CS/CS/HB 159

1	A bill to be entitled
2	An act relating to guaranty associations; amending s.
3	631.52, F.S.; expanding an exemption from the
4	applicability of certain provisions of state law to
5	include workers' compensation claims under employer
6	liability coverage; amending s. 631.54, F.S.; conforming
7	the definition of "account" to changes made by the act;
8	amending s. 631.55, F.S.; revising the separate accounts
9	of the association; amending s. 631.57, F.S.; conforming
10	cross-references; providing a legislative finding and
11	declaration; authorizing insurers to recoup certain
12	assessments levied by the Office of Insurance Regulation
13	by applying certain recoupment factors; deleting
14	provisions relating to classification and payment of
15	emergency assessments; providing guidelines and a
16	methodology for the calculation of recoupment factors for
17	recouping certain assessments; authorizing an insurer to
18	apply a recalculated recoupment factor under certain
19	conditions; providing for the return of excess assessments
20	and recoupment charges; providing that amounts recouped
21	are not premium and not subject to premium taxes, fees, or
22	commissions; requiring that insurers treat failure to pay
23	a recoupment charge as failure to pay the premium;
24	requiring that an insurer file with the office a statement
25	containing certain information within a specified period
26	before applying a recoupment factor to any policies;
27	authorizing an insurer to use a recoupment factor after
28	the expiration of such period; providing that an insurer
29	need submit only one such statement for all lines of
30	business; requiring that an insurer file with the office
31	an accounting report containing certain information within
32	a specified period after the completion of the recoupment
33	process; providing that an insurer need submit only one
34	such report for all lines of business; amending s.
35	631.713, F.S.; expanding the application of certain
36	provisions of state law to certain residents of other
37	states who own certain insurance policies; expanding the
38	list of contracts and policies to which life and health
39	insurance guaranty of payments provisions do not apply;
40	providing for application to coverage under certain
41	structured settlement annuities under certain
42	circumstances; amending s. 631.714, F.S.; revising certain
43	definitions; amending s. 631.717, F.S.; revising a
44	guaranty association's aggregate liability for life
45	insurance and deferred annuity contracts; authorizing an
46	association to issue alternative policies or contracts to
47	certain policies or contracts under certain circumstances;
48	subjecting such alternative policies or contracts to
49	specified requirements; creating s. 631.7295, F.S.;
50	authorizing an association to succeed to the rights of an
51	insolvent insurer arising after an order of liquidation or
52	rehabilitation with regard to certain contracts of
53	reinsurance; requiring that such an association pay all
54	unpaid premiums due under the contract; amending s.
55	631.735, F.S.; specifying that certain advertisement
56	prohibitions do not prohibit the furnishing of certain
57	written information in a form prepared by an association
58	upon request; amending s. 631.904, F.S.; revising the
59	definition of the term "covered claim"; providing an
60	effective date.
61
62	Be It Enacted by the Legislature of the State of Florida:
63
64	Section 1.  Subsection (14) of section 631.52, Florida
65	Statutes, is amended to read:
66	631.52  Scope.-This part shall apply to all kinds of direct
67	insurance, except:
68	(14)  Workers' compensation, including claims under
69	employer liability coverage;
70	Section 2.  Subsection (1) of section 631.54, Florida
71	Statutes, is amended to read:
72	631.54  Definitions.-As used in this part:
73	(1)  "Account" means any one of the three accounts created
74	by s. 631.55.
75	Section 3.  Subsection (2) of section 631.55, Florida
76	Statutes, is amended to read:
77	631.55  Creation of the association.-
78	(2)  For the purposes of administration and assessment, the
79	association shall be divided into two three separate accounts:
80	(a)  The auto liability and account;
81	(b)  The auto physical damage account.; and
82	(b)(c)  The account for all other insurance to which this
83	part applies.
84	Section 4.  Subsection (3) of section 631.57, Florida
85	Statutes, is amended to read:
86	631.57  Powers and duties of the association.-
87	(3)(a)  To the extent necessary to secure the funds for the
88	respective accounts for the payment of covered claims, to pay
89	the reasonable costs to administer the same, and to the extent
90	necessary to secure the funds for the account specified in s.
91	631.55(2)(b)(c) or to retire indebtedness, including, without
92	limitation, the principal, redemption premium, if any, and
93	interest on, and related costs of issuance of, bonds issued
94	under s. 631.695 and the funding of any reserves and other
95	payments required under the bond resolution or trust indenture
96	pursuant to which such bonds have been issued, the office, upon
97	certification of the board of directors, shall levy assessments
98	in the proportion that each insurer's net direct written
99	premiums in this state in the classes protected by the account
100	bears to the total of said net direct written premiums received
101	in this state by all such insurers for the preceding calendar
102	year for the kinds of insurance included within such account.
103	Assessments shall be remitted to and administered by the board
104	of directors in the manner specified by the approved plan. Each
105	insurer so assessed shall have at least 30 days' written notice
106	as to the date the assessment is due and payable. Every
107	assessment shall be made as a uniform percentage applicable to
108	the net direct written premiums of each insurer in the kinds of
109	insurance included within the account in which the assessment is
110	made. The assessments levied against any insurer shall not
111	exceed in any one year more than 2 percent of that insurer's net
112	direct written premiums in this state for the kinds of insurance
113	included within such account during the calendar year next
114	preceding the date of such assessments.
115	(b)  If sufficient funds from such assessments, together
116	with funds previously raised, are not available in any one year
117	in the respective account to make all the payments or
118	reimbursements then owing to insurers, the funds available shall
119	be prorated and the unpaid portion shall be paid as soon
120	thereafter as funds become available.
121	(c)  The Legislature finds and declares that all
122	assessments paid by an insurer or insurer group as a result of a
123	levy by the office, including regular and emergency assessments,
124	constitute advances of funds from the insurer to the
125	association. An insurer may fully recoup such advances by
126	applying a separate recoupment factor to the premium of policies
127	of the same kind or line as were considered by the office in
128	determining the assessment liability of the insurer or insurer
129	group. Assessments shall be included as an appropriate factor in
130	the making of rates.
131	(d)  No state funds of any kind shall be allocated or paid
132	to said association or any of its accounts.
133	(e)1.a.  In addition to assessments otherwise authorized in
134	paragraph (a) and to the extent necessary to secure the funds
135	for the account specified in s. 631.55(2)(b)(c) for the direct
136	payment of covered claims of insurers rendered insolvent by the
137	effects of a hurricane and to pay the reasonable costs to
138	administer such claims, or to retire indebtedness, including,
139	without limitation, the principal, redemption premium, if any,
140	and interest on, and related costs of issuance of, bonds issued
141	under s. 631.695 and the funding of any reserves and other
142	payments required under the bond resolution or trust indenture
143	pursuant to which such bonds have been issued, the office, upon
144	certification of the board of directors, shall levy emergency
145	assessments upon insurers holding a certificate of authority.
146	The emergency assessments payable under this paragraph by any
147	insurer shall not exceed in any single year more than 2 percent
148	of that insurer's direct written premiums, net of refunds, in
149	this state during the preceding calendar year for the kinds of
150	insurance within the account specified in s. 631.55(2)(b)(c).
151	b.  Any emergency assessments authorized under this
152	paragraph shall be levied by the office upon insurers referred
153	to in sub-subparagraph a., upon certification as to the need for
154	such assessments by the board of directors. In the event the
155	board of directors participates in the issuance of bonds in
156	accordance with s. 631.695, emergency assessments shall be
157	levied in each year that bonds issued under s. 631.695 and
158	secured by such emergency assessments are outstanding, in such
159	amounts up to such 2-percent limit as required in order to
160	provide for the full and timely payment of the principal of,
161	redemption premium, if any, and interest on, and related costs
162	of issuance of, such bonds. The emergency assessments provided
163	for in this paragraph are assigned and pledged to the
164	municipality, county, or legal entity issuing bonds under s.
165	631.695 for the benefit of the holders of such bonds, in order
166	to enable such municipality, county, or legal entity to provide
167	for the payment of the principal of, redemption premium, if any,
168	and interest on such bonds, the cost of issuance of such bonds,
169	and the funding of any reserves and other payments required
170	under the bond resolution or trust indenture pursuant to which
171	such bonds have been issued, without the necessity of any
172	further action by the association, the office, or any other
173	party. To the extent bonds are issued under s. 631.695 and the
174	association determines to secure such bonds by a pledge of
175	revenues received from the emergency assessments, such bonds,
176	upon such pledge of revenues, shall be secured by and payable
177	from the proceeds of such emergency assessments, and the
178	proceeds of emergency assessments levied under this paragraph
179	shall be remitted directly to and administered by the trustee or
180	custodian appointed for such bonds.
181	c.  Emergency assessments under this paragraph may be
182	payable in a single payment or, at the option of the
183	association, may be payable in 12 monthly installments with the
184	first installment being due and payable at the end of the month
185	after an emergency assessment is levied and subsequent
186	installments being due not later than the end of each succeeding
187	month.
188	d.  If emergency assessments are imposed, the report
189	required by s. 631.695(7) shall include an analysis of the
190	revenues generated from the emergency assessments imposed under
191	this paragraph.
192	e.  If emergency assessments are imposed, the references in
193	sub-subparagraph (1)(a)3.b. and s. 631.695(2) and (7) to
194	assessments levied under paragraph (a) shall include emergency
195	assessments imposed under this paragraph.
196	2.  In order to ensure that insurers paying emergency
197	assessments levied under this paragraph continue to charge rates
198	that are neither inadequate nor excessive, within 90 days after
199	being notified of such assessments, each insurer that is to be
200	assessed pursuant to this paragraph shall submit a rate filing
201	for coverage included within the account specified in s.
202	631.55(2)(c) and for which rates are required to be filed under
203	s. 627.062. If the filing reflects a rate change that, as a
204	percentage, is equal to the difference between the rate of such
205	assessment and the rate of the previous year's assessment under
206	this paragraph, the filing shall consist of a certification so
207	stating and shall be deemed approved when made. Any rate change
208	of a different percentage shall be subject to the standards and
209	procedures of s. 627.062.
210	2.3.  If In the event the board of directors participates
211	in the issuance of bonds in accordance with s. 631.695, an
212	annual assessment under this paragraph shall continue while the
213	bonds issued with respect to which the assessment was imposed
214	are outstanding, including any bonds the proceeds of which were
215	used to refund bonds issued pursuant to s. 631.695, unless
216	adequate provision has been made for the payment of the bonds in
217	the documents authorizing the issuance of such bonds.
218	3.4.  Emergency assessments under this paragraph are not
219	premium and are not subject to the premium tax, to any fees, or
220	to any commissions. An insurer is liable for all emergency
221	assessments that the insurer collects and shall treat the
222	failure of an insured to pay an emergency assessment as a
223	failure to pay the premium. An insurer is not liable for
224	uncollectible emergency assessments.
225	(f)  The recoupment factor applied to policies in
226	accordance with paragraph (c) shall be selected by the insurer
227	or insurer group so as to provide for the probable recoupment of
228	both regular and emergency assessments over a period of 12
229	months, unless the insurer or insurer group, at its option,
230	elects to recoup the assessment over a longer period. The
231	recoupment factor shall apply to all policies of the same kind
232	or line as were considered by the office in determining the
233	assessment liability of the insurer or insurer group issued or
234	renewed during a 12-month period. If the insurer or insurer
235	group does not collect the full amount of the assessment during
236	one 12-month period, the insurer or insurer group may apply
237	recalculated recoupment factors to policies issued or renewed
238	during one or more succeeding 12-month periods. If, at the end
239	of a 12-month period, the insurer or insurer group has collected
240	from the combined kinds or lines of policies subject to
241	assessment more than the total amount of the assessment paid by
242	the insurer or insurer group, the excess amount shall be
243	disbursed as follows:
244	1.  If the excess amount does not exceed 15 percent of the
245	total assessment paid by the insurer or insurer group, the
246	excess amount shall be remitted to the association within 60
247	days after the end of the 12-month period in which the excess
248	recoupment charges were collected.
249	2.  If the excess amount exceeds 15 percent of the total
250	assessment paid by the insurer or insurer group, the excess
251	amount shall be returned to the insurer's or insurer group's
252	current policyholders by refunds or premium credits. The
253	association shall use any remitted excess recoupment amounts to
254	reduce future assessments.
255	(g)  Amounts recouped pursuant to this subsection for
256	assessments levied under paragraph (a) due to insolvencies on or
257	after July 1, 2010, are considered premium solely for premium
258	tax purposes and are not subject to fees or commissions.
259	However, insurers shall treat the failure of an insured to pay a
260	recoupment charge as a failure to pay the premium.
261	(h)  At least 15 days before applying the recoupment factor
262	to any policies, the insurer or insurer group shall file with
263	the office a statement for informational purposes only setting
264	forth the amount of the recoupment factor and an explanation of
265	how the recoupment factor will be applied. Such statement shall
266	include documentation of the assessment paid by the insurer or
267	insurer group and the arithmetic calculations supporting the
268	recoupment factor. The insurer or insurer group may use the
269	recoupment factor at any time after the expiration of the 15-day
270	period. The insurer or insurer group need submit only one
271	informational statement for all lines of business using the same
272	recoupment factor.
273	(i)  No later than 90 days after the insurer or insurer
274	group has completed the recoupment process, the insurer or
275	insurer group shall file with the office, for information
276	purposes only, a final accounting report documenting the
277	recoupment. The report shall provide the amounts of assessments
278	paid by the insurer or insurer group, the amounts and
279	percentages recouped by year from each affected line of
280	business, and the direct written premium subject to recoupment
281	by year. The insurer or insurer group need submit only one
282	report for all lines of business using the same recoupment
283	factor.
284	Section 5.  Paragraph (b) of subsection (2) of section
285	631.713, Florida Statutes, is amended, paragraphs (n), (o), and
286	(p) are added to subsection (3) of that section, and subsection
287	(5) is added to that section, to read:
288	631.713  Application of part.-
289	(2)  Coverage under this part shall be provided to:
290	(b)  Persons who are owners of or certificateholders under
291	such policies or contracts, and who:
292	1.  Are residents of this state; or
293	2.  Are residents of other states, but only if:
294	a.  The insurers which issued such policies or contracts
295	are domiciled in this state;
296	b.  Such insurers were not licensed never held a license or
297	certificate of authority in the states in which such persons
298	reside at the time specified in a state's guaranty association
299	law as necessary for coverage by that state's association;
300	c.  Such other states have associations similar to the
301	association created by this part; and
302	d.  Such persons are not eligible for coverage by such
303	associations.
304	(3)  This part does not apply to:
305	(n)  A portion of a policy or contract, to the extent that
306	the rate of interest on which the policy or contract is based,
307	or the interest rate, crediting rate, or similar factor
308	determined by use of an index or other external reference stated
309	in the policy or contract employed in calculating returns or
310	changes in value:
311	1.  Averaged over the period of 4 years immediately
312	preceding the date on which the member insurer becomes an
313	impaired or insolvent insurer under this part, whichever is
314	earlier, exceeds the rate of interest determined by subtracting
315	2 percentage points from Moody's Corporate Bond Yield Average
316	averaged for that same 4-year period or for such lesser period
317	if the policy or contract was issued less than 4 years before
318	the member insurer becomes an impaired or insolvent insurer
319	under this part, whichever is earlier; and
320	2.  On and after the date on which the member insurer
321	becomes an impaired or insolvent insurer under this part,
322	whichever is earlier, exceeds the rate of interest determined by
323	subtracting 3 percentage points from the most current version of
324	Moody's Corporate Bond Yield Average.
325	(o)  A portion of a policy or contract to the extent the
326	policy or contract provides for interest or other changes in
327	value to be determined by the use of an index or other external
328	reference stated in the policy or contract, but which has not
329	been credited to the policy or contract, or as to which the
330	policy or contract owner's rights are subject to forfeiture, as
331	of the date the member insurer becomes an impaired or insolvent
332	insurer under this part. However, if the interest or change in
333	value is credited less frequently than annually as determined by
334	using the procedures defined in the policy or contract, interest
335	or change in value shall be credited by using the procedure
336	defined in the policy or contract as if the contractual date of
337	crediting interest or changing values was the date of impairment
338	or insolvency, whichever is earlier, and shall not be subject to
339	forfeiture.
340	(p)  A policy or contract providing any hospital, medical,
341	prescription drug, or other health care benefits pursuant to
342	Medicare Part C or Part D or any regulations issued pursuant to
343	Medicare Part C or Part D.
344	(5)  Notwithstanding any other provisions of this part,
345	this part applies to coverage of a person who is a payee under a
346	structured settlement annuity, or a beneficiary if the payee is
347	deceased, with a coverage limit of $300,000 by the association,
348	if:
349	(a)  The payee is a resident of this state, regardless of
350	where the contract owner resides.
351	(b)  Neither the payee, the beneficiary, nor the contract
352	owner is eligible for coverage by the association of the state
353	in which the contract owner resides.
354	Section 6.  Subsections (6) and (10) of section 631.714,
355	Florida Statutes, are amended to read:
356	631.714  Definitions.-As used in this part, the term:
357	(6)  "Insolvent insurer" means a member insurer authorized
358	to transact insurance in this state, either at the time the
359	policy was issued or when the insured event occurred, and
360	against which an order of liquidation with a finding of
361	insolvency has been entered by a court of competent
362	jurisdiction, if such order has become final by the exhaustion
363	of appellate review.
364	(10)  "Resident" means any person who resides in this state
365	at the time a member insurer is determined to be an impaired or
366	insolvent insurer and to whom contractual obligations are owed
367	by such impaired or insolvent member insurer. A person may be a
368	resident of only one state, which in the case of a person other
369	than an individual shall be the person's principal place of
370	business. Citizens of the United States who are residents of
371	foreign countries or United States possessions, territories, or
372	protectorates that do not have an association similar to the
373	guaranty association created by this part shall be deemed
374	residents of the state of domicile of the insurer issuing the
375	policies or contracts.
376	Section 7.  Subsection (9) of section 631.717, Florida
377	Statutes, is amended, and paragraph (g) is added to subsection
378	(12) of that section, to read:
379	631.717  Powers and duties of the association.-
380	(9)  The association's liability for the contractual
381	obligations of the insolvent insurer shall be as great as, but
382	no greater than, the contractual obligations of the insurer in
383	the absence of such insolvency, unless such obligations are
384	reduced as permitted by subsection (4), but the aggregate
385	liability of the association shall not exceed $100,000 in net
386	cash surrender and net cash withdrawal values for life
387	insurance, $250,000 in net cash surrender and net cash
388	withdrawal values for deferred annuity contracts, or $300,000
389	for all benefits including cash values, with respect to any one
390	life. In no event shall the association be liable for any
391	penalties or interest.
392	(12)
393	(g)  In carrying out its duties in connection with
394	guaranteeing, assuming, or reinsuring policies or contracts
395	under subsections (2) and (3), the association may, subject to
396	approval of the receivership court, issue substitute coverage
397	for a policy or contract that provides an interest rate,
398	crediting rate, or similar factor determined by use of an index
399	or other external reference stated in the policy or contract
400	employed in calculating returns or changes in value by issuing
401	an alternative policy or contract. In lieu of the index or other
402	external reference provided for in the original policy or
403	contract, the alternative policy or contract must provide for a
404	fixed interest rate, payment of dividends with minimum
405	guarantees, or a different method for calculating interest or
406	changes in value. In such case:
407	1.  There is no requirement for evidence of insurability,
408	waiting period, or other exclusion that would not have applied
409	under the replaced policy or contract.
410	2.  The alternative policy or contract shall be
411	substantially similar to the replaced policy or contract in all
412	other material terms.
413	Section 8.  Section 631.7295, Florida Statutes, is created
414	to read:
415	631.7295  Reinsurance.-With respect to covered policies for
416	which the association becomes obligated after an entry of an
417	order of liquidation or rehabilitation, the association may
418	elect to succeed to the rights of the insolvent insurer arising
419	after the order of liquidation or rehabilitation under any
420	contract of reinsurance to which the insolvent insurer was a
421	party, to the extent such contract provides coverage for losses
422	occurring after the date of the order of liquidation or
423	rehabilitation. As a condition to making such election, the
424	association must pay all unpaid premiums due under the contract
425	for coverage relating to periods before and after the date on
426	which the order of liquidation or rehabilitation was entered.
427	Section 9.  Section 631.735, Florida Statutes, is amended
428	to read:
429	631.735  Prohibited advertisement of Florida Life and
430	Health Insurance Guaranty Association Act in sale of insurance.-
431	A No person may not shall make, publish, disseminate, circulate,
432	or place before the public, or cause directly or indirectly to
433	be made, published, disseminated, circulated, or placed before
434	the public, in any newspaper, magazine, or other publication, or
435	in the form of a notice, circular, pamphlet, letter, or poster,
436	or over any radio station or television station, or in any other
437	way, any advertisement, announcement, or statement which uses
438	the existence of the Insurance Guaranty Association of this
439	state for the purpose of sales, solicitation, or inducement to
440	purchase any form of insurance covered by the Florida Life and
441	Health Insurance Guaranty Association Act. However, this section
442	does shall not apply to the Florida Life and Health Insurance
443	Guaranty Association or any other entity that which does not
444	sell or solicit insurance. This section also does not prohibit
445	the furnishing of written information that is in a form prepared
446	by the association, that summarizes the claim, cash value, and
447	annuity cash value limits of the association, upon request of
448	the policyholder or applicant for insurance.
449	Section 10.  Subsection (2) of section 631.904, Florida
450	Statutes, is amended to read:
451	631.904  Definitions.-As used in this part, the term:
452	(2)  "Covered claim" means an unpaid claim, including a
453	claim for return of unearned premiums, which arises out of, is
454	within the coverage of, and is not in excess of the applicable
455	limits of, an insurance policy to which this part applies, which
456	policy was issued by an insurer and which claim is made on
457	behalf of a claimant or insured who was a resident of this state
458	at the time of the injury. The term "covered claim" includes
459	unpaid claims under any employer liability coverage of a
460	workers' compensation policy limited to the lesser of $300,000
461	or the limits of the policy. The term "covered claim" does not
462	include any amount sought as a return of premium under any
463	retrospective rating plan; any amount due any reinsurer,
464	insurer, insurance pool, or underwriting association, as
465	subrogation recoveries or otherwise; any claim that would
466	otherwise be a covered claim that has been rejected by any other
467	state guaranty fund on the grounds that the insured's net worth
468	is greater than that allowed under that state's guaranty fund or
469	liquidation law, except this exclusion from the definition of
470	covered claim shall not apply to employers who, prior to April
471	30, 2004, entered into an agreement with the corporation
472	preserving the employer's right to seek coverage of claims
473	rejected by another state's guaranty fund; or any return of
474	premium resulting from a policy that was not in force on the
475	date of the final order of liquidation. Member insurers have no
476	right of subrogation against the insured of any insolvent
477	insurer. This provision shall be applied retroactively to cover
478	claims of an insolvent self-insurance fund resulting from
479	accidents or losses incurred prior to January 1, 1994,
480	regardless of the date the petition in circuit court was filed
481	alleging insolvency and the date the court entered an order
482	appointing a receiver.
483	Section 11.  This act shall take effect July 1, 2010.

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