| 1 | The Insurance Committee recommends the following: |
| 2 |
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| 3 | Council/Committee Substitute |
| 4 | Remove the entire bill and insert: |
| 5 | A bill to be entitled |
| 6 | An act relating to warranty associations; creating s. |
| 7 | 634.042, F.S.; prohibiting a motor vehicle service |
| 8 | agreement company from investing or lending company funds |
| 9 | for specified purposes; amending s. 634.301, F.S.; |
| 10 | revising a definition of "home warranty" to specify |
| 11 | nonapplication to certain contracts or agreements; |
| 12 | creating s. 634.3076, F.S.; prohibiting a home warranty |
| 13 | association from investing or lending association funds |
| 14 | for specified purposes; amending s. 634.3077, F.S.; |
| 15 | specifying an additional requirement for contractual |
| 16 | liability insurance purchased by a home warranty |
| 17 | association; amending s. 634.312, F.S; revising a |
| 18 | prohibition against the Office of Insurance Regulation for |
| 19 | nonapproval of certain forms; specifying cancellation |
| 20 | requirements for home warranty contracts; providing return |
| 21 | of premium requirements; authorizing an administrative |
| 22 | fee; specifying refund amounts for a home warranty under |
| 23 | certain circumstances; amending s. 634.336, F.S.; removing |
| 24 | a cross-reference to conform; creating s. 634.4062, F.S.; |
| 25 | prohibiting a service warranty association from investing |
| 26 | or lending association funds for specified purposes; |
| 27 | repealing s. 634.345, F.S., relating to a buyer's right to |
| 28 | cancel a home warranty; providing an effective date. |
| 29 |
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| 30 | Be It Enacted by the Legislature of the State of Florida: |
| 31 |
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| 32 | Section 1. Section 634.042, Florida Statutes, is created |
| 33 | to read: |
| 34 | 634.042 Prohibited investments and loans.--A motor vehicle |
| 35 | service agreement company shall not directly or indirectly |
| 36 | invest in or lend its funds upon the security of any note or |
| 37 | other evidence of indebtedness of any director, officer, or |
| 38 | controlling stockholder of the motor vehicle service agreement |
| 39 | company. This prohibition applies only to investments and loans |
| 40 | initially reported on motor vehicle service agreement financial |
| 41 | statements after the third quarterly statement for 2006. |
| 42 | Section 2. Subsection (3) of section 634.301, Florida |
| 43 | Statutes, is amended to read: |
| 44 | 634.301 Definitions.--As used in this part, the term: |
| 45 | (3) "Home warranty" or "warranty" means any contract or |
| 46 | agreement: |
| 47 | (a) Offered in connection with the sale of residential |
| 48 | property; |
| 49 | (b) Offered in connection with a loan of $5,000 or more |
| 50 | which is secured by residential property that is the subject of |
| 51 | the warranty, but not in connection with the sale of such |
| 52 | property; or |
| 53 | (c) Offered in connection with a home improvement of |
| 54 | $7,500 or more for residential property that is the subject of |
| 55 | the warranty, but not in connection with the sale of such |
| 56 | property; |
| 57 |
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| 58 | whereby a person undertakes to indemnify the warranty holder |
| 59 | against the cost of repair or replacement, or actually furnishes |
| 60 | repair or replacement, of any structural component or appliance |
| 61 | of a home, necessitated by wear and tear or an inherent defect |
| 62 | of any such structural component or appliance or necessitated by |
| 63 | the failure of an inspection to detect the likelihood of any |
| 64 | such loss. However, this part does not prohibit the giving of |
| 65 | usual performance guarantees by either the builder of a home or |
| 66 | the manufacturer or seller of an appliance, as long as no |
| 67 | identifiable charge is made for such guarantee. This part does |
| 68 | not permit the provision of indemnification against |
| 69 | consequential damages arising from the failure of any structural |
| 70 | component or appliance of a home, which practice constitutes the |
| 71 | transaction of insurance subject to all requirements of the |
| 72 | insurance code. This part does not apply to service contracts |
| 73 | entered into between consumers and nonprofit organizations or |
| 74 | cooperatives the members of which consist of condominium |
| 75 | associations and condominium owners and which perform repairs |
| 76 | and maintenance for appliances or maintenance of the residential |
| 77 | property. This part does not apply to a contract or agreement |
| 78 | offered in connection with a sale of residential property by a |
| 79 | warranty association in compliance with part III, provided such |
| 80 | contract or agreement only relates to the systems and appliances |
| 81 | of the covered residential property and does not cover any |
| 82 | structural component of the residential property. |
| 83 | Section 3. Section 634.3076, Florida Statutes, is created |
| 84 | to read: |
| 85 | 634.3076 Prohibited investments and loans.--A home |
| 86 | warranty association shall not directly or indirectly invest in |
| 87 | or lend its funds upon the security of any note or other |
| 88 | evidence of indebtedness of any director, officer, or |
| 89 | controlling stockholder of the home warranty association. This |
| 90 | prohibition applies only to investments and loans initially |
| 91 | reported on a home warranty association's financial statements |
| 92 | after the third quarterly statement for 2006. |
| 93 | Section 4. Paragraph (d) is added to subsection (3) of |
| 94 | section 634.3077, Florida Statutes, to read: |
| 95 | 634.3077 Financial requirements.-- |
| 96 | (3) An association shall not be required to set up an |
| 97 | unearned premium reserve if it has purchased contractual |
| 98 | liability insurance which demonstrates to the satisfaction of |
| 99 | the office that 100 percent of its claim exposure is covered by |
| 100 | such insurance. Such contractual liability insurance shall be |
| 101 | obtained from an insurer that holds a certificate of authority |
| 102 | to do business within the state or from an insurer approved by |
| 103 | the office as financially capable of meeting the obligations |
| 104 | incurred pursuant to the policy. For purposes of this |
| 105 | subsection, the contractual liability policy shall contain the |
| 106 | following provisions: |
| 107 | (d) The contractual liability insurance policy shall |
| 108 | insure all home warranty contracts that were issued while the |
| 109 | policy was in effect whether or not the premium has been |
| 110 | remitted to the insurer. |
| 111 | Section 5. Subsection (3) of section 634.312, Florida |
| 112 | Statutes, is amended, and subsection (8) is added to that |
| 113 | section, to read: |
| 114 | 634.312 Filing;, approval of forms.-- |
| 115 | (3) The office shall not approve any such form that |
| 116 | imposes which allows for more than nine annual renewals or which |
| 117 | renewal contracts provide that the cost of renewal exceeds the |
| 118 | then-current cost for new warranty contracts or impose a fee for |
| 119 | inspection of the premises. |
| 120 | (8) Each home warranty contract shall contain a |
| 121 | cancellation provision. Any home warranty agreement may be |
| 122 | canceled by the purchaser within 10 days after purchase. The |
| 123 | refund must be 100 percent of the gross premium paid, less any |
| 124 | claims paid on the agreement. A reasonable administrative fee |
| 125 | may be charged, not to exceed 5 percent of the gross premium |
| 126 | paid by the warranty agreement holder. After the home warranty |
| 127 | agreement has been in effect for 10 days, if the contract is |
| 128 | canceled by the warranty holder, a return of premium shall be |
| 129 | based upon 90 percent of unearned pro rata premium less any |
| 130 | claims that have been paid. If the contract is canceled by the |
| 131 | association for any reason other than for fraud or |
| 132 | misrepresentation, a return of premium shall be based upon 100 |
| 133 | percent of unearned pro rata premium. |
| 134 | Section 6. Subsection (8) of section 634.336, Florida |
| 135 | Statutes, is amended to read: |
| 136 | 634.336 Unfair methods of competition and unfair or |
| 137 | deceptive acts or practices defined.--The following methods, |
| 138 | acts, or practices are defined as unfair methods of competition |
| 139 | and unfair or deceptive acts or practices: |
| 140 | (8) COERCION OF DEBTORS.--When a home warranty is sold as |
| 141 | authorized by s. 634.301(3)(b): |
| 142 | (a) Requiring, as a condition precedent or condition |
| 143 | subsequent to the lending of the money or the extension of the |
| 144 | credit or any renewal thereof, that the person to whom such |
| 145 | credit is extended purchase a home warranty; or |
| 146 | (b) Failing to provide the advice required by s. 634.344; |
| 147 | or |
| 148 | (c) Failing to comply with the provisions of s. 634.345. |
| 149 | Section 7. Section 634.4062, Florida Statutes, is created |
| 150 | to read: |
| 151 | 634.4062 Prohibited investments and loans.--A service |
| 152 | warranty association shall not directly or indirectly invest in |
| 153 | or lend its funds upon the security of any note or other |
| 154 | evidence of indebtedness of any director, officer, or |
| 155 | controlling stockholder of the service warranty association. |
| 156 | This prohibition applies only to investments and loans initially |
| 157 | reported on a service warranty association's financial |
| 158 | statements after the third quarterly statement for 2006. |
| 159 | Section 8. Section 634.345, Florida Statutes, is repealed. |
| 160 | Section 9. This act shall take effect July 1, 2006. |