Florida Senate - 2025 CS for SB 282
By the Committee on Banking and Insurance; and Senator Truenow
597-02095-25 2025282c1
1 A bill to be entitled
2 An act relating to warranty associations; amending s.
3 634.3077, F.S.; making technical changes; amending s.
4 634.406, F.S.; revising the circumstances under which
5 certain service warranty associations are not required
6 to establish unearned premium reserves or to maintain
7 contractual liability insurance and are authorized to
8 allow their premiums to exceed specified ratios;
9 amending s. 634.414, F.S.; requiring that contracts
10 that include coverage for accidental damage from
11 handling be covered by a specified policy; providing
12 an exception; providing an effective date.
13
14 Be It Enacted by the Legislature of the State of Florida:
15
16 Section 1. Subsection (3) of section 634.3077, Florida
17 Statutes, is amended to read:
18 634.3077 Financial requirements.—
19 (3) An association may not be required to set up an
20 unearned premium reserve if it has purchased contractual
21 liability insurance which demonstrates to the satisfaction of
22 the office that 100 percent of its claim exposure is covered by
23 such insurance. Such contractual liability insurance must shall
24 be obtained from an insurer or insurers that hold a certificate
25 of authority to do business within this the state or from an
26 insurer or insurers approved by the office as financially
27 capable of meeting the obligations incurred pursuant to the
28 policy or policies. For purposes of this subsection, the
29 contractual liability policy or policies must shall contain the
30 following provisions:
31 (a) In the event that the home warranty association is
32 unable to fulfill its obligation under its contracts issued in
33 this state for any reason, including insolvency, bankruptcy, or
34 dissolution, the contractual liability insurer or insurers will
35 pay losses and unearned premiums under such plans directly to
36 persons making claims under such contracts.
37 (b) The insurer or insurers issuing the policy or policies
38 shall assume full responsibility for the administration of
39 claims in the event of the inability of the association to do
40 so.
41 (c) The policy or policies may not be canceled or not
42 renewed by the insurer or insurers or the association unless 60
43 days’ written notice thereof has been given to the office by the
44 insurer or insurers before the date of such cancellation or
45 nonrenewal.
46 (d) The contractual liability insurance policy or policies
47 must shall insure all home warranty contracts that were issued
48 while the policy or policies were was in effect regardless of
49 whether or not the premium has been remitted to the insurer or
50 insurers.
51 Section 2. Subsections (3) and (4), paragraphs (b) and (c)
52 of subsection (6), and paragraph (a) of subsection (7) of
53 section 634.406, Florida Statutes, are amended to read:
54 634.406 Financial requirements.—
55 (3) An association will not be required to establish an
56 unearned premium reserve if it has purchased contractual
57 liability insurance which demonstrates to the satisfaction of
58 the office that 100 percent of its claim exposure is covered by
59 such policy or policies. The contractual liability insurance
60 must shall be obtained from an insurer or insurers that hold
61 holds a certificate of authority to do business within the
62 state. For the purposes of this subsection, the contractual
63 liability policy or policies must shall contain the following
64 provisions:
65 (a) In the event that the service warranty association does
66 not fulfill its obligation under contracts issued in this state
67 for any reason, including insolvency, bankruptcy, or
68 dissolution, the contractual liability insurer or insurers will
69 pay losses and unearned premium refunds under such plans
70 directly to the person making a claim under the contract.
71 (b) The insurer or insurers issuing the contractual
72 liability policy or policies shall assume full responsibility
73 for the administration of claims in the event of the inability
74 of the association to do so.
75 (c) The policy or policies may not be canceled or not
76 renewed by either the insurer or insurers or the association
77 unless 60 days’ written notice thereof has been given to the
78 office by the insurer or insurers before the date of such
79 cancellation or nonrenewal.
80 (d) The contractual liability insurance policy or policies
81 must shall insure all service warranty contracts which were
82 issued while the policy or policies were was in effect
83 regardless of whether or not the premium has been remitted to
84 the insurer or insurers.
85 (e) In the event the issuer or issuers of the contractual
86 liability policy or policies are is fulfilling the service
87 warranty covered by policy or policies and in the event the
88 service warranty holder cancels the service warranty, it is the
89 responsibility of the contractual liability policy issuer or
90 issuers to effectuate a full refund of unearned premium to the
91 consumer. This refund is shall be subject to the cancellation
92 fee provisions of s. 634.414. The salesperson or agent shall
93 refund to the contractual liability policy issuer or issuers the
94 unearned pro rata commission.
95 (f) An association may not use utilize both the unearned
96 premium reserve and contractual liability insurance
97 simultaneously. However, an association is shall be allowed to
98 have contractual liability coverage on service warranties
99 previously sold and sell new service warranties covered by the
100 unearned premium reserve, and the converse of this is shall also
101 be allowed. An association must be able to distinguish how each
102 individual service warranty is covered.
103 (4) No warrantor may allow its gross written premiums in
104 force to exceed a 7-to-1 ratio to net assets; however, a company
105 may exceed this requirement if:
106 (a) The company:
107 1.(a) Holds licenses issued pursuant to the provisions of
108 part I and this part;, and
109 2.(b) Maintains net assets of at least $2.5 million;, and
110 3.(c) Uses Utilizes contractual liability insurance which
111 reimburses the service warranty association for 100 percent of
112 its paid claims;, and
113 (b)(d) The insurer or insurers issuing the contractual
114 liability insurance policy or policies maintain maintains a
115 policyholder surplus of at least $100 million and are is rated
116 “A” or higher by A.M. Best Company.
117 (6) An association that holds a license under this part may
118 allow its premiums for service warranties written under this
119 part to exceed the ratio to net assets limitations of this
120 section if the association meets all of the following:
121 (b) Uses a contractual liability insurance policy or
122 policies approved by the office that:
123 1. Reimburse Reimburses the service warranty association
124 for 100 percent of their its claims liability and are is issued
125 by an insurer or insurers that maintain maintains a policyholder
126 surplus of at least $100 million; or
127 2. Comply Complies with subsection (3) and are is issued by
128 an insurer or insurers that maintain maintains a policyholder
129 surplus of at least $200 million.
130 (c) The insurer or insurers issuing the contractual
131 liability insurance policy or policies:
132 1. Are Is rated “A” or higher by A.M. Best Company or an
133 equivalent rating by another national rating service acceptable
134 to the office.
135 2. In conjunction with the warranty association’s filing of
136 the quarterly and annual reports, provide provides, on a form
137 prescribed by the commission, a statement certifying the gross
138 written premiums in force reported by the warranty association
139 and a statement that all of the warranty association’s gross
140 written premium in force is covered under the contractual
141 liability policy or policies, regardless of whether it has been
142 reported.
143 (7) An association licensed under this part and holding no
144 other license under part I or part II of this chapter is not
145 required to establish an unearned premium reserve or maintain
146 contractual liability insurance and may allow its premiums to
147 exceed the ratio to net assets limitation of this section if the
148 association complies with the following:
149 (a) The association or, if the association is a direct or
150 indirect wholly owned subsidiary of a parent corporation, its
151 parent corporation has, and maintains at all times, a minimum
152 net worth of at least $100 million and provides the office with
153 one of the following:
154 1. A copy of the association’s annual audited financial
155 statements or the audited consolidated financial statements of
156 the association’s parent corporation, prepared by an independent
157 certified public accountant in accordance with generally
158 accepted accounting principles, which clearly demonstrate the
159 net worth of the association or its parent corporation to be
160 $100 million and a quarterly written certification to the office
161 that such entity continues to maintain the net worth required
162 under this paragraph.
163 2. The association’s, or its parent corporation’s, Form 10
164 K, Form 10-Q, or Form 20-F as filed with the United States
165 Securities and Exchange Commission or such other documents
166 required to be filed with a recognized stock exchange, which
167 shall be provided on a quarterly and annual basis within 10 days
168 after the last date each such report must be filed with the
169 Securities and Exchange Commission, the National Association of
170 Security Dealers Automated Quotation system, or other recognized
171 stock exchange.
172
173 Failure to timely file the documents required under this
174 paragraph may, at the discretion of the office, subject the
175 association to suspension or revocation of its license under
176 this part.
177 Section 3. Subsection (5) is added to section 634.414,
178 Florida Statutes, to read:
179 634.414 Forms; required provisions.—
180 (5) All contracts that include coverage for accidental
181 damage from handling must be covered by the contractual
182 liability policy specified in s. 634.406(3), unless such
183 coverage is issued by an association not required to establish
184 an unearned premium reserve or maintain contractual liability
185 insurance under s. 634.406(7).
186 Section 4. This act shall take effect July 1, 2025.