House Bill hb0421

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    Florida House of Representatives - 2002                 HB 421

        By Representative Weissman






  1                      A bill to be entitled

  2         An act relating to funeral and cemetery

  3         services; amending ss. 497.201 and 497.253,

  4         F.S.; reducing minimum acreage requirements for

  5         cemeteries; amending s. 497.245, F.S.; revising

  6         requirements for the purchase of burial rights

  7         and for the deposit of payments from sales of

  8         burial rights into care and maintenance trust

  9         funds; amending s. 497.405, F.S.; restricting

10         the preneed sale of services on behalf of a

11         certificateholder to licensed funeral

12         directors; amending s. 497.417, F.S.; revising

13         the amounts required to be placed in trust for

14         services and merchandise under a preneed

15         contract; providing for earlier phasing out of

16         the option to secure preneed contracts by means

17         of payment bonds; amending ss. 497.419 and

18         497.429, F.S.; providing for payment of

19         accumulated earnings or net income to the

20         purchaser rather than the certificateholder

21         upon cancellation of a preneed contract;

22         removing provisions authorizing liquidated

23         damages; creating s. 497.424, F.S.; providing a

24         limit on the interest that may be held in an

25         insurance company providing security on or

26         acting as a servicing agent for a preneed

27         contract; amending s. 497.425, F.S.; providing

28         for earlier phasing out of the option to secure

29         preneed contracts by means of payment bonds;

30         amending s. 497.441, F.S.; removing a reference

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  1         to liquidated damages, to conform; providing an

  2         effective date.

  3

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

  5

  6         Section 1.  Subsections (2) and (3) of section 497.201,

  7  Florida Statutes, are amended to read:

  8         497.201  Cemetery companies; license; application;

  9  fee.--

10         (2)  The department may require any person desiring to

11  establish a cemetery company who applies for a license to

12  provide any information reasonably necessary to make a

13  determination of the applicant's eligibility for licensure.

14  Any person desiring to establish a cemetery company must shall

15  first:

16         (a)  File an application, which states the exact

17  location of the proposed cemetery, which site shall contain

18  not less than 15 30 contiguous acres; provide a financial

19  statement signed by all officers of the company which attest

20  to a net worth of at least $50,000, which net worth must be

21  continuously maintained as a condition of licensure; and pay

22  an application fee of $5,000;

23         (b)  Create a legal entity; and

24         (c)  Demonstrate to the satisfaction of the board that

25  the applicant possesses the ability, experience, financial

26  stability, and integrity to operate a cemetery.

27         (3)  If the board finds that the applicant meets the

28  criteria established in subsection (2), the department shall

29  notify the applicant that a license will be issued when the

30  following conditions have been met:

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  1         (a)  The establishment of a care and maintenance trust

  2  fund containing not less than $50,000 has been certified by a

  3  trust company operating pursuant to chapter 660, a state or

  4  national bank holding trust powers, or a savings and loan

  5  association holding trust powers as provided in s. 497.423.

  6         (b)  The applicant has filed with the department

  7  development plans which are sufficient to ensure the

  8  department that the cemetery will provide adequate service to

  9  the community and which have been approved by the appropriate

10  local governmental agency regulating zoning in the area of the

11  proposed cemetery.

12         (c)  The applicant holds an unencumbered fee simple

13  title to at least 15 30 contiguous acres of land.

14         (d)  The applicant has designated as general manager a

15  person who has integrity, 3 years of cemetery management

16  experience as defined by board rule, and the ability to

17  operate a cemetery.

18         (e)  The applicant has fully developed not less than 2

19  acres for use as burial space, such development to include a

20  paved road from a public roadway to the developed section.

21         (f)  The applicant has recorded, in the public records

22  of the county in which the land is located, a notice which

23  contains the following language:

24

25                              NOTICE

26

27  The property described herein shall not be sold, conveyed,

28  leased, mortgaged, or encumbered without the prior written

29  approval of the Department of Banking and Finance, as provided

30  in the Florida Funeral and Cemetery Services Act.

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  1  Such notice shall be clearly printed in boldfaced type of not

  2  less than 10 points and may be included on the face of the

  3  deed of conveyance to the licensee or may be contained in a

  4  separate recorded instrument which contains a description of

  5  the property.

  6         Section 2.  Paragraphs (a) and (b) of subsection (1) of

  7  section 497.245, Florida Statutes, are amended to read:

  8         497.245  Care and maintenance trust fund, percentage of

  9  payments for burial rights to be deposited.--

10         (1)  Each cemetery company shall set aside and deposit

11  in its care and maintenance trust fund the following

12  percentages or amounts for all sums received from sales of

13  burial rights:

14         (a)  For graves burial rights, 25 10 percent of the

15  retail cost of the right to the grave, to be paid at the time

16  of purchase as a surcharge on the retail cost of the right to

17  the grave all payments received; however, for sales made after

18  September 30, 1993, no deposit shall be less than $25 per

19  grave.  For each burial right which is provided without

20  charge, the deposit to the fund shall be $25.

21         (b)  For mausoleums or columbaria, 25 10 percent of the

22  retail cost of the right to the mausoleum or columbarium, to

23  be paid at the time of purchase as a surcharge on the retail

24  cost of the right to the mausoleum or columbarium payments

25  received.

26         Section 3.  Subsections (1), (2), and (5) of section

27  497.253, Florida Statutes, are amended to read:

28         497.253  Minimum acreage; sale or disposition of

29  cemetery lands.--

30         (1)  Each licensee shall set aside a minimum of 15 30

31  contiguous acres of land for use by the licensee as a cemetery

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  1  and shall not sell, mortgage, lease, or encumber that property

  2  without prior written approval of the department.

  3         (2)  Any lands owned by a licensee and dedicated for

  4  use by it as a cemetery, which are contiguous, adjoining, or

  5  adjacent to the minimum of 15 30 contiguous acres described in

  6  subsection (1), may be sold, conveyed, or disposed of by the

  7  licensee, after obtaining written approval of the department

  8  pursuant to subsection (3), for use by the new owner for other

  9  purposes than as a cemetery. All of the human remains which

10  have been previously interred therein shall first have been

11  removed from the lands proposed to be sold, conveyed, or

12  disposed of; however, the provisions of ss. 470.0295 and

13  497.515(7) must be complied with prior to any disinterment of

14  human remains. Any and all titles, interests, or burial rights

15  which may have been sold or contracted to be sold in lands

16  which are the subject of the sale shall be conveyed to and

17  revested in the licensee prior to consummation of any such

18  sale, conveyance, or disposition.

19         (5)  The provisions of subsections (1) and (2) relating

20  to a requirement for minimum acreage shall not apply to any

21  cemetery company licensed by the department on or before July

22  1, 2001, which owns a total of less than 15 30 acres of land;

23  however, no cemetery company shall dispose of any land without

24  the prior written consent of the department.

25         Section 4.  Subsection (3) of section 497.405, Florida

26  Statutes, is amended to read:

27         497.405  Certificate of authority required.--

28         (3)  No person may obtain a certificate of authority

29  under this chapter for the preneed sale of services unless

30  such person or its agent, in the case of a corporate entity,

31  holds a license as a funeral establishment or cemetery company

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  1  or registration as a direct disposal establishment under

  2  chapter 470, and no person may sell services on a preneed

  3  basis on behalf of such a certificateholder unless such person

  4  is a funeral director licensed under chapter 470.

  5         Section 5.  Subsections (1), (5), and (6) of section

  6  497.417, Florida Statutes, are amended to read:

  7         497.417  Disposition of proceeds received on

  8  contracts.--

  9         (1)  Any person who is paid, collects, or receives

10  funds under a preneed contract for funeral services or

11  merchandise or burial services or merchandise shall deposit an

12  amount at least equal to the sum of 100 70 percent of the

13  purchase price collected for all services sold and facilities

14  rented; 100 percent of the purchase price collected for all

15  cash advance items sold; and 85 30 percent of the purchase

16  price collected or 110 percent of the retail wholesale cost,

17  whichever is greater, for each item of merchandise sold. The

18  method of determining wholesale cost shall be established by

19  rule of the board and shall be based upon the

20  certificateholder's stated wholesale cost for the 12-month

21  period beginning July 1 during which the initial deposit to

22  the preneed trust fund for the preneed contract is made.  Such

23  deposits shall be made within 30 days after the end of the

24  calendar month in which payment is received, under the terms

25  of a revocable trust instrument entered into with a trust

26  company operating pursuant to chapter 660, with a national or

27  state bank holding trust powers, or with a federal or state

28  savings and loan association holding trust powers.  The

29  trustee shall take title to the property conveyed to the trust

30  for the purpose of investing, protecting, and conserving it

31  for the certificateholder; collecting income; and distributing

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  1  the principal and income as prescribed in this chapter.  The

  2  certificateholder is prohibited from sharing in the discharge

  3  of these responsibilities, except that the certificateholder

  4  may request the trustee to invest in tax-free investments and

  5  may appoint an adviser to the trustee. The trust agreement

  6  shall be submitted to the board for approval and filing.  The

  7  funds shall be held in trust, both as to principal and income

  8  earned thereon, and shall remain intact, except that the cost

  9  of the operation of the trust or trust account authorized by

10  this section may be deducted from the income earned thereon.

11  The contract purchaser shall have no interest whatsoever in,

12  or power whatsoever over, funds deposited in trust pursuant to

13  this section.  In no event may said funds be loaned to a

14  certificateholder, an affiliate of a certificateholder, or any

15  person directly or indirectly engaged in the burial, funeral

16  home, or cemetery business. Furthermore, the

17  certificateholder's interest in said trust shall not be

18  pledged as collateral for any loans, debts, or liabilities of

19  the certificateholder and shall not be transferred to any

20  person without the prior written approval from the department

21  and the trustee which shall not be unreasonably withheld.

22  Even though the certificateholder shall be deemed and treated

23  as the settlor and beneficiary of said trust for all purposes,

24  all of said trust funds are exempt from all claims of

25  creditors of the certificateholder except as to the claims of

26  the contract purchaser, her or his representative, the board,

27  or the department.

28         (5)  The certificateholder, at her or his election,

29  shall have the right and power, at any time, to revest in it

30  title to the trust assets, or its pro rata share thereof,

31  provided it has complied with:

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  1         (a)  Section 497.423;

  2         (b)  Contracts written prior to July 1, 2001, under s.

  3  497.425; or

  4         (c)  Contracts written prior to December 31, 2002 2004,

  5  under s. 497.425 for any certificateholder authorized to do

  6  business in this state that has total bonded liability

  7  exceeding $100 million as of July 1, 2001.

  8         (6)  Notwithstanding anything contained in this chapter

  9  to the contrary, the certificateholder, via its election to

10  sell or offer for sale preneed contracts subject to this

11  section, shall represent and warrant, and is hereby deemed to

12  have done such, to all federal and Florida taxing authorities,

13  as well as to all potential and actual preneed contract

14  purchasers, that:

15         (a)  Section 497.423 is a viable option available to it

16  at any and all relevant times;

17         (b)  Section 497.425 is a viable option available to it

18  at any and all relevant times for contracts written prior to

19  July 1, 2001, for funds not held in trust as of July 1, 2001;

20  or

21         (c)  For any certificateholder authorized to do

22  business in this state that has total bonded liability

23  exceeding $100 million as of July 1, 2001, s. 497.425 is a

24  viable option to it at any and all relevant times for

25  contracts written prior to December 31, 2002 2004, for funds

26  not held in trust as of July 1, 2001.

27         Section 6.  Subsections (2) and (6) of section 497.419,

28  Florida Statutes, are amended to read:

29         497.419  Cancellation of, or default on, preneed

30  contracts.--

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  1         (2)  A purchaser, by providing written notice to the

  2  certificateholder, may cancel the services, facilities, and

  3  cash advance items portions of a preneed contract at any time,

  4  and shall be entitled to a full refund of the purchase price

  5  allocable to such items.  Any accumulated earnings allocable

  6  to such preneed contract shall be paid to the purchaser

  7  certificateholder upon such cancellation.

  8         (6)  If a purchaser is 90 days past due in making

  9  payments on a preneed contract, the contract shall be

10  considered to be in default, and the certificateholder shall

11  be entitled to cancel the contract, withdraw all funds in

12  trust allocable to merchandise items, and retain such funds as

13  liquidated damages. Upon making such withdrawal, The

14  certificateholder shall return all funds in trust allocable to

15  services, facilities, or cash advance items to the purchaser,

16  provided that the certificateholder has provided the purchaser

17  with 30 days' written notice of its intention to exercise any

18  of its rights under this provision.

19         Section 7.  Section 497.424, Florida Statutes, is

20  created to read:

21         497.424  Limit on interest in insurance company

22  providing security or acting as servicing agent.--No person

23  selling services or merchandise on a preneed basis may have

24  more than a 5-percent interest in any insurance company that

25  is either providing security for such services or merchandise

26  or acting as a servicing agent for the securing of such

27  services or merchandise.

28         Section 8.  Paragraph (a) of subsection (1) and

29  subsection (12) of section 497.425, Florida Statutes, are

30  amended to read:

31         497.425  Alternatives to deposits under s. 497.417.--

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  1         (1)(a)  As an alternative to the requirements of s.

  2  497.417 that relate to trust funds for contracts written prior

  3  to July 1, 2001, or that relate to trust funds for contracts

  4  written prior to December 31, 2002 2004, by any

  5  certificateholder authorized to do business in this state that

  6  has total bonded liability exceeding $100 million as of July

  7  1, 2001, a certificateholder may purchase a surety bond for

  8  funds not held in trust as of July 1, 2001, in an amount not

  9  less than the aggregate value of outstanding liabilities on

10  undelivered preneed contracts for merchandise and services.

11  For the purpose of this section, the term "outstanding

12  liabilities" means the gross replacement or wholesale value of

13  the preneed merchandise and services. The bond shall be made

14  payable to the State of Florida for the benefit of the board

15  and all purchasers of preneed cemetery merchandise or

16  services.  The bond must be approved by the board.

17         (12)  Certificateholders may utilize the bonding

18  alternatives to s. 497.417 provided in this section only for

19  contracts written prior to July 1, 2001, for funds not held in

20  trust as of July 1, 2001, or for contracts written prior to

21  December 31, 2002 2004, by any certificateholder authorized to

22  do business in this state that has total bonded liability

23  exceeding $100 million as of July 1, 2001, for funds not held

24  in trust as of July 1, 2001.

25         Section 9.  Subsections (5), (6), (7), and (9) of

26  section 497.429, Florida Statutes, are amended to read:

27         497.429  Alternative preneed contracts.--

28         (5)  The trust instrument shall prohibit the trustee

29  from distributing any appreciation on the trust to any person

30  and shall require that the trustee accumulate the entire net

31  income of the trust, or its pro rata share thereof.  The

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  1  accumulated net income shall be distributed to the

  2  certificateholder upon cancellation or performance of the

  3  contract or to the purchaser upon cancellation of the

  4  contract.

  5         (6)  The contract and trust instrument may provide that

  6  the certificateholder may receive a current distribution of

  7  not more than 10 percent of all funds paid or collected by the

  8  trustee and may further provide for liquidated damages during

  9  the first 3 years after the execution of the contract of not

10  more than 10 percent of all the funds paid on the preneed

11  contract, except that no liquidated damages shall apply for

12  cancellation within 30 days of the date of execution of the

13  contract.

14         (7)  Disbursement of funds discharging any preneed

15  contract shall be made by the trustee to the person issuing or

16  writing such contract upon receipt of a certified copy of the

17  death certificate of the contract beneficiary and evidence

18  satisfactory to the trustee that the preneed contract has been

19  fully performed. In the event of any contract default by the

20  contract purchaser, or in the event that the funeral

21  merchandise or service contracted for is not provided or is

22  not desired by the purchaser or the heirs or personal

23  representative of the contract beneficiary, the trustee shall

24  return, within 30 days after its receipt of a written request

25  therefor, funds paid on the contract to the contract purchaser

26  or to her or his assigns, heirs, or personal representative,

27  subject to the lawful liquidation damage provision in the

28  contract.

29         (9)  The contract may provide that the

30  certificateholder may cancel the contract, but only in the

31  event that the purchaser is more than 90 days in default of

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  1  the terms of the contract; and, unless subject to the

  2  provisions of s. 497.419(6), must provide that the purchaser,

  3  or her or his representative, has the right, at any time prior

  4  to the performance of the contract, to cancel the preneed

  5  contract and revest title to all the funds paid on the preneed

  6  contract, except for applicable liquidated damages, and the

  7  certificateholder's rights in the net income of the trust.

  8         Section 10.  Section 497.441, Florida Statutes, is

  9  amended to read:

10         497.441  Acceptability of funeral and burial

11  merchandise.--Each person who engages in preneed sales of

12  funeral or burial merchandise shall determine, and notify the

13  purchaser in writing prior to the completion of the contract,

14  that the merchandise being considered for purchase will be

15  accepted in the cemetery of the purchaser's choice.  The

16  failure to comply with this chapter shall nullify the

17  agreement, and all moneys paid in shall be returned,

18  notwithstanding the existence of any liquidated damages

19  provision pursuant to s. 497.419(2).

20         Section 11.  This act shall take effect July 1, 2002.

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  1            *****************************************

  2                          HOUSE SUMMARY

  3
      Reduces minimum acreage requirements for cemeteries.
  4    Revises requirements for the purchase of burial rights
      and for the deposit of payments from sales of burial
  5    rights into care and maintenance trust funds.  Restricts
      the preneed sale of services on behalf of a
  6    certificateholder to licensed funeral directors.  Revises
      the amounts required to be placed in trust for services
  7    and merchandise under a preneed contract.  Provides for
      payment of accumulated earnings or net income to the
  8    purchaser rather than the certificateholder upon
      cancellation of a preneed contract.  Removes provisions
  9    authorizing liquidated damages.  Provides a limit on the
      interest that may be held in an insurance company
10    providing security on or acting as a servicing agent for
      a preneed contract.  Provides for earlier phasing out of
11    the option to secure preneed contracts by means of
      payment bonds.  See bill for details.
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