Florida Senate - 2012 CS for CS for SB 1262
By the Committees on Budget Subcommittee on General Government
Appropriations; and Banking and Insurance; and Senator Oelrich
601-04291-12 20121262c2
1 A bill to be entitled
2 An act relating to warranty associations; amending s.
3 634.011, F.S.; revising the definition of the term
4 “motor vehicle service agreement”; amending s.
5 634.121, F.S.; providing criteria for a motor vehicle
6 service agreement company to effectuate refunds
7 through the issuing salesperson or agent; requiring
8 the salesperson, agent, or service agreement company
9 to maintain a copy of certain documents; requiring a
10 salesperson or agent to provide a copy of a document
11 to the service agreement company if requested by the
12 Department of Financial Services or the Office of
13 Insurance Regulation; requiring the office to provide
14 to the department findings that a salesperson or agent
15 exhibits a pattern or practice of failing to
16 effectuate refunds or to maintain and remit to the
17 service agreement company the required documentation;
18 amending s. 634.141, F.S.; authorizing rather than
19 requiring the office to examine service agreement
20 companies; limiting the examination period to the most
21 recent 5 years; limiting the cost of certain
22 examinations; creating s. 634.2855, F.S.; authorizing
23 a governmental entity, public agency, institution,
24 person, firm, or legal entity to provide money to the
25 department to pursue unauthorized entities operating
26 as motor vehicle service agreement companies;
27 providing requirements for the deposit of the money;
28 providing that funds remaining at the end of any
29 fiscal year shall be available for carrying out duties
30 and responsibilities of the department or the office;
31 amending s. 634.312, F.S.; authorizing a home warranty
32 association to effectuate a refund through the issuing
33 sales representative; amending s. 634.314, F.S.;
34 authorizing rather than requiring the office to
35 examine home warranty associations; limiting the
36 examination period to the most recent 5 years;
37 limiting the cost of certain examinations; removing
38 the requirement that the commission establish rules
39 for conducting examinations; removing the criteria for
40 determining whether an examination is warranted;
41 creating s. 634.3385, F.S.; authorizing a governmental
42 entity, public agency, institution, person, firm, or
43 legal entity to provide money to the department to
44 pursue unauthorized entities operating as home
45 warranty associations; providing that funds remaining
46 at the end of any fiscal year shall be available for
47 carrying out duties and responsibilities of the
48 department or the office; amending s. 634.414, F.S.;
49 authorizing service warranty associations to
50 effectuate refunds through the issuing sales
51 representative; authorizing a service warranty
52 association to issue refunds by cash, check, store
53 credit, gift card, or other similar means; amending s.
54 634.416, F.S.; authorizing rather than requiring the
55 office to examine service warranty associations;
56 limiting the examination period to the most recent 5
57 years; limiting the costs of certain examinations;
58 removing the requirement that the commission establish
59 rules for conducting examinations; removing the
60 criteria for determining whether an examination is
61 warranted; removing provisions relating to the rates
62 charged a to service warranty association for
63 examinations; creating s. 634.4385, F.S.; authorizing
64 a governmental entity, public agency, institution,
65 person, firm, or legal entity to provide money to the
66 department to pursue unauthorized entities operating
67 as service warranty associations; providing that funds
68 remaining at the end of any fiscal year shall be
69 available for carrying out duties and responsibilities
70 of the department or the office; providing an
71 effective date.
72
73 Be It Enacted by the Legislature of the State of Florida:
74
75 Section 1. Subsection (8) of section 634.011, Florida
76 Statutes, is amended to read:
77 634.011 Definitions.—As used in this part, the term:
78 (8) “Motor vehicle service agreement” or “service
79 agreement” means any contract or agreement indemnifying the
80 service agreement holder for the motor vehicle listed on the
81 service agreement and arising out of the ownership, operation,
82 and use of the motor vehicle against loss caused by failure of
83 any mechanical or other component part, or any mechanical or
84 other component part that does not function as it was originally
85 intended; however, nothing in this part shall prohibit or affect
86 the giving, free of charge, of the usual performance guarantees
87 by manufacturers or dealers in connection with the sale of motor
88 vehicles. Transactions exempt under s. 624.125 are expressly
89 excluded from this definition and are exempt from the provisions
90 of this part. Service agreements that are sold to persons other
91 than consumers and that cover motor vehicles used for commercial
92 purposes are excluded from this definition and are exempt from
93 regulation under the Florida Insurance Code. The term “motor
94 vehicle service agreement” includes any contract or agreement
95 that provides:
96 (a) For the coverage or protection defined in this
97 subsection and which is issued or provided in conjunction with
98 an additive product applied to the motor vehicle that is the
99 subject of such contract or agreement;
100 (b) For payment of vehicle protection expenses.
101 1.a. “Vehicle protection expenses” means a preestablished
102 flat amount payable for the loss of or damage to a vehicle or
103 expenses incurred by the service agreement holder for loss or
104 damage to a covered vehicle, including, but not limited to,
105 applicable deductibles under a motor vehicle insurance policy;
106 temporary vehicle rental expenses; expenses for a replacement
107 vehicle that is at least the same year, make, and model of the
108 stolen motor vehicle; sales taxes or registration fees for a
109 replacement vehicle that is at least the same year, make, and
110 model of the stolen vehicle; or other incidental expenses
111 specified in the agreement.
112 b. “Vehicle protection product” means a product or system
113 installed or applied to a motor vehicle or designed to prevent
114 the theft of the motor vehicle or assist in the recovery of the
115 stolen motor vehicle.
116 2. Vehicle protection expenses shall be payable in the
117 event of loss or damage to the vehicle as a result of the
118 failure of the vehicle protection product to prevent the theft
119 of the motor vehicle or to assist in the recovery of the stolen
120 motor vehicle. Vehicle protection expenses covered under the
121 agreement shall be clearly stated in the service agreement form,
122 unless the agreement provides for the payment of a
123 preestablished flat amount, in which case the service agreement
124 form shall clearly identify such amount.
125 3. Motor vehicle service agreements providing for the
126 payment of vehicle protection expenses shall either:
127 a. Reimburse a service agreement holder for the following
128 expenses, at a minimum: deductibles applicable to comprehensive
129 coverage under the service agreement holder’s motor vehicle
130 insurance policy; temporary vehicle rental expenses; sales taxes
131 and registration fees on a replacement vehicle that is at least
132 the same year, make, and model of the stolen motor vehicle; and
133 the difference between the benefits paid to the service
134 agreement holder for the stolen vehicle under the service
135 agreement holder’s comprehensive coverage and the actual cost of
136 a replacement vehicle that is at least the same year, make, and
137 model of the stolen motor vehicle; or
138 b. Pay a preestablished flat amount to the service
139 agreement holder.
140
141 Payments shall not duplicate any benefits or expenses paid to
142 the service agreement holder by the insurer providing
143 comprehensive coverage under a motor vehicle insurance policy
144 covering the stolen motor vehicle; however, the payment of
145 vehicle protection expenses at a preestablished flat amount of
146 $5,000 or less does not duplicate any benefits or expenses
147 payable under any comprehensive motor vehicle insurance policy;
148 or
149 (c)1. For the payment for paintless dent-removal services
150 provided by a company whose primary business is providing such
151 services.
152 2. “Paintless dent-removal” means the process of removing
153 dents, dings, and creases, including hail damage, from a vehicle
154 without affecting the existing paint finish, but does not
155 include services that involve the replacement of vehicle body
156 panels or sanding, bonding, or painting.
157 Section 2. Paragraph (b) of subsection (3) of section
158 634.121, Florida Statutes, is amended, and paragraphs (c), (d),
159 and (e) are added to that subsection, to read:
160 634.121 Forms, required procedures, provisions.—
161 (3)
162 (b) After the service agreement has been in effect for 60
163 days, it may not be canceled by the insurer or service agreement
164 company unless:
165 1. There has been a material misrepresentation or fraud at
166 the time of sale of the service agreement;
167 2. The agreement holder has failed to maintain the motor
168 vehicle as prescribed by the manufacturer;
169 3. The odometer has been tampered with or disabled and the
170 agreement holder has failed to repair the odometer; or
171 4. For nonpayment of premium by the agreement holder, in
172 which case the service agreement company shall provide the
173 agreement holder notice of cancellation by certified mail.
174
175 If the service agreement is canceled by the insurer or service
176 agreement company, the return of premium must not be less than
177 100 percent of the paid unearned pro rata premium, less any
178 claims paid on the agreement. If, after 60 days, the service
179 agreement is canceled by the service agreement holder, the
180 insurer or service agreement company shall return directly to
181 the agreement holder not less than 90 percent of the unearned
182 pro rata premium, less any claims paid on the agreement. The
183 service agreement company remains responsible for full refunds
184 to the consumer on canceled service agreements. However, the
185 salesperson and agent are responsible for the refund of the
186 unearned pro rata commission. A service agreement company may
187 effectuate refunds through the issuing salesperson or agent in
188 accordance with paragraphs (c) and (d).
189 (c) If the service agreement company effectuates refunds
190 through the issuing salesperson or agent, the service agreement
191 company must send the unearned pro rata premium refund due, less
192 any unearned pro rata commission, to the salesperson or agent
193 effectuating the refund. Upon receipt, the salesperson or agent
194 must refund the unearned pro rata premium, including any
195 unearned pro rata commission, and the sales tax refund owed to
196 the service agreement holder.
197 (d) The salesperson, agent, or service agreement company
198 shall maintain a copy of one of the following documents, as
199 applicable, demonstrating that the refund owed pursuant to
200 paragraph (c) has been refunded:
201 1. A copy of the front and back of the cancelled check for
202 the applicable refund amount owed to the service agreement
203 holder;
204 2. A copy of the front of the check for the applicable
205 refund amount owed to the service agreement holder and a copy of
206 the statement from the bank account on which the check was drawn
207 showing that the check was cashed;
208 3. A copy of the front of the check issued by the service
209 agreement company to the salesperson or agent in the amount of
210 the service agreement company’s portion of the refund owed to
211 the service agreement holder and a copy of the statement from
212 the bank account on which the check was drawn showing that the
213 check was cashed;
214 4. A copy of a completed buyer’s order demonstrating that
215 the applicable refund amount owed to the service agreement
216 holder was credited toward the purchase or lease of another
217 vehicle;
218 5. Any document received from or sent to a lender, finance
219 company, or creditor demonstrating that a loan or amount
220 financed by the agreement holder was decreased by the amount of
221 the applicable refund amount owed to the service agreement
222 holder; or
223 6. Any other evidence approved by the office in a written
224 communication to a person licensed pursuant to this part
225 demonstrating that the applicable refund amount due to the
226 service agreement holder was properly made.
227
228 A salesperson or agent effectuating a refund shall maintain a
229 copy of the documentation required by this paragraph and shall
230 provide a copy to the service agreement company within 45 days
231 after a request is made by the department or the office to
232 either the service agreement company or the salesperson.
233 (e) If the office finds that a salesperson or agent
234 exhibits a pattern or practice of failing to properly effectuate
235 refunds owed or to maintain and remit to the service agreement
236 company the documentation required by paragraph (d), the office
237 shall notify the department of its finding.
238 Section 3. Subsection (1) of section 634.141, Florida
239 Statutes, is amended to read:
240 634.141 Examination of companies.—
241 (1) Motor vehicle service agreement companies licensed
242 under this part may be subject to periodic examination by the
243 office in the same manner and subject to the same terms and
244 conditions as apply applies to insurers under part II of chapter
245 624. The office is not required to conduct periodic examinations
246 pursuant to this section, but may examine a service agreement
247 company at its discretion. An examination conducted pursuant to
248 this section may cover a period of only the most recent 5 years.
249 The costs of examinations conducted pursuant to ss.
250 624.316(2)(e) and 624.3161(3) may not exceed 10 percent of the
251 companies’ reported net income for the prior year. The
252 commission may by rule establish provisions whereby a company
253 may be exempted from examination.
254 Section 4. Section 634.2855, Florida Statutes, is created
255 to read:
256 634.2855 Unauthorized entities; gifts and grants.—A
257 governmental unit, public agency, institution, person, firm, or
258 legal entity may provide money to the department to enable the
259 department to pursue unauthorized entities operating in
260 violation of this part. The department may transfer funds to the
261 office to investigate, discipline, sanction, and take all action
262 consistent with this part relative to unauthorized entities. All
263 donations or grants of moneys to the department shall be
264 deposited into the Insurance Regulatory Trust Fund and shall be
265 separately accounted for in accordance with this section. Moneys
266 deposited into the Insurance Regulatory Trust Fund pursuant to
267 this section may be appropriated by the Legislature, pursuant to
268 chapter 216, for the purpose of enabling the department or the
269 office to carry out the provisions of this section.
270 Notwithstanding s. 216.301 and pursuant to s. 216.351, any
271 balance of moneys deposited into the Insurance Regulatory Trust
272 Fund pursuant to this section remaining at the end of any fiscal
273 year shall be available for carrying out the duties and
274 responsibilities of the department or the office.
275 Section 5. Subsection (5) of section 634.312, Florida
276 Statutes, is amended to read:
277 634.312 Forms; required provisions and procedures.—
278 (5) Each home warranty contract shall contain a
279 cancellation provision. Any home warranty agreement may be
280 canceled by the purchaser within 10 days after purchase. The
281 refund must be 100 percent of the gross premium paid, less any
282 claims paid on the agreement. A reasonable administrative fee
283 may be charged, not to exceed 5 percent of the gross premium
284 paid by the warranty agreement holder. After the home warranty
285 agreement has been in effect for 10 days, if the contract is
286 canceled by the warranty holder, a return of premium shall be
287 based upon 90 percent of unearned pro rata premium less any
288 claims that have been paid. If the contract is canceled by the
289 association for any reason other than for fraud or
290 misrepresentation, a return of premium shall be based upon 100
291 percent of unearned pro rata premium, less any claims paid on
292 the agreement. A home warranty association may effectuate a
293 refund through the issuing sales representative.
294 Section 6. Section 634.314, Florida Statutes, is amended to
295 read:
296 634.314 Examination of associations.—
297 (1) Home warranty associations licensed under this part may
298 be subject to periodic examinations by the office, in the same
299 manner and subject to the same terms and conditions as apply to
300 insurers under part II of chapter 624 of the insurance code. The
301 office is not required to conduct periodic examinations pursuant
302 to this section, but may examine a home warranty company at its
303 discretion. An examination conducted pursuant to this section
304 may cover a period of only the most recent 5 years. The costs of
305 examinations conducted pursuant to ss. 624.316(2)(e) and
306 624.3161(3) may not exceed 10 percent of the companies’ reported
307 net income for the prior year.
308 (2) The office shall determine whether to conduct an
309 examination of a home warranty association by considering:
310 (a) The amount of time that the association has been
311 continuously licensed and operating under the same management
312 and control.
313 (b) The association’s history of compliance with applicable
314 law.
315 (c) The number of consumer complaints against the
316 association.
317 (d) The financial condition of the association,
318 demonstrated by the financial reports submitted pursuant to s.
319 634.313.
320 Section 7. Section 634.3385, Florida Statutes, is created
321 to read:
322 634.3385 Unauthorized entities; gifts and grants.—A
323 governmental unit, public agency, institution, person, firm, or
324 legal entity may provide money to the department to enable the
325 department to pursue unauthorized entities operating in
326 violation of this part. The department may transfer funds to the
327 office to investigate, discipline, sanction, and take all action
328 consistent with this part relative to unauthorized entities. All
329 donations or grants of moneys to the department shall be
330 deposited into the Insurance Regulatory Trust Fund and shall be
331 separately accounted for in accordance with this section. Moneys
332 deposited into the Insurance Regulatory Trust Fund pursuant to
333 this section may be appropriated by the Legislature, pursuant to
334 chapter 216, for the purpose of enabling the department or the
335 office to carry out the provisions of this section.
336 Notwithstanding s. 216.301 and pursuant to s. 216.351, any
337 balance of moneys deposited into the Insurance Regulatory Trust
338 Fund pursuant to this section remaining at the end of any fiscal
339 year shall be available for carrying out the duties and
340 responsibilities of the department or the office.
341 Section 8. Section 634.414, Florida Statutes, is amended to
342 read:
343 634.414 Forms; required provisions.—
344 (1) Each service warranty contract shall contain a
345 cancellation provision. If the contract is canceled by the
346 warranty holder, return of premium shall be based upon no less
347 than 90 percent of unearned pro rata premium less any claims
348 that have been paid or less the cost of repairs made on behalf
349 of the warranty holder. If the contract is canceled by the
350 association, return of premium shall be based upon 100 percent
351 of unearned pro rata premium, less any claims paid or the cost
352 of repairs made on behalf of the warranty holder. Service
353 warranty associations may effectuate refunds through the issuing
354 sales representative.
355 (2) Refunds owed pursuant to this section may be made by
356 cash, check, store credit, gift card, or other similar means.
357 Upon request of the service warranty holder, the refund shall be
358 remitted by check.
359 (3)(2) By July 1, 2011, each service warranty contract sold
360 in this state must be accompanied by a written disclosure to the
361 consumer that the rate charged for the contract is not subject
362 to regulation by the office. A service warranty association may
363 comply with this requirement by including such disclosure in its
364 service warranty contract form or in a separate written notice
365 provided to the consumer at the time of sale.
366 Section 9. Section 634.416, Florida Statutes, is amended to
367 read:
368 634.416 Examination of associations.—
369 (1)(a) Service warranty associations licensed under this
370 part may be subject to periodic examination by the office, in
371 the same manner and subject to the same terms and conditions
372 that apply to insurers under part II of chapter 624. The office
373 is not required to conduct periodic examinations pursuant to
374 this section, but may examine a service warranty company at its
375 discretion. An examination conducted pursuant to this section
376 may cover a period of only the most recent 5 years. The costs of
377 examinations conducted pursuant to ss. 624.316(2)(e) and
378 624.3161(3) may not exceed 10 percent of the companies’ reported
379 net income for the prior year.
380 (b) The office shall determine whether to conduct an
381 examination of a service warranty association by considering:
382 1. The amount of time that the association has been
383 continuously licensed and operating under the same management
384 and control.
385 2. The association’s history of compliance with applicable
386 law.
387 3. The number of consumer complaints against the
388 association.
389 4. The financial condition of the association, demonstrated
390 by the financial reports submitted pursuant to s. 634.313.
391 (2) The rate charged a service warranty association by the
392 office for examination may be adjusted to reflect the amount
393 collected for the Form 10-K filing fee as provided in this
394 section.
395 (2)(3) On or before May 1 of each year, an association may
396 submit to the office the Form 10-K, as filed with the United
397 States Securities and Exchange Commission pursuant to the
398 Securities Exchange Act of 1934, as amended. Upon receipt and
399 review of the most current Form 10-K, the office may waive the
400 examination requirement; if the office determines not to waive
401 the examination, such examination will be limited to that
402 examination necessary to ensure compliance with this part. The
403 Form 10-K shall be accompanied by a filing fee of $2,000 to be
404 deposited into the Insurance Regulatory Trust Fund.
405 (3)(4) The office is not required to examine an association
406 that has less than $20,000 in gross written premiums as
407 reflected in its most recent annual statement. The office may
408 examine such an association if it has reason to believe that the
409 association may be in violation of this part or is otherwise in
410 an unsound financial condition. If the office examines an
411 association that has less than $20,000 in gross written
412 premiums, the examination fee may not exceed 5 percent of the
413 gross written premiums of the association.
414 Section 10. Section 634.4385, Florida Statutes, is created
415 to read:
416 634.4385 Unauthorized entities; gifts and grants.—A
417 governmental unit, public agency, institution, person, firm, or
418 legal entity may provide money to the department to enable the
419 department to pursue unauthorized entities operating in
420 violation of this part. The department may transfer funds to the
421 office to investigate, discipline, sanction, and take all action
422 consistent with this part relative to unauthorized entities. All
423 donations or grants of moneys to the department shall be
424 deposited into the Insurance Regulatory Trust Fund and shall be
425 separately accounted for in accordance with this section. Moneys
426 deposited into the Insurance Regulatory Trust Fund pursuant to
427 this section may be appropriated by the Legislature, pursuant to
428 chapter 216, for the purpose of enabling the department or the
429 office to carry out the provisions of this section.
430 Notwithstanding s. 216.301 and pursuant to s. 216.351, any
431 balance of moneys deposited into the Insurance Regulatory Trust
432 Fund pursuant to this section remaining at the end of any fiscal
433 year shall be available for carrying out the duties and
434 responsibilities of the department or the office.
435 Section 11. This act shall take effect July 1, 2012.