HB 1091

1
A bill to be entitled
2An act relating to insurer insolvency; amending s.
3631.181, F.S.; providing an exception to certain
4requirements for a signed statement for certain claims;
5providing requirements; amending s. 631.54, F.S.; revising
6the definition of "covered claim"; amending s. 631.57,
7F.S.; revising requirements and limitations for
8obligations of the Florida Insurance Guaranty Association,
9Inc., for covered claims; authorizing the association to
10contract with counties and municipalities to issue revenue
11bonds for certain purposes; authorizing the Department of
12Financial Services to levy assessments and emergency
13assessments on insurers under certain circumstances for
14certain bond repayment purposes; providing requirements
15for and limitations on such assessments; providing for
16payment, collection, and distribution of such assessments;
17requiring insurers to include an analysis of revenues from
18such assessments in a required report; providing rate
19filing requirements for insurers relating to such
20assessments; providing for continuing annual assessments
21under certain circumstances; specifying emergency
22assessments as not premium and not subject to certain
23taxes, fees, or commissions; specifying insurer liability
24for emergency assessments; providing an exception;
25creating s. 631.695, F.S.; providing legislative findings
26and purposes; providing for issuance of revenue bonds
27through counties and municipalities to fund assistance
28programs for paying covered claims for hurricane damage;
29providing procedures, requirements, and limitations for
30counties, municipalities, and the Florida Insurance
31Guaranty Association, Inc., relating to issuance and
32validation of such bonds; prohibiting pledging the funds,
33credit, property, and taxing power of the state, counties,
34and municipalities for payment of bonds; specifying
35authorized uses of bond proceeds; limiting the term of
36bonds; specifying a state covenant to protect bondholders
37from adverse actions relating to such bonds; specifying
38exemptions for bonds, notes, and other obligations of
39counties and municipalities from certain taxes or
40assessments on property and revenues; authorizing counties
41and municipalities to create a legal entity to exercise
42certain powers; requiring the association to issue an
43annual report on the status of certain uses of bond
44proceeds; providing report requirements; requiring the
45association to provide a copy of the report to the
46Legislature and Chief Financial Officer; prohibiting
47repeal of certain provisions relating to certain bonds
48under certain circumstances; providing severability;
49providing an effective date.
50
51Be It Enacted by the Legislature of the State of Florida:
52
53     Section 1.  Paragraph (f) is added to subsection (2) of
54section 631.181, Florida Statutes, to read:
55     631.181  Filing and proof of claim.--
56     (2)
57     (f)  The signed statement required by this section shall
58not be required on claims for which adequate claims file
59documentation exists within the records of the insolvent
60insurer. Claims for payment of unearned premium shall not be
61required to use the signed statement required by this section if
62the receiver certifies to the guaranty fund that the records of
63the insolvent insurer are sufficient to determine the amount of
64unearned premium owed to each policyholder of the insurer and
65such information is remitted to the guaranty fund by the
66receiver in electronic or other mutually agreed-upon format.
67     Section 2.  Subsection (3) of section 631.54, Florida
68Statutes, is amended to read:
69     631.54  Definitions.--As used in this part:
70     (3)  "Covered claim" means an unpaid claim, including one
71of unearned premiums, which arises out of, and is within the
72coverage, and not in excess of, the applicable limits of an
73insurance policy to which this part applies, issued by an
74insurer, if such insurer becomes an insolvent insurer and the
75claimant or insured is a resident of this state at the time of
76the insured event or the property from which the claim arises is
77permanently located in this state. For entities other than
78individuals, the residence of a claimant, insured, or
79policyholder is the state in which the entity's principal place
80of business is located at the time of the insured event.
81"Covered claim" shall not include:
82     (a)  Any amount due any reinsurer, insurer, insurance pool,
83or underwriting association, sought directly or indirectly
84through a third party, as subrogation, contribution,
85indemnification, or otherwise; or
86     (b)  Any claim that would otherwise be a covered claim
87under this part that has been rejected by any other state
88guaranty fund on the grounds that an insured's net worth is
89greater than that allowed under that state's guaranty law.
90Member insurers shall have no right of subrogation,
91contribution, indemnification, or otherwise, sought directly or
92indirectly through a third party, against the insured of any
93insolvent member.
94     Section 3.  Paragraph (a) of subsection (1), paragraph (d)
95of subsection (2), and paragraph (a) of subsection (3) of
96section 631.57, Florida Statutes, are amended, and paragraph (e)
97is added to subsection (3) of that section, to read:
98     631.57  Powers and duties of the association.--
99     (1)  The association shall:
100     (a)1.  Be obligated to the extent of the covered claims
101existing:
102     a.  Prior to adjudication of insolvency and arising within
10330 days after the determination of insolvency;
104     b.  Before the policy expiration date if less than 30 days
105after the determination; or
106     c.  Before the insured replaces the policy or causes its
107cancellation, if she or he does so within 30 days of the
108determination.
109     2.a.  The obligation under subparagraph 1. shall include
110only that amount of each covered claim which is in excess of
111$100 and is less than $300,000, except with respect to policies
112covering condominium associations or homeowners' associations,
113which associations have a responsibility to provide insurance
114coverage on residential units within the association, the
115obligation shall include that amount of each covered property
116insurance claim which is less than $100,000 multiplied by the
117number of condominium units or other residential units; however,
118as to homeowners' associations, this sub-subparagraph
119subparagraph applies only to claims for damage or loss to
120residential units and structures attached to residential units.
121     b.  Notwithstanding sub-subparagraph a., the association
122has no obligation to pay covered claims that are to be paid from
123the proceeds of bonds issued under s. 631.695. However, the
124association shall assign and pledge the first available moneys
125from all or part of the assessments to be made under paragraph
126(3)(a) to or on behalf of the issuer of such bonds for the
127benefit of the holders of such bonds. The association shall
128administer any such covered claims and present valid covered
129claims for payment in accordance with the provisions of the
130assistance program in connection with which such bonds have been
131issued.
132     3.  In no event shall the association be obligated to a
133policyholder or claimant in an amount in excess of the
134obligation of the insolvent insurer under the policy from which
135the claim arises.
136     (2)  The association may:
137     (d)  Negotiate and become a party to such contracts as are
138necessary to carry out the purpose of this part. Additionally,
139the association may enter into such contracts with a
140municipality, a county, or a legal entity created pursuant to s.
141163.01(7)(g) as are necessary in order for the municipality,
142county, or legal entity to issue bonds under s. 631.695. In
143connection with the issuance of any such bonds and the entering
144into of any such necessary contracts, the association may agree
145to such terms and conditions as the association deems necessary
146and proper.
147     (3)(a)  To the extent necessary to secure the funds for the
148respective accounts for the payment of covered claims, and also
149to pay the reasonable costs to administer the same, and to
150secure the funds for the account specified in s. 631.55(2)(c),
151or to retire indebtedness, including, without limitation, the
152principal, redemption premium, if any, and interest on, and
153related costs of issuance of, bonds issued under s. 631.695, and
154the funding of any reserves and other payments required under
155the bond resolution or trust indenture pursuant to which such
156bonds have been issued, the office, upon certification of the
157board of directors, shall levy assessments in the proportion
158that each insurer's net direct written premiums in this state in
159the classes protected by the account bears to the total of said
160net direct written premiums received in this state by all such
161insurers for the preceding calendar year for the kinds of
162insurance included within such account. Assessments shall be
163remitted to and administered by the board of directors in the
164manner specified by the approved plan. Each insurer so assessed
165shall have at least 30 days' written notice as to the date the
166assessment is due and payable. Every assessment shall be made as
167a uniform percentage applicable to the net direct written
168premiums of each insurer in the kinds of insurance included
169within the account in which the assessment is made. The
170assessments levied against any insurer shall not exceed in any
171one year more than 2 percent of that insurer's net direct
172written premiums in this state for the kinds of insurance
173included within such account during the calendar year next
174preceding the date of such assessments.
175     (e)1.a.  In addition to assessments otherwise authorized in
176paragraph (a) and to the extent necessary to secure the funds
177for the account specified in s. 631.55(2)(c), or to retire
178indebtedness, including, without limitation, the principal,
179redemption premium, if any, and interest on, and related costs
180of issuance of, bonds issued under s. 631.695, and the funding
181of any reserves and other payments required under the bond
182resolution or trust indenture pursuant to which such bonds have
183been issued, the department, upon certification of the board of
184directors, shall levy emergency assessments as provided in this
185paragraph upon insurers holding a certificate of authority. The
186emergency assessments payable under this paragraph by any
187insurer shall not exceed in any single year more than 2 percent
188of that insurer's direct written premiums, net of refunds, in
189this state during the preceding calendar year for the kinds of
190insurance within the account specified in s. 631.55(2)(c).
191     b.  Any emergency assessments authorized under this
192paragraph shall be levied by the department upon insurers
193holding a certificate of authority, upon certification as to the
194need for such assessments by the board of directors, in each
195year that bonds issued under s. 631.695 and secured by such
196emergency assessments are outstanding, in such amounts up to
197such 2-percent limit as required in order to provide for the
198full and timely payment of the principal of, redemption premium,
199if any, and interest on, and related costs of issuance of, such
200bonds. The emergency assessments provided for in this paragraph
201are assigned and pledged to the municipality, county, or legal
202entity issuing bonds under s. 631.695, for the benefit of the
203holders of such bonds, in order to enable such municipality,
204county, or legal entity to provide for the payment of the
205principal of, redemption premium, if any, and interest on such
206bonds, the cost of issuance of such bonds, and the funding of
207any reserves and other payments required under the bond
208resolution or trust indenture pursuant to which such bonds have
209been issued, without the necessity of any further action by the
210association, the department, or any other party. To the extent
211that bonds are issued under s. 631.695 and the association
212determines to secure such bonds by a pledge of revenues received
213from the emergency assessments, such bonds, upon such pledge of
214revenues, shall be secured by and payable from the proceeds of
215such emergency assessments, and the proceeds of emergency
216assessments levied under this paragraph shall be remitted
217directly to and administered by the trustee or custodian
218appointed for such bonds.
219     c.  Emergency assessments under this paragraph may be
220payable in a single payment or, at the option of the
221association, may be payable in 12 monthly installments with the
222first installment being due and payable at the end of the month
223after an emergency assessment is levied and subsequent
224installments being due not later than the end of each succeeding
225month.
226     d.  If emergency assessments are imposed, the report
227required by s. 631.695(7) shall include an analysis of the
228revenues generated from the emergency assessments imposed under
229this paragraph.
230     2.  In order to ensure that insurers paying emergency
231assessments levied under this paragraph continue to charge rates
232that are neither inadequate nor excessive, within 90 days after
233being notified of such assessments, each insurer that is to be
234assessed pursuant to this paragraph shall submit a rate filing
235for coverage included within the account specified in s.
236631.55(2)(c) and for which rates are required to be filed under
237s. 627.062. If the filing reflects a rate change that, as a
238percentage, is equal to the difference between the rate of such
239assessment and the rate of the previous year's assessment under
240this paragraph, the filing shall consist of a certification so
241stating and shall be deemed approved when made. Any rate change
242of a different percentage shall be subject to the standards and
243procedures of s. 627.062.
244     3.  An annual assessment under this paragraph shall
245continue while the bonds issued with respect to which the
246assessment was imposed are outstanding, including any bonds the
247proceeds of which were used to refund bonds issued pursuant to
248s. 631.695, unless adequate provision has been made for the
249payment of the bonds in the documents authorizing the issuance
250of such bonds.
251     4.  Emergency assessments under this paragraph are not
252premium and are not subject to the premium tax, to any fees, or
253to any commissions. An insurer is liable for all emergency
254assessments that the insurer collects and shall treat the
255failure of an insured to pay an emergency assessment as a
256failure to pay the premium. An insurer is not liable for
257uncollectible emergency assessments.
258     Section 4.  Section 631.695, Florida Statutes, is created
259to read:
260     631.695  Revenue bond issuance through counties or
261municipalities.--
262     (1)  The Legislature finds:
263     (a)  The potential for widespread and massive damage to
264persons and property caused by hurricanes making landfall in
265this state can generate insurance claims of such a number as to
266render numerous insurers operating within this state insolvent
267and therefore unable to satisfy covered claims.
268     (b)  The inability of insureds within this state to receive
269payment of covered claims or to timely receive such payment
270creates financial and other hardships for such insureds and
271places undue burdens on the state, the affected units of local
272government, and the community at large.
273     (c)  In addition, the failure of insurers to pay covered
274claims or to timely pay such claims due to the insolvency of
275such insurers can undermine the public's confidence in insurers
276operating within this state, thereby adversely affecting the
277stability of the insurance industry in this state.
278     (d)  The state has previously taken action to address these
279problems by adopting the Florida Insurance Guaranty Association
280Act, which, among other things, provides a mechanism for the
281payment of covered claims under certain insurance policies to
282avoid excessive delay in payment and to avoid financial loss to
283claimants or policyholders because of the insolvency of an
284insurer.
285     (e)  In the wake of the unprecedented destruction caused by
286various hurricanes that have made landfall in this state, the
287resultant covered claims, and the number of insurers rendered
288insolvent thereby, it is evident that alternative programs must
289be developed to allow the Florida Insurance Guaranty
290Association, Inc., to more expeditiously and effectively provide
291for the payment of covered claims.
292     (f)  It is therefore determined to be in the best interests
293of, and necessary for, the protection of the public health,
294safety, and general welfare of the residents of this state, and
295for the protection and preservation of the economic stability of
296insurers operating in this state, and it is declared to be an
297essential public purpose, to permit certain municipalities and
298counties to take such actions as will provide relief to
299claimants and policyholders having covered claims against
300insolvent insurers operating in this state by expediting the
301handling and payment of covered claims.
302     (g)  To achieve the foregoing purposes, it is proper to
303authorize municipalities and counties of this state
304substantially affected by the landfall of a category 1 or
305greater hurricane to issue bonds to assist the Florida Insurance
306Guaranty Association, Inc., in expediting the handling and
307payment of covered claims of insolvent insurers.
308     (h)  In order to avoid the needless and indiscriminate
309proliferation, duplication, and fragmentation of such assistance
310programs, it is in the best interests of the residents of this
311state to authorize municipalities and counties severely affected
312by a category 1 or greater hurricane to provide for the payment
313of covered claims beyond their territorial limits in the
314implementation of such programs.
315     (i)  It is a paramount public purpose for municipalities
316and counties substantially affected by the landfall of a
317category 1 or greater hurricane to be able to issue bonds for
318the purposes described in this section. Such issuance shall
319provide assistance to residents of those municipalities and
320counties as well as to other residents of this state.
321     (2)  The governing body of any municipality or county the
322residents of which have been substantially affected by a
323category 1 or greater hurricane may issue bonds to fund an
324assistance program in conjunction with, and with the consent of,
325the Florida Insurance Guaranty Association, Inc., for the
326purpose of paying claimants' or policyholders' covered claims as
327defined in s. 631.54 arising through the insolvency of an
328insurer, which insolvency is determined by the Florida Insurance
329Guaranty Association, Inc., to have been a result of a category
3301 or greater hurricane, regardless of whether such claimants or
331policyholders are residents of such municipality or county or
332the property to which such claim relates is located within or
333outside the territorial jurisdiction of such municipality or
334county. The power of a municipality or county to issue bonds as
335described in this section is in addition to any powers granted
336by law and may not be abrogated or restricted by any provisions
337in such municipality's or county's charter. A municipality or
338county issuing bonds for this purpose shall enter into such
339contracts with the Florida Insurance Guaranty Association, Inc.,
340or any entity acting on behalf of the Florida Insurance Guaranty
341Association, Inc., as are necessary to implement the assistance
342program. Any bonds issued by a municipality or county or
343combination thereof under this subsection shall be payable from
344and secured by moneys received by or on behalf of the
345municipality or county from assessments levied under s.
346631.57(3)(a) and assigned and pledged to or on behalf of the
347municipality or county for the benefit of the holders of such
348bonds in connection with such assistance program. The funds,
349credit, property, and taxing power of the state or any
350municipality or county shall not be pledged for the payment of
351such bonds.
352     (3)  Bonds may be validated by such municipality or county
353pursuant to chapter 75. The proceeds of such bonds may be used
354to pay covered claims of insolvent insurers; to refinance or
355replace previously existing borrowings or financial
356arrangements; to pay interest on bonds; to fund reserves for the
357bonds; to pay expenses incident to the issuance or sale of any
358bond issued under this section, including costs of validating,
359printing, and delivering the bonds, costs of printing the
360official statement, costs of publishing notices of sale of the
361bonds, costs of obtaining credit enhancement or liquidity
362support, and related administrative expenses; or for such other
363purposes related to the financial obligations of the fund as the
364association may determine. The term of the bonds may not exceed
36530 years.
366     (4)  The state covenants with holders of bonds of the
367assistance program that the state will not take any action that
368will have a material adverse effect on such holders and will not
369repeal or abrogate the power of the board of directors of the
370association to direct the Office of Insurance Regulation to levy
371the assessments and to collect the proceeds of the revenues
372pledged to the payment of such bonds as long as any such bonds
373remain outstanding unless adequate provision has been made for
374the payment of such bonds in the documents authorizing the
375issuance of such bonds.
376     (5)  The accomplishment of the authorized purposes of such
377municipality or county under this section is in all respects for
378the benefit of the people of the state, for the increase of
379their commerce and prosperity, and for the improvement of their
380health and living conditions. Such municipality or county, in
381performing essential governmental functions in accomplishing its
382purposes, is not required to pay any taxes or assessments of any
383kind whatsoever upon any property acquired or used by the county
384or municipality for such purposes or upon any revenues at any
385time received by the county or municipality. The bonds, notes,
386and other obligations of such municipality or county, and the
387transfer of and income from such bonds, notes, and other
388obligations, including any profits made on the sale of such
389bonds, notes, and other obligations, are exempt from taxation of
390any kind by the state or by any political subdivision or other
391agency or instrumentality of the state. The exemption granted in
392this subsection is not applicable to any tax imposed by chapter
393220 on interest, income, or profits on debt obligations owned by
394corporations.
395     (6)  Two or more municipalities or counties the residents
396of which have been substantially affected by a category 1 or
397greater hurricane may create a legal entity pursuant to s.
398163.01(7)(g) to exercise the powers described in this section as
399well as those powers granted in s. 163.01(7)(g). Reference in
400this section to a municipality or county includes such legal
401entity.
402     (7)  The association shall issue an annual report on the
403status of the use of bond proceeds as related to insolvencies
404caused by hurricanes. The report must contain the number and
405amount of claims paid. The association shall also include an
406analysis of the revenue generated from the assessment levied
407under s. 631.57(3)(a) to pay such bonds. The association shall
408submit a copy of the report to the President of the Senate, the
409Speaker of the House of Representatives, and the Chief Financial
410Officer within 90 days after the end of each calendar year in
411which bonds were outstanding.
412     Section 5.  No provision of s. 631.57 or s. 631.695,
413Florida Statutes, shall be repealed until such time as the
414principal, redemption premium, if any, and interest on all bonds
415issued under s. 631.695, Florida Statutes, payable and secured
416from assessments levied under s. 631.57(3)(a), Florida Statutes,
417have been paid in full or adequate provision for such payment
418has been made in accordance with the bond resolution or trust
419indenture pursuant to which such bonds were issued.
420     Section 6.  If any provision of this act or the application
421thereof to any person or circumstance is held invalid, the
422invalidity shall not affect other provisions or applications of
423the act which can be given effect without the invalid provision
424or application, and to this end the provisions of this act are
425declared severable.
426     Section 7.  This act shall take effect upon becoming a law.


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