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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
A bill to be entitled 1
An act relating to collateral protection insurance; 2
creating part XXII of ch. 627, F.S., entitled 3
"Collateral Protection Insurance"; creating s. 4
627.9901, F.S.; providing legislative purpose; 5
creating s. 627.9902, F.S.; providing applicability; 6
creating s. 627.9903, F.S.; defining terms; creating 7
s. 627.9904, F.S.; specifying requirements for 8
collateral protection insurance policy terms; 9
providing a restriction on insurance charges made to 10
mortgagors; creating s. 627.9905, F.S.; providing for 11
the calculation of collateral protection insurance 12
coverages and premiums; requiring certain excess 13
replacement cost coverage to be paid to the mortgagor; 14
prohibiting insurers from writing collateral 15
protection insurance having certain premium rates; 16
creating s. 627.9906, F.S.; specifying prohibited 17
practices by insurers and insurance agents relating to 18
collateral protection insurance; creating s. 627.9907, 19
F.S.; providing construction relating to 20
noncircumvention; creating s. 627.9908, F.S.; 21
providing requirements for t he delivery and contents 22
of policies or certificates of collateral protection 23
insurance; creating s. 627.9909, F.S.; specifying 24
requirements for the filing of policy forms and rates; 25
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
requiring certain insurers to file specified annual 26
reports with the Offi ce of Insurance Regulation; 27
providing construction; creating s. 627.9911, F.S.; 28
specifying the office's authority to enforce the 29
provisions of the part; specifying applicable 30
provisions for proceedings and for assessing 31
penalties; creating s. 627.9912, F.S .; authorizing the 32
Financial Services Commission to adopt rules; creating 33
s. 627.9913, F.S.; providing severability; providing 34
an effective date. 35
36
Be It Enacted by the Legislature of the State of Florida: 37
38
Section 1. Part XXII of chapter 627, Flori da Statutes, 39
consisting of ss. 627.9901 -627.9913, Florida Statutes, is 40
created and entitled "Collateral Protection Insurance." 41
Section 2. Section 627.9901, Florida Statutes, is created 42
to read: 43
627.9901 Purpose.—The purpose of this part is to: 44
(1) Promote the public welfare by regulating collateral 45
protection insurance on real property. 46
(2) Create a legal framework within which collateral 47
protection insurance on real property may be written in this 48
state. 49
(3) Help maintain the separation between the lenders and 50
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
servicers and the insurers and insurance agents. 51
(4) Minimize the possibility of unfair competitive 52
practices in the sale, placement, solicitation, and negotiation 53
of collateral protection insurance. 54
Section 3. Section 627.9902, Flor ida Statutes, is created 55
to read: 56
627.9902 Scope.— 57
(1) This part applies to insurers and insurance agents 58
engaged in any mortgage transaction involving collateral 59
protection insurance. 60
(2) All collateral protection insurance written in 61
connection with mortgaged real property, including manufactured 62
and mobile homes, is subject to the provisions of this part, 63
except: 64
(a) Insurance associated with mortgage loans or other 65
extensions of credit made primarily for business, commercial, or 66
agricultural purposes. 67
(b) Insurance offered by the lender or servicer and 68
elected by the mortgagor at the mortgagor's option. 69
(c) Insurance purchased by a lender or servicer on real 70
estate owned property. 71
(d) Insurance for which no specific charge is made to the 72
mortgagor or the mortgagor's account. 73
Section 4. Section 627.9903, Florida Statutes, is created 74
to read: 75
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627.9903 Definitions. —As used in this part, the term: 76
(1) "Affiliate" has the same meaning as in s. 624.10. 77
(2) "Collateral protection insura nce" has the same meaning 78
as in s. 624.6085, provided that for purposes of this part, the 79
term applies only to mortgaged real property and not to personal 80
property. 81
(3) "Individual collateral protection insurance" means 82
coverage for individual real prope rty evidenced by a certificate 83
of coverage under a master collateral protection insurance 84
policy or a collateral protection insurance policy for 85
individual real property. 86
(4) "Insurance agent" has the same meaning as the term 87
"agent" in s. 626.015. 88
(5) "Insurer" has the same meaning as in s. 624.03, 89
provided that for purposes of this part, the term is limited to 90
an insurer, or an affiliate of the insurer, authorized to issue 91
collateral protection insurance on mortgaged real property in 92
this state. 93
(6) "Investor" means a person or an entity, or an 94
affiliate thereof, holding a beneficial interest in loans 95
secured by real property. 96
(7) "Lapse" means the date on which a mortgagor has failed 97
to comply with a mortgage agreement's requirements to maintain 98
valid and sufficient insurance upon mortgaged real property. 99
(8) "Lender" means a person or an entity, or an affiliate 100
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thereof, making loans secured by an interest in real property. 101
(9) "Loss ratio" means the ratio of incurred losses to 102
earned premium. 103
(10) "Master collateral protection insurance policy" means 104
a group policy issued to a lender or servicer which provides 105
coverage for all loans in the lender's or servicer's loan 106
portfolio as needed. 107
(11) "Mortgage agreement" means the written document 108
setting forth an obligation or a liability of any kind secured 109
by a lien on real property and due from, owing by, or incurred 110
by a mortgagor to a lender on account of a mortgage loan, which 111
document includes the security agreement, the deed of trust, 112
other documents of similar effect, and any other document 113
incorporated by reference. 114
(12) "Mortgage loan" has the same meaning as in s. 115
494.001(25)(a). 116
(13) "Mortgagee" means a person who holds mortgaged real 117
property as security for repayment of a mortgage agreement. 118
(14) "Mortgagor" means a person who is obligated on a 119
mortgage loan pursuant to a mortgage agreement. 120
(15) "Real estate owned property" means property owned or 121
held by a lender or servicer as a result of a foreclosure under 122
the related mortgage agreement or acceptance of a deed in lieu 123
of foreclosure. 124
(16) "Replacement cost value" means the estimated cost to 125
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replace covered property at the time of loss or damage without 126
deduction for depreciation. Replacement cost value is not market 127
value but is the cost to replace covered property to its pre -128
loss condition. 129
(17) "Servicer" means a person or an entity, or an 130
affiliate thereof, contractually obligated to service one or 131
more mortgage loans for a lender or an investor. The term 132
includes an entity involved in subservicing arrangements. 133
Section 5. Section 627.9904, Florida Statutes, is created 134
to read: 135
627.9904 Term of insurance policy. — 136
(1) Collateral protection insurance must become effective 137
no earlier than the date of lapse of insu rance upon mortgaged 138
real property subject to the terms of a mortgage agreement or 139
any state or federal law requiring the same. 140
(2) Individual collateral protection insurance must 141
terminate on the earliest of the following dates: 142
(a) The date on which insurance acceptable under the 143
mortgage agreement becomes effective, subject to the mortgagor 144
providing sufficient evidence of such acceptable insurance. 145
(b) The date on which the applicable real property no 146
longer serves as collateral for a mortgage loa n pursuant to a 147
mortgage agreement. 148
(c) Such other date as specified by the individual policy 149
or certificate of insurance. 150
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(d) Such other date as specified by the lender or 151
servicer. 152
(e) The termination date of the policy. 153
(3) An insurance charge may not be made to a mortgagor for 154
collateral protection insurance before the effective date of the 155
collateral protection insurance or for a term longer than the 156
scheduled term of the collateral protection insurance. 157
Section 6. Section 627.9905, Florid a Statutes, is created 158
to read: 159
627.9905 Calculation of coverage and payment of premiums. — 160
(1) Any collateral protection insurance coverage, and the 161
subsequent calculation of premium, should be based upon the 162
replacement cost value of the property, whi ch is determined as: 163
(a) If known to the lender or servicer, the last known 164
coverage amount, which is the dwelling coverage amount set forth 165
in the most recent evidence of insurance coverage provided by 166
the mortgagee. The insurer shall inquire of the ins ured at least 167
once as to the last known coverage amount. If the insurer is 168
unable to obtain the last known coverage amount from the insured 169
or in another manner, the insurer may proceed according to 170
paragraph (b) or paragraph (c), as applicable. 171
(b) If the last known coverage amount is unknown, the 172
replacement cost of the property serving as collateral, as 173
calculated by the insurer, unless the use of replacement cost 174
for this purpose is prohibited by other state or federal law. 175
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(c) If the last known cov erage amount is unknown and the 176
replacement cost is not available or its use is prohibited by 177
other state or federal law, the unpaid principal balance of the 178
mortgage loan. 179
(2) In the event of a covered loss, any replacement cost 180
coverage provided by an insurer in excess of the unpaid 181
principal balance of the mortgage loan must be paid to the 182
mortgagor. 183
(3) An insurer may not write collateral protection 184
insurance for which the premium rate differs from that 185
determined by the schedules of the insurer on file with the 186
office as of the effective date of any such policy. 187
Section 7. Section 627.9906, Florida Statutes, is created 188
to read: 189
627.9906 Prohibited practices. — 190
(1) An insurer or insurance agent may not issue collateral 191
protection insurance on mortgaged property that the insurer or 192
insurance agent, or an affiliate thereof, owns, performs the 193
servicing for, or owns the servicing right to. 194
(2) An insurer or insurance agent may not compensate, 195
including through the payment of commissions to, a le nder, an 196
insurer, an investor, or a servicer on collateral protection 197
property insurance policies issued by the insurer. 198
(3) An insurer or insurance agent may not share collateral 199
protection insurance premium or risk with the lender, investor, 200
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or servicer that obtained the collateral protection insurance. 201
(4) An insurer or insurance agent may not offer contingent 202
commissions, profit sharing, or other payments dependent upon 203
profitability or loss ratios to any person affiliated with a 204
servicer or the insurer in connection with collateral protection 205
insurance. 206
(5) An insurer may not provide free or below -cost 207
outsourced services to lenders, investors, or servicers or 208
outsource its own functions to lenders, insurance agents, 209
investors, or servicers on an above-cost basis. 210
(6) An insurer or insurance agent may not make any 211
payments, including, but not limited to, the payment of expenses 212
to a lender, an insurer, an investor, or a servicer, for the 213
purpose of securing collateral protection insurance busines s or 214
related outsourced services. 215
Section 8. Section 627.9907, Florida Statutes, is created 216
to read: 217
627.9907 Noncircumvention. —This part may not be construed 218
to authorize an insurance agent or insurer solely underwriting 219
collateral protection insura nce to circumvent the requirements 220
of this part. Any requirement, limitation, or exclusion provided 221
in this part applies to an insurer or insurance agent involved 222
in collateral protection insurance. 223
Section 9. Section 627.9908, Florida Statutes, is cre ated 224
to read: 225
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627.9908 Evidence of coverage. —Collateral protection 226
insurance must be set forth in an individual policy or 227
certificate of insurance. A copy of the individual policy, 228
certificate of insurance, or other evidence of insurance 229
coverage must be mailed, first-class mailed, or delivered in 230
person to the last known address of the mortgagor, or delivered 231
in accordance with s. 668.50. Notwithstanding any other 232
information required by general law or by rule, the individual 233
policy or certificate of ins urance coverage must include all of 234
the following information: 235
(1) The address and identification of the insured 236
property. 237
(2) The coverage amount, or amounts if multiple coverages 238
are provided. 239
(3) The effective date of the coverage. 240
(4) The term of coverage. 241
(5) The premium charge for the coverage. 242
(6) Contact information for filing a claim. 243
(7) A complete description of the coverage provided. 244
Section 10. Section 627.9909, Florida Statutes, is created 245
to read: 246
627.9909 Filing, approval, and withdrawal of forms and 247
rates.— 248
(1) Except as otherwise provided in this part, all policy 249
forms and certificates of insurance to be delivered or issued 250
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for delivery in this state are subject to the applicable 251
provisions of s. 627.410, and t he schedules of premium rates 252
pertaining thereto are subject to the applicable provisions of 253
s. 627.062. 254
(2) With respect to any analysis of rates in accordance 255
with s. 627.062(1), the analysis must also include a 256
determination as to whether expenses inc luded by the insurer in 257
the rate are appropriate. 258
(3) Notwithstanding s. 627.0645, insurers subject to this 259
part shall refile collateral protection property insurance rates 260
at least once every 4 years. 261
(4) All insurers writing collateral protection ins urance 262
shall have separate rates for collateral protection insurance 263
and voluntary insurance obtained by a mortgage servicer on real 264
estate owned property. 265
(5) Upon the introduction of a new collateral protection 266
insurance program, the insurer shall refe rence its experience in 267
existing programs in the associated filings. This part does not 268
limit an insurer's discretion, as actuarially appropriate, to 269
distinguish different terms, conditions, exclusions, eligibility 270
criteria, or other unique or different ch aracteristics. 271
Moreover, an insurer may, where actuarially acceptable, rely 272
upon models or, in the case of flood filings where applicable 273
experience is not credible, on National Flood Insurance Program 274
data. 275
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(6) By April 1 of each year, each insurer with at least 276
$100,000 in direct written premium for collateral protection 277
insurance in this state during the prior calendar year shall 278
report to the office the following information for the prior 279
calendar year: 280
(a) Actual loss ratio. 281
(b) Earned premium. 282
(c) Any aggregate schedule rating debit or credit to 283
earned premium. 284
(d) Itemized expenses. 285
(e) Paid losses. 286
(f) Loss reserves, including case reserves and reserves 287
for incurred but not reported losses. 288
289
The report must be separately produced for each collateral 290
protection insurance program and presented on both an 291
individual-jurisdiction and countrywide basis. 292
(7) Except in the case of collateral protection insurance 293
covering the peril of flood, to which this subsection does not 294
apply, if an insurer experiences an annual loss ratio of less 295
than 35 percent in any collateral protection insurance program 296
for 2 consecutive years, it must submit a rate filing, either 297
adjusting its rates or supporting their continuance, to the 298
office no more than 90 da ys after the submission of the data 299
required in paragraph (6)(f). 300
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(8) Except as specifically set forth in this section, rate 301
and form filing requirements are subject to the Florida 302
Insurance Code. 303
Section 11. Section 627.9911, Florida Statutes, is cr eated 304
to read: 305
627.9911 Enforcement; proceedings; penalties. —The office 306
has all rights and powers to enforce the provisions of this part 307
as provided by s. 624.307. All proceedings must be conducted in 308
accordance with chapter 120. Any penalty must be asse ssed in 309
accordance with s. 624.4211. 310
Section 12. Section 627.9912, Florida Statutes, is created 311
to read: 312
627.9912 Rulemaking. —The commission may adopt rules to 313
administer this part. 314
Section 13. Section 627.9913, Florida Statutes, is created 315
to read: 316
627.9913 Severability. —If any provision of this part or 317
its application to any person or circumstance is held invalid, 318
the invalidity does not affect other provisions or applications 319
of this part which can be given effect without the invalid 320
provision or application, and to this end the provisions of this 321
part are severable. 322
Section 14. This act shall take effect July 1, 2023. 323