Capitol Report: Property Insurance Bill Creating Citizens Clearinghouse Passes 2013 Florida Legislature

by Carlton Fields

Committee Substitute for Senate Bill 1770 (CS/SB 1770) passed by the 2013 Florida Legislature creates a “keep-out” clearinghouse to reduce the size and type of exposures insured by Citizens Property Insurance Corporation (“Citizens”). It establishes an inspector general in the organization, and requires other restructuring of Citizens. CS/SB 1770 is effective July 1, 2013, unless otherwise specified in the bill.

A related bill, Senate Bill 1850 (SB 1850), makes confidential and exempts from public disclosure proprietary business information that insurers provide to the clearinghouse for the purpose of identifying and selecting risks for offers of coverage. SB 1850 takes effect on the same date as CS/SB 1770.

CS/SB 1770 and SB 1850 will be presented to the Governor and are subject to his veto authority. We recommend you check the ultimate status of these bills by visiting the Florida Legislature’s website ( This summary was compiled in substantial part using public records from the Florida Legislature.

Key provisions of CS/SB 1770 are summarized below:

  • Renames the “Florida Hurricane Catastrophe Fund Finance Corporation” to the “State Board of Administration Finance Corporation.”
  • Extends the Florida Hurricane Catastrophe Fund assessment exemption for medical malpractice insurance until May 31, 2016.
  • Repeals outdated language for the $10 million additional Florida Hurricane Catastrophe Fund coverage for limited apportionment insurers and insurers that participated in the Capital Build-Up Program and the Temporary Emergency Options for Additional Coverage.
  • Exempts Citizens Property Insurance Corp. (“Citizens”) from “exchange of business” restrictions in placing new and renewal business with authorized insurers to facilitate the operations of the clearinghouse.
  • Prohibits a public adjuster from receiving compensation from any source in excess of the statutory fee cap.
  • Applies disciplinary provisions in current law to public adjusters who violate the statutory fee caps through any maneuver, shift, or device.
  • Repeals the 10 percent public adjuster fee cap on Citizens' claims, which results in a fee of 10 percent for initial hurricane claims made the first year, 20 percent for initial claims made in subsequent years, and 20 percent for all reopened and supplemental claims.
  • Requires a public adjuster to meet or communicate with the insurer in an effort to reach agreement as to the scope of the covered loss under the insurance policy. 
  • Prohibits a public adjuster from acquiring any interest in salvaged property unless the policyholder provides written consent and permission by a signed affidavit.
  • Adds a licensed professional structural engineer, who must be a full-time faculty member in the State University System and who must have expertise in wind mitigation techniques, to the Florida Commission on Hurricane Loss Projection Methodology.
  • Reduces the maximum Citizens’ policy limit for personal lines residential structures effective January 1, 2014, from $2 million to $1 million and further reduces the policy limit by $100,000 a year for three years to $700,000. However, counties where the Florida Office of Insurance Regulation (OIR) determines there is no reasonable degree of competition are exempt from these limitations. Instead, in such exempted counties, a personal lines residential structure that has a dwelling replacement cost of less than $1 million, or a single condominium unit that has a combined dwelling and contents replacement cost of less than $1 million, is eligible for coverage by Citizens.
  • Deletes the provision that allows owners of personal lines residential structures to reapply and obtain Citizens coverage if the property owner provides Citizens with a sworn affidavit from one or more insurance agents stating that the agents have made their best efforts to obtain coverage and that the property has been rejected for coverage by at least one authorized insurer and at least three surplus lines insurers.
  • Prohibits Citizens from covering major structures defined in section 161.54(6)(a), Fla. Stat. for which a permit is applied for on or after July 1, 2014, for new construction or substantial improvement as defined in section 161.54(12), Fla. Stat., if the structure is seaward of the coastal construction control line established pursuant to section 161.053, Fla. Stat., or is within the Coastal Barrier Resources System as designated by 16 U.S.C. § § 3501 - 3510. 
  • Authorizes the Governor of Florida to appoint a consumer representative as an additional member to the Citizens Board of Governors (Board).
  • Clarifies that a risk (personal lines residential or commercial lines residential) is ineligible for coverage with Citizens if an authorized insurer issues an offer of coverage that is within 15 percent of Citizens’ rate for a new policy and no greater than Citizens’ current rate for a renewal policy.
  • Requires applicants for coverage with Citizens to acknowledge in writing that: 1) the Citizens policyholder surcharge may be avoided by obtaining coverage from a private market insurer; 2) coverage with the private market must be attempted prior to applying for or renewing coverage with Citizens; and 3) private market insurance rates are regulated and approved by the State of Florida.
  • Allows insurers that take out, assume, or remove policies from Citizens to use any of the Citizens’ policy forms or endorsements that apply to the policies taken out, removed, or assumed without obtaining approval from the OIR to use such policy forms or endorsement.
  • Establishes an Office of Inspector General at Citizens to be appointed by the Financial Services Commission.
  • Requires Citizens to prepare a report for each calendar year outlining Citizens' loss ratio for non-catastrophic losses for residential coverage on a statewide and county basis. The annual report must be presented to the OIR and available for public inspection on Citizens’ website by January 15 of the following calendar year.
  • Subjects Citizens to the purchasing of commodities restrictions under section 287.057, Fla. Stat., except as otherwise provided in the bill.
  • Establishes the Citizens Clearinghouse by January 1, 2014.
    • Citizens must establish a program for personal residential risks to facilitate the diversion of ineligible applicants and existing policyholders from the corporation into the voluntary insurance market.
    • Citizens must also develop appropriate procedures for facilitating the diversion of ineligible applicants and existing policyholders for commercial residential coverage into the private insurance market and shall report such procedures to the President of the Senate and the Speaker of the House of Representatives by January 1, 2014.
    • The program shall have all the rights and responsibilities in carrying out its duties as a licensed general lines agent, but may not be required to employ or engage a licensed general lines agent or to maintain an insurance agency license to carry out its activities in the solicitation and placement of insurance coverage.
    • Insurers and agents participating in the program are not required to pay a fee to offset or partially offset the cost of the program or use the program for renewal of policies initially written through the clearinghouse. 
    • For personal lines residential risks, the program must require, before approving all new applications for coverage by Citizens, that every application be subject to a period of two business days when any insurer participating in the program may select the application for coverage. The insurer may issue a binder on any policy selected for coverage for a period of at least 30 days but not more than 60 days.
    • Any authorized insurer may participate in the program; however, participation is not mandatory.
    • Participating insurers must either appoint the agent of record or offer a limited servicing agreement.
    • Agents are to be paid Citizens’ commission or the insurer’s standard commission, whichever is greater.
    • Clarifies that the 45-day notice of nonrenewal applies to policies submitted to the clearinghouse.
    • Independent and captive agents are granted and must maintain ownership of records including policies placed in Citizens.
    • Exclusive insurers (insurers whose agents are captive agents) are allowed to approve their agents’ limiting servicing agreements with each participating company.
  • Requires the Florida Hurricane Catastrophe Fund and Citizens to submit no later than February 1 of each year to the Florida Legislature and the Financial Services Commission a report identifying their respective aggregate net probable maximum losses, financing options, and potential assessments. The report must include their:
    • Respective 50-year, 100-year, and 250-year probable maximum losses;
    • Analysis of all reasonable financing strategies for each such probable maximum loss, including the amounts and terms of debt instruments;
    • Specification of the percentage assessments that would be needed to support each of the financing strategies; and
    • Calculations of the aggregate assessment burden on Florida property and casualty policyholders for each of the probable maximum losses.

Key provisions of SB 1850 are summarized below:

  • Makes proprietary business information provided to Citizens’ clearinghouse by insurers with respect to identifying and selecting risks for an offer of coverage confidential and exempt from section 119.07(1), Fla. Stat. and § 24(a), Art. I of the Fla. Const.
  • Defines the term “proprietary business information” to mean information, regardless of form or characteristics, owned or controlled by an insurer and:
    • Identified by the insurer as proprietary business information that is intended to be and is treated by the insurer as private, the disclosure of which would cause harm to the insurer, an individual, or the company’s business operations and which has not been disclosed except pursuant to a statutory requirement, an order of a court or administrative body, or a private agreement that provides that the information will not be released to the public;
    • Is not otherwise readily ascertainable or publicly available by proper means by other persons from another source in the same configuration as provided to the clearinghouse;
    • Includes, but is not limited to trade secrets or information relating to competitive interests, the disclosure of which would impair the competitive business of the provider of the information.
  • Specifies that proprietary business information may be found in underwriting criteria or instructions used to identify and select risks through the clearinghouse for an offer of coverage and that are shared with the clearinghouse to facilitate the shopping of risks with the insurer.
  • Provides that the clearinghouse may disclose confidential and exempt proprietary business information in the following circumstances:
    • If the insurer to which it pertains gives prior written consent;
    • Pursuant to a court order; or
    • To another state agency in this or another state or to a federal agency if the recipient agrees in writing to maintain the confidential and exempt status of the document, material, or other information and verified in writing its legal authority to maintain such confidentiality.

If you have questions regarding this Capitol Report, please contact Kelly Cruz-Brown.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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