| 1 | A bill to be entitled |
| 2 | An act relating to residential property insurance; |
| 3 | amending s. 215.555, F.S.; revising provisions relating to |
| 4 | calculation of an insurer's retention for purposes of |
| 5 | reimbursement from the Florida Hurricane Catastrophe Fund; |
| 6 | amending s. 627.4133, F.S.; prohibiting insurers from |
| 7 | canceling or nonrenewing residential property insurance |
| 8 | policies under certain emergency circumstances; providing |
| 9 | exceptions; providing notice requirements; providing |
| 10 | application to personal residential and commercial |
| 11 | residential policies covering certain damaged property; |
| 12 | extending the effective date of certain policies under |
| 13 | certain hurricane circumstances; authorizing the insurer |
| 14 | to collect premium for the extended period; providing |
| 15 | nonapplication; amending s. 627.4143, F.S.; requiring |
| 16 | private passenger motor vehicle insurance policies to |
| 17 | contain an outline of coverage; prohibiting delivery or |
| 18 | issuance of basic homeowner's, mobile home owner's, |
| 19 | condominium unit owner's, and dwelling policies without a |
| 20 | comprehensive checklist and outline of coverage; |
| 21 | specifying checklist and outline of coverage contents; |
| 22 | requiring the checklist and outline of coverage to be sent |
| 23 | with each renewal of personal lines residential insurance |
| 24 | policies; specifying application of the checklist and |
| 25 | outline of coverage to basic homeowner's, mobile home |
| 26 | owner's, condominium unit owner's, and dwelling policies; |
| 27 | amending s. 627.701, F.S.; revising a limitation on a |
| 28 | deductible amount attributable to hurricane or wind |
| 29 | losses; providing for computation and display of the |
| 30 | dollar value of hurricane deductibles; requiring insurers |
| 31 | to compute and display actual dollar values of certain |
| 32 | riders for certain policies; providing additional notice |
| 33 | requirements for certain deductible amounts; requiring |
| 34 | insurers to notify applicants or policyholders of the |
| 35 | availability and amounts of certain discounts, credits, |
| 36 | rate differentials, or reductions in deductibles for |
| 37 | properties on which certain fixtures have been installed |
| 38 | or construction techniques have been implemented; |
| 39 | requiring insurers to provide qualifying information; |
| 40 | authorizing the Financial Services Commission to adopt |
| 41 | rules; providing for application of hurricane deductibles |
| 42 | for certain personal lines residential property insurance |
| 43 | policies; requiring insurers to offer commercial |
| 44 | residential property insurance policyholders certain |
| 45 | alternative hurricane deductibles; providing effective |
| 46 | dates. |
| 47 |
|
| 48 | Be It Enacted by the Legislature of the State of Florida: |
| 49 |
|
| 50 | Section 1. Paragraph (e) of subsection (2) of section |
| 51 | 215.555, Florida Statutes, is amended to read: |
| 52 | 215.555 Florida Hurricane Catastrophe Fund.-- |
| 53 | (2) DEFINITIONS.--As used in this section: |
| 54 | (e) "Retention" means the amount of losses below which an |
| 55 | insurer is not entitled to reimbursement from the fund. An |
| 56 | insurer's retention shall be calculated as follows: |
| 57 | 1. The board shall calculate and report to each insurer |
| 58 | the retention multiples for that year. For the contract year |
| 59 | beginning June 1, 2005 2004, the retention multiple shall be |
| 60 | equal to $4 $4.5 billion divided by the total estimated |
| 61 | reimbursement premium for the contract year; for subsequent |
| 62 | years, the retention multiple shall be equal to $4 $4.5 billion, |
| 63 | adjusted based upon the reported exposure from the prior |
| 64 | contract year to reflect the percentage growth in exposure to |
| 65 | the fund for covered policies since 2004 2003, divided by the |
| 66 | total estimated reimbursement premium for the contract year. |
| 67 | Total reimbursement premium for purposes of the calculation |
| 68 | under this subparagraph shall be estimated using the assumption |
| 69 | that all insurers have selected the 90-percent coverage level. |
| 70 | 2. The retention multiple as determined under subparagraph |
| 71 | 1. shall be adjusted to reflect the coverage level elected by |
| 72 | the insurer. For insurers electing the 90-percent coverage |
| 73 | level, the adjusted retention multiple is 100 percent of the |
| 74 | amount determined under subparagraph 1. For insurers electing |
| 75 | the 75-percent coverage level, the retention multiple is 120 |
| 76 | percent of the amount determined under subparagraph 1. For |
| 77 | insurers electing the 45-percent coverage level, the adjusted |
| 78 | retention multiple is 200 percent of the amount determined under |
| 79 | subparagraph 1. |
| 80 | 3. An insurer shall determine its provisional retention by |
| 81 | multiplying its provisional reimbursement premium by the |
| 82 | applicable adjusted retention multiple and shall determine its |
| 83 | actual retention by multiplying its actual reimbursement premium |
| 84 | by the applicable adjusted retention multiple. |
| 85 | 4. For insurers who experience multiple covered events |
| 86 | causing loss during the contract year, beginning June 1, 2005, |
| 87 | each insurer's full retention shall be applied to the two |
| 88 | largest losses from the covered events for that insurer. For all |
| 89 | other covered events resulting in losses, the insurer's |
| 90 | retention shall be reduced to one-third of the full retention. |
| 91 | The reimbursement contract shall provide for the reimbursement |
| 92 | of losses for each covered event based on the full retention |
| 93 | with adjustments made to reflect the reduced retentions after |
| 94 | January 1 of the contract year provided the insurer reports its |
| 95 | losses as specified in the reimbursement contract. |
| 96 | Section 2. Paragraphs (d) and (e) are added to subsection |
| 97 | (2) of section 627.4133, Florida Statutes, to read: |
| 98 | 627.4133 Notice of cancellation, nonrenewal, or renewal |
| 99 | premium.-- |
| 100 | (2) With respect to any personal lines or commercial |
| 101 | residential property insurance policy, including, but not |
| 102 | limited to, any homeowner's, mobile home owner's, farmowner's, |
| 103 | condominium association, condominium unit owner's, apartment |
| 104 | building, or other policy covering a residential structure or |
| 105 | its contents: |
| 106 | (d)1. Upon a declaration of an emergency pursuant to s. |
| 107 | 252.36 and the filing of an order by the Commissioner of |
| 108 | Insurance Regulation, an insurer may not cancel or nonrenew a |
| 109 | personal residential or commercial residential property |
| 110 | insurance policy covering a dwelling or residential property |
| 111 | located in this state that has been damaged as a result of a |
| 112 | hurricane or wind loss that is the subject of the declaration of |
| 113 | emergency for a period of 90 days after the dwelling or |
| 114 | residential property has been repaired. A structure is deemed to |
| 115 | be repaired when substantially completed and restored to the |
| 116 | extent that it is insurable by another authorized insurer that |
| 117 | is writing policies in this state. |
| 118 | 2. However, an insurer or agent may cancel or nonrenew |
| 119 | such a policy prior to the repair of the dwelling or residential |
| 120 | property: |
| 121 | a. Upon 10 days' notice for nonpayment of premium; or |
| 122 | b. Upon 45 days' notice: |
| 123 | (I) For a material misstatement or fraud related to the |
| 124 | claim; |
| 125 | (II) If the insurer can demonstrate that the insured has |
| 126 | unreasonably caused a delay in the repair of the dwelling; or |
| 127 | (III) If the insurer has paid policy limits. |
| 128 | 3. If the insurer elects to nonrenew a policy covering a |
| 129 | property that has been damaged, the insurer shall provide at |
| 130 | least 90 days' notice to the insured that the insurer intends to |
| 131 | nonrenew the policy 90 days after the dwelling or residential |
| 132 | property has been repaired. Nothing in this paragraph shall |
| 133 | prevent the insurer from canceling or nonrenewing the policy 90 |
| 134 | days after the repairs are complete for the same reasons the |
| 135 | insurer would otherwise have canceled or nonrenewed the policy |
| 136 | but for the limitations of subparagraph 1. The Financial |
| 137 | Services Commission may adopt rules, and the Commissioner of |
| 138 | Insurance Regulation may issue orders, necessary to implement |
| 139 | this paragraph. |
| 140 | 4. This paragraph shall also apply to personal residential |
| 141 | and commercial residential policies covering property that was |
| 142 | damaged as the result of Tropical Storm Bonnie, Hurricane |
| 143 | Charley, Hurricane Frances, Hurricane Ivan, or Hurricane Jeanne. |
| 144 | (e) If any cancellation or nonrenewal of a policy subject |
| 145 | to this subsection is to take effect during the duration of a |
| 146 | hurricane as defined in s. 627.4025(2)(c), the effective date of |
| 147 | such cancellation or nonrenewal is extended until the end of the |
| 148 | duration of such hurricane. The insurer may collect premium at |
| 149 | the prior rates or the rates then in effect for the period of |
| 150 | time for which coverage is extended. This paragraph does not |
| 151 | apply to any property with respect to which replacement coverage |
| 152 | has been obtained and which is in effect for a claim occurring |
| 153 | during the duration of the hurricane. |
| 154 | Section 3. Effective October 1, 2005, section 627.4143, |
| 155 | Florida Statutes, is amended to read: |
| 156 | 627.4143 Outline of coverage.-- |
| 157 | (1) No private passenger automobile or basic homeowner's |
| 158 | policy shall be delivered or issued for delivery in this state |
| 159 | unless an appropriate outline of coverage has been delivered |
| 160 | prior to issuance of the policy or accompanies the policy when |
| 161 | issued. |
| 162 | (2) The outline of coverage for a private passenger motor |
| 163 | vehicle insurance policy shall contain all of the following: |
| 164 | (a) A brief description of the principal benefits and |
| 165 | coverage provided in the policy, broken down by each class or |
| 166 | type of coverage provided under the policy for which a premium |
| 167 | is charged, and itemization of the applicable premium. |
| 168 | (b) A summary statement of the principal exclusions and |
| 169 | limitations or reductions contained in the policy by class or |
| 170 | type, including, but not limited to, deductibles, coinsurance, |
| 171 | and any other limitations or reductions. |
| 172 | (c) A summary statement of any renewal or cancellation |
| 173 | provisions. |
| 174 | (d) A description of the credit or surcharge plan that is |
| 175 | being applied. The description may display numerical or |
| 176 | alphabetical codes on the declarations page or premium notice to |
| 177 | enable the insured to determine the reason or reasons why her or |
| 178 | his policy is being surcharged or is receiving a credit. |
| 179 | (e) A list of any additional coverage provided through any |
| 180 | rider or endorsement which accompanies the policy. The list |
| 181 | shall contain a descriptive reference to each additional |
| 182 | coverage, rather than solely a reference to a form or code |
| 183 | number. |
| 184 | (f) For a private passenger motor vehicle insurance |
| 185 | policy, The extent of coverage provided to the insured in the |
| 186 | event of collision damage to a rental vehicle rented by the |
| 187 | insured. The proof-of-insurance card required by s. 316.646 must |
| 188 | also specify whether rental car coverage is provided, and may |
| 189 | refer to the outline of coverage as to the details or extent of |
| 190 | coverage. |
| 191 | (3) A basic homeowner's, mobile home owner's, condominium |
| 192 | unit owner's, or dwelling policy may not be delivered or issued |
| 193 | for delivery in this state unless a comprehensive checklist of |
| 194 | coverage, on a form adopted by the commission, and an |
| 195 | appropriate outline of coverage have been delivered prior to |
| 196 | issuance of the policy or accompanies the policy when issued. |
| 197 | The commission shall, by rule, adopt a form for the checklist |
| 198 | for each type of policy to which this subsection applies. Each |
| 199 | form shall indicate that it was adopted by the commission. |
| 200 | (a) The checklist must contain a list of the standard |
| 201 | provisions and elements that may typically be included in such |
| 202 | policies, whether or not they are included in the particular |
| 203 | policy being issued, in a format that allows the insurer to |
| 204 | place a check mark next to the provision's elements that are |
| 205 | included so the consumer can see what is included and what is |
| 206 | not included in the policy. As an alternative to checking the |
| 207 | boxes on the checklist, an insurer may delete the check boxes |
| 208 | from the form and replace them with text indicating whether the |
| 209 | provision's elements are included or not. Limits of liability |
| 210 | shall be listed for each item. The checklist must include, but |
| 211 | is not limited to, the following: |
| 212 | 1. Property coverage for the principal premises shown in |
| 213 | the declarations. |
| 214 | 2. Property coverage for other structures on the residence |
| 215 | premises. |
| 216 | 3. Whether the principal premises and other structures are |
| 217 | insured against the following perils: |
| 218 | a. Fire. |
| 219 | b. Lightning. |
| 220 | c. Explosion. |
| 221 | d. Hurricane loss. |
| 222 | e. Nonhurricane wind loss. |
| 223 | f. Collapse. |
| 224 | g. Mold. |
| 225 | h. Sinkhole loss. |
| 226 | i. Vandalism. |
| 227 | 4. Personal property coverage. |
| 228 | 5. Whether personal property is insured against the |
| 229 | following perils: |
| 230 | a. Fire. |
| 231 | b. Lightning. |
| 232 | c. Hurricane loss. |
| 233 | d. Nonhurricane wind loss. |
| 234 | e. Collapse. |
| 235 | f. Mold. |
| 236 | g. Sinkhole loss. |
| 237 | h. Theft. |
| 238 | 6. The following additional coverages: |
| 239 | a. Debris removal. |
| 240 | b. Loss assessment. |
| 241 | c. Additional living expenses. |
| 242 | 7. Personal liability coverage. |
| 243 | 8. Medical payments coverage. |
| 244 | 9. Discounts applied to the premium. |
| 245 | 10. Deductibles for loss due to hurricane and loss to |
| 246 | other perils. |
| 247 | 11. Building ordinance or law coverage. |
| 248 | 12. Replacement cost coverage. |
| 249 | 13. Actual cash value coverage. |
| 250 | (b) The forms shall allow insurers to place other |
| 251 | coverages on the checklists which may or may not be included in |
| 252 | the insurer's policies. |
| 253 | (c) The outline of coverage must contain: |
| 254 | 1. A brief description of the principal benefits and |
| 255 | coverage provided in the policy, itemized by each class or type |
| 256 | of coverage provided under the policy for which a premium is |
| 257 | charged, and itemization of the applicable premium. |
| 258 | 2. A summary statement of the principal exclusions and |
| 259 | limitations or reductions contained in the policy by class or |
| 260 | type, including, but not limited to, deductibles, coinsurance, |
| 261 | and any other limitations or reductions. |
| 262 | 3. A summary statement of any renewal or cancellation |
| 263 | provisions. |
| 264 | 4. A description of the credit or surcharge plan that is |
| 265 | being applied. The description may display numerical or |
| 266 | alphabetical codes on the declarations page or premium notice to |
| 267 | enable the insured to determine the reason or reasons why her or |
| 268 | his policy is being surcharged or is receiving a credit. |
| 269 | 5. A summary of any additional coverage provided through |
| 270 | any rider or endorsement that accompanies the policy. |
| 271 | (4)(3) The outline of coverage for a private passenger |
| 272 | motor vehicle policy is required only on the initial policy |
| 273 | issued by an insurer. The outline of coverage and the checklist |
| 274 | for a basic homeowner's, mobile home owner's, condominium unit |
| 275 | owner's, or dwelling policy are required on the initial policy |
| 276 | and each renewal thereof issued by an insurer. |
| 277 | (5)(4) An insurer must insert the following language on |
| 278 | the outline of coverage: |
| 279 |
|
| 280 | "The following outline of coverage or checklist is for |
| 281 | informational purposes only. Florida law prohibits this outline |
| 282 | or checklist from changing any of the provisions of the |
| 283 | insurance contract which is the subject of this outline. Any |
| 284 | endorsement regarding changes in types of coverage, exclusions, |
| 285 | limitations, reductions, deductibles, coinsurance, renewal |
| 286 | provisions, cancellation provisions, surcharges, or credits will |
| 287 | be sent separately." |
| 288 |
|
| 289 | (7)(5) Neither this section nor the outline of coverage or |
| 290 | checklist mandated by this section alters or modifies the terms |
| 291 | of the insurance contract, creates a cause of action, or is |
| 292 | admissible in any civil action. |
| 293 | Section 4. Paragraph (a) of subsection (3) and subsection |
| 294 | (4) of section 627.701, Florida Statutes, are amended to read: |
| 295 | 627.701 Liability of insureds; coinsurance; deductibles.-- |
| 296 | (3)(a) A policy of residential property insurance shall |
| 297 | include a deductible amount applicable to hurricane or wind |
| 298 | losses no lower than $500 and no higher than 2 percent of the |
| 299 | policy dwelling limits with respect to personal lines |
| 300 | residential risks, and no higher than 3 percent of the policy |
| 301 | limits with respect to commercial lines residential risks; |
| 302 | however, if a risk was covered on August 24, 1992, under a |
| 303 | policy having a higher deductible than the deductibles allowed |
| 304 | by this paragraph, a policy covering such risk may include a |
| 305 | deductible no higher than the deductible in effect on August 24, |
| 306 | 1992. Notwithstanding the other provisions of this paragraph, a |
| 307 | personal lines residential policy covering a risk valued at |
| 308 | $50,000 or less may include a deductible amount attributable to |
| 309 | hurricane or wind losses no lower than $250, and a personal |
| 310 | lines residential policy covering a risk valued at $100,000 or |
| 311 | more may include a deductible amount attributable to hurricane |
| 312 | or wind losses no higher than 10 5 percent of the policy limits |
| 313 | unless subject to a higher deductible on August 24, 1992; |
| 314 | however, no maximum deductible is required with respect to a |
| 315 | personal lines residential policy covering a risk valued at more |
| 316 | than $500,000. An insurer may require a higher deductible, |
| 317 | provided such deductible is the same as or similar to a |
| 318 | deductible program lawfully in effect on June 14, 1995. In |
| 319 | addition to the deductible amounts authorized by this paragraph, |
| 320 | an insurer may also offer policies with a copayment provision |
| 321 | under which, after exhaustion of the deductible, the |
| 322 | policyholder is responsible for 10 percent of the next $10,000 |
| 323 | of insured hurricane or wind losses. |
| 324 | (4)(a) Any policy that contains a separate hurricane |
| 325 | deductible must on its face include in boldfaced type no smaller |
| 326 | than 18 points the following statement: "THIS POLICY CONTAINS A |
| 327 | SEPARATE DEDUCTIBLE FOR HURRICANE LOSSES, WHICH MAY RESULT IN |
| 328 | HIGH OUT-OF-POCKET EXPENSES TO YOU." A policy containing a |
| 329 | coinsurance provision applicable to hurricane losses must on its |
| 330 | face include in boldfaced type no smaller than 18 points the |
| 331 | following statement: "THIS POLICY CONTAINS A CO-PAY PROVISION |
| 332 | THAT MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU." |
| 333 | (b) Beginning October 1, 2005, for any personal lines |
| 334 | residential property insurance policy containing a separate |
| 335 | hurricane deductible, the insurer shall compute and prominently |
| 336 | display the actual dollar value of the hurricane deductible on |
| 337 | the declarations page of the policy at issuance and, for |
| 338 | renewal, on the renewal declarations page of the policy or on |
| 339 | the premium renewal notice. |
| 340 | (c) Beginning October 1, 2005, for any personal lines |
| 341 | residential property insurance policy containing an inflation |
| 342 | guard rider, the insurer shall compute and prominently display |
| 343 | the actual dollar value of the hurricane deductible on the |
| 344 | declarations page of the policy at issuance and, for renewal, on |
| 345 | the renewal declarations page of the policy or on the premium |
| 346 | renewal notice. In addition, beginning October 1, 2005, for any |
| 347 | personal lines residential property insurance policy containing |
| 348 | an inflation guard rider, the insurer shall notify the |
| 349 | policyholder of the possibility that the hurricane deductible |
| 350 | may be higher than indicated when loss occurs due to application |
| 351 | of the inflation guard rider. Such notification shall be made on |
| 352 | the declarations page of the policy at issuance and, for |
| 353 | renewal, on the renewal declarations page of the policy or on |
| 354 | the premium renewal notice. |
| 355 | Section 5. Effective October 1, 2005, subsection (10) is |
| 356 | added to section 627.701, Florida Statutes, to read: |
| 357 | 627.701 Liability of insureds; coinsurance; deductibles.-- |
| 358 | (10) Using a form prescribed by the Office of Insurance |
| 359 | Regulation, the insurer shall clearly notify the applicant or |
| 360 | policyholder of any personal lines residential property |
| 361 | insurance policy, at the time of the issuance of the policy and |
| 362 | at each renewal, of the availability and the range of each |
| 363 | premium discount, credit, other rate differential, or reduction |
| 364 | in deductibles for properties on which fixtures or construction |
| 365 | techniques demonstrated to reduce the amount of loss in a |
| 366 | windstorm can or have been installed or implemented. The |
| 367 | prescribed form shall describe generally what actions the |
| 368 | policyholders may be able to take to reduce their windstorm |
| 369 | premium. The prescribed form and a list of such ranges approved |
| 370 | by the office for each insurer licensed in the state and |
| 371 | providing such discounts, credits, other rate differentials, or |
| 372 | reductions in deductibles for properties described in this |
| 373 | subsection shall be available for electronic viewing and |
| 374 | download from the Department of Financial Services' or the |
| 375 | Office of Insurance Regulation's Internet website. The Financial |
| 376 | Services Commission may adopt rules to implement this |
| 377 | subsection. |
| 378 | Section 6. Subsection (5) of section 627.701, Florida |
| 379 | Statutes, as created by section 4 of chapter 2004-480, Laws of |
| 380 | Florida, is amended to read: |
| 381 | 627.701 Liability of insureds; coinsurance; deductibles.-- |
| 382 | (5)(a) The hurricane deductible of any personal lines |
| 383 | residential property insurance policy issued or renewed on or |
| 384 | after May 1, 2005, shall be applied as follows: |
| 385 | 1.(a) The hurricane deductible shall apply on an annual |
| 386 | basis to all covered hurricane losses that occur during the |
| 387 | calendar year for losses that are covered under one or more |
| 388 | policies issued by the same insurer or an insurer in the same |
| 389 | insurer group. |
| 390 | 2.(b) If a hurricane deductible applies separately to each |
| 391 | of one or more structures insured under a single policy, the |
| 392 | requirements of this paragraph subsection apply with respect to |
| 393 | the deductible for each structure. |
| 394 | 3.(c) If there was a hurricane loss for a prior hurricane |
| 395 | or hurricanes during the calendar year, the insurer may apply a |
| 396 | deductible to a subsequent hurricane which deductible that is |
| 397 | the greater of the remaining amount of the hurricane deductible |
| 398 | or the amount of the deductible that applies to perils other |
| 399 | than a hurricane. Insurers may require policyholders to report |
| 400 | hurricane losses that are below the hurricane deductible or to |
| 401 | maintain receipts or other records of such hurricane losses in |
| 402 | order to apply such losses to subsequent hurricane claims. |
| 403 | 4.(d) If there are hurricane losses in a calendar year on |
| 404 | more than one policy issued by the same insurer or an insurer in |
| 405 | the same insurer group, the hurricane deductible shall be the |
| 406 | highest amount stated in any one of the policies. If a |
| 407 | policyholder who had a hurricane loss under the prior policy is |
| 408 | provided or offered a lower hurricane deductible under the new |
| 409 | or renewal policy, the insurer must notify the policyholder, in |
| 410 | writing, at the time the lower hurricane deductible is provided |
| 411 | or offered, that the lower hurricane deductible will not apply |
| 412 | until January 1 of the following calendar year. |
| 413 | (b) For any commercial residential property insurance |
| 414 | policy issued or renewed on or after January 1, 2006, the |
| 415 | insurer must offer the policyholder one of the following |
| 416 | alternative hurricane deductibles: |
| 417 | 1. A hurricane deductible that applies on an annual basis |
| 418 | as provided in paragraph (a). |
| 419 | 2. A hurricane deductible that applies to each hurricane. |
| 420 | Section 7. Except as otherwise provided herein, this act |
| 421 | shall take effect upon becoming a law. |