The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Appropriations
BILL: CS/SB 1728
INTRODUCER: Banking and Insurance Committee and Senator Boyd
SUBJECT: Property Insurance
DATE: February 25, 2022
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Arnold/Knudson Knudson BI Fav/CS
2. Sanders Betta AEG Recommend: Fav/CS
3. Sanders Sadberry AP Pre-meeting
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 1728 addresses contractor solicitations related to property insurance roof claims, the type
of homeowners’ insurance coverage insurers must offer for roof losses, and various aspects of
Citizens Property Insurance Corporation (Citizens or corporation).
Property Insurance Claims for Roof Damage
The bill allows contractors to make written or electronic communications that encourage,
instruct, or induce a consumer to contact a contractor or public adjuster for the purpose of
making an insurance claim for roof damage if such communication includes the following
disclosures:
The consumer is responsible for payment of any insurance deductible;
It is insurance fraud punishable as a felony of the third degree for a contractor to pay, waive,
or rebate all or part of an insurance deductible applicable to payment to the contractor for
repairs to property covered by a property insurance policy; and
It is insurance fraud punishable as a felony of the third degree to intentionally file an
insurance claim containing any false, incomplete or misleading information.
The disclosures must be stated in a font size that is at least 12 points and at least half as large as
the largest font used in the solicitation. With this change, contractors will no longer be prohibited
from making such solicitations so long as the solicitation includes the aforementioned
disclosures.
REVISED: BILL: CS/SB 1728 Page 2
The bill allows residential property insurers to offer only homeowners’ insurance policies that
reimburse roof losses on a depreciated value or actual cash value basis using a roof surface type
reimbursement schedule, rather than on the basis of replacement costs. The bill thus creates an
exception to the requirement an insurer must offer a homeowners policy that reimburses losses to
the dwelling on the basis of replacement costs and also provides law and ordinance coverage,
and must also provide a replacement cost reimbursement homeowners’ policy that does not
provide law and ordinance coverage. Currently, insurers may offer homeowner’s insurance
policies with roof surface type reimbursement schedules approved by the Office of Insurance
Regulation (OIR), but must also offer policies that provide replacement cost reimbursement.
Additionally, the bill allows an insurer to issue homeowners’ policies that provide coverage to
the roof on a stated value basis. For example, instead of expressing the coverage in the form of a
depreciating percentage over time, the stated value clearly provides the dollar value of the
coverage of the roof.
A homeowners’ policy that utilizes a roof surface replacement schedule or provides roof
coverage on a stated value basis must provide replacement cost reimbursement for:
Any roof surface type less than 10 years old;
A covered total loss to a primary structure in accordance with the valued policy law; and
A loss to the roof caused by a storm declared to be a hurricane by the National Hurricane
Center.
Citizens Property Insurance Corporation
The bill increases the insurance expertise required of certain appointed members of the Citizens
Board of Governors and to require that the Citizens executive director must have the experience,
character and qualifications necessary to serve in that role for an insurer that has a certificate of
authority to transact insurance in Florida.
The bill limits the application of the Citizens “glidepath” to personal lines residential policies
covering an insured’s primary residence and any commercial lines residential policy.
“Glidepath” is the term commonly used to refer to the statutory limitation on rate increases that
may be imposed on an individual Citizens policyholder. The maximum rate increase that may be
imposed on any single policy, excluding coverage changes and surcharges, is 11 percent for
2022.
1
Other properties would be charged the actuarially indicated rate.
The bill provides whenever such an offer is received by a Citizens policyholder, the risk is not
eligible for Citizens coverage unless the premium for coverage from the authorized insurer is
more than 20 percent greater than the renewal premium for comparable coverage from Citizens.
Under current law, Citizens policyholders remain eligible for coverage unless the offer from an
authorized insurer is less than the policyholder’s Citizens renewal premium.
The bill has an indeterminate fiscal impact to state revenues and expenditures. See Section V.
Fiscal Impact Statement.
1
The maximum rate increase will increase by one percent for each subsequent year until it reaches 15 percent for 2026. BILL: CS/SB 1728 Page 3
The bill has an effective date of July 1, 2022.
II. Present Situation:
Florida Residential Property Insurance Market Data and CS/CS/CS/SB 76 (2021)
According to the Florida Office of Insurance Regulation (OIR), from 2017 through the second
quarter of 2021, Florida domestic property insurers had cumulative net underwriting losses that
resulted in a cumulative net income in excess of negative one billion dollars.
2
Prior to the 2021 Legislative Session, the OIR reported an increasing trend of domestic property
insurers filing for rate increases. Insurers submitted 105 rate filings in 2020 for increases of
10 percent or more, with the OIR approving 55 of those filings. In 2016, the OIR approved only
six rate increases of at least 10 percent.
3
In a presentation to the Florida Senate Committee on Banking and Insurance on January 12,
2021, the State Insurance Commissioner attributed the net underwriting losses, combined ratios,
and resulting rate increases displayed above to several related trends and behaviors present in
Florida’s domestic property insurance market:
Claims with litigation;
Claims solicitation; and
Adverse loss reserve development.
4
In 2020, the OIR conducted a data call of Florida’s domestic property insurers.
5
According to the
State Insurance Commissioner, the results of the data call showed the severity of non-weather
water claims with litigation is nearly double that of the claims that are closed without litigation.
6
According to the OIR, the increased severity of claims involving litigation is driving adverse loss
reserve development, leading to high rate filings.
7
Loss reserve development is the difference
between the original loss as initially reserved by the insurer and its subsequent evaluation later or
at the time of its final disposal.
8
When adverse loss reserve development occurs, the claim costs
more than its reserve was originally estimated by the insurer.
2
David Altmaier, Florida Office of Insurance Regulation, Overview of the Florida Insurance Market, pg. 6 (Sept. 22, 2021).
https://www.flsenate.gov/Committees/Show/BI/MeetingPacket/5252/9419_MeetingPacket_5252_2.pdf (last accessed
Jan. 30, 2022).
3
Florida Senate, Meeting of the Committee on Banking and Insurance (Jan. 12, 2021) (statement of David Altmaier,
Commissioner, Florida Office of Insurance Regulation).
4
Florida Senate, Meeting of the Committee on Banking and Insurance (Jan. 12, 2021) (statement of David Altmaier,
Commissioner, Florida Office of Insurance Regulation).
5
https://www.floir.com/Sections/PandC/AssignmentofBenefits.aspx (last visited Jan. 27, 2021).
6
Florida Senate, Meeting of the Committee on Banking and Insurance (Jan. 12, 2021) (statement of David Altmaier,
Commissioner, Florida Office of Insurance Regulation).
7
Florida Senate, Meeting of the Committee on Banking and Insurance (Jan. 12, 2021) (statement of David Altmaier,
Commissioner, Florida Office of Insurance Regulation)
8
International Risk Management Institute, Glossary, https://www.irmi.com/term/insurance-definitions/loss-development (last
visited Jan. 27, 2021). BILL: CS/SB 1728 Page 4
In response to the aforementioned challenges in Florida’s property insurance market, the 2021
Legislature passed CS/CS/CS/SB 76 (2021).
9
The bill addressed multiple aspects of the property
insurance market, including solicitations regarding roof claims, notice of bringing a civil action
in a property insurance dispute, attorney fee awards in first-party property insurance litigation,
and the eligibility standards and ratemaking of Citizens.
Property Insurance Practices by Contractors
The 2021 property insurance law attempted to address increases in roof claims by prohibiting
contractors, and persons acting on behalf of contractors, from:
Soliciting residential property owners through prohibited advertisements, which are
communications to a consumer that encourage, instruct, or induce a consumer to contact a
contractor to file an insurance claim for roof damage;
Offering the residential property owner consideration to perform a roof inspection or file an
insurance claim;
Offering or receiving consideration for referrals when property insurance proceeds are
payable;
Engaging in unlicensed public adjusting; and
Providing an authorization agreement to the insured without providing a good faith estimate.
The above acts are subject to license discipline by the Department of Business and Professional
Regulation and a $10,000 fine per violation. The law provides the residential property owner
may void the contract with the contractor within 10 days of its execution if the contractor fails to
provide notice to the residential property owner of the contractor’s prohibited practices.
The law prohibits licensed contractors and subcontractors from advertising, soliciting, offering to
handle, handling, or performing public adjuster (PA) services without a license. The prohibition
does not prohibit the contractor from recommending the consumer consider contacting his or her
insurer to determine if the proposed repair is covered by insurance.
The law prohibits a PA, PA apprentice, or person acting on behalf of a PA or PA apprentice,
from offering financial inducements for allowing a roof inspection of residential property or
making an insurance claim for roof damage. The law also prohibits them from offering or
accepting consideration for referring services related to a roof claim. Each violation subjects the
PA or PA licensee to up to a $10,000 fine. Unlicensed persons not otherwise exempted from PA
licensure commit the unlicensed practice of public adjusting when they do these prohibited acts,
and are subject to a $10,000 fine per act and the criminal penalty for unlicensed activity.
Regulations of Commercial Speech
The United States Supreme Court set forth the standards for analyzing whether a restriction on
commercial speech
10
violates the First Amendment of the United States Constitution in the case
of Central Hudson Gas & Elec. Corp. v. Public Service Commission of New York.
11
Justice
Powell succinctly set forth the standards.
9
Ch. 2021-77, Laws of Florida.
10
Commercial speech is expression related solely to the economic interests of the speaker and its audience.
11
447 U.S. 557 (1980). BILL: CS/SB 1728 Page 5
In commercial speech cases, then, a four-part analysis has developed. At
the outset, we must determine whether the expression is protected by the
First Amendment. For commercial speech to come within that provision, it
at least must concern lawful activity and not be misleading. Next, we ask
whether the asserted governmental interest is substantial. If both inquiries
yield positive answers, we must determine whether the regulation directly
advances the governmental interest asserted, and whether it is not more
extensive than is necessary to serve that interest.
12
The court explained in Central Hudson that if a law restricts commercial speech that address
speech that is not misleading or related to unlawful activity, the government’s power to regulate
such speech is limited:
If the communication is neither misleading nor related to unlawful
activity, the government's power is more circumscribed. The State must
assert a substantial interest to be achieved by restrictions on commercial
speech. Moreover, the regulatory technique must be in proportion to that
interest. The limitation on expression must be designed carefully to
achieve the State's goal. Compliance with this requirement may be
measured by two criteria. First, the restriction must directly advance the
state interest involved; the regulation may not be sustained if it provides
only ineffective or remote support for the government's purpose. Second,
if the governmental interest could be served as well by a more limited
restriction on commercial speech, the excessive restrictions cannot
survive.
Florida Courts have applied the Central Hudson test to determine whether government
restrictions on commercial speech violate article 1, section 4 of the Florida Constitution.
13
The United State Supreme Court in Zauderer v. Office of Disciplinary Counsel of the Supreme
Court of Ohio, noted state laws that require disclosures in advertising do not receive the same
degree of constitutional protection as a prohibition on commercial free speech.
Because the extension of First Amendment protection to commercial
speech is justified principally by the value to consumers of the information
such speech provides, appellant's constitutionally protected interest in not
providing any particular factual information in his advertising is minimal.
An advertiser's rights are adequately protected as long as disclosure
requirements are reasonably related to the State's interest in preventing
deception of consumers.
14
12
See Central Hudson Gas,, 447 US. 557 at pg. 565.
13
See Kortum v. Sink, 54 So.3d 1012 (Fla. 1st DCA, 2010).
14
Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626, at pg. 628 (1985). BILL: CS/SB 1728 Page 6
The United States Supreme Court (Court) used the Zauderer test to uphold disclosure
requirements in Milavetz, Gallop & Milavetz, P.A., v. U.S. In delivering the opinion of the Court,
Supreme Court Associate Justice Sonia Sotomayor upheld disclosure requirements placed by
federal law
15
upon debt relief agents that provide bankruptcy assistance for payment because,
“…the disclosures are intended to combat the problem of inherently misleading commercial
advertisements… [and] … entail only an accurate statement of the advertiser's legal status and
the character of the assistance provided.”
16
Federal Preliminary Injunction against Provisions of SB 76 Banning Prohibited
Advertisements
On July 11, 2021, a federal district court enjoined the enforcement of the provisions of
CS/CS/CS/SB 76 (2021) that ban contractors from making prohibited advertisements regarding
property insurance roof claims.
17
Within the law, a prohibited advertisement is any written or
electronic communication that encourages, instructs, or induces a consumer to contract a public
adjuster or contractor for purposes of making an insurance claim for roof damage. The
preliminary injunction prevents the enforcement of specific prohibitions in newly created
s. 489.147, F.S., specifically (2)(a), (3), and (4)(b), F.S. These provisions are:
(2)(a): A contractor may not directly or indirectly solicit a residential property owner by
means of a prohibited advertisement;
(3): A contractor who violates this section is subject to a disciplinary proceeding through
Department of Business and Professional Regulation (DBPR) under s. 489.129, F.S., and is
subject to a $10,000 fine for each violation; and
(4)(b): An unlicensed person who violates s. 489.147, F.S., is subject to the penalties in
s. 489.13, F.S., and is subject to a fine of up to $10,000 for each violation.
The judge issued the injunction on the basis that these provisions of the bill violate First
Amendment commercial free speech rights of contractors under the United States Constitution.
The injunction against (3) and (4)(b) above only apply to the prohibited advertisement provision.
The prohibitions in the s. 489.147, F.S., regarding roof claims that ban offering inducements to
consumers, accepting or paying referral fees, interpreting the insurance policy, or signing a
contract with a consumer for roof repairs without providing a good faith estimate remain valid
and enforceable.
The judge did not enjoin enforcement of the rest of the bill, thus the only provisions affected are
those mentioned above that were specifically addressed by the preliminary injunction order.
Replacement Cost and Actual Cash Value Loss Settlement Provisions
There are two primary settlement options available when purchasing a homeowner’s property
insurance policy: replacement cost and actual cash value. Replacement cost is usually defined in
the policy as the cost to repair or replace the damaged property with materials of like kind and
15
11 U.S.C. s. 528 (2006).
16
Milavetz, Gallop & Milavetz, P.A., v. U.S., 559 U.S. 229 at pg. 231 (2010).
17
Gale Force Roofing & Restoration, LLC v. Julie I. Brown, 2021 WL 3046800, Case No. 4:21CV246-MW/MAF (U.S.D.C.,
N.D. Fla., Tallahassee Division) (Order Granting Preliminary Injunction, July 11, 2021). BILL: CS/SB 1728 Page 7
quality, without any deduction for depreciation.
18
Replacement cost is designed to cover the
difference between what the property is actually worth and what it would cost to rebuild or repair
that property.
19
Following a covered loss, the insurer assumes the full cost of repairing or
replacing the damaged property.
20
By contrast, actual cash value is the cost to repair or replace the damaged property with material
of like kind and quality, minus the cost of depreciation due to use, wear, obsolescence, or age.
21
Following a covered loss, the insured assumes the cost to cover the difference between the
depreciated value of the damaged property and the cost of repairing or replacing it.
Florida law currently requires insurers writing homeowner’s property insurance policies to offer
adjustment to the dwelling, including the roof, on the basis of replacement cost.
22
The OIR will
approve policy forms that adjust roof losses on the basis of actual cash value, or the depreciated
value of the roof. The insurer must, however, also offer replacement cost adjustment on the roof
before issuing the policy.
Fannie Mae and Freddie Mac Minimum Insurance Requirements
The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage
Corporation (Freddie Mac) provide liquidity, stability, and affordability to the mortgage market
by buying mortgages from lenders and either holding the mortgages in their own portfolios or
packaging the mortgages into mortgage-based securities for purposes of selling in the secondary
mortgage market.
23
Fannie Mae and Freddie Mac, in turn, protect their interest in each mortgage
by requiring minimum insurance coverages and settlement on the basis of replacement cost.
24
Fannie Mae does not accept a property insurance policy that limits or excludes coverage, in
whole or in part, for windstorm, hurricane, hail damages, or any other perils that normally are
included under an extended coverage endorsement.
25
The borrower may not obtain a property
insurance policy that includes such limitation or exclusion unless the borrower is able to obtain a
separate policy or endorsement from another insurer that provides adequate coverage for the
limited or excluded peril, or from an insurance pool that the state has established to cover the
18
National Association of Insurance Commissioners, Glossary of Insurance Terms,
https://content.naic.org/consumer_glossary.htm (last visited Jan. 4, 2021).
19
See Trinidad v. Florida Peninsula Ins. Co., 121 So.3d 433, 438 (Fla. 2013) (quoting State Farm Fire & Cas. Co, v.
Patrick, 647 So.2d 983 (Fla. 3d DCA 1994))
20
Insureds that elect for adjustment on the basis of replacement cost receive greater coverage than adjustment on the basis of
actual cash value because depreciation is not excluded from replacement cost, whereas it is generally excluded from actual
cash value. See Trinidad at 438 (quoting Goff v. State Farm Florida Ins. Co., 999 So.2d 684, 689 (Fla. 2d DCA 2008))
21
National Association of Insurance Commissioner, Glossary of Insurance Terms,
https://content.naic.org/consumer_glossary.htm (last visited Jan. 4, 2021).
22
Section 627.7011(1), F.S.
23
Federal House Finance Agency, About Fannie Mae and Freddie Mac, https://www.fhfa.gov/about-fannie-mae-freddie-mac
(last visited Jan. 28, 2022).
24
Fannie Mae, Selling Guide: Fannie Mae Single Family (Dec. 15, 2021),
https://singlefamily.fanniemae.com/media/30286/display#page=905 (last visited Jan. 28, 2022); Freddie Mac, Minimum
Property Insurance Types and Amounts (November 4, 2020), https://guide.freddiemac.com/app/guide/section/4703.2 (last
visited Jan. 28, 2022).
25
See Fannie Mae, Selling Guide: Fannie Mae Single Family (Dec. 15, 2021),
https://singlefamily.fanniemae.com/media/30286/display#page=905 (last visited Jan. 28, 2022); Extended coverage must
include, at minimum, wind, hurricane, civil commotion (including riots), smoke, hail, and damages caused by aircraft,
vehicle, or explosion. Typhoon coverage is required for security properties located in Guam. BILL: CS/SB 1728 Page 8
limitation or exclusions.
26
For first-lien residential mortgages, Fannie Mae requires coverage
equal to the lesser of the following:
100 percent of the insurable value of the improvements, as established by the property
insurer; or
The unpaid principal balance of the mortgage, as long as it at least equals the minimum
amount (80 percent of the insurable value of the improvements) required to compensate for
damage or loss on a replacement cost basis.
27
Freddie Mac does not accept a property insurance policy that excludes coverage for loss or
damage from fire, lightning, and other perils, including windstorm, hail, explosion, riot, civil
commotion, damage by aircraft, damage by vehicles, and damage by smoke, covered within the
scope standard extended coverage.
28
The borrower may not obtain a property insurance policy
that includes such exclusion unless the borrower is able to obtain a separate policy or
endorsement from another insurer that provides adequate coverage for the limited or excluded
peril, or from an insurance pool the state has established to cover the limitation or exclusions.
29
For one-to-four unit residential properties, Freddie Mac requires coverage at least equal to the
higher of the following, not to exceed the replacement cost of the insurable improvements:
The unpaid principal balance of the mortgage; or
Eighty percent of the full replacement cost of the insurable improvements.
30
Roof Surface Payment Schedules
A roof surface payment schedule, sometimes referred to in residential property insurance policies
as a roof surfacing loss percentage table, is a depreciation table that states upfront, in either the
individual policy or endorsement, the cost the insurer will assume following a covered loss,
expressed as a percentage of the loss amount. The depreciation rates in a roof surface payment
schedule generally vary by the age of the roof and type of roof to account for differences in
estimated roof lifespans based on roof surface material type.
The roof surface payment schedule example below from Nevada demonstrates the variance in
depreciation rates between roof surface material type over time.
26
Id.
27
Id.
28
Freddie Mac, Minimum Property Insurance Types and Amounts (Nov. 4, 2020),
https://guide.freddiemac.com/app/guide/section/4703.2 (last visited Jan. 28, 2022).
29
Id.
30
Id. BILL: CS/SB 1728 Page 9
Roof Surface Payment Schedule
31
The percentages shown for the type of roofing surface are applied to all components and installation including
overhead, profit, labor, taxes, and fees associated with the replacement of the roofing system.
Age of
Roof in
Years
Roof Surface Material Type
Class 3 or 4
Impact
Resistant,
Synthetic,
Plastic, or
Architectural
Composition
Shingles
All Other
Composition
or Solar
Shingles
Wood
Shingles
or
Shakes
Metal
Shingles
or Panels
Concrete
Tile, Fiber
Cement
Tile, or
Clay Tile Slate
Built-up Tar With
or Without
Gravel, Rubber,
Membrane, or
Other Flat Roof
Surface
All
Other
Roof
Types
0 100% 100% 100% 100% 100% 100% 100% 100%
1 97% 96% 97% 98% 98% 99% 95% 95%
2 94% 92% 94% 96% 96% 98% 90% 90%
3 91% 88% 91% 94% 94% 97% 85% 85%
4 88% 84% 88% 92% 92% 96% 80% 80%
5 85% 80% 85% 90% 90% 95% 75% 75%
6 82% 76% 82% 88% 88% 94% 70% 70%
7 79% 72% 79% 86% 86% 93% 65% 65%
8 76% 68% 76% 84% 84% 92% 60% 60%
9 73% 64% 73% 82% 82% 91% 55% 55%
10 70% 60% 70% 80% 80% 90% 50% 50%
11 67% 56% 67% 78% 78% 89% 45% 45%
12 64% 52% 64% 76% 76% 88% 40% 40%
13 61% 48% 61% 74% 74% 87% 35% 35%
14 58% 44% 58% 72% 72% 86% 30% 30%
15 55% 40% 55% 70% 70% 85% ***** *****
16 52% 36% 52% 68% 68% 84%
17 49% 32% 49% 66% 66% 83%
18 46% 28% 46% 64% 64% 82%
19 43% ** 43% 62% 62% 81%
20 40% 40% 60% 60% 80%
21 37% 37% 58% 58% 79%
22 34% 34% 56% 56% 78%
23 31% 31% 54% 54% 77%
24 28% 28% 52% 52% 76%
25 * * 50% 50% 75%
26 48% 48% 74%
27 46% 46% 73%
28 44% 44% 72%
29 42% 42% 71%
30 *** *** ****
* 25 percent payable for 25 years or over; ** 25 percent payable for 19 years or over; *** 40 percent
payable for 30 years or over; **** 70 percent payable for 30 years or over; ***** 25 percent payable for
15 years or over
31
Nevada Division of Insurance, American Family Insurance Group – HO 88 02 01 14: Roof Surface Payment Schedule,
http://doi.nv.gov/uploadedFiles/doinvgov/_public-documents/Consumers/Home/American_Family/HO_88_02_01_14.pdf
(last visited Jan. 28, 2022). BILL: CS/SB 1728 Page 10
Valued Policy Law
Florida’s Valued Policy Law (VPL)
32
has been in effect since 1899
33
and requires the insurer to
set the value of the insured property in the event of a total loss.
34
The VPL originally applied to
damages caused by fire and lightning; however, in 1982, the Legislature extended VPL to all
covered perils under ch. 82-243, s. 539, L.O.F.
35
In the event of a total loss caused by a covered
peril, where the covered peril alone would have caused the loss, an insurer’s liability under a
property insurance policy equals the total coverage limit for which a premium was paid.
36
However, in the event of total loss caused in part by a covered peril and in part by a noncovered
peril, the insurer’s liability is limited to the amount of the loss caused by the covered peril.
37
Florida’s VPL currently applies to the total loss of buildings, structures, mobile homes, or
manufactured buildings located in Florida and insured as to a covered peril. While it does not
differentiate between residential and commercial property, it does not cover policies issued by
surplus lines insurers.
Citizens Property Insurance Corporation—Overview
Citizens Property Insurance Corporation (Citizens or corporation) is a state-created, not-for-
profit, tax-exempt governmental entity whose public purpose is to provide property insurance
coverage to those unable to find affordable coverage in the voluntary admitted market.
38
Citizens
is not a private insurance company.
39
Citizens was statutorily created in 2002 when the Florida
Legislature combined the state’s two insurers of last resort, the Florida Residential Property and
Casualty Joint Underwriting Association (RPCJUA) and the Florida Windstorm Underwriting
Association (FWUA).
Citizens operates in accordance with the provisions in s. 627.351(6), F.S., and is governed by an
eight member Board of Governors (board) that administers its Plan of Operations. The Plan of
Operations is reviewed and approved by the Financial Services Commission.
40
The Governor,
President of the Senate, Speaker of the House of Representatives, and Chief Financial Officer
each appoint two members to the board.
41
Citizens is subject to regulation by the Florida Office
of Insurance Regulation (OIR).
Citizens has three different accounts through which it offers property insurance: a personal lines
account, a commercial lines account, and a coastal account.
32
Section 627.702, F.S.
33
Florida Farm Bureau Cas. Ins. Co. v. Cox, 967 So. 2d 815, 818 (Fla. 2007).
34
Id.
35
Id. The Legislature amended the VPL in 2005 after Mierzwa v Florida Windstorm Underwriting Ass’n, 877 So.2d 774 (Fla.
4
th
DCA 2004) was released, “expressly providing that “when a loss was caused in part by a covered peril and in part by a
noncovered peril, paragraph (a) does not apply. In such circumstances, the insurer’s liability under this section shall be
limited to the amount of the loss caused by the covered peril. See s. 627.702(1)(b), F.S. (2005).”
36
Section 627.702(1)(a), F.S.
37
Section 627.702(1)(b), F.S.
38
Admitted market means insurance companies licensed to transact insurance in Florida.
39
Section 627.351(6)(a)1., F.S.
40
Section 627.351(6)(a)2., F.S.
41
Section 627.351(6)(c)4.a., F.S. BILL: CS/SB 1728 Page 11
Citizens’ Accounts
The Personal Lines Account (PLA) offers personal lines residential policies that provide
comprehensive, multi-peril coverage statewide, except for those areas contained in the Coastal
Account. The PLA also writes policies that exclude coverage for wind in areas contained within
the Coastal Account. Personal lines residential coverage consists of the types of coverage
provided to homeowners, mobile home owners, dwellings, tenants, and condominium unit
owner’s policies.
42
The Commercial Lines Account (CLA) offers commercial lines residential and non-residential
policies that provide basic perils coverage statewide, except for those areas contained in the
Coastal Account. The CLA also writes policies that exclude coverage for wind in areas contained
within the Coastal Account. Commercial lines coverage includes commercial residential policies
covering condominium associations, homeowners’ associations, and apartment buildings. The
coverage also includes commercial non-residential policies covering business properties.
43
The Coastal Account offers personal residential, commercial residential, and commercial non-
residential policies in coastal areas of the state. Citizens must offer policies that solely cover the
peril of wind (wind only policies) and may offer multi-peril policies.
44
The Citizens policyholder eligibility clearinghouse program was established by the Legislature
in 2013.
45
Under the program, new and renewal policies for Citizens are placed into the
clearinghouse where participating private insurers can review and decide to make offers of
coverage before policies are placed or renewed with Citizens.
46
Current Policies
As of December 31, 2021, Citizens reports 759,305 policies in-force with a total exposure of
$232,502,323,529.
47
The chart below outlines Citizens account and product type, number of
policies in-force, total exposure and premium with surcharges.
42
See s. 627.351(6)(b)2.a., F.S., and Account History and Characteristics, Citizens Property Insurance Corporation,
https://www.citizensfla.com/documents/20702/1183352/20160315+05A+Citizens+Account+History.pdf/31f51358-7105-
40e9-aa75-597f51a99563 (March 2016) (last visited Jan. 22, 2022).
43
Id.
44
Id.
45
Section 10, ch. 2013-60, L.O.F.
46
Section 627.3518(2)-(3), F.S.
47
Citizens Property Insurance, About Us, Snapshot, December 31, 2021, https://www.citizensfla.com/-/20211231-policies-in-
force (last visited Jan. 22, 2022). BILL: CS/SB 1728 Page 12
Account Product Line
Policies In-
Force
Total Exposure
Premium with
Surcharges
PLA Personal Residential Multiperil
(PR-M)
589,028 167,886,789,888 1,280,496,248
Coastal Personal Residential Multiperil
(PR-M)
98,105 23,245,226,192 278,331,349
Coastal Personal Residential Wind-Only
(PR-W)
67,342 28,784,726,623 178,916,825
Coastal Commercial Residential
Multiperil (CR-M)
111 592,392,383 2,789,952
Coastal Commercial Residential Wind-
Only (CR-W)
1,749 5,682,636,307 33,449,678
Coastal Commercial Non-Residential
Multiperil (CNR-M)
39 48,588,500 569,765
Coastal Commercial Non-Residential
Wind-Only (CNR-W)
2,212 1,837,291,826 23,692,614
CLA Commercial Residential
Multiperil (CR-M)
580 4,289,395,010 17,091,136
CLA Commercial Non-Residential
Multiperil (CNR-M)
139 135,276,800 879,248
Total 759,305 232,502,323,529 1,816,216,815
Source: Citizens Property Insurance
48
These numbers do not reflect policies tagged for takeout via Citizens’ depopulation program but
still serviced by Citizens.
49
From December, 2020 to December, 2021, Citizens’ policy count
grew by nearly 40 percent, adding 216,566 total policies in force.
50
Citizens has expressed it
expects to exceed one million policies in force in 2022.
51
Citizens Glidepath Rates
From 2007 until 2010, Citizens’ rates were frozen by statute at the level that had been
established in 2006. In 2010, the Legislature established a “glidepath” to impose annual rate
increases up to a level that is actuarially sound. Under the original established glidepath, Citizens
had to implement an annual rate increase which, except for sinkhole coverage, does not exceed
10 percent above the previous year for any individual policyholder, adjusted for coverage
changes and surcharges. In 2021, the Legislature revised this glidepath to increase it one percent
per year to 15 percent, as follows:
52
11 percent for 2022.
12 percent for 2023.
48
Id. This table does not include policies tagged for takeout via the Depopulation Program but still serviced by Citizens.
49
Id.
50
Citizens Property Insurance Corporation, Policies in Force, https://www.citizensfla.com/policies-in-force (last visited
Jan. 22, 2022).
51
Citizens Property Insurance Corporation, Press Release: Citizens Board approves 2022 rate recommendations
(December 15, 2021), available at https://www.citizensfla.com/-/20211215-citizens-board-approves-2022-rate-
recommendations.
52
Section 627.351(6)(n)5., F.S. BILL: CS/SB 1728 Page 13
13 percent for 2024.
14 percent for 2025.
15 percent for 2026 and all subsequent years.
The implementation of this increase ceases when Citizens has achieved actuarially sound rates.
53
In addition to the overall glide path rate increase, Citizens can increase its rates to recover the
additional reimbursement premium it incurs as a result of the annual cash build-up factor added
to the price of the mandatory layer of the Florida Hurricane Catastrophe Fund coverage, pursuant
to s. 215.555(5)(b), F.S.
54
Citizens Financial Resources
Citizens’ financial resources include insurance premiums, investment income, and operating
surplus from prior years, Florida Hurricane Catastrophe Fund (FHCF) reimbursements, private
reinsurance, policyholder surcharges, and regular and emergency assessments. Non-weather
water losses, reinsurance costs and litigation are currently the major determinants of insurance
rates.
55
In the event of a catastrophic storm or series of smaller storms, reserves could be
exhausted, leaving Citizens unable to pay all claims.
56
Under Florida law, if the Citizens’ Board
of Directors determines a Citizens’ account has a projected deficit, Citizens is authorized to levy
assessments
57
on its policyholders and on each line of property and casualty line of business
other than workers’ compensation insurance and medical malpractice insurance.
58
Citizens may
impose three assessment tiers and their sequence is as follows:
59
Citizens Policyholder Surcharge – A surcharge of up to 15 percent of premium on all Citizens'
policies, collected upon issuance or renewal. This 15 percent assessment can be levied for each
of the three Citizens’ accounts—the CLA, the PLA, and the Coastal Account— that project a
deficit. Thus, the total maximum premium surcharge a policyholder could be assessed is
45 percent.
60
Regular Assessment – If the Citizens’ surcharge is insufficient to cure the deficit for the coastal
account, Citizens can require an assessment against all other insurers except medical malpractice
and workers’ compensation. The assessment may be recouped from policyholders through a rate
filing process of up to two percent of premium or two percent of the deficit, whichever is
greater.
61
This assessment is not levied against Citizens’ policyholders.
53
Section 627.351(6)(n)7., F.S.
54
Section 627.351(6)(n)6., F.S.
55
Citizens Property Insurance Corporation, 2022 Rate Kit, Citizens 2021 Rates, Frequently Asked Questions,
https://www.citizensfla.com/documents/20702/15725518/20211213+2022+Rate+Kit.pdf/328181e5-1c41-a28d-76ea-
b7d911462c6a?t=1639433573548 (last visited Jan. 22, 2022).
56
Citizens Property Insurance Corporation, Insurance/Insurance 101/Assessments, https://www.citizensfla.com/assessments
(last visited Jan. 22, 2022).
57
Assessments are charges that Citizens and non-Citizens policyholders can be required to pay, in addition to their regular
policy premiums.
58
Accident and health insurance and policies written under the National Flood Insurance Program or the Federal Crop
Insurance Program are not assessable types of property and casualty insurance. Surplus lines insurers are not assessable, but
their policyholders are. Section 627.351.(6)(b)3.f.-h., F.S.
59
Citizens Property Insurance Corporation, supra note 56.
60
Sections 627.351.(6)(b)3.i.(I) and 627.351.(6)(c)21., F.S. See also, Citizens Property Insurance Corporation, supra note 56.
61
Section 627.351.(6)(b)3.a., F.S. BILL: CS/SB 1728 Page 14
Emergency Assessment – Requires any remaining deficit for Citizens’ three accounts be funded
by multi-year emergency assessments on all insurance policyholders (except medical malpractice
and workers’ compensation), including Citizens’ policyholders. This assessment may not exceed
the greater of 10 percent of the amount needed to cover the deficit, plus interest, fees,
commissions, required reserves, and other costs associated with financing the original deficit, or
10 percent of the aggregate statewide direct written premium for subject lines of business and all
accounts of the corporation for the prior year, plus interest, fees, commissions, required reserves,
and other costs associated with financing the deficit.
62
Eligibility for Insurance in Citizens
Current law requires Citizens to provide a procedure for determining the eligibility of a potential
risk for insurance in Citizens and provides specific eligibility requirements based on premium
amounts, value of the property insured, and the location of the property. Risks not meeting the
statutory eligibility requirements cannot be insured by Citizens. Citizens has additional eligibility
requirements set out in their underwriting rules. These rules are approved by the OIR and are set
out in Citizens’ underwriting manuals.
63
Eligibility Based on Premium Amount
An applicant for residential insurance cannot buy insurance in Citizens if an authorized insurer in
the private market offers the applicant insurance for a premium that does not exceed the Citizens
premium by 20 percent or more.
64
In addition, the coverage offered by the private insurer must
be comparable to Citizens’ coverage.
A residential policyholder cannot renew insurance in Citizens if an authorized insurer offers to
insure the property at a premium equal to or less than the Citizens’ renewal premium. The
insurance from the private market insurer must be comparable to the insurance from Citizens in
order for the eligibility requirement for renewal premium to apply.
65
Eligibility Based on Value of Property Insured
In addition to the eligibility restrictions based on premium amount, current law provides
eligibility restrictions for homes and condominium units based on the value of the property
insured.
66
Structures with a dwelling replacement cost of $700,000 or more, or a single
condominium unit that has a combined dwelling and contents replacement cost of $700,000 or
more, are not eligible for coverage with Citizens.
67
However, Citizens is allowed to insure
structures with a dwelling replacement cost or a condominium unit with a dwelling and contents
replacement cost of one million dollars or less in Miami-Dade and Monroe counties, after the
OIR determined these counties to be non-competitive.
68
62
Section 627.351(6)(b)3.d., F.S.
63
See Citizens Property Insurance Corporation Revised Underwriting Manuals, https://www.citizensfla.com/-/20160329-
revised-underwriting-manuals (last visited Jan. 22, 2022).
64
Section 627.351(6)(c)5., F.S.
65
Section 627.351(6)(c)5., F.S.
66
Section 627.351(6)(a)3., F.S.
67
Section 627.351(6)(a)3.d., F.S.
68
Office of Insurance Regulation, Final Order Case No: 165625-14 (Dec. 22, 2014), available at
https://www.floir.com/siteDocuments/Citizens165625-14-O.pdf) (last visited Jan. 22, 2022). See also BILL: CS/SB 1728 Page 15
Citizens Depopulation
Florida law requires Citizens to create programs to help return Citizens policies to the private
market and reduce the risk of additional assessments for all Floridians.
69
In 2016, the Legislature
passed requirements that Citizens, by January 1, 2017, amend its operations relating to takeout
agreements.
70
As part of these updated requirements, codified under s. 627.351(6)(ii), F.S., a
policy may not be taken out of Citizens unless Citizens:
Publishes a periodic schedule of cycles during which an insurer may identify, and notify
Citizens of, policies the insurer is requesting to take out;
71
Maintains and makes available to the agent of record a consolidated list of all insurers
requesting to take-out a policy; such list must include a description of the coverage offered
and the estimated premium for each take-out request; and
Provides written notice to the policyholder and the agent of record regarding all insurers
requesting to take-out the policy and regarding the policyholder’s option to accept a take-out
offer or to reject all take-out offers and to remain with the corporation. The notice must be in
a format prescribed by the corporation and include, for each take-out offer:
o The amount of the estimated premium;
o A description of the coverage; and
o A comparison of the estimated premium and coverage offered by the insurer to the
estimated premium and coverage provided by the corporation.
III. Effect of Proposed Changes:
Prohibition against Contractor Solicitations to Make Insurance Claims for Roof Damage
Section 1 amends s. 489.147(1)(a), F.S., to revise the definition of a prohibited advertisement,
which current law prohibits. The term is currently defined as any written or electronic
communication by a contractor which encourages, instructs, or induces a consumer to contact a
contractor or public adjuster, for making an insurance claim for roof damage. The bill revises the
definition by providing a prohibited advertisement means any such written or electronic
communication that does not include the following disclosures:
The consumer is responsible for payment of any insurance deductible;
It is insurance fraud punishable as a felony of the third degree for a contractor to pay, waive,
or rebate all or part of an insurance deductible applicable to payment to the contractor for
repairs to property covered by a property insurance policy; and
It is insurance fraud punishable as a felony of the third degree to intentionally file an
insurance claim containing any false, incomplete or misleading information.
The disclosures must be stated in a font size that is at least 12 points and at least half a large as
the largest font used in the solicitation.
Section 627.351(6)(a)3.d., F.S., and Citizens Property Insurance Corporation, Update to Maximum Coverage Limits,
November 12, 2019 https://www.citizensfla.com/-/2019-roof-permits-acceptable-for-fbc-credits.
69
Section 627.351(6)(q)3.a., F.S.
70
Chapter 2016-229, L.O.F.
71
Such requests from insurers must include a description of the coverage offered and an estimated premium and must be
submitted to the corporation in a form and manner prescribed by the corporation. BILL: CS/SB 1728 Page 16
With this change, contractors will no longer be prohibited from making such solicitations so long
as the solicitation includes the aforementioned disclosures.
Citizens Property Insurance Corporation
Section 2 amends s. 627.351(6), F.S., regarding Citizens Property Insurance Corporation
(Citizens or corporation), the governmental entity that provides residential and commercial
property insurance to applicants who are entitled, but, in good faith, are unable to procure
insurance through the voluntary market.
Eligibility for Citizens Coverage – Determining Replacement Cost
The bill amends s. 627.351(6)(a), F.S., to require that Citizens use a method for valuing dwelling
replacement cost, which is approved by the Office of Insurance Regulation (OIR), when
enforcing the requirement that structures and single condominium units with a replacement cost
above the statutory threshold are ineligible for Citizens. Currently, structures and single
condominium units with a replacement cost above $700,000 are ineligible for Citizens coverage
unless the dwelling or single condominium unit is located in a county where the OIR has
determined there is not a reasonable degree of competition. In a county where there is not a
reasonable degree of competition, which is currently Miami-Dade County and Monroe County,
structures and single condominium units are ineligible for Citizens if the replacement cost is one
million dollars or more.
The bill also deletes unnecessary language related to Citizens eligibility that ceased to be
effective on January 1, 2017.
Eligibility for Citizens Coverage – Existing Citizens Policyholders
The bill amends s. 627.351(6)(c)5., F.S., to increase the likelihood that a current Citizens
policyholder with a personal lines or commercial lines residential policy will be made ineligible
for Citizens by receiving an offer of coverage from an authorized insurer at renewal.
Specifically, the bill provides whenever such an offer is received by a Citizens policyholder, the
risk is not eligible for Citizens coverage unless the premium for coverage from the authorized
insurer is more than 20 percent greater than the renewal premium for comparable coverage from
Citizens. Thus, a current Citizens policyholder may not renew Citizens coverage if the
policyholder receives an offer of comparable coverage at renewal from an authorized insurer at a
premium that is not more than 20 percent higher than the Citizens renewal premium.
Section 3 of the bill amends s. 627.3518(5), F.S., to apply the revised eligibility criteria to
policies in the Citizens clearinghouse.
Governance of Citizens – Qualifications to Serve on the Board of Governors or as Executive
Director
The bill amends s. 627.351(6)(c)4., F.S., to increase the insurance expertise required of certain
appointed members of the Citizens Board of Governors (board) and to require executive director
of Citizens must have the qualifications necessary to serve in that role for an insurer that has a
certificate of authority to transact insurance in Florida. BILL: CS/SB 1728 Page 17
Under current law, at least one of the two members of the board appointed by each appointing
officer
72
must have “demonstrated expertise in insurance.” The bill specifies the demonstrated
expertise in insurance must be at least 10 years’ experience with property and casualty insurance
as a full-time employee, officer, or owner of a licensed insurance agency, an insurer authorized
to transact property insurance in Florida, or an insurance trade association.
The bill also specifies the executive director of Citizens must have the experience, character, and
qualification required under s. 624.404(3), F.S., to serve as the chief executive officer of an
insurer.
Section 624.404(3), F.S., contains a number of requirements a person must meet to be the chief
executive officer of an authorized insurer in Florida. The statute prohibits the OIR from
authorizing an insurer to transact insurance in Florida if the management, officers, or directors
are found by the OIR to be:
Incompetent or untrustworthy;
So lacking in insurance company managerial experience as to make the proposed operation
hazardous to the insurance buying public;
So lacking in insurance experience, ability, and standing as to jeopardize the reasonable
promise of success operation; or
A person the OIR has good reason to believe is affiliated directly or indirectly through
ownership, control, reinsurance transactions, or other insurance or business relations, with
any person or persons whose business operations are or have been marked, to the detriment
of policyholders or stockholders, or investors, or creditors or of the public, by manipulation
of assets, accounts, or reinsurance or by bad faith.
The OIR is also prohibited by s. 624.404(3), F.S., from authorizing an insurer who exercises or
has the ability to exercise control, or who influences or has the ability to influence the transaction
of the business of the insurer, does not possess the financial standing and business experience for
the successful operation of the insurer.
Under s. 624.404(3), F.S., an authorized insurer must immediately remove a person who
exercises, or has the ability to exercise, effective control of an insurer if such person:
Has been found guilty of, or has pleaded guilty or nolo contendere to, any felony or crime
punishable by imprisonment of one year or more of any state or country; or
Was in the past affiliated directly or indirectly, through ownership interest of 10 percent or
more, control, or reinsurance transactions, with any business, corporation, or entity that has
been found guilty of or plead nolo contendere to any felony or crime punishable by
imprisonment for one year or more under the laws of any state or country.
Under the bill, the executive director of Citizens would have be required to meet these
requirements.
72
The Governor, the Chief Financial Officer, the President of the Senate, and the Speaker of the House. BILL: CS/SB 1728 Page 18
Rates for Citizens Coverage – Narrowing the Scope of Application of the Citizens Glidepath
The bill amends s. 627.351(6)(n), F.S., which sets for the standards for Citizens rates. The bill
limits the application of the Citizens “glidepath” to personal lines residential policies covering an
insured’s primary residence and any commercial lines residential policy. “Glidepath” is the term
commonly used to refer to the statutory limitation on rate increases that may be imposed on an
individual Citizens policyholder. The maximum rate increase that may be imposed on any single
policy, excluding coverage changes and surcharges, is 11 percent for 2022.
73
This limit on rate
increases is notwithstanding the requirement that rates for Citizens coverage must be actuarially
sound and are subject to the standards of s. 627.062, F.S., of the Rating Law.
The bill defines a primary residence as the dwelling an insured has represented as their
permanent home on the insurance application or otherwise to the corporation. Thus, going
forward, a personal lines residential policy that does not cover a primary residence (for instance,
a second home) will have to pay an actuarially sound rate. The fiscal impact of this change on
policyholders and the corporation is examined in Section V, Fiscal Impact Statement below.
Citizens Clearinghouse
Section 3 of the bill amends s. 627.3518(5), F.S., to apply the revised eligibility criteria to
policies in the Citizens clearinghouse. Accordingly, if an offer of coverage from an authorized
insurer is received by a Citizens policyholder through the clearinghouse, the risk is not eligible
for Citizens coverage unless the premium for coverage from the authorized insurer is more than
20 percent greater than the renewal premium for comparable coverage from Citizens.
Reimbursement of Roof Losses – Actual Cash Value Reimbursement
Section 4 amends s. 627.7011(5), F.S., to allow residential property insurers to offer only
homeowners’ insurance policies (form HO-3) that reimburse roof losses on a depreciated value
or actual cash value basis using a roof surface type reimbursement schedule, rather than on the
basis of replacement costs. The bill thus creates an exception to the requirement an insurer must
offer a homeowners policy that reimburses losses to the dwelling on the basis of replacement
costs and also provides law and ordinance coverage, and must also provide a replacement cost
reimbursement homeowners’ policy that does not provide law and ordinance coverage.
Currently, insurers may offer homeowner’s insurance policies with roof surface type
reimbursement schedules approved by the OIR, but must also offer policies that provide
replacement cost reimbursement.
The bill requires that a roof surface type reimbursement schedule used to calculate the actual
cash value coverage that is provided for the roof must provide reimbursement for the repair,
replacement, and installation of a roof based on the annual age of the roof surface type. The
annual depreciation amounts must be actuarially justified, meet the requirements of s. 627.062,
F.S., (which governs homeowners’ insurance rate filings) and may not exceed four percent
unless actuarially justified. The roof surface type reimbursement schedule must be approved by
the OIR.
73
The maximum rate increase will increase by one percent for each subsequent year until it reaches 15 percent for 2026. BILL: CS/SB 1728 Page 19
Roof surface type reimbursement schedules must be furnished along with the personal lines
residential property insurance policy at the time of issuance or renewal, and must include the
following notice at the top of the schedule in no smaller than 12-point uppercase and boldfaced
type:
PLEASE DISCUSS WITH YOUR INSURANCE AGENT. YOU ARE
ELECTING TO PURCHASE COVERAGE ON YOUR ROOF
ACCORDING TO A ROOF SURFACE TYPE REIMBURSEMENT
SCHEDULE. IF YOUR ROOF IS DAMAGED BY A COVERED PERIL,
YOU WILL RECEIVE A PAYMENT AMOUNT FOR YOUR ROOF
ACCORDING TO THE SCHEDULE BELOW. BE ADVISED THIS
MAY RESULT IN YOUR HAVING TO PAY SIGNIFICANT COSTS
TO REPAIR OR REPLACE YOUR ROOF. PLEASE DISCUSS WITH
YOUR INSURANCE AGENT.
A homeowners’ policy that utilizes a roof surface replacement schedule must provide
replacement cost reimbursement for:
Any roof surface type less than 10 years old;
A covered total loss to a primary structure in accordance with the valued policy law; and
A loss to the roof caused by a storm declared to be a hurricane by the National Hurricane
Center.
The bill clarifies an insurer offering policies that provide roof coverage using a roof covering
reimbursement schedule may also offer policies that provide roof reimbursement on the basis of
replacement costs.
Reimbursement of Roof Losses – Stated Value Coverage
Additionally, the bill allows an insurer to issue homeowner’s policies that provide coverage to
the roof on a stated value basis. For example, instead of expressing the coverage in the form of a
depreciating percentage over time, the stated value clearly provides the dollar value of the
coverage of the roof. An insurer may limit its offering to the stated value coverage option, but
may also offer replacement cost coverage or a roof reimbursement schedule.
Notwithstanding the stated value of coverage, the homeowners’ policy must provide full
replacement cost reimbursement for:
Any roof surface type less than 10 years old;
A covered total loss to a primary structure in accordance with the valued policy law; and
A loss to the roof caused by a storm declared to be a hurricane by the National Hurricane
Center.
An insurer utilizing a stated value sublimit of coverage must include in the policy documents at
issuance and at renewal, in bold type of at least 12 points, the following statement:
PLEASE DISCUSS WITH YOUR INSURANCE AGENT. YOU ARE
ELECTING TO PURCHASE A STATED VALUE SUBLIMIT OF
COVERAGE ON YOUR ROOF. BE ADVISED THAT THIS MAY
RESULT IN YOU HAVING TO PAY SIGNIFICANT COSTS TO BILL: CS/SB 1728 Page 20
REPAIR OR REPLACE YOUR ROOF. PLEASE DISCUSS WITH
YOUR INSURANCE AGENT.
The bill clarifies an insurer offering policies that provide roof reimbursement at a stated value
sublimit of coverage may also offer policies that provide roof reimbursement on the basis of
replacement costs.
Other Bill Sections
Sections 5, 6, and 7 of the bill reenact certain sections of the Florida Statutes to incorporate the
amendments made by this bill.
Section 8 provides an effective date of July 1, 2022.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
None.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
None.
E. Other Constitutional Issues:
Section 1 of the bill revises the currently existing prohibition against contractors making
prohibited advertisements related to insurance claims for roof damage. Under the bill,
such communications are not prohibited if certain disclosures regarding insurance fraud
and property insurance deductibles are included in the advertisement. Background on
United States Supreme Court cases relevant to this topic is included on pages 4 through 6
of this Staff Analysis.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
None. BILL: CS/SB 1728 Page 21
B. Private Sector Impact:
The bill limits application of the Citizens glidepath on rates, which is the statutory
provision that provides that no single residential policy insured by Citizens may incur an
annual rate increase above a certain threshold – 11 percent in 2022, exclusive of coverage
changes and surcharges. Under the bill, the glidepath is applied to only primary
residences. Thus, Citizens will charge a premium based on an actuarially sound rate to
non-primary residences (such as second homes). According to the most recent Citizens
rate filing, the statewide average actuarially indicated rate for personal lines policies
would require an average rate increase of 34.9 percent.
74
Application of the glidepath
limit resulted in Citizens proposing an average rate increase of 8.6 percent for 2022.
75
Under the bill, an additional rate increase averaging 26.3 percent would be imposed on a
non-primary residences.
C. Government Sector Impact:
The provisions of the bill intended to depopulate Citizens – making current Citizens
policyholders ineligible for Citizens coverage upon receiving an offer from an authorized
insurer unless the premium is more than 20 percent higher than the Citizens renewal
premium, and limiting application of the Citizens glidepath – will result in Citizens
having a lower number of policies and collecting more premium from some
policyholders. To the extent that the bill reduces Citizens policy count or slows the
growth of the policy count, it will reduce the likelihood of Citizens running a deficit and
having to impose surcharges and assessments on policyholders.
VI. Technical Deficiencies:
None.
VII. Related Issues:
None.
VIII. Statutes Affected:
This bill substantially amends the following sections of the Florida Statutes: 489.147, 627.351,
627.3518, and 627.7011.
74
Citizens Property Insurance Corporation, 2022 Rate Kit, pg. 6 (Dec. 13, 2021).
https://www.citizensfla.com/documents/20702/15725518/20211213+2022+Rate+Kit.pdf/328181e5-1c41-a28d-76ea-
b7d911462c6a?t=1639433573548 (last visited Jan. 29, 2022).
75
See id. BILL: CS/SB 1728 Page 22
IX. Additional Information:
A. Committee Substitute – Statement of Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
CS by Banking and Insurance on February 2, 2022:
The committee substitute:
Removes the provisions related to Surplus Lines and public records exemptions in
s. 627.351, F.S, of the underlying bill; and
Makes a technical change restoring current law related to Citizens’ polices removed
from the corporation through an assumption agreement.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.