HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/CS/HB 503 Insurance
SPONSOR(S): Commerce Committee, Insurance & Banking Subcommittee, Gregory
TIED BILLS: IDEN./SIM. BILLS: CS/CS/SB 468
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY
CHIEF
1) Insurance & Banking Subcommittee 15 Y, 0 N, As CS Fortenberry Luczynski
2) Commerce Committee 22 Y, 0 N, As CS Fortenberry Hamon
SUMMARY ANALYSIS
The bill makes the following changes regarding insurance:
 Florida Hurricane Catastrophe (FHCF) Coverage – modifies when a collateral protection insurance policy is
eligible for FHCF coverage.
 Worker’s Compensation Payroll Audits – modifies the requirement that the annual audit for construction
businesses be conducted onsite to only be onsite if the estimated annual premium is $10,000 or more.
 Investment in Insurers – allows the Office of Insurance Regulation (OIR) to conduct background checks on persons
who maintain citizenship from, reside in, or are domiciled in, the same jurisdiction outside the United States if the
aggregate ownership by such persons exceeds 10 percent of either a newly established insurer applying for a
certificate of authority from OIR or an existing stock insurer possessing a certificate of authority from OIR.
 Meeting Requirements – authorizes associations, trusts, and pools that provide self-insurance for public entities to
use communications media technology to establish a quorum and conduct public business.
 Adjusters and Agents – adds an additional professional designation to the list of designations that exempt an
applicant for all-lines adjuster licensure from the passage of a written examination before being licensed; adds an
insurer’s affiliate’s adjusters to the definition of company employee adjuster; allows licensed general or personal lines
agents to sell service agreements or warranties without a salesperson or sales representative license.
 Hurricane Modeling – provides that a property insurer may use a weighted or straight average of two or more
approved hurricane models in a rate filing.
 Commission on Hurricane Loss Projection Methodology (Commission) – provides that a designee of the
Director of the Division of Emergency Management may be a member of the Commission in lieu of the Director.
 Mitigation Credits in Residential Property Insurance Rate Filings – allows insurers to give mitigation credit for
evaluation by, and compliance with, standards developed by an independent, not -for-profit, scientific research
organization.
 Automatic Withdrawal of Premium – modifies the notice requirement for a change in the amount of premium by
automatic bank withdrawal from an increase of any amount to increases greater than $10 and also changes the
number of days’ notice that must be given from 15 to 10 to match federal law.
 Citizens Property Insurance Corporation (Citizens) – allows Citizens the option to insure residential
condominiums under commercial residential wind-only coverage if the units are intended for residential use, but are
rented on a short-term basis.
 Policy Documents – authorizes electronic transmission of policy documents and revises notice requirements for
certain automobile insurance policies.
 Method to Reject/Exclude Certain Property Insurance Deductibles/Coverages – permits the required statements
related to waiving the 10 percent limit on hurricane deductibles, excluding windstorm coverage, and excluding
contents coverage, to be either personally written or typed by the policyholder.
 Assignment Agreements – adds inspection to the definition of assignment agreement, specifies that the list of
services that is specified in the definition of assignment agreement is not exhaustive, specifies that fees charged by a
public adjuster are not included in the definition of assignment agreement, and establishes where the pre-suit notice
required before filing a suit over a claim with an assignment agreement must be sent, whether sent by certified mail
or email.
The bill has no impact on state or local government revenues or expenditures. It has an unknown direct economic impact
on the private sector.
The bill has an effective date of July 1, 2022, except as otherwise provided.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
STORAGE NAME: h0503c.COM
DATE: 2/25/2022
 FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Hurricane Catastrophe Fund – Collateral Protection Insurance
The Florida Hurricane Catastrophe Fund (FHCF) is a tax-exempt trust fund created by the Legislature
in 1993 as a form of reinsurance for residential property insurance losses. 1 The purpose of the FHCF is
to protect and advance the state’s interest in maintaining insurance capacity in Florida by providing
reimbursements to insurers for a portion of their catastrophic losses.2 The FHCF is administered by the
State Board of Administration and reimburses property insurers for a selected percentage of hurricane
losses to residential property when those losses exceed the insurer’s retention (deductible).3 As a
condition of transacting insurance business in the state, residential property insurers are required to
enter reimbursement contracts with the FHCF.
The FHCF reimburses participating insurers for losses under covered polices, subject to limitations.4
Covered policies include collateral protection5 insurance policies covering personal residences that
protect both the borrower’s and the lender’s financial interest in an amount at least equal to coverage
for the dwelling in place under a lapsed homeowner’s policy, if such policies meet certain statutory
conditions.6
Collateral protection insurance is placed by an insurer when a homeowner’s policy on the property has
lapsed. Sometimes, the insurer is unable to obtain correct information from the homeowner and places
coverage at an amount other than the amount of the homeowner’s lapsed policy. This can create a
discrepancy between the coverage in place and the amount of the homeowner’s lapsed policy, which
makes the policy ineligible for FHCF coverage.
Effect of the Bill
The bill amends the conditions under which a collateral protection insurance policy can be considered a
“covered policy” and, thus, eligible for FHCF coverage. The bill provides that a collateral protection
insurance policy is eligible for FHCF coverage if it is placed for the amount of the last known coverage,
the amount that the homeowner was notified of by the collateral protection insurer, or the amount that
the homeowner requests from the collateral protection insurer.
Workers’ Compensation – Payroll Audit Procedures
The cost of workers’ compensation insurance is based primarily upon an employer’s payroll and the
types of duties employees perform. Employers pay an estimated premium at the commencement of a
workers’ compensation policy and receive a refund or a bill for additional premium due at the end of the
policy year, based on a payroll audit conducted by the insurance carrier.
1 See s. 215.555, F.S.
22 See id.
3 Id.
4 S. 215.555(2)(d), F.S.
5 “Collateral protection insurance” means commercial property insurance of which a creditor is the primary beneficiary and
policyholder and which protects or covers an interest of the creditor arising out of a credit transaction secured by real or
personal property. Initiation of such coverage is triggered by the mortgagor’s failure to m aintain insurance coverage as
required by the mortgage or other lending document. Collateral protection insurance is not residential coverage. Ss.
215.555(15) and 624.6085, F.S.
6 S. 215.555(2)(c), F.S.
STORAGE NAME: h0503c.COM PAGE: 2
DATE: 2/25/2022
 The law requires that the Financial Services Commission7 establish by rule the minimum requirements
for audits of payroll and classifications 8 to ensure that the appropriate premium is charged for workers’
compensation coverage. The rules shall require payroll audits no less than every other year for non-
construction businesses. Businesses in the construction industry that are large enough to have an
experience rating factor applied to their premium (meaning the policy is based on Florida estimated
annual premium of $5,750 or more9) must be audited annually and the audit must take place at the
employer’s worksite.10
The Office of Insurance Regulation (OIR) has promulgated rules for payroll audits that were adopted by
the Financial Services Commission. The rules require:
 An annual physical audit for policies with an estimated annual premium of $10,000 or more,
regardless of governing classification;
 An annual mail or physical audit for policies with an estimated annual premium of $1 to $9,999;
 A physical audit for all new businesses that have construction classifications, regardless of
premium;
 An annual physical audit for renewal policies that have construction classifications if the estimated
annual premium is $5,000 or more;11 and
 A mail or physical audit not less than every other year for per capita policies, which use the number
of workers during the policy period to measure exposure.
Audits conducted by telephone are not permitted in lieu of mail or physical audits. 12
Effect of the Bill
The bill requires in-person audits for construction businesses only if the construction business has an
estimated annual premium of $10,000 or more. Passage of the bill would require changes to OIR rules
that require physical audits for all new construction businesses and for construction businesses that
have an annual premium of $5,000 or more.
Investment in Insurers
Control of an insurer is defined as the “direct or indirect possession of the power to direct or cause the
direction of the management and policies of a person, whether through the ownership of voting
securities, by contract other than a commercial contract for goods or nonmanagement services, or
otherwise.”13 Control is “presumed to exist if a person, directly or indirectly, owns, controls, or holds
with the power to vote, or holds proxies representing 10 percent or more of the voting securities of
another person.”14
Section 628.051(2)(b), F.S., provides that written applications for permits to form an insurer must
include the name, residence address, business background, and qualifications of each person
associated or to be associated in the formation or financing of an insurer. Each person with an
ownership interest of 10 percent or more, or who will hold a position as an officer or director, must
furnish a sworn biographical statement, legible copies of fingerprints, and authority for the release of
7 The Financial Services Commission (commission) is c omposed of the Governor, Attorney General, Chief Financial
Officer, and Commissioner of Agriculture. S. 20.121(3), F.S. The commission members are OIR’s agency head for the
purpose of rulemaking. S. 20.121(3)(c), F.S.
8 Classifications, or classification codes, are three- or four-digit codes used to identify types of work so that risk can be
estimated when establishing workers’ compensation insurance rates. The Hartford, Work ers’ Comp Class Codes,
https://www.thehartford.com/workers-compensation/workers-comp-class-codes (last visited Jan. 5, 2022).
9 OIR, 2020 Workers’ Compensation Annual Report, p. 32 (Jan. 15, 2021), 2020WorkersCompensationAnnualReport.pdf
(floir.com) (last visited Jan. 5, 2022).
10 S. 440.381, F.S.
11 R. 69O-189.003(4)(b)1, F.A.C.
12 R. 69O-189.003(4)(b)3, F.A.C.
13 S. 624.410(3), F.S.
14 Id.
STORAGE NAME: h0503c.COM PAGE: 3
DATE: 2/25/2022
 information regarding the investigation of such person’s background.15 However, OIR does not have
the authority to conduct background checks on persons who do not possess 10 percent or more of an
insurer or applicant to become an insurer, but are from the same jurisdiction outside the United States
and may collectively exert the equivalent of more than a 10 percent ownership interest.
Effect of the Bill
The bill allows OIR to conduct background checks on persons who maintain citizenship from, reside in,
or are domiciled in, the same jurisdiction outside the United States if the aggregate ownership by such
persons exceeds 10 percent of either:
 A newly established insurer applying for a certificate of authority from OIR; or
 An existing stock insurer possessing a certificate of authority from OIR.
The bill further allows OIR to apply these criteria to applications for various specialty acquisitions,
permits for certain types of insurers, and special insurance arrangements that are provided for
throughout the Florida Insurance Code. The bill also establishes that such persons who meet the 10
percent aggregate threshold are considered to have control of an insurer.
Meeting Requirements – Risk Management Mechanisms and Self-Insurance Pools
Current law does not address whether associations, trusts, and pools formed to provide self-insurance
for public entities can establish a quorum, and conduct public business, virtually. The authority to
conduct business virtually has become a greater issue as COVID-19 has forced private and public
entities to work remotely.
Effect of the Bill
The bill authorizes associations, trusts, and pools formed to provide self-insurance for public entities to
establish a quorum, and to conduct public business, through communications media technology.
Adjusters and Agents
All-lines Adjuster
Ordinarily, any applicant to the Department of Financial Services for licensure as an all-lines adjuster
must pass a written examination in order to receive licensure. However, an applicant who has a
professional designation listed in s. 626.221(2)(j), F.S., is exempt from the examination requirement.
Effect of the Bill
The bill adds an additional professional designation to the list of designations under which an applicant
to become a licensed all-lines adjuster is exempt from the licensure examination requirement.
Company Employee Adjuster
A “company employee adjuster” is a licensed insurance adjuster who is appointed and employed on an
insurer’s adjusting staff or a wholly owned subsidiary of the insurer. 16 The duties of such an adjuster
include determining the amount of a claim, loss, or damage payable under an insurance policy, and
settling the claim, loss, or damage.17
Effect of the Bill
15 S. 628.051(2)(b), F.S.
16 S. 626.856, F.S.
17 Id.
STORAGE NAME: h0503c.COM PAGE: 4
DATE: 2/25/2022
 The bill adds adjusters employed by an insurer’s affiliate to the definition of company employee
adjuster.
Agent Licensing
General Lines Agent
A general lines agent18 is one who sells the following lines of insurance: property; 19 casualty,20 including
commercial liability insurance underwritten by a risk retention group, a commercial self-insurance
fund,21 or a workers’ compensation self-insurance fund;22 surety;23 health;24 and, marine.25 The general
lines agent may only transact health insurance for an insurer that the general lines agent also
represents for property and casualty insurance. If the general lines agent wishes to represent health
insurers that are not also property and casualty insurers, they must be licensed as a health insurance
agent.26
Personal Lines Agent
A personal lines agent is a general lines agent who is limited to transacting business related to property
and casualty insurance sold to individuals and families for noncommercial purposes. 27
Motor Vehicle Servicing Agreements
Motor vehicle service agreements provide vehicle owners with protection when the manufacturer’s
warranty expires. A motor vehicle service agreement indemnifies the vehicle owner (or holder of the
agreement) against loss caused by failure of any mechanical or other component part, or any
mechanical or other component part that does not function as it was originally intended. 28 Motor vehicle
service agreements can only be sold by a licensed and appointed salesperson. Salespersons are
licensed in the same manner as insurance representatives under ch. 626, F.S., with some exceptions
to the requirements applied to insurance representatives.
Service Warranty Associations
Service warranty associations are entities, other than insurers, which issue service warranties. A
service warranty is an agreement or maintenance service contract equal to or greater than 1 year in
length to repair, replace, or maintain a consumer product, or for indemnification for repair, replacement,