florida hot topics & regulatory changes

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Florida Hot Topics&

Regulatory Changes2011 Gulf States Chapter Education Day

Atlanta, GeorgiaFriday, June 24, 2011

Katherine Scott Webb, Esq.Colodny, Fass, Talenfeld, Karlinsky & Abate, P.A.


DISCLAIMER

The materials in this presentation are intended to provide a general overview of the issues contained herein and are not intended nor should they be construed to provide specific legal or regulatory guidance or advice. If you have any questions or issues of a specific nature you should consult with appropriate legal or regulatory counsel to review the specific circumstances involved.


THE AGENDA State of the State 2011 Florida Legislative

Session Looking ahead Florida CAT Fund

Changes Questions


STATE OF THE STATE

Above: An aerial view of Florida’s Capitol


STATE OF THE STATE

Rick Scott, a Republican from Naples, was sworn in as Florida’s 45th Governor on January 4, 2011.

His investment of more than $73 million of his own money into the race ultimately proved to be the most expensive gubernatorial campaign in Florida’s history.

Florida Governor

Above: Florida Governor Rick Scott


STATE OF THE STATE“We’re gonna freeze all regulations. Regulation is killing jobs, the paperwork, the delay, the uncertainty, so we’re gonna freeze regulation and look at what we can roll back that doesn’t hurt consumers.”

--Governor Scott’s January 4, 2011 Inaugural Speech

Within an hour of his inauguration, Governor Scott issued Executive Order No. 11-01, which required “all agencies under the direction of the Governor to immediately suspend all rulemaking.”“Citizens has got to become the insurance of last resort, not he insurance of first resort.”

--Governor Scott, April 26, 2011


STATE OF THE STATE

Jeff Atwater, (R-Palm Beach), was elected as Florida’s Chief Financial Officer by a vote of over 57%, beating the Democratic nominee, former State Representative Loranne Ausley.

Having served as Florida Senate President during the two-year period prior to his election as CFO, he oversaw and was actively involved in the passage of a number of insurance-related bills.

Florida Cabinet

Right: Florida Chief Financial Officer Jeff Atwater


STATE OF THE STATE

Adam Putnam (R-Bartow), who had represented Florida’s 12th Congressional District since 2001, was elected as Florida Commissioner of Agriculture and Consumer Services by a vote of over 56%, beating Scott Maddox (D).

Pam Bondi (R-Tampa) was elected as Florida Attorney General by a vote of nearly 55%, beating Democratic nominee Dan Gelber.

Florida Cabinet

Above: Florida Attorney General Pam Bondi

Above: Florida Commissioner of Agriculture and Consumer Services Adam Putnam


STATE OF THE STATEFlorida Senate

Republicans hold a 2/3 majority in the Florida Senate.


STATE OF THE STATE

Florida Senate President Mike Haridopolos’ (R-Melbourne) presidency runs until 2012.

He was first elected to the Florida House of Representatives in 2000 and then to the Florida Senate in 2003.

On January 14, 2011, he officially announced his candidacy for the U.S. Senate against incumbent Democratic Senator Bill Nelson.

Florida Senate

Above: Florida Senate President Mike Haridopolos


STATE OF THE STATE

Florida House of Representatives

Republicans hold a 2/3 majority in the Florida House of Representatives.


STATE OF THE STATE

Speaker of the House Dean Cannon, a Republican from Winter Park, was re-elected to Florida’s 35th House District in 2011.

First elected to the House in 2004, he previously chaired the Finance & Tax Council and the Select Policy Council on Strategic Planning.

Florida House of Representatives

Right: Florida House Speaker Dean Cannon


2011 FLORIDA LEGISLATIVE SESSION

So what happened?



Property Insurance Legislation



NOW LAW

CS/CS/CS/SB 408 was signed into law on May 17, 2011.

“Cost Driver” Property Insurance BillsCS/CS/CS/SB 408 (CS/CS/HB 803)



Statute of Limitations Provides that an action for breach of property insurance contract must be brought within five years from date of loss.Definition of “Losses” Expands the definition of “losses” under the Florida Hurricane Catastrophe Fund (FHCF).

“Cost Driver” Property Insurance Bill



Insurance Capital Build-Up Incentive Program Allows insurers to renegotiate the terms of surplus

notes issued through the Insurance Capital Build-Up Incentive Program.

Minimum Capital and Surplus Increases surplus requirements for new insurers and

current residential property insurers.

“Cost Driver” Property Insurance Bill Cont’d



Public Adjusters Compensation for reopened or supplemental claims may not exceed 20 percent. Requires certain information to be contained in a public adjuster contract. The contract must also be submitted to the insurer within 30 days after execution.





Specifies that certain statements made in advertisements or solicitation material are deceptive or misleading.Provides that the insurer be allowed to obtain necessary information to investigate and respond to a claim.

19



Notice of Windstorm/Hurricane Claims A windstorm or hurricane claim, supplemental, or

reopened claim must be filed within three years from the date of damage.

Insurer Report Card Repeals Florida’s annual residential property insurer

report card.




Rates and Rate Filings Requires the Office of Insurance Regulation (Office) to

issue an approval or notice of intent to disapprove of a “file & use” filing within 90 days of submission.

Extends the moratorium on “use & file” rate increases to May 1, 2012.




“Cost Driver” Property Insurance Bill Cont’dUse of the Public ModelFees charged for private sector access and use of the public model shall be reasonable costs associated with the operation and maintenance of the model by the Office.Windstorm MitigationRepeals Florida’s Uniform Home Grading Scale.



Citizens Renames “High Risk Account” to the “Coastal

Account.” Limits Citizens-related public adjuster fees to

10%. Provides that Citizens policyholder surcharge is

payable upon cancellation, termination, renewal or issuance of a new policy within 12 months after imposition of the surcharge or the period of time necessary to collect.




Citizens Directs the Citizens’ Board to commission an

independent third-party consultant to review the costs and benefits of outsourcing.

All new or renewal Citizens’ policies issued on or after January 1, 2012 that cover sinkholes are restricted to dwellings.

Requires an acknowledgement to be signed by the applicant that he or she may be subject to surcharges if Citizens sustains a deficit.




Notice of Cancellation, Nonrenewal or Renewal Premium Changes the timeframe for notice of nonrenewal to 120 days. Requires Citizens to provide 45 days’ written notice of nonrenewal for policies to be assumed by authorized insurers. Insurers may cancel or nonrenew upon 45 days’ notice if the Office finds that early cancellation is necessary to protect the best interest of the public and the plan is approved.




“Cost Driver” Property Insurance Bill Cont’dProvides that a policy covering both a home and motor vehicle may be nonrenewed upon 90 days’ notice.Notice of Change in Policy TermsAllows insurers to provide a notice of change in policy terms, rather than a notice of renewal.



RCV/ACV For dwellings, allows the insurer to pay

actual cash value (ACV), less the deductible. Requires the insurer to pay replacement

cost value (RCV) without reservation or holdback if a total loss of a dwelling occurs.

Requires the insurer to offer RCV. If accepted, the insurer must offer a policy with and without a holdback.




Sinkholes Redefines “structural damage.” Provides that sinkhole claims must be

filed within 2 years after the policyholder knew, or reasonably should have known about the sinkhole loss.

Establishes new regulations on sinkhole testing.




“Cost Driver” Property Insurance Bill Cont’dRequires policyholders to enter into a contract for sinkhole repairs within 90 days and requires the repairs to be completed within 12 months. Provides that repairs must be in accordance with recommendations set forth in the insurer’s professional engineer’s report. If this report determines the repairs cannot be made within policy limits, the insurer must pay to complete repairs or tender policy limits.




A policyholder may not accept a rebate from any person performing repairs and no person making repairs may offer a rebate.Allows an insurer to nonrenew a policy if it has paid policy limits.Requires all parties to file a copy of the report with the county clerk of the court.



“Cost Driver” Property Insurance Bill Cont’dFinancial Insurance Guaranty Association (“FIGA”)Revises the definition of “covered claim.”Provides that FIGA may not pay attorneys’ fee or public adjuster fees in connection with sinkhole loss.



Commercial Deregulation BillsCS/CS/HB 99 (CS/CS/SB 178)

PASSED CS/CS/HB 99 passed in both the Senate and the House

and was signed by Governor Scott on June 17, 2011.



Commercial Deregulation Bills Changes requirements with respect to specified types

of records, information, and actuarial date related to rate changes, and requires records to be maintained for 2 years after the effective date of the rate changes.

Deletes authority for the Office to require all necessary information from an insurer in order to evaluate a rate change.



Workers’ Compensation and Insurer NotificationCS/HB 1087 (SB 1252)

PASSED CS/HB 1087 passed in both the House and Senate and

was signed by Governor Scott on June 17, 2011.



Workers’ Compensation and Insurer Notification Allows weekly compensation payments to be paid by a

prepaid card. Provides that assessment rates for the Special

Disability Trust Fund be included in workers’ compensation rate filings.

Requires managing general agents to hold funds collected for insurers in a bank insured by the Federal Deposit Insurance Corporation.



Workers’ Compensation and Insurer Notification Requires notice to policyholders that they are

agreeing to surplus lines coverage, which is not protected under Florida Insurance Guaranty Act.

Provides an exemption from the requirement to obtain a certificate of authority for an insurer domiciled outside of the U.S. and covering only persons who, at the time of issuance or renewal, are nonresidents of the U.S. The exempt insurer must disclose that the policy has not been approved by the Office.


2011 FLORIDA LEGISLATIVE SESSIONWorkers’ Compensation and Insurer

Notification Provides that an insurer cannot use the

same accountant for more than 5 consecutive years.

Increases civil and criminal penalties for motor vehicle fraud.

Requires that certain insurance information go to the registered agent of a corporation.



Workers’ Compensation and Insurer Notification Creates new exemptions to the licensure requirements for

service warranty entities. Premium audits for workers’ compensation would only be

available in certain circumstances. Changes the designated recipient of certain insurance policy

notices from the “named insured,” including all persons named on a policy, to the “first-named insured” as the primary contract for administrative matters on the policy.

Bars an applicant from receiving a license due to a felony conviction.



Surplus Lines BillsCS/CS/SB 1816 (CS/HB 1227)

NOW LAW CS/CS/SB was signed into law on May 26, 2011.



Surplus Lines Bill Changes the timeframe for submission of agent

affidavit and payment of surplus lines service fees from monthly to quarterly.

Requires that the surplus lines and IPC tax imposed by Florida as the home state must not exceed the tax rate where the risk or exposure is located.

Provides for tax and service fees to be based upon gross premium on multi-state surplus lines policies and independently procured coverage (“IPC”) when Florida is the home state.



Surplus Lines Bill Authorizes the Florida Department of Financial

Services (“DFS”) and the Office to enter into a cooperative reciprocal agreement with other states pursuant to the federal Nonadmitted and Reinsurance Reform Act of 2010.

Requires the Florida Surplus Lines Service Office (“FSLSO”) to implement such cooperative reciprocal agreements and collect the total tax imposed.



Surplus Lines Bill Requires the DFS to submit a report to the President

of the Senate and Speaker of the House, after executing a cooperative reciprocal agreement, detailing the terms.

The Legislature has discretion to review such agreement and if it determines the agreement is not in the best interest of the State, it is required to direct the CFO and the Office to withdraw from the agreement.



Failed Legislation CS/SB 1714 and CS/CS/HB 1243 – Relating to Citizens

Property Insurance Corporation. SB 1330 and CS/HB 885 – Relating to Residential

Property Insurance. CS/SB 1592 and HB 1187 – Relating to Civil Remedies

Against Insurers.



Failed Legislation Cont’d CS/SB 1694 and CS/HB 967 – Relating to Personal

Injury Protection Insurance (“Legal Fixes”). CS/SB 1930 and CS/HB 1411 – Relating to Motor

Vehicle Personal Injury Protection Insurance (“Anti-Fraud”).


LOOKING AHEAD


LOOKING AHEAD

Redistricting in 2012 Article III, Section 16(a) of the Florida Constitution: Based

on the decennial census (April 1, 2010), the Legislature is required, by a joint resolution during its Regular Session in the second year after the U.S. Census (2012) Regular Session), to apportion state legislative districts.

This year, the Legislature advanced the start date of the 2012 Regular Session to January 10, 2012 – 2 months earlier than usual.

Special Sessions may be called by either the Governor or the Legislature.


LOOKING AHEAD2012 Presidential Election Year

Republican National Convention in Tampa, Florida


FLORIDA CAT FUND CHANGES


FLORIDA CAT FUND CHANGESFlorida Hurricane Catastrophe Fund (FHCF)

Restructuring Draft FHCF Chief Operating Officer Jack Nicholson

anticipates proposing legislation for the 2012 Regular Session which would restructure the FHCF.

The legislation would stabilize the FHCF’s capacity and funding ability and provide a highly reliable product.

It was presented to the CAT Fund Advisory Council in response to the need to issue more bonds because of recently filed claims from the 2005 hurricane season.



Florida Hurricane Catastrophe Fund (FHCF) Restructuring Draft Cont’d

The legislation:• Reduces the limits of the FHCF mandatory

coverage layer;• Increases the participating insurer copay;• Increases insurer retention to $8 billion;• Increases the cash build-up factor; and• Reduces emergency assessment caps.



Florida Hurricane Catastrophe Fund (FHCF) Restructuring Draft Cont’d

The legislation also:• Terminates the Temporary Increase in Coverage

Limit Option;• Redefines “losses” for purposes of FHCF coverage;• Changes the name of the Florida Hurricane

Catastrophe Fund Finance Corporation; and• Removes obsolete language.


ANY QUESTIONS?


FOR MORE INFORMATION

For additional questions or comments, please contact:

Katherine Scott Webb, [email protected]

Direct: (850) 701-3103Tallahassee Office

215 South Monroe StreetSuite 701T

Tallahassee, Florida 32301Main: (850) 577-0398

www.cftlaw.com

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