HB 1937

1	A bill to be entitled
2	An act relating to property insurance; amending s.
3	627.062, F.S.; limiting an insurer's recoupment of
4	reimbursement premium; providing limitations; amending s.
5	627.0628, F.S.; limiting use of certain methodologies in
6	determining hurricane loss factors for reimbursement
7	premium rates in certain rate filings; creating s.
8	627.06281, F.S.; requiring certain insurers and
9	organizations to develop, maintain, and update a public
10	hurricane loss projection model; providing reporting
11	requirements for insurers; protecting trade secret
12	information; amending s. 627.0629, F.S.; tightening a
13	limitation on rate filings based on computer models under
14	certain circumstances; amending s. 627.351, F.S.;
15	providing additional legislative intent relating to the
16	Citizens Property Insurance Corporation; specifying a
17	limitation on dwelling limits for personal lines policies;
18	revising appointment authority for members of the board of
19	governors of the corporation; requiring creation of a
20	Market Accountability Advisory Committee to assist the
21	corporation for certain purposes; providing for
22	appointment of committee members; providing for terms;
23	requiring reports to the corporation; revising
24	requirements for the plan of operation of the corporation;
25	requiring the corporation to pay bonuses to carriers
26	removing policies by assumption; providing for calculation
27	of the bonus amount; providing eligibility for carriers to
28	receive bonuses; deleting limitations on certain person
29	lines residential wind-only policies; deleting an obsolete
30	reporting requirement; specifying nonapplication of
31	certain policy requirements in counties lacking reasonable
32	degrees of competition for certain policies under certain
33	circumstances; authorizing the commission to adopt rules;
34	deleting an obsolete rate methodology panel reporting
35	requirement provision; amending s. 627.411, F.S.; revising
36	grounds for office disapproval of certain forms; amending
37	s. 627.7015, F.S.; revising purpose and scope provisions
38	relating to an alternative procedure for resolution of
39	disputed property insurance claims; providing an
40	additional criterion for excusing an insured from being
41	required to submit to certain loss appraisal processes;
42	amending s. 627.702, F.S.; providing legislative intent;
43	limiting an insurer's loss liability under certain
44	circumstances; amending s. 627.706, F.S.; revising
45	definitions relating to sinkholes; creating s. 627.7065,
46	F.S.; providing legislative findings; requiring the
47	Department of Financial Services and the Office of the
48	Insurance Consumer Advocate to consult with the Florida
49	Geological Survey and the Department of Environmental
50	Protection to implement a statewide automated database of
51	sinkholes and related activity; providing requirements for
52	the form and content of the database; authorizing the
53	Department of Financial Services to require insurers to
54	provide certain information; providing for management of
55	the database; requiring the department to investigate
56	sinkhole activity reports and include findings and
57	investigations in the database; requiring the Department
58	of Environmental Protection to report on the database to
59	the Governor, Legislature, and Chief Financial Officer;
60	authorizing the Department of Financial services to adopt
61	implementing rules; requiring the Auditor General to
62	perform an operational audit of the Citizens Property
63	Insurance Corporation; specifying audit requirements;
64	requiring a report; requiring the board of governors of
65	the Citizens Property Insurance Corporation to submit a
66	report to the Legislature relating to property and
67	casualty insurance; specifying report requirements;
68	providing for contingent effect; providing effective
69	dates.
70
71	Be It Enacted by the Legislature of the State of Florida:
72
73	Section 1.  Subsection (5) of section 627.062, Florida
74	Statutes, is amended to read:
75	627.062  Rate standards.--
76	(5)  With respect to a rate filing involving coverage of
77	the type for which the insurer is required to pay a
78	reimbursement premium to the Florida Hurricane Catastrophe Fund,
79	the insurer may fully recoup in its property insurance premiums
80	any reimbursement premiums paid to the Florida Hurricane
81	Catastrophe Fund, together with reasonable costs of other
82	reinsurance, but may not recoup reinsurance costs that duplicate
83	coverage provided by the Florida Hurricane Catastrophe Fund. An
84	insurer may not recoup more than one year of reimbursement
85	premium at a time. Any under-recoupment from the prior year may
86	be added to the following year's reimbursement premium and any
87	over-recoupment shall be subtracted from the following year's
88	reimbursement premium.
89	Section 2.  Paragraph (c) of subsection (1) and paragraph
90	(c) of subsection (3) of section 627.0628, Florida Statutes, are
91	amended to read:
92	627.0628  Florida Commission on Hurricane Loss Projection
93	Methodology.--
94	(1)  LEGISLATIVE FINDINGS AND INTENT.--
95	(c)  It is the intent of the Legislature to create the
96	Florida Commission on Hurricane Loss Projection Methodology as a
97	panel of experts to provide the most actuarially sophisticated
98	guidelines and standards for projection of hurricane losses
99	possible, given the current state of actuarial science. It is
100	the further intent of the Legislature that such standards and
101	guidelines must be used by the State Board of Administration in
102	developing reimbursement premium rates for the Florida Hurricane
103	Catastrophe Fund, and, subject to paragraph (3)(c), may be used
104	by insurers in rate filings under s. 627.062 unless the way in
105	which such standards and guidelines were applied by the insurer
106	was erroneous, as shown by a preponderance of the evidence.
107	(3)  ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.--
108	(c)  With respect to a rate filing under s. 627.062, an
109	insurer may employ actuarial methods, principles, standards,
110	models, or output ranges found by the commission to be accurate
111	or reliable to determine hurricane loss factors for use in a
112	rate filing under s. 627.062. Such, which findings and factors
113	are admissible and relevant in consideration of a rate filing by
114	the office or in any arbitration or administrative or judicial
115	review only if the office and the consumer advocate appointed
116	pursuant to s. 627.0613 have access to all of the assumptions
117	and factors that were used in developing the actuarial methods,
118	principles, standards, models, or output ranges and are not
119	precluded from disclosing such information in a rate proceeding.
120	Section 3.  Section 627.06281, Florida Statutes, is created
121	to read:
122	627.06281  Public hurricane loss projection model;
123	reporting of data by insurers.--Within 30 days after a written
124	request for loss data and associated exposure data by the office
125	or a type I center within the State University System
126	established to study mitigation, residential property insurers
127	and licensed rating and advisory organizations that compile
128	residential property insurance loss data shall provide loss data
129	and associated exposure data for residential property insurance
130	policies to the office or to a type I center within the State
131	University System established to study mitigation, as directed
132	by the office, for the purposes of developing, maintaining, and
133	updating a public model for hurricane loss projections. The loss
134	data and associated exposure data provided shall be in writing.
135	Any loss data and associated exposure data provided pursuant to
136	this section that constitutes a trade secret as defined in s.
137	812.081, and as provided in s. 815.04(3), shall be subject to
138	the provisions of s. 815.045.
139	Section 4.  Subsection (7) of section 627.0629, Florida
140	Statutes, is amended to read:
141	627.0629  Residential property insurance; rate filings.--
142	(7)  Any rate filing that is based in whole or part on data
143	from a computer model may not exceed 15 25 percent unless there
144	is a public hearing.
145	Section 5.  Paragraphs (a), (c), and (d) of subsection (6)
146	of section 627.351, Florida Statutes, are amended to read:
147	627.351  Insurance risk apportionment plans.--
148	(6)  CITIZENS PROPERTY INSURANCE CORPORATION.--
149	(a)1.  The Legislature finds that actual and threatened
150	catastrophic losses to property in this state from hurricanes
151	have caused insurers to be unwilling or unable to provide
152	property insurance coverage to the extent sought and needed. It
153	is in the public interest and a public purpose to assist in
154	assuring that property in the state is insured so as to
155	facilitate the remediation, reconstruction, and replacement of
156	damaged or destroyed property in order to reduce or avoid the
157	negative effects otherwise resulting to the public health,
158	safety, and welfare; to the economy of the state; and to the
159	revenues of the state and local governments needed to provide
160	for the public welfare. It is necessary, therefore, to provide
161	property insurance to applicants who are in good faith entitled
162	to procure insurance through the voluntary market but are unable
163	to do so. The Legislature intends by this subsection that
164	property insurance be provided and that it continues, as long as
165	necessary, through an entity organized to achieve efficiencies
166	and economies, while providing service to policyholders,
167	applicants, and agents that is no less than the quality
168	generally provided in the voluntary market, all toward the
169	achievement of the foregoing public purposes. Because it is
170	essential for the corporation to have the maximum financial
171	resources to pay claims following a catastrophic hurricane, it
172	is the intent of the Legislature that the income of the
173	corporation be exempt from federal income taxation and that
174	interest on the debt obligations issued by the corporation be
175	exempt from federal income taxation.
176	2.  The Residential Property and Casualty Joint
177	Underwriting Association originally created by this statute
178	shall be known, as of July 1, 2002, as the Citizens Property
179	Insurance Corporation. The corporation shall provide insurance
180	for residential and commercial property, for applicants who are
181	in good faith entitled, but are unable, to procure insurance
182	through the voluntary market. The corporation shall operate
183	pursuant to a plan of operation approved by order of the office.
184	The plan is subject to continuous review by the office. The
185	office may, by order, withdraw approval of all or part of a plan
186	if the office determines that conditions have changed since
187	approval was granted and that the purposes of the plan require
188	changes in the plan. For the purposes of this subsection,
189	residential coverage includes both personal lines residential
190	coverage, which consists of the type of coverage provided by
191	homeowner's, mobile home owner's, dwelling, tenant's,
192	condominium unit owner's, and similar policies, and commercial
193	lines residential coverage, which consists of the type of
194	coverage provided by condominium association, apartment
195	building, and similar policies.
196	3.  It is the intent of the Legislature that policyholders,
197	applicants, and agents of the corporation receive service and
198	treatment of the highest possible level but never less than that
199	generally provided in the voluntary market. It also is intended
200	that the corporation be held to service standards no less than
201	those applied to insurers in the voluntary market by the office
202	with respect to responsiveness, timeliness, customer courtesy,
203	and overall dealings with policyholders, applicants, or agents
204	of the corporation.
205	(c)  The plan of operation of the corporation:
206	1.  Must provide for adoption of residential property and
207	casualty insurance policy forms and commercial residential and
208	nonresidential property insurance forms, which forms must be
209	approved by the office prior to use. The corporation shall adopt
210	the following policy forms:
211	a.  Standard personal lines policy forms that are
212	comprehensive multiperil policies providing full coverage of a
213	residential property equivalent to the coverage provided in the
214	private insurance market under an HO-3, HO-4, or HO-6 policy.
215	b.  Basic personal lines policy forms that are policies
216	similar to an HO-8 policy or a dwelling fire policy that provide
217	coverage meeting the requirements of the secondary mortgage
218	market, but which coverage is more limited than the coverage
219	under a standard policy.
220	c.  Commercial lines residential policy forms that are
221	generally similar to the basic perils of full coverage
222	obtainable for commercial residential structures in the admitted
223	voluntary market.
224	d.  Personal lines and commercial lines residential
225	property insurance forms that cover the peril of wind only. The
226	forms are applicable only to residential properties located in
227	areas eligible for coverage under the high-risk account referred
228	to in sub-subparagraph (b)2.a.
229	e.  Commercial lines nonresidential property insurance
230	forms that cover the peril of wind only. The forms are
231	applicable only to nonresidential properties located in areas
232	eligible for coverage under the high-risk account referred to in
233	sub-subparagraph (b)2.a.
234
235	The dwelling limits for any personal lines policy in both the
236	personal lines account and the high-risk account may not exceed
237	$1 million.
238	2.a.  Must provide that the corporation adopt a program in
239	which the corporation and authorized insurers enter into quota
240	share primary insurance agreements for hurricane coverage, as
241	defined in s. 627.4025(2)(a), for eligible risks, and adopt
242	property insurance forms for eligible risks which cover the
243	peril of wind only. As used in this subsection, the term:
244	(I)  "Quota share primary insurance" means an arrangement
245	in which the primary hurricane coverage of an eligible risk is
246	provided in specified percentages by the corporation and an
247	authorized insurer. The corporation and authorized insurer are
248	each solely responsible for a specified percentage of hurricane
249	coverage of an eligible risk as set forth in a quota share
250	primary insurance agreement between the corporation and an
251	authorized insurer and the insurance contract. The
252	responsibility of the corporation or authorized insurer to pay
253	its specified percentage of hurricane losses of an eligible
254	risk, as set forth in the quota share primary insurance
255	agreement, may not be altered by the inability of the other
256	party to the agreement to pay its specified percentage of
257	hurricane losses. Eligible risks that are provided hurricane
258	coverage through a quota share primary insurance arrangement
259	must be provided policy forms that set forth the obligations of
260	the corporation and authorized insurer under the arrangement,
261	clearly specify the percentages of quota share primary insurance
262	provided by the corporation and authorized insurer, and
263	conspicuously and clearly state that neither the authorized
264	insurer nor the corporation may be held responsible beyond its
265	specified percentage of coverage of hurricane losses.
266	(II)  "Eligible risks" means personal lines residential and
267	commercial lines residential risks that meet the underwriting
268	criteria of the corporation and are located in areas that were
269	eligible for coverage by the Florida Windstorm Underwriting
270	Association on January 1, 2002.
271	b.  The corporation may enter into quota share primary
272	insurance agreements with authorized insurers at corporation
273	coverage levels of 90 percent and 50 percent.
274	c.  If the corporation determines that additional coverage
275	levels are necessary to maximize participation in quota share
276	primary insurance agreements by authorized insurers, the
277	corporation may establish additional coverage levels. However,
278	the corporation's quota share primary insurance coverage level
279	may not exceed 90 percent.
280	d.  Any quota share primary insurance agreement entered
281	into between an authorized insurer and the corporation must
282	provide for a uniform specified percentage of coverage of
283	hurricane losses, by county or territory as set forth by the
284	corporation board, for all eligible risks of the authorized
285	insurer covered under the quota share primary insurance
286	agreement.
287	e.  Any quota share primary insurance agreement entered
288	into between an authorized insurer and the corporation is
289	subject to review and approval by the office. However, such
290	agreement shall be authorized only as to insurance contracts
291	entered into between an authorized insurer and an insured who is
292	already insured by the corporation for wind coverage.
293	f.  For all eligible risks covered under quota share
294	primary insurance agreements, the exposure and coverage levels
295	for both the corporation and authorized insurers shall be
296	reported by the corporation to the Florida Hurricane Catastrophe
297	Fund. For all policies of eligible risks covered under quota
298	share primary insurance agreements, the corporation and the
299	authorized insurer shall maintain complete and accurate records
300	for the purpose of exposure and loss reimbursement audits as
301	required by Florida Hurricane Catastrophe Fund rules. The
302	corporation and the authorized insurer shall each maintain
303	duplicate copies of policy declaration pages and supporting
304	claims documents.
305	g.  The corporation board shall establish in its plan of
306	operation standards for quota share agreements which ensure that
307	there is no discriminatory application among insurers as to the
308	terms of quota share agreements, pricing of quota share
309	agreements, incentive provisions if any, and consideration paid
310	for servicing policies or adjusting claims.
311	h.  The quota share primary insurance agreement between the
312	corporation and an authorized insurer must set forth the
313	specific terms under which coverage is provided, including, but
314	not limited to, the sale and servicing of policies issued under
315	the agreement by the insurance agent of the authorized insurer
316	producing the business, the reporting of information concerning
317	eligible risks, the payment of premium to the corporation, and
318	arrangements for the adjustment and payment of hurricane claims
319	incurred on eligible risks by the claims adjuster and personnel
320	of the authorized insurer. Entering into a quota sharing
321	insurance agreement between the corporation and an authorized
322	insurer shall be voluntary and at the discretion of the
323	authorized insurer.
324	3.  May provide that the corporation may employ or
325	otherwise contract with individuals or other entities to provide
326	administrative or professional services that may be appropriate
327	to effectuate the plan. The corporation shall have the power to
328	borrow funds, by issuing bonds or by incurring other
329	indebtedness, and shall have other powers reasonably necessary
330	to effectuate the requirements of this subsection. The
331	corporation may, but is not required to, seek judicial
332	validation of its bonds or other indebtedness under chapter 75.
333	The corporation may issue bonds or incur other indebtedness, or
334	have bonds issued on its behalf by a unit of local government
335	pursuant to subparagraph (g)2., in the absence of a hurricane or
336	other weather-related event, upon a determination by the
337	corporation, subject to approval by the office, that such action
338	would enable it to efficiently meet the financial obligations of
339	the corporation and that such financings are reasonably
340	necessary to effectuate the requirements of this subsection. The
341	corporation is authorized to take all actions needed to
342	facilitate tax-free status for any such bonds or indebtedness,
343	including formation of trusts or other affiliated entities. The
344	corporation shall have the authority to pledge assessments,
345	projected recoveries from the Florida Hurricane Catastrophe
346	Fund, other reinsurance recoverables, market equalization and
347	other surcharges, and other funds available to the corporation
348	as security for bonds or other indebtedness. In recognition of
349	s. 10, Art. I of the State Constitution, prohibiting the
350	impairment of obligations of contracts, it is the intent of the
351	Legislature that no action be taken whose purpose is to impair
352	any bond indenture or financing agreement or any revenue source
353	committed by contract to such bond or other indebtedness.
354	4.a.  Must require that the corporation operate subject to
355	the supervision and approval of a board of governors consisting
356	of 8 7 individuals who are residents of this state, from
357	different geographical areas of this state, appointed by the
358	Chief Financial Officer. The Governor, the Chief Financial
359	Officer, the President of the Senate, and the Speaker of the
360	House of Representatives shall each appoint two members of the
361	board, effective August 1, 2005. The Chief Financial Officer
362	shall designate one of the appointees as chair. All board
363	members serve at the pleasure of the appointing officer Chief
364	Financial Officer. All board members, including the chair, must
365	be appointed to serve for 3-year terms beginning annually on a
366	date designated by the plan. Any board vacancy shall be filled
367	for the unexpired term by the appointing officer Chief Financial
368	Officer. The Chief Financial Officer shall appoint a technical
369	advisory group to provide information and advice to the board of
370	governors in connection with the board's duties under this
371	subsection. The executive director and senior managers of the
372	corporation shall be engaged by the board, as recommended by the
373	Chief Financial Officer and serve at the pleasure of the board
374	Chief Financial Officer. The executive director is responsible
375	for employing other staff as the corporation may require,
376	subject to review and concurrence by the board and office of the
377	Chief Financial Officer.
378	b.  The board shall create a Market Accountability Advisory
379	Committee to assist the corporation in developing awareness of
380	its rates and its customer and agent service levels in
381	relationship to the voluntary market insurers writing similar
382	coverage. The members of the advisory committee shall consist of
383	the following ten persons, one of whom must be elected chair by
384	the members of the committee: one representative appointed by
385	each of the three largest property and casualty insurance agents
386	independent trade associations in this state; three
387	representatives appointed by the insurers with the three highest
388	voluntary market share of residential property insurance
389	business in the state; one representative from the Office of
390	Insurance Regulation; one consumer appointed by the board who is
391	insured by the corporation at the time of appointment to the
392	committee; one representative appointed by the Florida
393	Association of Realtors; and one representative appointed by the
394	Florida Bankers Association. All members must serve for 3-year
395	terms and may serve for consecutive terms. The committee shall
396	report to the corporation at each board meeting on insurance
397	market issues which may include rates and rate competition with
398	the voluntary market; service, including policy issuance, claims
399	processing, and general responsiveness to policyholders,
400	applicants, and agents; and matters relating to depopulation.
401	5.  Must provide a procedure for determining the
402	eligibility of a risk for coverage, as follows:
403	a.  Subject to the provisions of s. 627.3517, with respect
404	to personal lines residential risks, if the risk is offered
405	coverage from an authorized insurer at the insurer's approved
406	rate under either a standard policy including wind coverage or,
407	if consistent with the insurer's underwriting rules as filed
408	with the office, a basic policy including wind coverage, the
409	risk is not eligible for any policy issued by the corporation.
410	If the risk is not able to obtain any such offer, the risk is
411	eligible for either a standard policy including wind coverage or
412	a basic policy including wind coverage issued by the
413	corporation; however, if the risk could not be insured under a
414	standard policy including wind coverage regardless of market
415	conditions, the risk shall be eligible for a basic policy
416	including wind coverage unless rejected under subparagraph 8.
417	The corporation shall determine the type of policy to be
418	provided on the basis of objective standards specified in the
419	underwriting manual and based on generally accepted underwriting
420	practices.
421	(I)  If the risk accepts an offer of coverage through the
422	market assistance plan or an offer of coverage through a
423	mechanism established by the corporation before a policy is
424	issued to the risk by the corporation or during the first 30
425	days of coverage by the corporation, and the producing agent who
426	submitted the application to the plan or to the corporation is
427	not currently appointed by the insurer, the insurer shall:
428	(A)  Pay to the producing agent of record of the policy,
429	for the first year, an amount that is the greater of the
430	insurer's usual and customary commission for the type of policy
431	written or a fee equal to the usual and customary commission of
432	the corporation; or
433	(B)  Offer to allow the producing agent of record of the
434	policy to continue servicing the policy for a period of not less
435	than 1 year and offer to pay the agent the greater of the
436	insurer's or the corporation's usual and customary commission
437	for the type of policy written.
438
439	If the producing agent is unwilling or unable to accept
440	appointment, the new insurer shall pay the agent in accordance
441	with sub-sub-sub-subparagraph (A).
442	(II)  When the corporation enters into a contractual
443	agreement for a take-out plan, the producing agent of record of
444	the corporation policy is entitled to retain any unearned
445	commission on the policy, and the insurer shall:
446	(A)  Pay to the producing agent of record of the
447	corporation policy, for the first year, an amount that is the
448	greater of the insurer's usual and customary commission for the
449	type of policy written or a fee equal to the usual and customary
450	commission of the corporation; or
451	(B)  Offer to allow the producing agent of record of the
452	corporation policy to continue servicing the policy for a period
453	of not less than 1 year and offer to pay the agent the greater
454	of the insurer's or the corporation's usual and customary
455	commission for the type of policy written.
456
457	If the producing agent is unwilling or unable to accept
458	appointment, the new insurer shall pay the agent in accordance
459	with sub-sub-sub-subparagraph (A).
460	b.  With respect to commercial lines residential risks, if
461	the risk is offered coverage under a policy including wind
462	coverage from an authorized insurer at its approved rate, the
463	risk is not eligible for any policy issued by the corporation.
464	If the risk is not able to obtain any such offer, the risk is
465	eligible for a policy including wind coverage issued by the
466	corporation.
467	(I)  If the risk accepts an offer of coverage through the
468	market assistance plan or an offer of coverage through a
469	mechanism established by the corporation before a policy is
470	issued to the risk by the corporation or during the first 30
471	days of coverage by the corporation, and the producing agent who
472	submitted the application to the plan or the corporation is not
473	currently appointed by the insurer, the insurer shall:
474	(A)  Pay to the producing agent of record of the policy,
475	for the first year, an amount that is the greater of the
476	insurer's usual and customary commission for the type of policy
477	written or a fee equal to the usual and customary commission of
478	the corporation; or
479	(B)  Offer to allow the producing agent of record of the
480	policy to continue servicing the policy for a period of not less
481	than 1 year and offer to pay the agent the greater of the
482	insurer's or the corporation's usual and customary commission
483	for the type of policy written.
484
485	If the producing agent is unwilling or unable to accept
486	appointment, the new insurer shall pay the agent in accordance
487	with sub-sub-sub-subparagraph (A).
488	(II)  When the corporation enters into a contractual
489	agreement for a take-out plan, the producing agent of record of
490	the corporation policy is entitled to retain any unearned
491	commission on the policy, and the insurer shall:
492	(A)  Pay to the producing agent of record of the
493	corporation policy, for the first year, an amount that is the
494	greater of the insurer's usual and customary commission for the
495	type of policy written or a fee equal to the usual and customary
496	commission of the corporation; or
497	(B)  Offer to allow the producing agent of record of the
498	corporation policy to continue servicing the policy for a period
499	of not less than 1 year and offer to pay the agent the greater
500	of the insurer's or the corporation's usual and customary
501	commission for the type of policy written.
502
503	If the producing agent is unwilling or unable to accept
504	appointment, the new insurer shall pay the agent in accordance
505	with sub-sub-sub-subparagraph (A).
506	6.  Must include rules for classifications of risks and
507	rates therefor.
508	7.  Must provide that if premium and investment income for
509	an account attributable to a particular calendar year are in
510	excess of projected losses and expenses for the account
511	attributable to that year, such excess shall be held in surplus
512	in the account. Such surplus shall be available to defray
513	deficits in that account as to future years and shall be used
514	for that purpose prior to assessing assessable insurers and
515	assessable insureds as to any calendar year.
516	8.  Must provide objective criteria and procedures to be
517	uniformly applied for all applicants in determining whether an
518	individual risk is so hazardous as to be uninsurable. In making
519	this determination and in establishing the criteria and
520	procedures, the following shall be considered:
521	a.  Whether the likelihood of a loss for the individual
522	risk is substantially higher than for other risks of the same
523	class; and
524	b.  Whether the uncertainty associated with the individual
525	risk is such that an appropriate premium cannot be determined.
526
527	The acceptance or rejection of a risk by the corporation shall
528	be construed as the private placement of insurance, and the
529	provisions of chapter 120 shall not apply.
530	9.  Must provide that the corporation shall make its best
531	efforts to procure catastrophe reinsurance at reasonable rates,
532	to cover its projected 100-year probable maximum loss as
533	determined by the board of governors.
534	10.  Must provide that in the event of regular deficit
535	assessments under sub-subparagraph (b)3.a. or sub-subparagraph
536	(b)3.b., in the personal lines account, the commercial lines
537	residential account, or the high-risk account, the corporation
538	shall levy upon corporation policyholders in its next rate
539	filing, or by a separate rate filing solely for this purpose, a
540	market equalization surcharge arising from a regular assessment
541	in such account in a percentage equal to the total amount of
542	such regular assessments divided by the aggregate statewide
543	direct written premium for subject lines of business for the
544	prior calendar year. Market equalization surcharges under this
545	subparagraph are not considered premium and are not subject to
546	commissions, fees, or premium taxes; however, failure to pay a
547	market equalization surcharge shall be treated as failure to pay
548	premium.
549	11.  The policies issued by the corporation must provide
550	that, if the corporation or the market assistance plan obtains
551	an offer from an authorized insurer to cover the risk at its
552	approved rates, the risk is no longer eligible for renewal
553	through the corporation.
554	12.  Corporation policies and applications must include a
555	notice that the corporation policy could, under this section, be
556	replaced with a policy issued by an authorized insurer that does
557	not provide coverage identical to the coverage provided by the
558	corporation. The notice shall also specify that acceptance of
559	corporation coverage creates a conclusive presumption that the
560	applicant or policyholder is aware of this potential.
561	13.  May establish, subject to approval by the office,
562	different eligibility requirements and operational procedures
563	for any line or type of coverage for any specified county or
564	area if the board determines that such changes to the
565	eligibility requirements and operational procedures are
566	justified due to the voluntary market being sufficiently stable
567	and competitive in such area or for such line or type of
568	coverage and that consumers who, in good faith, are unable to
569	obtain insurance through the voluntary market through ordinary
570	methods would continue to have access to coverage from the
571	corporation. When coverage is sought in connection with a real
572	property transfer, such requirements and procedures shall not
573	provide for an effective date of coverage later than the date of
574	the closing of the transfer as established by the transferor,
575	the transferee, and, if applicable, the lender.
576	14.  Must provide that, with respect to the high-risk
577	account, any assessable insurer with a surplus as to
578	policyholders of $25 million or less writing 25 percent or more
579	of its total countrywide property insurance premiums in this
580	state may petition the office, within the first 90 days of each
581	calendar year, to qualify as a limited apportionment company. In
582	no event shall a limited apportionment company be required to
583	participate in the portion of any assessment, within the high-
584	risk account, pursuant to sub-subparagraph (b)3.a. or sub-
585	subparagraph (b)3.b. in the aggregate which exceeds $50 million
586	after payment of available high-risk account funds in any
587	calendar year. However, a limited apportionment company shall
588	collect from its policyholders any emergency assessment imposed
589	under sub-subparagraph (b)3.d. The plan shall provide that, if
590	the office determines that any regular assessment will result in
591	an impairment of the surplus of a limited apportionment company,
592	the office may direct that all or part of such assessment be
593	deferred as provided in subparagraph (g)4. However, there shall
594	be no limitation or deferment of an emergency assessment to be
595	collected from policyholders under sub-subparagraph (b)3.d.
596	15.  Must provide that the corporation appoint as its
597	licensed agents only those agents who also hold an appointment
598	as defined in s. 626.015(3) with an insurer who at the time of
599	the agent's initial appointment by the corporation is authorized
600	to write and is actually writing personal lines residential
601	property coverage, commercial residential property coverage, or
602	commercial nonresidential property coverage within the state.
603	16.  Must provide that for each carrier removing policies
604	by assumption from the personal lines account of the corporation
605	that carrier shall receive a minimum per policy bonus equal to
606	12.5 percent of written premium for a minimum of 10,000 policies
607	removed with wind coverage in coastal counties, 15 percent of
608	written premium for a minimum of 30,000 policies removed with
609	wind coverage in coastal counties, and 17.5 percent of written
610	premium for a minimum of 50,000 policies removed with wind
611	coverage in coastal counties. In order to be eligible for such
612	per-policy bonus, the carrier must offer to issue and renew the
613	carrier's policy for a period of 3 years subsequent to the
614	expiration of the assumed policy. The carrier shall nonetheless
615	be eligible for such per-policy bonus if the policy is
616	voluntarily terminated by the insured at any time subsequent to
617	the insured's initial acceptance of coverage from the carrier.
618	Cancellation of a policy for nonpayment of premium by the
619	insured shall be deemed a voluntary termination by the insured.
620	Failure of the insured to accept the carrier's offer of renewal,
621	if such renewal is in accordance with the corporation's plan of
622	operations, shall be deemed a voluntary termination by the
623	insured.
624	(d)1.  It is the intent of the Legislature that the rates
625	for coverage provided by the corporation be actuarially sound
626	and not competitive with approved rates charged in the admitted
627	voluntary market, so that the corporation functions as a
628	residual market mechanism to provide insurance only when the
629	insurance cannot be procured in the voluntary market. Rates
630	shall include an appropriate catastrophe loading factor that
631	reflects the actual catastrophic exposure of the corporation.
632	2.  For each county, the average rates of the corporation
633	for each line of business for personal lines residential
634	policies excluding rates for wind-only policies shall be no
635	lower than the average rates charged by the insurer that had the
636	highest average rate in that county among the 20 insurers with
637	the greatest total direct written premium in the state for that
638	line of business in the preceding year, except that with respect
639	to mobile home coverages, the average rates of the corporation
640	shall be no lower than the average rates charged by the insurer
641	that had the highest average rate in that county among the 5
642	insurers with the greatest total written premium for mobile home
643	owner's policies in the state in the preceding year.
644	3.  Rates for personal lines residential wind-only policies
645	must be actuarially sound and not competitive with approved
646	rates charged by authorized insurers. However, for personal
647	lines residential wind-only policies issued or renewed between
648	July 1, 2002, and June 30, 2003, the maximum premium increase
649	must be no greater than 10 percent of the Florida Windstorm
650	Underwriting Association premium for that policy in effect on
651	June 30, 2002, as adjusted for coverage changes and seasonal
652	occupancy surcharges. For personal lines residential wind-only
653	policies issued or renewed between July 1, 2003, and June 30,
654	2004, the corporation shall use its existing filed and approved
655	wind-only rating and classification plans, provided, however,
656	that the maximum premium increase must be no greater than 20
657	percent of the premium for that policy in effect on June 30,
658	2003, as adjusted for coverage changes and seasonal occupancy
659	surcharges. Corporation rate manuals shall include a rate
660	surcharge for seasonal occupancy. To ensure that personal lines
661	residential wind-only rates effective on or after July 1, 2004,
662	are not competitive with approved rates charged by authorized
663	insurers, the corporation, in conjunction with the office, shall
664	develop a wind-only ratemaking methodology, which methodology
665	shall be contained in each a rate filing made by the corporation
666	with the office by January 1, 2004. If the office thereafter
667	determines that the wind-only rates or rating factors filed by
668	the corporation fail to comply with the wind-only ratemaking
669	methodology provided for in this subsection, it shall so notify
670	the corporation and require the corporation to amend its rates
671	or rating factors to come into compliance within 90 days of
672	notice from the office. The office shall report to the Speaker
673	of the House of Representatives and the President of the Senate
674	on the provisions of the wind-only ratemaking methodology by
675	January 31, 2004.
676	4.  The provisions of subparagraph 2. do not apply to
677	coverage provided by the corporation in any county for which the
678	office determines that a reasonable degree of competition does
679	not exist for personal lines residential policies. The
680	provisions of subparagraph 3. do not apply to coverage provided
681	by the corporation in any county for which the office determines
682	that a reasonable degree of competition does not exist for
683	personal lines residential policies in the area of that county
684	which is eligible for wind-only coverage. In such counties, the
685	rates for personal lines residential coverage shall be
686	actuarially sound and not excessive, inadequate, or unfairly
687	discriminatory and are subject to the other provisions of the
688	paragraph and s. 627.062. The commission may adopt rules
689	establishing the criteria for determining whether a reasonable
690	degree of competition exists for personal lines residential
691	policies. Beginning October 1, 2005, and each 6 months
692	thereafter, the office shall determine and identify those
693	counties for which a reasonable degree of competition does not
694	exist for purposes of subparagraphs 2. and 3., respectively.
695	5.4.  Rates for commercial lines coverage shall not be
696	subject to the requirements of subparagraph 2., but shall be
697	subject to all other requirements of this paragraph and s.
698	627.062.
699	6.5.  Nothing in this paragraph shall require or allow the
700	corporation to adopt a rate that is inadequate under s. 627.062.
701	7.6.  The corporation shall certify to the office at least
702	twice annually that its personal lines rates comply with the
703	requirements of this paragraph subparagraphs 1. and 2. If any
704	adjustment in the rates or rating factors of the corporation is
705	necessary to ensure such compliance, the corporation shall make
706	and implement such adjustments and file its revised rates and
707	rating factors with the office. If the office thereafter
708	determines that the revised rates and rating factors fail to
709	comply with the provisions of this paragraph subparagraphs 1.
710	and 2., it shall notify the corporation and require the
711	corporation to amend its rates or rating factors in conjunction
712	with its next rate filing. The office must notify the
713	corporation by electronic means of any rate filing it approves
714	for any insurer among the insurers referred to in subparagraph
715	2.
716	8.7.  In addition to the rates otherwise determined
717	pursuant to this paragraph, the corporation shall impose and
718	collect an amount equal to the premium tax provided for in s.
719	624.509 to augment the financial resources of the corporation.
720	9.8.a.  To assist the corporation in developing additional
721	ratemaking methods to assure compliance with this paragraph
722	subparagraphs 1. and 4., the corporation shall appoint a rate
723	methodology panel consisting of one person recommended by the
724	Florida Association of Insurance Agents, one person recommended
725	by the Professional Insurance Agents of Florida, one person
726	recommended by the Florida Association of Insurance and
727	Financial Advisors, one person recommended by the insurer with
728	the highest voluntary market share of residential property
729	insurance business in the state, one person recommended by the
730	insurer with the second-highest voluntary market share of
731	residential property insurance business in the state, one person
732	recommended by an insurer writing commercial residential
733	property insurance in this state, one person recommended by the
734	Office of Insurance Regulation, and one board member designated
735	by the board chairman, who shall serve as chairman of the panel.
736	b.  By January 1, 2004, the rate methodology panel shall
737	provide a report to the corporation of its findings and
738	recommendations for the use of additional ratemaking methods and
739	procedures, including the use of a rate equalization surcharge
740	in an amount sufficient to assure that the total cost of
741	coverage for policyholders or applicants to the corporation is
742	sufficient to comply with subparagraph 1.
743	c.  Within 30 days after such report, the corporation shall
744	present to the President of the Senate, the Speaker of the House
745	of Representatives, the minority party leaders of each house of
746	the Legislature, and the chairs of the standing committees of
747	each house of the Legislature having jurisdiction of insurance
748	issues, a plan for implementing the additional ratemaking
749	methods and an outline of any legislation needed to facilitate
750	use of the new methods.
751	d.  The plan must include a provision that producer
752	commissions paid by the corporation shall not be calculated in
753	such a manner as to include any rate equalization surcharge.
754	However, without regard to the plan to be developed or its
755	implementation, producer commissions paid by the corporation for
756	each account, other than the quota share primary program, shall
757	remain fixed as to percentage, effective rate, calculation, and
758	payment method until January 1, 2004.
759	10.9.  By January 1, 2004, The corporation shall develop a
760	notice to policyholders or applicants that the rates of Citizens
761	Property Insurance Corporation are intended to be higher than
762	the rates of any admitted carrier except when the provisions of
763	subparagraph 4. apply and providing other information the
764	corporation deems necessary to assist consumers in finding other
765	voluntary admitted insurers willing to insure their property.
766	Section 6.  Subsection (1) of section 627.411, Florida
767	Statutes, is amended to read:
768	627.411  Grounds for disapproval.--
769	(1)  The office shall disapprove any form filed under s.
770	627.410, or withdraw any previous approval thereof, only if the
771	form:
772	(a)  Is in any respect in violation of, or does not comply
773	with, this code.
774	(b)  Contains or incorporates by reference, where such
775	incorporation is otherwise permissible, any inconsistent,
776	ambiguous, or misleading clauses, or exceptions and conditions
777	which deceptively affect the risk purported to be assumed in the
778	general coverage of the contract.
779	(c)  Has any title, heading, or other indication of its
780	provisions which is misleading.
781	(d)  Is printed or otherwise reproduced in such manner as
782	to render any material provision of the form substantially
783	illegible.
784	(e)  Contains provisions that are unfair or inequitable or
785	contrary to the public policy of this state or that encourage
786	misrepresentation.
787	(f)(e)  Is for health insurance, and:
788	1.  Provides benefits that are unreasonable in relation to
789	the premium charged.;
790	2.  Contains provisions that are unfair or inequitable or
791	contrary to the public policy of this state or that encourage
792	misrepresentation;
793	2.3.  Contains provisions that apply rating practices that
794	result in unfair discrimination pursuant to s. 626.9541(1)(g)2.
795	(g)(f)  Excludes coverage for human immunodeficiency virus
796	infection or acquired immune deficiency syndrome or contains
797	limitations in the benefits payable, or in the terms or
798	conditions of such contract, for human immunodeficiency virus
799	infection or acquired immune deficiency syndrome which are
800	different than those which apply to any other sickness or
801	medical condition.
802	Section 7.  Subsections (1) and (7) of section 627.7015,
803	Florida Statutes, are amended to read:
804	627.7015  Alternative procedure for resolution of disputed
805	property insurance claims.--
806	(1)  PURPOSE AND SCOPE.--This section sets forth a
807	nonadversarial alternative dispute resolution procedure for a
808	mediated claim resolution conference prompted by the need for
809	effective, fair, and timely handling of property insurance
810	claims. There is a particular need for an informal,
811	nonthreatening forum for helping parties who elect this
812	procedure to resolve their claims disputes because most
813	homeowner's and commercial residential insurance policies
814	obligate insureds to participate in a potentially expensive and
815	time-consuming adversarial appraisal process prior to
816	litigation. The procedure set forth in this section is designed
817	to bring the parties together for a mediated claims settlement
818	conference without any of the trappings or drawbacks of an
819	adversarial process. Before resorting to these procedures,
820	insureds and insurers are encouraged to resolve claims as
821	quickly and fairly as possible. This section is available with
822	respect to claims under personal lines and commercial
823	residential policies for all claimants and insurers prior to
824	commencing the appraisal process, or commencing litigation. If
825	requested by the insured, participation by legal counsel shall
826	be permitted. Mediation under this section is also available to
827	litigants referred to the department by a county court or
828	circuit court. This section does not apply to commercial
829	coverages, to private passenger motor vehicle insurance
830	coverages, or to disputes relating to liability coverages in
831	policies of property insurance.
832	(7)  If the insurer fails to comply with subsection (2) by
833	failing to notify a first-party claimant of its right to
834	participate in the mediation program under this section or if
835	the insurer requests the mediation, and the mediation results
836	are rejected by either party, the insured shall not be required
837	to submit to or participate in any contractual loss appraisal
838	process of the property loss damage as a precondition to legal
839	action for breach of contract against the insurer for its
840	failure to pay the policyholder's claims covered by the policy.
841	Section 8.  Effective upon this act becoming a law,
842	subsection (1) of section 627.702, Florida Statutes, is amended
843	to read:
844	627.702  Valued policy law.--
845	(1)(a)  In the event of the total loss of any building,
846	structure, mobile home as defined in s. 320.01(2), or
847	manufactured building as defined in s. 553.36(12), located in
848	this state and insured by any insurer as to a covered peril, in
849	the absence of any change increasing the risk without the
850	insurer's consent and in the absence of fraudulent or criminal
851	fault on the part of the insured or one acting in her or his
852	behalf, the insurer's liability, if any, under the policy for
853	such total loss shall be in the amount of money for which such
854	property was so insured as specified in the policy and for which
855	a premium has been charged and paid.
856	(b)  The legislative intent of this subsection is not to
857	require an insurer to pay for a loss other than one caused by
858	the covered peril or one resulting from a covered peril. In
859	furtherance of such legislative intent, when a loss was caused
860	in part by or resulting from a covered peril and in part by a
861	noncovered peril, the insurer's liability under this section
862	shall be limited to the amount of the loss caused by or
863	resulting from the covered peril.
864	Section 9.  Section 627.706, Florida Statutes, is amended
865	to read:
866	627.706  Sinkhole insurance; definitions.--
867	(1)  Every insurer authorized to transact property
868	insurance in this state shall make available coverage for
869	insurable sinkhole losses on any structure, including contents
870	of personal property contained therein, to the extent provided
871	in the form to which the sinkhole coverage attaches.
872	(2)  As used in this section and s. 627.7065, and as used
873	in connection with any policy providing coverage for sinkhole
874	losses:
875	(a)  "Sinkhole" means a landform created by subsidence of
876	soil, sediment, or rock as underlying strata are dissolved by
877	ground water. A sinkhole may form by collapse into subterranean
878	voids created by dissolution of limestone or dolostone or by
879	subsidence as these strata are dissolved.
880	(b)  "Sinkhole loss" means structural damage to a the
881	building caused by sinkhole activity. Contents coverage shall
882	apply only if there is structural damage to the building caused
883	by sinkhole activity. Building coverage shall apply only to the
884	reasonable costs to stabilize the land and building if necessary
885	and to repair the damage to the foundation, subject to the
886	coverage and terms of the policy.
887	(c)(3)  "Sinkhole activity loss" means actual physical
888	damage to the covered property covered arising out of or caused
889	by sudden settlement or collapse of the earth supporting such
890	property only when such settlement or collapse results from
891	movement or raveling of soils, sediments, or rock materials from
892	the surface into subterranean voids created by the effect action
893	of water on a limestone or similar rock formation.
894	(3)(4)  Every insurer authorized to transact property
895	insurance in this state shall make a proper filing with the
896	office for the purpose of extending the appropriate forms of
897	property insurance to include coverage for insurable sinkhole
898	losses.
899	Section 10.  Section 627.7065, Florida Statutes, is created
900	to read:
901	627.7065  Database of information relating to sinkholes;
902	the Department of Financial Services and the Department of
903	Environmental Protection.--
904	(1)  The Legislature finds that there has been a dramatic
905	increase in the number of sinkholes and insurance claims for
906	sinkhole damage in the state during the past 10 years.
907	Accordingly, the Legislature recognizes the need to track
908	current and past sinkhole activity and to make the information
909	available for prevention and remediation activities. The
910	Legislature further finds that the Florida Geological Survey of
911	the Department of Environmental Protection has created a partial
912	database of some sinkholes identified in Florida, although the
913	database is not reflective of all sinkholes or insurance claims
914	for sinkhole damage. The Legislature determines that creating a
915	complete electronic database of sinkhole activity serves an
916	important purpose in protecting the public and in studying
917	property claims activities in the insurance industry.
918	(2)  The Department of Financial Services, including the
919	employee of the Division of Consumer Services designated as the
920	primary contact for consumers on issues relating to sinkholes,
921	and the Office of the Insurance Consumer Advocate shall consult
922	with the Florida Geological Survey and the Department of
923	Environmental Protection to implement a statewide automated
924	database of sinkholes and related activity identified in the
925	state.
926	(3)  Representatives of the Department of Financial
927	Services, with the agreement of the Department of Environmental
928	Protection, shall determine the form and content of the
929	database. The content may include standards for reporting and
930	investigating sinkholes for inclusion in the database and
931	requirements for insurers to report to the departments the
932	receipt of claims involving sinkhole loss and other similar
933	activities. The Department of Financial Services may require
934	insurers to report present and past data of sinkhole claims. The
935	database also may include information of damage due to ground
936	settling and other subsidence activity.
937	(4)  The Department of Financial Services may manage the
938	database or may contract for its management and maintenance. The
939	Department of Environmental Protection shall investigate reports
940	of sinkhole activity and include its findings and investigations
941	in the database.
942	(5)  The Department of Environmental Protection, in
943	consultation with the Department of Financial Services, shall
944	present a report of activities relating to the sinkhole
945	database, including recommendations regarding the database and
946	similar matters, to the Governor, the Speaker of the House of
947	Representatives, the President of the Senate, and the Chief
948	Financial Officer by December 31, 2005. The report may consider
949	the need for the Legislature to create an entity to study the
950	increase in sinkhole activity in the state and other similar
951	issues relating to sinkhole damage, including recommendations
952	and costs for staffing the entity. The report may include other
953	information, as appropriate.
954	(6)  The Department of Financial Services, in consultation
955	with the Department of Environmental Protection, may adopt rules
956	to implement the provisions of this section.
957	Section 11.  The Auditor General shall perform an
958	operational audit, as defined in s. 11.45(1), Florida Statutes,
959	of Citizens Property Insurance Corporation created under s.
960	627.351(6), Florida Statutes. The scope of the audit shall also
961	include:
962	(1)  An analysis of the corporation's infrastructure,
963	customer service, claims handling, accessibility of policyholder
964	information to the agent of record, take-out programs, take-out
965	bonuses, and financing arrangements.
966	(2)  An evaluation of costs associated with the
967	administration and servicing of the policies issued by the
968	corporation to determine alternatives by which costs can be
969	reduced, customer service improved, and claims handling
970	improved.
971	The audit shall contain policy alternatives for the Legislature
972	to consider. The Auditor General shall submit a report to the
973	Governor, the President of the Senate, and the Speaker of the
974	House of Representatives no later than February 1, 2006.
975	Section 12.  The board of governors of Citizens Property
976	Insurance Corporation created by section 627.351(6), Florida
977	Statutes, shall, by February 1, 2006, submit a report to the
978	President of the Senate, the Speaker of the House of
979	Representatives, the minority party leaders of the Senate and
980	the House of Representatives, and the chairs of the standing
981	committees of the Senate and the House of Representatives having
982	jurisdiction over matters relating to property and casualty
983	insurance. The report shall include the board's findings and
984	recommendations on the following issues:
985	(1)  The number of policies and the aggregate premium of
986	Citizens Property Insurance Corporation, before and after
987	enactment of this act, and projections for future policy and
988	premium growth.
989	(2)  Increases or decreases in availability of residential
990	property coverage in the voluntary market and the effectiveness
991	of this act in improving the availability of residential
992	property coverage in the voluntary market in the state.
993	(3)  The board's efforts to depopulate the corporation and
994	the willingness of insurers in the voluntary market to avail
995	themselves of depopulation incentives.
996	(4)  Further actions that could be taken by the Legislature
997	to improve availability of residential property coverage in the
998	voluntary and residual markets.
999	(5)  Actions that the board has taken to restructure the
1000	corporation and recommendations for legislative action to
1001	restructure the corporation, including, but not limited to,
1002	actions relating to claims handling and customer service.
1003	(6)  Projected surpluses or deficits and possible means of
1004	providing funding to ensure the continued solvency of the
1005	corporation.
1006	(7)  The corporation's efforts to procure catastrophe
1007	reinsurance to cover its projected 100-year probable maximum
1008	loss with specification as to what best efforts were made by the
1009	corporation to procure such reinsurance.
1010	(8)  Such other issues as the board determines are worthy
1011	of the Legislature's consideration.
1012	Section 13.  (1)  Section 2 of this act shall take effect
1013	on the same date that House Bill 1939 or similar legislation
1014	takes effect, if such legislation is adopted in the same
1015	legislative session or an extension thereof and becomes a law.
1016	(2)  Section 3 of this act shall take effect on the same
1017	date that House Bill 1939 or similar legislation takes effect,
1018	if such legislation is adopted in the same legislative session
1019	or an extension thereof and becomes a law.
1020	Section 14.  Except as otherwise provided herein, this act
1021	shall take effect July 1, 2005.

CODING: Words stricken are deletions; words underlined are additions.