Florida Senate - 2010 SB 260
By Senator Bennett
21-00262-10 2010260__
1 A bill to be entitled
2 An act relating to title insurance; creating s.
3 626.8422, F.S.; authorizing a title insurance agent or
4 agency to charge a reasonable fee for certain
5 services; providing that such charges are not part of
6 the rate charged by the title insurer; requiring that
7 certain information regarding each charge be filed
8 with the Office of Insurance Regulation; requiring
9 that the office publish such information by specified
10 means; prohibiting charges for certain services from
11 being set below the cost of providing such services;
12 amending s. 626.9541, F.S.; deleting clarifying
13 provisions related to the payment of certain portions
14 of premium; amending s. 627.7711, F.S.; expanding the
15 definition of “premium” to include endorsements,
16 commitments, or other contracts; providing additional
17 exceptions to the scope of the term “premium”;
18 providing a method of calculation of premium; creating
19 s. 627.7712, F.S.; authorizing a title insurance agent
20 or agency to charge a reasonable fee for certain
21 services; providing that such charges are not part of
22 the rate charged by the title insurer; requiring that
23 certain information regarding each charge be filed
24 with the office; requiring that the office publish
25 such information by specified means; prohibiting
26 charges for certain services from being set below the
27 cost of providing such services; amending s. 627.780,
28 F.S.; prohibiting a person from knowingly quoting,
29 charging, accepting, collecting, or receiving a
30 premium for title insurance other than the premium
31 approved by the office; amending s. 627.782, F.S.;
32 providing for the approval of rates; requiring that
33 each title insurer make an annual filing with the
34 office on or before a specified deadline demonstrating
35 that the rate for such insurance is actuarially sound;
36 prohibiting rates for such filing from including
37 certain charges, commission, or compensation;
38 providing methods by which filing requirements may be
39 satisfied; requiring that the office issue a notice of
40 intent to approve or disapprove the filing on or
41 before a specified deadline; providing that such
42 notice constitutes agency action; providing that
43 requests for supporting information, mathematical or
44 mechanical corrections, or notification of the
45 office’s preliminary findings do not toll the deadline
46 date; providing that a rate is deemed approved if the
47 office does not issue the required notice within the
48 specified period; requiring that the office review a
49 rate filing to determine if the rate is excessive,
50 inadequate, or unfairly discriminatory; requiring that
51 the office consider certain factors and information
52 when making such review; providing standards upon
53 which a rate may be found excessive, inadequate, or
54 unfairly discriminatory; authorizing the office to
55 require an insurer to provide, at the insurer’s
56 expense, any information necessary to evaluate the
57 condition of the company and reasonableness of the
58 filing; authorizing the office to review certain
59 information at any time; requiring that the office
60 initiate proceedings to disapprove a rate and notify
61 the insurer if the office finds on a preliminary basis
62 that a rate is excessive, inadequate, or unfairly
63 discriminatory; requiring that an insurer, upon
64 receipt of such notice from the office, provide
65 certain information within a specified period;
66 requiring that the office issue a notice of intent to
67 approve or a notice of intent to disapprove within a
68 specified period; providing that an insurer has the
69 burden of proof to show by a preponderance of the
70 evidence that a rate is not excessive, inadequate, or
71 unfairly discriminatory; prohibiting an insurer from
72 altering a rate for a specified period after its
73 receipt of notice from the office that a rate may be
74 excessive, inadequate, or unfairly discriminatory;
75 providing exceptions; authorizing the office to
76 disapprove without notice any rate increase filed by
77 an insurer during the prohibited period; requiring
78 that certain individuals affiliated with a title
79 insurer certify specified information on a form
80 approved by the Financial Services Commission when
81 submitting a rate filing; providing that it is a
82 violation of state law for a certifying officer or
83 actuary to knowingly make a false certification;
84 providing that failure to provide such certification
85 results in a filing being disapproved without
86 prejudice; authorizing an insurer to refile a rate
87 filing under such circumstances; defining the term
88 “actuary”; authorizing an insurer to apply for an
89 extension of time to make a filing under certain
90 circumstances; authorizing the office to exempt a
91 company from filing rates or rate certifications under
92 certain circumstances; authorizing the office to order
93 insurers not meeting certain filing requirements to
94 discontinue the issuance of policies for which the
95 required filing was not made until such time that the
96 office determines that the required filing has been
97 submitted properly; providing for application of an
98 approved rate; authorizing the commission to require
99 by rule that licensees submit certain information
100 determined by the office as necessary to analyze
101 premium rates, retention rates, or the condition of
102 the title insurance industry; authorizing the
103 commission to adopt rules; amending s. 627.7845, F.S.;
104 providing that an insurer is liable to the insured for
105 damages up to three times the amount of coverage under
106 certain conditions; repealing s. 627.783, F.S.,
107 relating to rate deviation; providing for application
108 of the act; providing an effective date.
109
110 Be It Enacted by the Legislature of the State of Florida:
111
112 Section 1. Section 626.8422, Florida Statutes, is created
113 to read:
114 626.8422 Charges for services.—
115 (1) A title insurance agent or agency may charge a
116 reasonable fee for primary title services, title searches, and
117 closing services, or the components thereof, actually performed
118 by the agent or agency. Any charges under this section do not
119 constitute a part of the rate charged by the title insurer for
120 the issuance of the title insurance form, policy, commitment, or
121 contract issued in connection therewith. The agent or agency
122 must file with the office the amount of each such charge or
123 change to such charge, including the components thereof,
124 together with related information as required by the office on a
125 form adopted by the office. The office shall publish the
126 information collected from agents or agencies pursuant to this
127 section via the Internet or otherwise as the office deems
128 sufficient to apprise the public of costs for these services
129 among the various agents or agencies.
130 (2) Charges for the services or components of services
131 described in subsection (1) which are set by the agent or agency
132 may not be set below the cost of providing such services.
133 Section 2. Paragraph (h) of subsection (1) of section
134 626.9541, Florida Statutes, is amended to read:
135 626.9541 Unfair methods of competition and unfair or
136 deceptive acts or practices defined.—
137 (1) UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE
138 ACTS.—The following are defined as unfair methods of competition
139 and unfair or deceptive acts or practices:
140 (h) Unlawful rebates.—
141 1. Except as otherwise expressly provided by law, or in an
142 applicable filing with the office, knowingly:
143 a. Permitting, or offering to make, or making, any contract
144 or agreement as to such contract other than as plainly expressed
145 in the insurance contract issued thereon;
146 b. Paying, allowing, or giving, or offering to pay, allow,
147 or give, directly or indirectly, as inducement to such insurance
148 contract, any unlawful rebate of premiums payable on the
149 contract, any special favor or advantage in the dividends or
150 other benefits thereon, or any valuable consideration or
151 inducement whatever not specified in the contract;
152 c. Giving, selling, or purchasing, or offering to give,
153 sell, or purchase, as inducement to such insurance contract or
154 in connection therewith, any stocks, bonds, or other securities
155 of any insurance company or other corporation, association, or
156 partnership, or any dividends or profits accrued thereon, or
157 anything of value whatsoever not specified in the insurance
158 contract.
159 2. Nothing in paragraph (g) or subparagraph 1. of this
160 paragraph shall be construed as including within the definition
161 of discrimination or unlawful rebates:
162 a. In the case of any contract of life insurance or life
163 annuity, paying bonuses to all policyholders or otherwise
164 abating their premiums in whole or in part out of surplus
165 accumulated from nonparticipating insurance; provided that any
166 such bonuses or abatement of premiums is fair and equitable to
167 all policyholders and for the best interests of the company and
168 its policyholders.
169 b. In the case of life insurance policies issued on the
170 industrial debit plan, making allowance to policyholders who
171 have continuously for a specified period made premium payments
172 directly to an office of the insurer in an amount which fairly
173 represents the saving in collection expenses.
174 c. Readjustment of the rate of premium for a group
175 insurance policy based on the loss or expense thereunder, at the
176 end of the first or any subsequent policy year of insurance
177 thereunder, which may be made retroactive only for such policy
178 year.
179 d. Issuance of life insurance policies or annuity contracts
180 at rates less than the usual rates of premiums for such policies
181 or contracts, as group insurance or employee insurance as
182 defined in this code.
183 e. Issuing life or disability insurance policies on a
184 salary savings, bank draft, preauthorized check, payroll
185 deduction, or other similar plan at a reduced rate reasonably
186 related to the savings made by the use of such plan.
187 3.a. No title insurer, or any member, employee, attorney,
188 agent, or agency thereof, shall pay, allow, or give, or offer to
189 pay, allow, or give, directly or indirectly, as inducement to
190 title insurance, or after such insurance has been effected, any
191 rebate or abatement of the premium or any other charge or fee,
192 or provide any special favor or advantage, or any monetary
193 consideration or inducement whatever.
194 b. Nothing in this subparagraph shall be construed as
195 prohibiting the payment of fees to attorneys at law, duly
196 licensed to practice law in the courts of this state, for
197 professional services, or as prohibiting the payment of earned
198 portions of the premium to duly appointed agents or agencies who
199 actually perform services for the title insurer. Nothing in this
200 subparagraph shall be construed as prohibiting a rebate or
201 abatement of an attorney’s fee charged for professional
202 services, or that portion of the premium that is not required to
203 be retained by the insurer pursuant to s. 627.782(1), or any
204 other agent charge or fee to the person responsible for paying
205 the premium, charge, or fee.
206 c. No insured named in a policy, or any other person
207 directly or indirectly connected with the transaction involving
208 the issuance of such policy, including, but not limited to, any
209 mortgage broker, real estate broker, builder, or attorney, any
210 employee, agent, agency, or representative thereof, or any other
211 person whatsoever, shall knowingly receive or accept, directly
212 or indirectly, any rebate or abatement of any portion of the
213 title insurance premium or of any other charge or fee or any
214 monetary consideration or inducement whatsoever, except as set
215 forth in sub-subparagraph b.; provided, in no event shall any
216 portion of the attorney’s fee, any portion of the premium that
217 is not required to be retained by the insurer pursuant to s.
218 627.782(1), any agent charge or fee, or any other monetary
219 consideration or inducement be paid directly or indirectly for
220 the referral of title insurance business.
221 Section 3. Subsection (2) of section 627.7711, Florida
222 Statutes, is amended to read:
223 627.7711 Definitions.—As used in this part, the term:
224 (2) “Premium” means the charge, as specified by rule of the
225 commission, that is made by a title insurer for a title
226 insurance policy, endorsement, commitment, or other contract for
227 including the charge for performance of primary title services
228 by a title insurer or title insurance agent or agency, and
229 incurring the risks incident to the such policy, endorsement,
230 commitment, or other contract under the several classifications
231 of title insurance contracts and forms, and upon which charge a
232 premium tax is paid under s. 624.509. As used in this part or in
233 any other law, with respect to title insurance, the word
234 “premium” does not include a commission or any reimbursement for
235 primary title services, title searches, closing services, or any
236 component thereof performed by a title insurer, title insurance
237 agent, or agency. The premium shall be calculated by multiplying
238 the approved rate by each $1,000 of title insurance limits
239 provided.
240 Section 4. Section 627.7712, Florida Statutes, is created
241 to read:
242 627.7712 Charges for services.—
243 (1) A title insurance agent or agency may charge a
244 reasonable fee for primary title services, title searches, and
245 closing services, or the components thereof, actually performed
246 by the agent or agency. Any charges under this section do not
247 constitute a part of the rate charged by the title insurer for
248 the issuance of the title insurance form, policy, commitment, or
249 contract issued in connection therewith. The agent or agency
250 must file with the office the amount of each such charge or
251 change to such charge, including the components thereof,
252 together with related information as required by the office on a
253 form adopted by the office. The office shall publish the
254 information collected from agents or agencies pursuant to this
255 section via the Internet or otherwise as the office deems
256 sufficient to apprise the public of costs for these services
257 among the various agents or agencies.
258 (2) Charges for the services or components of services
259 described in subsection (1) set by the agent or agency may not
260 be set below the cost of providing such services.
261 Section 5. Subsection (1) of section 627.780, Florida
262 Statutes, is amended to read:
263 627.780 Illegal dealings in premium.—
264 (1) A person may not knowingly quote, charge, accept,
265 collect, or receive a premium for title insurance other than the
266 premium approved by the office adopted by the commission, except
267 as provided in s. 626.9541(1)(h)3.b.
268 Section 6. Section 627.782, Florida Statutes, is amended to
269 read:
270 627.782 Approval Adoption of rates.—
271 (1) Each title insurer shall make an annual filing with the
272 office no later than 12 months after the date of that insurer’s
273 previous filing which demonstrates that the rate is actuarially
274 sound. Rates for the required filing may not include any charge
275 for primary title services, closing services, or title searches
276 as defined in s. 627.7711 or any commission or other
277 compensation made to title agents or agencies.
278 (a) The filing requirements of this section shall be
279 satisfied by one of the following methods:
280 1. A rate filing prepared by an actuary containing
281 documentation demonstrating that the proposed rates are not
282 excessive, inadequate, or unfairly discriminatory pursuant to
283 applicable rating laws and rules of the commission.
284 2. If no rate change is proposed, a filing consisting of a
285 certification by an actuary that the existing rate is
286 actuarially sound and not excessive, inadequate, or unfairly
287 discriminatory.
288 (b) The office shall finalize its review by issuing a
289 notice of intent to approve or a notice of intent to disapprove
290 within 90 days after the date of its receipt of the filing. The
291 notice of intent to approve and the notice of intent to
292 disapprove constitute agency action for purposes of chapter 120.
293 Requests for supporting information, requests for mathematical
294 or mechanical corrections, or notification to the insurer by the
295 office of its preliminary findings do not toll the 90-day period
296 during any such proceeding. The rate shall be deemed approved if
297 the office does not issue a notice of intent to approve or a
298 notice of intent to disapprove within 90 days after the date of
299 its receipt of the filing.
300 (c) Upon receipt of a rate filing, the office shall review
301 the rate filing to determine if the rate is excessive,
302 inadequate, or unfairly discriminatory. The office shall, in
303 accordance with generally accepted and reasonable actuarial
304 principles and techniques, consider the following factors when
305 making such determination:
306 1. Each title insurer’s loss experience and prospective
307 loss experience within and without this state under closing
308 protection letters, policies, endorsements, commitments, and
309 other contracts and policy liabilities.
310 2. A reasonable margin for profit and contingencies,
311 including contingent liability under s. 627.7865, sufficient to
312 allow title insurers to earn a rate of return on their capital
313 which will attract and retain adequate capital investment in the
314 title insurance business and maintain an efficient title
315 insurance delivery system.
316 3. Past expenses and prospective expenses for the
317 administration and handling of risks.
318 4. Liability for defalcation.
319 5. The degree of competition among insurers for the risk
320 insured.
321 6. Investment income reasonably expected by the insurer,
322 consistent with the insurer’s investment practices, from
323 premiums anticipated in the filing, plus any other expected
324 income from currently invested assets representing the amount
325 expected on unearned premium reserves and loss reserves. The
326 commission may adopt rules using reasonable techniques of
327 actuarial science and economics to specify the manner in which
328 insurers must calculate investment income attributable to such
329 classes of insurance written in this state and the manner in
330 which such investment income must be used in the calculation of
331 insurance rates. The manner of calculation shall contemplate
332 allowances for a profit factor and investment income that
333 produce a reasonable rate of return; however, investment income
334 from invested surplus may not be considered.
335 7. The reasonableness of the judgment reflected in the
336 filing.
337 8. Dividends, savings, or unabsorbed premium deposits
338 allowed or returned to Florida policyholders, members, or
339 subscribers.
340 9. The adequacy of loss reserves.
341 10. The cost of reinsurance.
342 11. Trend factors, including trends in actual losses per
343 insured unit for the insurer making the filing.
344 12. Other relevant factors that affect the frequency or
345 severity of claims or expenses.
346 (d) After consideration of the rate factors provided in
347 paragraph (c), a rate may be found by the office to be
348 excessive, inadequate, or unfairly discriminatory based upon the
349 following standards:
350 1. Rates shall be deemed excessive if they are likely to
351 produce a profit from Florida business which is unreasonably
352 high in relation to the risk involved in the class of business
353 or if expenses are unreasonably high in relation to services
354 rendered.
355 2. Rates shall be deemed excessive if, among other things,
356 the rate structure established by a title insurer provides for
357 replenishment of surpluses from premiums if the replenishment is
358 necessitated by investment losses.
359 3. Rates shall be deemed inadequate if the rates and the
360 investment income attributable to them are clearly insufficient
361 to sustain projected losses and expenses in the class of
362 business to which they apply.
363 (e) In reviewing a rate filing, the office may require the
364 insurer to provide, at the insurer’s expense, all information
365 necessary to evaluate the condition of the company and the
366 reasonableness of the filing according to the criteria
367 enumerated in this section.
368 (f) The office may at any time review a rate, rating
369 schedule, rating manual, or rate change; the pertinent records
370 of the insurer; and market conditions. If the office finds on a
371 preliminary basis that a rate may be excessive, inadequate, or
372 unfairly discriminatory, the office shall initiate proceedings
373 to disapprove the rate and shall notify the insurer. Upon being
374 notified, the insurer shall, within 60 days, file with the
375 office all information that, in the belief of the insurer,
376 proves the reasonableness, adequacy, and fairness of the rate or
377 rate change. The office shall issue a notice of intent to
378 approve or a notice of intent to disapprove pursuant to the
379 procedures of paragraph (b) within 90 days after the date of its
380 receipt of the insurer’s initial response. In such instances and
381 in any administrative proceeding relating to the legality of the
382 rate, the insurer has the burden of proof to show by a
383 preponderance of the evidence that the rate is not excessive,
384 inadequate, or unfairly discriminatory. After the office
385 notifies an insurer that a rate may be excessive, inadequate, or
386 unfairly discriminatory, unless the office withdraws the
387 notification, the insurer may not alter the rate except to
388 conform with the office’s notice until the earlier of 120 days
389 after the date the notification was provided or 180 days after
390 the date of the implementation of the rate. The office may,
391 subject to chapter 120, disapprove without the required 60-day
392 notification any rate increase filed by an insurer within the
393 prohibited period or during the time that the legality of the
394 increased rate is being contested.
395 (g) When submitting a rate filing, the chief executive
396 officer or the chief financial officer of the title insurer and
397 the chief actuary of the title insurer must certify the
398 following information on a form approved by the commission,
399 under oath, and subject to penalty of perjury:
400 1. The signing officer and actuary have reviewed the rate
401 filing;
402 2. Based on the knowledge of the signing officer and
403 actuary, the rate filing does not contain any untrue statement
404 of a material fact or omit a material fact necessary to make the
405 statements not misleading, in light of the circumstances under
406 which such statements were made;
407 3. Based on the knowledge of the signing officer and
408 actuary, the information and other factors described in this
409 section, including, but not limited to, investment income,
410 present the basis of the rate filing in all material respects
411 for the periods presented in the filing; and
412 4. Based on the knowledge of the signing officer and
413 actuary, the rate filing reflects all premium savings that are
414 reasonably expected to result from legislative enactments and
415 are in accordance with generally accepted and reasonable
416 actuarial techniques.
417
418 A signing officer or actuary who knowingly makes a false
419 certification under this subsection commits a violation of s.
420 626.9541(1)(e) and is subject to the penalties prescribed in s.
421 626.9521. Failure to provide such certification by the officer
422 and actuary shall result in the rate filing being disapproved
423 without prejudice. Under such circumstances, the insurer or
424 rating organization may refile its rate filing with the required
425 certification. As used in this paragraph, the term “actuary”
426 means an individual who is a member of the Casualty Actuary
427 Society or the American Academy of Actuaries.
428 (h) If, at the time a filing is required under this
429 section, an insurer is in the process of completing a rate
430 review, the insurer may apply to the office for an extension of
431 up to an additional 30 days to make the filing. The request for
432 an extension must be received by the office no later than the
433 date the filing is due.
434 (i) After receiving a request to be exempted from the
435 provisions of this section before the filing is due, the office
436 may, due to insignificant numbers of policies in force or
437 insignificant premium volume, exempt a company from filing rates
438 or rate certification as required by this section.
439 (j) If an insurer fails to meet the filing requirements of
440 this subsection and does not submit the filing within 60 days
441 following the date on which the filing is due, the office may,
442 in addition to any other penalty authorized by law, order the
443 insurer to discontinue the issuance of policies for which the
444 required filing was not made until such time that the office
445 determines that the required filing has been submitted properly.
446 (1) Subject to the rating provisions of this code, the
447 commission must adopt a rule specifying the premium to be
448 charged in this state by title insurers for the respective types
449 of title insurance contracts and, for policies issued through
450 agents or agencies, the percentage of such premium required to
451 be retained by the title insurer which shall not be less than 30
452 percent. However, in a transaction subject to the Real Estate
453 Settlement Procedures Act of 1974, 12 U.S.C. ss. 2601 et seq.,
454 as amended, no portion of the premium attributable to providing
455 a primary title service shall be paid to or retained by any
456 person who does not actually perform or is not liable for the
457 performance of such service.
458 (2) In adopting premium rates, the commission must give due
459 consideration to the following:
460 (a) The title insurers’ loss experience and prospective
461 loss experience under closing protection letters and policy
462 liabilities.
463 (b) A reasonable margin for underwriting profit and
464 contingencies, including contingent liability under s. 627.7865,
465 sufficient to allow title insurers, agents, and agencies to earn
466 a rate of return on their capital that will attract and retain
467 adequate capital investment in the title insurance business and
468 maintain an efficient title insurance delivery system.
469 (c) Past expenses and prospective expenses for
470 administration and handling of risks.
471 (d) Liability for defalcation.
472 (e) Other relevant factors.
473 (3) Rates may be grouped by classification or schedule and
474 may differ as to class of risk assumed.
475 (4) Rates may not be excessive, inadequate, or unfairly
476 discriminatory.
477 (2)(5) The approved rate premium applies to each $100 of
478 insurance issued to an insured.
479 (3)(6) The approved rate applies premium rates apply
480 throughout this state.
481 (7) The commission shall, in accordance with the standards
482 provided in subsection (2), review the premium as needed, but
483 not less frequently than once every 3 years, and shall, based
484 upon the review required by this subsection, revise the premium
485 if the results of the review so warrant.
486 (4)(8) The commission may, by rule, require licensees under
487 this part to annually submit statistical information, including
488 loss and expense data, as the office department determines to be
489 necessary to analyze premium rates, retention rates, and the
490 condition of the title insurance industry.
491 (5) The commission may establish procedures for the
492 required filings by rule.
493 Section 7. Subsection (1) of section 627.7845, Florida
494 Statutes, is amended to read:
495 627.7845 Determination of insurability required;
496 preservation of evidence of title search and examination.—
497 (1) A title insurer may not issue a title insurance
498 commitment, endorsement, or title insurance policy until the
499 title insurer has caused to be made a determination of
500 insurability based upon the evaluation of a reasonable title
501 search or a search of the records of a Uniform Commercial Code
502 filing office, as applicable, has examined such other
503 information as may be necessary, and has caused to be made a
504 determination of insurability of title or the existence,
505 attachments, perfection, and priority of a Uniform Commercial
506 Code security interest, including endorsement coverages, in
507 accordance with sound underwriting practices. If an insurer or
508 its agent is negligent in performing the activities required in
509 this subsection, the insurer is liable to the insured for
510 damages up to three times the amount of coverage.
511 Section 8. Section 627.783, Florida Statutes, is repealed.
512 Section 9. This act shall take effect July 1, 2010, and
513 applies to title insurance forms, contracts, commitments, or
514 policies issued on or after that date.