Florida Senate - 2010 SB 2232
By Senator Richter
37-01259A-10 20102232__
1 A bill to be entitled
2 An act relating to guaranty associations; amending s.
3 631.52, F.S.; expanding an exemption from the
4 applicability of certain provisions of state law to
5 include workers’ compensation claims under employer
6 liability coverage; amending s. 631.54, F.S.;
7 conforming the definition of “account” to changes made
8 by the act; amending s. 631.55, F.S.; revising the
9 structure of the Florida Insurance Guaranty
10 Association by combining the auto liability and auto
11 physical damage accounts; amending s. 631.57, F.S.;
12 conforming cross-references; providing legislative
13 intent; deleting provisions relating to classification
14 and payment of emergency assessments; providing
15 guidelines for the calculation of recoupment factors;
16 authorizing an insurer to apply a recalculated
17 recoupment factor under certain conditions; providing
18 for the return of excess assessments and recoupment
19 charges; providing that amounts recouped pursuant to
20 specified provisions of state law are not premium and
21 not subject to premium taxes, fees, or commissions;
22 requiring that insurers treat failure to pay a
23 recoupment charge as failure to pay the premium;
24 requiring that an insurer file with the Office of
25 Insurance Regulation a statement containing certain
26 information within a specified period before applying
27 a recoupment factor to any policies; authorizing an
28 insurer to use a recoupment factor after the
29 expiration of such period; providing that an insurer
30 need submit only one such statement for all lines of
31 business; requiring that an insurer file with the
32 office an accounting report containing certain
33 information within a specified period after the
34 completion of the recoupment process; amending s.
35 631.713, F.S.; expanding the application of certain
36 provisions of state law to certain residents of other
37 states who own certain insurance policies; expanding
38 the list of contracts and policies to which certain
39 provisions of state law do not apply; amending s.
40 631.714, F.S.; revising the definition of “insolvent
41 insurer” to remove the requirement that an order of
42 liquidation become final by the exhaustion of
43 appellate review; expanding the definition of
44 “resident” to account for persons other than
45 individuals and residents of foreign countries and
46 United State possessions, territories, and
47 protectorates; amending s. 631.717, F.S.; limiting a
48 guaranty association’s liability for cash surrender,
49 net cash withdrawal, and annuity benefits with respect
50 to life insurance on any one life; authorizing an
51 association to issue substitute coverage under certain
52 circumstances; requiring that such alternate policy or
53 contract meet certain criteria; creating s. 631.7295,
54 F.S.; authorizing an association to succeed to the
55 rights of an insolvent insurer arising after an order
56 of liquidation or rehabilitation with regard to
57 certain contracts of reinsurance; requiring that such
58 an association pay all unpaid premiums due under the
59 contract; amending s. 631.735, F.S.; providing that
60 certain provisions of state law do not prohibit a
61 licensed insurance agent from explaining the existence
62 or function of the association to policyholders,
63 prospects, or applicants for coverage; amending s.
64 631.904, F.S.; clarifying the definition of “covered
65 claim” to include unpaid claims under any employer
66 liability coverage of a workers’ compensation policy
67 limited to the lesser of a specified amount and the
68 limits of the policy; providing an effective date.
69
70 Be It Enacted by the Legislature of the State of Florida:
71
72 Section 1. Section 631.52, Florida Statutes, is amended to
73 read:
74 631.52 Scope.—This part shall apply to all kinds of direct
75 insurance, except:
76 (1) Life, annuity, health, or disability insurance;
77 (2) Mortgage guaranty, financial guaranty, or other forms
78 of insurance offering protection against investment risks;
79 (3) Fidelity or surety bonds, or any other bonding
80 obligations;
81 (4) Credit insurance, vendors’ single interest insurance,
82 or collateral protection insurance or any similar insurance
83 protecting the interests of a creditor arising out of a
84 creditor-debtor transaction;
85 (5) Warranty, including motor vehicle service, home
86 warranty, or service warranty;
87 (6) Ambulance service, health care service, or preneed
88 funeral merchandise or service;
89 (7) Optometric service plan, pharmaceutical service plan,
90 or dental service plan;
91 (8) Legal expense;
92 (9) Health maintenance, prepaid health clinic, or
93 continuing care;
94 (10) Ocean marine or wet marine insurance;
95 (11) Self-insurance and any kind of self-insurance fund,
96 liability pool, or risk management fund;
97 (12) Title insurance;
98 (13) Surplus lines;
99 (14) Workers’ compensation, including claims under employer
100 liability coverage;
101 (15) Any transaction or combination of transactions between
102 a person, including affiliates of such person, and an insurer,
103 including affiliates of such insurer, which involves the
104 transfer of investment or credit risk unaccompanied by the
105 transfer of insurance risk; or
106 (16) Any insurance provided by or guaranteed by government.
107 Section 2. Subsection (1) of section 631.54, Florida
108 Statutes, is amended to read:
109 631.54 Definitions.—As used in this part:
110 (1) “Account” means any one of the three accounts created
111 by s. 631.55.
112 Section 3. Subsection (2) of section 631.55, Florida
113 Statutes, is amended to read:
114 631.55 Creation of the association.—
115 (2) For the purposes of administration and assessment, the
116 association shall be divided into two three separate accounts:
117 (a) The auto liability and auto physical damage account;
118 and
119 (b) The auto physical damage account; and
120 (b)(c) The account for all other insurance to which this
121 part applies.
122 Section 4. Subsection (3) of section 631.57, Florida
123 Statutes, is amended to read:
124 631.57 Powers and duties of the association.—
125 (3)(a) To the extent necessary to secure the funds for the
126 respective accounts for the payment of covered claims, to pay
127 the reasonable costs to administer the same, and to the extent
128 necessary to secure the funds for the account specified in
129 s.631.55(2)(b) s. 631.55(2)(c) or to retire indebtedness,
130 including, without limitation, the principal, redemption
131 premium, if any, and interest on, and related costs of issuance
132 of, bonds issued under s. 631.695 and the funding of any
133 reserves and other payments required under the bond resolution
134 or trust indenture pursuant to which such bonds have been
135 issued, the office, upon certification of the board of
136 directors, shall levy assessments in the proportion that each
137 insurer’s net direct written premiums in this state in the
138 classes protected by the account bears to the total of said net
139 direct written premiums received in this state by all such
140 insurers for the preceding calendar year for the kinds of
141 insurance included within such account. Assessments shall be
142 remitted to and administered by the board of directors in the
143 manner specified by the approved plan. Each insurer so assessed
144 shall have at least 30 days’ written notice as to the date the
145 assessment is due and payable. Every assessment shall be made as
146 a uniform percentage applicable to the net direct written
147 premiums of each insurer in the kinds of insurance included
148 within the account in which the assessment is made. The
149 assessments levied against any insurer shall not exceed in any
150 one year more than 2 percent of that insurer’s net direct
151 written premiums in this state for the kinds of insurance
152 included within such account during the calendar year next
153 preceding the date of such assessments.
154 (b) If sufficient funds from such assessments, together
155 with funds previously raised, are not available in any one year
156 in the respective account to make all the payments or
157 reimbursements then owing to insurers, the funds available shall
158 be prorated and the unpaid portion shall be paid as soon
159 thereafter as funds become available.
160 (c) The Legislature finds and declares that all assessments
161 paid by an insurer or insurer group as a result of a levy by the
162 office, including regular and emergency assessments, constitute
163 advances of funds from the insurer to the association. The
164 insurer is entitled to fully recoup such advances by applying a
165 separate recoupment factor to the premium of policies of the
166 same kind line or type as were considered by the office in
167 determining the assessment liability of the insurer or insurer
168 group. Assessments shall be included as an appropriate factor in
169 the making of rates.
170 (d) No state funds of any kind shall be allocated or paid
171 to said association or any of its accounts.
172 (e)1.a. In addition to assessments otherwise authorized in
173 paragraph (a) and to the extent necessary to secure the funds
174 for the account specified in s. 631.55(2)(b) s. 631.55(2)(c) for
175 the direct payment of covered claims of insurers rendered
176 insolvent by the effects of a hurricane and to pay the
177 reasonable costs to administer such claims, or to retire
178 indebtedness, including, without limitation, the principal,
179 redemption premium, if any, and interest on, and related costs
180 of issuance of, bonds issued under s. 631.695 and the funding of
181 any reserves and other payments required under the bond
182 resolution or trust indenture pursuant to which such bonds have
183 been issued, the office, upon certification of the board of
184 directors, shall levy emergency assessments upon insurers
185 holding a certificate of authority. The emergency assessments
186 payable under this paragraph by any insurer shall not exceed in
187 any single year more than 2 percent of that insurer’s direct
188 written premiums, net of refunds, in this state during the
189 preceding calendar year for the kinds of insurance within the
190 account specified in s. 631.55(2)(b) s. 631.55(2)(c).
191 b. Any emergency assessments authorized under this
192 paragraph shall be levied by the office upon insurers referred
193 to in sub-subparagraph a., upon certification as to the need for
194 such assessments by the board of directors. In the event the
195 board of directors participates in the issuance of bonds in
196 accordance with s. 631.695, emergency assessments shall be
197 levied in each year that bonds issued under s. 631.695 and
198 secured by such emergency assessments are outstanding, in such
199 amounts up to such 2-percent limit as required in order to
200 provide for the full and timely payment of the principal of,
201 redemption premium, if any, and interest on, and related costs
202 of issuance of, such bonds. The emergency assessments provided
203 for in this paragraph are assigned and pledged to the
204 municipality, county, or legal entity issuing bonds under s.
205 631.695 for the benefit of the holders of such bonds, in order
206 to enable such municipality, county, or legal entity to provide
207 for the payment of the principal of, redemption premium, if any,
208 and interest on such bonds, the cost of issuance of such bonds,
209 and the funding of any reserves and other payments required
210 under the bond resolution or trust indenture pursuant to which
211 such bonds have been issued, without the necessity of any
212 further action by the association, the office, or any other
213 party. To the extent bonds are issued under s. 631.695 and the
214 association determines to secure such bonds by a pledge of
215 revenues received from the emergency assessments, such bonds,
216 upon such pledge of revenues, shall be secured by and payable
217 from the proceeds of such emergency assessments, and the
218 proceeds of emergency assessments levied under this paragraph
219 shall be remitted directly to and administered by the trustee or
220 custodian appointed for such bonds.
221 c. Emergency assessments under this paragraph may be
222 payable in a single payment or, at the option of the
223 association, may be payable in 12 monthly installments with the
224 first installment being due and payable at the end of the month
225 after an emergency assessment is levied and subsequent
226 installments being due not later than the end of each succeeding
227 month.
228 d. If emergency assessments are imposed, the report
229 required by s. 631.695(7) shall include an analysis of the
230 revenues generated from the emergency assessments imposed under
231 this paragraph.
232 e. If emergency assessments are imposed, the references in
233 sub-subparagraph (1)(a)3.b. and s. 631.695(2) and (7) to
234 assessments levied under paragraph (a) shall include emergency
235 assessments imposed under this paragraph.
236 2. In order to ensure that insurers paying emergency
237 assessments levied under this paragraph continue to charge rates
238 that are neither inadequate nor excessive, within 90 days after
239 being notified of such assessments, each insurer that is to be
240 assessed pursuant to this paragraph shall submit a rate filing
241 for coverage included within the account specified in s.
242 631.55(2)(c) and for which rates are required to be filed under
243 s. 627.062. If the filing reflects a rate change that, as a
244 percentage, is equal to the difference between the rate of such
245 assessment and the rate of the previous year’s assessment under
246 this paragraph, the filing shall consist of a certification so
247 stating and shall be deemed approved when made. Any rate change
248 of a different percentage shall be subject to the standards and
249 procedures of s. 627.062.
250 2.3. If In the event the board of directors participates in
251 the issuance of bonds in accordance with s. 631.695, an annual
252 assessment under this paragraph shall continue while the bonds
253 issued with respect to which the assessment was imposed are
254 outstanding, including any bonds the proceeds of which were used
255 to refund bonds issued pursuant to s. 631.695, unless adequate
256 provision has been made for the payment of the bonds in the
257 documents authorizing the issuance of such bonds.
258 4. Emergency assessments under this paragraph are not
259 premium and are not subject to the premium tax, to any fees, or
260 to any commissions. An insurer is liable for all emergency
261 assessments that the insurer collects and shall treat the
262 failure of an insured to pay an emergency assessment as a
263 failure to pay the premium. An insurer is not liable for
264 uncollectible emergency assessments.
265 (f) The recoupment factor applied to policies in accordance
266 with paragraph (c) shall be selected by the insurer or insurer
267 group so as to provide for the probable recoupment of both
268 regular and emergency assessments over a period of 12 months,
269 unless the insurer or insurer group, at its option, elects to
270 recoup the assessment over a longer period. The recoupment
271 factor shall apply to all policies of the same kind, line, or
272 type as were considered by the office in determining the
273 assessment liability of the insurer or insurer group issued or
274 renewed during a 12-month period. If the insurer or insurer
275 group does not collect the full amount of the assessment during
276 one 12-month period, the insurer or insurer group may apply
277 recalculated recoupment factors to policies issued or renewed
278 during one or more succeeding 12-month periods. If, at the end
279 of a 12-month period, the insurer or insurer group has collected
280 more than the amount of the assessment, all excess amounts
281 collected by the insurer or insurer group shall be remitted to
282 the association. Recoupment charges collected by an insurer or
283 insurer group in excess of the assessment amount paid to the
284 association shall be remitted to the association within 60 days
285 after the end of the calendar year in which the excess
286 recoupment charges were collected. The association may use such
287 excess recoupment amounts submitted to reduce future
288 assessments.
289 (g) Amounts recouped under this subsection are not premium
290 and are not subject to premium taxes, fees, or commissions.
291 However, insurers shall treat the failure of an insured to pay a
292 recoupment charge as a failure to pay the premium.
293 (h) At least 15 days before applying the recoupment factor
294 to any policies, the insurer or insurer group shall file with
295 the office a statement for informational purposes only setting
296 forth the amount of the recoupment factor and an explanation of
297 how the recoupment factor will be applied. Such statement shall
298 include documentation of the assessment paid by the insurer or
299 insurer group and the arithmetic calculations supporting the
300 recoupment factor. The insurer or insurer group may use the
301 recoupment factor at any time after the expiration of the 15-day
302 period. The insurer or insurer group need submit only one
303 informational statement for all lines of business using the same
304 recoupment factor.
305 (i) No later than 90 days after the insurer or insurer
306 group has completed the recoupment process, it shall file with
307 the office, for information purposes only, a final accounting
308 report documenting the recoupment. The report shall provide the
309 amounts of assessments paid by the insurer or insurer group, the
310 amounts and percentages recouped by year from each affected line
311 of business, and the direct written premium subject to
312 recoupment by year. The insurer or insurer group need submit
313 only one informational statement for all lines of business using
314 the same recoupment factor.
315 Section 5. Paragraph (b) of subsection (2) of section
316 631.713, Florida Statutes, is amended, paragraphs (n), (o), and
317 (p) are added to subsection (3) of that section, and subsection
318 (5) is added to that section, to read:
319 631.713 Application of part.—
320 (2) Coverage under this part shall be provided to:
321 (b) Persons who are owners of or certificateholders under
322 such policies or contracts, and who:
323 1. Are residents of this state; or
324 2. Are residents of other states, but only if:
325 a. The insurers which issued such policies or contracts are
326 domiciled in this state;
327 b. Such insurers were not licensed never held a license or
328 certificate of authority in the states in which such persons
329 reside at the time specified in a state’s guaranty association
330 law as necessary for coverage by that state’s association;
331 c. Such other states have associations similar to the
332 association created by this part; and
333 d. Such persons are not eligible for coverage by such
334 associations.
335 (3) This part does not apply to:
336 (n) A portion of a policy or contract, to the extent that
337 the rate of interest on which it is based, or the interest rate,
338 crediting rate, or similar factor determined by use of an index
339 or other external reference stated in the policy or contract
340 employed in calculating returns or changes in value:
341 1. Averaged over the period of 4 years immediately
342 preceding the date on which the member insurer becomes an
343 impaired or insolvent insurer under this part, whichever is
344 earlier, exceeds the rate of interest determined by subtracting
345 2 percentage points from Moody’s Corporate Bond Yield Average
346 averaged for that same 4-year period or for such lesser period
347 if the policy or contract was issued less than 4 years before
348 the member insurer becomes an impaired or insolvent insurer
349 under this part, whichever is earlier; and
350 2. On and after the date on which the member insurer
351 becomes an impaired or insolvent insurer under this part,
352 whichever is earlier, exceeds the rate of interest determined by
353 subtracting 3 percentage points from the most current version of
354 Moody’s Corporate Bond Yield Average.
355 (o) A portion of a policy or contract to the extent it
356 provides for interest or other changes in value to be determined
357 by the use of an index or other external reference stated in the
358 policy or contract, but which have not been credited to the
359 policy or contract, or as to which the policy or contract
360 owner’s rights are subject to forfeiture, as of the date the
361 member insurer becomes an impaired or insolvent insurer under
362 this part, whichever is earlier. However, if the interest or
363 change in value determined by using the procedures defined in
364 the policy or contract will be credited as if the contractual
365 date of crediting interest or changing value were the date of
366 impairment or insolvency, whichever is earlier, and any interest
367 or change in value shall not be subject to forfeiture.
368 (p) A policy or contract providing any hospital, medical,
369 prescription drug, or other health care benefits pursuant to
370 Medicare Part C or D or any regulations issued pursuant to
371 Medicare Part C or D.
372 (5) Notwithstanding any other provisions of this part, this
373 part includes coverage to a person who is a payee under a
374 structured settlement annuity, or a beneficiary if the payee is
375 deceased, with a coverage limit of $300,000 by the association,
376 if:
377 (a) The payee is a resident of this state, regardless of
378 where the contract owner resides; and
379 (b) Neither the payee, beneficiary, nor contract owner is
380 eligible for coverage by the association of the state in which
381 the contract owner resides.
382 Section 6. Subsections (6) and (10) of section 631.714,
383 Florida Statutes, are amended to read:
384 631.714 Definitions.—As used in this part, the term:
385 (6) “Insolvent insurer” means a member insurer authorized
386 to transact insurance in this state, either at the time the
387 policy was issued or when the insured event occurred, and
388 against which an order of liquidation with a finding of
389 insolvency has been entered by a court of competent
390 jurisdiction, if such order has become final by the exhaustion
391 of appellate review.
392 (10) “Resident” means any person who resides in this state
393 at the time a member insurer is determined to be an impaired or
394 insolvent insurer and to whom contractual obligations are owed
395 by such impaired or insolvent member insurer. A person may be a
396 resident of only one state, which in the case of a person other
397 than an individual shall be the person’s principal place of
398 business. Citizens of the United States who are residents of
399 foreign countries or United States possessions, territories, or
400 protectorates that do not have an association similar to the
401 guaranty association created by this part, shall be deemed
402 residents of the state of domicile of the insurer issuing the
403 policies or contracts.
404 Section 7. Subsection (9) of section 631.717, Florida
405 Statutes, is amended, and paragraph (g) is added to subsection
406 (12) of that section, to read:
407 631.717 Powers and duties of the association.—
408 (9) The association’s liability for the contractual
409 obligations of the insolvent insurer shall be as great as, but
410 no greater than, the contractual obligations of the insurer in
411 the absence of such insolvency, unless such obligations are
412 reduced as permitted by subsection (4), but the aggregate
413 liability of the association shall not exceed $100,000 in net
414 cash surrender and net cash withdrawal values for life
415 insurance, $250,000 in present value of annuity benefits,
416 including cash surrenders and net cash withdrawals, or $300,000
417 for all benefits including cash values, with respect to any one
418 life. In no event shall the association be liable for any
419 penalties or interest.
420 (12)
421 (g) In carrying out its duties in connection with
422 guaranteeing, assuming, or reinsuring policies or contracts
423 under subsections (2) and (3), the association may, subject to
424 approval of the receivership court, issue substitute coverage
425 for a policy or contract that provides an interest rate,
426 crediting rate, or similar factor determined by use of an index
427 or other external reference stated in the policy or contract
428 employed in calculating returns or changes in value by issuing
429 an alternative policy or contract. In lieu of the index or other
430 external reference provided for in the original policy or
431 contract, the alternative policy or contract must provide for a
432 fixed interest rate, payment of dividends with minimum
433 guarantees, or a different method for calculating interest or
434 changes in value. In such case:
435 1. There is no requirement for evidence of insurability,
436 waiting period, or other exclusion that would not have applied
437 under the replaced policy or contract; and
438 2. The alternative policy or contract shall be
439 substantially similar to the replaced policy or contract in all
440 other material terms.
441 Section 8. Section 631.7295, Florida Statutes, is created
442 to read:
443 631.7295 Reinsurance.—With respect to covered policies for
444 which the association becomes obligated after an entry of an
445 order of liquidation or rehabilitation, the association may
446 elect to succeed to the rights of the insolvent insurer arising
447 after the order of liquidation or rehabilitation under any
448 contract of reinsurance to which the insolvent insurer was a
449 party, to the extent that such contract provides coverage for
450 losses occurring after the date of the order of liquidation or
451 rehabilitation. As a condition to making such election, the
452 association must pay all unpaid premiums due under the contract
453 for coverage relating to periods before and after the date on
454 which the order of liquidation or rehabilitation was entered.
455 Section 9. Section 631.735, Florida Statutes, is amended to
456 read:
457 631.735 Prohibited advertisement of Florida Life and Health
458 Insurance Guaranty Association Act in sale of insurance.—No
459 person shall make, publish, disseminate, circulate, or place
460 before the public, or cause directly or indirectly to be made,
461 published, disseminated, circulated, or placed before the
462 public, in any newspaper, magazine, or other publication, or in
463 the form of a notice, circular, pamphlet, letter, or poster, or
464 over any radio station or television station, or in any other
465 way, any advertisement, announcement, or statement which uses
466 the existence of the Insurance Guaranty Association of this
467 state for the purpose of sales, solicitation, or inducement to
468 purchase any form of insurance covered by the Florida Life and
469 Health Insurance Guaranty Association Act. However, this section
470 does shall not apply to the Florida Life and Health Insurance
471 Guaranty Association or any other entity that which does not
472 sell or solicit insurance, and does not prohibit a duly licensed
473 insurance agent from explaining the existence or function of the
474 association to policyholders, prospects, or applicants for
475 coverage.
476 Section 10. Subsection (2) of section 631.904, Florida
477 Statutes, is amended to read:
478 631.904 Definitions.—As used in this part, the term:
479 (2) “Covered claim” means an unpaid claim, including a
480 claim for return of unearned premiums, which arises out of, is
481 within the coverage of, and is not in excess of the applicable
482 limits of, an insurance policy to which this part applies, which
483 policy was issued by an insurer and which claim is made on
484 behalf of a claimant or insured who was a resident of this state
485 at the time of the injury. The term “covered claim” includes
486 unpaid claims under any employer liability coverage of a
487 workers’ compensation policy limited to the lesser of $300,000
488 and the limits of the policy. The term “covered claim” does not
489 include any amount sought as a return of premium under any
490 retrospective rating plan; any amount due any reinsurer,
491 insurer, insurance pool, or underwriting association, as
492 subrogation recoveries or otherwise; any claim that would
493 otherwise be a covered claim that has been rejected by any other
494 state guaranty fund on the grounds that the insured’s net worth
495 is greater than that allowed under that state’s guaranty fund or
496 liquidation law, except this exclusion from the definition of
497 covered claim shall not apply to employers who, prior to April
498 30, 2004, entered into an agreement with the corporation
499 preserving the employer’s right to seek coverage of claims
500 rejected by another state’s guaranty fund; or any return of
501 premium resulting from a policy that was not in force on the
502 date of the final order of liquidation. Member insurers have no
503 right of subrogation against the insured of any insolvent
504 insurer. This provision shall be applied retroactively to cover
505 claims of an insolvent self-insurance fund resulting from
506 accidents or losses incurred prior to January 1, 1994,
507 regardless of the date the petition in circuit court was filed
508 alleging insolvency and the date the court entered an order
509 appointing a receiver.
510 Section 11. This act shall take effect upon becoming a law.