Senate Bill sb2240e2

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    SB 2240                                 Second Engrossed (ntc)



  1                      A bill to be entitled

  2         An act relating to warranty associations;

  3         amending s. 634.011, F.S.; defining the term

  4         "additive product"; redefining the terms "motor

  5         vehicle service agreement" and "salesperson";

  6         amending s. 634.044, F.S.; including part

  7         inventories among the allowable assets of a

  8         service agreement company; amending s. 634.137,

  9         F.S.; providing for submission of financial

10         reports to the Department of Insurance in a

11         computer-readable form; amending s. 634.171,

12         F.S.; providing that a motor vehicle service

13         agreement company is not required to be

14         licensed as a salesperson to solicit, sell,

15         issue, or otherwise transact the motor vehicle

16         service agreements issued by the company;

17         repealing s. 634.281, F.S., which provides that

18         service agreement companies and their

19         salespersons shall be subject to pt. IX of ch.

20         626, F.S., relating to service agreement

21         companies and their salespersons; creating s.

22         634.2815, F.S.; prohibiting engaging in any

23         trade practice determined to be an unfair

24         method of competition or an unfair or deceptive

25         act or practice involving the business of motor

26         vehicle service agreements; creating s.

27         634.282, F.S.; defining unfair methods of

28         competition and unfair or deceptive acts or

29         practices; creating s. 634.2825, F.S.;

30         requiring vendors and lenders to separately

31         state and identify the amount charged and to be


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    SB 2240                                 Second Engrossed (ntc)



  1         paid for a motor vehicle service agreement;

  2         providing applicability; creating s. 634.283,

  3         F.S.; providing power of the Department of

  4         Insurance to examine and investigate the

  5         affairs of persons involved in the business of

  6         motor vehicle service agreements in the state;

  7         creating s. 634.284, F.S.; authorizing the

  8         department to conduct hearings with respect to

  9         specified prohibited practices; providing a

10         fine for failure to comply with a subpoena or

11         an order directing discovery; creating s.

12         634.285, F.S.; providing for the issuance of

13         cease and desist orders by the department;

14         providing specified penalties; creating s.

15         634.286, F.S.; providing for appeals of orders

16         of the department; creating s. 634.287, F.S.;

17         providing penalties for violation of a cease

18         and desist order of the department; creating s.

19         634.288, F.S.; providing for civil liability;

20         amending s. 634.3077, F.S.; eliminating

21         specified assets to be deducted in computing

22         the net asset requirement of a home warranty

23         association; creating s. 634.3078, F.S.;

24         specifying allowable assets and liabilities

25         with respect to the determination of the

26         financial condition of a service warranty

27         association; amending s. 634.312, F.S.;

28         amending provisions relating to the filing and

29         approval of forms; amending s. 634.313, F.S.;

30         providing for the submission of annual

31         statements and financial reports to the


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    SB 2240                                 Second Engrossed (ntc)



  1         Department of Insurance in a computer-readable

  2         form; amending s. 634.318, F.S.; providing that

  3         a home warranty association is not required to

  4         be licensed as a salesperson to solicit, sell,

  5         issue, or otherwise transact the home warranty

  6         agreements issued by the association; amending

  7         s. 634.331, F.S.; revising terminology with

  8         respect to coverage of property for sale;

  9         amending s. 634.415, F.S.; providing for the

10         submission of statements and reports to the

11         Department of Insurance in a computer-readable

12         form; amending s. 634.419, F.S.; providing that

13         a service warranty association is not required

14         to be licensed as a sales representative to

15         solicit, sell, or issue service warranty

16         agreements issued by the association; amending

17         s. 634.436, F.S.; including advertising,

18         offering, or providing a free service warranty

19         as an inducement to specified purchases or

20         sales among acts or practices that constitute

21         unfair methods of competition and unfair or

22         deceptive acts or practices; amending ss.

23         624.124, 628.4615, F.S.; correcting

24         cross-references; creating s. 634.289, F.S.;

25         providing rulemaking authority; amending s.

26         634.302, F.S.; providing rulemaking authority;

27         amending s. 634.402, F.S.; providing rulemaking

28         authority; providing for effective dates.

29  

30  Be It Enacted by the Legislature of the State of Florida:

31  


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    SB 2240                                 Second Engrossed (ntc)



  1         Section 1.  Present subsections (2) through (16) of

  2  section 634.011, Florida Statutes, are renumbered as

  3  subsections (3) through (17), respectively, present

  4  subsections (7) and (13) are amended, and a new subsection (2)

  5  is added to that section, to read:

  6         634.011  Definitions.--As used in this part, the term:

  7         (2)  "Additive product" means any fuel supplement, oil

  8  supplement, or any other supplement product added to a motor

  9  vehicle for the purpose of increasing or enhancing the

10  performance or improving the longevity of such motor vehicle.

11         (8)(7)  "Motor vehicle service agreement" or "service

12  agreement" means any contract or agreement indemnifying the

13  service agreement holder for the motor vehicle listed on the

14  service agreement and arising out of the ownership, operation,

15  and use of the motor vehicle against loss caused by failure of

16  any mechanical or other component part, or any mechanical or

17  other component part that does not function as it was

18  originally intended; however, nothing in this part shall

19  prohibit or affect the giving, free of charge, of the usual

20  performance guarantees by manufacturers or dealers in

21  connection with the sale of motor vehicles; and provided

22  further, however, transactions exempt under s. 624.125 shall

23  be expressly excluded from this definition and are exempt from

24  the provisions of this part. The term "motor vehicle service

25  agreement" includes any contract or agreement which provides

26  the coverage or protection defined in this subsection and is

27  issued or provided in conjunction with an additive product

28  applied to the motor vehicle which is the subject of such

29  contract or agreement.

30         (14)(13)  "Salesperson" means any dealership,

31  corporation, partnership, or sole proprietorship employed or


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    SB 2240                                 Second Engrossed (ntc)



  1  otherwise retained by an insurer or motor vehicle service

  2  agreement company for the purpose of selling or issuing motor

  3  vehicle service agreements or for the purpose of soliciting or

  4  retaining other salespersons.

  5         Section 2.  Subsection (1) of section 634.044, Florida

  6  Statutes, is amended to read:

  7         634.044  Assets and liabilities.--

  8         (1)  ASSETS.--In any determination of the financial

  9  condition of a service agreement company, there shall be

10  allowed as assets only those assets that are owned by the

11  service agreement company and which assets consist of:

12         (a)  Cash in the possession of the service agreement

13  company, or in transit under its control, including the true

14  balance of any deposit in a solvent bank, savings and loan

15  association, or trust company which is domiciled in the United

16  States.

17         (b)  Investments, securities, properties, and loans

18  acquired or held in accordance with this part, and in

19  connection therewith the following items:

20         1.  Interest due or accrued on any bond or evidence of

21  indebtedness which is not in default and which is not valued

22  on a basis including accrued interest.

23         2.  Declared and unpaid dividends on stock and shares,

24  unless the amount of the dividends has otherwise been allowed

25  as an asset.

26         3.  Interest due or accrued upon a collateral loan

27  which is not in default in an amount not to exceed 1 year's

28  interest thereon.

29         4.  Interest due or accrued on deposits or certificates

30  of deposit in solvent banks, savings and loan associations,

31  and trust companies domiciled in the United States, and


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    SB 2240                                 Second Engrossed (ntc)



  1  interest due or accrued on other assets, if such interest is

  2  in the judgment of the department a collectible asset.

  3         5.  Interest due or accrued on current mortgage loans,

  4  in an amount not exceeding in any event the amount, if any, of

  5  the excess of the value of the property less delinquent taxes

  6  thereon over the unpaid principal; but in no event shall

  7  interest accrued for a period in excess of 90 days be allowed

  8  as an asset.

  9         6.  Rent due or accrued on real property if such rent

10  is not in arrears for more than 3 months.  However, in no

11  event shall rent accrued for a period in excess of 90 days be

12  allowed as an asset.

13         7.  The unaccrued portion of taxes paid prior to the

14  due date on real property.

15         (c)  Furniture, fixtures, furnishings, vehicles, and

16  equipment, if the original cost of each item is at least $200,

17  which cost shall be amortized in full over a period not to

18  exceed 5 calendar years, unless otherwise approved by the

19  department.

20         (d)  Part inventories maintained for the purpose of

21  servicing products warranted. Part inventories must be listed

22  at cost. Service agreement companies are required to maintain

23  records to support valuation of part inventories.

24         (e)(d)  The liquidation value of or prepaid expenses.

25         (f)(e)  Other assets or receivables, not inconsistent

26  with the provisions of this section, deemed by the department

27  to be available for the payment of losses and claims, at

28  values to be determined by the department.

29  

30  The department, upon determining that a service agreement

31  company's asset has not been evaluated according to applicable


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    SB 2240                                 Second Engrossed (ntc)



  1  law or that it does not qualify as an asset, shall require the

  2  service agreement company to properly reevaluate the asset or

  3  replace the asset with an asset suitable to the department

  4  within 30 days of written notification by the department of

  5  this determination, if the removal of the asset from the

  6  organization's assets would impair the company's solvency.

  7         Section 3.  Subsection (5) is added to section 634.137,

  8  Florida Statutes, to read:

  9         634.137  Financial and statistical reporting

10  requirements.--

11         (5)  The department may by rule require each motor

12  vehicle service agreement company to submit to the department,

13  as the department may designate, all or part of the

14  information contained in the financial reports required by

15  this section in a computer-readable form compatible with the

16  electronic data processing system specified by the department.

17         Section 4.  Section 634.171, Florida Statutes, is

18  amended to read:

19         634.171  Salesperson to be licensed and

20  appointed.--Salespersons for motor vehicle service agreement

21  companies and insurers shall be licensed, appointed, renewed,

22  continued, reinstated, or terminated as prescribed in chapter

23  626 for insurance representatives in general.  However, they

24  shall be exempt from all other provisions of chapter 626

25  including fingerprinting, photo identification, education, and

26  examination provisions.  License, appointment, and other fees

27  shall be those prescribed in s. 624.501.  A licensed and

28  appointed salesperson shall be directly responsible and

29  accountable for all acts of her or his employees and other

30  representatives.  Each service agreement company or insurer

31  shall, on forms prescribed by the department, within 30 days


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    SB 2240                                 Second Engrossed (ntc)



  1  after termination of the appointment, notify the department of

  2  such termination.  No employee or salesperson of a motor

  3  vehicle service agreement company or insurer may directly or

  4  indirectly solicit or negotiate insurance contracts, or hold

  5  herself or himself out in any manner to be an insurance agent

  6  or solicitor, unless so qualified, licensed, and appointed

  7  therefor under the Florida Insurance Code. A motor vehicle

  8  service agreement company is not required to be licensed as a

  9  salesperson to solicit, sell, issue, or otherwise transact the

10  motor vehicle service agreements issued by the motor vehicle

11  service agreement company.

12         Section 5.  Section 634.281, Florida Statutes, is

13  repealed.

14         Section 6.  Section 634.2815, Florida Statutes, is

15  created to read:

16         634.2815  Unfair methods of competition and unfair or

17  deceptive acts or practices prohibited.--No person may engage

18  in this state in any trade practice which is defined in this

19  part as, or determined pursuant to s. 634.282 to be, an unfair

20  method of competition or an unfair or deceptive act or

21  practice involving the business of motor vehicle service

22  agreements.

23         Section 7.  Section 634.282, Florida Statutes, is

24  created to read:

25         634.282  Unfair methods of competition and unfair or

26  deceptive acts or practices defined.--The following methods,

27  acts, or practices are defined as unfair methods of

28  competition and unfair or deceptive acts or practices:

29         (1)  MISREPRESENTATION AND FALSE

30  ADVERTISING.--Knowingly making, issuing, circulating, or

31  causing to be made, issued, or circulated, any estimate,


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    SB 2240                                 Second Engrossed (ntc)



  1  illustration, circular, statement, sales presentation,

  2  omission, or comparison which:

  3         (a)  Misrepresents the benefits, advantages,

  4  conditions, or terms of any motor vehicle service agreement.

  5         (b)  Is misleading or is a misrepresentation as to the

  6  financial condition of any person.

  7         (c)  Uses any name or title of any contract

  8  misrepresenting the true nature thereof.

  9         (d)  Is a misrepresentation for the purpose of

10  inducing, or tending to induce, the lapse, forfeiture,

11  exchange, conversion, or surrender of any motor vehicle

12  service agreement.

13         (e)  Uses any advertisement that would mislead or

14  otherwise cause a reasonable person to believe mistakenly that

15  the state or federal government is responsible for the motor

16  vehicle service agreement sales activity of any person or

17  stands behind any person's credit or that any person, the

18  state, or the federal government guarantees any returns on

19  motor vehicle service agreements or is a source of payment of

20  any motor vehicle service agreement obligation of or sold by

21  any person.

22         (2)  FALSE INFORMATION AND ADVERTISING

23  GENERALLY.--Knowingly making, publishing, disseminating,

24  circulating, or placing before the public, or causing,

25  directly or indirectly, to be made, published, disseminated,

26  circulated, or placed before the public:

27         (a)  In a newspaper, magazine, or other publication;

28         (b)  In the form of a notice, circular, pamphlet,

29  letter, or poster;

30         (c)  Over any radio or television station; or

31  


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    SB 2240                                 Second Engrossed (ntc)



  1         (d)  Over the Internet, electronically, or in any other

  2  way,

  3  

  4  an advertisement, announcement, or statement containing any

  5  assertion, representation, or statement with respect to the

  6  business of motor vehicle service agreements, which assertion,

  7  representation, or statement is untrue, deceptive, or

  8  misleading.

  9         (3)  DEFAMATION.--Knowingly making, publishing,

10  disseminating, or circulating, directly or indirectly, or

11  aiding, abetting, or encouraging the making, publishing,

12  disseminating, or circulating of, any oral or written

13  statement, or any pamphlet, circular, article, or literature,

14  that is false or maliciously critical of, or derogatory to,

15  any person and that is calculated to injure such person.

16         (4)  BOYCOTT, COERCION, AND INTIMIDATION.--Entering

17  into any agreement to commit, or by any concerted action

18  committing, any act of boycott, coercion, or intimidation

19  resulting in, or tending to result in, unreasonable restraint

20  of, or monopoly in, the business of motor vehicle service

21  agreements.

22         (5)  FALSE STATEMENTS AND ENTRIES.--

23         (a)  Knowingly:

24         1.  Filing with any supervisory or other public

25  official;

26         2.  Making, publishing, disseminating, or circulating;

27         3.  Delivering to any person;

28         4.  Placing before the public; or

29         5.  Causing, directly or indirectly, to be made,

30  published, disseminated, circulated, delivered to any person,

31  or placed before the public,


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    SB 2240                                 Second Engrossed (ntc)



  1  

  2  any false statement.

  3         (b)  Knowingly making any false entry of a material

  4  fact in any book, report, or statement of any person, or

  5  knowingly failing to make a true entry of any material fact

  6  pertaining to the business of such person in any book, report,

  7  or statement of such person.

  8         (6)  UNFAIR DISCRIMINATION.--Knowingly making or

  9  permitting any unfair discrimination between individuals of

10  the same actuarially supportable class and essentially the

11  same hazard, in the amount of premium, policy fees, or rates

12  charged for any motor vehicle service agreement, in any of the

13  terms or conditions of such agreement, or in any other manner

14  whatsoever.

15         (7)  UNLAWFUL REBATES.--Except as otherwise expressly

16  provided by law, or in an applicable filing with the

17  department, knowingly:

18         (a)  Permitting, or offering to make, or making, any

19  contract or agreement as to such contract other than as

20  plainly expressed in the motor vehicle service agreement

21  issued thereon;

22         (b)  Paying, allowing, or giving, or offering to pay,

23  allow, or give, directly or indirectly, as inducement to such

24  motor vehicle service agreement, any unlawful rebate of

25  premiums payable on the agreement, any special favor or

26  advantage in the benefits thereon, or any valuable

27  consideration or inducement not specified in the agreement;

28         (c)  Giving, selling, or purchasing, or offering to

29  give, sell, or purchase, as an inducement to such motor

30  vehicle service agreement or in connection therewith, any

31  stocks, bonds, or other securities of any insurance company,


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    SB 2240                                 Second Engrossed (ntc)



  1  service agreement company, or other corporation, association,

  2  or partnership, or any dividends or profits accrued thereon,

  3  or anything of value not specified in the motor vehicle

  4  service agreement.

  5         (8)  UNFAIR CLAIM SETTLEMENT PRACTICES.--

  6         (a)  Attempting to settle claims on the basis of an

  7  application or any other material document that was altered

  8  without notice to, or knowledge or consent of, the service

  9  agreement holder;

10         (b)  Making a material misrepresentation to the service

11  agreement holder for the purpose and with the intent of

12  effecting settlement of such claims, loss, or damage under

13  such contract on less favorable terms than those provided in,

14  and contemplated by, such contract; or

15         (c)  Committing or performing with such frequency as to

16  indicate a general business practice any of the following

17  practices:

18         1.  Failure to adopt and implement internal standards

19  for the investigation of claims;

20         2.  Misrepresentation of pertinent facts or contract

21  provisions relating to coverages at issue;

22         3.  Failure to acknowledge and act promptly upon

23  communications with respect to claims;

24         4.  Denial of claims without conducting reasonable

25  investigations based upon available information;

26         5.  Failure to affirm or deny full or partial coverage

27  of claims and, as to partial coverage, the dollar amount or

28  extent of coverage, or failure to provide a written statement

29  that the claim is being investigated, upon written request of

30  the service agreement holder within 30 days after

31  proof-of-loss statements have been completed;


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    SB 2240                                 Second Engrossed (ntc)



  1         6.  Failure to promptly provide a reasonable

  2  explanation to the service agreement holder of the basis in

  3  the contract in relation to the facts or applicable law for

  4  denial of a claim or for the offer of a compromise settlement;

  5         7.  Failure to promptly notify the service agreement

  6  holder of any additional information necessary for the

  7  processing of a claim; or

  8         8.  Failure to clearly explain the nature of the

  9  requested information and the reasons such information is

10  necessary.

11         (9)  FAILURE TO MAINTAIN PROCEDURES FOR HANDLING

12  COMPLAINTS.--Failing to maintain a complete record of all

13  complaints received since the date of the last examination.

14  For purposes of this paragraph, "complaint" means any written

15  communication primarily expressing a grievance.

16         (10)  DISCRIMINATORY REFUSAL TO ISSUE A

17  CONTRACT.--Refusing to issue a contract solely because of an

18  individual's race, color, creed, marital status, sex, or

19  national origin.

20         (11)  MISREPRESENTATION IN SERVICE AGREEMENT

21  APPLICATIONS.--Knowingly making a false or fraudulent written

22  or oral statement or representation on, or relative to, an

23  application or negotiation for a motor vehicle service

24  agreement for the purpose of obtaining a fee, commission,

25  money, or other benefit from any insurer, service agreement

26  company, agent, broker, salesperson, or individual.

27         (12)  FREE SERVICE AGREEMENTS.--

28         (a)  Advertising, offering, or providing a free motor

29  vehicle service agreement as an inducement to the purchase or

30  sale of real or personal property or of services directly or

31  indirectly connected with such real or personal property.


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  1         (b)  For the purposes of this subsection, a "free"

  2  motor vehicle service agreement is:

  3         1.  A motor vehicle service agreement for which no

  4  identifiable and additional charge is made to the purchaser of

  5  such real property, personal property, or services.

  6         2.  A motor vehicle service agreement for which an

  7  identifiable or additional charge is made in an amount less

  8  than the cost of such motor vehicle service agreement as to

  9  the seller or other person, other than the service agreement

10  company, providing the same.

11         3.  Using the word "free" or words that imply the

12  provision of a motor vehicle service agreement without a cost

13  in connection with the advertising or offering for sale of any

14  kind of goods, merchandise, or services.

15         (13)  ILLEGAL DEALINGS IN PREMIUMS; EXCESS OR REDUCED

16  CHARGES FOR MOTOR VEHICLE SERVICE AGREEMENTS.--

17         (a)  Knowingly collecting any sum as a premium or

18  charge for a motor vehicle service agreement, which is not

19  then provided, or is not in due course to be provided, subject

20  to acceptance of the risk by a service agreement company or an

21  insurer, by a motor vehicle service agreement issued by a

22  service agreement company or an insurer as permitted by this

23  part.

24         (b)  Knowingly collecting as a premium or charge for a

25  motor vehicle service agreement any sum in excess of or less

26  than the premium or charge applicable to such motor vehicle

27  service agreement, in accordance with the applicable

28  classifications and rates as filed with the department, and as

29  specified in the motor vehicle service agreement.

30         (14)  INTERLOCKING OWNERSHIP AND MANAGEMENT.--

31  


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  1         (a)  Any motor vehicle service agreement company may

  2  retain, invest in, or acquire the whole or any part of the

  3  capital of any other motor vehicle service agreement company,

  4  or have a common management with any other motor vehicle

  5  service agreement company, unless such retention, investment,

  6  acquisition, or common management is inconsistent with any

  7  other provision of this part, or unless by reason thereof the

  8  business of such insurers with the public is conducted in a

  9  manner that substantially lessens competition generally in the

10  insurance business.

11         (b)  Any person otherwise qualified may be a director

12  of two or more motor vehicle service agreement companies that

13  are competitors, unless the effect thereof is substantially to

14  lessen competition between motor vehicle service agreement

15  companies generally or materially tend to create a monopoly.

16         (15)  FALSE CLAIMS; OBTAINING OR RETAINING MONEY

17  DISHONESTLY.--

18         (a)  Any salesperson who causes to be presented to any

19  motor vehicle service agreement company a false claim for

20  payment, knowing the same to be false; or

21         (b)  Any salesperson who represents any motor vehicle

22  service agreement company or collects or does business without

23  the authority of the motor vehicle service agreement company,

24  secures cash advances by false statements, or fails to turn

25  over when required, or satisfactorily account for, all

26  collections of such motor vehicle service agreement company,

27  

28  in addition to the other penalties provided in this act,

29  commits a misdemeanor of the second degree, punishable as

30  provided in s. 775.082 or s. 775.083.

31         (16)  SLIDING.--Sliding is the act or practice of:


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  1         (a)  Representing to the applicant that a specific

  2  ancillary coverage or product is required by law in

  3  conjunction with the purchase of a motor vehicle service

  4  agreement when such coverage or product is not required;

  5         (b)  Representing to the applicant that a specific

  6  ancillary coverage or product is included in the motor vehicle

  7  service agreement contract applied for without an additional

  8  charge when such charge is required; or

  9         (c)  Charging an applicant for a specific ancillary

10  coverage or product, in addition to the cost of the motor

11  vehicle service agreement coverage applied for, without the

12  informed consent of the applicant.

13  

14  No provision of this section shall be deemed to prohibit a

15  service agreement company or a licensed insurer from giving to

16  service agreement holders, prospective service agreement

17  holders, and others for the purpose of advertising, any

18  article of merchandise having a value of not more than $25.

19         Section 8.  Section 634.2825, Florida Statutes, is

20  created to read:

21         634.2825  Motor vehicle service agreement cost

22  specified in "price package".--

23         (1)  When the premium or charge for a motor vehicle

24  service agreement or involving such property or merchandise is

25  included in the overall purchase price or financing of the

26  purchase of merchandise or property, the vendor or lender

27  shall separately state and identify the amount charged and to

28  be paid for the motor vehicle service agreement, and the

29  classifications, if any, upon which based; and the inclusion

30  or exclusion of the cost of a motor vehicle service agreement

31  in such purchase price or financing shall not increase,


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  1  reduce, or otherwise affect any other factor involved in the

  2  cost of merchandise, property, or financing as to the

  3  purchaser or borrower.

  4         (2)  This section does not apply to transactions that

  5  are subject to the provisions of part I of chapter 520,

  6  entitled "The Motor Vehicle Retail Sales Finance Act."

  7         Section 9.  Section 634.283, Florida Statutes, is

  8  created to read:

  9         634.283  Power of department to examine and

10  investigate.--The department may examine and investigate the

11  affairs of every person involved in the business of motor

12  vehicle service agreements in this state in order to determine

13  whether such person has been or is engaged in any unfair

14  method of competition or in any unfair or deceptive act or

15  practice prohibited by s. 634.2815.

16         Section 10.  Section 634.284, Florida Statutes, is

17  created to read:

18         634.284 Prohibited practices; hearings, witnesses,

19  appearances, production of books, and service of process.--

20         (1)  Whenever the department has reason to believe that

21  any person has engaged, or is engaging, in this state in any

22  unfair method of competition or any unfair or deceptive act or

23  practice as defined in s. 634.282, or is engaging in the

24  business of motor vehicle service agreements without being

25  properly licensed as required by this part, and that a

26  proceeding by the department in respect thereto would be in

27  the interest of the public, the department shall conduct or

28  cause to have conducted a hearing in accordance with chapter

29  120.

30         (2)  The department, a duly empowered hearing officer,

31  or an administrative law judge shall, during the conduct of


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  1  such hearing, have those powers enumerated in s. 120.569;

  2  however, the penalty for failure to comply with a subpoena or

  3  with an order directing discovery is limited to a fine not to

  4  exceed $1,000 per violation.

  5         (3)  A statement of charges, notice, or order under

  6  this part may be served by anyone duly authorized by the

  7  department, either in the manner provided by law for service

  8  of process in civil actions or by certifying and mailing a

  9  copy thereof to the person affected by such statement, notice,

10  order, or other process at her or his residence or principal

11  office or place of business. The verified return by the person

12  so serving such statement, notice, order, or other process,

13  setting forth the manner of the service, is proof of the same;

14  and the return postcard receipt for such statement, notice,

15  order, or other process, certified and mailed as provided in

16  this subsection, is proof of service of the same.

17         Section 11.  Section 634.285, Florida Statutes, is

18  created to read:

19         634.285  Cease and desist and penalty orders.--After

20  the hearing provided for in s. 634.284, the department shall

21  enter a final order in accordance with s. 120.569. If it is

22  determined that the person charged has engaged in an unfair or

23  deceptive act or practice or the unlawful transaction of a

24  service agreement business, the department also shall issue an

25  order requiring the violator to cease and desist from engaging

26  in such method of competition, act, or practice or the

27  unlawful transaction of service agreement business. Further,

28  the department may, at its discretion, order any one or more

29  of the following penalties:

30         (1)  The suspension or revocation of such person's

31  license, or eligibility for any license, if the person knew,


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  1  or reasonably should have known, that she or he was in

  2  violation of this part.

  3         (2)  If it is determined that the person charged has

  4  provided or offered to provide motor vehicle service

  5  agreements without proper licensure, the imposition of an

  6  administrative penalty not to exceed $1,000 for each service

  7  agreement contract offered or effectuated.

  8         Section 12.  Section 634.286, Florida Statutes, is

  9  created to read:

10         634.286  Appeals from orders of the department.--Any

11  person subject to an order of the department under s. 634.285

12  may obtain a review of such order by filing an appeal

13  therefrom in accordance with the provisions and procedures for

14  appeal from the orders of the department in general under s.

15  120.68.

16         Section 13.  Section 634.287, Florida Statutes, is

17  created to read:

18         634.287  Penalty for violation of cease and desist

19  order.--Any person who violates a cease and desist order of

20  the department under s. 634.285 while such order is in effect,

21  after notice and hearing as provided in s. 634.284, is

22  subject, at the discretion of the department, to any one or

23  more of the following penalties:

24         (1)  A monetary penalty of not more than $50,000 as to

25  all matters determined in such hearing.

26         (2)  The suspension or revocation of such person's

27  license or eligibility to hold a license.

28         Section 14.  Section 634.288, Florida Statutes, is

29  created to read:

30         634.288 Civil liability.--The provisions of this part

31  are cumulative to rights under the general civil and common


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  1  law, and no action of the department will abrogate such rights

  2  to damages or other relief in any court.

  3         Section 15.  Effective January 1, 2002, section

  4  634.3077, Florida Statutes, is amended to read:

  5         634.3077  Financial requirements.--

  6         (1)  An association licensed under this part shall

  7  maintain a funded, unearned premium reserve account,

  8  consisting of unencumbered assets, equal to a minimum of 25

  9  percent of the gross written premiums received by it from all

10  warranty contracts in force.  Such assets shall be held in the

11  form of cash or invested in securities for investments as

12  provided in part II of chapter 625.

13         (2)  An association shall maintain, at a minimum, net

14  assets equal to one-sixth of the written premiums it receives

15  for the issuance and delivery of any binder or warranty in

16  force.  Net assets may be less than one-sixth of the premiums

17  written provided the association has net assets of not less

18  than $500,000 and maintains a funded, unearned premium reserve

19  account consisting of unencumbered assets equal to a minimum

20  of 40 percent of the gross written premiums received by it

21  from all warranty contracts in force which shall be held in

22  the form of cash or invested in securities for investments as

23  provided in part II of chapter 625.

24         (3)  In computing the net asset requirement, goodwill;

25  franchises; customer lists; patents or trademarks; receivables

26  from or advances to officers, directors, employees,

27  salespersons, or affiliated companies; and assets deposited

28  outside the United States shall be deducted from the net

29  assets of the association.

30         (3)(4)  An association shall not be required to set up

31  an unearned premium reserve if it has purchased contractual


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  1  liability insurance which demonstrates to the satisfaction of

  2  the department that 100 percent of its claim exposure is

  3  covered by such insurance.  Such contractual liability

  4  insurance shall be obtained from an insurer that holds a

  5  certificate of authority to do business within the state or

  6  from an insurer approved by the department as financially

  7  capable of meeting the obligations incurred pursuant to the

  8  policy.  For purposes of this subsection, the contractual

  9  liability policy shall contain the following provisions:

10         (a)  In the event that the home warranty association is

11  unable to fulfill its obligation under its contracts issued in

12  this state for any reason, including insolvency, bankruptcy,

13  or dissolution, the contractual liability insurer will pay

14  losses and unearned premiums under such plans directly to

15  persons making claims under such contracts.

16         (b)  The insurer issuing the policy shall assume full

17  responsibility for the administration of claims in the event

18  of the inability of the association to do so.

19         (c)  The policy may not be canceled or not renewed by

20  either the insurer or the association unless 60 days' written

21  notice thereof has been given to the department by the insurer

22  before the date of such cancellation or nonrenewal.

23         (4)(5)  An association that purchases contractual

24  liability insurance on the warranties that it issues shall

25  provide the department with claim statistics required to be

26  filed by associations not purchasing such insurance.

27         Section 16.  Effective January 1, 2002, section

28  634.3078, Florida Statutes, is created to read:

29         634.3078  Assets and liabilities.--

30         (1)  ASSETS.--In any determination of the financial

31  condition of a home warranty association, there shall be


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  1  allowed as assets only those assets that are owned by the home

  2  warranty association company and which assets consist of:

  3         (a)  Cash in the possession of the home warranty

  4  association, or in transit under its control, including the

  5  true balance of any deposit in a solvent bank, savings and

  6  loan association, or trust company that is domiciled in the

  7  United States.

  8         (b)  Investments, securities, properties, and loans

  9  acquired or held in accordance with this part and, in

10  connection therewith, the following items:

11         1.  Interest due or accrued on any bond or evidence of

12  indebtedness which is not in default and which is not valued

13  on a basis including accrued interest.

14         2.  Declared and unpaid dividends on stock and shares,

15  unless the amount of the dividends has otherwise been allowed

16  as an asset.

17         3.  Interest due or accrued upon a collateral loan that

18  is not in default in an amount not to exceed 1 year's interest

19  thereon.

20         4.  Interest due or accrued on deposits or certificates

21  of deposit in solvent banks, savings and loan associations,

22  and trust companies domiciled in the United States, and

23  interest due or accrued on other assets, if such interest is

24  in the judgment of the department a collectible asset.

25         5.  Interest due or accrued on current mortgage loans,

26  in an amount not exceeding the amount, if any, of the excess

27  of the value of the property less delinquent taxes thereon

28  over the unpaid principal; but interest accrued for a period

29  in excess of 90 days may not be allowed as an asset.

30         6.  Rent due or accrued on real property if such rent

31  is not in arrears for more than 3 months. However, rent


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  1  accrued for a period in excess of 90 days may not be allowed

  2  as an asset.

  3         7.  The unaccrued portion of taxes paid prior to the

  4  due date on real property.

  5         (c)  Furniture, fixtures, furnishings, vehicles, and

  6  equipment, if the original cost of each item is at least $200,

  7  which cost shall be amortized in full over a period not to

  8  exceed 5 calendar years, unless otherwise approved by the

  9  department.

10         (d)  Part inventories maintained for the purpose of

11  servicing products warranted. Part inventories must be listed

12  at cost. Home warranty associations companies are required to

13  maintain records to support valuation of part inventories.

14         (e)  The liquidation value of prepaid expenses.

15         (f)  Other assets or receivables, not inconsistent with

16  the provisions of this section, deemed by the department to be

17  available for the payment of losses and claims, at values to

18  be determined by the department.

19  

20  The department, upon determining that a home warranty

21  association's asset has not been evaluated according to

22  applicable law or that it does not qualify as an asset, shall

23  require the home warranty association to properly reevaluate

24  the asset or replace the asset with an asset suitable to the

25  department within 30 days after written notification by the

26  department of this determination, if the removal of the asset

27  from the organization's assets would impair the company's

28  solvency.

29         (2)  ASSETS NOT ALLOWED.--In addition to assets

30  impliedly excluded by the provisions of subsection (1), the

31  following assets expressly shall not be allowed as assets in


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  1  any determination of the financial condition of a home

  2  warranty association:

  3         (a)  Goodwill, agreement holder lists, patents, trade

  4  names, agreements not to compete, and other like intangible

  5  assets.

  6         (b)  Any note or account receivable from or advances to

  7  officers, directors, or controlling stockholders, whether

  8  secured or not, and advances to employees, agents, or other

  9  persons on personal security only.

10         (c)  Stock of the home warranty association owned by it

11  directly or owned by it through any entity in which the

12  organization owns or controls, directly or indirectly, more

13  than 25 percent of the ownership interest.

14         (d)  Leasehold improvements, stationery, and

15  literature, except that leasehold improvements made prior to

16  October 1, 2001, shall be allowed as an asset and shall be

17  amortized over the shortest of the following periods:

18         1.  The life of the lease.

19         2.  The useful life of the improvements.

20         3.  The 3-year period following October 1, 2001.

21         (e)  Furniture, fixtures, furnishings, vehicles, and

22  equipment, other than those items authorized under paragraph

23  (1)(c).

24         (f)  Notes or other evidences of indebtedness which are

25  secured by mortgages or deeds of trust which are in default

26  and beyond the express period specified in the instrument for

27  curing the default.

28         (g)  Bonds in default for more than 60 days.

29         (h)  Deferred costs other than the liquidation value of

30  prepaid expenses except for those companies that reserve 100

31  percent of gross written premium.


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  1         (i)  Any note, account receivable, advance, or other

  2  evidence of indebtedness, or investment in:

  3         1.  The parent of the home warranty association;

  4         2.  Any entity directly or indirectly controlled by the

  5  home warranty association's parent;

  6         3.  An affiliate of the parent or the home warranty

  7  association; or

  8         4.  Officers, directors, shareholders, employees, or

  9  salespersons of the home warranty association; however,

10  premium receivables under 45 days old may be considered an

11  admitted asset.

12  

13  The department may, however, allow all or a portion of such

14  asset, at values to be determined by the department, if deemed

15  by the department to be available for the payment of losses

16  and claims.

17         (3)  LIABILITIES.--In any determination of the

18  financial condition of a home warranty association,

19  liabilities to be charged against its assets shall include,

20  but not be limited to:

21         (a)  The amount, in conformity with generally accepted

22  accounting principles, necessary to pay all of its unpaid

23  losses and claims incurred for or on behalf of an agreement

24  holder, on or prior to the end of the reporting period,

25  whether reported or unreported.

26         (b)  Taxes, expenses, and other obligations due or

27  accrued at the date of the statement.

28         (c)  Reserve for unearned premiums.

29  

30  The department, upon determining that the home warranty

31  association has failed to report liabilities that should have


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  1  been reported, shall require a correct report which reflects

  2  the proper liabilities to be submitted by the home warranty

  3  association to the department within 10 working days after

  4  receipt of written notification.

  5         Section 17.  Effective January 1, 2002, subsection (7)

  6  is added to section 634.312, Florida Statutes, to read:

  7         634.312  Filing, approval of forms.--

  8         (7)  All home warranty contracts must disclose any

  9  exclusions, restrictions, or limitations on the benefits

10  offered or the coverage provided by the home warranty contract

11  in boldfaced type, and must contain, in boldfaced type, a

12  statement on the front page of the contract substantially

13  similar to the following: "Certain items and events are not

14  covered by this contract. Please refer to the exclusions

15  listed on page _ of this document."

16         Section 18.  Subsection (5) is added to section

17  634.313, Florida Statutes, to read:

18         634.313  Tax on premiums; annual statement; reports.--

19         (5)  The department may by rule require each home

20  warranty association to submit to the department, as the

21  department may designate, all or part of the information

22  contained in the financial reports required by this section in

23  a computer-readable form compatible with the electronic data

24  processing system specified by the department.

25         Section 19.  Section 634.318, Florida Statutes, is

26  amended to read:

27         634.318  License and appointment of sales

28  representatives.--Sales representatives for home warranty

29  associations and insurers shall be licensed, appointed,

30  renewed, continued, reinstated, or terminated in the same

31  manner as prescribed in chapter 626 for insurance


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  1  representatives in general, except they shall be exempt from

  2  the fingerprinting, photo identification card, education, and

  3  examination provisions. License, appointment, and other fees

  4  shall be those as prescribed in s. 624.501.  No employee or

  5  sales representative of a home warranty association or insurer

  6  may directly or indirectly solicit or negotiate insurance

  7  contracts, or hold herself or himself out in any manner to be

  8  an insurance agent or solicitor, unless so qualified,

  9  licensed, and appointed therefor under the insurance code. A

10  home warranty association is not required to be licensed as a

11  sales representative to solicit, sell, issue, or otherwise

12  transact the home warranty agreements issued by the home

13  warranty association.

14         Section 20.  Section 634.331, Florida Statutes, is

15  amended to read:

16         634.331  Coverage of property for sale.--A home

17  warranty may provide coverage of residential property during

18  the listing period of such property for a period not to exceed

19  12 months, provided that the home warranty company charges the

20  warranty purchaser a separately identifiable charge for the

21  listing list period coverage in an amount equal to at least 15

22  percent of the annual premium charged for the home warranty

23  and the charge for such coverage is due at the earlier of the

24  end of the listing period or the date the sale of the

25  residential property is closed.

26         Section 21.  Subsection (6) is added to section

27  634.415, Florida Statutes, to read:

28         634.415  Tax on premiums; annual statement; reports;

29  quarterly statements.--

30         (6)  The department may by rule require each service

31  warranty association to submit to the department, as the


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  1  department may designate, all or part of the information

  2  contained in the financial statements and reports required by

  3  this section in a computer-readable form compatible with the

  4  electronic data processing system specified by the department.

  5         Section 22.  Section 634.419, Florida Statutes, is

  6  amended to read:

  7         634.419  License and appointment required.--No person

  8  or entity shall solicit, negotiate, advertise, or effectuate

  9  service warranty contracts in this state unless such person or

10  entity is licensed and appointed as a sales representative.

11  Sales representatives shall be responsible for the actions of

12  persons under their supervision.  However, a service warranty

13  association licensed as such under this part shall not be

14  required to be licensed and appointed as a sales

15  representative to solicit, negotiate, advertise, or effectuate

16  its products.

17         Section 23.  Subsection (8) is added to section

18  634.436, Florida Statutes, to read:

19         634.436  Unfair methods of competition and unfair or

20  deceptive acts or practices defined.--The following methods,

21  acts, or practices are defined as unfair methods of

22  competition and unfair or deceptive acts or practices:

23         (8)  FREE SERVICE WARRANTIES.--

24         (a)  Advertising, offering, or providing a free service

25  warranty as an inducement to the purchase or sale of real or

26  personal property or of services directly or indirectly

27  connected with such real or personal property.

28         (b)  For the purposes of this subsection, a "free"

29  service warranty is:

30  

31  


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  1         1.  A service warranty for which no identifiable and

  2  additional charge is made to the purchaser of such real

  3  property, personal property, or services.

  4         2.  A service warranty for which an identifiable or

  5  additional charge is made in an amount less than the cost of

  6  such service warranty as to the seller or other person, other

  7  than the service warranty association, providing the same.

  8         3.  A service warranty with respect to which the word

  9  "free" or words implying that the provision of the service

10  warranty is without cost are used in connection with the

11  advertising or offering for sale of any kind of goods,

12  merchandise, or services.

13         Section 24.  Section 624.124, Florida Statutes, is

14  amended to read:

15         624.124  Motor vehicle services; exemption from

16  code.--Any person may, in exchange for fees, dues, charges, or

17  other consideration, provide any of the following services

18  related to the ownership, operation, use, or maintenance of a

19  motor vehicle without being deemed an insurer and without

20  being subject to the provisions of this code:

21         (1)  Towing service.

22         (2)  Procuring from an insurer group coverage for bail

23  and arrest bonds or for accidental death and dismemberment.

24         (3)  Emergency service.

25         (4)  Procuring prepaid legal services, or providing

26  reimbursement for legal services, except that this shall not

27  be deemed to be an exemption from chapter 642.

28         (5)  Offering assistance in locating or recovering

29  stolen or missing motor vehicles.

30  

31  


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  1         (6)  Paying emergency living and transportation

  2  expenses of the owner of a motor vehicle when the motor

  3  vehicle is damaged.

  4  

  5  For purposes of this section, "motor vehicle" has the same

  6  meaning specified by s. 634.011(7) s. 634.011(6).

  7         Section 25.  Subsection (1) of section 628.4615,

  8  Florida Statutes, is amended to read:

  9         628.4615  Specialty insurers; acquisition of

10  controlling stock, ownership interest, assets, or control;

11  merger or consolidation.--

12         (1)  For the purposes of this section, the term

13  "specialty insurer" means any person holding a license or

14  certificate of authority as:

15         (a)  A motor vehicle service agreement company

16  authorized to issue motor vehicle service agreements as those

17  terms are defined in s. 634.011(8) and (9) s. 634.011(7) and

18  (8);

19         (b)  A home warranty association authorized to issue

20  "home warranties" as those terms are defined in s. 634.301(4)

21  and (5);

22         (c)  A service warranty association authorized to issue

23  "service warranties" as those terms are defined in s.

24  634.401(14) and (15);

25         (d)  An optometric service plan corporation authorized

26  to issue optometric service plan contracts as those terms are

27  defined in s. 637.001(2) and (3);

28         (e)  A pharmaceutical service plan corporation

29  authorized to issue pharmaceutical service plan contracts as

30  those terms are defined in s. 637.1701(2) and (3);

31  


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  1         (f)  A dental service plan corporation licensed to

  2  issue contracts for dental services pursuant to a dental

  3  service plan as that term is defined in s. 637.401(1);

  4         (g)  An ambulance service association authorized to

  5  issue ambulance service contracts as those terms are defined

  6  in s. 638.021(1) and (2);

  7         (h)  An authorized health maintenance organization

  8  operating pursuant to s. 641.21;

  9         (i)  An authorized prepaid health clinic operating

10  pursuant to s. 641.405;

11         (j)  A legal expense insurance corporation authorized

12  to engage in a legal expense insurance business pursuant to s.

13  642.021;

14         (k)  A provider which is licensed to operate a facility

15  which undertakes to provide continuing care as those terms are

16  defined in s. 651.011(2), (5), (6), and (7);

17         (l)  A multiple-employer welfare arrangement operating

18  pursuant to ss. 624.436-624.446;

19         (m)  A premium finance company authorized to finance

20  insurance premiums pursuant to s. 627.828; or

21         (n)  A corporation authorized to accept donor annuity

22  agreements pursuant to s. 627.481.

23         Section 26.  Section 634.289, Florida Statutes, is

24  created to read:

25         634.289  Rules.--The department may adopt rules, in

26  accordance with chapter 120, to identify specific methods of

27  competition or acts or practices that are prohibited by s.

28  634.282, but these rules shall not enlarge upon or extend the

29  provisions of that section.

30         Section 27.  Section 634.302, Florida Statutes, is

31  amended to read:


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  1         634.302  Powers of department; rules.--The department

  2  shall administer this part, and, to that end, it has authority

  3  to adopt rules pursuant to ss. 120.536(1) and 120.54 to

  4  implement the provisions of this part. Such rules may include

  5  rules that identify specific methods of competition or acts or

  6  practices that are prohibited by s. 634.336, but the rules

  7  shall not enlarge upon or extend the provisions of that

  8  section.

  9         Section 28.  Section 634.402, Florida Statutes, is

10  amended to read:

11         634.402  Powers of department; rules.--The department

12  shall administer this part, and to that end it has authority

13  to adopt rules pursuant to ss. 120.536(1) and 120.54 to

14  implement the provisions of this part. Such rules may identify

15  specific methods of competition or acts or practices that are

16  prohibited by s. 634.436, but shall not enlarge upon or extend

17  the provisions of that section.

18         Section 29.  Except as otherwise expressly provided in

19  this act, this act shall take effect upon becoming a law.

20  

21  

22  

23  

24  

25  

26  

27  

28  

29  

30  

31  


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