Overview
Whereas domestic insurers are regulated by Chapter 627 of the Florida Statutes, it was assumed that this chapter did not apply to surplus line insurers. Following two 2008 court rulings in Florida, which created an ambiguity as to how many surplus lines insurers are regulated in contrast to domestic insurers, in 2009 the Florida Legislature passed House Bill 853 during the 2009 Legislative Session, which was signed into law by Governor Charlie Crist.
Background
The two cases which promulgated the legislative intervention where Essex Insurance Company v. Zota, 985 So.2d 1036 and CNL Hotels & Resorts, Inc. v. Twin City Fire Ins. Co., 2008 WL 3823898 (11th Cir. 2008).
In Essex, the Florida Supreme Court interpreted a specific provision to mean that surplus lines insurers were exempt from the rate filing requirements contained in Part I of Chapter 627. While the court did not specifically find that any other parts of Chapter 627 applied to surplus lines insurers, its decision in Essex did leave open the possibility that surplus lines insurers may be subjected to the remaining parts of the statute.
In CNL Hotels, the U.S. Court of Appeals, Eleventh Circuit issued a ruling that imposed on surplus lines insurers the filing requirements of Fla. Stat. ?627.410, which is located in Part II of Chapter 627. In dispute was an insureraEUR(TM)s reliance on an endorsement contained within the policy that would have removed the loss from coverage. The Eleventh Circuit agreed that the endorsement would preclude coverage; however, citing Essex, the court also indicated that the exclusion may be void if the insurer failed to file the form with the Office of Insurance Regulation as required by Florida law. Prior to CNL Hotels, filings with the Office of Insurance Regulation by surplus lines insurers have not been required.
House Bill 853
When the 2009 Florida Legislative session convened on March 1, 2009, lawmakers had to address the issue as to whether surplus lines insurers were required to comply with the statutory requirements contained in Chapter 627. The passage of HB 853 restores surplus lines carriersaEUR(TM) exemption from the regulatory requirements of admitted carriers. The ruling in Essex, according to the National Association of Professional Surplus Lines Offices (NAPSLO), held surplus lines carriers were only exempt from the rating section of FloridaaEUR(TM)s Insurance Rates and Contracts statute.
The newly enacted bill states, aEURoeExcept as may be specifically stated to apply to surplus lines insurers, the provisions of [the statute] do not apply to surplus lines insurance authorized under...the Surplus Lines Law.aEUR?
Some notable changes enacted by HB 853 apply to policies issued on or after October 1, 2009, which are as follows:
Section 626.924 (2), Florida Statutes, requires surplus lines policies issued on or after October 1, 2009 to have stamped or printed on the face of the policy the following statement in at least 14-point, boldface type: SURPLUS LINES INSURERSaEUR(TM) POLICY RATES AND FORMS ARE NOT APPROVED BY ANY FLORIDA REGULATORY AGENCY.
Section 626.9374(1), Florida Statutes, requires surplus lines, personal lines residential property insurance policies issued on or after October 1, 2009, containing a separate hurricane or wind deductible to have on the face of the policy the following statement in at least 14-point, boldface type: THIS POLICY CONTAINS A SEPARATE DEDUCTIBLE FOR HURRICANE OR WIND LOSSES, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.
Section 626.9374 (2), Florida Statutes, requires surplus lines, personal lines residential property insurance policies issued on or after October 1, 2009, containing a coinsurance provision applicable to hurricane or wind losses to include the following statement on the face of the policy in 14-point, boldface type: THIS POLICY CONTAINS A CO-PAY PROVISION THAT MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.
Conclusion
House Bill 853 is viewed as an important clarification for surplus lines insurers. In a statement issued by Cecil Pearce, American Insurance Association (AIA) Vice President of State Affairs, aEURoePassage of this legislation is also a victory by insurers and the stateaEUR(TM)s business community over the trial bar, who saw the court decisions as an invitation to endless litigation against surplus lines insurers whose policies suddenly were required to meet requirements that had previously applied only to admitted insurers.aEUR?
For more information, please contact Alan Fiedel at alan.fiedel@wilsonelser.com. He can also be reached at our Miami office at 305.374.4400.
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This communication is for general guidance only and does not contain definitive legal advice.
(C) 2009 Wilson Elser Moskowitz Edelman & Dicker LLP. All rights reserved.
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