FL
Florida House Bill H0793

Florida 2023 Regular Session

Florida House Bill H0793 Compare Versions

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1010 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
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14+A bill to be entitled 1
1515 An act relating to collateral protection insurance; 2
1616 creating part XXII of ch. 627, F.S., entitled 3
1717 "Collateral Protection Insurance"; creating s. 4
1818 627.9901, F.S.; providing legislative purpose; 5
1919 creating s. 627.9902, F.S.; providing applicability; 6
2020 creating s. 627.9903, F.S.; defining terms; creating 7
2121 s. 627.9904, F.S.; specifying requirements for 8
2222 collateral protection insurance policy terms; 9
2323 providing a restriction on insurance charges made to 10
2424 mortgagors; creating s. 627.9905, F.S.; providing for 11
2525 the calculation of collateral protection insurance 12
2626 coverages and premiums; requiring certain excess 13
2727 replacement cost coverage to be paid to the mortgagor; 14
2828 prohibiting insurers from writing collateral 15
2929 protection insurance having certain premium rates; 16
3030 creating s. 627.9906, F.S.; specifying prohibited 17
3131 practices by insurers and insurance agents relating to 18
3232 collateral protection insurance; creating s. 627.9907, 19
3333 F.S.; providing construction relating to 20
3434 noncircumvention; creating s. 627.9908, F.S.; 21
3535 providing requirements for t he delivery and contents 22
3636 of policies or certificates of collateral protection 23
3737 insurance; creating s. 627.9909, F.S.; specifying 24
3838 requirements for the filing of policy forms and rates; 25
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4747 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
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4949
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5151 requiring certain insurers to file specified annual 26
5252 reports with the Offi ce of Insurance Regulation; 27
5353 providing construction; creating s. 627.9911, F.S.; 28
5454 specifying the office's authority to enforce the 29
5555 provisions of the part; specifying applicable 30
5656 provisions for proceedings and for assessing 31
5757 penalties; creating s. 627.9912, F.S .; authorizing the 32
5858 Financial Services Commission to adopt rules; creating 33
5959 s. 627.9913, F.S.; providing severability; providing 34
6060 an effective date. 35
6161 36
6262 Be It Enacted by the Legislature of the State of Florida: 37
6363 38
6464 Section 1. Part XXII of chapter 627, Flori da Statutes, 39
6565 consisting of ss. 627.9901 -627.9913, Florida Statutes, is 40
6666 created and entitled "Collateral Protection Insurance." 41
6767 Section 2. Section 627.9901, Florida Statutes, is created 42
6868 to read: 43
6969 627.9901 Purpose.—The purpose of this part is to: 44
7070 (1) Promote the public welfare by regulating collateral 45
7171 protection insurance on real property. 46
7272 (2) Create a legal framework within which collateral 47
7373 protection insurance on real property may be written in this 48
7474 state. 49
7575 (3) Help maintain the separation between the lenders and 50
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8484 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
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8686
8787
8888 servicers and the insurers and insurance agents. 51
8989 (4) Minimize the possibility of unfair competitive 52
9090 practices in the sale, placement, solicitation, and negotiation 53
9191 of collateral protection insurance. 54
9292 Section 3. Section 627.9902, Flor ida Statutes, is created 55
9393 to read: 56
9494 627.9902 Scope.— 57
9595 (1) This part applies to insurers and insurance agents 58
9696 engaged in any mortgage transaction involving collateral 59
9797 protection insurance. 60
9898 (2) All collateral protection insurance written in 61
9999 connection with mortgaged real property, including manufactured 62
100100 and mobile homes, is subject to the provisions of this part, 63
101101 except: 64
102102 (a) Insurance associated with mortgage loans or other 65
103103 extensions of credit made primarily for business, commercial, or 66
104104 agricultural purposes. 67
105105 (b) Insurance offered by the lender or servicer and 68
106106 elected by the mortgagor at the mortgagor's option. 69
107107 (c) Insurance purchased by a lender or servicer on real 70
108108 estate owned property. 71
109109 (d) Insurance for which no specific charge is made to the 72
110110 mortgagor or the mortgagor's account. 73
111111 Section 4. Section 627.9903, Florida Statutes, is created 74
112112 to read: 75
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121121 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
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123123
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125125 627.9903 Definitions. —As used in this part, the term: 76
126126 (1) "Affiliate" has the same meaning as in s. 624.10. 77
127127 (2) "Collateral protection insura nce" has the same meaning 78
128128 as in s. 624.6085, provided that for purposes of this part, the 79
129129 term applies only to mortgaged real property and not to personal 80
130130 property. 81
131131 (3) "Individual collateral protection insurance" means 82
132132 coverage for individual real prope rty evidenced by a certificate 83
133133 of coverage under a master collateral protection insurance 84
134134 policy or a collateral protection insurance policy for 85
135135 individual real property. 86
136136 (4) "Insurance agent" has the same meaning as the term 87
137137 "agent" in s. 626.015. 88
138138 (5) "Insurer" has the same meaning as in s. 624.03, 89
139139 provided that for purposes of this part, the term is limited to 90
140140 an insurer, or an affiliate of the insurer, authorized to issue 91
141141 collateral protection insurance on mortgaged real property in 92
142142 this state. 93
143143 (6) "Investor" means a person or an entity, or an 94
144144 affiliate thereof, holding a beneficial interest in loans 95
145145 secured by real property. 96
146146 (7) "Lapse" means the date on which a mortgagor has failed 97
147147 to comply with a mortgage agreement's requirements to maintain 98
148148 valid and sufficient insurance upon mortgaged real property. 99
149149 (8) "Lender" means a person or an entity, or an affiliate 100
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158158 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
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160160
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162162 thereof, making loans secured by an interest in real property. 101
163163 (9) "Loss ratio" means the ratio of incurred losses to 102
164164 earned premium. 103
165165 (10) "Master collateral protection insurance policy" means 104
166166 a group policy issued to a lender or servicer which provides 105
167167 coverage for all loans in the lender's or servicer's loan 106
168168 portfolio as needed. 107
169169 (11) "Mortgage agreement" means the written document 108
170170 setting forth an obligation or a liability of any kind secured 109
171171 by a lien on real property and due from, owing by, or incurred 110
172172 by a mortgagor to a lender on account of a mortgage loan, which 111
173173 document includes the security agreement, the deed of trust, 112
174174 other documents of similar effect, and any other document 113
175175 incorporated by reference. 114
176176 (12) "Mortgage loan" has the same meaning as in s. 115
177177 494.001(25)(a). 116
178178 (13) "Mortgagee" means a person who holds mortgaged real 117
179179 property as security for repayment of a mortgage agreement. 118
180180 (14) "Mortgagor" means a person who is obligated on a 119
181181 mortgage loan pursuant to a mortgage agreement. 120
182182 (15) "Real estate owned property" means property owned or 121
183183 held by a lender or servicer as a result of a foreclosure under 122
184184 the related mortgage agreement or acceptance of a deed in lieu 123
185185 of foreclosure. 124
186186 (16) "Replacement cost value" means the estimated cost to 125
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195195 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
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197197
198198
199199 replace covered property at the time of loss or damage without 126
200200 deduction for depreciation. Replacement cost value is not market 127
201201 value but is the cost to replace covered property to its pre -128
202202 loss condition. 129
203203 (17) "Servicer" means a person or an entity, or an 130
204204 affiliate thereof, contractually obligated to service one or 131
205205 more mortgage loans for a lender or an investor. The term 132
206206 includes an entity involved in subservicing arrangements. 133
207207 Section 5. Section 627.9904, Florida Statutes, is created 134
208208 to read: 135
209209 627.9904 Term of insurance policy. — 136
210210 (1) Collateral protection insurance must become effective 137
211211 no earlier than the date of lapse of insu rance upon mortgaged 138
212212 real property subject to the terms of a mortgage agreement or 139
213213 any state or federal law requiring the same. 140
214214 (2) Individual collateral protection insurance must 141
215215 terminate on the earliest of the following dates: 142
216216 (a) The date on which insurance acceptable under the 143
217217 mortgage agreement becomes effective, subject to the mortgagor 144
218218 providing sufficient evidence of such acceptable insurance. 145
219219 (b) The date on which the applicable real property no 146
220220 longer serves as collateral for a mortgage loa n pursuant to a 147
221221 mortgage agreement. 148
222222 (c) Such other date as specified by the individual policy 149
223223 or certificate of insurance. 150
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232232 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
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234234
235235
236236 (d) Such other date as specified by the lender or 151
237237 servicer. 152
238238 (e) The termination date of the policy. 153
239239 (3) An insurance charge may not be made to a mortgagor for 154
240240 collateral protection insurance before the effective date of the 155
241241 collateral protection insurance or for a term longer than the 156
242242 scheduled term of the collateral protection insurance. 157
243243 Section 6. Section 627.9905, Florid a Statutes, is created 158
244244 to read: 159
245245 627.9905 Calculation of coverage and payment of premiums. — 160
246246 (1) Any collateral protection insurance coverage, and the 161
247247 subsequent calculation of premium, should be based upon the 162
248248 replacement cost value of the property, whi ch is determined as: 163
249249 (a) If known to the lender or servicer, the last known 164
250250 coverage amount, which is the dwelling coverage amount set forth 165
251251 in the most recent evidence of insurance coverage provided by 166
252252 the mortgagee. The insurer shall inquire of the ins ured at least 167
253253 once as to the last known coverage amount. If the insurer is 168
254254 unable to obtain the last known coverage amount from the insured 169
255255 or in another manner, the insurer may proceed according to 170
256256 paragraph (b) or paragraph (c), as applicable. 171
257257 (b) If the last known coverage amount is unknown, the 172
258258 replacement cost of the property serving as collateral, as 173
259259 calculated by the insurer, unless the use of replacement cost 174
260260 for this purpose is prohibited by other state or federal law. 175
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269269 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
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273273 (c) If the last known cov erage amount is unknown and the 176
274274 replacement cost is not available or its use is prohibited by 177
275275 other state or federal law, the unpaid principal balance of the 178
276276 mortgage loan. 179
277277 (2) In the event of a covered loss, any replacement cost 180
278278 coverage provided by an insurer in excess of the unpaid 181
279279 principal balance of the mortgage loan must be paid to the 182
280280 mortgagor. 183
281281 (3) An insurer may not write collateral protection 184
282282 insurance for which the premium rate differs from that 185
283283 determined by the schedules of the insurer on file with the 186
284284 office as of the effective date of any such policy. 187
285285 Section 7. Section 627.9906, Florida Statutes, is created 188
286286 to read: 189
287287 627.9906 Prohibited practices. — 190
288288 (1) An insurer or insurance agent may not issue collateral 191
289289 protection insurance on mortgaged property that the insurer or 192
290290 insurance agent, or an affiliate thereof, owns, performs the 193
291291 servicing for, or owns the servicing right to. 194
292292 (2) An insurer or insurance agent may not compensate, 195
293293 including through the payment of commissions to, a le nder, an 196
294294 insurer, an investor, or a servicer on collateral protection 197
295295 property insurance policies issued by the insurer. 198
296296 (3) An insurer or insurance agent may not share collateral 199
297297 protection insurance premium or risk with the lender, investor, 200
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306306 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
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310310 or servicer that obtained the collateral protection insurance. 201
311311 (4) An insurer or insurance agent may not offer contingent 202
312312 commissions, profit sharing, or other payments dependent upon 203
313313 profitability or loss ratios to any person affiliated with a 204
314314 servicer or the insurer in connection with collateral protection 205
315315 insurance. 206
316316 (5) An insurer may not provide free or below -cost 207
317317 outsourced services to lenders, investors, or servicers or 208
318318 outsource its own functions to lenders, insurance agents, 209
319319 investors, or servicers on an above-cost basis. 210
320320 (6) An insurer or insurance agent may not make any 211
321321 payments, including, but not limited to, the payment of expenses 212
322322 to a lender, an insurer, an investor, or a servicer, for the 213
323323 purpose of securing collateral protection insurance busines s or 214
324324 related outsourced services. 215
325325 Section 8. Section 627.9907, Florida Statutes, is created 216
326326 to read: 217
327327 627.9907 Noncircumvention. —This part may not be construed 218
328328 to authorize an insurance agent or insurer solely underwriting 219
329329 collateral protection insura nce to circumvent the requirements 220
330330 of this part. Any requirement, limitation, or exclusion provided 221
331331 in this part applies to an insurer or insurance agent involved 222
332332 in collateral protection insurance. 223
333333 Section 9. Section 627.9908, Florida Statutes, is cre ated 224
334334 to read: 225
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343343 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
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345345
346346
347347 627.9908 Evidence of coverage. —Collateral protection 226
348348 insurance must be set forth in an individual policy or 227
349349 certificate of insurance. A copy of the individual policy, 228
350350 certificate of insurance, or other evidence of insurance 229
351351 coverage must be mailed, first-class mailed, or delivered in 230
352352 person to the last known address of the mortgagor, or delivered 231
353353 in accordance with s. 668.50. Notwithstanding any other 232
354354 information required by general law or by rule, the individual 233
355355 policy or certificate of ins urance coverage must include all of 234
356356 the following information: 235
357357 (1) The address and identification of the insured 236
358358 property. 237
359359 (2) The coverage amount, or amounts if multiple coverages 238
360360 are provided. 239
361361 (3) The effective date of the coverage. 240
362362 (4) The term of coverage. 241
363363 (5) The premium charge for the coverage. 242
364364 (6) Contact information for filing a claim. 243
365365 (7) A complete description of the coverage provided. 244
366366 Section 10. Section 627.9909, Florida Statutes, is created 245
367367 to read: 246
368368 627.9909 Filing, approval, and withdrawal of forms and 247
369369 rates.— 248
370370 (1) Except as otherwise provided in this part, all policy 249
371371 forms and certificates of insurance to be delivered or issued 250
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380380 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
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382382
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384384 for delivery in this state are subject to the applicable 251
385385 provisions of s. 627.410, and t he schedules of premium rates 252
386386 pertaining thereto are subject to the applicable provisions of 253
387387 s. 627.062. 254
388388 (2) With respect to any analysis of rates in accordance 255
389389 with s. 627.062(1), the analysis must also include a 256
390390 determination as to whether expenses inc luded by the insurer in 257
391391 the rate are appropriate. 258
392392 (3) Notwithstanding s. 627.0645, insurers subject to this 259
393393 part shall refile collateral protection property insurance rates 260
394394 at least once every 4 years. 261
395395 (4) All insurers writing collateral protection ins urance 262
396396 shall have separate rates for collateral protection insurance 263
397397 and voluntary insurance obtained by a mortgage servicer on real 264
398398 estate owned property. 265
399399 (5) Upon the introduction of a new collateral protection 266
400400 insurance program, the insurer shall refe rence its experience in 267
401401 existing programs in the associated filings. This part does not 268
402402 limit an insurer's discretion, as actuarially appropriate, to 269
403403 distinguish different terms, conditions, exclusions, eligibility 270
404404 criteria, or other unique or different ch aracteristics. 271
405405 Moreover, an insurer may, where actuarially acceptable, rely 272
406406 upon models or, in the case of flood filings where applicable 273
407407 experience is not credible, on National Flood Insurance Program 274
408408 data. 275
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417417 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
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421421 (6) By April 1 of each year, each insurer with at least 276
422422 $100,000 in direct written premium for collateral protection 277
423423 insurance in this state during the prior calendar year shall 278
424424 report to the office the following information for the prior 279
425425 calendar year: 280
426426 (a) Actual loss ratio. 281
427427 (b) Earned premium. 282
428428 (c) Any aggregate schedule rating debit or credit to 283
429429 earned premium. 284
430430 (d) Itemized expenses. 285
431431 (e) Paid losses. 286
432432 (f) Loss reserves, including case reserves and reserves 287
433433 for incurred but not reported losses. 288
434434 289
435435 The report must be separately produced for each collateral 290
436436 protection insurance program and presented on both an 291
437437 individual-jurisdiction and countrywide basis. 292
438438 (7) Except in the case of collateral protection insurance 293
439439 covering the peril of flood, to which this subsection does not 294
440440 apply, if an insurer experiences an annual loss ratio of less 295
441441 than 35 percent in any collateral protection insurance program 296
442442 for 2 consecutive years, it must submit a rate filing, either 297
443443 adjusting its rates or supporting their continuance, to the 298
444444 office no more than 90 da ys after the submission of the data 299
445445 required in paragraph (6)(f). 300
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454454 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
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456456
457457
458458 (8) Except as specifically set forth in this section, rate 301
459459 and form filing requirements are subject to the Florida 302
460460 Insurance Code. 303
461461 Section 11. Section 627.9911, Florida Statutes, is cr eated 304
462462 to read: 305
463463 627.9911 Enforcement; proceedings; penalties. —The office 306
464464 has all rights and powers to enforce the provisions of this part 307
465465 as provided by s. 624.307. All proceedings must be conducted in 308
466466 accordance with chapter 120. Any penalty must be asse ssed in 309
467467 accordance with s. 624.4211. 310
468468 Section 12. Section 627.9912, Florida Statutes, is created 311
469469 to read: 312
470470 627.9912 Rulemaking. —The commission may adopt rules to 313
471471 administer this part. 314
472472 Section 13. Section 627.9913, Florida Statutes, is created 315
473473 to read: 316
474474 627.9913 Severability. —If any provision of this part or 317
475475 its application to any person or circumstance is held invalid, 318
476476 the invalidity does not affect other provisions or applications 319
477477 of this part which can be given effect without the invalid 320
478478 provision or application, and to this end the provisions of this 321
479479 part are severable. 322
480480 Section 14. This act shall take effect July 1, 2023. 323