Senate Bill sb2038c1

CODING: Words stricken are deletions; words underlined are additions.
    Florida Senate - 2004                           CS for SB 2038

    By the Committee on Banking and Insurance; and Senator Fasano





    311-2438-04

  1                      A bill to be entitled

  2         An act relating to insurance; amending s.

  3         20.121, F.S.; requiring the Division of

  4         Consumer Services of the Department of

  5         Financial Services to designate an employee as

  6         primary contact for consumers on issues

  7         involving sinkholes; amending s. 501.137, F.S.;

  8         requiring an insurer to reinstate, under

  9         certain circumstances, an insurance policy that

10         is cancelled due to failure of the lender to

11         pay a premium for which sufficient escrow funds

12         are on deposit; requiring that the lender

13         reimburse the property owner for any penalties

14         or fees paid for purposes of reinstating the

15         policy; requiring the lender to pay the

16         increased cost of insurance premiums for a

17         specified period of time under certain

18         conditions; amending s. 624.4622, F.S.;

19         providing that a local government

20         self-insurance fund comply with specified

21         provisions; amending s. 625.081, F.S.;

22         providing an exception; amending s. 625.121,

23         F.S.; providing for valuation of life insurance

24         policies; amending s. 626.321, F.S.; limiting

25         the types of business that may be transacted by

26         personal lines agents; amending s. 627.476,

27         F.S.; authorizing the use of certain mortality

28         tables for purposes of the Standard

29         Nonforfeiture Law for Life Insurance; creating

30         s. 625.9743, F.S., relating to claim settlement

31         practices for motor vehicle insurance;

                                  1

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1         prescribing standards to be followed by

 2         insurers; creating s. 626.9744, F.S., relating

 3         to claim settlement practices for homeowners'

 4         insurance; prescribing standards to be followed

 5         by insurers; amending s. 627.4091, F.S.;

 6         providing additional disclosure requirements

 7         with respect to a refusal to insure; amending

 8         s. 627.4133, F.S.; requiring property insurers

 9         to reinstate a canceled policy as required by

10         s. 501.137, F.S.; restricting the use of

11         certain claims as a cause for cancellation or

12         nonrenewal; amending s. 627.7015, F.S.;

13         providing that arbitration clauses do not

14         preclude an insured from using the property

15         claim mediation program; creating 627.7077,

16         F.S.; providing for a feasibility study for a

17         proposed Florida Sinkhole Insurance Facility;

18         amending s. 627.838, F.S.; deleting a filing

19         fee; amending s. 627.848, F.S.; specifying

20         provisions for cancellation of insurance

21         contracts; amending s. 627.849, F.S., to

22         conform to the elimination of a filing fee;

23         repealing s. 625.131, F.S., relating to credit

24         life and disability policies; providing for

25         construction of the act; providing effective

26         dates.

27  

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

29  

30         Section 1.  Paragraph (h) of subsection (2) of section

31  20.121, Florida Statutes, is amended to read:

                                  2

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1         20.121  Department of Financial Services.--There is

 2  created a Department of Financial Services.

 3         (2)  DIVISIONS.--The Department of Financial Services

 4  shall consist of the following divisions:

 5         (h)  The Division of Consumer Services, which shall

 6  include a Bureau of Funeral and Cemetery Services.

 7         1.  The Division of Consumer Services shall perform the

 8  following functions concerning products or services regulated

 9  by the Department of Financial Services or by either office of

10  the Financial Services Commission:

11         a.  Receive inquiries and complaints from consumers.;

12         b.  Prepare and disseminate such information as the

13  department deems appropriate to inform or assist consumers.;

14         c.  Provide direct assistance and advocacy for

15  consumers who request such assistance or advocacy.;

16         d.  With respect to apparent or potential violations of

17  law or applicable rules by a person or entity licensed by the

18  department or by either office of the commission, report such

19  apparent or potential violation to the appropriate division of

20  the department or office of the commission, which may take

21  such further action as it deems appropriate.

22         e.  Designate an employee of the division as primary

23  contact for consumers on issues relating to sinkholes.

24         2.  Any person licensed or issued a certificate of

25  authority by the department or by the Office of Insurance

26  Regulation shall respond, in writing, to the Division of

27  Consumer Services within 20 days after receipt of a written

28  request for information from the division concerning a

29  consumer complaint. The response must address the issues and

30  allegations raised in this complaint. The division may, in its

31  discretion, impose an administrative penalty for failure to

                                  3

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  comply with this subparagraph in an amount up to $2,500 per

 2  violation upon any entity licensed by the department or the

 3  Office of Insurance Regulation and $250 for the first

 4  violation, $500 for the second violation and up to $1,000 per

 5  violation thereafter upon any individual licensed by the

 6  department or the Office of Insurance Regulation.

 7         3.  The department may adopt rules to implement the

 8  provisions of this paragraph.

 9         4.  The powers, duties, and responsibilities expressed

10  or granted in this paragraph shall not limit the powers,

11  duties, and responsibilities of the Department of Financial

12  Services, the Financial Services Commission, the Office of

13  Insurance Regulation, or the Office of Financial Regulation

14  set forth elsewhere in the Florida Statutes.

15         Section 2.  Section 501.137, Florida Statutes, is

16  amended to read:

17         501.137  Mortgage lenders; tax and insurance payments

18  from escrow accounts; duties.--

19         (1)  Every lender of money, whether a natural person or

20  an artificial entity, whose loans are secured by a mortgage on

21  real estate located within the state and who receives funds

22  incidental thereto or in connection therewith for the payment

23  of property taxes or hazard insurance premiums when the such

24  funds are held in escrow by or on behalf of the lender, shall

25  promptly pay the such taxes or insurance premiums when the

26  such taxes or premiums become due and adequate escrow funds

27  are deposited, so that the maximum tax discount available may

28  be obtained with regard to the taxable property and so that

29  insurance coverage on the property does not lapse.

30         (2)  If an escrow account for the such taxes or

31  insurance premiums is deficient, the lender shall notify the

                                  4

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  property owner within 15 days after the lender receives the

 2  notification of taxes due from the county tax collector or

 3  receives the notification from the insurer that a premium is

 4  due.

 5         (3)(a)  If the lender, as a result of neglect, fails to

 6  pay any tax or insurance premium when the tax or premium is

 7  due and there are sufficient escrow funds on deposit to pay

 8  the tax or premium, and if the property owner suffers a loss

 9  as a result of this such failure, then the lender is will be

10  liable for the such loss; except, however, that with respect

11  to any loss which would otherwise have been insured, the

12  extent of the such liability shall not exceed the coverage

13  limits of any insurance policy which has lapsed.

14         (b)  If the lender violates paragraph (a) and the

15  premium payment is not more than 90 days overdue, the insurer

16  shall reinstate the insurance policy, retroactive to the date

17  of cancellation, and the lender shall reimburse the property

18  owner for any penalty or fees imposed by the insurer and paid

19  by the property owner for purposes of reinstating the policy.

20         (c)  If the lender violates paragraph (a) and the

21  premium payment is more than 90 days overdue or if the insurer

22  refuses to reinstate the insurance policy, the lender shall

23  pay the difference between the cost of the previous insurance

24  policy and a new, comparable insurance policy for a period of

25  2 years.

26         (4)  At the expiration of the annual accounting period,

27  the lender shall issue to the property owner an annual

28  statement of the escrow account.

29         Section 3.  Subsections (3) and (4) are added to

30  section 624.4622, Florida Statutes, to read:

31         624.4622  Local government self-insurance funds.--

                                  5

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1         (3)  Notwithstanding the provisions of subsection (2),

 2  a local government self-insurance fund created under this

 3  section after October 1, 2004, shall initially be organized as

 4  a commercial self-insurance fund under s. 624.462 or a group

 5  self-insurance fund under s. 624.4621 and, for the first 5

 6  years of its existence, shall be subject to all the

 7  requirements applied to commercial self-insurance funds or to

 8  group self-insurance funds, respectively.

 9         (4)(a)  A local government self-insurance fund formed

10  after January 1, 2005, shall, for its first 5 fiscal years,

11  file with the office full and true statements of its financial

12  condition, transactions, and affairs. An annual statement

13  covering the preceding fiscal year shall be filed within 60

14  days after the end of the fund's fiscal year and quarterly

15  statements shall be filed within 45 days after each such date.

16  The office may, for good cause, grant an extension of time for

17  filing an annual or quarterly statement. The statements shall

18  contain information generally included in insurers' financial

19  statements prepared in accordance with generally accepted

20  insurance accounting principles and practices and in a form

21  generally used by insurers for financial statements, sworn to

22  by at least two executive officers of the self-insurance fund.

23  The form for financial statements shall be the form currently

24  approved by the National Association of Insurance

25  Commissioners for use by property and casualty insurers.

26         (b)  Each annual statement shall contain a statement of

27  opinion on loss and loss adjustment expense reserves made by a

28  member of the American Academy of Actuaries. Workpapers in

29  support of the statement of opinion must be provided to the

30  office upon request.

31  

                                  6

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1         Section 4.  Section 625.081, Florida Statutes, is

 2  amended to read:

 3         625.081  Reserve for health insurance.--For all health

 4  insurance policies, the insurer shall maintain an active life

 5  reserve which places a sound value on the insurer's

 6  liabilities under such policies; is not less than the reserve

 7  according to appropriate standards set forth in rules issued

 8  by the commission; and, with the exception of credit

 9  disability insurance, in no event, is less in the aggregate

10  than the pro rata gross unearned premiums for such policies.

11         Section 5.  Paragraphs (a), (e), and (f) of subsection

12  (5) and subsection (13) of section 625.121, Florida Statutes,

13  are amended, and paragraphs (k) and (l) are added to

14  subsection (5) of that section, to read:

15         625.121  Standard Valuation Law; life insurance.--

16         (5)  MINIMUM STANDARD FOR VALUATION OF POLICIES AND

17  CONTRACTS ISSUED ON OR AFTER OPERATIVE DATE OF STANDARD

18  NONFORFEITURE LAW.--Except as otherwise provided in paragraph

19  (h) and subsections (6), (11), and (14), the minimum standard

20  for the valuation of all such policies and contracts issued on

21  or after the operative date of s. 627.476 (Standard

22  Nonforfeiture Law for Life Insurance) shall be the

23  commissioners' reserve valuation method defined in subsections

24  (7), (11), and (14); 5 percent interest for group annuity and

25  pure endowment contracts and 3.5 percent interest for all

26  other such policies and contracts, or in the case of life

27  insurance policies and contracts, other than annuity and pure

28  endowment contracts, issued on or after July 1, 1973, 4

29  percent interest for such policies issued prior to October 1,

30  1979, and 4.5 percent interest for such policies issued on or

31  after October 1, 1979; and the following tables:

                                  7

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1         (a)  For all ordinary policies of life insurance issued

 2  on the standard basis, excluding any disability and accidental

 3  death benefits in such policies:

 4         1.  For policies issued prior to the operative date of

 5  s. 627.476(9), the commissioners' 1958 Standard Ordinary

 6  Mortality Table; except that, for any category of such

 7  policies issued on female risks, modified net premiums and

 8  present values, referred to in subsection (7), may be

 9  calculated according to an age not more than 6 years younger

10  than the actual age of the insured.; and

11         2.  For policies issued on or after the operative date

12  of s. 627.476(9), the commissioners' 1980 Standard Ordinary

13  Mortality Table or, at the election of the insurer for any one

14  or more specified plans of life insurance, the commissioners'

15  1980 Standard Ordinary Mortality Table with Ten-Year Select

16  Mortality Factors.

17         3.  For policies issued on or after July 1, 2004,

18  ordinary mortality tables, adopted after 1980 by the National

19  Association of Insurance Commissioners, adopted by rule by the

20  commission for use in determining the minimum standard of

21  valuation for such policies.

22         (e)  For total and permanent disability benefits in or

23  supplementary to ordinary policies or contracts:

24         1.  For policies or contracts issued on or after

25  January 1, 1966, the tables of period 2 disablement rates and

26  the 1930 to 1950 termination rates of the 1952 disability

27  study of the Society of Actuaries, with due regard to the type

28  of benefit;

29         2.  For policies or contracts issued on or after

30  January 1, 1961, and prior to January 1, 1966, either those

31  

                                  8

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  tables or, at the option of the insurer, the class three

 2  disability table (1926); and

 3         3.  For policies issued prior to January 1, 1961, the

 4  class three disability table (1926); and.

 5         4.  For policies or contracts issued on or after July

 6  1, 2004, tables of disablement rates and termination rates

 7  adopted after 1980 by the National Association of Insurance

 8  Commissioners, adopted by rule by the commission for use in

 9  determining the minimum standard of valuation for those

10  policies or contracts.

11  

12  Any such table for active lives shall be combined with a

13  mortality table permitted for calculating the reserves for

14  life insurance policies.

15         (f)  For accidental death benefits in or supplementary

16  to policies:

17         1.  For policies issued on or after January 1, 1966,

18  the 1959 Accidental Death Benefits Table;

19         2.  For policies issued on or after January 1, 1961,

20  and prior to January 1, 1966, either that table or, at the

21  option of the insurer, the Intercompany Double Indemnity

22  Mortality Table; and

23         3.  For policies issued prior to January 1, 1961, the

24  Intercompany Double Indemnity Mortality Table; and.

25         4.  For policies issued on or after July 1, 2004,

26  tables of accidental death benefits adopted after 1980 by the

27  National Association of Insurance Commissioners, adopted by

28  rule by the commission for use in determining the minimum

29  standard of valuation for those policies.

30  

31  

                                  9

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  Either table shall be combined with a mortality table

 2  permitted for calculating the reserves for life insurance

 3  policies.

 4         (k)  For individual annuity and pure endowment

 5  contracts issued on or after July 1, 2004, excluding any

 6  disability and accidental death benefits purchased under those

 7  contracts, individual annuity mortality tables adopted after

 8  1980 by the National Association of Insurance Commissioners,

 9  adopted by rule by the commission for use in determining the

10  minimum standard of valuation for those contracts.

11         (l)  For all annuities and pure endowments purchased on

12  or after July 1, 2004, under group annuity and pure endowment

13  contracts, excluding any disability and accidental death

14  benefits purchased under those contracts, group annuity

15  mortality tables adopted after 1980 by the National

16  Association of Insurance Commissioners, adopted by rule by the

17  commission for use in determining the minimum standard of

18  valuation for those contracts.

19         (13)  APPLICABILITY TO CREDIT LIFE AND DISABILITY

20  INSURANCE POLICIES.--

21         (a)  For policies issued prior to January 1, 2004:

22         1.  The minimum reserve for single-premium credit

23  disability insurance, monthly premium credit life insurance

24  and monthly premium credit disability insurance shall be the

25  unearned gross premium.

26         2.  As to single-premium credit life insurance

27  policies, the insurer shall establish and maintain reserves

28  that are not less than the value, at the valuation date, of

29  the risk for the unexpired portion of the period for which the

30  premium has been paid as computed on the basis of the

31  commissioners' 1980 Standard Ordinary Mortality Table and 3.5

                                  10

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  percent interest. At the discretion of the office, the insurer

 2  may make a reasonable assumption as to the ages at which net

 3  premiums are to be determined. In lieu of the foregoing basis,

 4  reserves based upon unearned gross premiums may be used at the

 5  option of the insurer.

 6         (b)  For policies issued on or after January 1, 2004:

 7         1.  The minimum reserve for single-premium credit

 8  disability insurance shall be either:

 9         a.  The unearned gross premium, or

10         b.  Based upon a morbidity table that is adopted by the

11  National Association of Insurance Commissioners and is

12  specified in a rule the commission adopts pursuant to

13  subsection (14).

14         2.  The minimum reserve for monthly premium credit

15  disability insurance shall be the unearned gross premium.

16         3.  The minimum reserve for monthly premium credit life

17  insurance shall be the unearned gross premium.

18         4.  As to single-premium credit life insurance

19  policies, the insurer shall establish and maintain reserves

20  that are not less than the value, at the valuation date, of

21  the risk for the unexpired portion of the period for which the

22  premium has been paid as computed on the basis of the

23  commissioners' 1980 Standard Ordinary Mortality Table or any

24  ordinary mortality table, adopted after 1980 by the National

25  Association of Insurance Commissioners, that is approved by

26  rule adopted by the commission for use in determining the

27  minimum standard of valuation for such policies; and an

28  interest rate determined in accordance with subsection (6). At

29  the discretion of the office, the insurer may make a

30  reasonable assumption as to the ages at which net premiums are

31  to be determined. In lieu of the foregoing basis, reserves

                                  11

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  based upon unearned gross premiums may be used at the option

 2  of the insurer. This section does not apply as to those credit

 3  life insurance policies for which reserves are computed and

 4  maintained as required under s. 625.131.

 5         Section 6.  Paragraph (d) of subsection (1) and

 6  paragraph (a) of subsection (2) of section 626.321, Florida

 7  Statutes, are amended to read:

 8         626.321  Limited licenses.--

 9         (1)  The department shall issue to a qualified

10  individual, or a qualified individual or entity under

11  paragraphs (c), (d), (e), and (i), a license as agent

12  authorized to transact a limited class of business in any of

13  the following categories:

14         (d)  Baggage and motor vehicle excess liability

15  insurance.--

16         1.  License covering only insurance of personal effects

17  except as provided in subparagraph 2.  The license may be

18  issued only:

19         a.  To a full-time salaried employee of a common

20  carrier or a full-time salaried employee or owner of a

21  transportation ticket agency, which person is engaged in the

22  sale or handling of transportation of baggage and personal

23  effects of travelers, and may authorize the sale of such

24  insurance only in connection with such transportation; or

25         b.  To the full-time salaried employee of a licensed

26  general lines agent, a full-time salaried employee of a

27  business which offers motor vehicles for rent or lease, or to

28  a business office of a business entity that which offers motor

29  vehicles for rent or lease if insurance sales activities

30  authorized by the license are in connection with and

31  incidental to the rental of a motor vehicle limited to

                                  12

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  full-time salaried employees. An entity applying for a license

 2  under this subsection:

 3         (I)  Is required to submit only one application for a

 4  license under s. 626.171. The requirements of s. 626.171(5)

 5  shall apply only to the officers and directors of the entity

 6  submitting the application.

 7         (II)  Is required to obtain a license for each office,

 8  branch office, or place of business making use of the entity's

 9  business name by applying to the department for the license on

10  a simplified application form developed by rule of the

11  department for this purpose.

12         (III)  Is required to pay the applicable fees for a

13  license as prescribed in s. 624.501, be appointed under s.

14  626.112, and pay the prescribed appointment fee under s.

15  624.501. A licensed and appointed entity shall be directly

16  responsible and accountable for all acts of the licensee's

17  employees.

18  

19  The purchaser of baggage insurance shall be provided written

20  information disclosing that the insured's homeowner's policy

21  may provide coverage for loss of personal effects and that the

22  purchase of such insurance is not required in connection with

23  the purchase of tickets or in connection with the lease or

24  rental of a motor vehicle.

25         2.  A business entity that office licensed pursuant to

26  subparagraph 1., or a person licensed pursuant to subparagraph

27  1. who is a full-time salaried employee of a business which

28  offers motor vehicles for rent or lease, may include lessees

29  under a master contract providing coverage to the lessor or

30  may transact excess motor vehicle liability insurance

31  providing coverage in excess of the standard liability limits

                                  13

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  provided by the lessor in its lease to a person renting or

 2  leasing a motor vehicle from the licensee's employer for

 3  liability arising in connection with the negligent operation

 4  of the leased or rented motor vehicle, provided that the lease

 5  or rental agreement is for not more than 30 days; that the

 6  lessee is not provided coverage for more than 30 consecutive

 7  days per lease period, and, if the lease is extended beyond 30

 8  days, the coverage may be extended one time only for a period

 9  not to exceed an additional 30 days; that the lessee is given

10  written notice that his or her personal insurance policy

11  providing coverage on an owned motor vehicle may provide

12  additional excess coverage; and that the purchase of the

13  insurance is not required in connection with the lease or

14  rental of a motor vehicle.  The excess liability insurance may

15  be provided to the lessee as an additional insured on a policy

16  issued to the licensee's employer.

17         3.  A business entity that office licensed pursuant to

18  subparagraph 1., or a person licensed pursuant to subparagraph

19  1. who is a full-time salaried employee of a business which

20  offers motor vehicles for rent or lease, may, as an agent of

21  an insurer, transact insurance that provides coverage for the

22  liability of the lessee to the lessor for damage to the leased

23  or rented motor vehicle if:

24         a.  The lease or rental agreement is for not more than

25  30 days; or the lessee is not provided coverage for more than

26  30 consecutive days per lease period, but, if the lease is

27  extended beyond 30 days, the coverage may be extended one time

28  only for a period not to exceed an additional 30 days;

29         b.  The lessee is given written notice that his or her

30  personal insurance policy that provides coverage on an owned

31  

                                  14

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  motor vehicle may provide such coverage with or without a

 2  deductible; and

 3         c.  The purchase of the insurance is not required in

 4  connection with the lease or rental of a motor vehicle.

 5         (2)  An entity applying for a license under this

 6  section is required to:

 7         (a)  Submit only one application for a license under s.

 8  626.171. The requirements of s. 626.171(4) s. 626.171(5) shall

 9  only apply to the officers and directors of the entity

10  submitting the application.

11         Section 7.  Paragraph (h) of subsection (9) of section

12  627.476, Florida Statutes, is amended to read:

13         627.476  Standard Nonforfeiture Law for Life

14  Insurance.--

15         (9)  CALCULATION OF ADJUSTED PREMIUMS AND PRESENT

16  VALUES FOR POLICIES ISSUED AFTER OPERATIVE DATE OF THIS

17  SUBSECTION.--

18         (h)  All adjusted premiums and present values referred

19  to in this section shall for all policies of ordinary

20  insurance be calculated on the basis of the Commissioners'

21  1980 Standard Ordinary Mortality Table or, at the election of

22  the insurer for any one or more specified plans of life

23  insurance, the Commissioners' 1980 Standard Ordinary Mortality

24  Table with Ten-Year Select Mortality Factors; shall for all

25  policies of industrial insurance be calculated on the basis of

26  the Commissioners' 1961 Standard Industrial Mortality Table;

27  and shall for all policies issued in a particular calendar

28  year be calculated on the basis of a rate of interest not

29  exceeding the nonforfeiture interest rate as defined in this

30  subsection for policies issued in that calendar year. However:

31  

                                  15

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1         1.  At the option of the insurer, calculations for all

 2  policies issued in a particular calendar year may be made on

 3  the basis of a rate of interest not exceeding the

 4  nonforfeiture interest rate, as defined in this subsection,

 5  for policies issued in the immediately preceding calendar

 6  year.

 7         2.  Under any paid-up nonforfeiture benefit, including

 8  any paid-up dividend additions, any cash surrender value

 9  available, whether or not required by subsection (2), shall be

10  calculated on the basis of the mortality table and rate of

11  interest used in determining the amount of such paid-up

12  nonforfeiture benefit and paid-up dividend additions, if any.

13         3.  An insurer may calculate the amount of any

14  guaranteed paid-up nonforfeiture benefit, including any

15  paid-up additions under the policy, on the basis of an

16  interest rate no lower than that specified in the policy for

17  calculating cash surrender values.

18         4.  In calculating the present value of any paid-up

19  term insurance with accompanying pure endowment, if any,

20  offered as a nonforfeiture benefit, the rates of mortality

21  assumed may be not more than those shown in the Commissioners'

22  1980 Extended Term Insurance Table for policies of ordinary

23  insurance and not more than the Commissioners' 1961 Industrial

24  Extended Term Insurance Table for policies of industrial

25  insurance.

26         5.  In lieu of the mortality tables specified in this

27  section, at the option of the insurance company and subject to

28  rules adopted by the commission, the insurance company may

29  substitute:

30         a.  The 1958 CSO or CET Smoker and Nonsmoker Mortality

31  Tables, whichever is applicable, for policies issued on or

                                  16

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  after the operative date of this subsection and before January

 2  1, 1989;

 3         b.  The 1980 CSO or CET Smoker and Nonsmoker Mortality

 4  Tables, whichever is applicable, for policies issued on or

 5  after the operative date of this subsection;

 6         c.  A mortality table that is a blend of the

 7  sex-distinct 1980 CSO or CET mortality table standard,

 8  whichever is applicable, or a mortality table that is a blend

 9  of the sex-distinct 1980 CSO or CET smoker and nonsmoker

10  mortality table standards, whichever is applicable, for

11  policies that are subject to the United States Supreme Court

12  decision in Arizona Governing Committee v. Norris to prevent

13  unfair discrimination in employment situations.

14         6.  Ordinary mortality tables, adopted after 1980 by

15  the National Association of Insurance Commissioners, adopted

16  by rule by the commission for use in determining the minimum

17  nonforfeiture standard may be substituted for the

18  Commissioners' 1980 Standard Ordinary Mortality Table with or

19  without Ten-Year Select Mortality Factors or for the

20  Commissioners' 1980 Extended Term Insurance Table.

21         7.6.  For insurance issued on a substandard basis, the

22  calculation of any such adjusted premiums and present values

23  may be based on appropriate modifications of the

24  aforementioned tables.

25         Section 8.  Section 626.9743, Florida Statutes, is

26  created to read:

27         626.9743  Claim settlement practices relating to motor

28  vehicle insurance.--

29         (1)  This section shall apply to the adjustment and

30  settlement of personal and commercial motor vehicle insurance

31  claims.

                                  17

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1         (2)  An insurer may not, when liability and damages

 2  owed under the policy are reasonably clear, recommend that a

 3  third-party claimant make a claim under his or her own policy

 4  solely to avoid paying the claim under the policy issued by

 5  that insurer.

 6         (3)  An insurer that elects to repair a motor vehicle

 7  and requires a specific repair shop for vehicle repairs shall

 8  cause the damaged vehicle to be restored to its physical

 9  condition as to performance and appearance prior to the loss

10  at no additional cost to the insured or third-party claimant

11  other than as stated in the policy.

12         (4)  An insurer may not require the use of replacement

13  parts in the repair of a motor vehicle which are not at least

14  equal in kind and quality to the damaged parts prior to the

15  loss in terms of fit, appearance, and performance.

16         (5)  When the insurance policy provides for the

17  adjustment and settlement of first-party motor vehicle total

18  losses on the basis of actual cash value or replacement with

19  another of like kind and quality, the insurer shall use one of

20  the following methods:

21         (a)  The insurer may elect a cash settlement based upon

22  the actual cost to purchase a comparable motor vehicle,

23  including sales tax, if applicable pursuant to subsection (9).

24  Such cost may be derived from:

25         1.  When comparable motor vehicles are available in the

26  local market area, the cost of two or more such comparable

27  motor vehicles available within the preceding 90 days;

28         2.  The retail cost as determined from a generally

29  recognized source such as a guidebook or electronic database

30  that is generally available to the public; or

31  

                                  18

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1         3.  The retail cost using two or more quotations

 2  obtained by the insurer from two or more licensed dealers in

 3  the local market area.

 4         (b)  The insurer may elect to offer a replacement motor

 5  vehicle that is a specified comparable motor vehicle available

 6  to the insured, including sales tax if applicable pursuant to

 7  subsection (9), paid for by the insurer at no cost other than

 8  any deductible provided in the policy and betterment as

 9  provided in subsection (6). The offer must be documented in

10  the insurer's claim file. For purposes of this subsection, a

11  comparable motor vehicle is one that is made by the same

12  manufacturer, of the same or newer model year, and of similar

13  body type and that has similar options and mileage as the

14  insured vehicle. Additionally, a comparable motor vehicle must

15  be in as good or better overall condition than the insured

16  vehicle and available for inspection within a reasonable

17  distance of the insured's residence.

18         (c)  When a motor vehicle total loss is adjusted or

19  settled on a basis that varies from the methods described in

20  paragraph (a) or paragraph (b), the determination of value

21  must be supported by documentation, and any deductions from

22  value must be itemized and specified in appropriate dollar

23  amounts. The basis for such settlement shall be explained to

24  the claimant in writing, if requested, and a copy of the

25  explanation shall be retained in the insurer's claim file.

26         (d)  Any other method agreed to by the claimant.

27         (6)  When the amount offered in settlement reflects a

28  reduction by the insurer because of betterment or

29  depreciation, information pertaining to the reduction shall be

30  maintained with the insurer's claim file. Deductions shall be

31  itemized and specific as to dollar amount and shall accurately

                                  19

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  reflect the value assigned to the betterment or depreciation.

 2  The basis for any deduction shall be explained to the claimant

 3  in writing, if requested, and a copy of the explanation shall

 4  be maintained with the insurer's claim file.

 5         (7)  Every insurer shall, if partial losses are settled

 6  on the basis of a written estimate prepared by or for the

 7  insurer, supply the insured a copy of the estimate upon which

 8  the settlement is based.

 9         (8)  Every insurer shall provide notice to an insured

10  before termination of payment for previously authorized

11  storage charges, and the notice shall provide 72 hours for the

12  insured to remove the vehicle from storage before terminating

13  payment of the storage charges.

14         (9)  If sales tax will necessarily be incurred by a

15  claimant upon replacement of a total loss or upon repair of a

16  partial loss, the insurer may defer payment of the sales tax

17  unless and until the obligation has actually been incurred.

18         (10)  Nothing in this section shall be construed to

19  preclude enforcement of policy provisions relating to

20  settlement disputes.

21         Section 9.  Section 626.9744, Florida Statutes, is

22  created to read:

23         626.9744  Claim settlement practices relating to

24  property insurance.--Unless otherwise provided by the policy,

25  when a homeowner's insurance policy provides for the

26  adjustment and settlement of first-party losses based on

27  repair or replacement cost, the following requirements apply:

28         (1)  When a loss requires repair or replacement of an

29  item or part, any physical damage incurred in making such

30  repair or replacement which is covered and not otherwise

31  excluded by the policy shall be included in the loss to the

                                  20

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  extent of any applicable limits. The insured may not be

 2  required to pay for betterment required by ordinance or code

 3  except for the applicable deductible, unless specifically

 4  excluded or limited by the policy.

 5         (2)  When a loss requires replacement of items and the

 6  replaced items do not match in quality, color, or size, the

 7  insurer shall make reasonable repairs or replacement of items

 8  in adjoining areas. In determining the extent of the repairs

 9  or replacement of items in adjoining areas, the insurer may

10  consider the cost of repairing or replacing the undamaged

11  portions of the property, the degree of uniformity that can be

12  achieved without such cost, the remaining useful life of the

13  undamaged portion, and other relevant factors.

14         (3)  This section shall not be construed to make the

15  insurer a warrantor of the repairs made pursuant to this

16  section.

17         (4)  Nothing in this section shall be construed to

18  preclude enforcement of policy provisions relating to

19  settlement disputes.

20         Section 10.  Subsection (5) is added to section

21  627.4091, Florida Statutes, to read:

22         627.4091  Specific reasons for denial, cancellation, or

23  nonrenewal.--

24         (5)  When an insurer refuses to provide coverage to an

25  applicant due to adverse underwriting information, the insurer

26  shall:

27         (a)  Provide to the applicant specific information

28  regarding the reasons for the refusal to insure.

29         (b)  If the reason for the refusal to insure is based

30  on a loss underwriting history or report from a consumer

31  reporting agency, to the extent applicable identify the loss

                                  21

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  underwriting history and notify the applicant of his or her

 2  right under the federal Fair and Accurate Credit Transactions

 3  Act to obtain a copy of the report from the consumer reporting

 4  agency.

 5         Section 11.  Effective upon this act becoming a law,

 6  subsections (4) and (5) are added to section 627.4133, Florida

 7  Statutes, to read:

 8         627.4133  Notice of cancellation, nonrenewal, or

 9  renewal premium.--

10         (4)  An insurer that cancels a property insurance

11  policy on property secured by a mortgage due to the failure of

12  the lender to timely pay the premium when due shall reinstate

13  the policy as required by s. 501.137.

14         (5)  A single claim on a property insurance policy

15  which is the result of water damage may not be used as the

16  sole cause for cancellation or nonrenewal unless the insurer

17  can demonstrate that the insured has failed to take action as

18  requested by the insurer to prevent a future similar

19  occurrence of damage to the insured property.

20         Section 12.  Subsection (10) is added to section

21  627.7015, Florida Statutes, to read:

22         627.7015  Alternative procedure for resolution of

23  disputed property insurance claims.--

24         (10)  An arbitration clause in an insurance policy

25  shall not preclude the insured from using the mediation

26  program under this section.

27         Section 13.  Section 627.7077, Florida Statutes, is

28  created to read:

29         627.7077  Florida Sinkhole Insurance Facility and other

30  matters related to affordability and availability of sinkhole

31  insurance; feasibility study.--

                                  22

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1         (1)  The Florida State University College of Business

 2  Department of Risk Management and Insurance shall, under the

 3  direction of the office, conduct a feasibility and

 4  cost-benefit study of a potential Florida Sinkhole Insurance

 5  Facility and of other matters related to affordability and

 6  availability of sinkhole insurance. The study shall be

 7  conducted in consultation with the State Board of

 8  Administration and the Florida Geological Survey. The

 9  university shall provide a preliminary report of its analysis,

10  findings, and recommendations to the Financial Services

11  Commission and the presiding officers of the Legislature no

12  later than February 1, 2005, and shall provide a final report

13  no later than April 1, 2005.

14         (2)  The potential functions of the facility to be

15  analyzed include:

16         (a)  Serving as the direct insurer or the reinsurer for

17  all or some sinkhole losses.

18         (b)  Providing training, communication, and other

19  educational services to the public, engineers, the

20  construction industry, insurance professionals, or others.

21         (c)  Providing uniform standards for use by insurers in

22  evaluating sinkhole loss claims.

23         (d)  Providing consulting services for insurers.

24         (e)  Maintaining a public database of all confirmed

25  sinkholes and paid sinkhole loss claims, for use by consumers

26  and by the insurance, building construction, banking, and real

27  estate industries.

28         (3)  The feasibility study shall, at a minimum, address

29  the following issues:

30         (a)  Where the facility should be housed, including,

31  but not limited to, the options of creating a separate

                                  23

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  facility or using the Citizens Property Insurance Corporation

 2  or the Florida Hurricane Catastrophe Fund.

 3         (b)  Federal income taxation implications.

 4         (c)  Funding options and costs associated with

 5  operating the facility, including means of funding sinkhole

 6  insurance through premiums that are adequate to fund covered

 7  losses.

 8         (d)  Applicability of the experience of similar

 9  facilities of other states.

10         (e)  Other economic impact considerations pertinent to

11  a facility.

12         (f)  Alternative dispute resolution mechanisms.

13         (g)  The impact of all present requirements in the

14  Florida Insurance Code on affordability and availability of

15  sinkhole insurance and recommendations to address such

16  impacts.

17         (4)  The study shall be funded from a budget of no more

18  than $300,000, which will be funded by assessments on insurers

19  issuing property insurance in this state. Such assessments

20  shall be collected by the office and shall be prorated among

21  such insurers according to a formula whereby each insurer

22  shall pay a fraction of such budget, the numerator of which

23  shall be such insurer's direct earned premiums for property

24  insurance in this state and the denominator of which shall be

25  the total direct earned premiums for property insurance in

26  this state for calendar year 2003.

27         Section 14.  Section 627.838, Florida Statutes, is

28  amended to read:

29         627.838  Filing and approval of forms; service

30  charges.--

31  

                                  24

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1         (1)  No premium finance agreement form or related form

 2  shall be used in this state by a premium finance company

 3  unless it has been filed with and approved by the office.

 4  Every filing shall be made within 30 days of issuance or use.

 5         (2)  Each premium finance company shall file with the

 6  office the service charge and interest rate plan, including

 7  all modifications thereto, for informational purposes only.

 8  Every filing shall be made within 30 days of its effective

 9  date.

10         (3)  Each filing shall be accompanied by the filing fee

11  specified in s. 627.849.

12         Section 15.  Paragraph (e) of subsection (1) of section

13  627.848, Florida Statutes, is amended to read:

14         627.848  Cancellation of insurance contract upon

15  default.--

16         (1)  When a premium finance agreement contains a power

17  of attorney or other authority enabling the premium finance

18  company to cancel any insurance contract listed in the

19  agreement, the insurance contract shall not be canceled unless

20  cancellation is in accordance with the following provisions:

21         (e)  Whenever a financed an insurance contract is

22  canceled in accordance with this section, the insurer shall,

23  within 30 days of the requested cancellation date, promptly

24  return the unpaid balance due under the finance contract, up

25  to the gross amount available upon the cancellation of the

26  policy, to the premium finance company and any remaining

27  unearned premium to the agent or the insured, or both, for the

28  benefit of the insured or insureds. The insurer shall notify

29  the insured and the agent of the amount of unearned premium

30  returned to the premium finance company and the amount of

31  unearned commission held by the agent. The premium finance

                                  25

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  company shall either, within 30 days of the account being

 2  overpaid, refund to the insured for the insured's benefit any

 3  refund due on the account or, if the refund is sent or

 4  credited to the agent within 15 days of the overpayment,

 5  notify the insured of the refunded amount. within 15 days

 6  shall notify the insured and the agent of the amount of

 7  unearned premium. Within 15 days of receipt of notification

 8  from the premium finance company, the agent shall return such

 9  amount including any unearned commission to the insured or

10  with the written approval of the insured apply such amount to

11  the purchase of other insurance products regulated by the

12  office. The commission may adopt rules necessary to implement

13  the provisions of this subsection.

14         Section 16.  Subsection (1) of section 627.849, Florida

15  Statutes, is amended to read:

16         627.849  Fees.--

17         (1)  The office shall collect in advance, and the

18  persons so served shall pay to it in advance, the following

19  fees:

20         (a)  Annual license fee............................$250

21         (b)  Investigation fee..............................100

22         (c)  Annual report filing fee........................25

23         (d)  Form filing fee.................................10

24         Section 17.  Section 625.131, Florida Statutes, is

25  repealed.

26         Section 18.  Nothing in this act shall be construed to

27  create or be the basis of a civil action. Nothing in this act

28  shall be construed as limiting settlement or adjustment of

29  claims by methods that are otherwise permissible under Florida

30  law.

31  

                                  26

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1         Section 19.  Except as otherwise expressly provided in

 2  this act and except for this section, which shall take effect

 3  upon becoming a law, this act shall take effect July 1, 2004.

 4  

 5  

 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  

                                  27

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
 2                         Senate Bill 2038

 3                                 

 4  Deletes proposed change to unfair trade practices law for
    refusal to insure based on past water damage or acts of God.
 5  
    Removes the proposed ban on arbitration provisions in
 6  insurance policies, instead stating arbitration does not
    override a policyholder's right to mediation in a property
 7  insurance dispute.

 8  Deletes proposed requirement that insurers establish
    comprehensive insurance coverage for residential property.
 9  
    Requires insurers to notify policyholders denied coverage due
10  to adverse underwriting information of their right to obtain
    the report relied on by the insurer from the consumer
11  reporting agency.

12  Exempts credit disability insurance from the requirement that
    the insurer maintain an active life reserve that is less in
13  the aggregate than the pro rata gross unearned premiums for
    such policies.
14  
    Allows insurers to use the minimum reserve requirements for
15  single-premium credit disability insurance, monthly premium
    credit life insurance and monthly premium credit disability
16  insurance established by the National Association of Insurance
    Commissioners.
17  
    Requires the F.S.U. Department of Risk Management and
18  Insurance to conduct a feasibility and cost-benefit study for
    a potential Florida Sinkhole Insurance Facility and other
19  matters related to the affordability and availability of
    sinkhole insurance.
20  
    Requires that new local government self-insurance trusts be
21  formed as a group or commercial self-insurance fund and comply
    with applicable law for the first 5 years of existence.
22  
    Allows the Financial Services Commission to adopt the latest
23  revisions to the minimum standards for valuation of life
    insurance policies, produced by the National Association of
24  Insurance Commissioners, by rule rather than having to do so
    by legislation.
25  
    Allows insurers to use the minimum reserve requirements for
26  single-premium credit disability insurance, monthly premium
    credit life insurance and monthly premium credit disability
27  insurance established by the National Association of Insurance
    Commissioners.
28  
    Allows businesses that sell personal accident and motor
29  vehicle excess liability insurance to submit one application
    to the Department in order to obtain licenses for each
30  location of the business.

31  Revises language regarding the settlement of automobile
    insurance claims.
                                  28

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






    Florida Senate - 2004                           CS for SB 2038
    311-2438-04




 1  Removes the authority for the Department of Financial Services
    to adopt rules establishing requirements applicable to the
 2  adjustment and settlement of motor vehicle insurance claims.

 3  

 4  

 5  

 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  

                                  29

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