Florida Senate - 2017                              CS for SB 794
       By the Committee on Banking and Insurance; and Senator Brandes
       597-02421-17                                           2017794c1
    1                        A bill to be entitled                      
    2         An act relating to motor vehicle service agreement
    3         companies; amending s. 634.041, F.S.; revising
    4         qualifications for a motor vehicle service agreement
    5         company to obtain and maintain a license; amending s.
    6         634.121, F.S.; requiring specified refunds by insurers
    7         or service agreement companies if service agreements
    8         are canceled by lenders, finance companies, or
    9         creditors after a specified timeframe; providing a
   10         limitation on such cancellations; providing an
   11         effective date.
   13  Be It Enacted by the Legislature of the State of Florida:
   15         Section 1. Paragraph (b) of subsection (8) and paragraph
   16  (a) of subsection (11) of section 634.041, Florida Statutes, are
   17  amended to read:
   18         634.041 Qualifications for license.—To qualify for and hold
   19  a license to issue service agreements in this state, a service
   20  agreement company must be in compliance with this part, with
   21  applicable rules of the commission, with related sections of the
   22  Florida Insurance Code, and with its charter powers and must
   23  comply with the following:
   24         (8)
   25         (b) A service agreement company does not have to establish
   26  and maintain an unearned premium reserve if it secures purchases
   27  and maintains contractual liability insurance in accordance with
   28  the following:
   29         1. Coverage of The insurance covers 100 percent of the its
   30  claim exposure and is obtained from an insurer that is approved
   31  by the office and that which holds a certificate of authority
   32  under s. 624.401 to do business within this state, or such
   33  coverage is secured through a risk retention group that is
   34  authorized to do business within this state under s. 627.943 or
   35  s. 627.944. Such insurer or risk retention group shall maintain
   36  a surplus as regards policyholders of at least $15 million.
   37         2. If the service agreement company does not meet its
   38  contractual obligations, the contractual liability insurance
   39  policy binds its issuer to pay or cause to be paid to the
   40  service agreement holder all legitimate claims and cancellation
   41  refunds for all service agreements issued by the service
   42  agreement company while the policy was in effect. This
   43  requirement also applies to those service agreements for which
   44  no premium has been remitted to the insurer.
   45         3. If the issuer of the contractual liability policy is
   46  fulfilling the service agreements covered by the contractual
   47  liability policy and the service agreement holder cancels the
   48  service agreement, the issuer must make a full refund of
   49  unearned premium to the consumer, subject to the cancellation
   50  fee provisions of s. 634.121(3). The sales representative and
   51  agent must refund to the contractual liability policy issuer
   52  their unearned pro rata commission.
   53         4. The policy may not be canceled, terminated, or
   54  nonrenewed by the insurer or the service agreement company
   55  unless a 90-day written notice thereof has been given to the
   56  office by the insurer before the date of the cancellation,
   57  termination, or nonrenewal.
   58         5. The service agreement company must provide the office
   59  with the claims statistics.
   61  All funds or premiums remitted to an insurer by a motor vehicle
   62  service agreement company under this part shall remain in the
   63  care, custody, and control of the insurer and shall be counted
   64  as an asset of the insurer; provided, however, this requirement
   65  does not apply when the insurer and the motor vehicle service
   66  agreement company are affiliated companies and members of an
   67  insurance holding company system. If the motor vehicle service
   68  agreement company chooses to comply with this paragraph but also
   69  maintains a reserve to pay claims, such reserve shall only be
   70  considered an asset of the covered motor vehicle service
   71  agreement company and may not be simultaneously counted as an
   72  asset of any other entity.
   73         (11)(a) A service agreement company offering service
   74  agreements providing vehicle protection expenses may meet the
   75  requirements for this part only by maintaining contractual
   76  liability insurance covering 100 percent of its vehicle
   77  protection claim exposure in accordance with paragraph (8)(b),
   78  which insurance must be issued by an insurance company not
   79  affiliated with the service agreement company, unless the
   80  insurance company had issued a contractual liability insurance
   81  policy to a service agreement company on or before January 1,
   82  2002. Service agreements providing vehicle protection expenses
   83  may be sold only to a service agreement holder that has in-force
   84  comprehensive motor vehicle insurance coverage for the vehicle
   85  to be covered by the service agreement.
   86         Section 2. Paragraph (b) of subsection (3) of section
   87  634.121, Florida Statutes, is amended to read:
   88         634.121 Forms, required procedures, provisions.—
   89         (3)
   90         (b) After the service agreement has been in effect for 60
   91  days, it may not be canceled by the insurer or service agreement
   92  company unless:
   93         1. There has been a material misrepresentation or fraud at
   94  the time of sale of the service agreement;
   95         2. The agreement holder has failed to maintain the motor
   96  vehicle as prescribed by the manufacturer;
   97         3. The odometer has been tampered with or disabled and the
   98  agreement holder has failed to repair the odometer; or
   99         4. For nonpayment of premium by the agreement holder, in
  100  which case the service agreement company shall provide the
  101  agreement holder notice of cancellation by certified mail.
  103  If the service agreement is canceled by the insurer or service
  104  agreement company, the return of premium must not be less than
  105  100 percent of the paid unearned pro rata premium, less any
  106  claims paid on the agreement. If, after 60 days, the service
  107  agreement is canceled by the service agreement holder, lender,
  108  finance company, or creditor, the insurer or service agreement
  109  company shall return directly to the agreement holder not less
  110  than 90 percent of the unearned pro rata premium, less any
  111  claims paid on the agreement. Cancellations initiated by
  112  lenders, creditors, or finance companies are valid only if
  113  authorized by the terms of the service agreement. The service
  114  agreement company remains responsible for full refunds to the
  115  consumer on canceled service agreements. However, the
  116  salesperson and agent are responsible for the refund of the
  117  unearned pro rata commission. A service agreement company may
  118  effectuate refunds through the issuing salesperson or agent in
  119  accordance with paragraphs (c) and (d).
  120         Section 3. This act shall take effect July 1, 2017.