In the closing days of the 2010 regular session of the FloridaLegislature, the House and Senate reached agreement on a wide rangeof insurance issues. Some of the more ambitious initiatives, suchas rate deregulation for residential property insurance, did notsurvive, but the Legislature did pass several important proposals.Now that the dust has settled and all of the insurance bills passedduring the session have either been signed by the governor or awaithis decision, here is a quick summary.
Property Insurance Senate Bill 2044 includes several issues that were sought bythe Florida Office of Insurance Regulation (OIR), includingincreased surplus requirements and increased regulatory authorityover managing general agents and other affiliates. The bill alsocontains provisions sought by insurers, including restrictions onpublic adjusters. Among the more important provisions:

• The bill gives OIR moreauthority over insurer affiliates and managing general agents,including the power to examine any MGA as if it were an insurer,even if the MGA represents more than one insurer. The bill alsoincreases minimum surplus requirements for residential propertyinsurers.
• Public adjusters will besubject to new limits on commissions, solicitations of business,and contract terms, and will not be able to deny insurers access toclaimants or damaged property. In addition, windstorm and hurricaneclaims will have to be filed within three years after the date ofthe storm.
• When a policyholder makes aclaim under a replacement cost policy, the insurer will be able tohold back a portion of payment for dwelling losses and pay theremainder as work is performed. The insurer will still have to paythe full replacement costs for contents coverage without anyholdbacks.
• The bill sets standards forthe inspections that determine whether a property qualifies for ahurricane loss mitigation discount, including the requirement thatthe person who signs the inspection form must personally inspectthe property. It also provides that a base rate increase may bejustified when the total value of all mitigation discounts exceedsthe aggregate expected reduction in losses.
• The mandated reduction inthe area in which Citizens Property Insurance Corp. writeswindstorm-only policies is delayed for another two years, enablinginsurers to continue to write ex-wind policies in that area.
• The bill also makesseveral changes to how rates are made for property insurance,including an expansion of the types of costs that an insurer caninclude in a rate filing that is subject to expedited review. Theprohibition on implementing rates before they are approved by theInsurance Commissioner ("use and file" ratemaking), which wasscheduled to expire on Dec. 31, 2010, is extended for anotheryear.

Gov. Charlie Crist has until June 1 to sign SB 2044, veto it, orallow it to become law without his signature. If it becomes a law,it will take effect on July 1.

Senate Bill 1460 revises the Florida Hurricane Catastrophe Fund(Cat Fund) contract year. The 2010 bill was enacted in response tothe unintended consequences of 2009 legislation that changed thestart date of the fund's contract year from June 1 to January 1 andprovided for a contract period of seven months, beginning on June1, 2010, and ending on Dec. 31, 2010, to provide for a transitionalperiod. The accounting consequences of the transitional contract"year" resulted in a reduction to insurers' surplus. SB 1460restores the June 1-May 31 contract year and does away with thetransitional period.

The bill also requires insurers to execute their contracts withthe Cat Fund by March 1 and limits provisions that automaticallyexpand the amount of coverage provided by the fund to match growthin exposure. SB 1460 was approved by the governor on April 15 andtook effect on that date.
House Bill 7217 amends a provision relating to the Cat Fundemergency assessments. Under current law, medical malpracticeinsurance premiums are exempt from assessment, but the exemptionexpires on May 31, 2010. HB 7127 extends the exemption for anadditional three years. SB 2044 also includes this three-yearextension of the exemption. The governor has until June 1 to signHB 7127, veto it, or allow it to become law without his signature.If it becomes a law, it will take effect immediately.
Commercial Insurance Ratemaking Senate Bill 2176 deregulates ratemaking for most forms ofcommercial insurance other than workers' compensation. The billalso includes provisions addressing several other areas, includingwarranty associations, workers' compensation, health insurance, andlife insurance. An insurer will be able to implement rates for mostforms of commercial insurance without the approval of the OIR,provided that the insurer notifies the regulator of any ratechanges no later than 30 days after the effective date of thechange. The regulator may subsequently review the rates todetermine whether they are excessive, inadequate, or unfairlydiscriminatory. The affected lines of insurance include commercialmotor vehicle insurance covering a fleet of 20 or moreself-propelled vehicles, excess or umbrella coverage, surety andfidelity, boiler and machinery, errors and omissions, directors andofficers, intellectual property liability, advertising and Internetliability, property risks rated under a highly protected risksrating plan, and other similar commercial lines as determined bythe OIR. The governor has until June 1 to sign SB 2176, veto it, orallow it to become law without his signature. If it becomes a law,the commercial insurance rate deregulation provisions will takeeffect on Jan. 1, 2011.
Warranty Associations SB 2176 also substantiallyrevises laws governing motor vehicle service agreement companies,home warranty associations, and service warranty associations.Among other things, the bill eliminates required rate and formfilings for all three types of warranty associations, excludesnon-consumer commercial motor vehicle service agreements fromregulation, provides misdemeanor penalties for unlicensedactivities, reduces the number of required financial reports, andmakes examinations of warranty associations discretionary ratherthan mandatory. If SB 2176 becomes law, the provisions relating towarranty associations will take effect immediately.
Workers' Compensation House Bill 5603 addresses an issue that some workers'compensation carriers have identified as a major cost driver.According to the carriers, some pharmaceutical providers repackageor relabel drugs in an effort to avoid fee schedules. HB 5603provides that statutory limitations on reimbursement forprescription drugs apply regardless of the location or providerfrom which the claimant receives the medication. The governor hasuntil May 28 to sign HB 5603, veto it, or allow it to become lawwithout his signature. If it becomes a law, it will take effect onJuly 1, 2010.
SB 2176 includes several provisions relating to workers'compensation coverage of law enforcement officers. It provides thata deputy sheriff's off-duty work will not impact the employingsheriff's workers' compensation premiums. The bill also makescorrectional probation officers eligible for the samein-the-line-of-duty presumption relating to tuberculosis, heartdisease, and hypertension as currently apply to law enforcementofficers, correctional officers, and firefighters, and revises thepresumption so that the presumption will not apply when theemployee deviated from a prescribed course of treatment or delayedmaking a claim for benefits. If SB 2176 becomes a law, theseprovisions will take effect Jan. 1, 2011.
Senate Bill 2046 revises provisions governing licensure ofemployee leasing companies to remove certain restrictions on changeof ownership. SB 2046 also changes the sanctions for failure to paylate fees for license renewals. The failure to pay the late feewill now be grounds for disciplinary action, rather thanautomatically voiding the license. The governor has until June 1 tosign SB 2046, veto it, or allow it to become law without hissignature. If it becomes a law, it will take effect July 1,2010.
Guaranty Funds House Bill 159 revises various provisions relating to theFlorida Insurance Guaranty Association (FIGA), the Florida Life andHealth Insurance Guaranty Association (FLAHIGA), and the FloridaWorkers' Compensation Insurance Guaranty Association (FWCIGA).Several provisions of the bill are intended to make Florida'sguaranty fund laws more closely conform to National Association ofInsurance Commissioners (NAIC) model laws. The bill revises theprocess by which insurers may pass their FIGA assessment coststhrough to their policyholders. The bill also streamlines FIGA byconsolidating two auto insurance accounts into a singleaccount.
HB 159 increases several FLAHIGA coverage limits for deferredannuities while in the accumulation phase to $250,000, removes aprohibition that prevents agents and insurers from mentioningFLAHIGA protections to prospective policyholders, providescircumstances under which FLAHIGA may protect persons who are notFlorida residents, and excludes Medicare Advantage policies andseveral forms of indexed products from FLAHIGA coverage. The billalso excludes coverage under employers' liability policies fromFIGA and covers those claims under FWCIGA, up to the lesser of$300,000 or policy limits. HB 159 was approved by the governor onMay 11 and will take effect July 1, 2010.
Health Insurance House Joint Resolution 37 proposes an amendment to the FloridaConstitution that would add a section on health-care services tothe Declaration of Rights if approved by 60 percent of the votersin the 2010 general election.
The constitutional amendment provides that a law or rule may notdirectly or indirectly compel any person, employer, or health careprovider to participate in any health-care system. It also providesthat a person has the right to pay directly for health-careservices and that a health-care provider has the right to acceptdirect payment for health-care services. It further provides that,subject to "reasonable and necessary rules that do notsubstantially limit a person's options," the purchase or sale ofprivate health insurance may not be prohibited. These provisionsmay be superseded by a law passed by two-thirds of the membershipof each house of the legislature. If approved by the voters, theamendment will take effect January 4, 2011.
SB 2176 includes provisions allowing Medicare supplement insurersto use inpatient facility networks. Under the bill, a Medicaresupplement insurer may grant a premium credit to insureds who usean inpatient facility within the insurer's network. The bill alsoauthorizes insurers to enter into network agreements withfacilities that agree to waive the Medicare Part A deductible. IfSB 2176 becomes a law, these provisions will take effect Jan. 1,2011.
Life Insurance House Bill 885 amends several life insurance provisions. Thebill exempts certain transactions from the requirement that thecurrent insurer be notified of the replacement of a policy. Thenotice requirement will not apply in transactions involving anapplication to the current insurer when a contractual change orconversion privilege is being exercised, when a current contract isbeing replaced by the same insurer with regulatory approval, orwhen a term conversion privilege is being exercised among corporateaffiliates.
The bill also allows coverage of spouses and dependent childrenunder a group life insurance policy up to the full amount for whichthe employee is insured, prohibits creation of a class of employeesfor purposes of a group life policy that consists solely ofemployees covered under the employer's group health plan, andprohibits the sale or transfer to third parties of annuities thatwere obtained as part of a settlement to satisfy Medicare secondarypayer requirements. HB 885 was approved by the governor on May 11and took effect on that date.
SB 2176 also included a series of life insurance provisions knownas the "Safeguard Our Seniors Act." The bill revises disclosurerequirements for the sale of fixed or variable annuities andprovides a 21-day "free look" period for buyers who are 65 years ofage or older, instead of the 14-day period applicable to otherbuyers. It also prohibits surrender or deferred sales charges inexcess of 10 percent for annuity contracts sold to seniorconsumers, subject to some exceptions, and allows the Department ofFinancial Services to order an insurance agent to pay restitutionto a senior consumer who is the victim of misappropriation by theagent. In a provision not limited to senior consumers, the billincreases the penalties for willful violations of the prohibitionsagainst "twisting" and "churning" to $75,000 and removes therequirement that criminal penalties may be imposed only if theconduct was fraudulent. If SB 2176 becomes a law, these provisionswill take effect Jan. 1, 2011.
Thomas J. Maida is managing partner of the Tallahassee officeof Foley & Lardner LLP and Leonard E. Schulte is a publicaffairs director with the firm. Both are members of the firm'sinsurance industry team and government & public policypractice. They can be reached at 850-222-6100 or by e-mail at[email protected]or [email protected].www.foley.com.