ENROLLED 2016 Legislature CS for CS for SB 1274, 1st Engrossed 20161274er 1 2 An act relating to limited sinkhole coverage 3 insurance; amending s. 624.407, F.S.; specifying the 4 amount of surplus funds required for domestic insurers 5 applying for a certificate of authority to provide 6 limited sinkhole coverage insurance; amending s. 7 624.408, F.S.; specifying the minimum surplus funds 8 that must be maintained by insurers that provide 9 limited sinkhole coverage insurance; creating s. 10 627.7151, F.S.; authorizing certain insurers to offer 11 limited sinkhole coverage insurance in this state; 12 providing requirements and applicability; prohibiting 13 Citizens Property Insurance Corporation from issuing 14 limited sinkhole coverage insurance; requiring signed 15 acknowledgment of certain statements; specifying loss 16 payment requirements; authorizing use of certain 17 insurance forms; exempting such forms from approval; 18 providing an insurer with rate options; requiring the 19 insurer to notify the Office of Insurance Regulation 20 before writing limited sinkhole coverage insurance and 21 to file a plan of operation with the office; providing 22 an effective date. 23 24 Be It Enacted by the Legislature of the State of Florida: 25 26 Section 1. Subsection (1) of section 624.407, Florida 27 Statutes, is amended to read: 28 624.407 Surplus required; new insurers.— 29 (1) To receive authority to transact any one kind or 30 combinations of kinds of insurance, as defined in part V of this 31 chapter, an insurer applying for its original certificate of 32 authority in this state shall possess surplus as to 33 policyholders at least the greater of: 34 (a) For a property and casualty insurer, $5 million, or 35 $2.5 million for any other insurer; 36 (b) For life insurers, 4 percent of the insurer’s total 37 liabilities; 38 (c) For life and health insurers, 4 percent of the 39 insurer’s total liabilities, plus 6 percent of the insurer’s 40 liabilities relative to health insurance; 41 (d) For all insurers other than life insurers and life and 42 health insurers, 10 percent of the insurer’s total liabilities; 43
or44 (e) Notwithstanding paragraph (a) or paragraph (d), for a 45 domestic insurer that transacts residential property insurance 46 and is: 47 1. Not a wholly owned subsidiary of an insurer domiciled in 48 any other state, $15 million. 49 2. A wholly owned subsidiary of an insurer domiciled in any 50 other state, $50 million; or 51 (f) Notwithstanding paragraphs (a), (d), and (e), for a 52 domestic insurer that only transacts limited sinkhole coverage 53 insurance for personal lines residential property pursuant to s. 54 627.7151, $7.5 million. 55 Section 2. Paragraph (h) is added to subsection (1) of 56 section 624.408, Florida Statutes, to read: 57 624.408 Surplus required; current insurers.— 58 (1) To maintain a certificate of authority to transact any 59 one kind or combinations of kinds of insurance, as defined in 60 part V of this chapter, an insurer in this state must at all 61 times maintain surplus as to policyholders at least the greater 62 of: 63 (h) Notwithstanding paragraphs (e), (f), and (g), for a 64 domestic insurer that only transacts limited sinkhole coverage 65 insurance for personal lines residential property pursuant to s. 66 627.7151, $7.5 million. 67 68 The office may reduce the surplus requirement in paragraphs (f) 69 and (g) if the insurer is not writing new business, has premiums 70 in force of less than $1 million per year in residential 71 property insurance, or is a mutual insurance company. 72 Section 3. Section 627.7151, Florida Statutes, is created 73 to read: 74 627.7151 Limited sinkhole coverage insurance.— 75 (1) An authorized insurer may issue, but is not required to 76 make available, a limited sinkhole coverage insurance policy 77 providing personal lines residential coverage, subject to 78 underwriting, for the peril of sinkhole loss on any structure or 79 the contents of personal property contained therein, subject to 80 this section and ss. 627.706-627.7074. This section does not 81 apply to commercial lines residential or commercial lines 82 nonresidential coverage for the peril of sinkhole loss. This 83 section also does not apply to coverage for the peril of 84 sinkhole loss that is excess coverage over any other insurance 85 covering the peril of sinkhole loss. 86 (2) Limited sinkhole coverage insurance must cover only 87 losses from the peril of sinkhole loss, as defined in s. 88 627.706(2)(j); however, such coverage is not required to provide 89 for contents and additional living expenses. 90 (3) Citizens Property Insurance Corporation may not issue 91 limited sinkhole coverage insurance. 92 (4) Limited sinkhole coverage insurance may: 93 (a) Notwithstanding s. 627.707(5), limit coverage to 94 repairs to stabilize the building and repair the foundation in 95 accordance with the recommendations of the professional engineer 96 retained pursuant to s. 627.707(2). 97 (b) In addition to the deductibles authorized under s. 98 627.706(1)(b), offer deductibles agreed to by the insured and 99 insurer. 100 (c) Offer policy limits agreed to by the insured and 101 insurer. However, policy limits below $50,000 are prohibited 102 unless that amount exceeds full replacement cost of the 103 property. 104 (5) Before issuing a limited sinkhole coverage insurance 105 policy under this section, the insurance agent must obtain a 106 signed acknowledgment from an applicant that includes the 107 following statement in at least 12-point bold, uppercase type: 108 “BY ACCEPTING THIS LIMITED SINKHOLE COVERAGE INSURANCE POLICY, I 109 HAVE READ AND UNDERSTAND THE LIMITATIONS THAT MAY APPLY TO MY 110 POLICY AND I UNDERSTAND THAT MY POLICY IS A “REPAIR-ONLY” POLICY 111 WHICH MEANS ONLY REPAIR AND/OR STABILIZATION OF THE SPECIFIED 112 BUILDING AND ITS FOUNDATION IS COVERED, NOT TO EXCEED THE POLICY 113 LIMITS AFTER APPLICATION OF MY DEDUCTIBLE. I ALSO UNDERSTAND 114 THAT IT IS RECOMMENDED THAT I CONSULT WITH A QUALIFIED 115 PROFESSIONAL TO IDENTIFY THE APPROXIMATE COST OF REPAIRING OR 116 STABILIZING THE SPECIFIED BUILDING AND ITS FOUNDATION SO THAT I 117 CAN MAKE AN INFORMED DECISION WHEN SELECTING MY POLICY LIMITS 118 AND DEDUCTIBLE.” The signed acknowledgment must also include, in 119 at least 12-point bold, uppercase type: 120 (a) For a policy that provides limited sinkhole coverage 121 insurance in an amount less than the full replacement cost of 122 the property, the following statement: “THIS POLICY LIMITS 123 SINKHOLE COVERAGE TO LESS THAN THE FULL COST OF REPLACEMENT FOR 124 THE PROPERTY, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO 125 YOU AND MAY PUT YOUR EQUITY IN THIS PROPERTY AT RISK.” 126 (b) For a policy that provides for a deductible that 127 exceeds the deductibles authorized under s. 627.706(1)(b), the 128 following statement: “THIS POLICY EXCEEDS THE DEDUCTIBLE AMOUNT 129 PERMITTED FOR OTHER AUTHORIZED SINKHOLE LOSS INSURANCE POLICIES, 130 WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.” 131 (6) If the sinkhole loss cannot be repaired within policy 132 limits, the insurer must: 133 (a) Pay the cost, without regard to policy limits, to 134 complete the repairs recommended by the insurer’s professional 135 engineer; or 136 (b) Pay the cost, not to exceed the policy limits, to 137 complete the repairs upon the insured’s entering into a contract 138 to repair the sinkhole loss in accordance with the repairs 139 recommended by the insurer’s professional engineer. 140 141 However, if the insured obtains a lower-cost alternative repair 142 recommendation from a professional engineer for stabilizing the 143 land or the building and repairing the foundation, the insurer 144 must pay the cost, not to exceed the policy limits, to complete 145 the lower-cost alternative repair upon the insured’s entering 146 into a contract to repair the sinkhole loss in accordance with 147 the lower-cost alternative repair recommendation by the 148 insured’s professional engineer. Such lower-cost alternative 149 repair shall be subject to reasonable cost adjustment by the 150 insurer; however, the insurer may not depart from the 151 engineering requirements of the insured’s professional 152 engineer’s lower-cost alternative repair recommendation. Except 153 when payment for sinkhole loss is made under paragraph (a), the 154 insured is responsible for the amount of the repair costs in 155 excess of policy limits, if any. 156 (7) The insurer shall make payment for sinkhole losses to 157 the insured and the contractor performing the repairs jointly. 158 The insurer may make payment for contents and additional living 159 expenses, if covered, directly to the insured. 160 (8) Notwithstanding s. 627.410, an insurer may establish 161 and use a limited sinkhole coverage insurance form without 162 filing the form with the office and requesting approval of the 163 form from the office. 164 (9)(a) An insurer may establish and use limited sinkhole 165 coverage insurance rates in accordance with the rate standards 166 provided in s. 627.062. 167 (b) For limited sinkhole coverage insurance rates filed 168 with the office before October 1, 2019, the insurer may also 169 establish and use rates in accordance with the rates, rating 170 schedules, or rating manuals filed by the insurer with the 171 office which allow the insurer a reasonable rate of return on 172 limited sinkhole coverage insurance written in this state. 173 Limited sinkhole coverage insurance rates established pursuant 174 to this paragraph are not subject to s. 627.062(2)(a) or (f). An 175 insurer shall notify the office of any change to such rates 176 within 30 days after the effective date of the change. The 177 notice must include the name of the insurer and the average 178 statewide percentage change in rates. Actuarial data with regard 179 to such rates for limited sinkhole coverage insurance must be 180 maintained by the insurer for 2 years after the effective date 181 of such rate change and is subject to examination by the office. 182 The office may require the insurer to incur the costs associated 183 with an examination. Upon examination, the office, in accordance 184 with generally accepted and reasonable actuarial techniques, 185 shall consider the rate factors in s. 627.062(2)(b) and (d) and 186 the standards in s. 627.062(2)(e) to determine whether the rate 187 is excessive, inadequate, or unfairly discriminatory. 188 (10) In addition to any other applicable requirements, an 189 insurer providing limited sinkhole coverage insurance in this 190 state must: 191 (a) Notify the office at least 30 days before writing 192 limited sinkhole coverage insurance in this state. 193 (b) File a plan of operation and financial projections or 194 revisions to such plan, as applicable, with the office. 195 Section 4. This act shall take effect July 1, 2016.