June 12, 2009
Written By Attorney: Susan T. Stead
Note: This article is an interpretation of current law and is offered for informational purposes only. This material is not legal advice and should not be construed or used as a substitute for the advice of an attorney.
Surplus lines carriers in Florida no longer have to worry that a court may declare policy provisions, exclusions and conditions to be invalid simply because the policy forms were not filed with the Florida Office of Insurance Regulation ("OIR"). On June 11, 2009, Governor Crist signed HB 853 which relieves the uncertainly and angst created by a recent line of cases. As most believed had been the case for years, surplus lines policies are now expressly exempted from the form filing and other requirements that have traditionally applied only to admitted carriers. The Florida Legislature also added new disclosure requirements for surplus lines policies.
The troubling effect of the recent court decisions was that the provisions in a policy issued by a surplus lines insurer may not be enforceable against the insured in a coverage dispute unless the policy had been filed with the OIR. See, Essex Insurance Company v. Zota, 985 So. 2d 1036 (Fla. 2008); CNL Hotels & Resorts, Inc. v. Twin City Fire Insurance Company, 2008 WL: 3823898 (11 C.A. Fla); The American Mutual Fire Insurance Company v. Illingworth, 213 So.2d 747 (Fla. App. 1968.
The bill expressly exempts policies that are issued in accordance with the state's surplus lines laws from Chapter 627 of the Florida Statutes, including form filing and approval requirements in that chapter. This is consistent with current industry practice and the OIR's position. The new provision was added to § 626.913, one of the laws governing surplus lines.
There are some new disclosure requirements imposed by the bill. Surplus lines polices issued on or after October 1, 2009, must show the following statement on the face of the policy: "SURLUS LINES INSURERS' POLICY RATES AND FORMS ARE NOT APPROVED BY ANY FLORIDA REGULATORY AGENCY." The law requires the statement to be in at least 14-point boldface type. The bill contains disclosure requirements for hurricane and wind deductibles and for co-pays. The required notices are similar but less detailed than those required of admitted carriers. A surplus lines policy that provides personal lines property insurance and that contains a hurricane or wind deductible must contain a specific statement: "THIS POLICY CONTAINS A SEPARATE DEDUCTIBLE FOR HURRICANE OR WIND LOSSES, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU." Similarly, if the policy contains a coinsurance provision, the following statement must appear on the face of the policy: "THIS POLICY CONTAINS A CO-PAY PROVISION THAT MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU." All of these disclosure requirements apply to policies issued on or after October 1, 2009.
The bill contains other requirements including a duty to provide a claimant, upon request, with a statement of a corporate officer or claims manager that includes specific information about the insurer, the insureds, limits of coverage, a statement of any policy or coverage defense that the insurer believes is available and a copy of the policy. The insurer has 60 days to provide this information. The law also imposes a duty on insureds and their agents to identify the name of each known insurer and coverage information to claimants upon request. And a specific section of the bill provides for the award of attorneys fees against a surplus lines carrier when there is a judgment against the carrier and in favor of the insured.
The amendment to § 626.913 (that exempts surplus lines insurers from form filing and other requirements) is retroactive to October 1, 1988 "with respect to the regulation of surplus lines insurers." The bill analysis prepared by the state legislature indicates that only the new policy disclosure requirements are prospective. However, the actual language in the bill states:
The amendments to s. 626.913, Florida Statutes, in this act are
remedial in nature and operate retroactively to the regulation of
surplus lines insurers from October 1, 1988, except with respect to
lawsuits that are filed on or before May 15, 2009.
The intent of the last phrase is unclear and was not mentioned in the official bill analysis or in the various articles and comments about the legislation. There was only one amendment to § 626.913 and that was to exempt surplus lines insurers from the form filing and other laws in chapter 627 that apply to admitted carriers. The plain language of the provision that makes the bill retroactive would suggest that there may not be any retroactive effect in pending lawsuits that were filed on or before May 15, 2009. Generally, only laws that concern procedures and remedies can be retroactive; laws that deal with substantive rights, liabilities and duties cannot be retroactive. This raises the question of whether there could be a constitutional challenge to the retroactivity of this legislation.
NLdH will continue to monitor this issue.
