House Bill hb0193e1

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                                  CS/CS/CS/HB 193, First Engrossed



  1                      A bill to be entitled

  2         An act relating to insurance; amending s.

  3         624.430, F.S.; providing for the department to

  4         approve insurer withdrawals upon certain

  5         conditions being satisfied; providing for the

  6         dissolution of a domestic property and casualty

  7         insurer upon approval of the surrender of the

  8         certificate of authority; granting the

  9         department rulemaking authority; amending s.

10         626.9541, F.S.; conforming cross-references;

11         amending s. 631.001, F.S.; revising

12         construction and purpose provisions; amending

13         s. 631.011, F.S.; providing additional

14         definitions; revising definitions; creating s.

15         631.015, F.S.; providing for reciprocity;

16         creating s. 631.025, F.S.; specifying

17         application to certain persons and entities;

18         amending s. 631.041, F.S.; conforming a

19         cross-reference; creating s. 631.042, F.S.;

20         limiting application of certain time

21         restrictions; providing for tolling certain

22         time limitations in certain actions; amending

23         s. 631.141, F.S.; authorizing the Department of

24         Insurance to exercise certain third-party

25         rights; providing an exception; amending s.

26         631.154, F.S.; including certain assets within

27         provisions authorizing a receiver to take

28         certain actions; including certain costs and

29         expenses of the department in costs and

30         expenses entitled to be recovered by the

31         receiver under certain circumstances; creating


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                                  CS/CS/CS/HB 193, First Engrossed



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

  2         by the department; providing department powers;

  3         authorizing the department to provide certain

  4         information in such investigations; requiring a

  5         receivership court to order expedited discovery

  6         under certain circumstances; providing

  7         penalties; creating s. 631.157, F.S.; providing

  8         for civil actions by receivers; imposing

  9         liability on certain persons or entities for

10         certain actions; specifying amounts of damages;

11         providing construction; providing costs and

12         expenses entitled to be recovered by the

13         receiver under certain circumstances; providing

14         a time certain for bringing certain actions;

15         creating s. 631.1571, F.S.; providing that

16         persons serving as officers or directors of

17         insolvent insurers may not thereafter serve as

18         officers or directors of insurers authorized in

19         this state; providing time restrictions;

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

21         department to pursue actions for damages or

22         recoveries; amending s. 631.54, F.S.;

23         redefining the term "covered claim"; amending

24         s. 631.57, F.S.; vesting the Florida Insurance

25         Guaranty Association with the defenses of

26         certain insolvent insurers; amending s.

27         631.904, F.S.; redefining the term "covered

28         claim"; creating s. 817.2341, F.S.; specifying

29         certain activities relating to false or

30         misleading financial statements or supporting

31         documents as criminal offenses; providing


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                                  CS/CS/CS/HB 193, First Engrossed



  1         penalties; repealing s. 624.3101, F.S.,

  2         relating to false or misleading financial

  3         statements or supporting documents; providing

  4         an effective date.

  5

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

  7

  8         Section 1.  Section 624.430, Florida Statutes, is

  9  amended to read:

10         624.430  Withdrawal of insurer or discontinuance of

11  writing certain kinds or lines of insurance.--

12         (1)  Any insurer desiring to surrender its certificate

13  of authority, withdraw from this state, or discontinue the

14  writing of any one or multiple kinds or lines of insurance in

15  this state shall give 90 days' notice in writing to the

16  department setting forth its reasons for such action.  Any

17  insurer who does not write any premiums in a kind or line of

18  insurance within a calendar year shall have that kind or line

19  of insurance removed from its certificate of authority;

20  however, such line of insurance shall be restored to the

21  insurer's certificate upon the insurer demonstrating that it

22  has available the expertise necessary and meets the other

23  requirements of this code to write that line of insurance.

24         (2)  If the department determines, based upon its

25  review of the notice and other required information, that the

26  plan of an insurer withdrawing from this state makes adequate

27  provision for the satisfaction of the insurer's obligations

28  and is not hazardous to policyholders or the public, the

29  department shall approve the surrender of the insurer's

30  certificate of authority.  The department shall, within 45

31  days from receipt of a complete notice and all required or


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                                  CS/CS/CS/HB 193, First Engrossed



  1  requested additional information, approve, disapprove or

  2  approve with conditions, the plan submitted by the insurer.

  3  Failure to timely take action with respect to the notice shall

  4  be deeemed an approval of the surrender of the certificate of

  5  authority.

  6         (3)  Upon department approval of the surrender of the

  7  certificate of authority of a domestic property and casualty

  8  insurer that is a corporation, the insurer may initiate the

  9  dissolution of the corporation in accordance with the

10  applicable provisions of chapter 607.

11         (4)(2)  Any insurer withdrawing from this state or

12  discontinuing the writing of all kinds of insurance in this

13  state shall surrender its certificate of authority.

14         (5)(3)  This section does not apply to life insurance

15  and corresponding lines of insurance as long as the insurer

16  has in force life insurance policies and corresponding lines

17  in this state.

18         (6)(4)  This section does not apply to insurers during

19  the calendar year in which they first receive their

20  certificate of authority.

21         (7)(5)  This section does not apply to insurers who

22  have discontinued writing in accordance with an order issued

23  by the department.

24         (8)  The department may adopt rules to administer this

25  section.

26         Section 2.  Paragraph (w) of subsection (1) of section

27  626.9541, Florida Statutes, is amended to read:

28         626.9541  Unfair methods of competition and unfair or

29  deceptive acts or practices defined.--

30

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                                  CS/CS/CS/HB 193, First Engrossed



  1         (1)  UNFAIR METHODS OF COMPETITION AND UNFAIR OR

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

  3  of competition and unfair or deceptive acts or practices:

  4         (w)  Soliciting or accepting new or renewal insurance

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

  6         1.  Whether or not delinquency proceedings as to the

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

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

  9  insurer, except with the written permission of the Department

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

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

12  such director or officer knew, or reasonably should have

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

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

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

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

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

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

19  775.083, or s. 775.084.

20         Section 3.  Section 631.001, Florida Statutes, is

21  amended to read:

22         631.001  Title, construction, and purpose.--

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

24  "Insurers Rehabilitation and Liquidation Act."

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

26  powers granted the Department of Insurance by other provisions

27  of law.

28         (2)(3)  This part shall be liberally construed to

29  effect the purposes of this part purpose stated in subsection

30  (4).

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                                  CS/CS/CS/HB 193, First Engrossed



  1         (3)(4)  The purposes purpose of this part, which are

  2  integral elements of the regulation of the business of

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

  4  to:

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

  6  policyholders insureds, creditors, and other claimants and the

  7  public.

  8         (b)  Provide a comprehensive scheme for administering

  9  insurer receiverships. generally, through:

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

11  dangerous condition in an insurer and promptly apply prompt

12  application of appropriate corrective measures. which are

13  neither unduly harsh nor subject to unwarranted publicity

14  needlessly damaging to the insurer;

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

16  insurers, which methods involve the cooperation and management

17  expertise of the insurance industry.;

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

19  the liquidation process by clarifying through clarification

20  and specification of the law to minimize legal uncertainty and

21  litigation.;

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

23  Equitable apportionment of any unavoidable loss.; and

24         (g)(e)  Administer insurer receiverships more

25  efficiently on an interstate and international basis Lessening

26  the problems of interstate rehabilitation and liquidation by

27  facilitating cooperation between states in the liquidation

28  process and by extending extension of the scope of personal

29  jurisdiction over debtors of the insurer outside this state.

30

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                                  CS/CS/CS/HB 193, First Engrossed



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

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

  3  claimants; and the public.

  4         (5)  The Insurers Rehabilitation and Liquidation Act

  5  shall be so interpreted and construed as to effectuate its

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

  7  in substance and effect enact the Insurers Rehabilitation and

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

  9  Insurers Rehabilitation and Liquidation Act, when applicable,

10  conflict with other provisions of this chapter, the provisions

11  of such act shall control.

12         Section 4.  Section 631.011, Florida Statutes, is

13  amended to read:

14         631.011  Definitions.--For the purpose of this part,

15  the term:

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

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

18  indirectly through:

19         (a)  Equity ownership of voting securities;

20         (b)  Common managerial control; or

21         (c)  Collusive participation by the management of the

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

23  affiliate.

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

25  domiciliary state.

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

27  (8)-(10), means only allowed assets as defined in chapter 625.

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

29  while not possessing information that would lead a reasonable

30  person similarly situated to believe that the insurer is

31  insolvent or is experiencing an impairment of capital or an


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                                  CS/CS/CS/HB 193, First Engrossed



  1  impairment of surplus and while unaware of the imminence or

  2  pendency of any receivership proceeding against the insurer,

  3  has, in the exercise of reasonable business judgment,

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

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

  6  value.

  7         (5)(4)  "Court" refers to the circuit court in which

  8  the receivership proceeding is pending.

  9         (6)(5)  "Delinquency proceeding" means any proceeding

10  commenced against an insurer pursuant to this chapter for the

11  purpose of liquidating, rehabilitating, reorganizing, or

12  conserving such insurer.

13         (7)(6)  "Domiciliary state" means the state in which an

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

15  insurer incorporated or organized in a foreign country, the

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

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

18  delinquency proceeding, the largest amount of its assets held

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

20  policyholders or policyholders and creditors in the United

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

22  state.

23         (8)  "Fair consideration" means that consideration

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

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

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

27  obligation not invalidated by the receivership proceedings is

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

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

30         (9)(7)  "Foreign country" means territory not in any

31  state.


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                                  CS/CS/CS/HB 193, First Engrossed



  1         (10)(8)  "General assets" means all property, real,

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

  3  deposited, or otherwise encumbered for the security or benefit

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

  5  and as to such specifically encumbered property the term

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

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

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

  9  security or benefit of all policyholders or all policyholders

10  and creditors in the United States shall be deemed general

11  assets.

12         (11)  "Good faith", as used in ss. 631.262 and 631.263,

13  means honesty in fact, including, but not limited to, the

14  exercise of reasonable business judgment, in the conduct or

15  transaction concerned, together with the absence of

16  information that would lead a reasonable person in the same

17  position to know that the insurer is insolvent or is

18  experiencing an impairment of capital or an impairment of

19  surplus and together with the absence of knowledge regarding

20  the imminence or pendency of any receivership proceeding

21  against the insurer.

22         (12)(9)  "Impairment of capital" means that the minimum

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

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

25  equal to all its liabilities together with its total issued

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

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

28  mutual, reciprocal, or business trust insurer.

29         (13)(10)  "Impairment of surplus" means that the

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

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


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                                  CS/CS/CS/HB 193, First Engrossed



  1  business trust insurer does not comply with the requirements

  2  of s. 624.408.

  3         (14)(11)  "Insolvency" means that all the assets of the

  4  insurer, if made immediately available, would not be

  5  sufficient to discharge all its liabilities or that the

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

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

  8  this code so indicates, insolvency also includes and is

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

10  (13)(9), and "impairment of capital," as defined in subsection

11  (12)(8).

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

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

14  insurers or organizing, or holding themselves out as

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

16  and all insurers who have policyholders insureds resident in

17  this state.

18         (16)(13)  "Liabilities," as used in subsections (12)

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

20  specifically required in s. 625.041.

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

22  partnerships, trusts, estates, and sole proprietorships.

23         (17)  "Property" includes:

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

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

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

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

28  this state.

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

30  order of conservation, rehabilitation, or liquidation and

31  entitlements that may arise by operation of the provisions of


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                                  CS/CS/CS/HB 193, First Engrossed



  1  this part or other provisions of law allowing the department

  2  to avoid prior transfers or assert other rights in its

  3  capacity as receiver.

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

  5  property of the insolvent insurer, in whatever form

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

  7  files, application files, litigation files, premium records,

  8  rate books, underwriting manuals, personnel records, or

  9  financial records, or similar records within the possession,

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

11  administrator, management company, accountant, attorney,

12  affiliate, or other person. 

13         (18)(15)  "Receiver" means a receiver, liquidator,

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

15  require.

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

17  under the control of a receiver pursuant to a delinquency

18  proceeding under this part.

19         (20)(16)  "Reciprocal state" means any state other than

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

21  the Insurers Rehabilitation and Liquidation Act are in force,

22  including the provisions requiring that the commissioner of

23  insurance or equivalent insurance supervisory official be the

24  receiver of a delinquent insurer.

25         (21)(17)  "Secured claim" means any claim secured by

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

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

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

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

30  months before the commencement of a delinquency proceeding in

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                                  CS/CS/CS/HB 193, First Engrossed



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

  2  specific assets by reason of judicial process.

  3         (22)(18)  "Special deposit claim" means any claim

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

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

  6  including any general assets.

  7         (23)(19)  "State" is as defined in s. 624.08.

  8         Section 5.  Section 631.015, Florida Statutes, is

  9  created to read:

10         631.015  Reciprocity; treatment of

11  policyholders.--Reciprocity in the treatment of policyholders

12  in receivership is extended to those states which, in

13  substance and effect, enact the National Association of

14  Insurance Commissioners Rehabilitation and Liquidation Model

15  Act or the Uniform Insurers Liquidation Act.

16         Section 6.  Section 631.025, Florida Statutes, is

17  created to read:

18         631.025  Persons subject to this part.--Delinquency

19  proceedings authorized by this part may be initiated against

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

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

22  exercise jurisdiction over any person required to cooperate

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

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

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

26  to:

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

28  insurance business in or from this state and against whom

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

30  future.

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                                  CS/CS/CS/HB 193, First Engrossed



  1         (2)  A person purporting to transact an insurance

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

  3  transacts insurance, or otherwise engages in insurance

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

  5  certificate of authority or proper authority from the

  6  department, against whom claims arising from that business may

  7  exist now or in the future.

  8         (3)  An insurer with policyholders resident in this

  9  state.

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

11  organizing with the intent to transact an insurance business

12  in this state.

13         Section 7.  Subsection (1) of section 631.041, Florida

14  Statutes, is amended to read:

15         631.041  Automatic stay; relief from stay;

16  injunctions.--

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

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

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

20  be permanent and survive the entry of an order of

21  conservation, rehabilitation, or liquidation, and which shall

22  prohibit:

23         (a)  The commencement or continuation of judicial,

24  administrative, or other action or proceeding against the

25  insurer or against its assets or any part thereof;

26         (b)  The enforcement of a judgment against the insurer

27  or an affiliate obtained either before or after the

28  commencement of the delinquency proceeding;

29         (c)  Any act to obtain possession of property of the

30  insurer;

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

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

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

  4  s. 631.191 after the order of liquidation is entered;

  5         (e)  Any act to collect, assess, or recover a claim

  6  against the insurer, except claims as provided for under this

  7  chapter; and

  8         (f)  The setoff or offset of any debt owing to the

  9  insurer, except offsets as provided in s. 631.281.

10         Section 8.  Section 631.042, Florida Statutes, is

11  created to read:

12         631.042  Extension of time.--

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

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

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

16  delinquency proceeding against an insurer and the date the

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

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

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

20  commenced no later than 60 days after the order denying such

21  relief or the remaining unexpired time under the applicable

22  statute of limitations or defense of laches that was available

23  on the day the petition was filed, whichever is longer.

24         (2)  The running of any unexpired statute of

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

26  receiver, or an official or agency exercising powers pursuant

27  to this chapter seeking damages or other recoveries on behalf

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

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

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

31  If the delinquency proceedings against the insurer terminate


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

  2  proceedings are final, including all appeals.

  3         (3)  A cause of action does not accrue, and the

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

  5  the time the insurer is controlled by parties acting contrary

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

  7  claim are concealed fraudulently from regulatory authorities

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

  9  chapter 95 shall be construed to be consistent with the

10  provisions of this section.  The receiver may institute any

11  action or proceeding authorized under this part while any

12  statute of limitation is tolled pursuant to this section.

13  This tolling provision shall be in addition to any other

14  applicable tolling provision.

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

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

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

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

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

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

21  delinquency proceeding.

22         Section 9.  Present subsections (6) through (9) of

23  section 631.141, Florida Statutes, are renumbered as

24  subsections (7) through (10), respectively, and a new

25  subsection (6) is added to that section to read:

26         631.141  Conduct of delinquency proceeding; domestic

27  and alien insurers.--

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

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

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

31  individual claim is personal and unique to the claimant and


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                                  CS/CS/CS/HB 193, First Engrossed



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

  2  policyholders, creditors, or other claimants.

  3         Section 10.  Section 631.154, Florida Statutes, is

  4  amended to read:

  5         631.154  Funds, assets, or other property in the

  6  possession of third person.--

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

  8  property in the possession of another person are rightfully

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

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

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

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

13  receivership action, and notifying the person that any claim

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

15  be presented to the receivership court within 20 days after

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

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

18  receivership subject to an order of conservation,

19  rehabilitation, or liquidation under this chapter shall

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

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

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

23  631.191, s. 631.261, s. 631.262, s. 631.263, or s. 631.281, a

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

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

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

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

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

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

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

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


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

  2  funds pending determination of the dispute.

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

  4  held to determine where and under what conditions the

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

  6  determination of the dispute.  The court may impose conditions

  7  as it may deem necessary or appropriate for the preservation

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

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

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

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

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

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

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

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

16  hold a subsequent hearing to determine entitlement to the

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

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

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

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

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

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

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

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

25         (5)  This section shall apply to all proceedings

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

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

28  the entity subject to an order of conservation,

29  rehabilitation, or liquidation.  The receiver shall be exempt

30  from the provisions of s. 57.111.

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                                  CS/CS/CS/HB 193, First Engrossed



  1         (6)  Should the receiver be successful in establishing

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

  3  to recover judgment for the following:

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

  5  the order of conservation, rehabilitation, or liquidation,

  6  whichever is applicable.

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

  8  date of the order of conservation, rehabilitation, or

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

10  is delivered to the receiver.

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

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

13  rehabilitation, or liquidation, whichever is applicable, to

14  the date the funds are delivered to the receiver.

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

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

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

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

19  costs and expenses include staff salaries.

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

22  holding receivership assets fully reimburse the receiver for

23  any and all efforts made to recover those assets.

24         Section 11.  Section 631.156, Florida Statutes, is

25  created to read:

26         631.156  Investigation by the department; scope of

27  authority; sharing of materials.--

28         (1)  The department may, under the direction and

29  supervision of the receivership court, conduct an

30  investigation to determine the causes of the insolvency,

31  including whether false statements filed with the department


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                                  CS/CS/CS/HB 193, First Engrossed



  1  contributed to the insolvency and if any laws of this state,

  2  any other state, or the Federal Government relating to the

  3  solvency of the insurer were violated; to discover assets for

  4  recovery; and to determine the location of assets and their

  5  manner of recovery. The department may take statements under

  6  oath and examine and review the books, records, and documents

  7  of the insurer or any affiliate, controlling person, officer,

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

  9  independent contractor of any insurer or affiliate and any

10  other person possessing any executive authority over, or

11  exercising or having exercised any control over, any segment

12  of the affairs of the insurer or affiliate. Contracts of

13  reinsurance between an insurer and a reinsurer do not

14  constitute the exercise of control by the reinsurer over the

15  insurer for purposes of this section.

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

17  records; other investigative products, work product, and

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

19  Division of Insurance Fraud or any other appropriate

20  government agency.  The sharing of these materials shall not

21  waive any work product or other privilege otherwise applicable

22  under law.

23         (3)  The receivership court, upon motion of the

24  department, shall enter an order expediting compliance with

25  the requirements of subsection (1). The court may impose

26  appropriate penalties and sanctions for noncompliance with

27  such order, including penalties and sanctions for the loss,

28  destruction, or spoliation of any evidence that occurs after

29  entry of such order.

30         Section 12.  Section 631.157, Florida Statutes, is

31  created to read:


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                                  CS/CS/CS/HB 193, First Engrossed



  1         631.157  Civil action by the receiver.--

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

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

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

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

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

  7  beneficiary under a policy of insurance, and who willfully

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

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

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

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

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

13  creditors, and policyholders, as follows:

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

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

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

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

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

19  plus prejudgment interest provided by law.

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

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

22  significant cause of the insurer being placed in receivership,

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

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

25  interest provided by law on the original amount.

26         (2)(a)  Any person who:

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

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

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

30  transaction relating to the conduct of affairs of such a

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                                  CS/CS/CS/HB 193, First Engrossed



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

  2  policy of insurance;

  3         2.  Has actual knowledge or such constructive knowledge

  4  as should have been obtained through reasonable inquiry by a

  5  person in that position; and

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

  7  statement of an insurer

  8

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

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

11  agent or examiner appointed by the department to examine the

12  affairs of the person or insurer, concerning the financial

13  condition or solvency of such business is liable to the

14  department as receiver for the use and benefit of the

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

16  provided in paragraph (b).

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

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

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

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

21  misreported.

22         2.  If the misreporting jeopardized the safety and

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

24  insurer being placed in receivership, the person shall be

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

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

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

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

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

30  the time a receivership proceeding is instituted, the

31  obtaining or using shall be presumed to have jeopardized the


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                                  CS/CS/CS/HB 193, First Engrossed



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

  2  significant cause of the insurer's being placed in

  3  conservation, rehabilitation, or liquidation, with the burden

  4  of proof on the defendants to show otherwise.

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

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

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

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

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

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

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

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

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

14  initial order of rehabilitation or liquidation under this part

15  but shall be filed before the time the receivership proceeding

16  is closed or dismissed.

17         Section 13.  Section 631.1571, Florida Statutes, is

18  created to read:

19         631.1571  Officers and directors of insolvent

20  insurers.--Any person who was an officer or director of an

21  insurer doing business in this state and who served in that

22  capacity within the 2-year period prior to the date the

23  insurer became insolvent, for any insolvency that occurs on or

24  after July 1, 2002, may not thereafter serve as an officer or

25  director of an insurer authorized in this state.

26         Section 14.  Section 631.3915, Florida Statutes, is

27  created to read:

28         631.3915  Actions for damages.--The department, in its

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

30  pursue any actions for damages or other recoveries on behalf

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                                  CS/CS/CS/HB 193, First Engrossed



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

  2  creditors, and other claimants.

  3         Section 15.  Subsection (3) of section 631.54, Florida

  4  Statutes, is amended to read:

  5         631.54  Definitions.--As used in this part:

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

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

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

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

10  insurer, if such insurer becomes an insolvent insurer after

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

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

13  from which the claim arises is permanently located in this

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

15  reinsurer, insurer, insurance pool, or underwriting

16  association, as subrogation, contribution, indemnification,

17  recoveries or otherwise.  Member insurers shall have no right

18  of subrogation against the insured of any insolvent member.

19         Section 16.  Paragraph (b) of subsection (1) of section

20  631.57, Florida Statutes, is amended to read:

21         631.57  Powers and duties of the association.--

22         (1)  The association shall:

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

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

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

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

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

28  or interest.

29         Section 17.  Subsection (2) of section 631.904, Florida

30  Statutes, is amended to read:

31         631.904  Definitions.--As used in this part, the term:


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                                  CS/CS/CS/HB 193, First Engrossed



  1         (2)  "Covered claim" means an unpaid claim, including a

  2  claim for return of unearned premiums, which arises out of, is

  3  within the coverage of, and is not in excess of the applicable

  4  limits of, an insurance policy to which this part applies,

  5  which policy was issued by an insurer and which claim is made

  6  on behalf of a claimant or insured who was a resident of this

  7  state at the time of the injury. The term "covered claim" does

  8  not include any amount sought as a return of premium under any

  9  retrospective rating plan; any amount due any reinsurer,

10  insurer, insurance pool, or underwriting association, as

11  subrogation recoveries or otherwise; or any return of premium

12  resulting from a policy that was not in force on the date of

13  the final order of liquidation. Member insurers have no right

14  of subrogation  against the insured of any insolvent insurer.

15  This provision shall be applied retroactively to cover claims

16  of an insolvent self-insurance fund resulting from accidents

17  or losses incurred prior to January 1, 1994, regardless of the

18  date the Department of Insurance filed a petition in circuit

19  court alleging insolvency and the date the court entered an

20  order appointing a receiver.

21         Section 18.  Section 817.2341, Florida Statutes, is

22  created to read:

23         817.2341  False or misleading statements or supporting

24  documents; penalty.--

25         (1)  Any person who willfully files with the

26  department, or who willfully signs for filing with the

27  department, a materially false or materially misleading

28  financial statement or document in support of such statement

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

30  knowledge that the statement or document is materially false

31  or materially misleading, commits a felony of the third


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                                  CS/CS/CS/HB 193, First Engrossed



  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

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                                  CS/CS/CS/HB 193, First Engrossed



  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 19.  Section 624.3101, Florida Statutes, is

  4  repealed.

  5         Section 20.  This act shall take effect July 1, 2002.

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