STORAGE NAME: h0367b.COM
DATE: 3/14/2025
1
FLORIDA HOUSE OF REPRESENTATIVES
BILL ANALYSIS
This bill analysis was prepared by nonpartisan committee staff and does not constitute an official statement of legislative intent.
BILL #: CS/HB 367
TITLE: Home and Service Warranty Association
Financial Requirements
SPONSOR(S): Conerly
COMPANION BILL: CS/SB 282 (Truenow)
LINKED BILLS: None
RELATED BILLS: None
Committee References
Insurance & Banking
17 Y, 0 N, As CS
Commerce
SUMMARY
Effect of the Bill:
The bill allows both home warranty associations and service warranty associations to satisfy financial
requirements using one or more contractual liability insurance policies from multiple insurers rather than only
permitting a single contractual liability policy.
Additionally, the bill reduces the amount of information a service warranty association must file to document its
eligibility for an exemption from reserve or contracting requirements.
The bill specifies that contracts covering accidental damage from handling must be backed by a contractual liability
policy, except for associations exempt from reserve and insurance requirements under specific statutory
provisions.
Fiscal or Economic Impact:
None
JUMP TO SUMMARY ANALYSIS RELEVANT INFORMATION BILL HISTORY
ANALYSIS
EFFECT OF THE BILL:
The bill allows home warranty associations and service warranty associations to satisfy financial requirements
using one or more contractual liability insurance policies from multiple insurers. (Section 1 and 2).
Additionally, the bill allows a service warranty association to document its parent company's required net worth
by submitting one of the following, rather than both:
Audited financial statements, or
SEC filings (or equivalent forms from a recognized stock exchange). (Section 2).
The bill requires that all contracts providing coverage for accidental damage from handling be backed by a
contractual liability policy as referenced in existing law. However, an exception is made for associations that are
not required to establish an unearned premium reserve or maintain contractual liability insurance under specific
statutory provisions. (Section 3).
The effective date of the bill is January 1, 2026. (Section 4).
JUMP TO SUMMARY ANALYSIS RELEVANT INFORMATION BILL HISTORY
2
RELEVANT INFORMATION
SUBJECT OVERVIEW:
A warranty is an assurance that a manufacturer or seller makes about the condition of its product.
1 A warranty
means that a manufacturer or seller will replace or repair the product under certain instances. A warranty can be
either express or implied.
2
An express warranty is a verbal or written assurance for the product.
3 On the other hand, an implied warranty is an
unstated assurance that the product is made for its intended purpose.
4 An implied warranty is in addition to an
express warranty. However, an implied warranty may be negated or limited by an express warranty. There is no
implied warranty if a seller states that the product is “as is”, “with all faults”, or similar language.
5
The Office of Insurance Regulation (OIR)
Warranty associations and companies in Florida, including those associations selling home and service warranties,
and those companies selling motor vehicle service agreements, are regulated by the Office of Insurance Regulation
(OIR).
6 OIR regulates the insurance industry in Florida. OIR is responsible for the regulation of all activities in the
state concerning insurers and other risk bearing entities, including licensing, rates, policy forms, market conduct,
claims, issuance of certificates of authority, solvency, viatical settlements, premium financing, and administrative
supervision.
7
While warranties are not considered traditional insurance products, OIR regulates warranty associations and
companies similarly to the way in which it regulates insurers.
8 Home and service warranty associations must be
licensed by OIR
9 and must maintain certain minimum financial standards in order to do warranty business in
Florida.
10
Home Warranties
A home warranty is a contract or agreement between the homeowner and the issuing company, safeguarding the
homeowner from expenses related to the repair or replacement of structural components or appliances in the
home.
11 This protection extends to issues caused by normal wear and tear or defects in these components or
appliances.
12
Home warranty contracts or agreements can be drafted by a Home Warranty Association licensed under s.
634.303, F.S., or by an authorized insurance company permitted to offer coverage in this category.
13
1 s. 681.102(22), F.S.
2 45 Fla. Jur 2d Sales and Exchanges of Goods § 156.
3 “An express warranty is created by an affirmation of fact or promise made by the seller to the buyer that relates to the goods, by any
description of the goods that is made part of the basis of the bargain, or by any sample or model that is made part of the basis of the bargain.”
S. 672.313, F.S.
4 S. 672.314, F.S.
5 S. 672.316, F.S.
6 See ch. 634, F.S.
7 Florida Office of Insurance Regulation, Organization and Operation, https://floir.com/about-us/organization-and-
operation#:~:text=The%20Florida%20um%20financing%2C%20and%20administrative (last visited Feb. 28, 2025). See also s. 624.308, F.S.,
and R. 69O, et seq., F.A.C.]
8 See ch. 634, F.S.
9 Ss. 634.303 and 634.403, F.S. Neither the Florida Insurance Code nor this section grants permission for any home warranty association to
conduct insurance business beyond what is specifically defined as home warranty or to participate in any other form of insurance. Any
engagement in alternative insurance types requires explicit authorization through a certificate of authority issued by the office under the
provisions of the Florida Insurance Code. S. 634.325, F.S.
10 Ss. s. 634.3077, F.S. and 634.406, F.S.
11 S. 634.301(2), F.S.
12 Id.
13 S. 634.303, F.S. JUMP TO SUMMARY ANALYSIS RELEVANT INFORMATION BILL HISTORY
3
Service Warranty
A Service Warranty is a warranty, guarantee, extended warranty, or maintenance service contract lasting one year
or more that covers the cost of repair, replacement, or maintenance of a consumer product in exchange for a
premium payment.
14
A service warranty contract may be issued by a licensed Service Warranty Association, as authorized under S.
634.403, F.S., or by an insurance company authorized to provide this type of coverage.
15
Service warranty rates are not regulated or approved by the Florida Office of Insurance Regulation (OIR).
16 As
required by s. 634.414, F.S., every service agreement sold in Florida must include a written disclosure informing
consumers that the rate charged is not subject to OIR regulation.
17 This disclosure may be included in the service
agreement itself or provided separately at the time of purchase.
18
How Home and Service Warranty Associations Work in Florida
In Florida, companies that sell home warranties and service warranties are regulated under Ch. 634, and are
commonly referred to as warranty associations. These businesses collect fees from customers in exchange for
providing coverage and must comply with financial regulations to ensure they can pay claims when required.
To meet Florida’s financial requirements, warranty associations have two options:
1. Maintain an Unearned Premium Reserve
o A portion of the money collected from customers must be set aside in a reserve fund to cover future
claims.
19
2. Purchase Contractual Liability Insurance (CLI)
o Instead of maintaining a reserve, a warranty association can purchase a CLI from an insurer.
20
o CLI guarantees that if the warranty association is unable to fulfill its obligations (due to insolvency,
bankruptcy, or other financial issues), the insurer will cover the claims.
21
o CLI must be obtained from an insurer authorized to do business in Florida or approved by the OIR
as financially capable of covering obligations.
22
Financial Requirements for Home and Service Warranty Associations
To ensure warranty associations remain financially stable and capable of meeting their obligations to consumers,
Florida law imposes additional financial requirements.
Premium-to-Net-Assets Ratio
Warranty associations cannot have gross written premiums that exceed seven times their available assets
(a 7-to-1 ratio).
23
If a company exceeds this limit, it must meet stricter financial conditions, such as maintaining higher net
assets or purchasing CLI from an insurer with significant financial reserves.
24
Net Worth Requirements
Some warranty associations must maintain a minimum level of net assets to demonstrate financial
stability.
25
14 S. 634.401, F.S.
15 Consumer Services, Service Warranty Overview, https://myfloridacfo.com/division/consumers/understanding-insurance/service-
warranty-overview, (Last visited Feb. 18, 2025).
16 Id.
17 Id.
18 Id.
19 S. 634.3077(1), F.S., and S. 634.406(3), F.S.
20 S. 634.406(3), F.S.
21 S. 634.406(3)(a), F.S.
22 S. 634.406(3), F.S.
23 S. 634.406(4), F.S.
24 S. 634.406(4)(b), F.S.
25 S. 634.406(6)(a), F.S. JUMP TO SUMMARY ANALYSIS RELEVANT INFORMATION BILL HISTORY
4
Companies exceeding the 7-to-1 ratio must hold at least $750,000 in net assets and secure CLI from an
insurer with a policyholder surplus of at least $100 million or $200 million, depending on circumstances.
26
Exemptions for Large Companies
Warranty associations (or their parent companies) with a net worth of at least $100 million may be exempt
from maintaining an unearned premium reserve or purchasing CLI.
27
These companies must submit audited financial statements and regular financial reports to regulators to
prove they meet the exemption criteria.
28
BILL HISTORY
COMMITTEE REFERENCE ACTION DATE
STAFF
DIRECTOR/
POLICY CHIEF
ANALYSIS
PREPARED BY
Insurance & Banking
Subcommittee
17 Y, 0 N, As CS 3/5/2025 Lloyd Herrera
THE CHANGES ADOPTED BY THE
COMMITTEE:
requires that contracts covering accidental damage from handling must be backed
by contractual liability insurance, unless issued by an association exempt from the
applicable financial requirements.
Commerce Committee Lloyd Herrera
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THIS BILL ANALYSIS HAS BEEN UPDATED TO INCORPORATE ALL OF THE CHANGES DESCRIBED ABOVE.
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26 S. 634.406(6)(b), F.S.
27 S. 634.406(7)(a), F.S.
28 S. 634.406(7)(a)(1), F.S.