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  or
   44         (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         627.7151Limited 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.