Florida Senate - 2023                                     SB 410
       By Senator Garcia
       36-00598-23                                            2023410__
    1                        A bill to be entitled                      
    2         An act relating to collateral protection insurance;
    3         creating part XXII of ch. 627, F.S., entitled
    4         “Collateral Protection Insurance”; creating s.
    5         627.9901, F.S.; providing legislative purpose;
    6         creating s. 627.9902, F.S.; providing applicability;
    7         creating s. 627.9903, F.S.; defining terms; creating
    8         s. 627.9904, F.S.; specifying requirements for
    9         collateral protection insurance policy terms;
   10         providing a restriction on insurance charges made to
   11         mortgagors; creating s. 627.9905, F.S.; providing for
   12         the calculation of collateral protection insurance
   13         coverages and premiums; requiring certain excess
   14         replacement cost coverage to be paid to the mortgagor;
   15         prohibiting insurers from writing collateral
   16         protection insurance having certain premium rates;
   17         creating s. 627.9906, F.S.; specifying prohibited
   18         practices by insurers and insurance agents relating to
   19         collateral protection insurance; creating s. 627.9907,
   20         F.S.; providing construction relating to
   21         noncircumvention; creating s. 627.9908, F.S.;
   22         providing requirements for the delivery and contents
   23         of policies or certificates of collateral protection
   24         insurance; creating s. 627.9909, F.S.; specifying
   25         requirements for the filing of policy forms and rates;
   26         requiring certain insurers to file specified annual
   27         reports with the Office of Insurance Regulation;
   28         providing construction; creating s. 627.9911, F.S.;
   29         specifying the office’s authority to enforce the
   30         provisions of the part; specifying applicable
   31         provisions for proceedings and for assessing
   32         penalties; creating s. 627.9912, F.S.; authorizing the
   33         Financial Services Commission to adopt rules; creating
   34         s. 627.9913, F.S.; providing severability; providing
   35         an effective date.
   37  Be It Enacted by the Legislature of the State of Florida:
   39         Section 1. Part XXII of chapter 627, Florida Statutes,
   40  consisting of ss. 627.9901-627.9913, Florida Statutes, is
   41  created and entitled “Collateral Protection Insurance.”
   42         Section 2. Section 627.9901, Florida Statutes, is created
   43  to read:
   44         627.9901 Purpose.—The purpose of this part is to:
   45         (1)Promote the public welfare by regulating collateral
   46  protection insurance on real property.
   47         (2)Create a legal framework within which collateral
   48  protection insurance on real property may be written in this
   49  state.
   50         (3)Help maintain the separation between the lenders and
   51  servicers and the insurers and insurance agents.
   52         (4)Minimize the possibility of unfair competitive
   53  practices in the sale, placement, solicitation, and negotiation
   54  of collateral protection insurance.
   55         Section 3. Section 627.9902, Florida Statutes, is created
   56  to read:
   57         627.9902 Scope.—
   58         (1)This part applies to insurers and insurance agents
   59  engaged in any mortgage transaction involving collateral
   60  protection insurance.
   61         (2)All collateral protection insurance written in
   62  connection with mortgaged real property, including manufactured
   63  and mobile homes, is subject to the provisions of this part,
   64  except:
   65         (a)Insurance associated with mortgage loans or other
   66  extensions of credit made primarily for business, commercial, or
   67  agricultural purposes.
   68         (b)Insurance offered by the lender or servicer and elected
   69  by the mortgagor at the mortgagor’s option.
   70         (c)Insurance purchased by a lender or servicer on real
   71  estate owned property.
   72         (d)Insurance for which no specific charge is made to the
   73  mortgagor or the mortgagor’s account.
   74         Section 4. Section 627.9903, Florida Statutes, is created
   75  to read:
   76         627.9903 Definitions.—As used in this part, the term:
   77         (1)“Affiliate” has the same meaning as in s. 624.10.
   78         (2)“Collateral protection insurance” has the same meaning
   79  as in s. 624.6085, provided that for purposes of this part, the
   80  term applies only to mortgaged real property and not to personal
   81  property.
   82         (3)“Individual collateral protection insurance” means
   83  coverage for individual real property evidenced by a certificate
   84  of coverage under a master collateral protection insurance
   85  policy or a collateral protection insurance policy for
   86  individual real property.
   87         (4)“Insurance agent” has the same meaning as the term
   88  “agent” in s. 626.015.
   89         (5)“Insurer” has the same meaning as in s. 624.03,
   90  provided that for purposes of this part, the term is limited to
   91  an insurer, or an affiliate of the insurer, authorized to issue
   92  collateral protection insurance on mortgaged real property in
   93  this state.
   94         (6)“Investor” means a person or an entity, or an affiliate
   95  thereof, holding a beneficial interest in loans secured by real
   96  property.
   97         (7)“Lapse” means the date on which a mortgagor has failed
   98  to comply with a mortgage agreement’s requirements to maintain
   99  valid and sufficient insurance upon mortgaged real property.
  100         (8)“Lender” means a person or an entity, or an affiliate
  101  thereof, making loans secured by an interest in real property.
  102         (9)“Loss ratio” means the ratio of incurred losses to
  103  earned premium.
  104         (10)“Master collateral protection insurance policy” means
  105  a group policy issued to a lender or servicer which provides
  106  coverage for all loans in the lender’s or servicer’s loan
  107  portfolio as needed.
  108         (11)“Mortgage agreement” means the written document
  109  setting forth an obligation or a liability of any kind secured
  110  by a lien on real property and due from, owing by, or incurred
  111  by a mortgagor to a lender on account of a mortgage loan, which
  112  document includes the security agreement, the deed of trust,
  113  other documents of similar effect, and any other document
  114  incorporated by reference.
  115         (12)“Mortgage loan” has the same meaning as in s.
  116  494.001(25)(a).
  117         (13)“Mortgagee” means a person who holds mortgaged real
  118  property as security for repayment of a mortgage agreement.
  119         (14)“Mortgagor” means a person who is obligated on a
  120  mortgage loan pursuant to a mortgage agreement.
  121         (15)“Real estate owned property” means property owned or
  122  held by a lender or servicer as a result of a foreclosure under
  123  the related mortgage agreement or acceptance of a deed in lieu
  124  of foreclosure.
  125         (16)“Replacement cost value” means the estimated cost to
  126  replace covered property at the time of loss or damage without
  127  deduction for depreciation. Replacement cost value is not market
  128  value but is the cost to replace covered property to its pre
  129  loss condition.
  130         (17)“Servicer” means a person or an entity, or an
  131  affiliate thereof, contractually obligated to service one or
  132  more mortgage loans for a lender or an investor. The term
  133  includes an entity involved in subservicing arrangements.
  134         Section 5. Section 627.9904, Florida Statutes, is created
  135  to read:
  136         627.9904 Term of insurance policy.—
  137         (1)Collateral protection insurance must become effective
  138  no earlier than the date of lapse of insurance upon mortgaged
  139  real property subject to the terms of a mortgage agreement or
  140  any state or federal law requiring the same.
  141         (2)Individual collateral protection insurance must
  142  terminate on the earliest of the following dates:
  143         (a)The date on which insurance acceptable under the
  144  mortgage agreement becomes effective, subject to the mortgagor
  145  providing sufficient evidence of such acceptable insurance.
  146         (b)The date on which the applicable real property no
  147  longer serves as collateral for a mortgage loan pursuant to a
  148  mortgage agreement.
  149         (c)Such other date as specified by the individual policy
  150  or certificate of insurance.
  151         (d)Such other date as specified by the lender or servicer.
  152         (e)The termination date of the policy.
  153         (3)An insurance charge may not be made to a mortgagor for
  154  collateral protection insurance before the effective date of the
  155  collateral protection insurance or for a term longer than the
  156  scheduled term of the collateral protection insurance.
  157         Section 6. Section 627.9905, Florida Statutes, is created
  158  to read:
  159         627.9905 Calculation of coverage and payment of premiums.
  160         (1)Any collateral protection insurance coverage, and the
  161  subsequent calculation of premium, should be based upon the
  162  replacement cost value of the property, which is determined as:
  163         (a)If known to the lender or servicer, the last known
  164  coverage amount, which is the dwelling coverage amount set forth
  165  in the most recent evidence of insurance coverage provided by
  166  the mortgagee. The insurer shall inquire of the insured at least
  167  once as to the last known coverage amount. If the insurer is
  168  unable to obtain the last known coverage amount from the insured
  169  or in another manner, the insurer may proceed according to
  170  paragraph (b) or paragraph (c), as applicable.
  171         (b)If the last known coverage amount is unknown, the
  172  replacement cost of the property serving as collateral, as
  173  calculated by the insurer, unless the use of replacement cost
  174  for this purpose is prohibited by other state or federal law.
  175         (c)If the last known coverage amount is unknown and the
  176  replacement cost is not available or its use is prohibited by
  177  other state or federal law, the unpaid principal balance of the
  178  mortgage loan.
  179         (2)In the event of a covered loss, any replacement cost
  180  coverage provided by an insurer in excess of the unpaid
  181  principal balance of the mortgage loan must be paid to the
  182  mortgagor.
  183         (3)An insurer may not write collateral protection
  184  insurance for which the premium rate differs from that
  185  determined by the schedules of the insurer on file with the
  186  office as of the effective date of any such policy.
  187         Section 7. Section 627.9906, Florida Statutes, is created
  188  to read:
  189         627.9906 Prohibited practices.—
  190         (1)An insurer or insurance agent may not issue collateral
  191  protection insurance on mortgaged property that the insurer or
  192  insurance agent, or an affiliate thereof, owns, performs the
  193  servicing for, or owns the servicing right to.
  194         (2)An insurer or insurance agent may not compensate,
  195  including through the payment of commissions to, a lender, an
  196  insurer, an investor, or a servicer on collateral protection
  197  property insurance policies issued by the insurer.
  198         (3)An insurer or insurance agent may not share collateral
  199  protection insurance premium or risk with the lender, investor,
  200  or servicer that obtained the collateral protection insurance.
  201         (4)An insurer or insurance agent may not offer contingent
  202  commissions, profit sharing, or other payments dependent upon
  203  profitability or loss ratios to any person affiliated with a
  204  servicer or the insurer in connection with collateral protection
  205  insurance.
  206         (5)An insurer may not provide free or below-cost
  207  outsourced services to lenders, investors, or servicers or
  208  outsource its own functions to lenders, insurance agents,
  209  investors, or servicers on an above-cost basis.
  210         (6)An insurer or insurance agent may not make any
  211  payments, including, but not limited to, the payment of expenses
  212  to a lender, an insurer, an investor, or a servicer, for the
  213  purpose of securing collateral protection insurance business or
  214  related outsourced services.
  215         Section 8. Section 627.9907, Florida Statutes, is created
  216  to read:
  217         627.9907 Noncircumvention.—This part may not be construed
  218  to authorize an insurance agent or insurer solely underwriting
  219  collateral protection insurance to circumvent the requirements
  220  of this part. Any requirement, limitation, or exclusion provided
  221  in this part applies to an insurer or insurance agent involved
  222  in collateral protection insurance.
  223         Section 9. Section 627.9908, Florida Statutes, is created
  224  to read:
  225         627.9908 Evidence of coverage.—Collateral protection
  226  insurance must be set forth in an individual policy or
  227  certificate of insurance. A copy of the individual policy,
  228  certificate of insurance, or other evidence of insurance
  229  coverage must be mailed, first-class mailed, or delivered in
  230  person to the last known address of the mortgagor, or delivered
  231  in accordance with s. 668.50. Notwithstanding any other
  232  information required by general law or by rule, the individual
  233  policy or certificate of insurance coverage must include all of
  234  the following information:
  235         (1)The address and identification of the insured property.
  236         (2)The coverage amount, or amounts if multiple coverages
  237  are provided.
  238         (3)The effective date of the coverage.
  239         (4)The term of coverage.
  240         (5)The premium charge for the coverage.
  241         (6)Contact information for filing a claim.
  242         (7)A complete description of the coverage provided.
  243         Section 10. Section 627.9909, Florida Statutes, is created
  244  to read:
  245         627.9909 Filing, approval, and withdrawal of forms and
  246  rates.—
  247         (1)Except as otherwise provided in this part, all policy
  248  forms and certificates of insurance to be delivered or issued
  249  for delivery in this state are subject to the applicable
  250  provisions of s. 627.410, and the schedules of premium rates
  251  pertaining thereto are subject to the applicable provisions of
  252  s. 627.062.
  253         (2)With respect to any analysis of rates in accordance
  254  with s. 627.062(1), the analysis must also include a
  255  determination as to whether expenses included by the insurer in
  256  the rate are appropriate.
  257         (3)Notwithstanding s. 627.0645, insurers subject to this
  258  part shall refile collateral protection property insurance rates
  259  at least once every 4 years.
  260         (4)All insurers writing collateral protection insurance
  261  shall have separate rates for collateral protection insurance
  262  and voluntary insurance obtained by a mortgage servicer on real
  263  estate owned property.
  264         (5)Upon the introduction of a new collateral protection
  265  insurance program, the insurer shall reference its experience in
  266  existing programs in the associated filings. This part does not
  267  limit an insurer’s discretion, as actuarially appropriate, to
  268  distinguish different terms, conditions, exclusions, eligibility
  269  criteria, or other unique or different characteristics.
  270  Moreover, an insurer may, where actuarially acceptable, rely
  271  upon models or, in the case of flood filings where applicable
  272  experience is not credible, on National Flood Insurance Program
  273  data.
  274         (6)By April 1 of each year, each insurer with at least
  275  $100,000 in direct written premium for collateral protection
  276  insurance in this state during the prior calendar year shall
  277  report to the office the following information for the prior
  278  calendar year:
  279         (a)Actual loss ratio.
  280         (b)Earned premium.
  281         (c)Any aggregate schedule rating debit or credit to earned
  282  premium.
  283         (d)Itemized expenses.
  284         (e)Paid losses.
  285         (f)Loss reserves, including case reserves and reserves for
  286  incurred but not reported losses.
  288  The report must be separately produced for each collateral
  289  protection insurance program and presented on both an
  290  individual-jurisdiction and countrywide basis.
  291         (7)Except in the case of collateral protection insurance
  292  covering the peril of flood, to which this subsection does not
  293  apply, if an insurer experiences an annual loss ratio of less
  294  than 35 percent in any collateral protection insurance program
  295  for 2 consecutive years, it must submit a rate filing, either
  296  adjusting its rates or supporting their continuance, to the
  297  office no more than 90 days after the submission of the data
  298  required in paragraph (6)(f).
  299         (8)Except as specifically set forth in this section, rate
  300  and form filing requirements are subject to the Florida
  301  Insurance Code.
  302         Section 11. Section 627.9911, Florida Statutes, is created
  303  to read:
  304         627.9911 Enforcement; proceedings; penalties.—The office
  305  has all rights and powers to enforce the provisions of this part
  306  as provided by s. 624.307. All proceedings must be conducted in
  307  accordance with chapter 120. Any penalty must be assessed in
  308  accordance with s. 624.4211.
  309         Section 12. Section 627.9912, Florida Statutes, is created
  310  to read:
  311         627.9912 Rulemaking.—The commission may adopt rules to
  312  administer this part.
  313         Section 13. Section 627.9913, Florida Statutes, is created
  314  to read:
  315         627.9913 Severability.—If any provision of this part or its
  316  application to any person or circumstance is held invalid, the
  317  invalidity does not affect other provisions or applications of
  318  this part which can be given effect without the invalid
  319  provision or application, and to this end the provisions of this
  320  part are severable.
  321         Section 14. This act shall take effect July 1, 2023.