CS/CS/HB 367 2025
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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 home and service warranty 2
association financial requirements; amending s. 3
634.3077, F.S.; revising the circumstances under which 4
home warranty associations are not required to set up 5
unearned premium reserves; revising the requirements 6
for certain contractual liability policies purchased 7
by home warranty associations; amending s. 634.406, 8
F.S.; revising the circumstances under which service 9
warranty associations are not required to establish 10
unearned premium reserves and are authorized to allow 11
their premiums to exceed specified ratios; revising 12
the requirements for certain contractual liability 13
policies purchased by service warranty associations ; 14
amending s. 634.414, F.S.; requiring service warranty 15
contracts that include coverage for certain accidental 16
damage to be covered by contractual liability 17
policies; providing exceptions; providing an effective 18
date. 19
20
Be It Enacted by the Legislature of the State of Florida: 21
22
Section 1. Subsection (3) of section 634.3077, Florida 23
Statutes, is amended to read: 24
634.3077 Financial requirements. — 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
(3) An association may not be required to set up an 26
unearned premium reserve if it has purchased contra ctual 27
liability insurance which demonstrates to the satisfaction of 28
the office that 100 percent of its claim exposure is covered by 29
such insurance. Such contractual liability insurance shall be 30
obtained from an insurer or insurers that hold a certificate o f 31
authority to do business within the state or from an insurer or 32
insurers approved by the office as financially capable of 33
meeting the obligations incurred pursuant to the policy or 34
policies. For purposes of this subsection, the contractual 35
liability policy or policies shall contain the following 36
provisions: 37
(a) In the event that the home warranty association is 38
unable to fulfill its obligation under its contracts issued in 39
this state for any reason, including insolvency, bankruptcy, or 40
dissolution, the contractual liability insurer or insurers will 41
pay losses and unearned premiums under such plans directly to 42
persons making claims under such contracts. 43
(b) The insurer or insurers issuing the policy or policies 44
shall assume full responsibility for the a dministration of 45
claims in the event of the inability of the association to do 46
so. 47
(c) The policy or policies may not be canceled or not 48
renewed by the insurer or insurers or the association unless 60 49
days' written notice thereof has been given to the of fice by the 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
insurer or insurers before the date of such cancellation or 51
nonrenewal. 52
(d) The contractual liability insurance policy or policies 53
shall insure all home warranty contracts that were issued while 54
the policy or policies were was in effect whether or not the 55
premium has been remitted to the insurer or insurers. 56
(e) The policy or policies may either pay 100 percent of 57
claims as they are incurred, or pay 100 percent of claims due in 58
the event of the association's failure to pay claims when due. 59
Section 2. Subsections (3) and (4), paragraphs (b) and (c) 60
of subsection (6), and paragraph (a) of subsection (7) of 61
section 634.406, Florida Statutes, are amended to read: 62
634.406 Financial requirements. — 63
(3) An association will not be required to establish an 64
unearned premium reserve if it has purchased contractual 65
liability insurance which demonstrates to the satisfaction of 66
the office that 100 percent of its claim exposure is covered by 67
such policy or policies. The contractual liability insurance 68
shall be obtained from an insurer or insurers that hold holds a 69
certificate of authority to do business within the state. For 70
the purposes of this subsection, the contractual liability 71
policy or policies shall contain the following provisions: 72
(a) In the event that the service warranty association 73
does not fulfill its obligation under contracts issued in this 74
state for any reason, including insolvency, bankruptcy, or 75
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dissolution, the contractual liability insurer or insurers will 76
pay losses and unearned premium refunds under such plans 77
directly to the person making a claim under the contract. 78
(b) The insurer or insurers issuing the contractual 79
liability policy or policies shall assume full responsibility 80
for the administration of claims in the event of the inability 81
of the association to do so. 82
(c) The policy or policies may not be canceled or not 83
renewed by either the insurer or insurers or the association 84
unless 60 days' written notice thereof has been given to the 85
office by the insurer or insurers before the date of such 86
cancellation or nonrenewal. 87
(d) The contractual liability insurance policy or policies 88
shall insure all service warranty contracts which were issued 89
while the policy or policies were was in effect whether or not 90
the premium has been remitted to the insurer or insurers. 91
(e) In the event the issuer or issuers of the contractual 92
liability policy or policies are is fulfilling the service 93
warranty covered by policy or policies and in the event the 94
service warranty holder cancels the service warranty, it is the 95
responsibility of the contractual liability policy issuer or 96
issuers to effectuate a full refund of unearned premium to the 97
consumer. This refund s hall be subject to the cancellation fee 98
provisions of s. 634.414. The salesperson or agent shall refund 99
to the contractual liability policy issuer or issuers the 100
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unearned pro rata commission. 101
(f) An association may not utilize both the unearned 102
premium reserve and contractual liability insurance 103
simultaneously. However, an association shall be allowed to have 104
contractual liability coverage on service warranties previously 105
sold and sell new service warranties covered by the unearned 106
premium reserve, and th e converse of this shall also be allowed. 107
An association must be able to distinguish how each individual 108
service warranty is covered. 109
(g) The policy or policies may either pay 100 percent of 110
claims as they are incurred, or pay 100 percent of claims due i n 111
the event of the association's failure to pay claims when due. 112
(4) No warrantor may allow its gross written premiums in 113
force to exceed a 7-to-1 ratio to net assets; however, a company 114
may exceed this requirement if : 115
(a) The company: 116
1.(a) Holds licenses issued pursuant to the provisions of 117
part I and this part ;, and 118
2.(b) Maintains net assets of at least $2.5 million ;, and 119
3.(c) Utilizes contractual liability insurance which 120
reimburses the service warranty association for 100 percent of 121
its paid claims;, and 122
(b)(d) The insurer or insurers issuing the contractual 123
liability insurance policy or policies maintain maintains a 124
policyholder surplus of at least $100 million and are is rated 125
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"A" or higher by A.M. Best Company. 126
(6) An association that holds a license under this part 127
may allow its premiums for service warranties written under this 128
part to exceed the ratio to net assets limitations of this 129
section if the association meets all of the following: 130
(b) Uses a contractual liability insurance policy or 131
policies approved by the office that: 132
1. Reimburse Reimburses the service warranty association 133
for 100 percent of their its claims liability and are is issued 134
by an insurer or insurers that maintain maintains a policyholder 135
surplus of at least $100 million; or 136
2. Comply Complies with subsection (3) and are is issued 137
by an insurer or insurers that maintain maintains a policyholder 138
surplus of at least $200 million. 139
(c) The insurer or insurers issuing the contractual 140
liability insurance policy or policies: 141
1. Are Is rated "A" or higher by A.M. Best Company or an 142
equivalent rating by another national rating service acceptable 143
to the office. 144
2. In conjunction with the warranty association's filing 145
of the quarterly and annual reports , provide provides, on a form 146
prescribed by the commission, a statement certifying the gross 147
written premiums in force reported by the warranty association 148
and a statement that all of the warranty association's gross 149
written premium in force is covered und er the contractual 150
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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
liability policy or policies, regardless of whether it has been 151
reported. 152
(7) An association licensed under this part and holding no 153
other license under part I or part II of this chapter is not 154
required to establish an unearned premium reserve or maintain 155
contractual liability insurance and may allow its premiums to 156
exceed the ratio to net assets limitation of this section if the 157
association complies with the following: 158
(a) The association or, if the association is a direct or 159
indirect wholly owned subsidiary of a parent corporation, its 160
parent corporation has, and maintains at all times, a minimum 161
net worth of at least $100 million and provides the office with 162
one of the following: 163
1. A copy of the association's annual audited finan cial 164
statements or the audited consolidated financial statements of 165
the association's parent corporation, prepared by an independent 166
certified public accountant in accordance with generally 167
accepted accounting principles, which clearly demonstrate the 168
net worth of the association or its parent corporation to be 169
$100 million and a quarterly written certification to the office 170
that such entity continues to maintain the net worth required 171
under this paragraph. 172
2. The association's, or its parent corporation' s, Form 173
10-K, Form 10-Q, or Form 20-F as filed with the United States 174
Securities and Exchange Commission or such other documents 175
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required to be filed with a recognized stock exchange, which 176
shall be provided on a quarterly and annual basis within 10 days 177
after the last date each such report must be filed with the 178
Securities and Exchange Commission, the National Association of 179
Security Dealers Automated Quotation system, or other recognized 180
stock exchange. 181
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Failure to timely file the documents required under this 183
paragraph may, at the discretion of the office, subject the 184
association to suspension or revocation of its license under 185
this part. 186
Section 3. Subsection (5) is added to section 634.414, 187
Florida Statutes, to read: 188
634.414 Forms; required provisions. — 189
(5) Each service warranty contract that includes coverage 190
for accidental damage from handling must be covered by the 191
contractual liability policy referred to in s. 634.406(3), 192
unless issued by an association not required to establish an 193
unearned premium reserve or maintain contractual liability 194
insurance under s. 634.406(7). 195
Section 4. This act shall take effect July 1, 2025. 196