Senate Bill sb0010A

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    Florida Senate - 2004                                  SB 10-A

    By Senator Garcia





    41-516-05

  1                      A bill to be entitled

  2         An act relating to hurricane deductibles;

  3         providing for the Department of Financial

  4         Services to reimburse policyholders of

  5         residential property insurance for multiple

  6         deductibles applied by insurers for two or more

  7         hurricanes; providing legislative findings and

  8         intent; establishing criteria for eligibility

  9         for reimbursement; requiring applications to be

10         submitted to the department and to include

11         certain information; limiting the maximum

12         amount of reimbursement; limiting total

13         reimbursement to the amount appropriated for

14         this purpose; requiring payment to be made in a

15         specified order of priority and providing for

16         pro rata reimbursement; requiring insurers to

17         provide the department with certain information

18         related to the claim for reimbursement, subject

19         to the policyholder's authorization;

20         authorizing the department to contract with a

21         third party for investigation or adjustment of

22         a claim for reimbursement; requiring insurers

23         to mail notice to certain policyholders of the

24         reimbursement procedures; providing for

25         emergency rules; providing that an application

26         for reimbursement constitutes an insurance

27         claim for purposes of determining insurance

28         fraud; amending s. 627.701, F.S.; requiring

29         that hurricane deductibles of residential

30         property insurance policies be applied on an

31         annual basis to all hurricane losses that occur

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    Florida Senate - 2004                                  SB 10-A
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 1         during a calendar year; allowing insurers to

 2         apply an alternative deductible to subsequent

 3         hurricane losses after the annual deductible is

 4         met; providing the method by which the

 5         hurricane deductible is to be calculated if a

 6         hurricane deductible is changed for a new or

 7         renewal policy; allowing insurers to require

 8         policyholders to report hurricane losses or to

 9         maintain receipts or records in order to apply

10         hurricane losses to a subsequent hurricane

11         claim; providing appropriations; requiring the

12         State Board of Administration to increase

13         future premiums to the Florida Hurricane

14         Catastrophe Fund; providing an effective date.

15  

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

17  

18         Section 1.  Legislative findings and intent.--The

19  Legislature finds that the four hurricanes striking Florida in

20  2004 resulted in at least 30,000 residential property

21  insurance policyholders experiencing damage from two or more

22  hurricanes for which insurers have applied the hurricane

23  deductible to each hurricane claim. The fact that

24  policyholders have separate hurricane deductibles can result

25  in significant out-of-pocket expense and financial hardship to

26  policyholders. Although insurers are required by law to notify

27  policyholders that the hurricane deductible can result in a

28  large out-of-pocket expense, it was not anticipated that a

29  policyholder would have damage from two or more hurricanes in

30  the same year and be forced to meet two or more deductibles in

31  this circumstance. The Legislature further finds that the

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    Florida Senate - 2004                                  SB 10-A
    41-516-05




 1  public health, safety, and welfare demand that residential

 2  structures damaged or destroyed in a catastrophe be repaired

 3  or reconstructed as soon as possible and that application of

 4  multiple deductibles delays or prevents such reconstruction,

 5  hinders the economic recovery of the state and its residents,

 6  and endangers the public health, safety, and welfare.

 7  Therefore, state action to establish a program to reimburse

 8  policyholders for the financial loss suffered due to the

 9  application of multiple hurricane deductibles constitutes a

10  valid and necessary public and governmental purpose. The

11  Legislature intends to establish a program to reimburse

12  policyholders for such losses, up to specified limits.

13         Section 2.  Reimbursement for multiple hurricane

14  deductibles.--

15         (1)  As used in this section, the term "residential

16  property insurance" means residential coverage as described in

17  section 627.4025(1), Florida Statutes.

18         (2)  The Department of Financial Services shall

19  reimburse policyholders of residential property insurance

20  whose property was damaged by two or more hurricanes in 2004

21  and whose insurer applied more than one hurricane deductible

22  to the insurance claims. The reimbursement shall be the amount

23  of the claim that was not paid due to application of the

24  second or subsequent deductible, as further limited by this

25  section.

26         (3)  To be eligible for reimbursement, a policyholder

27  must meet the criteria of subsection (2) and must:

28         (a)  Apply to the department by March 1, 2005, on a

29  form provided by the department. The form must identify the

30  amount of the claims paid by the insurer, per hurricane, the

31  amount of the deductible which was applied to each claim; and

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    Florida Senate - 2004                                  SB 10-A
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 1  such additional information as the department requires to

 2  verify the claim for reimbursement, including documentation

 3  from the insurer.

 4         (b)  Have incurred damage in excess of the full amount

 5  of a single hurricane deductible.

 6         (c)  Meet a $100 deductible for a second and each

 7  subsequent hurricane claim in addition to the amount of the

 8  deductible which must be met under paragraph (b).

 9         (d)  Provide written authorization for the department

10  to obtain from the policyholder's insurer information related

11  to the claim for reimbursement.

12         (4)(a)  Reimbursement may be provided only for damages

13  that would have been paid under the policy but for application

14  of the deductible. The maximum reimbursement shall be limited

15  to the amount of the policyholder's loss in excess of one full

16  deductible, but not more than $10,000 per policy for damage

17  caused by two hurricanes and not more than $20,000 per policy

18  for damage caused by three or more hurricanes, except as

19  otherwise provided in this subsection.

20         (b)  For a policy issued to a condominium association,

21  the maximum reimbursement shall be limited to an amount equal

22  to $3,000 multiplied by the number of condominium units or the

23  maximum amount specified in paragraph (a) or paragraph (c),

24  whichever is greater.

25         (c)  If more than one residential structure is insured

26  under the policy and a separate hurricane deductible applies

27  to each, the maximum reimbursement shall be limited to $10,000

28  per structure for multiple hurricane claims for that

29  structure.

30  

31  

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 1         (d)  Reimbursement may not be paid for loss amounts for

 2  which the policyholder has received a grant from the Federal

 3  Emergency Management Agency.

 4         (5)  The total amount of funds paid to policyholders

 5  pursuant to this section is limited to the amount appropriated

 6  for this purpose. Payments shall be made to eligible

 7  applicants in the following order of priority:

 8         (a)  The department shall first reimburse policyholders

 9  who received claims payments from their insurer for two or

10  more hurricanes for which each payment was reduced by the full

11  amount of the deductible.

12         (b)  After reimbursing all policyholders who meet the

13  criterion of paragraph (a), the department shall reimburse all

14  other eligible policyholders. If the amount appropriated for

15  this purpose is not adequate to pay all other eligible

16  policyholders up to the maximum reimbursement amounts, the

17  department shall provide reimbursement pro rata so that each

18  policyholder receives an equal percentage of the funds

19  available.

20         (6)  The insurer issuing the policy to the applicant

21  for reimbursement shall provide to the department, upon

22  request, such information in the applicant's claim file as

23  will assist the department in determining the validity and

24  reasonableness of the claim, subject to the policyholder's

25  authorization to release such information. The department may

26  further investigate or adjust the claim as it determines is

27  necessary and may contract with third parties for this

28  purpose.

29         (7)  Insurers shall mail notice to those residential

30  property insurance policyholders who filed claims with the

31  insurer for two or more hurricanes in 2004 and to whom the

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    Florida Senate - 2004                                  SB 10-A
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 1  insurer applied more than one hurricane deductible, whether

 2  there was a claims payment or not. The notice shall be on a

 3  form provided by the department which informs the policyholder

 4  of the reimbursement program established by this section and

 5  the procedures for seeking reimbursement, including the

 6  application form provided by the department. The notice shall

 7  be mailed in such manner and within such time as specified by

 8  the department. For subsequent claims, the insurer shall

 9  provide the notice at the time that the insurer notifies the

10  policyholder of the application of the second deductible.

11         (8)  The department may adopt rules to implement this

12  section. It is the Legislature's intent that the department

13  implement this section as soon as possible in order to provide

14  immediate relief to affected policyholders. Therefore, the

15  department may adopt such rules pursuant to the emergency rule

16  procedures of section 120.54(4), Florida Statutes.

17         (9)  An application for reimbursement shall be

18  considered an insurance claim for purposes of determining

19  whether a person has committed insurance fraud pursuant to

20  section 817.234, Florida Statutes. The Department of Financial

21  Services and the department's Division of Insurance Fraud

22  shall have the powers to investigate and enforce such actions

23  provided in section 626.989, Florida Statutes.

24         Section 3.  Present subsections (5) through (8) of

25  section 627.701, Florida Statutes, are renumbered subsections

26  (6) through (9), respectively, and a new subsection (5) is

27  added to that section to read:

28         627.701  Liability of insureds; coinsurance;

29  deductibles.--

30         (5)  The hurricane deductible of any residential

31  property insurance policy shall be applied as follows:

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    Florida Senate - 2004                                  SB 10-A
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 1         (a)  The hurricane deductible shall apply on an annual

 2  basis to all covered hurricane losses that occur during a

 3  calendar year for losses that are covered under one or more

 4  policies issued by the same insurer or an insurer in the same

 5  insurer group.

 6         (b)  If a hurricane deductible applies separately to

 7  any structure insured under a single policy, the requirements

 8  of this subsection apply with respect to the deductible for

 9  such structure.

10         (c)  If there was a hurricane loss for a prior

11  hurricane or hurricanes during the calendar year, the insurer

12  may apply a deductible to a subsequent hurricane which is the

13  greater of the remaining amount of the hurricane deductible or

14  the amount of the deductible which applies to perils other

15  than a hurricane. Insurers may require policyholders to report

16  hurricane losses that are below the hurricane deductible or to

17  maintain receipts or other records of such hurricane losses in

18  order to apply such losses to subsequent hurricane claims.

19         (d)  If there are hurricane losses in a calendar year

20  on more than one policy issued by the same insurer or an

21  insurer in the same insurer group, the hurricane deductible

22  shall be the highest amount stated in any one of the policies.

23  If a policyholder who had a hurricane loss under a prior

24  policy is provided or offered a lower hurricane deductible

25  under a new or renewal policy, the insurer must notify the

26  policyholder, in writing, at the time the lower hurricane

27  deductible is provided or offered that the lower hurricane

28  deductible will not apply until January 1 of the following

29  calendar year.

30  

31  

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 1  This subsection applies to policies issued or renewed on or

 2  after May 1, 2005.

 3         Section 4.  (1)  Notwithstanding section 215.555,

 4  Florida Statutes, the State Board of Administration is

 5  directed to transfer, no later than January 15, 2005, $20

 6  million from the Florida Hurricane Catastrophe Fund cash

 7  balance to the Insurance Regulatory Trust Fund within the

 8  Department of Financial Services to provide funding for the

 9  reimbursements authorized in subsection (3).

10         (2)  Notwithstanding section 215.555, Florida Statutes,

11  the State Board of Administration is directed to transfer up

12  to $130 million from the Florida Hurricane Catastrophe Fund

13  cash balance to the Insurance Regulatory Trust Fund in the

14  Department of Financial Services to provide funding for the

15  reimbursements authorized in subsection (3). The Chief

16  Financial Officer shall periodically certify to the State

17  Board of Administration an amount to be transferred from the

18  funds appropriated in this subsection based on the documented

19  expenditure need for reimbursement payments submitted to the

20  Department of Financial Services. The amount of each transfer

21  may not exceed the documented need. The Chief Financial

22  Officer shall provide a copy of each certification to the

23  Executive Office of the Governor and the chair and vice chair

24  of the Legislative Budget Commission. The State Board of

25  Administration shall provide notice of each transfer to the

26  Executive Office of the Governor and the chair and vice chair

27  of the Legislative Budget Commission at least 3 working days

28  before such transfer.

29         (3)  The sum of $150 million is appropriated for the

30  period from the effective date of this act through September

31  30, 2005, from the Insurance Regulatory Trust Fund in the

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    Florida Senate - 2004                                  SB 10-A
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 1  Department of Financial Services in a special appropriation

 2  category "Hurricane Multiple Deductible Reimbursements" for

 3  reimbursement to residential property insurance policyholders

 4  for the expense of multiple hurricane deductibles, as provided

 5  in sections 1 and 2. Up to 1 percent of this appropriation may

 6  be used by the department for the administration of payments

 7  to such policyholders.

 8         (4)  All Florida Hurricane Catastrophe Fund moneys

 9  transferred to the Insurance Regulatory Trust Fund under this

10  act which remain unexpended on September 30, 2005, shall

11  revert to the Florida Hurricane Catastrophe Fund.

12         (5)  Beginning January 15, 2005, and monthly

13  thereafter, the Chief Financial Officer shall provide a report

14  to the Executive Office of the Governor and the chair and vice

15  chair of the Legislative Budget Commission containing

16  information regarding the reimbursement for multiple hurricane

17  deductibles. The report shall include, but is not limited to,

18  cumulative and monthly information on the number of

19  reimbursement claims submitted, the total amount requested for

20  reimbursement, the number of claims paid, and the amount paid

21  for reimbursement.

22         (6)  In order to maintain actuarially indicated

23  premiums as required by section 215.555, Florida Statutes, the

24  State Board of Administration shall increase future premiums

25  by the amount appropriated and transferred from the Florida

26  Hurricane Catastrophe Fund under this section, plus additional

27  amounts necessary to recover lost investment income, less any

28  refunds of unused cash to the Florida Hurricane Catastrophe

29  Fund. The increase in future premiums shall be divided over 5

30  years, in equal or approximately equal amounts, beginning with

31  the June 1, 2005, contract year.

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 1         (7)  All appropriations authorized by this act are

 2  nonrecurring and are intended to address needs caused by

 3  Hurricanes Charley, Frances, Ivan, and Jeanne.

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

 5  law.

 6  

 7            *****************************************

 8                          SENATE SUMMARY

 9    Creates a program to reimburse residential property
      insurance policyholders for expenses incurred in 2004
10    when the insured properties were damaged by two or more
      hurricanes and the respective insurers imposed more than
11    one hurricane deductible. The program will be funded by
      appropriations from the cash balance of the Florida
12    Hurricane Catastrophe Fund, to be repaid in 5 years
      through increased premiums. Requires insurers to apply
13    hurricane deductibles on an annual basis for residential
      property insurance policies issued or renewed on or after
14    a specified date.

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