Florida Senate - 2025 CS for CS for SB 282 By the Committees on Rules; and Banking and Insurance; and Senator Truenow 595-02618-25 2025282c2 1 A bill to be entitled 2 An act relating to warranty associations; amending s. 3 634.3077, F.S.; revising the requirements of 4 contractual liability insurance policies; amending s. 5 634.406, F.S.; revising the requirements of 6 contractual liability insurance policies; revising the 7 circumstances under which certain service warranty 8 associations are not required to establish unearned 9 premium reserves or to maintain contractual liability 10 insurance and are authorized to allow their premiums 11 to exceed specified ratios; amending s. 634.414, F.S.; 12 requiring that contracts that include coverage for 13 accidental damage from handling be covered by a 14 specified policy; providing an exception; providing an 15 effective date. 16 17 Be It Enacted by the Legislature of the State of Florida: 18 19 Section 1.Subsection (3) of section 634.3077, Florida 20 Statutes, is amended to read: 21 634.3077Financial requirements. 22 (3)An association may not be required to set up an 23 unearned premium reserve if it has purchased contractual 24 liability insurance which demonstrates to the satisfaction of 25 the office that 100 percent of its claim exposure is covered by 26 such insurance. Such contractual liability insurance must shall 27 be obtained from an insurer or insurers that hold a certificate 28 of authority to do business within this the state or from an 29 insurer or insurers approved by the office as financially 30 capable of meeting the obligations incurred pursuant to the 31 policy or policies. For purposes of this subsection, the 32 contractual liability policy or policies must shall contain the 33 following provisions: 34 (a)In the event that the home warranty association is 35 unable to fulfill its obligation under its contracts issued in 36 this state for any reason, including insolvency, bankruptcy, or 37 dissolution, the contractual liability insurer or insurers will 38 pay losses and unearned premiums under such plans directly to 39 persons making claims under such contracts. 40 (b)The insurer or insurers issuing the policy or policies 41 shall assume full responsibility for the administration of 42 claims in the event of the inability of the association to do 43 so. 44 (c)The policy or policies may not be canceled or not 45 renewed by the insurer or insurers or the association unless 60 46 days written notice thereof has been given to the office by the 47 insurer or insurers before the date of such cancellation or 48 nonrenewal. 49 (d)The contractual liability insurance policy or policies 50 must shall insure all home warranty contracts that were issued 51 while the policy or policies were was in effect, regardless of 52 whether or not the premium has been remitted to the insurer or 53 insurers. 54 (e)The contractual liability insurance policy or policies 55 must either pay 100 percent of claims as they are incurred or 56 pay 100 percent of claims due in the event of the associations 57 failure to pay claims when due. 58 Section 2.Subsections (3) and (4), paragraphs (b) and (c) 59 of subsection (6), and paragraph (a) of subsection (7) of 60 section 634.406, Florida Statutes, are amended to read: 61 634.406Financial requirements. 62 (3)An association will not be required to establish an 63 unearned premium reserve if it has purchased contractual 64 liability insurance which demonstrates to the satisfaction of 65 the office that 100 percent of its claim exposure is covered by 66 such policy or policies. The contractual liability insurance 67 must shall be obtained from an insurer or insurers that hold 68 holds a certificate of authority to do business within the 69 state. For the purposes of this subsection, the contractual 70 liability policy or policies must shall contain the following 71 provisions: 72 (a)In the event that the service warranty association does 73 not fulfill its obligation under contracts issued in this state 74 for any reason, including insolvency, bankruptcy, or 75 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 must shall insure all service warranty contracts which were 89 issued while the policy or policies were was in effect 90 regardless of whether or not the premium has been remitted to 91 the insurer or insurers. 92 (e)In the event the issuer or issuers of the contractual 93 liability policy or policies are is fulfilling the service 94 warranty covered by policy or policies and in the event the 95 service warranty holder cancels the service warranty, it is the 96 responsibility of the contractual liability policy issuer or 97 issuers to effectuate a full refund of unearned premium to the 98 consumer. This refund is shall be subject to the cancellation 99 fee provisions of s. 634.414. The salesperson or agent shall 100 refund to the contractual liability policy issuer or issuers the 101 unearned pro rata commission. 102 (f)An association may not use utilize both the unearned 103 premium reserve and contractual liability insurance 104 simultaneously. However, an association is shall be allowed to 105 have contractual liability coverage on service warranties 106 previously sold and sell new service warranties covered by the 107 unearned premium reserve, and the converse of this is shall also 108 be allowed. An association must be able to distinguish how each 109 individual service warranty is covered. 110 (g)The contractual liability insurance policy or policies 111 must either pay 100 percent of claims as they are incurred or 112 pay 100 percent of claims due in the event of the associations 113 failure to pay claims when due. 114 (4)No warrantor may allow its gross written premiums in 115 force to exceed a 7-to-1 ratio to net assets; however, a company 116 may exceed this requirement if: 117 (a)The company: 118 1.(a)Holds licenses issued pursuant to the provisions of 119 part I and this part;, and 120 2.(b)Maintains net assets of at least $2.5 million;, and 121 3.(c)Uses Utilizes contractual liability insurance which 122 reimburses the service warranty association for 100 percent of 123 its paid claims;, and 124 (b)(d)The insurer or insurers issuing the contractual 125 liability insurance policy or policies maintain maintains a 126 policyholder surplus of at least $100 million and are is rated 127 A or higher by A.M. Best Company. 128 (6)An association that holds a license under this part may 129 allow its premiums for service warranties written under this 130 part to exceed the ratio to net assets limitations of this 131 section if the association meets all of the following: 132 (b)Uses a contractual liability insurance policy or 133 policies approved by the office that: 134 1.Reimburse Reimburses the service warranty association 135 for 100 percent of their its claims liability and are is issued 136 by an insurer or insurers that maintain maintains a policyholder 137 surplus of at least $100 million; or 138 2.Comply Complies with subsection (3) and are is issued by 139 an insurer or insurers that maintain maintains a policyholder 140 surplus of at least $200 million. 141 (c)The insurer or insurers issuing the contractual 142 liability insurance policy or policies: 143 1.Are Is rated A or higher by A.M. Best Company or an 144 equivalent rating by another national rating service acceptable 145 to the office. 146 2.In conjunction with the warranty associations filing of 147 the quarterly and annual reports, provide provides, on a form 148 prescribed by the commission, a statement certifying the gross 149 written premiums in force reported by the warranty association 150 and a statement that all of the warranty associations gross 151 written premium in force is covered under the contractual 152 liability policy or policies, regardless of whether it has been 153 reported. 154 (7)An association licensed under this part and holding no 155 other license under part I or part II of this chapter is not 156 required to establish an unearned premium reserve or maintain 157 contractual liability insurance and may allow its premiums to 158 exceed the ratio to net assets limitation of this section if the 159 association complies with the following: 160 (a)The association or, if the association is a direct or 161 indirect wholly owned subsidiary of a parent corporation, its 162 parent corporation has, and maintains at all times, a minimum 163 net worth of at least $100 million and provides the office with 164 one of the following: 165 1.A copy of the associations annual audited financial 166 statements or the audited consolidated financial statements of 167 the associations parent corporation, prepared by an independent 168 certified public accountant in accordance with generally 169 accepted accounting principles, which clearly demonstrate the 170 net worth of the association or its parent corporation to be 171 $100 million and a quarterly written certification to the office 172 that such entity continues to maintain the net worth required 173 under this paragraph. 174 2.The associations, or its parent corporations, Form 10 175 K, Form 10-Q, or Form 20-F as filed with the United States 176 Securities and Exchange Commission or such other documents 177 required to be filed with a recognized stock exchange, which 178 shall be provided on a quarterly and annual basis within 10 days 179 after the last date each such report must be filed with the 180 Securities and Exchange Commission, the National Association of 181 Security Dealers Automated Quotation system, or other recognized 182 stock exchange. 183 184 Failure to timely file the documents required under this 185 paragraph may, at the discretion of the office, subject the 186 association to suspension or revocation of its license under 187 this part. 188 Section 3.Subsection (5) is added to section 634.414, 189 Florida Statutes, to read: 190 634.414Forms; required provisions. 191 (5)All contracts that include coverage for accidental 192 damage from handling must be covered by the contractual 193 liability insurance policy or policies specified in s. 194 634.406(3), unless such coverage is issued by an association not 195 required to establish an unearned premium reserve or maintain 196 contractual liability insurance under s. 634.406(7). 197 Section 4.This act shall take effect July 1, 2025.