Senate Bill sb1488c2

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    Florida Senate - 2005                    CS for CS for SB 1488

    By the Committees on General Government Appropriations;
    Banking and Insurance; and Senators Garcia and Klein




    601-2244-05

  1                      A bill to be entitled

  2         An act relating to property insurance; amending

  3         s. 215.555, F.S.; revising the retention of

  4         losses for which an insurer is not entitled to

  5         reimbursement from the Florida Hurricane

  6         Catastrophe Fund; amending s. 215.559, F.S.;

  7         revising the allocation of funds appropriated

  8         to the Department of Community Affairs from the

  9         Florida Hurricane Catastrophe Fund for the

10         Hurricane Loss Mitigation Program; requiring

11         that the department establish a low-interest

12         loan program and pilot project for hurricane

13         loss mitigation; authorizing contractual

14         agreements between the department and financial

15         institutions; authorizing the Department of

16         Community Affairs to adopt rules; amending s.

17         627.062, F.S.; requiring the Office of

18         Insurance Regulation to submit a proposed plan

19         to the Legislature establishing uniform rating

20         territories to be used by insurers for

21         residential property insurance rate filings;

22         requiring a further act of the Legislature to

23         implement the plan; limiting the recoupment by

24         an insurer in its rates of the reimbursement

25         premium it pays to the Florida Hurricane

26         Catastrophe Fund; repealing provisions allowing

27         an insurer to submit a rate filing to an

28         arbitration panel; amending s. 627.0628, F.S.;

29         restricting the admissibility and relevance in

30         rate proceedings of findings of the Florida

31         Commission on Hurricane Loss Projection

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 1         Methodology; amending s. 627.0629, F.S.;

 2         lowering the percentage amount of a rate filing

 3         based on a computer model which requires a

 4         public hearing; creating s. 627.06291, F.S.;

 5         requiring residential property insurance and

 6         rating and advisory organizations to report

 7         hurricane loss data for development of a public

 8         hurricane model for hurricane loss projections;

 9         amending s. 627.351, F.S.; revising the

10         appointments to the board and the approval of

11         officers and employees of the corporation;

12         creating a Market Accountability Advisory

13         Committee to assist the corporation in

14         developing awareness of it rates and service

15         levels; providing for membership of the

16         committee; providing terms of office; requiring

17         the committee to report to the corporation at

18         each board meeting; revising the criteria and

19         standards for establishing the rates charged

20         for coverage by the corporation; providing that

21         rates may not be increased by more than a

22         specified percentage; creating s. 627.40951,

23         F.S.; providing legislative findings and

24         intent; providing for an advisory committee;

25         providing for membership; providing for

26         recommendations to be submitted to the

27         Legislature regarding standard residential

28         property insurance policies; amending s.

29         627.411, F.S.; adding grounds for which the

30         Office of Insurance Regulation must disapprove

31         a form filed by an insurer; amending s.

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 1         627.4133, F.S.; prohibiting insurers from

 2         canceling or nonrenewing residential property

 3         insurance policies under certain emergency

 4         circumstances; providing exceptions; providing

 5         notice requirements; providing application to

 6         personal residential and commercial residential

 7         policies covering certain damaged property;

 8         amending s. 627.4143, F.S.; requiring insurers

 9         to provide personal lines property insurance

10         policyholders with a checklist of items

11         contained in policies; authorizing the

12         Financial Services Commission to adopt rules;

13         prescribing elements to be contained in the

14         checklist; requiring the checklist and outline

15         of insurance coverage to be sent with each

16         renewal; clarifying that homeowners' insurance

17         includes mobile homeowners', dwelling, and

18         condominium unit owners' insurance for purposes

19         of the outline of coverage; amending s.

20         627.701, F.S.; increasing the maximum allowable

21         hurricane deductible for personal lines and

22         certain commercial lines residential policies;

23         requiring insurers to offer specified hurricane

24         deductibles for such policies; requiring

25         insurers to provide written notice explaining

26         hurricane deductible options for such policies;

27         amending s. 627.7011, F.S.; requiring insurers

28         to offer coverage for additional costs of

29         repair due to laws and ordinances; requiring

30         insurers to pay the replacement cost for a loss

31         insured on that basis, whether or not the

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 1         insured replaces or repairs the dwelling or

 2         property; amending s. 627.7015, F.S.; providing

 3         a penalty for an insurer that fails to notify a

 4         claimant of the availability of mediation

 5         procedures for resolving a disputed property

 6         insurance claim; amending s. 627.702, F.S.;

 7         providing legislative intent regarding the

 8         requirement that an insurer pay policy limits

 9         if there is a total loss of a building;

10         amending s. 627.706, F.S., relating to sinkhole

11         insurance; providing definitions; amending s.

12         627.707, F.S.; revising requirements for

13         insurers in investigating sinkhole claims;

14         requiring that the insurer provide certain

15         notification to the policyholder; requiring

16         that the insurer engage an engineer and

17         professional geologist; providing requirements

18         for the insurer if a claim is denied; providing

19         requirements if a sinkhole loss is verified;

20         creating s. 627.7072, F.S.; providing testing

21         standards for sinkholes; creating s. 627.7073,

22         F.S.; providing requirements for reports issued

23         by engineers and professional geologists;

24         requiring certain reports and certifications to

25         be issued to the policyholder and the insurer;

26         requiring that the insurer file a copy of the

27         report and certification with the county

28         property appraiser to be recorded with the

29         parcel number for the property; providing that

30         there is no cause of action or liability

31         against an insurer for filing such report and

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 1         certification; creating s. 627.711, F.S.;

 2         requiring insurers to provide written notice to

 3         applicants and policyholders of the amount of

 4         the premium discounts and credits for fixtures

 5         and construction techniques that reduce the

 6         amount of windstorm loss; authorizing the

 7         Financial Services Commission to adopt rules;

 8         creating s. 627.712, F.S.; requiring property

 9         insurers to pay or deny claims within certain

10         time periods; providing that overdue payments

11         bear interest; requiring the Office of the

12         Auditor General to conduct an operational audit

13         of Citizens Property Insurance Corporation;

14         providing an appropriation and authorizing

15         positions; providing effective dates.

16  

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

18  

19         Section 1.  Effective June 1, 2005, paragraph (e) of

20  subsection (2) of section 215.555, Florida Statutes, is

21  amended to read:

22         215.555  Florida Hurricane Catastrophe Fund.--

23         (2)  DEFINITIONS.--As used in this section:

24         (e)  "Retention" means the amount of losses below which

25  an insurer is not entitled to reimbursement from the fund. An

26  insurer's retention shall be calculated as follows:

27         1.  The board shall calculate and report to each

28  insurer the retention multiples for that year. For the

29  contract year beginning June 1, 2005 2004, the retention

30  multiple shall be equal to $4.5 billion divided by the total

31  estimated reimbursement premium for the contract year; for

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 1  subsequent years, the retention multiple shall be equal to

 2  $4.5 billion, adjusted based upon the reported exposure from

 3  the prior contract year to reflect the percentage growth in

 4  exposure to the fund for covered policies since 2004 2003,

 5  divided by the total estimated reimbursement premium for the

 6  contract year. Total reimbursement premium for purposes of the

 7  calculation under this subparagraph shall be estimated using

 8  the assumption that all insurers have selected the 90-percent

 9  coverage level.

10         2.  The retention multiple as determined under

11  subparagraph 1. shall be adjusted to reflect the coverage

12  level elected by the insurer. For insurers electing the

13  90-percent coverage level, the adjusted retention multiple is

14  100 percent of the amount determined under subparagraph 1. For

15  insurers electing the 75-percent coverage level, the retention

16  multiple is 120 percent of the amount determined under

17  subparagraph 1. For insurers electing the 45-percent coverage

18  level, the adjusted retention multiple is 200 percent of the

19  amount determined under subparagraph 1.

20         3.  An insurer shall determine its provisional

21  retention by multiplying its provisional reimbursement premium

22  by the applicable adjusted retention multiple and shall

23  determine its actual retention by multiplying its actual

24  reimbursement premium by the applicable adjusted retention

25  multiple.

26         4.  For insurers who experience multiple covered events

27  causing loss during the contract year, beginning June 1, 2005,

28  each insurer's full retention shall be applied to each of the

29  covered events causing the two largest losses for that

30  insurer. For each other covered event resulting in losses, the

31  insurer's retention shall be reduced to one-third of the full

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 1  retention. The reimbursement contract shall provide for the

 2  reimbursement of losses for each covered event based on the

 3  full retention with adjustments made to reflect the reduced

 4  retentions after January 1 of the contract year provided the

 5  insurer reports its losses as specified in the reimbursement

 6  contract.

 7         Section 2.  Effective July 1, 2005, section 215.559,

 8  Florida Statutes, is amended to read:

 9         215.559  Hurricane Loss Mitigation Program.--

10         (1)  There is created a Hurricane Loss Mitigation

11  Program. The Legislature shall annually appropriate $10

12  million of the moneys authorized for appropriation under s.

13  215.555(7)(c) from the Florida Hurricane Catastrophe Fund to

14  the Department of Community Affairs for the purposes set forth

15  in this section.

16         (2)(a)  Seven million dollars in funds provided in

17  subsection (1) shall be used for programs to improve the wind

18  resistance of residences and mobile homes, including loans,

19  subsidies, grants, demonstration projects, and direct

20  assistance; cooperative programs with local governments and

21  the Federal Government; and other efforts to prevent or reduce

22  losses or reduce the cost of rebuilding after a disaster.

23         (b)  Three million dollars in funds provided in

24  subsection (1) shall be used to retrofit existing facilities

25  used as public hurricane shelters. The department must

26  prioritize the use of these funds for projects included in the

27  September 1, 2000, version of the Shelter Retrofit Report

28  prepared in accordance with s. 252.385(3), and each annual

29  report thereafter. The department must give funding priority

30  to projects in regional planning council regions that have

31  

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 1  shelter deficits and to projects that maximize use of state

 2  funds.

 3         (3)  By the 2006-2007 fiscal year, the Department of

 4  Community Affairs shall develop a low-interest loan program

 5  for homeowners and mobile home owners to retrofit their homes

 6  with fixtures or apply construction techniques that have been

 7  demonstrated to reduce the amount of damage or loss due to a

 8  hurricane. Funding for the program shall be used to subsidize

 9  or guaranty private-sector loans for this purpose to qualified

10  homeowners by financial institutions chartered by the state or

11  Federal Government. The department may enter into contracts

12  with financial institutions for this purpose. The department

13  shall establish criteria for determining eligibility for the

14  loans and selecting recipients, standards for retrofitting

15  homes or mobile homes, limitations on loan subsidies and loan

16  guaranties, and other terms and conditions of the program,

17  which must be specified in the department's report to the

18  Legislature on January 1, 2006, required by subsection (8).

19  For the 2005-2006 fiscal year, the Department of Community

20  Affairs may use up to $1 million of the funds appropriated

21  pursuant to paragraph (2)(a) to begin the low-interest loan

22  program as a pilot project in one or more counties. The

23  Department of Financial Services, the Office of Financial

24  Regulation, the Florida Housing Finance Corporation, and the

25  Office of Tourism, Trade, and Economic Development shall

26  assist the Department of Community Affairs in establishing the

27  program and pilot project. The department may use up to 2.5

28  percent of the funds appropriated in any given fiscal year for

29  administering the loan program. The department may adopt rules

30  to implement the program.

31  

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 1         (4)(3)  Forty percent of the total appropriation in

 2  paragraph (2)(a) shall be used to inspect and improve

 3  tie-downs for mobile homes. Within 30 days after the effective

 4  date of that appropriation, the department shall contract with

 5  a public higher educational institution in this state which

 6  has previous experience in administering the programs set

 7  forth in this subsection to serve as the administrative entity

 8  and fiscal agent pursuant to s. 216.346 for the purpose of

 9  administering the programs set forth in this subsection in

10  accordance with established policy and procedures. The

11  administrative entity working with the advisory council set up

12  under subsection (6) (5) shall develop a list of mobile home

13  parks and counties that may be eligible to participate in the

14  tie-down program.

15         (5)(4)  Of moneys provided to the Department of

16  Community Affairs in paragraph (2)(a), 10 percent shall be

17  allocated to a Type I Center within the State University

18  System dedicated to hurricane research. The Type I Center

19  shall develop a preliminary work plan approved by the advisory

20  council set forth in subsection (6) (5) to eliminate the state

21  and local barriers to upgrading existing mobile homes and

22  communities, research and develop a program for the recycling

23  of existing older mobile homes, and support programs of

24  research and development relating to hurricane loss reduction

25  devices and techniques for site-built residences. The State

26  University System also shall consult with the Department of

27  Community Affairs and assist the department with the report

28  required under subsection (8) (7).

29         (6)(5)  Except for the program set forth in subsection

30  (3), The Department of Community Affairs shall develop the

31  programs set forth in this section in consultation with an

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 1  advisory council consisting of a representative designated by

 2  the Chief Financial Officer, a representative designated by

 3  the Florida Home Builders Association, a representative

 4  designated by the Florida Insurance Council, a representative

 5  designated by the Federation of Manufactured Home Owners, a

 6  representative designated by the Florida Association of

 7  Counties, and a representative designated by the Florida

 8  Manufactured Housing Association.

 9         (7)(6)  Moneys provided to the Department of Community

10  Affairs under this section are intended to supplement other

11  funding sources of the Department of Community Affairs and may

12  not supplant other funding sources of the Department of

13  Community Affairs.

14         (8)(7)  On January 1st of each year, the Department of

15  Community Affairs shall provide a full report and accounting

16  of activities under this section and an evaluation of such

17  activities to the Speaker of the House of Representatives, the

18  President of the Senate, and the Majority and Minority Leaders

19  of the House of Representatives and the Senate.

20         (9)(8)  This section is repealed June 30, 2011.

21         Section 3.  Subsections (4) and (5) of section 627.062,

22  Florida Statutes, are amended, subsection (6) of that section

23  is repealed, and subsections (7) and (8) of that section are

24  renumbered as subsections (6) and (7), respectively, to read:

25         627.062  Rate standards.--

26         (4)  The establishment of any rate, rating

27  classification, rating plan or schedule, or variation thereof

28  in violation of part IX of chapter 626 is also in violation of

29  this section. In order to enhance the ability of consumers to

30  compare premiums and to increase the accuracy and usefulness

31  of rate-comparison information provided by the office to the

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 1  public, the office shall develop a proposed standard rating

 2  territory plan to be used by all authorized property and

 3  casualty insurers for residential property insurance. In

 4  adopting the proposed plan, the office may consider

 5  geographical characteristics relevant to risk, county lines,

 6  major roadways, existing rating territories used by a

 7  significant segment of the market, and other relevant factors.

 8  Such plan shall be submitted to the President of the Senate

 9  and the Speaker of the House of Representatives by January 15,

10  2006. The plan may not be implemented unless authorized by

11  further act of the Legislature.

12         (5)  With respect to a rate filing involving coverage

13  of the type for which the insurer is required to pay a

14  reimbursement premium to the Florida Hurricane Catastrophe

15  Fund, the insurer may fully recoup in its property insurance

16  premiums any reimbursement premiums paid to the Florida

17  Hurricane Catastrophe Fund, together with reasonable costs of

18  other reinsurance, but may not recoup reinsurance costs that

19  duplicate coverage provided by the Florida Hurricane

20  Catastrophe Fund. An insurer may not recoup more than 1 year

21  of reimbursement premium at a time. Any under-recoupment from

22  the prior year may be added to the following year's

23  reimbursement premium and any over-recoupment shall be

24  subtracted from the following year's reimbursement premium.

25         (6)(a)  After any action with respect to a rate filing

26  that constitutes agency action for purposes of the

27  Administrative Procedure Act, except for a rate filing for

28  medical malpractice, an insurer may, in lieu of demanding a

29  hearing under s. 120.57, require arbitration of the rate

30  filing. Arbitration shall be conducted by a board of

31  arbitrators consisting of an arbitrator selected by the

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 1  office, an arbitrator selected by the insurer, and an

 2  arbitrator selected jointly by the other two arbitrators. Each

 3  arbitrator must be certified by the American Arbitration

 4  Association. A decision is valid only upon the affirmative

 5  vote of at least two of the arbitrators. No arbitrator may be

 6  an employee of any insurance regulator or regulatory body or

 7  of any insurer, regardless of whether or not the employing

 8  insurer does business in this state. The office and the

 9  insurer must treat the decision of the arbitrators as the

10  final approval of a rate filing. Costs of arbitration shall be

11  paid by the insurer.

12         (b)  Arbitration under this subsection shall be

13  conducted pursuant to the procedures specified in ss.

14  682.06-682.10. Either party may apply to the circuit court to

15  vacate or modify the decision pursuant to s. 682.13 or s.

16  682.14. The commission shall adopt rules for arbitration under

17  this subsection, which rules may not be inconsistent with the

18  arbitration rules of the American Arbitration Association as

19  of January 1, 1996.

20         (c)  Upon initiation of the arbitration process, the

21  insurer waives all rights to challenge the action of the

22  office under the Administrative Procedure Act or any other

23  provision of law; however, such rights are restored to the

24  insurer if the arbitrators fail to render a decision within 90

25  days after initiation of the arbitration process.

26         (6)(7)(a)  The provisions of this subsection apply only

27  with respect to rates for medical malpractice insurance and

28  shall control to the extent of any conflict with other

29  provisions of this section.

30         (b)  Any portion of a judgment entered or settlement

31  paid as a result of a statutory or common-law bad faith action

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 1  and any portion of a judgment entered which awards punitive

 2  damages against an insurer may not be included in the

 3  insurer's rate base, and shall not be used to justify a rate

 4  or rate change. Any common-law bad faith action identified as

 5  such, any portion of a settlement entered as a result of a

 6  statutory or common-law action, or any portion of a settlement

 7  wherein an insurer agrees to pay specific punitive damages may

 8  not be used to justify a rate or rate change. The portion of

 9  the taxable costs and attorney's fees which is identified as

10  being related to the bad faith and punitive damages in these

11  judgments and settlements may not be included in the insurer's

12  rate base and may not be utilized to justify a rate or rate

13  change.

14         (c)  Upon reviewing a rate filing and determining

15  whether the rate is excessive, inadequate, or unfairly

16  discriminatory, the office shall consider, in accordance with

17  generally accepted and reasonable actuarial techniques, past

18  and present prospective loss experience, either using loss

19  experience solely for this state or giving greater credibility

20  to this state's loss data after applying actuarially sound

21  methods of assigning credibility to such data.

22         (d)  Rates shall be deemed excessive if, among other

23  standards established by this section, the rate structure

24  provides for replenishment of reserves or surpluses from

25  premiums when the replenishment is attributable to investment

26  losses.

27         (e)  The insurer must apply a discount or surcharge

28  based on the health care provider's loss experience or shall

29  establish an alternative method giving due consideration to

30  the provider's loss experience. The insurer must include in

31  the filing a copy of the surcharge or discount schedule or a

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 1  description of the alternative method used, and must provide a

 2  copy of such schedule or description, as approved by the

 3  office, to policyholders at the time of renewal and to

 4  prospective policyholders at the time of application for

 5  coverage.

 6         (f)  Each medical malpractice insurer must make a rate

 7  filing under this section, sworn to by at least two executive

 8  officers of the insurer, at least once each calendar year.

 9         (7)(8)(a)1.  No later than 60 days after the effective

10  date of medical malpractice legislation enacted during the

11  2003 Special Session D of the Florida Legislature, the office

12  shall calculate a presumed factor that reflects the impact

13  that the changes contained in such legislation will have on

14  rates for medical malpractice insurance and shall issue a

15  notice informing all insurers writing medical malpractice

16  coverage of such presumed factor. In determining the presumed

17  factor, the office shall use generally accepted actuarial

18  techniques and standards provided in this section in

19  determining the expected impact on losses, expenses, and

20  investment income of the insurer. To the extent that the

21  operation of a provision of medical malpractice legislation

22  enacted during the 2003 Special Session D of the Florida

23  Legislature is stayed pending a constitutional challenge, the

24  impact of that provision shall not be included in the

25  calculation of a presumed factor under this subparagraph.

26         2.  No later than 60 days after the office issues its

27  notice of the presumed rate change factor under subparagraph

28  1., each insurer writing medical malpractice coverage in this

29  state shall submit to the office a rate filing for medical

30  malpractice insurance, which will take effect no later than

31  January 1, 2004, and apply retroactively to policies issued or

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 1  renewed on or after the effective date of medical malpractice

 2  legislation enacted during the 2003 Special Session D of the

 3  Florida Legislature. Except as authorized under paragraph (b),

 4  the filing shall reflect an overall rate reduction at least as

 5  great as the presumed factor determined under subparagraph 1.

 6  With respect to policies issued on or after the effective date

 7  of such legislation and prior to the effective date of the

 8  rate filing required by this subsection, the office shall

 9  order the insurer to make a refund of the amount that was

10  charged in excess of the rate that is approved.

11         (b)  Any insurer or rating organization that contends

12  that the rate provided for in paragraph (a) is excessive,

13  inadequate, or unfairly discriminatory shall separately state

14  in its filing the rate it contends is appropriate and shall

15  state with specificity the factors or data that it contends

16  should be considered in order to produce such appropriate

17  rate. The insurer or rating organization shall be permitted to

18  use all of the generally accepted actuarial techniques

19  provided in this section in making any filing pursuant to this

20  subsection. The office shall review each such exception and

21  approve or disapprove it prior to use. It shall be the

22  insurer's burden to actuarially justify any deviations from

23  the rates required to be filed under paragraph (a). The

24  insurer making a filing under this paragraph shall include in

25  the filing the expected impact of medical malpractice

26  legislation enacted during the 2003 Special Session D of the

27  Florida Legislature on losses, expenses, and rates.

28         (c)  If any provision of medical malpractice

29  legislation enacted during the 2003 Special Session D of the

30  Florida Legislature is held invalid by a court of competent

31  jurisdiction, the office shall permit an adjustment of all

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 1  medical malpractice rates filed under this section to reflect

 2  the impact of such holding on such rates so as to ensure that

 3  the rates are not excessive, inadequate, or unfairly

 4  discriminatory.

 5         (d)  Rates approved on or before July 1, 2003, for

 6  medical malpractice insurance shall remain in effect until the

 7  effective date of a new rate filing approved under this

 8  subsection.

 9         (e)  The calculation and notice by the office of the

10  presumed factor pursuant to paragraph (a) is not an order or

11  rule that is subject to chapter 120. If the office enters into

12  a contract with an independent consultant to assist the office

13  in calculating the presumed factor, such contract shall not be

14  subject to the competitive solicitation requirements of s.

15  287.057.

16         Section 4.  Paragraph (c) of subsection (1) and

17  paragraph (c) of subsection (3) of section 627.0628, Florida

18  Statutes, are amended to read:

19         627.0628  Florida Commission on Hurricane Loss

20  Projection Methodology.--

21         (1)  LEGISLATIVE FINDINGS AND INTENT.--

22         (c)  It is the intent of the Legislature to create the

23  Florida Commission on Hurricane Loss Projection Methodology as

24  a panel of experts to provide the most actuarially

25  sophisticated guidelines and standards for projection of

26  hurricane losses possible, given the current state of

27  actuarial science. It is the further intent of the Legislature

28  that such standards and guidelines must be used by the State

29  Board of Administration in developing reimbursement premium

30  rates for the Florida Hurricane Catastrophe Fund, and, subject

31  to paragraph (3)(c), may be used by insurers in rate filings

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 1  under s. 627.062 unless the way in which such standards and

 2  guidelines were applied by the insurer was erroneous, as shown

 3  by a preponderance of the evidence.

 4         (3)  ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.--

 5         (c)  With respect to a rate filing under s. 627.062, an

 6  insurer may employ actuarial methods, principles, standards,

 7  models, or output ranges found by the commission to be

 8  accurate or reliable to determine hurricane loss factors for

 9  use in a rate filing under s. 627.062. Such, which findings

10  and factors are admissible and relevant in consideration of a

11  rate filing by the office or in any arbitration or

12  administrative or judicial review only if the office and the

13  consumer advocate appointed pursuant to s. 627.0613 have

14  access to all of the assumptions and factors that were used in

15  developing the actuarial methods, principles, standards,

16  models, or output ranges, and are not precluded from

17  disclosing such information in a rate proceeding.

18         Section 5.  Subsection (7) of section 627.0629, Florida

19  Statutes, is amended to read:

20         627.0629  Residential property insurance; rate

21  filings.--

22         (7)  Any rate filing that is based in whole or part on

23  data from a computer model may not exceed 15 25 percent unless

24  there is a public hearing.

25         Section 6.  Section 627.06291, Florida Statutes, is

26  created to read:

27         627.06291  Reports of hurricane loss data for the

28  public hurricane model.--Residential property insurers and

29  licensed rating and advisory organizations that compile loss

30  data concerning residential property insurance shall report

31  residential hurricane loss data and associated exposure data,

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 1  within such time and in such manner as specified by the

 2  office, to the office or to a type I center at a state

 3  university under contract with the office, for the purpose of

 4  developing, maintaining, and updating a public hurricane model

 5  for hurricane loss projections.

 6         Section 7.  Effective August 1, 2005, paragraphs (c),

 7  (d), and (g) of subsection (6) of section 627.351, Florida

 8  Statutes, are amended to read:

 9         627.351  Insurance risk apportionment plans.--

10         (6)  CITIZENS PROPERTY INSURANCE CORPORATION.--

11         (c)  The plan of operation of the corporation:

12         1.  Must provide for adoption of residential property

13  and casualty insurance policy forms and commercial residential

14  and nonresidential property insurance forms, which forms must

15  be approved by the office prior to use. The corporation shall

16  adopt the following policy forms:

17         a.  Standard personal lines policy forms that are

18  comprehensive multiperil policies providing full coverage of a

19  residential property equivalent to the coverage provided in

20  the private insurance market under an HO-3, HO-4, or HO-6

21  policy.

22         b.  Basic personal lines policy forms that are policies

23  similar to an HO-8 policy or a dwelling fire policy that

24  provide coverage meeting the requirements of the secondary

25  mortgage market, but which coverage is more limited than the

26  coverage under a standard policy.

27         c.  Commercial lines residential policy forms that are

28  generally similar to the basic perils of full coverage

29  obtainable for commercial residential structures in the

30  admitted voluntary market.

31  

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 1         d.  Personal lines and commercial lines residential

 2  property insurance forms that cover the peril of wind only.

 3  The forms are applicable only to residential properties

 4  located in areas eligible for coverage under the high-risk

 5  account referred to in sub-subparagraph (b)2.a.

 6         e.  Commercial lines nonresidential property insurance

 7  forms that cover the peril of wind only.  The forms are

 8  applicable only to nonresidential properties located in areas

 9  eligible for coverage under the high-risk account referred to

10  in sub-subparagraph (b)2.a.

11         2.a.  Must provide that the corporation adopt a program

12  in which the corporation and authorized insurers enter into

13  quota share primary insurance agreements for hurricane

14  coverage, as defined in s. 627.4025(2)(a), for eligible risks,

15  and adopt property insurance forms for eligible risks which

16  cover the peril of wind only. As used in this subsection, the

17  term:

18         (I)  "Quota share primary insurance" means an

19  arrangement in which the primary hurricane coverage of an

20  eligible risk is provided in specified percentages by the

21  corporation and an authorized insurer. The corporation and

22  authorized insurer are each solely responsible for a specified

23  percentage of hurricane coverage of an eligible risk as set

24  forth in a quota share primary insurance agreement between the

25  corporation and an authorized insurer and the insurance

26  contract. The responsibility of the corporation or authorized

27  insurer to pay its specified percentage of hurricane losses of

28  an eligible risk, as set forth in the quota share primary

29  insurance agreement, may not be altered by the inability of

30  the other party to the agreement to pay its specified

31  percentage of hurricane losses. Eligible risks that are

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 1  provided hurricane coverage through a quota share primary

 2  insurance arrangement must be provided policy forms that set

 3  forth the obligations of the corporation and authorized

 4  insurer under the arrangement, clearly specify the percentages

 5  of quota share primary insurance provided by the corporation

 6  and authorized insurer, and conspicuously and clearly state

 7  that neither the authorized insurer nor the corporation may be

 8  held responsible beyond its specified percentage of coverage

 9  of hurricane losses.

10         (II)  "Eligible risks" means personal lines residential

11  and commercial lines residential risks that meet the

12  underwriting criteria of the corporation and are located in

13  areas that were eligible for coverage by the Florida Windstorm

14  Underwriting Association on January 1, 2002.

15         b.  The corporation may enter into quota share primary

16  insurance agreements with authorized insurers at corporation

17  coverage levels of 90 percent and 50 percent.

18         c.  If the corporation determines that additional

19  coverage levels are necessary to maximize participation in

20  quota share primary insurance agreements by authorized

21  insurers, the corporation may establish additional coverage

22  levels. However, the corporation's quota share primary

23  insurance coverage level may not exceed 90 percent.

24         d.  Any quota share primary insurance agreement entered

25  into between an authorized insurer and the corporation must

26  provide for a uniform specified percentage of coverage of

27  hurricane losses, by county or territory as set forth by the

28  corporation board, for all eligible risks of the authorized

29  insurer covered under the quota share primary insurance

30  agreement.

31  

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 1         e.  Any quota share primary insurance agreement entered

 2  into between an authorized insurer and the corporation is

 3  subject to review and approval by the office. However, such

 4  agreement shall be authorized only as to insurance contracts

 5  entered into between an authorized insurer and an insured who

 6  is already insured by the corporation for wind coverage.

 7         f.  For all eligible risks covered under quota share

 8  primary insurance agreements, the exposure and coverage levels

 9  for both the corporation and authorized insurers shall be

10  reported by the corporation to the Florida Hurricane

11  Catastrophe Fund. For all policies of eligible risks covered

12  under quota share primary insurance agreements, the

13  corporation and the authorized insurer shall maintain complete

14  and accurate records for the purpose of exposure and loss

15  reimbursement audits as required by Florida Hurricane

16  Catastrophe Fund rules. The corporation and the authorized

17  insurer shall each maintain duplicate copies of policy

18  declaration pages and supporting claims documents.

19         g.  The corporation board shall establish in its plan

20  of operation standards for quota share agreements which ensure

21  that there is no discriminatory application among insurers as

22  to the terms of quota share agreements, pricing of quota share

23  agreements, incentive provisions if any, and consideration

24  paid for servicing policies or adjusting claims.

25         h.  The quota share primary insurance agreement between

26  the corporation and an authorized insurer must set forth the

27  specific terms under which coverage is provided, including,

28  but not limited to, the sale and servicing of policies issued

29  under the agreement by the insurance agent of the authorized

30  insurer producing the business, the reporting of information

31  concerning eligible risks, the payment of premium to the

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 1  corporation, and arrangements for the adjustment and payment

 2  of hurricane claims incurred on eligible risks by the claims

 3  adjuster and personnel of the authorized insurer. Entering

 4  into a quota sharing insurance agreement between the

 5  corporation and an authorized insurer shall be voluntary and

 6  at the discretion of the authorized insurer.

 7         3.  May provide that the corporation may employ or

 8  otherwise contract with individuals or other entities to

 9  provide administrative or professional services that may be

10  appropriate to effectuate the plan. The corporation shall have

11  the power to borrow funds, by issuing bonds or by incurring

12  other indebtedness, and shall have other powers reasonably

13  necessary to effectuate the requirements of this subsection.

14  The corporation may, but is not required to, seek judicial

15  validation of its bonds or other indebtedness under chapter

16  75. The corporation may issue bonds or incur other

17  indebtedness, or have bonds issued on its behalf by a unit of

18  local government pursuant to subparagraph (g)2., in the

19  absence of a hurricane or other weather-related event, upon a

20  determination by the corporation, subject to approval by the

21  office, that such action would enable it to efficiently meet

22  the financial obligations of the corporation and that such

23  financings are reasonably necessary to effectuate the

24  requirements of this subsection. The corporation is authorized

25  to take all actions needed to facilitate tax-free status for

26  any such bonds or indebtedness, including formation of trusts

27  or other affiliated entities. The corporation shall have the

28  authority to pledge assessments, projected recoveries from the

29  Florida Hurricane Catastrophe Fund, other reinsurance

30  recoverables, market equalization and other surcharges, and

31  other funds available to the corporation as security for bonds

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 1  or other indebtedness. In recognition of s. 10, Art. I of the

 2  State Constitution, prohibiting the impairment of obligations

 3  of contracts, it is the intent of the Legislature that no

 4  action be taken whose purpose is to impair any bond indenture

 5  or financing agreement or any revenue source committed by

 6  contract to such bond or other indebtedness.

 7         4.a.  Must require that the corporation operate subject

 8  to the supervision and approval of a board of governors

 9  consisting of 8 7 individuals who are residents of this state,

10  from different geographical areas of this state, appointed by

11  the Chief Financial Officer. The Governor, the Chief Financial

12  Officer, the President of the Senate, and the Speaker of the

13  House of Representatives shall each appoint two members of the

14  board, effective August 1, 2005. At least one of the two

15  members appointed by each appointing officer must have

16  demonstrated expertise in insurance. The Chief Financial

17  Officer shall designate one of the appointees as chair. All

18  board members serve at the pleasure of the appointing officer

19  Chief Financial Officer. All board members, including the

20  chair, must be appointed to serve for 3-year terms beginning

21  annually on a date designated by the plan. Any board vacancy

22  shall be filled for the unexpired term by the appointing

23  officer Chief Financial Officer. The Chief Financial Officer

24  shall appoint a technical advisory group to provide

25  information and advice to the board of governors in connection

26  with the board's duties under this subsection. The executive

27  director and senior managers of the corporation shall be

28  engaged by the board, as recommended by the Chief Financial

29  Officer and serve at the pleasure of the board Chief Financial

30  Officer. The executive director is responsible for employing

31  other staff as the corporation may require, subject to review

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 1  and concurrence by the board and office of the Chief Financial

 2  Officer.

 3         b.  A Market Accountability Advisory Committee shall be

 4  created to assist the corporation in developing awareness of

 5  its customer and agent service levels in relationship to the

 6  voluntary market insurers that are writing similar coverage.

 7  The members of the advisory committee shall consist of the

 8  following 10 persons, one of whom must be elected chair by the

 9  members of the committee: one representative appointed by each

10  of the three largest property and casualty insurance agents

11  associations in this state; one representative appointed by

12  each of the insurers having the three highest voluntary market

13  share of residential property insurance business in the state;

14  one representative from the Office of Insurance Regulation;

15  one consumer appointed by the board who is insured by the

16  corporation at the time of appointment to the committee; one

17  representative appointed by the Florida Association of

18  Realtors; and one representative appointed by the Florida

19  Bankers Association. All members shall be appointed to 3-year

20  terms and may serve consecutive terms. The Market

21  Accountability Advisory Committee shall report to the

22  corporation at each board meeting on insurance market issues,

23  which may include service levels, policy issuance, claims

24  processing and general responsiveness to policyholders,

25  applicants, and agents, and matters relating to depopulation.

26         5.  Must provide a procedure for determining the

27  eligibility of a risk for coverage, as follows:

28         a.  Subject to the provisions of s. 627.3517, with

29  respect to personal lines residential risks, if the risk is

30  offered coverage from an authorized insurer at the insurer's

31  approved rate under either a standard policy including wind

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 1  coverage or, if consistent with the insurer's underwriting

 2  rules as filed with the office, a basic policy including wind

 3  coverage, the risk is not eligible for any policy issued by

 4  the corporation. If the risk is not able to obtain any such

 5  offer, the risk is eligible for either a standard policy

 6  including wind coverage or a basic policy including wind

 7  coverage issued by the corporation; however, if the risk could

 8  not be insured under a standard policy including wind coverage

 9  regardless of market conditions, the risk shall be eligible

10  for a basic policy including wind coverage unless rejected

11  under subparagraph 8. The corporation shall determine the type

12  of policy to be provided on the basis of objective standards

13  specified in the underwriting manual and based on generally

14  accepted underwriting practices.

15         (I)  If the risk accepts an offer of coverage through

16  the market assistance plan or an offer of coverage through a

17  mechanism established by the corporation before a policy is

18  issued to the risk by the corporation or during the first 30

19  days of coverage by the corporation, and the producing agent

20  who submitted the application to the plan or to the

21  corporation is not currently appointed by the insurer, the

22  insurer shall:

23         (A)  Pay to the producing agent of record of the

24  policy, for the first year, an amount that is the greater of

25  the insurer's usual and customary commission for the type of

26  policy written or a fee equal to the usual and customary

27  commission of the corporation; or

28         (B)  Offer to allow the producing agent of record of

29  the policy to continue servicing the policy for a period of

30  not less than 1 year and offer to pay the agent the greater of

31  

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 1  the insurer's or the corporation's usual and customary

 2  commission for the type of policy written.

 3  

 4  If the producing agent is unwilling or unable to accept

 5  appointment, the new insurer shall pay the agent in accordance

 6  with sub-sub-sub-subparagraph (A).

 7         (II)  When the corporation enters into a contractual

 8  agreement for a take-out plan, the producing agent of record

 9  of the corporation policy is entitled to retain any unearned

10  commission on the policy, and the insurer shall:

11         (A)  Pay to the producing agent of record of the

12  corporation policy, for the first year, an amount that is the

13  greater of the insurer's usual and customary commission for

14  the type of policy written or a fee equal to the usual and

15  customary commission of the corporation; or

16         (B)  Offer to allow the producing agent of record of

17  the corporation policy to continue servicing the policy for a

18  period of not less than 1 year and offer to pay the agent the

19  greater of the insurer's or the corporation's usual and

20  customary commission for the type of policy written.

21  

22  If the producing agent is unwilling or unable to accept

23  appointment, the new insurer shall pay the agent in accordance

24  with sub-sub-sub-subparagraph (A).

25         b.  With respect to commercial lines residential risks,

26  if the risk is offered coverage under a policy including wind

27  coverage from an authorized insurer at its approved rate, the

28  risk is not eligible for any policy issued by the corporation.

29  If the risk is not able to obtain any such offer, the risk is

30  eligible for a policy including wind coverage issued by the

31  corporation.

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 1         (I)  If the risk accepts an offer of coverage through

 2  the market assistance plan or an offer of coverage through a

 3  mechanism established by the corporation before a policy is

 4  issued to the risk by the corporation or during the first 30

 5  days of coverage by the corporation, and the producing agent

 6  who submitted the application to the plan or the corporation

 7  is not currently appointed by the insurer, the insurer shall:

 8         (A)  Pay to the producing agent of record of the

 9  policy, for the first year, an amount that is the greater of

10  the insurer's usual and customary commission for the type of

11  policy written or a fee equal to the usual and customary

12  commission of the corporation; or

13         (B)  Offer to allow the producing agent of record of

14  the policy to continue servicing the policy for a period of

15  not less than 1 year and offer to pay the agent the greater of

16  the insurer's or the corporation's usual and customary

17  commission for the type of policy written.

18  

19  If the producing agent is unwilling or unable to accept

20  appointment, the new insurer shall pay the agent in accordance

21  with sub-sub-sub-subparagraph (A).

22         (II)  When the corporation enters into a contractual

23  agreement for a take-out plan, the producing agent of record

24  of the corporation policy is entitled to retain any unearned

25  commission on the policy, and the insurer shall:

26         (A)  Pay to the producing agent of record of the

27  corporation policy, for the first year, an amount that is the

28  greater of the insurer's usual and customary commission for

29  the type of policy written or a fee equal to the usual and

30  customary commission of the corporation; or

31  

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 1         (B)  Offer to allow the producing agent of record of

 2  the corporation policy to continue servicing the policy for a

 3  period of not less than 1 year and offer to pay the agent the

 4  greater of the insurer's or the corporation's usual and

 5  customary commission for the type of policy written.

 6  

 7  If the producing agent is unwilling or unable to accept

 8  appointment, the new insurer shall pay the agent in accordance

 9  with sub-sub-sub-subparagraph (A).

10         6.  Must include rules for classifications of risks and

11  rates therefor.

12         7.  Must provide that if premium and investment income

13  for an account attributable to a particular calendar year are

14  in excess of projected losses and expenses for the account

15  attributable to that year, such excess shall be held in

16  surplus in the account. Such surplus shall be available to

17  defray deficits in that account as to future years and shall

18  be used for that purpose prior to assessing assessable

19  insurers and assessable insureds as to any calendar year.

20         8.  Must provide objective criteria and procedures to

21  be uniformly applied for all applicants in determining whether

22  an individual risk is so hazardous as to be uninsurable. In

23  making this determination and in establishing the criteria and

24  procedures, the following shall be considered:

25         a.  Whether the likelihood of a loss for the individual

26  risk is substantially higher than for other risks of the same

27  class; and

28         b.  Whether the uncertainty associated with the

29  individual risk is such that an appropriate premium cannot be

30  determined.

31  

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 1  The acceptance or rejection of a risk by the corporation shall

 2  be construed as the private placement of insurance, and the

 3  provisions of chapter 120 shall not apply.

 4         9.  Must provide that the corporation shall make its

 5  best efforts to procure catastrophe reinsurance at reasonable

 6  rates, as determined by the board of governors.

 7         10.  Must provide that in the event of regular deficit

 8  assessments under sub-subparagraph (b)3.a. or sub-subparagraph

 9  (b)3.b., in the personal lines account, the commercial lines

10  residential account, or the high-risk account, the corporation

11  shall levy upon corporation policyholders in its next rate

12  filing, or by a separate rate filing solely for this purpose,

13  a market equalization surcharge arising from a regular

14  assessment in such account in a percentage equal to the total

15  amount of such regular assessments divided by the aggregate

16  statewide direct written premium for subject lines of business

17  for the prior calendar year. Market equalization surcharges

18  under this subparagraph are not considered premium and are not

19  subject to commissions, fees, or premium taxes; however,

20  failure to pay a market equalization surcharge shall be

21  treated as failure to pay premium.

22         11.  The policies issued by the corporation must

23  provide that, if the corporation or the market assistance plan

24  obtains an offer from an authorized insurer to cover the risk

25  at its approved rates, the risk is no longer eligible for

26  renewal through the corporation.

27         12.  Corporation policies and applications must include

28  a notice that the corporation policy could, under this

29  section, be replaced with a policy issued by an authorized

30  insurer that does not provide coverage identical to the

31  coverage provided by the corporation. The notice shall also

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 1  specify that acceptance of corporation coverage creates a

 2  conclusive presumption that the applicant or policyholder is

 3  aware of this potential.

 4         13.  May establish, subject to approval by the office,

 5  different eligibility requirements and operational procedures

 6  for any line or type of coverage for any specified county or

 7  area if the board determines that such changes to the

 8  eligibility requirements and operational procedures are

 9  justified due to the voluntary market being sufficiently

10  stable and competitive in such area or for such line or type

11  of coverage and that consumers who, in good faith, are unable

12  to obtain insurance through the voluntary market through

13  ordinary methods would continue to have access to coverage

14  from the corporation. When coverage is sought in connection

15  with a real property transfer, such requirements and

16  procedures shall not provide for an effective date of coverage

17  later than the date of the closing of the transfer as

18  established by the transferor, the transferee, and, if

19  applicable, the lender.

20         14.  Must provide that, with respect to the high-risk

21  account, any assessable insurer with a surplus as to

22  policyholders of $25 million or less writing 25 percent or

23  more of its total countrywide property insurance premiums in

24  this state may petition the office, within the first 90 days

25  of each calendar year, to qualify as a limited apportionment

26  company. In no event shall a limited apportionment company be

27  required to participate in the portion of any assessment,

28  within the high-risk account, pursuant to sub-subparagraph

29  (b)3.a. or sub-subparagraph (b)3.b. in the aggregate which

30  exceeds $50 million after payment of available high-risk

31  account funds in any calendar year. However, a limited

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 1  apportionment company shall collect from its policyholders any

 2  emergency assessment imposed under sub-subparagraph (b)3.d.

 3  The plan shall provide that, if the office determines that any

 4  regular assessment will result in an impairment of the surplus

 5  of a limited apportionment company, the office may direct that

 6  all or part of such assessment be deferred as provided in

 7  subparagraph (g)4. However, there shall be no limitation or

 8  deferment of an emergency assessment to be collected from

 9  policyholders under sub-subparagraph (b)3.d.

10         15.  Must provide that the corporation appoint as its

11  licensed agents only those agents who also hold an appointment

12  as defined in s. 626.015(3) with an insurer who at the time of

13  the agent's initial appointment by the corporation is

14  authorized to write and is actually writing personal lines

15  residential property coverage, commercial residential property

16  coverage, or commercial nonresidential property coverage

17  within the state.

18         (d)1.  It is the intent of the Legislature that the

19  rates for coverage provided by the corporation be actuarially

20  sound and not competitive with approved rates charged in the

21  admitted voluntary market, so that the corporation functions

22  as a residual market mechanism to provide insurance only when

23  the insurance cannot be procured in the voluntary market.

24  Rates shall include an appropriate catastrophe loading factor

25  that reflects the actual catastrophic exposure of the

26  corporation.

27         2.  For each county, the average rates of the

28  corporation for each line of business for personal lines

29  residential policies excluding rates for wind-only policies

30  shall be no lower than the average rates charged by the

31  insurer that had the highest average rate in that county among

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 1  the 20 insurers with the greatest total direct written premium

 2  in the state for that line of business in the preceding year,

 3  except that with respect to mobile home coverages, the average

 4  rates of the corporation shall be no lower than the average

 5  rates charged by the insurer that had the highest average rate

 6  in that county among the 5 insurers with the greatest total

 7  written premium for mobile home owner's policies in the state

 8  in the preceding year.

 9         3.  Rates for personal lines residential wind-only

10  policies must be actuarially sound and not competitive with

11  approved rates charged by authorized insurers. However, for

12  personal lines residential wind-only policies issued or

13  renewed between July 1, 2002, and June 30, 2003, the maximum

14  premium increase must be no greater than 10 percent of the

15  Florida Windstorm Underwriting Association premium for that

16  policy in effect on June 30, 2002, as adjusted for coverage

17  changes and seasonal occupancy surcharges. For personal lines

18  residential wind-only policies issued or renewed between July

19  1, 2003, and June 30, 2004, the corporation shall use its

20  existing filed and approved wind-only rating and

21  classification plans, provided, however, that the maximum

22  premium increase must be no greater than 20 percent of the

23  premium for that policy in effect on June 30, 2003, as

24  adjusted for coverage changes and seasonal occupancy

25  surcharges. Corporation rate manuals shall include a rate

26  surcharge for seasonal occupancy. To ensure that personal

27  lines residential wind-only rates effective on or after July

28  1, 2004, are not competitive with approved rates charged by

29  authorized insurers, the corporation, in conjunction with the

30  office, shall develop a wind-only ratemaking methodology,

31  which methodology shall be contained in each a rate filing

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 1  made by the corporation with the office by January 1, 2004. If

 2  the office thereafter determines that the wind-only rates or

 3  rating factors filed by the corporation fail to comply with

 4  the wind-only ratemaking methodology provided for in this

 5  subsection, it shall so notify the corporation and require the

 6  corporation to amend its rates or rating factors to come into

 7  compliance within 90 days of notice from the office. The

 8  office shall report to the Speaker of the House of

 9  Representatives and the President of the Senate on the

10  provisions of the wind-only ratemaking methodology by January

11  31, 2004.

12         4.  The provisions of subparagraph 2. do not apply to

13  coverage provided by the corporation in any county for which

14  the office determines that a reasonable degree of competition

15  does not exist for personal lines residential policies. The

16  provisions of subparagraph 3. do not apply to coverage

17  provided by the corporation in any county for which the office

18  determines that a reasonable degree of competition does not

19  exist for personal lines residential policies in the area of

20  that county which is eligible for wind-only coverage. In such

21  counties, the rates for personal lines residential coverage

22  shall be actuarially sound and not excessive, inadequate, or

23  unfairly discriminatory and are subject to the other

24  provisions of this paragraph and s. 627.062. The commission

25  may adopt rules establishing the criteria for determining

26  whether a reasonable degree of competition exists for personal

27  lines residential policies. Beginning October 1, 2005, and

28  each 6 months thereafter, the office shall determine and

29  identify those counties for which a reasonable degree of

30  competition does not exist for purposes of subparagraphs 2.

31  and 3., respectively.

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 1         5.  Notwithstanding subparagraphs 2., 3., and 4., for

 2  personal lines residential policies and personal lines

 3  residential wind-only policies issued or renewed between July

 4  1, 2005, and June 30, 2006, the maximum premium increase must

 5  be not greater than 5 percent of the premium for that policy

 6  in effect on June 30, 2005, as adjusted for coverage changes

 7  and seasonal-occupancy surcharges.

 8         6.4.  Rates for commercial lines coverage shall not be

 9  subject to the requirements of subparagraph 2., but shall be

10  subject to all other requirements of this paragraph and s.

11  627.062.

12         7.5.  Nothing in this paragraph shall require or allow

13  the corporation to adopt a rate that is inadequate under s.

14  627.062.

15         8.6.  The corporation shall certify to the office at

16  least twice annually that its personal lines rates comply with

17  the requirements of this paragraph subparagraphs 1. and 2. If

18  any adjustment in the rates or rating factors of the

19  corporation is necessary to ensure such compliance, the

20  corporation shall make and implement such adjustments and file

21  its revised rates and rating factors with the office. If the

22  office thereafter determines that the revised rates and rating

23  factors fail to comply with the provisions of this paragraph

24  subparagraphs 1. and 2., it shall notify the corporation and

25  require the corporation to amend its rates or rating factors

26  in conjunction with its next rate filing. The office must

27  notify the corporation by electronic means of any rate filing

28  it approves for any insurer among the insurers referred to in

29  subparagraph 2.

30         9.7.  In addition to the rates otherwise determined

31  pursuant to this paragraph, the corporation shall impose and

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 1  collect an amount equal to the premium tax provided for in s.

 2  624.509 to augment the financial resources of the corporation.

 3         10.8.a.  To assist the corporation in developing

 4  additional ratemaking methods to assure compliance with this

 5  paragraph subparagraphs 1. and 4., the corporation shall

 6  appoint a rate methodology panel consisting of one person

 7  recommended by the Florida Association of Insurance Agents,

 8  one person recommended by the Professional Insurance Agents of

 9  Florida, one person recommended by the Florida Association of

10  Insurance and Financial Advisors, one person recommended by

11  the insurer with the highest voluntary market share of

12  residential property insurance business in the state, one

13  person recommended by the insurer with the second-highest

14  voluntary market share of residential property insurance

15  business in the state, one person recommended by an insurer

16  writing commercial residential property insurance in this

17  state, one person recommended by the Office of Insurance

18  Regulation, and one board member designated by the board

19  chairman, who shall serve as chairman of the panel.

20         b.  By January 1, 2004, the rate methodology panel

21  shall provide a report to the corporation of its findings and

22  recommendations for the use of additional ratemaking methods

23  and procedures, including the use of a rate equalization

24  surcharge in an amount sufficient to assure that the total

25  cost of coverage for policyholders or applicants to the

26  corporation is sufficient to comply with subparagraph 1.

27         c.  Within 30 days after such report, the corporation

28  shall present to the President of the Senate, the Speaker of

29  the House of Representatives, the minority party leaders of

30  each house of the Legislature, and the chairs of the standing

31  committees of each house of the Legislature having

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 1  jurisdiction of insurance issues, a plan for implementing the

 2  additional ratemaking methods and an outline of any

 3  legislation needed to facilitate use of the new methods.

 4         d.  The plan must include a provision that producer

 5  commissions paid by the corporation shall not be calculated in

 6  such a manner as to include any rate equalization surcharge.

 7  However, without regard to the plan to be developed or its

 8  implementation, producer commissions paid by the corporation

 9  for each account, other than the quota share primary program,

10  shall remain fixed as to percentage, effective rate,

11  calculation, and payment method until January 1, 2004.

12         11.9.  By January 1, 2004, The corporation shall

13  develop a notice to policyholders or applicants that the rates

14  of Citizens Property Insurance Corporation are intended to be

15  higher than the rates of any admitted carrier and providing

16  other information the corporation deems necessary to assist

17  consumers in finding other voluntary admitted insurers willing

18  to insure their property.

19         (g)1.  The corporation shall certify to the office its

20  needs for annual assessments as to a particular calendar year,

21  and for any interim assessments that it deems to be necessary

22  to sustain operations as to a particular year pending the

23  receipt of annual assessments. Upon verification, the office

24  shall approve such certification, and the corporation shall

25  levy such annual or interim assessments. Such assessments

26  shall be prorated as provided in paragraph (b). The

27  corporation shall take all reasonable and prudent steps

28  necessary to collect the amount of assessment due from each

29  assessable insurer, including, if prudent, filing suit to

30  collect such assessment. If the corporation is unable to

31  collect an assessment from any assessable insurer, the

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 1  uncollected assessments shall be levied as an additional

 2  assessment against the assessable insurers and any assessable

 3  insurer required to pay an additional assessment as a result

 4  of such failure to pay shall have a cause of action against

 5  such nonpaying assessable insurer. Assessments shall be

 6  included as an appropriate factor in the making of rates. The

 7  failure of a surplus lines agent to collect and remit any

 8  regular or emergency assessment levied by the corporation is

 9  considered to be a violation of s. 626.936 and subjects the

10  surplus lines agent to the penalties provided in that section.

11         2.  The governing body of any unit of local government,

12  any residents of which are insured by the corporation, may

13  issue bonds as defined in s. 125.013 or s. 166.101 from time

14  to time to fund an assistance program, in conjunction with the

15  corporation, for the purpose of defraying deficits of the

16  corporation. In order to avoid needless and indiscriminate

17  proliferation, duplication, and fragmentation of such

18  assistance programs, any unit of local government, any

19  residents of which are insured by the corporation, may provide

20  for the payment of losses, regardless of whether or not the

21  losses occurred within or outside of the territorial

22  jurisdiction of the local government. Revenue bonds under this

23  subparagraph may not be issued until validated pursuant to

24  chapter 75, unless a state of emergency is declared by

25  executive order or proclamation of the Governor pursuant to s.

26  252.36 making such findings as are necessary to determine that

27  it is in the best interests of, and necessary for, the

28  protection of the public health, safety, and general welfare

29  of residents of this state and declaring it an essential

30  public purpose to permit certain municipalities or counties to

31  issue such bonds as will permit relief to claimants and

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 1  policyholders of the corporation. Any such unit of local

 2  government may enter into such contracts with the corporation

 3  and with any other entity created pursuant to this subsection

 4  as are necessary to carry out this paragraph. Any bonds issued

 5  under this subparagraph shall be payable from and secured by

 6  moneys received by the corporation from emergency assessments

 7  under sub-subparagraph (b)3.d., and assigned and pledged to or

 8  on behalf of the unit of local government for the benefit of

 9  the holders of such bonds.  The funds, credit, property, and

10  taxing power of the state or of the unit of local government

11  shall not be pledged for the payment of such bonds. If any of

12  the bonds remain unsold 60 days after issuance, the office

13  shall require all insurers subject to assessment to purchase

14  the bonds, which shall be treated as admitted assets; each

15  insurer shall be required to purchase that percentage of the

16  unsold portion of the bond issue that equals the insurer's

17  relative share of assessment liability under this subsection.

18  An insurer shall not be required to purchase the bonds to the

19  extent that the office determines that the purchase would

20  endanger or impair the solvency of the insurer.

21         3.a.  The corporation shall adopt one or more programs

22  subject to approval by the office for the reduction of both

23  new and renewal writings in the corporation. The corporation

24  may consider any prudent and not unfairly discriminatory

25  approach to reducing corporation writings, and may adopt a

26  credit against assessment liability or other liability that

27  provides an incentive for insurers to take risks out of the

28  corporation and to keep risks out of the corporation by

29  maintaining or increasing voluntary writings in counties or

30  areas in which corporation risks are highly concentrated and a

31  program to provide a formula under which an insurer

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 1  voluntarily taking risks out of the corporation by maintaining

 2  or increasing voluntary writings will be relieved wholly or

 3  partially from assessments under sub-subparagraphs (b)3.a. and

 4  b. When the corporation enters into a contractual agreement

 5  for a take-out plan, the producing agent of record of the

 6  corporation policy is entitled to retain any unearned

 7  commission on such policy, and the insurer shall either:

 8         (I)  Pay to the producing agent of record of the

 9  policy, for the first year, an amount which is the greater of

10  the insurer's usual and customary commission for the type of

11  policy written or a policy fee equal to the usual and

12  customary commission of the corporation; or

13         (II)  Offer to allow the producing agent of record of

14  the policy to continue servicing the policy for a period of

15  not less than 1 year and offer to pay the agent the insurer's

16  usual and customary commission for the type of policy written.

17  If the producing agent is unwilling or unable to accept

18  appointment by the new insurer, the new insurer shall pay the

19  agent in accordance with sub-sub-subparagraph (I).

20         b.  Any credit or exemption from regular assessments

21  adopted under this subparagraph shall last no longer than the

22  3 years following the cancellation or expiration of the policy

23  by the corporation. With the approval of the office, the board

24  may extend such credits for an additional year if the insurer

25  guarantees an additional year of renewability for all policies

26  removed from the corporation, or for 2 additional years if the

27  insurer guarantees 2 additional years of renewability for all

28  policies so removed.

29         c.  There shall be no credit, limitation, exemption, or

30  deferment from emergency assessments to be collected from

31  policyholders pursuant to sub-subparagraph (b)3.d.

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 1         4.  The plan shall provide for the deferment, in whole

 2  or in part, of the assessment of an assessable insurer, other

 3  than an emergency assessment collected from policyholders

 4  pursuant to sub-subparagraph (b)3.d., if the office finds that

 5  payment of the assessment would endanger or impair the

 6  solvency of the insurer. In the event an assessment against an

 7  assessable insurer is deferred in whole or in part, the amount

 8  by which such assessment is deferred may be assessed against

 9  the other assessable insurers in a manner consistent with the

10  basis for assessments set forth in paragraph (b).

11         Section 8.  Section 627.40951, Florida Statutes, is

12  created to read:

13         627.40951  Standard personal lines residential

14  insurance policy.--

15         (1)  The Legislature finds that many consumers who

16  filed property loss claims as a result of the hurricanes that

17  struck this state in 2004 were inadequately insured due to the

18  difficulty consumers encounter in trying to understand the

19  complex nature of property insurance policies. The purpose and

20  intent of this section is to have property and casualty

21  insurers offer standard personal lines residential property

22  insurance policies and standard checklists of policy contents,

23  in accordance with s. 627.4143, to consumers and to ensure

24  that these policies and checklists are written in a simple

25  format with easily readable language that will enable most

26  consumers to understand the principal benefits and coverage

27  provided in the policy; the principal exclusions and

28  limitations or reductions contained in the policy, including,

29  but not limited to, deductibles, coinsurance, and any other

30  limitations or reductions; and any additional coverage

31  

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 1  provided through any rider or endorsement that accompanies the

 2  policy and renewal or cancellation provisions.

 3         (2)  The Chief Financial Officer shall appoint an

 4  advisory committee composed of two representatives of insurers

 5  currently selling personal lines residential property

 6  insurance coverage, two representatives of property and

 7  casualty agents, two representatives of consumers, two

 8  representatives of the Commissioner of Insurance Regulation,

 9  and the Insurance Consumer Advocate or her or his designee.

10  The Chief Financial Officer or her or his designee shall serve

11  as chair of the committee. The committee shall develop policy

12  language for coverage that represents general industry

13  standards in the market for comprehensive coverage under

14  personal lines residential insurance policies and shall

15  develop a checklist to be used with each type of personal

16  lines residential property insurance policy. The committee

17  shall review policies and related forms written by Insurance

18  Services Office, Inc. The committee shall file a report

19  containing its recommendations to the President of the Senate

20  and the Speaker of the House of Representatives by January 15,

21  2006. No insurer shall be required to offer the standard

22  policy unless required by further act of the Legislature.

23         Section 9.  Subsection (1) of section 627.411, Florida

24  Statutes, is amended to read:

25         627.411  Grounds for disapproval.--

26         (1)  The office shall disapprove any form filed under

27  s. 627.410, or withdraw any previous approval thereof, only if

28  the form:

29         (a)  Is in any respect in violation of, or does not

30  comply with, this code.

31  

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 1         (b)  Contains or incorporates by reference, where such

 2  incorporation is otherwise permissible, any inconsistent,

 3  ambiguous, or misleading clauses, or exceptions and conditions

 4  which deceptively affect the risk purported to be assumed in

 5  the general coverage of the contract.

 6         (c)  Has any title, heading, or other indication of its

 7  provisions which is misleading.

 8         (d)  Is printed or otherwise reproduced in such manner

 9  as to render any material provision of the form substantially

10  illegible.

11         (e)  Contains provisions that are unfair or inequitable

12  or contrary to the public policy of this state or that

13  encourage misrepresentation.

14         (f)(e)  Is for health insurance, and:

15         1.  Provides benefits that are unreasonable in relation

16  to the premium charged; or

17         2.  Contains provisions that are unfair or inequitable

18  or contrary to the public policy of this state or that

19  encourage misrepresentation;

20         2.3.  Contains provisions that apply rating practices

21  that result in unfair discrimination pursuant to s.

22  626.9541(1)(g)2.

23         (g)(f)  Excludes coverage for human immunodeficiency

24  virus infection or acquired immune deficiency syndrome or

25  contains limitations in the benefits payable, or in the terms

26  or conditions of such contract, for human immunodeficiency

27  virus infection or acquired immune deficiency syndrome which

28  are different than those which apply to any other sickness or

29  medical condition.

30         Section 10.  Paragraph (d) is added to subsection (2)

31  of section 627.4133, Florida Statutes, to read:

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 1         627.4133  Notice of cancellation, nonrenewal, or

 2  renewal premium.--

 3         (2)  With respect to any personal lines or commercial

 4  residential property insurance policy, including, but not

 5  limited to, any homeowner's, mobile home owner's, farmowner's,

 6  condominium association, condominium unit owner's, apartment

 7  building, or other policy covering a residential structure or

 8  its contents:

 9         (d)1.  Upon a declaration of an emergency pursuant to

10  s. 252.36 and the filing of an order by the Commissioner of

11  Insurance Regulation, an insurer may not cancel or nonrenew a

12  personal residential or commercial residential property

13  insurance policy covering a dwelling or residential property

14  located in this state which has been damaged as a result of a

15  hurricane or wind loss that is the subject of the declaration

16  of emergency for a period of 60 days after the dwelling or

17  residential property has been repaired. A structure is deemed

18  to be repaired when substantially completed and restored to

19  the extent that it is insurable by another authorized insurer

20  that is writing policies in this state.

21         2.  However, an insurer or agent may cancel or nonrenew

22  such a policy prior to the repair of the dwelling or

23  residential property:

24         a.  Upon 10 days' notice for nonpayment of premium; or

25         b.  Upon 45 days' notice:

26         (I)  For a material misstatement or fraud related to

27  the claim;

28         (II)  If the insurer can demonstrate that the insured

29  has unreasonably caused a delay in the repair of the dwelling;

30  or

31  

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 1         (III)  If the insurer has paid policy limits, provided

 2  the insurer has offered the insured a builder's risk or

 3  similar policy that would cover the property until completion

 4  of repairs.

 5         3.  If the insurer elects to nonrenew a policy covering

 6  a property that has been damaged, the insurer shall provide at

 7  least 60 days' notice to the insured that the insurer intends

 8  to nonrenew the policy 60 days after the dwelling or

 9  residential property has been repaired. This paragraph does

10  not prevent the insurer from canceling or nonrenewing the

11  policy 60 days after the repairs are complete for the same

12  reasons the insurer would otherwise have canceled or

13  nonrenewed the policy but for the limitations of subparagraph

14  1. The Financial Services Commission may adopt rules, and the

15  Commissioner of Insurance Regulation may issue orders,

16  necessary to administer this paragraph.

17         4.  This paragraph also applies to personal residential

18  and commercial residential policies covering property that was

19  damaged as the result of Tropical Storm Bonnie, Hurricane

20  Charley, Hurricane Frances, Hurricane Ivan, or Hurricane

21  Jeanne.

22         Section 11.  Effective January 1, 2006, section

23  627.4143, Florida Statutes, is amended to read:

24         627.4143  Outline of coverage.--

25         (1)  No private passenger automobile or basic

26  homeowner's policy shall be delivered or issued for delivery

27  in this state unless an appropriate outline of coverage has

28  been delivered prior to issuance of the policy or accompanies

29  the policy when issued.

30  

31  

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 1         (2)  The outline of coverage for a private passenger

 2  motor vehicle insurance policy shall contain all of the

 3  following:

 4         (a)  A brief description of the principal benefits and

 5  coverage provided in the policy, broken down by each class or

 6  type of coverage provided under the policy for which a premium

 7  is charged, and itemization of the applicable premium.

 8         (b)  A summary statement of the principal exclusions

 9  and limitations or reductions contained in the policy by class

10  or type, including, but not limited to, deductibles,

11  coinsurance, and any other limitations or reductions.

12         (c)  A summary statement of any renewal or cancellation

13  provisions.

14         (d)  A description of the credit or surcharge plan that

15  is being applied.  The description may display numerical or

16  alphabetical codes on the declarations page or premium notice

17  to enable the insured to determine the reason or reasons why

18  her or his policy is being surcharged or is receiving a

19  credit.

20         (e)  A list of any additional coverage provided through

21  any rider or endorsement which accompanies the policy.  The

22  list shall contain a descriptive reference to each additional

23  coverage, rather than solely a reference to a form or code

24  number.

25         (f)  For a private passenger motor vehicle insurance

26  policy, The extent of coverage provided to the insured in the

27  event of collision damage to a rental vehicle rented by the

28  insured. The proof-of-insurance card required by s. 316.646

29  must also specify whether rental car coverage is provided, and

30  may refer to the outline of coverage as to the details or

31  extent of coverage.

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 1         (3)  A basic homeowners', mobile homeowners', dwelling,

 2  or condominium unit owners' policy may not be delivered or

 3  issued for delivery in this state unless a comprehensive

 4  checklist of coverage on a form adopted by the commission and

 5  an appropriate outline of coverage have been delivered prior

 6  to issuance of the policy or accompanies the policy when

 7  issued. The commission shall, by rule, adopt a form for the

 8  checklist for each type of policy to which this subsection

 9  applies. Each form shall indicate that it was adopted by the

10  commission.

11         (a)  The checklist must contain a list of the standard

12  provisions and elements that may typically be included in

13  these policies, whether or not they are included in the

14  particular policy being issued, in a format that allows the

15  insurer to place a check mark next to the provisions elements

16  that are included so that the consumer can see both what is

17  included and what is not included in the policy. As an

18  alternative to checking the boxes on the checklist, an insurer

19  may delete the check boxes from the form and replace them with

20  text indicating whether the provision's elements are included

21  or not. Limits of liability shall be listed for each item. The

22  checklist must include, but is not limited to, the following:

23         1.  Property coverage for the principal premises shown

24  in the declarations.

25         2.  Property coverage for other structures on the

26  residence premises.

27         3.  Whether the principal premises and other structures

28  are insured against the following perils:

29         a.  Fire.

30         b.  Lightning.

31         c.  Explosion.

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 1         d.  Hurricane loss.

 2         e.  Nonhurricane wind loss.

 3         f.  Collapse.

 4         g.  Mold.

 5         h.  Sinkhole loss.

 6         i.  Vandalism.

 7         4.  Personal property coverage.

 8         5.  Whether personal property is insured against the

 9  following perils:

10         a.  Fire.

11         b.  Lightning.

12         c.  Hurricane loss.

13         d.  Nonhurricane wind loss.

14         e.  Collapse.

15         f.  Mold.

16         g.  Sinkhole loss.

17         h.  Theft.

18         6.  The following additional coverages:

19         a.  Debris removal.

20         b.  Loss assessment.

21         c.  Additional living expenses.

22         7.  Personal liability coverage.

23         8.  Medical payments coverage.

24         9.  Discounts applied to the premium.

25         10.  Deductibles for loss due to hurricane and loss to

26  other perils.

27         11.  Building ordinance or law coverage.

28         12.  Replacement cost coverage.

29         13.  Actual cash value coverage.

30  

31  

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 1         (b)  The forms shall allow insurers to place other

 2  coverages on the checklists which may or may not be included

 3  in the insurer's policies.

 4         (c)  The outline of coverage must contain:

 5         1.  A brief description of the principal benefits and

 6  coverage provided in the policy, broken down by each class or

 7  type of coverage provided under the policy for which a premium

 8  is charged, and itemization of the applicable premium.

 9         2.  A summary statement of the principal exclusions and

10  limitations or reductions contained in the policy by class or

11  type, including, but not limited to, deductibles, coinsurance,

12  and any other limitations or reductions.

13         3.  A summary statement of any renewal or cancellation

14  provisions.

15         4.  A description of the credit or surcharge plan that

16  is being applied. The description may display numerical or

17  alphabetical codes on the declarations page or premium notice

18  to enable the insured to determine the reason or reasons why

19  her or his policy is being surcharged or is receiving a

20  credit.

21         5.  A summary of any additional coverage provided

22  through any rider or endorsement that accompanies the policy.

23         (4)(3)  The outline of coverage for a private passenger

24  motor vehicle policy is required only on the initial policy

25  issued by an insurer. The outline of coverage and the

26  checklist for a basic homeowners', mobile homeowners',

27  dwelling, or condominium unit owners' policy is required on

28  the initial policy and each renewal thereof issued by an

29  insurer.

30         (5)(4)  An insurer must insert the following language

31  on the outline of coverage:

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 1  

 2  "The following outline of coverage  or checklist  is for

 3  informational purposes only. Florida law prohibits this

 4  outline  or checklist  from changing any of the provisions of

 5  the insurance contract which is the subject of this outline.

 6  Any endorsement regarding changes in types of coverage,

 7  exclusions, limitations, reductions, deductibles, coinsurance,

 8  renewal provisions, cancellation provisions, surcharges, or

 9  credits will be sent separately."

10  

11         (6)(5)  Neither this section nor the outline of

12  coverage or checklist mandated by this section alters or

13  modifies the terms of the insurance contract, creates a cause

14  of action, or is admissible in any civil action.

15         Section 12.  Effective January 1, 2006, subsections

16  (3), (8), and (9) of section 627.701, Florida Statutes, as

17  amended by section 4 of chapter 2004-480, Laws of Florida, are

18  amended to read:

19         627.701  Liability of insureds; coinsurance;

20  deductibles.--

21         (3)(a)  A policy of residential property insurance

22  shall include a deductible amount applicable to hurricane or

23  wind losses no lower than $500 and no higher than 2 percent of

24  the policy dwelling limits with respect to personal lines

25  residential risks, and no higher than 3 percent of the policy

26  limits with respect to commercial lines residential risks;

27  however, if a risk was covered on August 24, 1992, under a

28  policy having a higher deductible than the deductibles allowed

29  by this paragraph, a policy covering such risk may include a

30  deductible no higher than the deductible in effect on August

31  24, 1992. Notwithstanding the other provisions of this

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 1  paragraph, a personal lines residential policy covering a risk

 2  valued at $50,000 or less may include a deductible amount

 3  attributable to hurricane or wind losses no lower than $250,

 4  and a personal lines residential policy covering a risk valued

 5  at $100,000 or more may include a deductible amount

 6  attributable to hurricane or wind losses no higher than 10 5

 7  percent of the policy limits unless subject to a higher

 8  deductible on August 24, 1992; however, no maximum deductible

 9  is required with respect to a personal lines residential

10  policy covering a risk valued at more than $500,000.  An

11  insurer may require a higher deductible, provided such

12  deductible is the same as or similar to a deductible program

13  lawfully in effect on June 14, 1995.  In addition to the

14  deductible amounts authorized by this paragraph, an insurer

15  may also offer policies with a copayment provision under

16  which, after exhaustion of the deductible, the policyholder is

17  responsible for 10 percent of the next $10,000 of insured

18  hurricane or wind losses.

19         (b)1.  Except as otherwise provided in this paragraph,

20  prior to issuing a personal lines residential property

21  insurance policy on or after January 1, 2006 April 1, 1996, or

22  prior to the first renewal of a residential property insurance

23  policy on or after January 1, 2006 April 1, 1996, the insurer

24  must offer alternative deductible amounts applicable to

25  hurricane or wind losses equal to $500, and 2 percent, 5

26  percent, and 10 percent of the policy dwelling limits, unless

27  the specific percentage 2 percent deductible is less than

28  $500. The written notice of the offer shall specify the

29  hurricane or wind deductible to be applied in the event that

30  the applicant or policyholder fails to affirmatively choose a

31  hurricane deductible. The insurer must provide such

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 1  policyholder with notice of the availability of the deductible

 2  amounts specified in this paragraph in a form approved by the

 3  office in conjunction with each renewal of the policy. The

 4  failure to provide such notice constitutes a violation of this

 5  code but does not affect the coverage provided under the

 6  policy.

 7         2.  This paragraph does not apply with respect to a

 8  deductible program lawfully in effect on June 14, 1995, or to

 9  any similar deductible program, if the deductible program

10  requires a minimum deductible amount of no less than 2 percent

11  of the policy limits.

12         2.3.  With respect to a policy covering a risk with

13  dwelling limits of at least $100,000, but less than $250,000,

14  the insurer may, in lieu of offering a policy with a $500

15  hurricane or wind deductible as required by subparagraph 1.,

16  offer a policy that the insurer guarantees it will not

17  nonrenew for reasons of reducing hurricane loss for one

18  renewal period and that contains up to a 2 percent hurricane

19  or wind deductible as required by subparagraph 1.

20         3.4.  With respect to a policy covering a risk with

21  dwelling limits of $250,000 or more, the insurer need not

22  offer the $500 hurricane or wind deductible as required by

23  subparagraph 1., but must, except as otherwise provided in

24  this subsection, offer the other 2 percent hurricane

25  deductibles or wind deductible as required by subparagraph 1.

26         (c)  Before issuing a personal lines residential

27  property insurance policy and before each renewal thereof, an

28  insurer must provide each policyholder and applicant with a

29  notice of the availability of the deductible amounts that

30  insurers are required to offer and any other deductible that

31  the insurer chooses to offer which is not prohibited by this

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 1  section. The notice shall be on a form approved by the office.

 2  The form shall fully advise the policyholder or applicant of

 3  the nature of the deductible, including the fact that higher

 4  deductibles result in lower premiums but will also result in

 5  higher out-of-pocket expenses to the policyholder in the event

 6  of a hurricane damage claim. For each percentage deductible

 7  available to the policyholder or applicant, the form shall

 8  include the dollar amount of the deduction which will result

 9  from application of the percentage deductible. The heading of

10  the form shall be in 12-point bold type and shall state: "You

11  are required by Florida law to choose a deductible that will

12  apply to any claims that you may have with your insurer as a

13  result of damage to your residence by a hurricane. This form

14  explains the deductible options that your insurer is required

15  or permitted to offer to you. Please read carefully." If this

16  form is signed by the named insured, it will be conclusively

17  presumed that there was an informed, knowing selection of the

18  amount of the deductible. Such notice shall provide for a

19  means to allow the policyholder or applicant to select the

20  deductible. The failure to provide such notice constitutes a

21  violation of this code but does not affect the coverage

22  provided under the policy.

23         (c)  In order to provide for the transition from wind

24  deductibles to hurricane deductibles as required by this

25  subsection, an insurer is required to provide wind deductibles

26  meeting the requirements of this subsection until the

27  effective date of the insurer's first rate filing made after

28  January 1, 1997, and is thereafter required to provide

29  hurricane deductibles meeting the requirements of this

30  subsection.

31  

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 1         (8)(a)  The Legislature finds that property insurance

 2  coverage has become unaffordable for a significant number of

 3  mobile home owners, as evidenced by reports that up to 100,000

 4  mobile home owners have terminated their insurance coverage

 5  because they cannot afford to pay approved rates charged in

 6  the voluntary or residual markets. The Legislature further

 7  finds that additional flexibility in available coverages will

 8  enable mobile home owners to obtain affordable insurance and

 9  increase capacity.

10         (b)  Notwithstanding the provisions of subsection (3),

11  with respect to mobile home policies:

12         1.  The deductible for hurricane coverage may not

13  exceed 10 percent of the property value if the property is not

14  subject to any liens and may not exceed 5 percent of the

15  property value if the property is subject to any liens.

16         2.  The insurer need not make the offers required by

17  paragraph (3)(b).

18         (8)(9)  Notwithstanding the other provisions of this

19  section or of other law, but only as to hurricane coverage as

20  defined in s. 627.4025 for commercial lines residential

21  coverages, an insurer may offer a deductible in an amount not

22  exceeding 5 percent of the insured value with respect to a

23  condominium association or cooperative association policy, or

24  in an amount not exceeding 10 percent of the insured value

25  with respect to any other commercial lines residential policy,

26  if, at the time of such offer and at each renewal, the insurer

27  also offers to the policyholder a deductible in the amount of

28  3 percent of the insured value. Nothing in this subsection

29  prohibits any deductible otherwise authorized by this section.

30  All forms by which the offers authorized in this subsection

31  

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 1  are made or required to be made shall be on forms that are

 2  adopted or approved by the commission or office.

 3         Section 13.  Effective October 1, 2005, section

 4  627.7011, Florida Statutes, is amended to read:

 5         627.7011  Homeowners' policies; offer of replacement

 6  cost coverage and law and ordinance coverage.--

 7         (1)  Prior to issuing a homeowner's insurance policy on

 8  or after October 1, 2005 June 1, 1994, or prior to the first

 9  renewal of a homeowner's insurance policy on or after October

10  1, 2005 June 1, 1994, the insurer must offer each of the

11  following:

12         (a)  A policy or endorsement providing that any loss

13  which is repaired or replaced will be adjusted on the basis of

14  replacement costs not exceeding policy limits as to the

15  dwelling, rather than actual cash value, but not including

16  costs necessary to meet applicable laws and ordinances

17  regulating the construction, use, or repair of any property or

18  requiring the tearing down of any property, including the

19  costs of removing debris.

20         (b)  A policy or endorsement providing that, subject to

21  other policy provisions, any loss which is repaired or

22  replaced at any location will be adjusted on the basis of

23  replacement costs not exceeding policy limits as to the

24  dwelling, rather than actual cash value, and also including

25  costs necessary to meet applicable laws and ordinances

26  regulating the construction, use, or repair of any property or

27  requiring the tearing down of any property, including the

28  costs of removing debris; however, such additional costs

29  necessary to meet applicable laws and ordinances may be

30  limited to either 25 percent or 50 percent of the dwelling

31  limit, as selected by the policyholder, and such coverage

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 1  shall apply only to repairs of the damaged portion of the

 2  structure unless the total damage to the structure exceeds 50

 3  percent of the replacement cost of the structure.

 4  

 5  An insurer is not required to make the offers required by this

 6  subsection with respect to the issuance or renewal of a

 7  homeowner's policy that contains the provisions specified in

 8  paragraph (b) for law and ordinance coverage limited to 25

 9  percent of the dwelling limit, except that the insurer must

10  offer the law and ordinance coverage limited to 50 percent of

11  the dwelling limit. This subsection does not prohibit the

12  offer of a guaranteed replacement cost policy.

13         (2)  Unless the insurer obtains the policyholder's

14  written refusal of the policies or endorsements specified in

15  subsection (1), any policy covering the dwelling is deemed to

16  include the coverage specified in paragraph (1)(b). The

17  rejection or selection of alternative coverage shall be made

18  on a form approved by the office. The form shall fully advise

19  the applicant of the nature of the coverage being rejected. If

20  this form is signed by a named insured, it will be

21  conclusively presumed that there was an informed, knowing

22  rejection of the coverage or election of the alternative

23  coverage on behalf of all insureds. Unless the policyholder

24  requests in writing the coverage specified in this section, it

25  need not be provided in or supplemental to any other policy

26  that renews, insures, extends, changes, supersedes, or

27  replaces an existing policy when the policyholder has rejected

28  the coverage specified in this section or has selected

29  alternative coverage. The insurer must provide such

30  policyholder with notice of the availability of such coverage

31  in a form approved by the office at least once every 3 years.

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 1  The failure to provide such notice constitutes a violation of

 2  this code, but does not affect the coverage provided under the

 3  policy.

 4         (3)  In the event of a loss for which a dwelling or

 5  personal property is insured on the basis of replacement

 6  costs, the insurer shall pay the replacement cost without

 7  reservation or holdback of any depreciation in value, whether

 8  or not the insured replaces or repairs the dwelling or

 9  property.

10         (4)(3)  Nothing in this section shall be construed to

11  apply to policies not considered to be "homeowners' policies,"

12  as that term is commonly understood in the insurance industry.

13  This section specifically does not apply to mobile home

14  policies. Nothing in this section shall be construed as

15  limiting the ability of any insurer to reject or nonrenew any

16  insured or applicant on the grounds that the structure does

17  not meet underwriting criteria applicable to replacement cost

18  or law and ordinance policies or for other lawful reasons.

19         Section 14.  Effective July 1, 2005, subsection (7) of

20  section 627.7015, Florida Statutes, is amended, and subsection

21  (2) of that section is republished, to read:

22         627.7015  Alternative procedure for resolution of

23  disputed property insurance claims.--

24         (2)  At the time a first-party claim within the scope

25  of this section is filed, the insurer shall notify all

26  first-party claimants of their right to participate in the

27  mediation program under this section. The department shall

28  prepare a consumer information pamphlet for distribution to

29  persons participating in mediation under this section.

30         (7)  If the insurer fails to comply with the

31  requirements of subsection (2) by failing to notify a

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 1  first-party claimant of his or her right to participate in the

 2  mediation program under this section, or if the insurer

 3  requests the mediation, and the mediation results are rejected

 4  by either party, the insured shall not be required to submit

 5  to or participate in any contractual loss appraisal process of

 6  the property loss damage as a precondition to legal action for

 7  breach of contract against the insurer for its failure to pay

 8  the policyholder's claims covered by the policy.

 9         Section 15.  Subsection (1) of section 627.702, Florida

10  Statutes, is amended to read:

11         627.702  Valued policy law.--

12         (1)(a)  In the event of the total loss of any building,

13  structure, mobile home as defined in s. 320.01(2), or

14  manufactured building as defined in s. 553.36(12), located in

15  this state and insured by any insurer as to a covered peril,

16  in the absence of any change increasing the risk without the

17  insurer's consent and in the absence of fraudulent or criminal

18  fault on the part of the insured or one acting in her or his

19  behalf, the insurer's liability, if any, under the policy for

20  such total loss shall be in the amount of money for which such

21  property was so insured as specified in the policy and for

22  which a premium has been charged and paid.

23         (b)  The legislative intent of this subsection is not

24  to require an insurer to pay for a loss caused by a peril

25  other than the covered peril. In furtherance of such

26  legislative intent, when a loss was caused in part by a

27  covered peril and in part by a noncovered peril, the insurer's

28  liability under this section is limited to the percentage of

29  the loss caused by the covered peril.

30         Section 16.  Section 627.706, Florida Statutes, is

31  amended to read:

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 1         627.706  Sinkhole insurance; definitions.--

 2         (1)  Every insurer authorized to transact property

 3  insurance in this state shall make available coverage for

 4  insurable sinkhole losses on any structure, including contents

 5  of personal property contained therein, to the extent provided

 6  in the form to which the sinkhole coverage attaches.

 7         (2)  As used in ss. 627.706-627.7074, and as used in

 8  connection with any policy providing coverage for sinkhole

 9  losses:

10         (a)  "Sinkhole" means a landform created by subsidence

11  of soil, sediment, or rock as underlying strata are dissolved

12  by ground water. A sinkhole may form by collapse into

13  subterranean voids created by dissolution of limestone or

14  dolostone or by subsidence as these strata are dissolved.

15         (b)(2)  "Sinkhole loss" means structural damage to the

16  building caused by sinkhole activity. Contents coverage shall

17  apply only if there is structural damage to the building

18  caused by sinkhole activity.

19         (c)(3)  "Sinkhole activity loss" means actual physical

20  damage to the property covered arising out of or caused by

21  sudden settlement or systematic weakening collapse of the

22  earth supporting such property only when such settlement or

23  systematic weakening collapse results from movement or

24  raveling of soils, sediments, or rock materials into

25  subterranean voids created by the effect action of water on a

26  limestone or similar rock formation.

27         (d)  "Engineer" means a person, as defined in s.

28  471.005, who has a bachelor degree or higher in engineering

29  with a specialty in the geotechnical engineering field. An

30  engineer must have geotechnical experience and expertise in

31  

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 1  the identification of sinkhole activity as well as other

 2  potential causes of damage to the structure.

 3         (e)  "Professional geologist" means a person, as

 4  defined by s. 492.102, who has a bachelor degree or higher in

 5  geology or related earth science with expertise in the geology

 6  of Florida. A professional geologist must have geological

 7  experience and expertise in the identification of sinkhole

 8  activity as well as other potential causes of damage to the

 9  structure.

10         (3)(4)  Every insurer authorized to transact property

11  insurance in this state shall make a proper filing with the

12  office for the purpose of extending the appropriate forms of

13  property insurance to include coverage for insurable sinkhole

14  losses.

15         Section 17.  Section 627.707, Florida Statutes, is

16  amended to read:

17         627.707  Minimum Standards for investigation of

18  sinkhole claims by insurers; nonrenewals.--

19         (1)  Upon receipt of a claim for a sinkhole loss, an

20  insurer must meet the following minimum standards in

21  investigating a claim:

22         (1)(a)  Upon receipt of a claim for a sinkhole loss,

23  The insurer must make an inspection of the insured's premises

24  to determine if there has been physical damage to the

25  structure which may might be the result of sinkhole activity.

26         (b)  If, upon the investigation pursuant to paragraph

27  (a), the insurer discovers damage to a structure which is

28  consistent with sinkhole activity or if the structure is

29  located in close proximity to a structure in which sinkhole

30  damage has been verified, then prior to denying a claim, the

31  insurer must obtain a written certification from an individual

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 1  qualified to determine the existence of sinkhole activity,

 2  stating that the cause of the claim is not sinkhole activity,

 3  and that the analysis conducted was of sufficient scope to

 4  eliminate sinkhole activity as the cause of damage within a

 5  reasonable professional probability.  The written

 6  certification must also specify the professional discipline

 7  and professional licensure or registration under which the

 8  analysis was conducted.

 9         (2)  Following the insurer's initial inspection, the

10  insurer shall engage an engineer and a professional geologist

11  to conduct testing as provided in s. 627.7072 to determine the

12  cause of the loss within a reasonable professional probability

13  and issue a report as provided in s. 627.7073, if:

14         (a)  The insurer is unable to identify a valid cause of

15  the damage or discovers damage to the structure which is

16  consistent with sinkhole loss; or

17         (b)  The policyholder demands testing in accordance

18  with this section or s. 627.7072.

19         (3)  Following the initial inspection of the insured

20  premises, the insurer shall provide written notice to the

21  policyholder containing the following disclosure:

22         (a)  What the insurer has determined to be the cause of

23  damage, if it has made such a determination.

24         (b)  A statement of the circumstances under which the

25  insurer is required to engage an engineer and a professional

26  geologist to verify or eliminate sinkhole loss and to make

27  recommendations regarding land and building stabilization and

28  foundation repair.

29         (c)  A statement regarding the right of the

30  policyholder to request testing by an engineer and a

31  

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 1  professional geologist and the circumstances under which the

 2  policyholder may demand certain testing.

 3         (4)  If the insurer determines that there is no

 4  sinkhole loss, the insurer may deny the claim. If the insurer

 5  denies the claim, the policyholder may demand testing under s.

 6  627.7072. The policyholder's demand for testing must be

 7  communicated to the insurer in writing after the

 8  policyholder's receipt of insurer's denial of the claim.

 9         (5)(a)  If a sinkhole loss is verified, the insurer

10  shall pay to stabilize the land and building, and repair the

11  foundation in accordance with the recommendations of the

12  engineer and the professional geologist as provided under s.

13  627.7073, and in consultation with the policyholder, subject

14  to the coverage and terms of the policy. The insurer shall pay

15  for other repairs to the structure and contents in accordance

16  with the terms of the policy.

17         (b)  For a personal lines residential policy, the

18  insurer may limit its payment to the actual cash value of the

19  sinkhole loss until such time as expenses related to land and

20  building stabilization and foundation repairs are incurred.

21  The insurer has no liability for the work performed unless it

22  agrees to such liability in writing.

23         (6)  Except as provided in subsection (7), the fees and

24  costs of the engineer or the professional geologist shall be

25  paid by the insurer.

26         (7)(c)  If the insurer obtains, pursuant to s. 627.7073

27  paragraph (b), written certification that there is no sinkhole

28  loss or that the cause of the damage claim was not sinkhole

29  activity, and if the policyholder has submitted the sinkhole

30  claim without good faith grounds for submitting such claim,

31  the policyholder shall reimburse the insurer for 50 percent of

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 1  the actual costs cost of the analyses and services provided

 2  under ss. 627.7072 and 627.7073 analysis under paragraph (b);

 3  however, a policyholder is not required to reimburse an

 4  insurer more than $2,500 with respect to any claim. A

 5  policyholder is required to pay reimbursement under this

 6  subsection paragraph only if the insurer, prior to ordering

 7  the analysis under s. 627.7072 paragraph (b), informs the

 8  policyholder in writing of the policyholder's potential

 9  liability for reimbursement and gives the policyholder the

10  opportunity to withdraw the claim.

11         (8)(2)  No insurer shall nonrenew any policy of

12  property insurance on the basis of filing of claims for

13  partial loss caused by sinkhole damage or clay shrinkage as

14  long as the total of such payments does not exceed the current

15  policy limits of coverage for property damage, and provided

16  the insured has repaired the structure in accordance with the

17  engineering recommendations upon which any payment or policy

18  proceeds were based.

19         (9)  The insurer may engage a structural engineer to

20  make recommendations as to repair of the structure.

21         Section 18.  Section 627.7072, Florida Statutes, is

22  created to read:

23         627.7072  Testing standards for sinkholes.--

24         (1)  The engineer and professional geologist shall

25  perform such tests as sufficient, in their professional

26  opinion, to determine the presence or absence of sinkhole loss

27  or other cause of damage within reasonable professional

28  probability, and to make recommendations regarding necessary

29  building stabilization and foundation repair.

30         (2)  Testing shall be conducted in compliance with the

31  Florida Geological Survey Special Publication No. 57 (2005).

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 1         Section 19.  Section 627.7073, Florida Statutes, is

 2  created to read:

 3         627.7073  Sinkhole reports.--

 4         (1)  Upon completion of testing as provided in s.

 5  627.7072, the engineer or professional geologist shall issue a

 6  report and certification to the insurer and the policyholder

 7  as provided in this section.

 8         (a)  Sinkhole loss is verified if, based upon tests

 9  performed in accordance with s. 627.7072, an engineer or a

10  professional geologist issues a written report and

11  certification stating:

12         1.  That the cause of the actual physical and

13  structural damage is sinkhole activity within a reasonable

14  professional probability.

15         2.  That the analyses conducted were of sufficient

16  scope to identify sinkhole activity as the cause of damage

17  within a reasonable professional probability.

18         3.  A description of the tests performed.

19         4.  A recommendation of methods for stabilizing the

20  land and building, and for making repairs to the foundation.

21         (b)  If sinkhole activity is eliminated as the cause of

22  damage to the structure, the engineer or professional

23  geologist shall issue a written report and certification to

24  the policyholder and the insurer stating:

25         1.  That the cause of the damage is not sinkhole

26  activity within a reasonable professional probability.

27         2.  That the analyses and tests conducted were of

28  sufficient scope to eliminate sinkhole activity as the cause

29  of damage within a reasonable professional probability.

30         3.  A statement of the cause of the damage within a

31  reasonable professional probability.

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 1         4.  A description of the tests performed.

 2         (c)  The respective findings, opinions and

 3  recommendations of the engineer or professional geologist as

 4  to the verification of a sinkhole loss, land and building

 5  stabilization, foundation repair, and elimination of sinkhole

 6  loss shall be presumed correct.

 7         (2)  Any insurer that has paid a claim for a sinkhole

 8  loss shall file a copy of the report and certification

 9  prepared pursuant to subsection (1), with the county property

10  appraiser, who shall record the report and certification with

11  the parcel number. The insurer shall bear the cost of filing

12  and recording the report and certification. There shall be no

13  cause of action or liability against an insurer for compliance

14  with this section.

15         Section 20.  Effective October 1, 2005, and applicable

16  to policies issued or renewed on or after that date, section

17  627.711, Florida Statutes, is created to read:

18         627.711  Notice of premium discounts for hurricane loss

19  mitigation.--Before issuing a personal lines residential

20  property insurance policy and as part of each premium renewal

21  notice, the insurer shall provide written notice to the

22  applicant or policyholder, on a form approved by the office,

23  of the availability and amount of the premium discounts and

24  credits for fixtures and construction techniques that reduce

25  the amount of loss in a windstorm, as required by s.

26  627.0629(1). The notice must clearly inform the applicant or

27  policyholder as to what the policyholder must do to qualify

28  for such credits or discounts. The commission may adopt rules

29  to administer this section.

30         Section 21.  Section 627.712, Florida Statutes, is

31  created to read:

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 1         627.712  Timely payment of claims.--

 2         (1)  An insurer shall, within 30 days after receipt of

 3  a claim under a property insurance policy:

 4         (a)  Pay that portion of the claim for which the

 5  policyholder has submitted all information that is required

 6  for payment under the terms of the policy;

 7         (b)  Provide a written denial to the policyholder for

 8  that portion of a claim which the insurer determines is not

 9  covered under the policy, including the specific reasons; and

10         (c)  Specify, in writing, the additional information

11  that the policyholder must submit to the insurer in order for

12  any remaining amount of the claim to be paid.

13         (2)  Within 30 days after receipt of the additional

14  information specified in paragraph (1)(c), the insurer shall

15  either pay or deny the claim as specified in paragraph (1)(a)

16  or paragraph (1)(b).

17         (3)  Payment shall be considered made on the date a

18  check or other valid payment instrument is placed in the

19  United States mail in a properly addressed, postpaid envelope,

20  or if not so posted, on the date of delivery.

21         (4)  All overdue payments shall bear simple interest at

22  the rate of 10 percent per year.

23         (5)  Following a hurricane or natural disaster, the

24  requirements of this section are subject to such exceptions or

25  alternative requirements as may be provided by rule of the

26  commission or order of the office.

27         Section 22.  By January 15, 2006, the Office of the

28  Auditor General shall conduct an operational audit of Citizens

29  Property Insurance Corporation regarding its customer service,

30  claims handling, accessibility of policyholder information to

31  the agent of record, take-out programs, and financing

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 1  arrangements, including recommendations for legislative

 2  changes related to the findings of the audit.

 3         Section 23.  For the 2005-2006 fiscal year, there is

 4  appropriated $350,000 in recurring funds from the Insurance

 5  Regulatory Trust Fund and four positions are authorized to the

 6  Office of the Consumer Advocate within the Department of

 7  Financial Services for the purposes provided in section

 8  627.0613, Florida Statutes.

 9         Section 24.  Except as otherwise expressly provided in

10  this act, this act shall take effect upon becoming a law.

11  

12          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
13                            CS/SB 1488

14                                 

15  This committee substitute makes the following changes.

16  o    Deletes the provision of the bill that prohibits Citizens
         Property Insurance Corporation from insuring any
17       residential structure valued in excess of  $1 million.

18  o    Deletes the provision of the bill that requires insurers
         to offer hurricane deductibles of 1 percent of policy
19       limits.

20  o    Revises provisions related to claims for sinkhole losses.

21  o    Deletes the provision of the bill providing that the
         amendments to the valued policy law are remedial in
22       nature and intending to clarify the intent of that
         section.
23  

24  

25  

26  

27  

28  

29  

30  

31  

                                  66

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