Chapter 8 FL State Laws Flashcards
Financial Services Regulations
The administration of state insurance law is the responsibility of the Chief Financial Officer (CFO), Financial Services Commission and Director, or Commissioner, of the Office of Insurance Regulation.
Chief Financial Officer
The Chief Financial Officer (CFO) is an elected official and is the head of the Department of Financial Services (DFS). The CFO directly oversees the following divisions under the DFS:
Division of Accounting and Auditing
Division of Consumer Services
Division of Insurance Agent and Agency Services
Division of Public Assistance/Insurance Fraud
Office of Consumer Advocate for Insurance
Division of Unclaimed Property
The CFO as the head of the Department, is directly responsible for the regulation of insurance agents.
The CFO is a member of the Financial Services Commission, also known as the Governor's Cabinet. Elected head of DFS Licensing of: Insurance agents adjusters agencies
Financial Services Commission
The Financial Services Commission is composed of the Governor, CFO, Attorney General, and Commissioner of Agriculture.
It appoints the Commissioner of the Office of Insurance Regulation (OIR), which is responsible for:
Regulating the following areas of insurance industry:
Licensing
Rates
Policy forms
Market conduct
Claims
Certificates of Authority
Protecting the public through oversight of insurance company solvency
Maintaining expertise related to life and health, property and casualty, specialty lines, and other insurance entities
The Commission also appoints the Director of the Office of Financial Regulation (OFR), which is responsible for:
Regulating the following:
Banks, credit unions, savings association, international bank agencies
Financial service companies
Securities industry
Includes the Bureau of Financial Investigations:
Functions as a criminal justice agency
Conducts investigations to protect consumers from financial entities that violate state laws and rules
The administration of state insurance law is the responsibility of which of the following?
Chief Financial Officer
The administration of state insurance law is the responsibility of the Chief Financial Officer (CFO), Financial Services Commission and Director of the Office of Insurance Regulation.
Which state entity decides conflicts between insurance companies and policyholders?
State judicial system
The State judicial system also enforces the code by administering criminal penalties and decides if new laws are constitutional.
Which state entity is responsible for approving a Certificate of Authority for an insurance company?
Office of Insurance Regulation
The Commissioner of the Office of Insurance Regulation also regulates insurance licensing, rates, policy forms, market conduct, claims, and company solvency.
Department of Financial Services (DFS)
General Duties and Powers
Agent and Adjuster Licensing and Investigations
The DFS supervises methods of obtaining business, including agent licensing and control of unfair trade practices. The department may interrogate an applicant or agent relating to the applicant’s qualifications, residence, prospective place of business, and any other matter which, in the opinion of the department or office, is deemed necessary or advisable for the protection of the public and to ascertain the applicant’s qualifications.
The department also may make further investigation of the applicant’s character, experience, background, and fitness for the license or appointment, and include the applicant’s fingerprints to be checked by local and federal law enforcement agencies. If the department believes that any person has violated any provision of the code, or upon the written complaint, it will conduct an investigation of the person’s accounts, documents, and transactions pertaining to the subject.
The CFO can impose the following penalties upon an agent for Insurance Code violations:
Failure to answer a subpoena or order – $1,000 fine
Violation of cease and desist order – Up to $50,000 fine
Willful violation of the Insurance Code – Misdemeanor of the 2nd degree (imprisonment up to 60 days)
Fraudulent conduct in committing twisting or churning – 1st degree misdemeanor (imprisonment up to one year)
Non-willful violation – $5,000 fine per violation
Willful violation – $75,000 fine per violation
Willfully submit fraudulent signatures – 3rd degree felony (imprisonment up to 5 years)
Non-willful violation – $5,000 fine per violation
Willful violation – $75,000 fine per violation
Division of Consumer Services
The Division of Consumer Services within the DFS is responsible for assisting consumers, answering general insurance and financial questions from its toll-free helpline, regional service centers, and website. The division provides consumer education and outreach assistance, as well as the following:
Receive and compile inquiries and complaints the DFS deems necessary to assist consumers
Provide direct assistance and advocacy for consumers who request such services
Report alleged violations of law by persons licensed by the DFS, OIR, or OFR to the appropriate regulator
Insurance Fraud
The Bureau of Financial Investigations, which functions as a criminal justice agency within DFS, may conduct investigations within or outside Florida as the bureau deems necessary to aid in the enforcement of a suspected violation. If, during an investigation, the office has reason to believe any criminal law has or may have been violated, the office will refer any records to show such violation to state or federal law enforcement or prosecutorial agencies and provide investigative assistance to those agencies as required.
Receivership
The Division of Rehabilitation and Liquidation of the DFS monitors the financial condition of insurers and rehabilitates or liquidates insurers as needed. It has the responsibility of performing the duties as receiver of any insurer placed into receivership in Florida.
The division plans, coordinates, and directs the conservation, rehabilitation, and liquidation of insolvent insurance companies, unlicensed insurance companies, and unlicensed insurance entities.
The basic responsibilities of the receiver include the collection of assets or debts due to the company, and evaluating all known claims against the company. The goal of the division as the liquidator is to maximize the value of the assets of the liquidated company and distribute the assets equitably.
Unclaimed Property
The Department of Commerce Division of Unclaimed Funds handles unclaimed property. Written notice must be sent to apparent owner of unclaimed property, which refers to property abandoned that remains unclaimed for 3-5 years. All unclaimed property must be turned over to the state. There are filing and reporting requirements if property remains unclaimed.
Other Powers
Oversee the insurance industry based on the Insurance Code
Organize and license insurance companies including establishing the initial financial requirements
Guard against unauthorized insurance activities
Regulate insurance company activities, policy forms, provisions, and rates
An agent willfully violated a requirement in the Insurance Code and his penalty was which of the following?
Imprisonment up to 60 days
A willful violation of the Insurance Code is a misdemeanor of the 2nd degree and imprisonment up to 60 days.
Choose the true statement about the state insurance fraud department.
If a criminal law has been violated, the office will refer it to the appropriate law enforcement agency
The Bureau of Financial Investigations functions as a criminal justice agency within DFS, may conduct investigations within or outside Florida, and will refer records to the appropriate state or federal agency and provide assistance as required.
The Department of Financial Services can impose which of the following penalties?
Fine for violation of a cease and desist order up to $50,000
A willful violation for submitting fraudulent signatures is $75,000 per violation and $5,000 per violation for a non-willful violation.
Which of the following is not a duty of the Department of Financial Services?
Enforces the Insurance Code by administering criminal penalties
The Department of Financial Services also handles unclaimed property, licensing insurance companies, and investigates applicants for an insurance license.
Policy Approval Authority
The Office of Insurance Regulation (OIR) supervises insurers via approval of new rates and forms, which must be approved by the OIR.
Prior approval exists when insurers are not allowed to implement a rate or rate change until it has been approved by the insurance department. Florida requires the insurer submit the filing 30 days prior to use. The Office has 30 days to approve or disapprove or request a change to the filing. If no decision is made within that time period the rate or form is approved.
Every filing must include the effective date and character and extent of the changes.
Rates
Rates for all insurance classes must not be excessive, inadequate, or unfairly discriminatory. Insurers must include rates, rating schedules, rating manuals, premium credits or discount schedules, and surcharge schedules with noted changes.
Forms
The following forms require approval:
Insurance policy or annuity contract form
Printed application
Group policy certificates
Printed rider, endorsement, renewal certificate
Market Conduct Examinations
Market Investigations is a division of the Office of Insurance Regulation that conducts examinations and investigations of insurers (as often as it believes necessary) to ensure compliance with the statutes and rules. All accounts, records, documents, files, etc., must be freely available to the examiners. The cost of an examination will be paid by the person or entity examined.
There are 4 sections with unique duties:
Property and Casualty Section – Conduct exams and investigate business practices of authorized property and casualty insurers.
Life and Health Section – Conduct exams and investigate business practices of authorized life and health insurers.
Investigations – Special Investigation Unit – investigates allegations of unauthorized and illegal insurance activity and in-
depth investigations of authorized insurers.
Market Analysis Section – Identifies trends and analyzes patterns of insurer’s data related to industry or marketplace issues.
Which of the following forms does not require approval from the Office of Insurance Regulation?
Agent report
Other forms that do require approval include the insurance policy, annuity contract form, and printed riders or endorsements.
The Market Investigation division includes 4 sections with unique duties. Which of the following is not one of those 4 sections?
Approval
The Property and Casualty section conducts exams and investigates business practices of authorized P&C insurers; the Special Investigation unit investigates illegal activity; and the Market Analysis section identifies trends and date relating to the insurance industry.
Office of Financial Regulation
General Duties and Powers
Enforcement of the Insurance Code and carrying out those duties
Collect, propose, publish or disseminate information regarding duties
Protecting the public against unauthorized behavior
All carriers must be audited at least once every 3 years. It can be more frequent if warranted
Monitoring marketing activity to avoid unfair trade practices such as twisting, unsupported replacement and illegal rebating
Protecting the public by trying to limit insolvencies via tracking reserves, restricting investments to prudent vehicles and confirm accuracy of financial statements
Taking over insolvent companies and attempting to restore financial integrity. If not successful, these companies will be liquidated. Other carriers in the state will be asked to buy blocks of business
Subjecting all people and companies to audit. Records of business associated with premiums must be kept for 3 years
Restricting carrier investments to avoid high-risk transactions. Accounting procedures must conform to state guidelines. Approved investments include:
Government paper
First mortgages in secured real estate
Policy loans
Small amounts of blue chip stock (allowed by the leeway or basket provision)
Investment quality corporate bonds (“junk bonds” are not allowed)
The two most common types of life insurance investments are bonds and mortgages, which are long-term investments.
Calculate reserves that carriers are required to maintain
Order hearings to discover unfair competition, unethical marketing practices, nonconformity to license requirements, and if the public trust has been violated
Agency Actions
The purpose of the OFR’s actions are to protect insurance consumers from unlawful or harmful business practices. It can bring about administrative actions and penalties when corrective action is required.
Within existing resources, the OFR develops and implements an outreach program for the purpose of encouraging the entry of additional insurers into the Florida market.
Investigation
The OFR can conduct any investigation to determine violations of the Code, obtain information to administer the Code, and secure information useful in the lawful administration of any provision. The cost of investigations are borne by the state.
All insurance carriers authorized in Florida must be audited by the Office of Financial Regulation once every __________.
3 years
The Office of Financial Regulation protects the public against unauthorized behavior by audited insurance companies at least once every 3 years, and more frequently if warranted.
Definitions
Insurance Contract – An agreement enforceable by law in which the insurer agrees to pay a certain amount of money upon the death of the insured, and the policyholder agrees to pay the premium.
Insurance Transaction – “Transact” with respect to insurance includes any of the following, in addition to other applicable provisions of this code:
Solicitation or inducement
Preliminary negotiations
Effectuation of a contract of insurance
Transaction of matters subsequent to effectuation of insurance contract and arising out of it
Insurer – Every person engaged as indemnitor, surety, or contractor in the business of entering into contracts of insurance or of annuity.
Admitted (authorized) – Admitted carriers are those that have been issued a license (certificate of authority) by conforming to Florida standards for transacting business.
Nonadmitted (unauthorized) Carriers – Nonadmitted companies are not state licensed, so they are not regulated by Florida. They are not permitted to sell through the mail, and the Florida Guaranty Association does not extend protection for Floridians who buy from these companies.
Some nonadmitted carriers claim an exemption from state law as a result of ERISA regulations. Florida regulators take the position that ERISA, in most situations, does not allow nonadmitted companies relief from Florida law.
Agents doing business with nonadmitted carriers are subject to a 3rd degree felony, personal liability for unpaid claims and may have their license suspended or revoked. Companies acting without a certificate of authority are subject to a 1st degree felony, liable for unpaid claims and may lose all licenses.
Unlicensed Entities – The following are regulatory concerns with unlicensed (nonadmitted/unauthorized) companies transacting insurance business in Florida:
Potential for criminal activity
Adverse economic impact on authorized insurers
Potential for unpaid claims due to dishonesty and lack of sound actuarial decisions
State or federal guaranty funds do not pay unpaid claims
Future insurability issues for insureds
Lack of oversight by state or federal regulatory agencies
Which of the following is not true of a nonadmitted carrier?
The Florida Guaranty Association protects residents who buy from a nonadmitted carrier
Nonadmitted companies are not state licensed nor regulated by Florida, and the Florida Guaranty Association does not extend protection for Floridians who buy from these companies.
Unlicensed entities is a regulatory concern due to which of the following issues?
Potential for criminal activity
Unlicensed entities also have an adverse economic impact on authorized insurers, potential for unpaid claims due to dishonesty and lack of sound actuarial decisions and the state and federal guaranty funds do not pay for those unpaid claims.
Definitions (continued)
Unauthorized Insurers Process Law – The purpose of the Unauthorized Insurers Process Law is to subject certain insurers, their representatives or those aiding such insurers to the jurisdiction of Florida courts in lawsuits by or on behalf of insureds or beneficiaries under insurance contracts. This law also provides a process for residents of this state to assert their legal rights on policies issued or delivered by insurers not authorized to do business in this state.
The Legislature declares that in so doing it exercises its power to protect its residents and to define what constitutes doing business in this state. It also exercises powers and privileges available to the state by virtue of Public Law No. 15, 79th Congress of the United States, which declares that the business of insurance and every person engaged therein is subject to the laws of the several states.
Certificate of Authority – No person can act as an insurer and no insurer or its agents, attorneys, subscribers, or representatives can directly or indirectly transact insurance in Florida unless authorized by a Certificate of Authority, issued to the insurer by the Office of Insurance Regulation.
No county, city, municipality, district, school district, or political subdivision can require any further authorization, permit or registration of any insurer, agent, or representative regulated under this code for conducting lawful insurance transactions granted by the state under this code.
Any person who acts as an insurer, transacts insurance, or otherwise engages in insurance activities in this state without a Certificate of Authority commits a:
3rd degree felony, punishable by fines up to $5,000 and up to 5 years imprisonment, only if the total premiums collected in the unauthorized transaction(s) are less than $20,000
2nd degree felony, up to 15 years imprisonment, if the total premiums collected are between $20,000 and $100,000
1st degree felony, a term not exceeding 30 years, if the total premiums collected are over $100,000
Certificate of Authority is not required:
When an insurer formerly authorized in this state needs to conduct investigations, settlements or litigations concerning claims on policies written in this state
For transactions pursuant to surplus lines coverages lawfully written by this state’s insurance code
For authorized reinsurance transactions
For continuation and servicing of insurance or annuity policies/contracts remaining in force on residents of this state when the insurer is no longer transacting new insurance business in Florida
For investment by a foreign insurer in Florida real estate if the foreign insurer complies with the Florida laws relating to foreign business corporations
For life insurance policies or annuity contracts issued by an alien insurer which cover only persons who, at the time of issuance, are not residents of the United States and are not illegal nonresidents. However, the alien insurer must meet specific capital requirements.
A person acting as an insurer without a Certificate of Authority and collects $150,000 in premiums is guilty of which of the following?
1st degree felony
A person, while acting as an insurer without a Certificate of Authority, is subject to not more than 30 years imprisonment if the total premium collected is over $100,000.
Licensing
Purpose
An applicant must obtain an insurance license in order to be familiar with the Florida insurance laws.
License Types
Agent – A general lines agent who transacts business related to selling property and casualty insurance to individuals.
Adjuster – A qualified individual may be licensed as a:
Public Adjuster – A person hired for a fee on behalf of an insured or third-party claimant to negotiate and settle a claim.
All-lines Adjuster – A person who is self-employed or employed by an insurer or an independent adjusting firm and determines the amount of a claim and settles the claim.
The same individual cannot concurrently be licensed as a public and all-lines adjuster, nor can an all-lines adjuster may be appointed concurrently as an independent and a company employee adjuster.
Agency – An insurance agency is a business location at which an individual, firm, partnership, corporation, association, or other entity, but not an employee, that engages or employs individuals to engage in any activity which by law may be performed only by a licensed insurance agent.
An agency:
Must complete an application for an agency license, which must be renewed every 3 years
Must have a licensed and appointed full-time agent in charge of each agency location
That fails to file an application for licensure may be levied an administrative penalty of up to $10,000
If an agent works out of his/her own home, the home doesn’t have to be licensed as an agency as long as it is not advertised to be a business location.
Which of the following is true about an insurance agency?
An agency must have a licensed and appointed full-time agent in charge
An insurance agency is a business location at which an individual, firm, partnership, corporation, association, or other entity that employs individuals to engage in any activity which by law may be performed only by a licensed insurance agent.
Which type of adjuster is hired on behalf of a third-party claimant to negotiate and settle a claim?
Public Adjuster
A public adjuster is a person hired for a fee on behalf of an insured or third-party claimant to negotiate and settle a claim. An all-lines adjuster is self-employed or employed by an insurer or an independent adjusting firm and determines the amount of a claim and settles the claim, but cannot concurrently be licensed as a public and all-lines adjuster.
A personal lines agent may not sell which type of insurance?
Limited credit insurance
A personal lines agent is limited to transacting business related to property and casualty insurance sold to individuals and families for noncommercial purposes.
Appointments
An agent:
Must be appointed with a carrier in order to earn a commission or deliver a policy. An agent may use another carrier for excess or rejected business, which is defined as applications that are rejected or amounts requested that exceed what the “home company” will issue or cases that will not be issue at a standard rate. This is done using “a single case agreement” that falls under the state’s “exchange of business” law.
May present a proposal to a company that has not appointed him/her, if the sale is in the business for which he/she is licensed. If the policy is sold, the agent must obtain an appointment which then allows the carrier to issue the policy and pay a commission.
May broker business, which means that it is placed through another agent who operates as a broker. Both broker and agent must be licensed in the line of insurance being sold.
Unless specifically prohibited, the same individual may at any one time hold any and all categories of appointments for which he/she has qualified and been licensed under this code. An agent must have a separate appointment as to each insurer by whom he/she is appointed as an agent.
A customer service representative may be appointed only by the following:
A person holding a Florida general lines agent license
A general lines insurance agency
A surplus lines agent if the surplus lines agent obtained surplus lines licensure based upon licensure as a general lines. If the surplus lines agent obtained such licensure upon grounds of being a managing general agent, that surplus lines agent may not appoint a customer representative.
Which of the following is incorrect about insurance company appointments?
An agent must be appointed for property and casualty insurance separately
The department may issue a single appointment covering both property and casualty insurances to an individual licensed for both kinds of insurance and appointed as agent for both kinds by the same insurer.
License Requirements
Any person seeking a personal lines license in Florida must be:
Trustworthy and competent
A natural person at least 18 years of age
A United States citizen or legal alien who possesses work authorization from the United States Bureau of Citizenship and Immigration Services and a bona fide resident of this state
The applicant’s place of business will be located in Florida and be identifiable and accessible by the public, and the applicant must be actively engaged in the business of insurance
Qualified by knowledge, experience or instruction by completing any of the following:
Successfully completed an insurance course of a minimum of 60 hours approved by the Department covering property, casualty, and inland marine insurance
Completed at least 6 months of responsible insurance duties as a substantially full-time employee in the area of property and casualty insurance sold to individuals and families for noncommercial purposes
Completed at least 6 months of responsible insurance duties as a licensed and appointed customer representative, limited customer representative, or service representative in property and casualty insurance
Application
An applicant must file a written application completed under oath and signed by the applicant. A third party may complete, sign, and submit the application on the applicant’s behalf. If the applicant takes the licensing exam before submitting the application, an exam application must be submitted with the fees. Applications may be submitted online.
The method for completing the prelicensing education must be stated on the application. The application will ask if the applicant has ever been refused an insurance license, voluntarily surrendered, or suspended or revoked in any other state. Details must be provided if any insurer or MGA claims the applicants is indebted to him.
Background Check
Applicants are required to submit a set of fingerprints and pay the fee to the department in order to investigate the applicant’s qualifications. The fingerprints must be taken by a law enforcement agency or the exam center. An applicant’s Social Security number also must be provided on the application in order to verify child support enforcement.
Examination
Applicants must take and pass a written examination. License examinations may not be taken more than 5 times in a 1 year period. A lapsed or suspended licensee may have to retake the exam and pay the fees before the license can be reinstated.
Which of the following is not a qualification to apply for an insurance license in Florida?
Must have a high school diploma or GED
The person must also be trustworthy and competent and a resident of Florida.
Maintaining a License
Continuing Education
Compliance with continuing education requirements must occur prior to the issuance, continuation, reinstatement, or renewal of any appointment.
New agents licensed within the past 5 years must complete a must take a 5-hour law and ethics course specific to the license held every 2 years. In addition, the licensee must complete 19 hours of elective continuing education courses every 2 years. The total amount of CE required is 24 hours every 2 years.
An agent licensed for 6 years or more must complete only 20 hours. However, the 20 hours must be in intermediate or advanced courses.
An agent who has been licensed for at least 25 years, a CLU or CPCU, has a B.S. in risk management or insurance with 18 or more semester hours in upper-level insurance courses, must complete 10 hours of CE every 2 years
A nonresident licensee must complete the required CE hours in the home state as long as the home state is reciprocal with Florida
Failure to comply will result in nonrenewal of the license. However, the department can grant an extension of time (up to 1 year) during which the requirements may be completed.
Communicating with the Department
A new residence address, principal business street address, mailing address, contact telephone numbers, including a business telephone number, or email address must be reported to the Department of Financial Services within 30 days.
Recordkeeping
Every agent transacting any insurance policy must maintain in his/her office, or have readily accessible by electronic or photographic means, for a period of at least 5 years after policy expiration, records of policies he/she transacted. This enables policyholders and department to obtain all necessary information, including daily reports, applications, change endorsements, or documents signed or initialed by the insured concerning such policies.
Criminal and Administrative Actions
Reporting Agent Crimes – If an agent is declared guilty of any crime punishable by imprisonment for 1 year or more, it must be reported to the Insurance Department within 30 days. Where the crime occurred is irrelevant.
Reporting Administrative Actions – Administrative actions include those relating to the:
Business of insurance
Sale of securities
Activities involving fraud, dishonesty, untrustworthiness, or breach of fiduciary duty
Any licensee must report any administrative action, including copies of the orders, reported by any governmental or regulatory agency in Florida or any other state or jurisdiction to the department.
A new agent must complete ______ hours of continuing education every ______ year(s).
24 hours/2 years
New agents must take 24 hours of continuing education every 2 years and agents licensed for 6 years or more must complete 20 hours in intermediate or advanced courses.
A change of address must be reported to the DFS within how many days after moving?
30
A new residence address, principal business street address, mailing address, contact telephone numbers, including a business telephone number, or e-mail address must be reported to the Department of Financial Services within 30 days.
If you are found guilty of any crime punishable by imprisonment one year or more, you must report it to the Insurance Department within how many days?
30
If you are declared guilty of any crime that is punishable by imprisonment for 1 year or more, you must report it to the Insurance Department within 30 days, even if you pleaded “no contest” or it occurred outside of Florida or even the U.S.
Maintaining a License (continued)
Suspension, Termination, Revocation of License – The department may, in its discretion, deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant or agent. It may suspend or revoke a person’s eligibility to hold a license or appointment if it finds that any one or more of the following applicable grounds exist:
Any cause for which issuance of the license or appointment could have been refused had it then existed and been known to the department
Violation of any provision of this code or of any other law applicable to the business of insurance in the course of dealing under the license or appointment
Violation of any lawful order or rule of the department, commission, or office
Failure or refusal, upon demand, to pay over to any insurer he/she represents, or has represented, any money coming into his/her hands belonging to the insurer
Violation of the provision against twisting, as defined in the Unfair Methods of Competition
In the conduct of business under the license or appointment, engaging in unfair methods of competition or in unfair or deceptive acts or practices, or having otherwise been a source of injury or loss to the public
Willful over-insurance of any property or health insurance risk
Having been found guilty of or having pleaded guilty or nolo contendere (no contest) to a felony or a crime punishable by imprisonment of 1 year or more under federal or state laws, or under the law of any other country, without regard to whether a judgment of conviction has been entered by the court having jurisdiction of such cases
If a life agent, violation of the code of ethics
Cheating on an examination required for licensure or violating test center or examination procedures. Communication of test center and examination procedures must be clearly established and documented.
Failure to inform the department in writing within 30 days after pleading guilty or nolo contendere (no contest) to, or being convicted or found guilty of, any felony or a crime punishable by imprisonment of 1 year or more under the laws of the United States or of any state, or under the law of any other country without regard to whether a judgment of conviction has been entered by the court having jurisdiction of the case
Knowingly aiding, assisting, procuring, advising, or abetting any person in the violation of a provision of the insurance code or any order or rule of the department, commission, or office
Failure to comply with any civil, criminal, or administrative action taken by the child support enforcement program to determine paternity or to establish, modify, enforce, or collect support
An insurance license may not be suspended for which of the following?
Over-insuring a health insurance risk
An agent’s license will not be suspended for over-insuring a health insurance risk unless the agent willfully over-insured it.
Maintaining a License (continued)
Appointments
Subject to renewal or continuation by the appointing entity, the appointment of an agent will continue in effect until the person’s license is revoked or otherwise terminated, unless written notice of earlier termination of the appointment is filed with the department. If a licensee is not reappointed by another company within 48 months, the license will lapse and a new examination must be taken for re-licensure.
Subject to an appointee’s contract rights, an appointing entity may terminate its appointment of any appointee at any time. The appointing entity must give the agent at least 60 days advance written notice of its intention to terminate the appointment. Exceptions include:
When termination is based upon a ground which would subject the appointee to suspension or revocation of his or her license
The appointing contract allows for less days advance notice
The appointing entity must notify the department within 30 days after terminating an appointment. The written notice must include the reason(s) for the termination. Upon termination of the appointment of an appointee, whether by failure to renew or continue the appointment, the appointing entity must:
File with the department the information required under the regulation
Subject to the exceptions provided under the regulation, continue the outstanding contracts transacted by an agent until the expiration date or anniversary date when the policy is a continuous policy with no expiration date
An appointee may terminate the appointment at any time by giving written or electronic notice to the appointing entity or to the department. The department will immediately terminate the appointment and notify the appointing entity of the termination. The termination is subject to the appointee’s contract rights, if any.
Agent Responsibilities
Fiduciary Capacity
A fiduciary holds a position of special trust and confidence.
Premium Accountability
An agent, as a fiduciary, accepts premiums, return premiums, or other funds on behalf of the insurer and offers advice about financial security. As a fiduciary on behalf of the insurer, the payment of premiums to the agent by the insured is the same as giving the money directly to the insurer. The agent’s fiduciary responsibility is to turn that money over to the insurer immediately.
Separate Account Requirements
An agent/agency must keep funds belonging to each insurer in a separate account so it can be properly audited. An agent must not commingle the insurer’s premium with personal funds, or otherwise use it for personal purposes.
Agent Responsibilities/Commissions and Compensation/Charges for Extra Services
Agents are paid by commissions that are a percentage of the first year premium, and thereafter, a percentage of subsequent renewal premiums. A written contract between the agent and the party paying the negotiated fee must be signed by both parties and include the promise that any commissions paid by the insurer will refund the amount paid by the party within 30 days. The contract must be retained by the agent for 3 years.
Sharing of Commissions – An agent may not share a commission or any valuable consideration with anyone who does not have a license and appointment for the type of insurance sold. Commissions may be shared with a person who is licensed and appointed in the same line of business.
An agent may write excess or rejected business (business that was first rejected by the agent’s company or accepted only on a substandard basis) with another company. One of the typical reasons for business to be rejected is because the risk limits are in excess of what the agent’s company will accept.
A licensed and appointed health insurance agent may broker rejected business to another agent appointed by the issuing insurer. The brokerage must be desired by both parties and in the best interest of the insured.
The agent’s fiduciary responsibility is to turn that money over to the insurer _____________.
Immediately
As a fiduciary on behalf of the insurer, the payment of premiums to the agent by the insured is the same as giving the money directly to the insurer.
A homeowner agent may share a commission or any valuable consideration with anyone who:
Has an appointment and license to sell homeowner insurance
Commissions may be shared with a person who is licensed and appointed in the same line of business.
A contract between the agent and the party paying the negotiated fee must be signed by both parties and retained by the agent for how many years?
3
A written contract between the agent and the party paying the negotiated fee must be signed by both parties and include the promise that any commissions paid by the insurer will refund the amount paid by the party within 30 days. The contract must be retained by the agent for 3 years.
Reply to DFS and/or Office of Insurance Regulation
Civil Immunity
A person, other than a person filing a required report or other required information, may provide the department, commission, or office with information about the financial condition of an insurer. Unless the person acted with knowledge that the information was false or with reckless disregard for the truth or falsity of the information, he or she is immune from civil liability arising out of the provision of the information.
Examination Testimony
A person may ask to be excused from testifying or producing records involving an examination, hearing, or investigation conducted by the DFS or Office of Insurance Regulation, for fear that it might incriminate the person who will then be prosecuted. DFS or the Office will direct the person to testify or produce the evidence, but the person will not be prosecuted or subjected to any penalty or forfeiture.
Ethics
Avoid the commission of acts or the existence of circumstances that would constitute grounds for suspension, revocation, or refusal of licensees. The purpose of an insurance license issued to an agent is to authorize and enable the licensee to actively and in good faith engage in the insurance business as an agent with respect to the general public and to facilitate the public supervision of such activities in the public interest.
Examples of Unfair Trade and Marketing Practices include:
Twisting Rebating Defamation Misrepresentation CPCU: Canons of the Code of Professional Ethics for CPCU
Clearly communicates the minimum standards of conduct expected for CPCUs and for those who are candidates for this designation
Disciplinary process includes investigation of violations of the Code
The 3 requirements of the CPCU designation are education, experience, and ethics
Agent Ethics can be summarized by the principle in the Golden Rule: “Conduct business with a client as you would want business to be conducted with you.”
Which of the following is not considered unethical as described in the Unfair Trade and Marketing Practices?
Representation
Unfair Trade and Marketing Practices provide examples of unethical behavior, such as twisting, rebating, churning, and misrepresentation.
Insurance Guaranty Fund
Florida Insurance Guaranty Association
The Florida Insurance Guaranty Association is a nonprofit legal entity. All insurers authorized to conduct business in Florida must be members of the association. Further, as a condition of such authority, an insurer agrees to reimburse the association for all claim payments the association makes on said insurer’s behalf if such insurer is subsequently rehabilitated. For the purposes of administration and assessment, the association is divided into 2 separate accounts:
Auto liability and auto physical damage account
All other eligible insurance account
The association’s liability for the contractual obligations of the insolvent insurer is in excess of $100 and does not exceed:
$300,000 per policy per claim $200,000 for the portion of a covered homeowner’s insurance claim which relates only to damage to the structure and contents In no event is the association liable for any penalties or interest. To pay covered claims and claim expenses, the association will levy assessments in the proportion that each insurer’s net direct written premiums in Florida in the class protected by the account bears to the net total written premiums received from all respective insurers the previous year, not to exceed 2% of each insurer’s net total written premium.
Emergency assessments will be levied for the direct payment of covered claims of insolvent insurers by the effects of a hurricane. The following types of insurers are not eligible for guarantee payments:
Life, annuity, health, disability Protection against investment risks Fidelity and surety bonds Creditor-debtor transactions Warranty Ambulance service, health care, funeral merchandise or service Optometric, pharmaceutical, or dental service Legal expense Ocean marine or wet marine Self-insurance Title Surplus lines Workers’ Compensation and employer liability Transfer of investment or credit risk Government guaranteed
The Florida Insurance Guaranty Association will assume the contractual obligations of an insolvent insurer up to _________ for any one policy.
$300,000
The Association’s liability for the contractual obligations of the insolvent insurer does not exceed $300,000 for any one policy and an additional $200,000 for the portion of a covered claim for damage to the structure and contents.
Marketing Practices
Unfair Methods of Competition
Sliding
Representing to the applicant that a specific coverage or product is:
Required by law in conjunction with the purchase of insurance when such coverage or product is not required
Freely included in the policy when in fact there is a charge required
Charging an applicant for a specific coverage or product, in addition to the cost of the insurance coverage applied for, without the informed consent of the applicant
Boycott, Coercion, and Intimidation
Entering into any agreement to commit, any act of boycott, coercion, or intimidation resulting in an unreasonable restraint of, or monopoly in, the business of insurance.
Example
A bank or credit union will not give a loan unless the borrower buys insurance from a specific company.
Misrepresentation
An agent failing to make the prospect aware of relevant facts is guilty of misrepresentation. This occurs if statements are false, incomplete or misleading. If it was a material fact, the contract can be considered void even though the agent’s misstatement may have been innocent. On the other hand, a purposeful misstatement of an irrelevant fact will not result in a voided contract.
A sales person who knowingly makes a false statement can be found guilty of a 2nd degree misdemeanor.
Agents can only make accurate statements regarding their carrier’s financial strength. Additionally, representatives may not use misleading titles that tend to conceal the fact that they are insurance agents.
Defamation
It is deemed unethical for an agent to make any statement (oral or written) or promote any statement that is designed to be malicious or critical about any person or company in the insurance industry.
False Advertising
Knowingly making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public:
In a newspaper, magazine, or other publication
In the form of a notice, circular, pamphlet, letter, or poster
Over any radio or television station; or
In any other way, an advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of insurance, which is untrue, deceptive, or misleading
Unfair Methods of Competition
Unfair Discrimination
An insurer may not discriminate against a policy holder by refusing to underwrite, refusing to issue or renew a policy, by denying a claim, by terminating a policy or by increasing rates because the insured’s claims may result from abuse, assault, battery or sexual assault from a family or household member.
“Abuse” and “domestic violence” is the occurrence of one or more of the following:
Attempting or committing assault, battery, sexual assault, or sexual battery
Placing another in fear of imminent serious bodily injury by physical menace
False imprisonment
Physically or sexually abusing a minor child
An act of domestic violence resulting in physical injury or death of one family or household member by another family or household member
Other Unfair Practices
Excess Charges – Occur when agent collects money over and above what a policy requires.
False Claims – All claim forms must contain a warning that insurance claim fraud is subject to a 3rd degree felony
Unfair Rate Increases for Persons in Military Service – Charging an increased premium for reinstating a motor vehicle insurance policy that was canceled by the insured solely because he/she was deployed outside the United States.
Unfair Claims Settlements
Settling claims based on an application altered without the insured’s consent
Misstating terms of the policy in an attempt to obtain an unjust settlement
Not making a proper investigation
Making a misrepresentation to the insured
Not responding to communications from the client
Denying a claim without a reasonable investigation
Not giving claim affirmation or denial after receiving proof of loss
Failure to give proper explanation of a claim denial
Not outlining the allocation of a claim payment
Offering a settlement so low that the claimant must resort to a lawsuit to be fairly compensated
Failure to pay PIP claims within 30 days after the insurer is furnished written notice
Unfair Methods of Competition (continued)
Fraud
Any action involving intentional deception that results in injury to another party, and concealment, misrepresentation, misleading behavior, or nondisclosure of a material fact
Knowingly submitting a PIP claim for medical expenses at a clinic that falsely submitted a fraudulent license application
Controlled Business
Controlled business is the practice of an agent selling policies or annuity contracts to:
Himself/herself or family members
Officers, directors, stockholders, partners, or employees of a business in which he or a family member is engaged
The debtors of a firm, association, or corporation of whom he or she is an officer, director, stockholder, partner, or employee
An agent may have no more than 50% of his/her total business within a 12-month period be from controlled sources.
Twisting
Knowingly making any misleading representations or incomplete or fraudulent comparisons or material omissions with respect to any insurance policy for the purpose of inducing a person to lapse a policy. A valid replacement based on accurate data and resulting in an improvement to the client is not twisting.
Unfair Methods of Competition (continued)
Churning
Churning is the practice whereby policy values (such as cash value) in an existing life insurance policy, annuity contract, and/or any riders, are used to purchase another insurance policy or annuity contract with that same insurer for the purpose of earning additional premiums, fees, commissions, or other compensation.
This practice will not be considered churning if:
There is an objectively reasonable basis for believing that the replacement or extraction will result in an actual and demonstrable benefit to the policyholder
There are no fraudulent, deceptive, misleading or otherwise deceptive omissions
The applicant is informed that the policy values including cash values, etc., will be reduced, forfeited, or used in the purchase of the replacing or additional policy or contract
The applicant is informed that the replacing or additional policy or contract will not be a paid-up policy or that additional premiums will be due, if this is the case
Insurers must use disclosure forms that include disclosure of the premium, the death benefit of the proposed replacing or additional policy, and the date when the policy values of the existing policy or contract will be insufficient to pay the premiums of the replacing or additional policy or contract.
Rebating
An agent may not offer or extend anything of value to a client that is not already a part of the contract, as an incentive to purchase insurance.
Example
Offering to pay the client’s first 3 months of premiums if they buy the policy.
An agent who induces a client to use the cash value of an existing policy to buy an additional but unneeded policy is guilty of _______________.
Churning
Churning is the practice whereby policy values, such as cash value, in an existing life insurance policy, annuity contract, and/or any riders, are used to purchase another insurance policy or annuity contract with that same insurer for the purpose of earning additional premiums, fees, commissions, or other compensation.
Charging different rates or providing different benefits to insureds of the same actuarial class or hazard category is which of the following?
Unfair discrimination Unfair discrimination is knowingly making or permitting individuals of the same actuarially supportable class and equal expectation of life to be charged different rates, paid different dividends or have different terms/conditions regarding any life insurance contract.
A bank or credit union will not give a loan unless the borrower buys insurance from a specific company. This is known as ___________.
Coercion
It is an unfair trade practice to enter into any agreement to commit, any act of boycott, coercion, or intimidation resulting in an unreasonable restraint of, or monopoly in, the business of insurance.
An agent may have no more than ________ of his total business within a 12-month period be from controlled business.
50%
Controlled business is the practice of an agent selling policies or annuity contracts to himself or family members, officers, directors, stockholders, partners, or employees of a business in which he or a family member is engaged, or the debtors of a firm, association, or corporation of whom he or she is an officer, director, stockholder, partner, or employee.
Insurance Contracts
Renewal, Nonrenewal, Cancellation of Homeowners, Personal Auto and Casualty Policies
The denial of an application for an insurance policy and each notice of nonrenewal or cancellation must be accompanied by the specific reasons for denial, including the specific underwriting reasons.
When an insurer refuses to provide private passenger automobile insurance or personal lines residential property insurance to an applicant due to a loss underwriting report from a consumer reporting agency, notify the applicant of his right under the federal Fair and Accurate Credit Transactions Act to obtain a copy of the report from the consumer reporting agency.
An insurer must give the named insured at least 45 days’ advance written notice of nonrenewal.
Nonpayment of Premium – At least 10 days’ written notice of cancellation must be given for nonpayment of premium.
An insurer must give the named insured written notice of cancellation other than nonrenewal at least 45 days prior to the effective date of the cancellation, except:
When cancellation occurs during the first 90 days for reasons other than nonpayment of premium, at least 20 days’ written notice, except:
There has been a material misstatement or misrepresentation
Failure to comply with the underwriting requirements established by the insurer
After the policy has been in effect for 90 days, no policy may be canceled by the insurer, except for:
A material misstatement
Nonpayment of premium
Failure to comply with underwriting requirements established by the insurer within 90 days of the effective date of coverage
A substantial change in the covered risk
The cancellation is for all insureds under the policies for a given class of insureds
A notice explaining the reason for the denial of insurance coverage applies in which of the following?
All notices of denials require a reason
The denial of an application for an insurance policy and each notice of nonrenewal or cancellation must be accompanied by the specific reasons for denial, including the specific underwriting reasons.
Insurance Contracts
Renewal, Nonrenewal, Cancellation of Homeowners, Personal Auto and Casualty Policies (continued)
With respect to any personal lines or commercial residential property insurance policy, the insurer must give the named insured written notice of nonrenewal, cancellation, or termination at least 100 days prior to the effective date of the nonrenewal, cancellation, or termination.
Upon a declaration of an emergency and the filing of an order by the Commissioner of Insurance Regulation, an insurer may not cancel or nonrenew a personal/commercial residential property policy covering a dwelling/residential property in Florida damaged by hurricane or wind loss and subject to the declaration of emergency for a period of 90 days after the property has been repaired (this means it has restored to the extent that it is insurable).
However, an insurer may then cancel or nonrenew a policy prior to the repair of the dwelling/residential property:
Upon 10 days’ notice for nonpayment of premium
Upon 45 days’ notice:
For a material misstatement or fraud related to the claim
If the insurer determines that the insured has unreasonably caused a delay in the repair of the dwelling
If the insurer has paid policy limits
If the insurer elects to nonrenew a policy covering a property that has been damaged, the insurer must provide at least 90 days’ notice to the insured that the insurer intends to nonrenew the policy 90 days after the dwelling or residential property has been repaired.
If any cancellation or nonrenewal of a policy is to take effect during the duration of a hurricane, the effective date of cancellation or nonrenewal is extended until the end of the duration of the hurricane.
Claims on property insurance policies that are the result of an act of God or the result of water damage may not be used as a cause for cancellation or nonrenewal, unless the insurer can demonstrate, by claims frequency or otherwise, that the insured has failed to take action reasonably necessary as requested by the insurer to prevent recurrence of damage to the insured property.
Insurance Contracts/ Proof of loss
Proof of Loss
When an insurer receives the notice of claim, within 15 days it will send the claimant forms for filing proof of loss. If these forms are not given to the claimant within 15 days, the claimant may meet the proof of loss requirements by giving the insurer a written statement of the nature and extent of the loss within the time limit.
If the policy provides for periodic payment for a continuing loss, written proof of loss must be given to the insurer within 90 days after the end of each period for which the insurer is liable. For any other loss, written proof must be given within 90 days after such loss. In any event, the proof required must be given no later than 1 year from the time specified unless the claimant was legally incapacitated.
All proof of loss statements must prominently display the following statement:
“Pursuant to s. 817.234, Florida Statutes, any person who, with the intent to injure, defraud, or deceive any insurer or insured, prepares, presents, or causes to be presented a proof of loss or estimate of cost or repair of damaged property in support of a claim under an insurance policy knowing that the proof of loss or estimate of claim or repairs contains any false, incomplete, or misleading information concerning any fact or thing material to the claim commits a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084, Florida Statutes.”
For reference:
- 234 – False and Fraudulent Insurance Claims
- 082 – Imprisonment not exceeding 5 years
- 083 – Fine up to $5,000
- 084 – Imprisonment not exceeding 10 years as a habitual felony offender as of the third felony conviction
A proof of loss must be provided to the insurer within _____ days of a homeowner loss.
90
A written proof must be given within 90 days after the loss except for a continuing loss.
Payment of Claims
Dual Interest
A property insurer must transmit claims payments directly to the primary policyholder, payable to the primary policyholder only. A dual endorsement from any mortgage holder or lienholder is not required for amounts payable under the policy for:
Personal property and contents
Additional living expenses
Other covered items not subject to a recorded security interest
Third-party Automobile Claims
Before making any payment on a claim for damage to an automobile for a total loss not owned by an insured, the insurer must first search the Department of Highway Safety and Motor Vehicles records to determine whether the damaged vehicle is subject to any liens. If there is a lien, payment of the claim will be made jointly to the owner of the damaged vehicle and the first lienholder of record.
When making any payment on a third party claim for partial damage to an automobile, the insurer must include the following on the loss estimate:
“Failure to use the insurance proceeds in accordance with the security agreement, if any, could be a violation of s. 812.014 (Theft, Robbery, and Related Crimes), Florida Statutes. If you have any questions, contact your lending institution.”
Casualty Health Claims
The insurance contract must include the following provisions:
Time of Payment of Claims – After receiving written proof of loss, the insurer will pay monthly all benefits then due for (type of benefit). Benefits for any other loss covered by this policy will be paid as soon as the insurer receives proper written proof.
Payment of Claims – Benefits will be paid to the insured. Loss-of-life benefits are payable in accordance with the beneficiary designation in effect at the time of payment. If none is then in effect, the benefits will be paid to the insured’s estate. Any other benefits unpaid at death may be paid, at the insurer’s option, either to the insured’s beneficiary or estate.
Unpaid Premium – Upon the payment of a claim under this policy, any premium then due and unpaid or covered by any note or written order may be deducted therefrom.
The insurance contract may not prohibit, and claims forms must provide an option for, the payment of benefits directly to a licensed hospital, licensed ambulance provider, physician, dentist, or other person who provided the services in accordance with the provisions of the policy for care provided.
Health insurers must reimburse all claims or any portion of any claim from an insured or an insured’s assignees, for payment under a health insurance policy, within 45 days after receipt of the claim by the health insurer.
A health insurer, upon receipt of the additional information requested from the insured or the insured’s assignees must pay or deny the contested claim or portion of the contested claim, within 60 days. An insurer must pay or deny any claim no later than 120 days after receiving the claim.
Choose the statement that is true about the payment of claims.
A property insurer must transmit claims payments directly to the primary policyholder
A property insurer must transmit claims payments directly to the primary policyholder, payable to the primary policyholder only.
Premium Financing
A premium finance agreement is a promissory note or other written agreement by which an insured promises or agrees to pay a premium finance company the amount to be advanced under the agreement to an insurer or to an insurance agent, in payment of premiums on an insurance contract, together with a service charge as authorized and limited by law.
Premium Finance Company
Upon signing a premium finance agreement, the insured and premium finance company agree that premiums will be advanced to the insurance company and the insured will repay the premium finance company in installments.
A service charge up to $12 out of every $100 per year plus a nonrefundable additional charge up to $20 assessed by the premium finance company will be separately stated, identified, and included on the installment bill. A premium finance company must file all forms, service charge, and interest rate plans with the Office for approval.
The premium finance agreement allows the company to cancel any insurance policy listed in the agreement after mailing a written notice of 10 days’ if the insured fails to pay a defaulted installment.
Premium Financing by an Insurance Agent or Agency – A general lines agent may make reasonable service charges for financing insurance premiums on policies produced by the agent or agency.
The service charge cannot exceed $3 per installment, or $36 per year
The rate of interest charged is not to exceed 18% simple interest per year on the unpaid balance or average unpaid balance billed over the term and subject to endorsement changes
Premium Financing by an Insurer
An insurer:
Must file premium finance agreement forms, related forms, and service charge or interest rate plans separately from rates and filings
May finance property, casualty, surety, and marine insurance policies issued or produced by that insurer or its agent
The service charge may not be more than 50% of the additional charge by premium finance companies.
A general lines agent can finance insurance premiums and charge service charges up to______ per installment.
$3.00
A general lines agent may make service charges for financing insurance premiums on policies produced by the agent, but it cannot exceed $3 per installment, or $36 per year, or a simple interest rate over 18% on unpaid balances.
Property
Hurricane Deductible
Prior to issuing a personal lines residential property insurance policy, the insurer must offer alternative deductible amounts applicable to hurricane losses equal to $500, 2%, 5%, or 10% of the policy dwelling limits, unless the specific percentage deductible is less than $500. The insurer must provide the written notice in conjunction with each renewal of the policy. Failure to provide notice constitutes a violation of the Insurance Code, but does not affect the coverage provided under the policy.
For a dwelling with limits between $100,000 and $250,000, the insurer may, in lieu of offering a policy with a $500 hurricane deductible, offer a policy that:
The insurer guarantees it will not be nonrenewed for reasons of reducing hurricane loss for one renewal period
Contains up to a 2% hurricane deductible
For a dwelling with limits of $250,000 or more, the insurer must offer hurricane deductibles of 2%, 5%, or 10% of the policy dwelling limits. Notification of the separate hurricane deductible must include the following:
“THIS POLICY CONTAINS A SEPARATE DEDUCTIBLE FOR HURRICANE LOSSES, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.”
“THIS POLICY CONTAINS A CO-PAY PROVISION THAT MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.”
The actual dollar value of the hurricane deductible must appear on the declarations page of the policy at issuance and, for renewal, on the renewal declarations page of the policy or on the premium renewal notice
For any personal lines residential property insurance policy containing an inflation guard rider, the policy at issuance and the renewal declarations page or premium renewal notice must include the:
Actual dollar value of the hurricane deductible
Possibility that the hurricane deductible may be higher than indicated when loss occurs due to application of the inflation guard rider
A personal lines residential property insurance policy covering a risk valued at less than $500,000 may not have a hurricane deductible in excess of 10% of the policy dwelling limits, unless the policyholder provides the insurer with a handwritten statement:
“I do not want the insurance on my home to pay for the first (specify dollar value) of damage from hurricanes. I will pay those costs. My insurance will not.”
Changes to the deductible percentage may be implemented only as of the renewal date.
Hurricane Deductible (continued)
The hurricane deductible of any personal lines residential property insurance policy issued or renewed must be applied as follows:
The hurricane deductible applies on an annual basis to all covered hurricane losses that occur during the calendar year
If a hurricane deductible applies separately to each of one or more structures insured under a single policy, these requirements apply with respect to the deductible for each structure
If there are 2 or more hurricanes during the calendar year, the insurer may apply a deductible to a subsequent hurricane that is the greater of the remaining amount of the hurricane deductible or the amount of the deductible that applies to perils other than a hurricane
If there are hurricane losses in a calendar year on more than one policy issued by the same insurer, the hurricane deductible will be the highest amount stated in any one of the policies
A personal lines residential insurance policy providing hurricane coverage may, at the mutual option of the insured and insurer, include a secured hurricane deductible.
The first $500 of any claim, regardless of the peril causing the loss, is fully deductible
With respect to hurricane losses only, the next $5,000 in losses is fully insured, subject to a copayment requirement of 10%
With respect to hurricane losses only, the remainder of the claim is subject to the hurricane deductible chosen by the insured up to 10% of the policy dwelling limits
The insurer agrees to renew the coverage on a guaranteed basis for a period of years after initial issuance of the secured deductible equal to at least 1 year for each 2 percentage points of deductible unless the policy is canceled for nonpayment of premium or the insured fails to maintain the certificate of security
The Florida Hurricane Catastrophe Fund will negotiate agreements creating a financing consortium to serve as an additional source of lines of credit to secure deductibles. Any licensed insurance agent may act as the agent of such consortium.
If the policyholder has taken appropriate hurricane mitigation measures regarding the residence covered under the policy, the insurer will provide the insured the option of selecting an appropriate reduction in the policy’s hurricane deductible or selecting the appropriate discount credit or other rate differential. The insurer must provide the policyholder with notice of the options available.
The insurer must offer alternative deductible amount applicable to hurricane losses equal to which of the following?
5%
Prior to issuing a personal lines residential property insurance policy, the insurer must offer alternative deductible amounts applicable to hurricane losses equal to $500, 2%, 5%, or 10% of the policy dwelling limits.
Wind Mitigation/Code Issues
When the policy covers the peril of Windstorm or Hail, a risk may be eligible for a credit to the wind portion of the premium if the dwelling has been built or retrofitted in conformance with the windstorm mitigation elements of the 2001 Florida building code.
The insurer must notify the applicant or policyholder of any personal lines residential property insurance policy, at the time of the issuance of the policy and at each renewal, the availability and combinations of premium discount, credit, other rate differential, or reduction in deductibles for properties on which fixtures or construction techniques demonstrated to reduce the amount of loss in a windstorm have been installed or implemented.
The credits apply to the:
Roof Covering Roof Deck Attachment Roof-Wall Connection Opening Protection Roof Shape Secondary Water Resistance Besides the existence of changes to the dwelling construction, the credits for the mitigation features are impacted by:
Whether the construction of the dwelling is new or existing
Location of dwelling
Community participation in the ISO Building Code Effectiveness Grading program
A rate filing for residential property insurance must include actuarially reasonable discounts, credits, or other rate differentials, or appropriate reductions in deductibles for the insured who installs or implements windstorm damage mitigation techniques, alterations, or solutions to prevent windstorm losses.
The insurer must require proof of the existence of the loss mitigation features. The Financial Services Commission developed a uniform mitigation verification inspection form that will be used by all insurers. The inspection will be completed by authorized mitigation inspectors. The Division of Insurance Fraud will investigate authorized mitigation inspector suspected of completing inspections that are intentionally false or include fraudulent statements in the inspection form, and if convicted, charged a 1st degree misdemeanor.
Catastrophic Ground Collapse
Definitions
Catastrophic Ground Cover Collapse – Geological activity that results in all the following:
The abrupt collapse of the ground cover
A depression in the ground cover clearly visible to the naked eye
Structural damage to the covered building, including the foundation
The insured structure being condemned and ordered to be vacated by the governmental agency authorized by law to issue such an order for that structure
Contents coverage applies if there is a loss resulting from a catastrophic ground cover collapse. Damage consisting merely of the settling or cracking of a foundation, structure, or building does not constitute a loss resulting from a catastrophic ground cover collapse.
Professional Engineer – A person who has a bachelor’s degree or higher in engineering and experience and expertise in the identification of sinkhole activity, as well as other potential causes of structural damage.
Professional Geologist – A person who has a bachelor’s degree or higher in geology or related earth science and experience and expertise in the identification of sinkhole activity, as well as other potential geologic causes of structural damage.
Sinkhole – A landform created by subsidence of soil, sediment, or rock as underlying strata dissolved by groundwater; a sinkhole forms by collapse into subterranean voids created by dissolution of limestone or dolostone or by subsidence as these strata are dissolved.
Sinkhole Loss – Structural damage to the covered building, including the foundation, caused by sinkhole activity. Contents coverage and additional living expenses apply only if there is structural damage to the covered building caused by sinkhole activity.
Catastrophic Ground Collapse (Sinkholes)
Definitions (continued)
Structural Damage – A covered building, regardless of the date of its construction, has experienced the following:
Interior floor displacement
Foundation displacement or deflection
Damage resulting in listing, leaning, or buckling of the exterior load-bearing walls
Damage resulting in movement or instability of the ground
Every insurer authorized to transact property insurance in Florida must provide coverage for a catastrophic ground cover collapse. The insurer must make available, for an appropriate additional premium, coverage for sinkhole losses on any structure, including the contents of personal property.
The insurer may require an inspection of the property before issuance of sinkhole loss coverage. A policy for residential property insurance may include a deductible amount applicable to sinkhole losses equal to 1%, 2%, 5%, or 10% of the policy dwelling limits, with appropriate premium discounts offered with each deductible amount.
The insurer may restrict catastrophic ground cover collapse and sinkhole loss coverage to the principal building.
Insurers offering policies that exclude coverage for sinkhole losses must inform policyholders: “YOUR POLICY PROVIDES COVERAGE FOR A CATASTROPHIC GROUND COVER COLLAPSE THAT RESULTS IN THE PROPERTY BEING CONDEMNED AND UNINHABITABLE. OTHERWISE, YOUR POLICY DOES NOT PROVIDE COVERAGE FOR SINKHOLE LOSSES. YOU MAY PURCHASE ADDITIONAL COVERAGE FOR SINKHOLE LOSSES FOR AN ADDITIONAL PREMIUM.”
Coverage for catastrophic ground cover collapse is required, and sinkhole coverage is optional. So, insurers offering sinkhole coverage to policyholders may nonrenew the policies maintaining sinkhole coverage at the option of the insurer, and then provide an offer of coverage that includes catastrophic ground cover collapse and excludes sinkhole coverage.
Insurers MUST:
Notify policyholders that a nonrenewal is for purposes of removing sinkhole coverage, and that the policyholder is being offered a policy that provides coverage for catastrophic ground cover collapse
Provide an actuarially reasonable premium credit or discount for the removal of sinkhole coverage and provision of only catastrophic ground cover collapse
Provide each policyholder, subject to the insurer’s approved underwriting or insurability guidelines, the opportunity to purchase an endorsement providing sinkhole coverage
Any claim, including initial, supplemental, and reopened claims under an insurance policy that provides sinkhole coverage is barred unless notice of the claim was given to the insurer within 2 years after the policyholder knew or reasonably should have known about the sinkhole loss.
Upon receipt of a claim for a sinkhole loss, an insurer must meet the following claim investigation standards:
Make an inspection of the insured’s premises to determine if there has been physical damage to the structure which may be the result of sinkhole activity
Engage a professional engineer or professional geologist to conduct testing to determine the cause of the loss within a reasonable professional probability and issue a report if:
The insurer is unable to identify a valid cause of the damage or discovers damage to the structure which is consistent with sinkhole loss
The policyholder demands testing
Provide written notice to the policyholder disclosing the information after the first inspection, a determination of the cause of damage, and information about engaging a professional engineer or professional geologist to verify or eliminate sinkhole loss and make recommendations regarding land and building stabilization and foundation repair
If the insurer determines that there is no sinkhole loss, the insurer may deny the claim. If the insurer denies the claim, without performing testing, the policyholder may demand testing by the insurer in writing. If a sinkhole loss is verified, the insurer must pay to stabilize the land and building and repair the foundation in accordance with the recommendations of the professional engineer, and in consultation with the policyholder, subject to the coverage and terms of the policy. The insurer may limit its payment to the ACV of the sinkhole loss, not including repairs performed below the existing foundation of the building, until the policyholder enters into a contract for the performance of building stabilization or foundation repairs.
Upon the insurer’s obtaining the written approval of the policyholder and any lienholder, the insurer may make payment directly to the persons selected by the policyholder to perform the land and building stabilization and foundation repairs. The insurer, however, is not liable for the work performed. Fees and costs of the professional engineer or professional geologist must be paid by the insurer.
No insurer may nonrenew any policy of property insurance on the basis of filing claims for partial loss caused by sinkhole damage or clay shrinkage as long as the total of such payments does not exceed the current policy limits of coverage for property damage, and provided the insured has repaired the structure in accordance with the engineering recommendations upon which any payment or policy proceeds were based.
The insurer may engage a professional structural engineer to make recommendations as to the repair of the structure.
Catastrophic ground cover collapse must meet four requirements. Which of the following is NOT one of those requirements?
Failure of lateral loads of the structure
Catastrophic ground cover collapse also includes an insured structure being condemned and ordered to be vacated by the responsible governmental agency.
Hurricane Occurrence
Definitions
Hurricane – A storm system that has been declared a hurricane by the National Hurricane Center of the National Weather Service.
Hurricane Watch – Issued 48 hours before the anticipated onset of tropical storm force winds of 74 mph or higher.
Hurricane Warning – Issued 36 hours before the anticipated onset of tropical storm force winds of 74 mph or higher; warning can stay in effect when dangerously high water or a combination of dangerously high water and waves continue.
Hurricane Coverage – Loss or damage caused by the peril of windstorm during a hurricane. (Windstorm means wind, wind gusts, hail, rain, tornadoes, or cyclones caused by a hurricane resulting in direct physical loss or damage to property.)
Hurricane Damage – Ensuing damage to the interior of a building, or to property inside a building, caused by rain, snow, sleet, hail, sand, or dust if the direct force of the windstorm first damages the building, causing an opening through which rain, snow, sleet, hail, sand, or dust enters and causes damage.
Hurricane Occurrence
Beginning – A hurricane watch or warning is issued for any part of Florida by the National Hurricane Center of the National Weather Service.
During – The hurricane continues for the time period during which hurricane conditions exist anywhere in Florida.
End – 72 hours following the termination of the last hurricane watch or warning issued for any part of Florida by the National Hurricane Center of the National Weather Service.
A hurricane warning is issued _______ hours before the anticipated onset of tropical storm force winds of 74 mph or higher, and will stay in effect when dangerously high water or a combination of dangerously high water and waves continue.
36
A hurricane watch or warning is issued for any part of Florida by the National Hurricane Center of the National Weather Service as the beginning of the hurricane threat, and ends 72 hours following the last hurricane watch or warning issued for any part of Florida by the National Hurricane Center of the National Weather Service.
Fungi
Definitions
Fungi – All non-chlorophyll-bearing plants of a lower order than mosses and liverworts, such as rusts, smuts, mildews, molds, yeasts, and bacteria not living in humans or other animals.
Mold – Microscopic filamentous fungi that causes disintegration of organic matter and produces spores; breeds contamination in any moist ground; can destroy buildings and personal property if not prevented.
Mitigation – Prevent or mitigate the spread of fungi, including, but not limited to, mold or mildew, by removing and disposing of wet drywall, insulation, carpet, cabinetry, or other fixtures on or within the property.
Mold Remediation – The removal, cleaning, sanitizing, demolition, or other treatment, including preventive activities, of mold or mold-contaminated matter of greater than 10 square feet that was not purposely grown at that location.
The ISO Homeowner 2011 policy adds an Additional Coverage for Fungi, Wet or Dry Rot, or Bacteria. The policy will pay for damages caused by fungi, wet or dry rot, or bacteria, the cost to remove the fungi, tear out and replace part of the building or other covered property, and testing of air or property to confirm the fungi, wet or dry rot, and bacteria are eliminated. This coverage applies only as a result of an insured peril and if all reasonable means were used to preserve the property from further damage.
The Legislature finds it necessary, in the interest of the public safety and welfare, to prevent damage to real and personal property, to avert economic injury to the residents of this state, and to regulate persons and companies that hold themselves out to the public as qualified to perform mold-related services. Statutes require that any person engaged in the business of pest control be licensed by the Department of Agriculture and Consumer Services.
Loss Assessment (HO-6)
Coverage under a unit owner’s residential property policy must include at least $2,000 in property loss assessment coverage. It must be due to a direct loss to the property. The direct loss must be the type of loss covered by the unit owner’s residential property insurance policy. The unit owner’s loss assessment coverage must include a deductible of no more than $250 per direct property loss, or $0 deductible if the unit owner suffered damage from the same direct loss to owned property for which the deductible was paid.
All owner/members of The Guaranty Association are assessed.
The maximum amount of any unit owner’s loss assessment coverage that can be assessed for any loss is an amount equal to the unit owner’s loss assessment coverage limit in effect one day before the date of the occurrence.
Regardless of the number of assessments, an insurer providing loss assessment coverage to a unit owner is not required to pay more than an amount equal to that unit owner’s loss assessment coverage limit as a result of the same direct loss to property.
Every individual unit owner’s residential property policy must contain a provision stating that the coverage afforded by such policy is excess coverage over the amount recoverable under any other policy covering the same property.
Exclusions
Exclusion of Windstorm or Hail (Hurricane)
The perils of hurricane, windstorm or hail must be excluded if the property is eligible for coverage from the Citizens Property Insurance Corporation (CPIC), unless specific prior approval is received from the Company. A property insurer must make available, at the option of the policyholder, an exclusion of windstorm coverage.
The coverage may be excluded only if:
When the policyholder is a natural person, the policyholder personally writes and provides to the insurer the following statement in his or her own handwriting and signs his or her name, which must also be signed by every other named insured on the policy, and dated:
“I do not want the insurance on my (home/mobile home/condominium unit) to pay for damage from windstorms. I will pay those costs. My insurance will not.”
When the policyholder is other than a natural person, the policyholder provides to the insurer on the policyholder’s letterhead the following statement that must be signed by the policyholder’s authorized representative and dated:
“(Name of entity) does not want the insurance on its (type of structure) to pay for damage from windstorms. (Name of entity) will be responsible for these costs. (Name of entity’s) insurance will not.”
If the structure insured by the policy is subject to a mortgage or lien, the policyholder must provide the insurer with a written statement from the mortgage holder or lienholder indicating that the mortgage holder or lienholder approves the policyholder electing to exclude windstorm coverage or hurricane coverage from his or her or its property insurance policy.
An insurer nonrenewing a policy and issuing a replacement policy, or issuing a new policy, that does not provide wind coverage must provide a notice to the mortgage holder or lienholder indicating the policyholder has elected coverage that does not cover wind.
Exclusions (continued)
Exclusion of Contents
An insurer issuing a residential property insurance policy, except for a condominium unit owner’s policy or a tenant’s policy, must make available, at the option of the policyholder, an exclusion of coverage for the contents.
The coverage may be excluded only if the policyholder personally writes and provides to the insurer the following statement in his or her own handwriting and signs his/her signature, which must also be signed by every other named insured on the policy, and dated:
“I do not want the insurance on my (home/mobile home) to pay for the costs to repair or replace any contents that are damaged. I will pay those costs. My insurance will not.”
An insurer will keep the original copy of a required signed statement, electronically or otherwise, and provide a copy to the policyholder providing the signed statement. A signed statement meeting these requirements creates a presumption that there was an informed, knowing rejection of coverage.
The exclusions authorized apply for the term of the policy and for each subsequent renewal. Changes to the exclusions may be implemented only as of the date of renewal.
Loss Settlement
If a person and an insurer have agreed in writing to the settlement of a claim, the insurer must pay according to the terms of the agreement no later than 20 days after the settlement is reached.
Interest
If the payment is not made within 20 days, or any other date the agreement may provide, it must bear interest at a rate of 12% per year from the date of the agreement. If the payment is conditioned upon the execution of a release, the interest will not begin to accrue until the executed release is given to the insurer.
If the settlement of a claim has been agreed to by the insurer and claimant, the insurer must pay no later than how long after the settlement is reached?
20 days
If a person and an insurer have agreed in writing to the settlement of a claim, the insurer must pay according to the terms of the agreement no later than 20 days after the settlement is reached.
Mediation or Appraisal
A nonadversarial alternative dispute resolution procedure for a mediated claim resolution conference is prompted by the need for effective, fair, and timely handling of property insurance claims. Before resorting to these procedures, policyholders and insurers are encouraged to resolve claims as quickly and fairly as possible. This is available with respect to claims under personal lines residential policies before commencing the appraisal process, or litigation.
Mediation may be requested only by the policyholder, as a first-party claimant, or the insurer. If requested by the policyholder, participation by legal counsel is permitted. Mediation is also available to litigants referred to the department by a county court or circuit court.
At the time a first-party claim is filed by the policyholder, the insurer will notify the policyholder of its right to participate in the mediation program. The costs of mediation will be reasonable, and the insurer will bear all of the cost of conducting mediation conferences, except as otherwise provided in the statute.
The department will adopt a property insurance mediation program to be administered by the department or its designee. The rules will be modeled after practices and procedures set forth in mediation rules of procedure adopted by the Supreme Court. The rules provide for:
Reasonable requirement for processing and scheduling of requests for mediation
Qualifications of mediators
Provisions governing who may attend mediation conferences
Selection of mediators
Criteria for the conduct of mediation conferences
Right to legal counsel
All statements made and documents produced at a mediation conference are settlement negotiations in anticipation of litigation. All parties to the mediation must negotiate in good faith and have the authority to immediately settle the claim.
Mediation is nonbinding. However, if a written settlement is reached, the insured has 3 business days to rescind the settlement unless the insured has cashed or deposited any check or draft paid to the insured for the disputed matters as a result of the conference. A settlement agreement reached and not rescinded is binding and acts as a release of all specific claims that were presented in that mediation conference.
The term “claim” refers to any dispute between an insurer and a policyholder relating to a material issue of fact other than a dispute wherein:
The insurer has a reasonable basis to suspect fraud
Based on agreed-upon facts as to the cause of loss, there is no coverage under the policy
The insurer has a reasonable basis to believe that the policyholder has intentionally made a material misrepresentation of fact which is relevant to the claim, and the entire request for payment of a loss has been denied on the basis of the material misrepresentation
The amount in controversy is less than $500, unless the parties agree to mediate a dispute involving a lesser amount
A windstorm or hurricane loss does not comply with Notice of Windstorm or Hurricane Claims statute
Loss Payment
When an agent or a residential insurer receives a communication with respect to a claim, the insurer must, within 14 calendar days, review and acknowledge receipt of the communication unless:
Payment is made within that period of time
The failure to acknowledge is caused by factors beyond the control of the insurer that reasonably prevent such acknowledgment
In this case,“agent” refers to any person to whom an insurer has granted authority or responsibility to communicate with respect to claims on behalf of the insurer.
Unless the insurer’s acknowledgment reasonably advises the claimant that the claim doesn’t appear to be covered by the insurer, the insurer must provide necessary claim forms, instructions, and an appropriate telephone number.
Within 10 working days after an insurer receives proof of loss statements, the insurer must begin investigating unless factors beyond the control of the insurer reasonably prevent the start of the investigation.
Within 90 days after an insurer receives notice of a property insurance claim from a policyholder, the insurer must pay or deny the entire or portion of the claim unless factors beyond the control of the insurer reasonably prevent payment. Any claim payment paid 90 days after the insurer receives notice of the claim, or paid more than 15 days after there are no longer factors beyond the control of the insurer preventing payment, whichever is later, must bear interest, at a rate set quarterly by the CFO, from the date the insurer received notice of the claim. Failure to comply constitutes a violation of this code. However, failure to comply with this subsection shall not form the sole basis for a private cause of action.
In the event of a total loss or destruction of any personal property on which the amount of the appraised or agreed loss is less than the total amount insured, the insurer must return the unearned premium for the excess of insurance over the appraised or agreed loss to the insured at the same time and in the same manner as the loss is paid. The unearned premium is a just and legal claim against the insurer.
As a precondition to accepting payment for a sinkhole loss, the policyholder must file a copy of any sinkhole report regarding the insured property which was prepared on behalf or at the request of the policyholder.
Valued Policy Law – In the event of the total loss of any building, structure, mobile home, or manufactured building and insured by any insurer as to a covered peril, the insurer’s liability under the policy if caused by a covered peril, will be the amount of money for which the property was insured. The valued policy payment does not apply if there has been any change increasing the risk without the insurer’s consent or fraudulent/criminal fault on the part of the insured or one acting in his/her behalf.
In the event of the total loss of a building, the insurer’s liability under the policy if caused by a covered peril will be the amount of money for which the property was insured. This describes which of the following?
Valued Policy Law
Dwelling
The policy Coverage A amount will be the insurer’s liability regardless of the replacement cost of the dwelling, but it does not apply if there has been any change increasing the risk without the insurer’s consent or fraudulent or criminal fault on the part of the insured or acting in the insured’s behalf.
Citizens Property Insurance Corporation (Citizens)
Property insurers may make agreements to share fairly insurance for applicants unable to get insurance through ordinary methods.
The Department requires all insurers holding a certificate of authority, other than joint underwriting associations, to provide windstorm coverage to eligible applicants. Mobile homes are eligible for coverage if they are used as dwellings and are tied down in compliance with state requirements.
An applicant or policyholder is eligible for coverage only if an offer of coverage cannot be obtained by or for the applicant or policyholder from an admitted insurer at approved rates.
All insurers required to be members of such association must participate in its writings, expenses, and losses. Surplus of the association must be retained for the payment of claims and may not be distributed to the member insurers. Participation by member insurers is proportional to the net direct premiums of each member insurer during the preceding calendar year.
The association is subject to the supervision and approval of the board of governors of the Citizens Property Insurance Corporation. Furthermore, the association must accept a Commercial Lines residential risk with limits above $10 million or a Personal Lines residential risk with limits above $1 million if coverage is not available in the authorized market.
Choose the statement that is false regarding the Citizens Property Insurance Corporation:
Mobile homes are not eligible for coverage even if used as dwellings
Mobile homes are eligible for coverage if they are used as dwellings and are tied down in compliance with state requirements.
Surplus Lines
Florida Surplus Lines Service Office
The Florida Surplus Lines Service Office is a nonprofit association with the following objectives:
Protect consumers seeking insurance in Florida
Permit surplus lines insurance to be placed with approved surplus lines insurers
Establish a self-regulating organization that will promote and permit orderly access to surplus lines insurance in Florida
Enhance the number and types of insurance products available to consumers in Florida
Provide a source of advice and counsel for consumers, surplus lines agents, insurers, and government agencies concerning the operation of the surplus lines insurance market
Protect Florida revenues
All surplus lines agents will, as a condition of holding a Florida surplus lines agent license, be members of this association and report and file information on each surplus lines insurance policy. The service office will immediately report any unfiled policy to the department for enforcement of compliance with the Florida Surplus Lines Law.
The service office has the following duties:
Receive, record, and review all surplus lines insurance policies or documents
Prepare, maintain, and send surplus lines records and reports to the service office
Prepare and deliver to each surplus lines agent quarterly reports of each surplus lines agent’s business and collect and remit the surplus lines tax to the department
Collect from each surplus lines agent a service fee of up to 0.3% of the total gross premium of each surplus lines policy for the cost of operation of the service office. The service fee will be paid by the insured.
Facilitate and encourage compliance with the surplus lines
The association will provide an administrative procedure manual that surplus line insurance agents must follow. All surplus lines agents licensed in Florida must comply with the association plan of operation and the agent’s manual.
Which of the following is not a duty of the Florida Surplus Lines Service Office?
Collect a service fee of up to 3.0% of the total gross premium of each surplus lines policy for the cost of operation of the service office
The Service Office also collects a service fee of up to .3% of the total gross premium of each surplus lines policy from each surplus lines agent for the cost of operation of the service office, facilitates and encourages compliance with the surplus lines, and prepares and delivers quarterly business reports to each surplus lines agent.
Eligibility for Export
Definitions
Policy – An insurance policy, contract, cover note, certificate or any other detailed evidence of coverage, including policy jacket, endorsements and coverage parts.
Export – To place, in an unauthorized insurer under the Surplus Lines Law, insurance covering a subject of residential insurance located in Florida.
Eligible Surplus Lines Insurer – An unauthorized insurer that has been made eligible by the Department to issue insurance coverage under the Surplus Lines Law.
Surplus Lines Agent – An individual licensed and appointed as provided in the Surplus Lines Law to handle the placement of insurance coverages with unauthorized insurers and to place such coverage with authorized insurers as to which the licensee is not appointed as an agent.
Diligent Effort – Seeking coverage from and having been rejected by authorized insurers currently writing this type of coverage and documenting these rejections. For a residential structure with a dwelling replacement cost of:
Less than $1 million, rejections from 3 authorized insurers are required
$1 million or more, rejection from at least 1 authorized insurer is required
A diligent effort for a residential structure with a dwelling replacement cost of $250,000 means rejections from how many authorized insurers are required?
3
For a residential structure with a dwelling replacement cost of less than $1 million, rejections from 3 authorized insurers are required, and if $1 million or more, rejection from at least 1 authorized insurer is required constitute diligent efforts to obtain insurance from an authorized insurer.
Eligibility for Export (continued)
Diligent Effort Requirements:
Policies subject to the diligent effort requirements include:
Residential and multi-peril residential policies
Boats or aircraft used solely for personal pleasure, family use, or the transportation of executives, employees, and guests of the insured
Surplus lines agents must verify that a diligent effort has been made to procure the full amount of required insurance from an authorized insurer before pursuing surplus lines coverage by requiring a properly documented statement of diligent effort from the retail or producing agent.
The surplus lines agent’s reliance must be reasonable under the particular circumstances surrounding the export of that particular risk. Reasonableness will be assessed by taking into account factors which include, but are not limited to, a regularly conducted program of verification of the information provided by the retail or producing agent.
No insurance coverage is eligible for export unless it meets all of the following conditions:
The full amount of insurance required must not be procurable, after a diligent effort has been made by the producing agent to do so, from among the insurers authorized to transact and actually writing that kind and class of insurance in Florida
The amount of insurance exported will only be the excess over the amount procurable from authorized insurers. If it is not possible to obtain the full amount of insurance required by layering the risk, it is permissible to export the full amount.
Declinations must be documented on a risk-by-risk basis
The premium rate at which the coverage is exported must not be lower than that rate in current use by a majority of the authorized insurers for the same coverage on a similar risk.
The policy/contract form under which the insurance is exported must not be more favorable in coverage/rates to the insured than similar contracts in current use in Florida by the majority of authorized insurers writing similar coverages on similar risks.
The exported insurance policy, except for fire or windstorm policies, must not provide for deductible amounts other than those available under similar policies in current use by one or more authorized insurers.
For personal residential property risks, the retail or producing agent must advise the insured in writing that coverage from Citizens Property Insurance Corporation:
May be available and less expensive
May provide less coverage
Will be accompanied by higher assessments
Auto Insurance
Required Coverages
Financial Responsibility Law
Any owner’s/operator’s policy of liability insurance may be furnished as proof of financial responsibility
Each nonresident owner/registrant of a motor vehicle that, whether operated or not, has been physically present within Florida for more than 90 days during the preceding 365 days must maintain proof of financial responsibility that is in effect continuously throughout the period the motor vehicle remains within Florida
A member of the U.S. Armed Forces called on active duty outside Florida whose spouse is residing with the vehicle where it is primarily maintained is exempt from proving financial responsibility in Florida
The lessor of a vehicle leased for a period of 1 year or more is the owner and must provide proof of financial responsibility if the lessor does not require the lessee to obtain limits no less than 100/300/50 or $500,000 combined
In the case of a permissive user (one who uses a vehicle with the permission of the owner), the owner of the vehicle is liable for proof of financial responsibility up to 100/300/50, and up to $500,000 combined if the permissive owner is uninsured or has limits less than $500,000 combined liability
Self-insurance, maintaining an insurance policy or a deposit of cash is acceptable means of proving financial responsibility
Personal Injury Protection (PIP)
An auto insurance policy must provide personal injury protection to:
The named insured
Relatives residing in the same household
Persons operating the insured motor vehicle
Passengers in the motor vehicle
Anyone struck by the motor vehicle and suffering bodily injury while not an occupant of a motor vehicle
Minimum PIP Limits
$10,000 in medical and disability benefits
$5,000 in death benefits resulting from bodily injury, sickness, disease, or death arising out of the ownership, maintenance, or use of a motor vehicle
A person must maintain proof of financial responsibility if physically present within Florida for more than how many days during the preceding 365 days?
90
Each nonresident owner or registrant of a motor vehicle that has been physically present within Florida for more than 90 days during the preceding 365 days must maintain proof of financial responsibility that is in effect continuously throughout the period the motor vehicle remains within Florida.
Required Coverages (continued)
Types of PIP Coverages
Medical Benefits – 80% of all reasonable expenses for medically necessary medical, surgical, x-ray, dental, and rehabilitative services, including prosthetic devices and medically necessary ambulance, hospital, and nursing services if the individual receives initial services and within 14 days after the motor vehicle accident.
Medical benefits do not include massage or acupuncture regardless of the person, entity, or licensee providing massage or acupuncture, and a licensed massage therapist or licensed acupuncturist may not be reimbursed for medical benefits under this section.
Disability Benefits – 60% of any loss of gross income and loss of earning capacity per individual from inability to work proximately caused by the injury sustained by the injured person, plus all expenses reasonably incurred in obtaining from others ordinary and necessary services in lieu of those that, but for the injury, the injured person would have performed without income for the benefit of his/her household. All disability benefits payable under this provision must be paid at least every 2 weeks.
Death Benefits – Death benefits of $5,000 per individual are in addition to the medical and disability benefits provided under the insurance policy. The insurer may pay death benefits to the executor or administrator of the deceased, to any of the deceased’s relatives by blood, legal adoption, or marriage, or to any person appearing to the insurer to be equitably entitled to such benefits.
Exclusions – Any insurer may exclude benefits:
For injury sustained by the named insured and relatives residing in the same household while occupying another motor vehicle owned by the named insured and not insured under the policy or for injury sustained by any person operating the insured motor vehicle without the consent of the insured
To any injured person whose conduct contributed to his or her injury by causing injury to himself or herself intentionally or suffering the injury while committing a felony
Personal injury protection insurance benefits are overdue if not paid within 30 days after the insurer is furnished written notice of the fact of a covered loss. It is a violation of the insurance code for an insurer to fail to timely provide required benefits with frequency constituting a general business practice.
Benefits are not payable to an insured person if that person has committed insurance fraud relating to PIP coverage under his/her policy. Any insurance fraud voids all coverage arising from the claim related to such fraud under the PIP coverage of the insured person who committed the fraud, regardless of whether a portion of the insured person’s claim may be legitimate, and any benefits paid before the discovery of the fraud is recoverable by the insurer in its entirety from the person who committed insurance fraud.
Endorsements
These endorsements only apply to the named insured and family members.
Extended PIP
An Extended PIP endorsement can be purchased that increases benefits for medical reimbursement from 80% to 100% and from 60% to 80% for income loss.
Additional PIP
The Additional PIP endorsement increases this $10,000 limit by amounts such as $10,000, $25,000, $40,000, and $90,000. These increases do not affect the $5,000 death benefit limit.
Financial Responsibility Limits of Liability
The minimum financial responsibility limits of liability for automobile insurance in Florida for the owner of a motor vehicle are as follows:
$10,000 for bodily injury to, or death of, one person in any one crash
$20,000 for bodily injury to, or death of, 2 or more persons in any one crash
$10,000 for injury to, or destruction of, property of others in any one crash
Financial Responsibility after a Conviction of Driving under the Influence – An owner or operator of a motor vehicle who has been found guilty of driving under the influence must maintain the following minimum limits:
$100,000 for bodily injury to, or death of, 1 person in any one crash and, subject to such limits for 1 person
$300,000 for bodily injury to, or death of, 2 or more persons in any 1 crash
$50,000 for property damage in any 1 crash
These higher limits must be carried for a minimum period of 3 years.
Choose the limit of benefits that is incorrect.
The minimum financial responsibility limits of liability for automobile insurance in Florida for the owner of a motor vehicle are 15/30/10
The minimum financial responsibility limits of liability are 10/20/10.
Uninsured/Underinsured Motorists Coverage
No motor vehicle liability insurance policy may be delivered unless uninsured motor vehicle coverage is provided. However, it is allowed if an insured named in the policy makes a written rejection of the coverage on behalf of all insureds under the policy.
The rejection/selection of lower limits must fully advise the applicant of the nature of the coverage and state that the coverage is equal to bodily injury liability limits unless lower limits are requested or the coverage is rejected. The heading of the form must state:
“You are electing not to purchase certain valuable coverage which protects you and your family or you are purchasing uninsured motorist limits less than your bodily injury liability limits when you sign this form. Please read carefully.”
The limits of uninsured motorist coverage may be not less than the limits of bodily injury liability insurance purchased by the named insured, or such lower limit complying with the rating plan of the company as may be selected by the named insured.
Cancellation/Nonrenewal
After the first 60 days a policy is in force, notice of cancellation will be effective only if it is based on one or more of the following grounds:
Nonpayment of premium
Material misrepresentation or fraud
Suspension or revocation of the license or registration of the named insured or other operator covered by the policy
No notice of cancellation will be effective UNLESS:
Delivered at least 45 days prior to the effective date of cancellation, except when cancellation is for nonpayment of premium, in which case no less than 10 days’ notice of cancellation may be given
The reason or reasons for cancellation accompany the notice of cancellation
No insurer may fail to renew a policy unless it gives at least 45 days’ advance notice of its intention not to renew; the reasons for refusal to renew must accompany such notice. This subsection does not apply in case of nonpayment of premium.
When a policy is canceled (other than for nonpayment of premium) or nonrenewed, the insurer must notify the first-named insured of possible eligibility for insurance through the Automobile Joint Underwriting Association.
Except in the case of cancellation for nonpayment of premium or nonrenewal of the policy, the notice of cancellation must prominently contain the following words:
“You are permitted by law to appeal this cancellation. An appeal must be filed no later than 20 days before the effective date of cancellation set forth in this notice. Forms for such appeal and the regulations pertaining thereto may be obtained from the office. The office does not have the authority to extend the effective date of cancellation; therefore you should obtain replacement coverage prior to the effective date of cancellation.”
An insurer may not deny an application for automobile liability insurance solely on the ground that renewal of similar coverage has been denied by another insurer or on the ground of an applicant’s failure to disclose that such denial has occurred.
No insurer may nonrenew a policy for reasons based:
Entirely on the sex, occupation, marital status, residence, military service, or age of the insured, or the principal place of garaging the insured vehicle in Florida, or on any combination of such factors
On the race, color, creed, or national origin of the insured or for any reason which is arbitrary or without reason
Instead of canceling or nonrenewing a policy, an insurer may, upon expiration of the policy term, transfer a policy to another insurer under the same ownership or management by giving the first-named insured at least 45 days’ advance notice of:
Its intent to transfer the policy
The premium
Specific reasons for any increase in the premium
An insurer may not deny an application for automobile liability insurance or impose a surcharge or otherwise increase the premium rate for an automobile liability policy solely on the basis that the applicant, a named insured, a member of the insured’s household, or a person who customarily operates the insured’s vehicle is a volunteer driver.
A “volunteer driver” means a person who provides services, including transporting individuals or goods, without compensation in excess of expenses to a private nonprofit agency or a charitable organization.
After the first 60 days a policy is in force, the underwriter cannot cancel for which of the following reasons?
Unacceptable driving record since effective date
After the first 60 days a policy is in force, notice of cancellation will be effective only if it is based on nonpayment of premium, material misrepresentation or fraud, or suspension or revocation of the license or registration of the named insured or other operator covered by the policy.
Treatment of Motorcycles
Any motor vehicle having a seat or saddle for the use of the rider and designed to travel on not more than 3 wheels in contact with the ground, but excluding a tractor or a moped, is considered a motorcycle. The Florida Motorcycle Safety Education Program establishes and administers motorcycle safety courses. The following requirements apply:
Minimum of 12 hours of instruction with at least 6 hours of actual motorcycle operation
Organizations must be approved in order to conduct a safety program
A register fee must not be more than $20 per student, and refunded upon completion of the course
Every first-time applicant for a license to operate a motorcycle who is under age 21 must complete a motorcycle education course. Proof of completion must be presented to the driver licensing examining office prior to licensing to operate a motorcycle
Florida has a waiver for completing a state testing requirement as long as the rider is older than 21 and has completed a rider education course. Each motorcycle registered to a person under 21 years of age must display a license plate that is unique in design and color.
The Florida full helmet law was repealed in 2000. Florida currently has a partial requirement stating a helmet is required for riders under the age of 21 or those any age who carry less than $10,000 in medical coverage for motorcycle-related injuries.
A person may not drive any motorcycle on any highway, roadway, or parking lot in any race, speed competition or contest, drag race or acceleration contest, test of physical endurance, or exhibition of speed or acceleration or for the purpose of making a speed record.
A person under 16 years of age may not operate a motorcycle that has a motor with more than
150 cubic centimeters displacement, or rent a motorcycle or a moped.
In consideration of road hazards involving road construction, Florida requires a grooved pavement ahead sign 500 feet in advance of a milled or grooved surface.
Florida’s Ride Legal, Ride Smart is a multi-issue safety campaign. The campaign includes activities designed to increase motorist awareness of motorcycles, decrease impaired riding, increase helmet and protective equipment use, increase proper licensure and promote rider education and awareness. The Florida Highway Patrol’s (FHP) Enjoy the Ride Safe and Sober is a state wide billboard campaign designed to encourage motorcycle riders of all ages to make sure they don’t drink and ride and ride as safely as possible.
The Florida Motorcycle Safety Education Program establishes and administers motorcycle safety courses for a minimum of _____ hours of instruction with at least _____ hours of actual motorcycle operation.
12/6
Every first-time applicant for a license to operate a motorcycle who is under age 21 must complete a motorcycle education course and Florida has a waiver for completing a state testing requirement as long as the rider is over 21 and has completed a rider education course.
Responsibility for Minors Operating Motor Vehicles
No parent or guardian of any minor child may authorize or knowingly permit any minor child to violate any provisions of the Florida Uniform Traffic Control Law. A court has original jurisdiction in the case of any minor alleged to have committed a violation of law or ordinance pertaining to the operation of a motor vehicle.
If a minor is arrested for the commission of a criminal traffic offense, the minor will not be placed in any police car which also includes an adult under arrest, unless the minor was alleged to have participated with the adult in the same alleged crime. If the minor does not appear:
As a first offense, the minor will serve up to 5 days in a staff-secure shelter or secure juvenile detention center
As a second or subsequent offense, the minor will serve up to 15 days in a staff-secure shelter or secure juvenile detention center
A learner’s driving permit may be issued to a person at least 15 years old who completes an application, passes a written exam, passes a vision and hearing exam, completes the traffic law and substance abuse education course, and meets an education requirement (e.g. in school, graduate, enrolled for GED, exemption, or hardship).
When operating a motor vehicle, the holder of a learner’s permit must:
Be accompanied by a driver with a valid license, is at least 21 years of age, and occupies the closest seat to the right of the driver
Operate during daylight hours up to 3 months after issuance of the learner’s permit, and until 10 p.m., after 3 months
The learner may apply for a driver’s license after at least 12 months:
With no moving traffic convictions while driving on the permit
With a moving traffic conviction but elects to attend a traffic driving school
A driver’s license may be issued to a person between 16-18 years old who completes an application, and if the parent, guardian, or responsible adult certifies that she, or another licensed driver over 21 years old, has accompanied the applicant for a total of not less than 50 hours’ behind-the-wheel experience, with at least 10 hours during the night.
A driver’s license may be issued to a 16 or 17 year old who completes an application and the parents certify that they accompanied her for how many hours of behind-the-wheel experience?
50 Hours
A driver’s license may be issued to a person at least 16 but under 18 years old who completes an application, and if a responsible adult certifies that she, or another licensed driver over 21 years old, accompanied the applicant for a total of not less than 50 hours’ behind-the-wheel experience, with at least 10 hours during the night.
Inspection for Auto Coverage
A private passenger motor vehicle insurance policy providing physical damage coverage, including collision or comprehensive coverage, may not be issued in Florida unless the insurer has inspected the motor vehicle, EXCEPT:
A policyholder who has been insured for 2 years or longer, without interruption, under a private passenger motor vehicle policy which provides physical damage coverage, if the agent of the insurer verifies the previous coverage
To a new, unused motor vehicle purchased from a licensed motor vehicle dealer or leasing company, if the insurer is provided with:
A bill of sale or buyer’s order with a full description of the motor vehicle, including all options and accessories; or
A copy of the title which establishes transfer of ownership from the dealer or leasing company to the customer and a copy of the window sticker or the dealer invoice showing the itemized options and equipment and the total retail price of the vehicle
To a temporary substitute motor vehicle
To a motor vehicle which is leased for less than 6 months, if the insurer receives the lease or rental agreement containing a description of the leased motor vehicle, including its condition. Payment of a physical damage claim is conditioned upon receipt of the lease or rental agreement.
To a vehicle that is 10 years old or older, as determined by the model year
To any renewal policy
To a motor vehicle policy issued in a county with a 1988 estimated population of less than 500,000
When the insurer’s authorized inspection service has no inspection facility either in the municipality in which the automobile is principally garaged or within 10 miles of such municipality
When the insured vehicle is insured under a commercially rated policy that insures 5 or more vehicles
When an insurance producer is transferring a book of business from one insurer to another
When an individual insured’s coverage is being transferred and initiated by a producer to a new insurer
The required inspection must be provided by the insurer or by a person or organization authorized by the insurer. The applicant may be required to pay the cost of the inspection, not to exceed $5. The fee may not be considered part of the premium. The inspection must be recorded on an approved form, and the form or a copy must be retained by the insurer with its policy records for the insured.
The insurer must provide a copy of the form to the insured upon request. If an insurer provides the inspection at no cost to the applicant, it may include the expense of the inspection within a rate filing.
The inspection must include at least the following:
Take a physical imprint of the vehicle identification number of the vehicle, or otherwise record the vehicle identification number in an approved manner
Record the presence of accessories
Record the locations of and a description of existing damage to the vehicle
An insurer may defer an inspection for 30 calendar days following the effective date of coverage for a new policy. However, this does not apply for a renewal policy or additional or replacement vehicles to an existing policy if an inspection at the time of the request for coverage would create a serious inconvenience for the applicant and such hardship is documented in the insured’s policy record.
The physical damage coverage on the motor vehicle may not be suspended during the term of the policy due to the applicant’s failure to provide the required documents. Payment of a claim is conditioned upon the receipt by the insurer of the required documents. No physical damage loss occurring after the effective date of the coverage is payable until the documents are provided to the insurer.
Comparative Negligence Law/ Pure Comparative Fault
Definitions
Accident
The events and actions that relate to the incident as well as those events and actions that relate to the alleged defect or injuries, including enhanced injuries.
Negligence
A duty is owedImage result for arrow iconthe insured breached that dutyImage result for arrow iconthe claimant is injuredImage result for arrow iconand the injury is a direct result of the breached duty.
A negligence action is a civil action for damages based upon a theory of negligence, strict liability, product liability, or professional malpractice in terms of contract, tort, or breach of warranty. The substance of an action determines whether an action is a negligence action.
Pure Comparative Fault
Each party to the action will be evaluated and determined to be a certain percent at fault. The degree of fault could range from 0% to 100%. Each would be able to collect from the other for the amount of damages that equal the percent of being free of fault.
Example
Insured A was judged to be 40% at fault and Claimant A was 60% at fault. Insured A is responsible for 40% of Claimant A’s injuries, and Claimant A is responsible for 60% of Insured A’s injury.
No recovery is received if a person is injured while under the influence of drugs or alcohol and more than 50% at fault.
Effect of Contributory Fault
In a negligence action, contributory fault is a defense in which the claimant’s chargeability diminishes proportionately as the injured party’s chargeability for being partially at fault increases proportionately. The amount awarded as economic and noneconomic damages for an injury is attributable to the claimant’s contributory fault. It does not bar recovery.
Apportionment of Damages
In a negligence action, the court must enter judgment against each party liable on the basis of such party’s percentage of fault. The apportionment is not on the basis of the doctrine of joint and several liability, which means that the injured may recover all the damages from either of the negligent parties.
In order to allocate any or all fault to a nonparty, a defendant must affirmatively plead the fault of a nonparty and identify the nonparty, if known, or describe the nonparty as specifically as possible. In order to allocate any or all fault to a nonparty and include the named or unnamed nonparty on the verdict form for purposes of apportioning damages, a defendant must prove at trial, by a preponderance of the evidence, the fault of the nonparty in causing the plaintiff’s injuries.
Choose the false statement about the Contributory Negligence Law.
Contributory fault bars recovery in any other means
The amount awarded as economic and noneconomic damages for an injury is attributable to the claimant’s contributory fault and does not bar recovery
Florida Automobile Joint Underwriting Association (FAJUA)
Casualty insurers may make agreements to equitably apportion insurance for applicants unable to obtain automobile insurance through the voluntary markets at standard rates.
Every authorized insurer must be a participant in the FAJUA. Designated insurers will provide policy and claims service acting on behalf of all FAJUA members, and losses and expenses will be equitably apportioned among the insurers.
Any insured placed with the plan must be notified in writing that insurance coverage is being afforded through the plan and not through the private market, within 10 days of placement.
Each application for coverage in the plan shall include, in boldfaced 12-point type immediately preceding the applicant’s signature, the following statement:
“THIS INSURANCE IS BEING AFFORDED THROUGH THE FLORIDA JOINT UNDERWRITING ASSOCIATION AND NOT THROUGH THE PRIVATE MARKET. PLEASE BE ADVISED THAT COVERAGE WITH A PRIVATE INSURER MAY BE AVAILABLE FROM ANOTHER AGENT AT A LOWER COST. AGENT AND COMPANY LISTINGS ARE AVAILABLE IN THE LOCAL YELLOW PAGES.”
An insured placed with the FAJUA must be notified in writing that the insurance coverage is not through the private market within _________ of placement.
10 days
Any insured placed with the plan must be notified in writing that insurance coverage is being afforded through the plan and not through the private market, within 10 days of placement.
Health
Health insurance, also known as “disability insurance,” is insurance of human beings against bodily injury, disablement, or death by accident or accidental means, or the expense thereof, or against disablement or expense resulting from sickness. It provides reimbursement for direct expense of sickness or injury and resulting loss of income.
The majority of health insurance premiums come from group plans sponsored by employers, associations, or other organizations. The employer often pays all or most of the employee’s cost, and employee can choose to include family members at employee’s expense. Generally, it consists, generally, of broad coverage at a lower cost, as well as the ability to tailor the coverages to the group insured.
Health insurance does not include Workers’ Compensation coverages.
Contract Provisions
Grace Period – Time period after a premium due date during which the insured can pay the premium if unpaid by the due date.
7 days – Weekly premium policies
10 days – Monthly premium policies
31 days – All other policies
Reinstatement – Lapsed policy may be reinstated subject to requirements: If premium is not paid by end of grace period the policy lapses, but a policy may automatically reinstate upon receipt of late premium. A company may give a conditional receipt for premium and require reinstatement application and then the policy would be automatically reinstated upon approval of reinstatement application.
Coverage for accidents is immediate, and there is a 10-day waiting period for sickness.
Limitations on Insurer Defenses – This is similar to Incontestable Clause or Time Limit on Certain Defenses. After 2 years, only fraudulent misstatements in the application may be used to void policy or deny a claim.
Waiting or Elimination Period – Time period between issuance and acceptance before sickness benefits begin (avoids adverse selection).
Waiver of Premium – If an insured becomes totally disabled, the premium is waived but coverage remains in force for the duration of the disability or until the policy expires, whichever occurs first.
Double Indemnity – Death benefit is doubled if due to an accident under certain circumstances (e.g. building collapse, boiler explosion, fire, hurricane, tornado, or lightning).
Coverage Continuation – Upon termination from the group policy, the insured is given the opportunity to continue coverage under another policy.
Cancellation Clause – Insurer’s right to cancel policy by giving not less than 20 days’ notice.
Optionally Renewable – Insurer may not cancel during the policy term, but reserves the right to nonrenew the policy upon its expiration.
Conditionally Renewable – Insurer can refuse to renew the policy only under certain circumstances listed in the policy (e.g. all renewals are declined in the state).
Guaranteed Renewable – Insurer must renew the policy to a stated age, typically, 65, but may increase the premium in the underwriting class.
Noncancellable – Greatest degree of protection as the insurer cannot cancel the policy, change the benefits, increase the premium, and renew the policy, at the option of the insured.
Which renewable option provides the greatest degree of protection for the insured?
Noncancellable
Noncancellable provides the greatest degree of protection as the insurer cannot cancel the policy, change the benefits, or increase the premium, and must renew the policy, at the option of the insured.
Types of Policies
Hospitalization Expense Insurance
Hospitalization Expense Insurance is designed to provide indemnity to the insured for the following:
Basic hospitalization expenses for room and board
Nursing care
Laboratory fees
Operating room
Medical supplies
The daily limit for room and board is subject to a maximum number of days. Maternity benefits are usually optional; if chosen there is usually a 9 month waiting period.
Other coverages may have specific limits or blanket limits.
Hospital Indemnity Insurance
This policy pays for a flat amount per days of hospitalization regardless of expenses or other insurance. It can supplement other inadequate coverage.
Accident Insurance
Accident policies provide coverage for expenses arising from accidents, and may include loss of income, loss of time, and dismemberment coverage. It can include optional coverage to reimburse insured for hospital, doctor, surgeon, and nursing care.
Some companies issue accident coverage without an elimination period.
Surgical Expense Insurance
This policy covers fees of physicians for performing surgery. There is maximum amount payable for each procedure, and the surgical schedule of benefits from most expensive and serious down to less expensive and simple available at different premium rates.
Physicians Coverage
Physicians coverage reimburses the insured for nonsurgical care provided by a physician. The benefits are payable for physician services in the hospital, physician’s office, or patient’s home. Typically, a limit applies per visit and subject to a maximum per illness.
Dread Disease
This limited benefit policy pays benefits for the diagnosis and treatment of a specifically named disease or diseases, such as cancer. It provides a daily benefit for confinement in a qualified intensive care unit of a certified hospital. Benefits can be paid as expense incurred, per diem, or a principal sum.
Types of Policies (continued)
Major Medical Insurance
Major Medical policies provide protection against catastrophic losses. Some policies supplement basic hospital/surgical policies, while others intend to provide both basic and catastrophic. Broad coverage is provided for a covered sickness or injury. This includes:
Services in the doctor’s office, hospital, or at home
Hospital room and board
Physician and surgeon fees
Operating room
Medical expenses, such as lab, transfusions, drugs, medicines, x-rays, and anesthetics
Nursing services
The Policy generally includes:
Deductibles up to 10% of maximum limit
High maximum limits of $10,000 to $1 million
Percentage participation/Coinsurance percentages of 20% or 25%
Internal limits for room charges and surgical services
Exclusions are as follows:
Occupational injury or disease if Workers’ Compensation applies
Automobile accident injuries to the extent no-fault benefits are paid
Childbirth, normal pregnancy, elective abortions
Treatment in a VA or other government hospital
Intentionally self-inflicted injury or attempted suicide
Dental expenses except from an accident
Mental illness or reduced benefits for psychiatric care
Injury as a member of an aircraft crew
Cosmetic surgery unless required due to an accident
War
Riders excluding coverage for specific conditions may be added to the policy.
Which of the following is false about Major Medical coverage?
Coinsurance percentages of 10%
Major Medical insurance cover catastrophic losses and charges coinsurance to the insured of 20% or 25%.
Types of Policies (continued)
Disability Income Insurance
Disability Income insurance provides periodic payments when the insured in not able to work due to sickness or injury. A waiting period may apply before income payments begin (e.g., 7, 30, 60, 90 days, or 6 months or a year), and monthly benefits are paid for a specified period of time, or for life.
Rates may vary based on occupation causing a provision to adjust premium accordingly if the occupation changes. A non-prorating policy will not adjust the premiums if the occupation changes. To avoid over-insurance and possible moral hazards, a benefit will not be 100% of monthly income, but rather 66-2/3%.
Florida law allows insurers to add provisions that state that the total disability income for all policies will not exceed the insured’s average monthly earnings for the 2 years preceding disability limited to the lesser of $500 or the benefits due.
Some policies pay benefits for partial disabilities. The definitions of total vs. partial vary by insurer. Generally, the benefit equals half of the total disability payment. There may be a schedule for lump-sum benefits for loss of sight, hands, fingers, toes, etc. Subsequent claims may occur from one claim and be paid if within usually 200 weeks.
Elective indemnity benefit is available for lump-sum benefits for certain injuries, such as fractures or dislocations, instead of weekly or monthly loss of time payments.
Riders may be available for:
Waiver of premium
Cost of Living Adjustment – Adjusts the schedule of benefits on the disability anniversary based on Consumer Price Index.
Social Security Rider – Pays additional income if insured is eligible for social insurance benefits but the benefits have not yet begun, have been denied, or reduced to an amount less than the rider amount.
Guaranteed Insurability Rider – Insured is guaranteed the right to purchase additional insurance at predetermined times in the future without evidence of insurability; insured may be required to meet certain earnings tests to avoid over-insurance.
Medicare Supplement Insurance
Medicare is a federal program. Medicare Supplement Insurance, also called Medigap, is sold by private insurance companies and the insured will pay a monthly premium. It is a standardized insurance policy and only the premium by insurance company may differ.
There are 10 Medicare Supplement plans, Plans A, B, C, D, F, G, K, L, M, and N, but not all insurance companies may offer all the plans. These plans cover Medicare deductibles, copayments, coinsurance, and exclusions; and fill in the gaps.
Under disability income insurance, a monthly benefit will be ________ of the insured’s monthly income.
66 2/3%
To avoid over-insurance and possible moral hazards, a disability income insurance benefit will not be 100% of monthly income, but rather 66 2/3%.
Types of Policies (continued)
Health Maintenance Organization (HMO)
HMOs are a noninsurance alternative that provide comprehensive health services to its members for a prepaid fixed fee, which is similar to an insurance premium.
HMOs encourages preventive activities, such as:
Wellness programs
Diagnostic screenings
Early treatment
They also provide direct delivery of health services through employed or contracted (network) physicians, sometimes in HMO facilities. HMOs include broad coverage, fewer exclusions, low deductibles, and coinsurance.
Preferred Provider Organization (PPO)
PPOs are selected groups of hospitals and medical practitioners in a given area. Each group has a contract with a traditional insurance company or Blue Cross/Blue Shield to provide services at a prearranged cost.
Other policies include Dental, Accidental Death and Dismemberment, and Dread Disease.
Long-Term Care
Long-Term Care insurance includes any individual policy, group policy or rider that is advertised, marketed, offered, solicited, or designed to provide coverage for no less than 12 consecutive months, also referred to as Extended Care. It may cover diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services that are provided in a setting other than an acute care unit of a hospital.
Disclosure
Outline of Coverage
This contains the underwriting classification of the insured and riders, exclusions, summary of benefits and cancellation provisions. It must be presented at time of sale or delivery.
Renewal Agreements/Nonrenewal and Cancellation
An insurer that provides individual health insurance coverage must renew or continue the policy at the option of the individual. An insurer may nonrenew or cancel the individual health insurance coverage for the following reasons:
Failure to pay premiums, contributions, copayments or pay timely payments
Fraud or material misrepresentation
Insurer is ceasing to offer coverage in the individual market
Insured no longer lives or works in the service area, if policy is based on a network plan
If the insurance is only available to association members, failure of insured to maintain membership requirements
The insurer must notify at least 90 days before the date of nonrenewal due to discontinuing the offering of a particular non-grandfathered policy in the individual market.
Advertising
The Commissioner will adopt rules establishing standards for the advertising, marketing, and sale of health insurance policies in order to protect applicants from unfair or deceptive sales or enrollment practices.
An insurer must file with the office any insurance advertising material intended for use in Florida and may immediately begin using such material upon filing, subject to subsequent disapproval by the office. Following receipt of a notice of disapproval or a withdrawal of approval, the insurer must immediately cease use of the disapproved material.
The office may also disapprove an advertisement at any time and enter an immediate order requiring that the use of the advertisement be discontinued if it determines that the advertisement violates any rule of the Commission.
Which of the following cannot be used to show proof of financial responsibility?
A bank account with an adequate balance
A bank account cannot be used to show proof of financial responsibility.
Catastrophic ground cover collapse must meet four requirements. Which of the following is NOT one of those requirements?
Failure of lateral loads of the structure
Catastrophic ground cover collapse must also include the structure is being condemned and ordered to be vacated by the responsible governmental agency.
Which of the following statements is false with respect to the Citizens Property Insurance Corporation (Citizens)?
The association must reject a commercial lines residential risk with limits above $10 million or a personal lines residential risk with limits above $1 million
An agent willfully violated a requirement in the Insurance Code and his penalty was which of the following?
Imprisonment up to 60 days
A willful violation of the Insurance Code is a misdemeanor of the 2nd degree and imprisonment up to 60 days.
For a dwelling with limits of at least $100,000, but less than $250,000, the insurer may, in lieu of offering a policy with a $500 hurricane deductible, offer a policy that:
Contains up to a 2% hurricane deductible
For a dwelling with limits of at least $100,000, but less than $250,000, the insurer may, in lieu of offering a policy with a $500 hurricane deductible, offer a policy that contains up to a 2% hurricane deductible.
A contract between the agent and the party paying the negotiated fee must be signed by both parties and retained by the agent for how many years?
3
A written contract between the agent and the party paying the negotiated fee must be signed by both parties and include the promise that any commissions paid by the insurer will refund the amount paid by the party within 30 days. The contract must be retained by the agent for 3 years.
Which of the following statements is correct concerning the required time periods under loss payments?
The insurer must pay or deny the entire portion of the claim within 90 days after receipt of notice of a property insurance claim
The insurer must begin investigating the claim within 10 working days after receiving proof of loss statements. An agent or insurer must acknowledge receipt of a communication regarding a claim within 14 calendar days. The insurer must pay or deny the entire portion of the claim within 90 days after receipt of notice of a property insurance claim.
The Department of Financial Services can impose which of the following penalties?
Fine for violation of a cease and desist order up to $50,000
A willful violation for submitting fraudulent signatures is $75,000 per violation and $5,000 per violation for a non-willful violation.
Which of the following statements is correct concerning coverage for a catastrophic ground cover collapse?
Every insurer authorized to transact property insurance in Florida must provide coverage for a catastrophic ground cover collapse
Every insurer authorized to transact property insurance in Florida must provide coverage for a catastrophic ground cover collapse. The contents of personal property is covered along with the actual structure. Insurers may restrict catastrophic ground cover collapse and sinkhole loss coverage to the principal building.
A hurricane warning is issued _______ hours before the anticipated onset of tropical storm force winds of 74 mph or higher, and will stay in effect when dangerously high water or a combination of dangerously high water and waves continue.
36
A hurricane watch or warning is issued for any part of Florida by the National Hurricane Center of the National Weather Service as the beginning of the hurricane threat, and ends 72 hours following the last hurricane watch or warning issued for any part of Florida by the National Hurricane Center of the National Weather Service.
Which of the following statements is correct concerning proof of loss requirements?
When the insurer receives a notice of claim, the insurer must provide the claimant forms for filing proof of loss within 15 days
If the forms for filing proof of loss are not given to the claimant within 15 days, the claimant may give the insurer a written statement of the nature and extent of the loss within the time. Written proof of loss must be filed with the insurer within 90 days after the loss. Written proof of loss must be given to the insurer no later than one year from the time specified unless the claimant was legally incapacitated.
Which of the following is false with respect to pure comparative fault?
Only one party may be at fault
Each party to the action will be evaluated and determined to be a certain percent at fault, so more than one party is at fault.
Which of the following is incorrect with regard to commissions and compensation?
Commissions may be shared with a person who is licensed and appointed in a different line of business
Commissions may be shared only with a person who is licensed and appointed in the same line of business.
Which of the following statements is correct regarding motor vehicle inspections?
An insurer may defer an inspection for 30 calendar days following the effective date of coverage for a new policy, but not for a renewal policy
If the applicant fails to provide the required documents, physical damage coverage may NOT be suspended during the term of the policy. The applicant may be required to pay the cost of the inspection up to $5. A physical damage loss occurring after the effective date of the coverage is NOT payable until the inspection documents are provided to the insurer.
A person acting as an insurer without a Certificate of Authority and collects $150,000 in premiums is guilty of which of the following?
1st degree felony
A person, while acting as an insurer without a Certificate of Authority, is subject to not more than 30 years imprisonment if the total premium collected is over $100,000.
