance and effect, enact the National Association of

10  Insurance Commissioners Rehabilitation and Liquidation Model

11  Act or the Uniform Insurers Liquidation Act.

12         Section 5.  Section 631.025, Florida Statutes, is

13  created to read:

14         631.025  Persons subject to this part.--Delinquency

15  proceedings authorized by this part may be initiated against

16  any insurer, as defined in s. 631.011(15), if the statutory

17  grounds are present as to that insurer, and the court may

18  exercise jurisdiction over any person required to cooperate

19  with the department pursuant to s. 631.391 and over all

20  persons made subject to the court's jurisdiction by other

21  provisions of law. Such persons include, but are not limited

22  to:

23         (1)  A person transacting, or that has transacted,

24  insurance business in or from this state and against whom

25  claims arising from that business may exist now or in the

26  future.

27         (2)  A person purporting to transact an insurance

28  business in this state and any person who acts as an insurer,

29  transacts insurance, or otherwise engages in insurance

30  activities in or from this state, with or without a

31

                                  10

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  certificate of authority or proper authority from the

  2  department.

  3         (3)  An insurer with policyholders resident in this

  4  state.

  5         (4)  All other persons organized or in the process of

  6  organizing with the intent to transact an insurance business

  7  in this state.

  8         Section 6.  Paragraph (d) of subsection (1) of section

  9  631.041, Florida Statutes, is amended to read:

10         631.041  Automatic stay; relief from stay;

11  injunctions.--

12         (1)  An application or petition under s. 631.031

13  operates as a matter of law as an automatic stay applicable to

14  all persons and entities, other than the receiver, which shall

15  be permanent and survive the entry of an order of

16  conservation, rehabilitation, or liquidation, and which shall

17  prohibit:

18         (d)  Any act to create, perfect, or enforce a lien

19  against property of the insurer, except that a secured claim

20  as defined in s. 631.011(21)(17) may proceed under s. 631.191

21  after the order of liquidation is entered;

22         Section 7.  Section 631.042, Florida Statutes, is

23  created to read:

24         631.042  Extension of time.--

25         (1)  With respect to any action by or against an

26  insurer, no statute of limitations or defense of laches shall

27  run between the date the department files a petition for a

28  delinquency proceeding against an insurer and the date the

29  court enters an order granting or denying that petition.  If

30  the petition is denied, any action against the insurer that

31  might have been commenced when the petition was filed may be

                                  11

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  commenced for at least 60 days after the order denying such

  2  relief.

  3         (2)  The running of any unexpired statute of

  4  limitations, as to any claims brought by the administrator, a

  5  receiver, or an official or agency exercising powers pursuant

  6  to this chapter seeking damages or other recoveries on behalf

  7  of an insurer, its policyholders, its creditors, or its

  8  estate, shall be tolled for a period of 4 years from the date

  9  the court enters an order placing the insurer in receivership.

10  If the delinquency proceedings against the insurer terminate

11  in fewer than 4 years, tolling shall cease at the time the

12  proceedings are final, including all appeals.

13         (3)  The right of action does not accrue, and the

14  limitations period for any such action does not run, during

15  the time the insurer is controlled by parties acting contrary

16  to the company's interests or when facts giving rise to the

17  claim are concealed fraudulently from regulatory authorities

18  or from any members of company management.  The provisions of

19  chapter 95 shall be construed to be consistent with the

20  provisions of this section.  The receiver may institute any

21  action or proceeding authorized under this part while any

22  statute of limitation is tolled pursuant to this section.

23  This tolling provision shall be in addition to any other

24  applicable tolling provision.

25         (4)  For actions not covered by subsection (2), if any

26  unexpired time period is fixed by any agreement or in any

27  proceeding for doing any act for the benefit of the estate,

28  the receiver shall have 180 days, or for good cause shown more

29  than 180 days as allowed by the court, from the date the court

30  enters the order granting the department's petition for a

31  delinquency proceeding.

                                  12

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1         Section 8.  Subsections (6) through (9) of section

  2  631.141, Florida Statutes, are renumbered as subsections (7)

  3  through (10), respectively, and a new subsection (6) is added

  4  to said section to read:

  5         631.141  Conduct of delinquency proceeding; domestic

  6  and alien insurers.--

  7         (6)  The department may assert all rights belonging to

  8  third parties, including, but not limited to, policyholders,

  9  creditors, and other claimants, except to the extent an

10  individual claim is personal and unique to the claimant and

11  could not inure to the benefit of the estate or to

12  policyholders, creditors, or other claimants.

13         Section 9.  Section 631.154, Florida Statutes, is

14  amended to read:

15         631.154  Funds, assets, or other property in the

16  possession of third person.--

17         (1)  If the receiver determines that funds, assets, or

18  property in the possession of another person are rightfully

19  the property of the estate, the receiver shall deliver to such

20  person a written demand for immediate delivery of the funds,

21  assets, or property to the receiver, referencing this section

22  by number, referencing the court and docket number of the

23  receivership action, and notifying the person that any claim

24  of right to the funds, assets, or property by her or him must

25  be presented to the receivership court within 20 days after

26  the date of the written demand.  Any person who holds funds,

27  assets, or other property belonging to an entity placed in

28  receivership subject to an order of conservation,

29  rehabilitation, or liquidation under this chapter shall

30  deliver the funds, assets, or other property to the receiver

31  on demand.  Should the person allege any right to retain the

                                  13

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  funds, assets, or other property pursuant to s. 631.155, s.

  2  631.191, s. 631.261, s. 631.262, s. 631.263, or s. 631.281, a

  3  pleading setting out the right shall be filed with the court

  4  within 20 days after of the receipt of the receiver's demand

  5  that the funds, assets, or property be delivered to the

  6  receiver.  The person shall serve a copy of the pleading on

  7  the receiver.  The pleading of the person shall inform the

  8  court as to the nature of the claim to the property, the

  9  alleged value of the assets or property, or the amount of

10  funds held, and what action has been taken by the person to

11  preserve and protect the assets or property or to preserve any

12  funds pending determination of the dispute.

13         (2)  If requested by the receiver, a hearing shall be

14  held to determine where and under what conditions the

15  property, assets, or funds shall be held by the person pending

16  determination of the dispute.  The court may impose conditions

17  as it may deem necessary or appropriate for the preservation

18  of the property until the court can determine the validity of

19  the person's claim to the property, assets, or funds.  If any

20  property, assets, or funds are allowed to remain in the

21  possession of the person after demand made by the receiver,

22  that person shall be strictly liable for any waste, loss, or

23  damage of the property, assets, or funds retained.

24         (3)  If a person has filed a pleading alleging any

25  right to retain funds, assets, or property, the court shall

26  hold a subsequent hearing to determine entitlement to the

27  funds, assets, or property claimed by the receiver.

28         (4)  If a person fails to file the pleading required by

29  subsection (1) within the 20-day period, the court may, upon

30  petition of the receiver and upon a copy of the petition being

31  served by the petitioner to such person, issue its summary

                                  14

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  order directing the immediate delivery of the funds, assets,

  2  or property to the receiver and finding that the person has

  3  waived all claims of right to the funds, assets, or property.

  4         (5)  This section shall apply to all proceedings

  5  brought by the receiver to recover funds, assets, or property

  6  believed by the receiver under this chapter to be assets of

  7  the entity subject to an order of conservation,

  8  rehabilitation, or liquidation.  The receiver shall be exempt

  9  from the provisions of s. 57.111.

10         (6)  Should the receiver be successful in establishing

11  its claim or any part thereof, the receiver shall be entitled

12  to recover judgment for the following:

13         (a)  The property or its cash value as of the date of

14  the order of conservation, rehabilitation, or liquidation,

15  whichever is applicable.

16         (b)  Rental for the use of the property to run from the

17  date of the order of conservation, rehabilitation, or

18  liquidation, whichever is applicable, to the date the property

19  is delivered to the receiver.

20         (c)  In the case of funds, interest at the statutory

21  rate to run from the date of the order of conservation,

22  rehabilitation, or liquidation, whichever is applicable, to

23  the date the funds are delivered to the receiver.

24         (d)  All costs, investigative and other expenses,

25  including, but not limited to, those for department staff,

26  incurred in necessary to the recovery of the property, assets,

27  or funds, and reasonable attorney's fees. Department staff

28  costs and expenses include staff salaries.

29

30

31

                                  15

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  It is the intent of this section that a person found to be

  2  holding receivership assets fully reimburse the receiver for

  3  any and all efforts made to recover those assets.

  4         Section 10.  Section 631.156, Florida Statutes, is

  5  created to read:

  6         631.156  Investigation by the department; scope of

  7  authority; sharing of materials.--

  8         (1)  The department may, and if appointed receiver

  9  shall, conduct an investigation to determine the causes of the

10  insolvency, including whether false statements filed with the

11  department contributed to the insolvency and if any laws of

12  this state, any other state, or the Federal Government

13  relating to the solvency of the insurer were violated; to

14  discover assets for recovery; and to determine the location of

15  assets and their manner of recovery.  To the extent reasonably

16  calculated to further the investigation, the department may

17  examine and review any and all documents; take statements

18  under oath; examine and review the books, records, and

19  documents of any affiliate, controlling person, officer,

20  director, manager, trustee, agent, adjuster, employee, or

21  independent contractor of any insurer or affiliate and any

22  other person possessing any executive authority over, or

23  exercising or having exercised any control over, any segment

24  of the affairs of the insurer or affiliate; and request the

25  court to issue any necessary subpoenas.

26         (2)  The department may provide documents, books, and

27  records; other investigative products, work product, and

28  analysis; and copies of any or all of such materials to the

29  Division of Insurance Fraud or any other appropriate

30  government agency.  The sharing of these materials shall not

31

                                  16

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  waive any work product or other privilege otherwise applicable

  2  under law.

  3         (3)  The department shall have the discretion to

  4  determine the books, records, documents, or testimony

  5  reasonably calculated to:

  6         1.  Disclose, or lead to the disclosure of, the causes

  7  of the insolvency.

  8         2.  Discover or locate, or lead to the discovery and

  9  location of, assets to be recovered and the recovery of those

10  assets.

11         3.  Determine the veracity of statements filed with the

12  department.

13         4.  Determine whether any laws of this state, any other

14  state, or the Federal Government were violated.

15

16  Parties failing to produce requested materials or provide

17  requested testimony under this section shall present their

18  objections by written motion to the court within 10 days

19  following receipt of the request and shall be responsible for

20  the loss of any evidence occurring from the date the

21  department made its request for materials or testimony.  The

22  court shall determine as expeditiously as possible whether the

23  department has abused its discretion in seeking the materials

24  or testimony, with the objecting party having the burden of

25  proof.  A party who fails to produce the requested materials

26  or testimony without filing a proper timely objection or who,

27  having unsuccessfully asserted the objection, fails to furnish

28  the evidence or testimony within the time provided by the

29  court or the department shall be subject to the contempt

30  powers of the court in addition to any other penalties

31  applicable under law.

                                  17

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1         Section 11.  Section 631.157, Florida Statutes, is

  2  created to read:

  3         631.157  Civil action by the receiver.--

  4         (1)  Any person who is engaged in the business of

  5  insurance, is or acts as an officer, director, agent, or

  6  employee of any person engaged in the business of insurance,

  7  or is involved in a transaction relating to the conduct of

  8  affairs of such a business, other than as an insured or

  9  beneficiary under a policy of insurance, and who willfully

10  obtains or uses, as defined in s. 812.012(3), any funds,

11  assets, or property, including, but not limited to, moneys,

12  funds, premiums, credits, or other property of an insurer,

13  shall be liable to the department as receiver for the use and

14  benefit of an insolvent insurer's estate, claimants,

15  creditors, and policyholders, as follows:

16         (a)  If the funds, assets, or property obtained or used

17  did not jeopardize the safety and soundness of an insurer and

18  was not a significant cause of such insurer being placed in

19  receivership, the person shall be liable only for the full

20  amount of any funds, assets, or property obtained or used,

21  plus prejudgment interest provided by law.

22         (b)  If the funds, assets, or property obtained or used

23  jeopardized the safety and soundness of an insurer or was a

24  significant cause of the insurer being placed in receivership,

25  the person shall be liable for triple the full amount of any

26  funds, assets, or property obtained or used, plus prejudgment

27  interest provided by law on the original amount.

28         (2)(a)  Any person who:

29         1.  Is engaged in the business of insurance, is or acts

30  as an officer, director, agent, or employee of any person

31  engaged in the business of insurance, or is involved in a

                                  18

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  transaction relating to the conduct of affairs of such a

  2  business, other than as an insured or beneficiary under a

  3  policy of insurance;

  4         2.  Has actual knowledge or such constructive knowledge

  5  as should have been obtained through reasonable inquiry by a

  6  person in that position; and

  7         3.  Misreports a material fact in any book, report, or

  8  statement of an insurer

  9

10  with the intent to deceive the insurer, including any officer,

11  employee, or agent of the insurer, the department, or any

12  agent or examiner appointed by the department to examine the

13  affairs of the person or insurer, concerning the financial

14  condition or solvency of such business is liable to the

15  department as receiver for the use and benefit of the

16  insolvent insurer's estate, creditors, and policyholders, as

17  provided in paragraph (b).

18         (b)1.  If the misreporting did not jeopardize the

19  safety and soundness of an insurer and was not a significant

20  cause of the insurer being placed in receivership, the person

21  shall be liable only for the full amount of any asset

22  misreported.

23         2.  If the misreporting jeopardized the safety and

24  soundness of an insurer or was a significant cause of the

25  insurer being placed in receivership, the person shall be

26  liable for triple the full amount of any asset misreported.

27         (3)  If the asset or property that has been obtained or

28  used was reported to the department as being available to the

29  insurer as an admitted asset and such asset is unavailable to

30  the receiver for payment of the obligations of the insurer at

31  the time a receivership proceeding is instituted, the

                                  19

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  obtaining or using shall be presumed to have jeopardized the

  2  safety and soundness of the insurer and to have been a

  3  significant cause of the insurer's being placed in

  4  conservation, rehabilitation, or liquidation, with the burden

  5  of proof on the defendants to show otherwise.

  6         (4)  If the receiver is successful in establishing a

  7  claim under this section, the receiver shall be entitled to

  8  recover all of its costs; investigative and other expenses,

  9  which shall include the department's in-house staff and staff

10  attorney's expenses, costs, and salaries, expended in the

11  prosecution of the action; and reasonable attorney's fees.

12  The receiver shall be exempt from the provisions of s. 57.111.

13         (5)  An action under this section may be brought at any

14  time before the expiration of 4 years after the entry of the

15  initial order of rehabilitation or liquidation under this part

16  but shall be filed before the time the receivership proceeding

17  is closed or dismissed.

18         Section 12.  Section 631.3915, Florida Statutes, is

19  created to read:

20         631.3915  Actions for damages.--The department, in its

21  capacity as administrator, receiver, or similar capacity, may

22  pursue any actions for damages or other recoveries on behalf

23  of the insurer's estate and the insurer's policyholders,

24  creditors, and other claimants.

25         Section 13.  Subsection (3) of section 631.54, Florida

26  Statutes, is amended to read:

27         631.54  Definitions.--As used in this part:

28         (3)  "Covered claim" means an unpaid claim, including

29  one of unearned premiums, which arises out of, and is within

30  the coverage, and not in excess of, the applicable limits of

31  an insurance policy to which this part applies, issued by an

                                  20

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  insurer, if such insurer becomes an insolvent insurer after

  2  October 1, 1970, and the claimant or insured is a resident of

  3  this state at the time of the insured event or the property

  4  from which the claim arises is permanently located in this

  5  state. "Covered claim" shall not include any amount due any

  6  reinsurer, insurer, insurance pool, or underwriting

  7  association, as subrogation, contribution, indemnification,

  8  recoveries or otherwise.  Member insurers shall have no right

  9  of subrogation against the insured of any insolvent member.

10         Section 14.  Paragraph (b) of subsection (1) of section

11  631.57, Florida Statutes, is amended to read:

12         631.57  Powers and duties of the association.--

13         (1)  The association shall:

14         (b)  Be deemed the insurer to the extent of its

15  obligation on the covered claims, and, to such extent, shall

16  have all rights, duties, defenses, and obligations of the

17  insolvent insurer as if the insurer had not become insolvent.

18  In no event shall the association be liable for any penalties

19  or interest.

20         Section 15.  Section 817.2341, Florida Statutes, is

21  created to read:

22         817.2341  False or misleading statements or supporting

23  documents; penalty.--

24         (1)  Any person who willfully files with the

25  department, or who willfully signs for filing with the

26  department, a materially false or materially misleading

27  financial statement or document in support of such statement

28  required by law or rule, with intent to deceive and with

29  knowledge that the statement or document is materially false

30  or materially misleading, commits a felony of the third

31

                                  21

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  degree, punishable as provided in s. 775.082, s. 775.083, or

  2  s. 775.084.

  3         (2)(a)  Any person who makes a false entry of a

  4  material fact in any book, report, or statement relating to a

  5  transaction of an insurer or entity organized pursuant to

  6  chapter 624 or chapter 641, intending to deceive any person

  7  about the financial condition or solvency of the insurer or

  8  entity, commits a felony of the third degree, punishable as

  9  provided in s. 775.082, s. 775.083, or s. 775.084.

10         (b)  If the false entry of a material fact is made with

11  the intent to deceive any person as to the impairment of

12  capital, as defined in s. 631.011(12), of the insurer or

13  entity or is the significant cause of the insurer or entity

14  being placed in conservation, rehabilitation, or liquidation

15  by a court, the person commits a felony of the first degree,

16  punishable as provided in s. 775.082, s. 775.083, or s.

17  775.084.

18         (3)(a)  Any person who knowingly makes a material false

19  statement or report to the department or any agent of the

20  department, or knowingly and materially overvalues any

21  property in any document or report prepared to be presented to

22  the department or any agent of the department, commits a

23  felony of the third degree, punishable as provided in s.

24  775.082, s. 775.083, or s. 775.084.

25         (b)  If the material false statement or report or the

26  material overvaluation is made with the intent to deceive any

27  person as to the impairment of capital, as defined in s.

28  631.011(12), of an insurer or entity organized pursuant to

29  chapter 624 or chapter 641, or is the significant cause of the

30  insurer or entity being placed in receivership by a court, the

31

                                  22

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 2002              CS/HB 193

    200-565-02






  1  person commits a felony of the first degree, punishable as

  2  provided in s. 775.082, s. 775.083, or s. 775.084.

  3         Section 16.  Section 624.3101, Florida Statutes, is

  4  repealed.

  5         Section 17.  This act shall take effect July 1, 2002.

  6

  7

  8

  9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

                                  23

CODING: Words stricken are deletions; words underlined are additions.