CS/CS/CS/HB 159

1
A bill to be entitled
2An act relating to guaranty associations; amending s.
3631.52, F.S.; expanding an exemption from the
4applicability of certain provisions of state law to
5include workers' compensation claims under employer
6liability coverage; amending s. 631.54, F.S.; conforming
7the definition of "account" to changes made by the act;
8amending s. 631.55, F.S.; revising the separate accounts
9of the association; amending s. 631.57, F.S.; conforming
10cross-references; providing a legislative finding and
11declaration; authorizing insurers to recoup certain
12assessments levied by the Office of Insurance Regulation
13by applying certain recoupment factors; deleting
14provisions relating to classification and payment of
15emergency assessments; providing guidelines and a
16methodology for the calculation of recoupment factors for
17recouping certain assessments; authorizing an insurer to
18apply a recalculated recoupment factor under certain
19conditions; providing for the return of excess assessments
20and recoupment charges; providing that amounts recouped
21are not premium and not subject to premium taxes, fees, or
22commissions; requiring that insurers treat failure to pay
23a recoupment charge as failure to pay the premium;
24requiring that an insurer file with the office a statement
25containing certain information within a specified period
26before applying a recoupment factor to any policies;
27authorizing an insurer to use a recoupment factor after
28the expiration of such period; providing that an insurer
29need submit only one such statement for all lines of
30business; requiring that an insurer file with the office
31an accounting report containing certain information within
32a specified period after the completion of the recoupment
33process; providing that an insurer need submit only one
34such report for all lines of business; amending s.
35631.713, F.S.; expanding the application of certain
36provisions of state law to certain residents of other
37states who own certain insurance policies; expanding the
38list of contracts and policies to which life and health
39insurance guaranty of payments provisions do not apply;
40providing for application to coverage under certain
41structured settlement annuities under certain
42circumstances; amending s. 631.714, F.S.; revising certain
43definitions; amending s. 631.717, F.S.; revising a
44guaranty association's aggregate liability for life
45insurance and deferred annuity contracts; authorizing an
46association to issue alternative policies or contracts to
47certain policies or contracts under certain circumstances;
48subjecting such alternative policies or contracts to
49specified requirements; creating s. 631.7295, F.S.;
50authorizing an association to succeed to the rights of an
51insolvent insurer arising after an order of liquidation or
52rehabilitation with regard to certain contracts of
53reinsurance; requiring that such an association pay all
54unpaid premiums due under the contract; amending s.
55631.735, F.S.; specifying that certain advertisement
56prohibitions do not prohibit the furnishing of certain
57written information in a form prepared by an association
58upon request; amending s. 631.904, F.S.; revising the
59definition of the term "covered claim"; providing an
60effective date.
61
62Be It Enacted by the Legislature of the State of Florida:
63
64     Section 1.  Subsection (14) of section 631.52, Florida
65Statutes, is amended to read:
66     631.52  Scope.-This part shall apply to all kinds of direct
67insurance, except:
68     (14)  Workers' compensation, including claims under
69employer liability coverage;
70     Section 2.  Subsection (1) of section 631.54, Florida
71Statutes, is amended to read:
72     631.54  Definitions.-As used in this part:
73     (1)  "Account" means any one of the three accounts created
74by s. 631.55.
75     Section 3.  Subsection (2) of section 631.55, Florida
76Statutes, is amended to read:
77     631.55  Creation of the association.-
78     (2)  For the purposes of administration and assessment, the
79association 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
83part applies.
84     Section 4.  Subsection (3) of section 631.57, Florida
85Statutes, 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
88respective accounts for the payment of covered claims, to pay
89the reasonable costs to administer the same, and to the extent
90necessary to secure the funds for the account specified in s.
91631.55(2)(b)(c) or to retire indebtedness, including, without
92limitation, the principal, redemption premium, if any, and
93interest on, and related costs of issuance of, bonds issued
94under s. 631.695 and the funding of any reserves and other
95payments required under the bond resolution or trust indenture
96pursuant to which such bonds have been issued, the office, upon
97certification of the board of directors, shall levy assessments
98in the proportion that each insurer's net direct written
99premiums in this state in the classes protected by the account
100bears to the total of said net direct written premiums received
101in this state by all such insurers for the preceding calendar
102year for the kinds of insurance included within such account.
103Assessments shall be remitted to and administered by the board
104of directors in the manner specified by the approved plan. Each
105insurer so assessed shall have at least 30 days' written notice
106as to the date the assessment is due and payable. Every
107assessment shall be made as a uniform percentage applicable to
108the net direct written premiums of each insurer in the kinds of
109insurance included within the account in which the assessment is
110made. The assessments levied against any insurer shall not
111exceed in any one year more than 2 percent of that insurer's net
112direct written premiums in this state for the kinds of insurance
113included within such account during the calendar year next
114preceding the date of such assessments.
115     (b)  If sufficient funds from such assessments, together
116with funds previously raised, are not available in any one year
117in the respective account to make all the payments or
118reimbursements then owing to insurers, the funds available shall
119be prorated and the unpaid portion shall be paid as soon
120thereafter as funds become available.
121     (c)  The Legislature finds and declares that all
122assessments paid by an insurer or insurer group as a result of a
123levy by the office, including assessments levied pursuant to
124paragraph (a) and emergency assessments, constitute advances of
125funds from the insurer to the association. An insurer may fully
126recoup such advances by applying a separate recoupment factor to
127the premium of policies of the same kind or line as were
128considered by the office in determining the assessment liability
129of the insurer or insurer group. Assessments shall be included
130as an appropriate factor in the making of rates.
131     (d)  No state funds of any kind shall be allocated or paid
132to said association or any of its accounts.
133     (e)1.a.  In addition to assessments otherwise authorized in
134paragraph (a) and to the extent necessary to secure the funds
135for the account specified in s. 631.55(2)(b)(c) for the direct
136payment of covered claims of insurers rendered insolvent by the
137effects of a hurricane and to pay the reasonable costs to
138administer such claims, or to retire indebtedness, including,
139without limitation, the principal, redemption premium, if any,
140and interest on, and related costs of issuance of, bonds issued
141under s. 631.695 and the funding of any reserves and other
142payments required under the bond resolution or trust indenture
143pursuant to which such bonds have been issued, the office, upon
144certification of the board of directors, shall levy emergency
145assessments upon insurers holding a certificate of authority.
146The emergency assessments payable under this paragraph by any
147insurer shall not exceed in any single year more than 2 percent
148of that insurer's direct written premiums, net of refunds, in
149this state during the preceding calendar year for the kinds of
150insurance within the account specified in s. 631.55(2)(b)(c).
151     b.  Any emergency assessments authorized under this
152paragraph shall be levied by the office upon insurers referred
153to in sub-subparagraph a., upon certification as to the need for
154such assessments by the board of directors. In the event the
155board of directors participates in the issuance of bonds in
156accordance with s. 631.695, emergency assessments shall be
157levied in each year that bonds issued under s. 631.695 and
158secured by such emergency assessments are outstanding, in such
159amounts up to such 2-percent limit as required in order to
160provide for the full and timely payment of the principal of,
161redemption premium, if any, and interest on, and related costs
162of issuance of, such bonds. The emergency assessments provided
163for in this paragraph are assigned and pledged to the
164municipality, county, or legal entity issuing bonds under s.
165631.695 for the benefit of the holders of such bonds, in order
166to enable such municipality, county, or legal entity to provide
167for the payment of the principal of, redemption premium, if any,
168and interest on such bonds, the cost of issuance of such bonds,
169and the funding of any reserves and other payments required
170under the bond resolution or trust indenture pursuant to which
171such bonds have been issued, without the necessity of any
172further action by the association, the office, or any other
173party. To the extent bonds are issued under s. 631.695 and the
174association determines to secure such bonds by a pledge of
175revenues received from the emergency assessments, such bonds,
176upon such pledge of revenues, shall be secured by and payable
177from the proceeds of such emergency assessments, and the
178proceeds of emergency assessments levied under this paragraph
179shall be remitted directly to and administered by the trustee or
180custodian appointed for such bonds.
181     c.  Emergency assessments under this paragraph may be
182payable in a single payment or, at the option of the
183association, may be payable in 12 monthly installments with the
184first installment being due and payable at the end of the month
185after an emergency assessment is levied and subsequent
186installments being due not later than the end of each succeeding
187month.
188     d.  If emergency assessments are imposed, the report
189required by s. 631.695(7) shall include an analysis of the
190revenues generated from the emergency assessments imposed under
191this paragraph.
192     e.  If emergency assessments are imposed, the references in
193sub-subparagraph (1)(a)3.b. and s. 631.695(2) and (7) to
194assessments levied under paragraph (a) shall include emergency
195assessments imposed under this paragraph.
196     2.  In order to ensure that insurers paying emergency
197assessments levied under this paragraph continue to charge rates
198that are neither inadequate nor excessive, within 90 days after
199being notified of such assessments, each insurer that is to be
200assessed pursuant to this paragraph shall submit a rate filing
201for coverage included within the account specified in s.
202631.55(2)(c) and for which rates are required to be filed under
203s. 627.062. If the filing reflects a rate change that, as a
204percentage, is equal to the difference between the rate of such
205assessment and the rate of the previous year's assessment under
206this paragraph, the filing shall consist of a certification so
207stating and shall be deemed approved when made. Any rate change
208of a different percentage shall be subject to the standards and
209procedures of s. 627.062.
210     2.3.  If In the event the board of directors participates
211in the issuance of bonds in accordance with s. 631.695, an
212annual assessment under this paragraph shall continue while the
213bonds issued with respect to which the assessment was imposed
214are outstanding, including any bonds the proceeds of which were
215used to refund bonds issued pursuant to s. 631.695, unless
216adequate provision has been made for the payment of the bonds in
217the documents authorizing the issuance of such bonds.
218     3.4.  Emergency assessments under this paragraph are not
219premium and are not subject to the premium tax, to any fees, or
220to any commissions. An insurer is liable for all emergency
221assessments that the insurer collects and shall treat the
222failure of an insured to pay an emergency assessment as a
223failure to pay the premium. An insurer is not liable for
224uncollectible emergency assessments.
225     (f)  The recoupment factor applied to policies in
226accordance with paragraph (c) shall be selected by the insurer
227or insurer group so as to provide for the probable recoupment of
228both assessments levied pursuant to paragraph (a) and emergency
229assessments over a period of 12 months, unless the insurer or
230insurer group, at its option, elects to recoup the assessment
231over a longer period. The recoupment factor shall apply to all
232policies of the same kind or line as were considered by the
233office in determining the assessment liability of the insurer or
234insurer group issued or renewed during a 12-month period. If the
235insurer or insurer group does not collect the full amount of the
236assessment during one 12-month period, the insurer or insurer
237group may apply recalculated recoupment factors to policies
238issued or renewed during one or more succeeding 12-month
239periods. If, at the end of a 12-month period, the insurer or
240insurer group has collected from the combined kinds or lines of
241policies subject to assessment more than the total amount of the
242assessment paid by the insurer or insurer group, the excess
243amount shall be disbursed as follows:
244     1.  If the excess amount does not exceed 15 percent of the
245total assessment paid by the insurer or insurer group, the
246excess amount shall be remitted to the association within 60
247days after the end of the 12-month period in which the excess
248recoupment charges were collected.
249     2.  If the excess amount exceeds 15 percent of the total
250assessment paid by the insurer or insurer group, the excess
251amount shall be returned to the insurer's or insurer group's
252current policyholders by refunds or premium credits. The
253association shall use any remitted excess recoupment amounts to
254reduce future assessments.
255     (g)  Amounts recouped pursuant to this subsection for
256assessments levied under paragraph (a) due to insolvencies on or
257after July 1, 2010, are considered premium solely for premium
258tax purposes and are not subject to fees or commissions.
259However, insurers shall treat the failure of an insured to pay a
260recoupment charge as a failure to pay the premium.
261     (h)  At least 15 days before applying the recoupment factor
262to any policies, the insurer or insurer group shall file with
263the office a statement for informational purposes only setting
264forth the amount of the recoupment factor and an explanation of
265how the recoupment factor will be applied. Such statement shall
266include documentation of the assessment paid by the insurer or
267insurer group and the arithmetic calculations supporting the
268recoupment factor. The insurer or insurer group may use the
269recoupment factor at any time after the expiration of the 15-day
270period. The insurer or insurer group need submit only one
271informational statement for all lines of business using the same
272recoupment factor.
273     (i)  No later than 90 days after the insurer or insurer
274group has completed the recoupment process, the insurer or
275insurer group shall file with the office, for information
276purposes only, a final accounting report documenting the
277recoupment. The report shall provide the amounts of assessments
278paid by the insurer or insurer group, the amounts and
279percentages recouped by year from each affected line of
280business, and the direct written premium subject to recoupment
281by year. The insurer or insurer group need submit only one
282report for all lines of business using the same recoupment
283factor.
284     Section 5.  Paragraph (b) of subsection (2) of section
285631.713, 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
291such 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
295are domiciled in this state;
296     b.  Such insurers were not licensed never held a license or
297certificate of authority in the states in which such persons
298reside at the time specified in a state's guaranty association
299law as necessary for coverage by that state's association;
300     c.  Such other states have associations similar to the
301association created by this part; and
302     d.  Such persons are not eligible for coverage by such
303associations.
304     (3)  This part does not apply to:
305     (n)  A portion of a policy or contract, to the extent that
306the rate of interest on which the policy or contract is based,
307or the interest rate, crediting rate, or similar factor
308determined by use of an index or other external reference stated
309in the policy or contract employed in calculating returns or
310changes in value:
311     1.  Averaged over the period of 4 years immediately
312preceding the date on which the member insurer becomes an
313impaired or insolvent insurer under this part, whichever is
314earlier, exceeds the rate of interest determined by subtracting
3152 percentage points from Moody's Corporate Bond Yield Average
316averaged for that same 4-year period or for such lesser period
317if the policy or contract was issued less than 4 years before
318the member insurer becomes an impaired or insolvent insurer
319under this part, whichever is earlier; and
320     2.  On and after the date on which the member insurer
321becomes an impaired or insolvent insurer under this part,
322whichever is earlier, exceeds the rate of interest determined by
323subtracting 3 percentage points from the most current version of
324Moody's Corporate Bond Yield Average.
325     (o)  A portion of a policy or contract to the extent the
326policy or contract provides for interest or other changes in
327value to be determined by the use of an index or other external
328reference stated in the policy or contract, but which has not
329been credited to the policy or contract, or as to which the
330policy or contract owner's rights are subject to forfeiture, as
331of the date the member insurer becomes an impaired or insolvent
332insurer under this part. However, if the interest or change in
333value is credited less frequently than annually as determined by
334using the procedures defined in the policy or contract, interest
335or change in value shall be credited by using the procedure
336defined in the policy or contract as if the contractual date of
337crediting interest or changing values was the date of impairment
338or insolvency, whichever is earlier, and shall not be subject to
339forfeiture.
340     (p)  A policy or contract providing any hospital, medical,
341prescription drug, or other health care benefits pursuant to
342Medicare Part C or Part D or any regulations issued pursuant to
343Medicare Part C or Part D.
344     (5)  Notwithstanding any other provisions of this part,
345this part applies to coverage of a person who is a payee under a
346structured settlement annuity, or a beneficiary if the payee is
347deceased, with a coverage limit of $300,000 by the association,
348if:
349     (a)  The payee is a resident of this state, regardless of
350where the contract owner resides.
351     (b)  Neither the payee, the beneficiary, nor the contract
352owner is eligible for coverage by the association of the state
353in which the contract owner resides.
354     Section 6.  Subsections (6) and (10) of section 631.714,
355Florida 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
358to transact insurance in this state, either at the time the
359policy was issued or when the insured event occurred, and
360against which an order of liquidation with a finding of
361insolvency has been entered by a court of competent
362jurisdiction, if such order has become final by the exhaustion
363of appellate review.
364     (10)  "Resident" means any person who resides in this state
365at the time a member insurer is determined to be an impaired or
366insolvent insurer and to whom contractual obligations are owed
367by such impaired or insolvent member insurer. A person may be a
368resident of only one state, which in the case of a person other
369than an individual shall be the person's principal place of
370business. Citizens of the United States who are residents of
371foreign countries or United States possessions, territories, or
372protectorates that do not have an association similar to the
373guaranty association created by this part shall be deemed
374residents of the state of domicile of the insurer issuing the
375policies or contracts.
376     Section 7.  Subsection (9) of section 631.717, Florida
377Statutes, 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
381obligations of the insolvent insurer shall be as great as, but
382no greater than, the contractual obligations of the insurer in
383the absence of such insolvency, unless such obligations are
384reduced as permitted by subsection (4), but the aggregate
385liability of the association shall not exceed $100,000 in net
386cash surrender and net cash withdrawal values for life
387insurance, $250,000 in net cash surrender and net cash
388withdrawal values for deferred annuity contracts, or $300,000
389for all benefits including cash values, with respect to any one
390life. In no event shall the association be liable for any
391penalties or interest.
392     (12)
393     (g)  In carrying out its duties in connection with
394guaranteeing, assuming, or reinsuring policies or contracts
395under subsections (2) and (3), the association may, subject to
396approval of the receivership court, issue substitute coverage
397for a policy or contract that provides an interest rate,
398crediting rate, or similar factor determined by use of an index
399or other external reference stated in the policy or contract
400employed in calculating returns or changes in value by issuing
401an alternative policy or contract. In lieu of the index or other
402external reference provided for in the original policy or
403contract, the alternative policy or contract must provide for a
404fixed interest rate, payment of dividends with minimum
405guarantees, or a different method for calculating interest or
406changes in value. In such case:
407     1.  There is no requirement for evidence of insurability,
408waiting period, or other exclusion that would not have applied
409under the replaced policy or contract.
410     2.  The alternative policy or contract shall be
411substantially similar to the replaced policy or contract in all
412other material terms.
413     Section 8.  Section 631.7295, Florida Statutes, is created
414to read:
415     631.7295  Reinsurance.-With respect to covered policies for
416which the association becomes obligated after an entry of an
417order of liquidation or rehabilitation, the association may
418elect to succeed to the rights of the insolvent insurer arising
419after the order of liquidation or rehabilitation under any
420contract of reinsurance to which the insolvent insurer was a
421party, to the extent such contract provides coverage for losses
422occurring after the date of the order of liquidation or
423rehabilitation. As a condition to making such election, the
424association must pay all unpaid premiums due under the contract
425for coverage relating to periods before and after the date on
426which the order of liquidation or rehabilitation was entered.
427     Section 9.  Section 631.735, Florida Statutes, is amended
428to read:
429     631.735  Prohibited advertisement of Florida Life and
430Health Insurance Guaranty Association Act in sale of insurance.-
431A No person may not shall make, publish, disseminate, circulate,
432or place before the public, or cause directly or indirectly to
433be made, published, disseminated, circulated, or placed before
434the public, in any newspaper, magazine, or other publication, or
435in the form of a notice, circular, pamphlet, letter, or poster,
436or over any radio station or television station, or in any other
437way, any advertisement, announcement, or statement which uses
438the existence of the Insurance Guaranty Association of this
439state for the purpose of sales, solicitation, or inducement to
440purchase any form of insurance covered by the Florida Life and
441Health Insurance Guaranty Association Act. However, this section
442does shall not apply to the Florida Life and Health Insurance
443Guaranty Association or any other entity that which does not
444sell or solicit insurance. This section also does not prohibit
445the furnishing of written information that is in a form prepared
446by the association, that summarizes the claim, cash value, and
447annuity cash value limits of the association, upon request of
448the policyholder or applicant for insurance.
449     Section 10.  Subsection (2) of section 631.904, Florida
450Statutes, 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
453claim for return of unearned premiums, which arises out of, is
454within the coverage of, and is not in excess of the applicable
455limits of, an insurance policy to which this part applies, which
456policy was issued by an insurer and which claim is made on
457behalf of a claimant or insured who was a resident of this state
458at the time of the injury. The term "covered claim" includes
459unpaid claims under any employer liability coverage of a
460workers' compensation policy limited to the lesser of $300,000
461or the limits of the policy. The term "covered claim" does not
462include any amount sought as a return of premium under any
463retrospective rating plan; any amount due any reinsurer,
464insurer, insurance pool, or underwriting association, as
465subrogation recoveries or otherwise; any claim that would
466otherwise be a covered claim that has been rejected by any other
467state guaranty fund on the grounds that the insured's net worth
468is greater than that allowed under that state's guaranty fund or
469liquidation law, except this exclusion from the definition of
470covered claim shall not apply to employers who, prior to April
47130, 2004, entered into an agreement with the corporation
472preserving the employer's right to seek coverage of claims
473rejected by another state's guaranty fund; or any return of
474premium resulting from a policy that was not in force on the
475date of the final order of liquidation. Member insurers have no
476right of subrogation against the insured of any insolvent
477insurer. This provision shall be applied retroactively to cover
478claims of an insolvent self-insurance fund resulting from
479accidents or losses incurred prior to January 1, 1994,
480regardless of the date the petition in circuit court was filed
481alleging insolvency and the date the court entered an order
482appointing a receiver.
483     Section 11.  This act shall take effect July 1, 2010.


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