Florida Senate - 2019                                    SB 1690
       
       
        
       By Senator Broxson
       
       
       
       
       
       1-01137B-19                                           20191690__
    1                        A bill to be entitled                      
    2         An act relating to warranty associations; amending s.
    3         634.3077, F.S.; revising the basis for calculating the
    4         required assets in a home warranty association’s
    5         premium reserve account; requiring that such reserve
    6         account be a separate auditable account; creating s.
    7         634.346, F.S.; prohibiting home warranties from
    8         excluding coverage solely because of the presence of
    9         rust or corrosion, except under certain circumstances;
   10         specifying requirements for certain home warranties
   11         providing coverage for HVAC system components;
   12         amending s. 634.406, F.S.; revising the basis for
   13         calculating the required assets in a service warranty
   14         association’s premium reserve account; requiring that
   15         such reserve account be a separate auditable account;
   16         revising the basis for calculating a certain reserve
   17         deposit with the Department of Financial Services;
   18         providing an effective date.
   19          
   20  Be It Enacted by the Legislature of the State of Florida:
   21  
   22         Section 1. Subsections (1) and (2) of section 634.3077,
   23  Florida Statutes, are amended to read:
   24         634.3077 Financial requirements.—
   25         (1) An association licensed under this part shall maintain
   26  a funded, unearned premium reserve account, consisting of
   27  unencumbered assets, equal to a minimum of 25 percent of the
   28  gross written premiums received by it from all warranty
   29  contracts in force in this state. Such assets must shall be held
   30  in the form of cash or invested in securities for investments as
   31  provided in part II of chapter 625. Such reserve account must be
   32  a separate auditable account.
   33         (2) An association shall maintain, at a minimum, net assets
   34  equal to one-sixth of the written premiums it receives for the
   35  issuance and delivery of any binder or warranty in force. Net
   36  assets may be less than one-sixth of the premiums written,
   37  provided the association has net assets of not less than
   38  $500,000 and maintains a funded, unearned premium reserve
   39  account consisting of unencumbered assets equal to a minimum of
   40  40 percent of the gross written premiums received by it from all
   41  warranty contracts in force in this state, which must shall be
   42  held in the form of cash or invested in securities for
   43  investments as provided in part II of chapter 625. Such reserve
   44  account must be a separate auditable account.
   45         Section 2. Section 634.346, Florida Statutes, is created to
   46  read:
   47         634.346 Home warranty coverage requirements.—
   48         (1)A home warranty sold in this state may not exclude
   49  coverage solely because of the presence of rust or corrosion
   50  unless the rust or corrosion was a contributing cause of the
   51  mechanical breakdown or failure of a covered appliance, unit, or
   52  system.
   53         (2) A home warranty contract providing coverage for wear
   54  and tear failures of components of a heating, ventilation, and
   55  air conditioning (HVAC) system, and which contains an exclusion
   56  of replacement coverage for any other functional components of
   57  the HVAC system on the basis of operational compatibility or
   58  operational efficiency requirements as set by the manufacturer,
   59  must:
   60         (a)Set forth a disclosure in conspicuous boldface type
   61  that the home warranty contract does not cover replacement of
   62  functional components of HVAC systems for reasons of
   63  compatibility or efficiency requirements of the manufacturer
   64  unless additional coverage for such circumstance is purchased,
   65  and provide the website or telephone number for the consumer to
   66  contact to add such additional coverage to the home warranty
   67  contract; and
   68         (b)Provide consumers the option to purchase additional
   69  coverage, for an additional charge, for the replacement of
   70  otherwise functional components of an HVAC system necessary to
   71  maintain the compatibility and operating efficiency requirements
   72  of the manufacturer.
   73         Section 3. Subsections (1) and (2) of section 634.406,
   74  Florida Statutes, are amended to read:
   75         634.406 Financial requirements.—
   76         (1) An association licensed under this part shall maintain
   77  a funded, unearned premium reserve account, consisting of
   78  unencumbered assets, equal to a minimum of 25 percent of the
   79  gross written premiums received on all warranty contracts in
   80  force which are, wherever written in this state. Such reserve
   81  account must be a separate auditable account. Such assets must
   82  shall be held as prescribed under ss. 625.301-625.340. For
   83  contracts in excess of 2 years which are offered by associations
   84  having net assets of less than $500,000 and for which premiums
   85  are collected in advance for coverage in a subsequent year, 100
   86  percent of the premiums for such subsequent years must shall be
   87  placed in the funded, unearned premium reserve account.
   88         (2) An association utilizing an unearned premium reserve
   89  shall deposit with the department a reserve deposit equal to 10
   90  percent of the gross written premium received on all warranty
   91  contracts in force in this state. Such reserve deposit must
   92  shall be of a type eligible for deposit by insurers under s.
   93  625.52. Request for release of all or part of the reserve
   94  deposit may be made quarterly and only after the office has
   95  received and approved the association’s current financial
   96  statements, as well as a statement sworn to by two officers of
   97  the association verifying such release will not reduce the
   98  reserve deposit to less than 10 percent of the gross written
   99  premium. The reserve deposit required under this part must shall
  100  be included in calculating the reserve required by subsection
  101  (1). The deposit required in s. 634.405(1)(b) must shall be
  102  included in calculating the reserve requirements of this
  103  section.
  104         Section 4. This act shall take effect July 1, 2019.