House Staff Analysis: PCS for HB 1149 Policy Cancellations and Nonrenewals by Property Insurers

Summary

A House of Representatives staff analysis of the PCS for HB 1149, Policy Cancellations and Nonrenewals by Property Insurers, sponsored by the Insurance & Banking Subcommittee and dated February 4, 2024. It describes current rules limiting when authorized insurers may cancel or nonrenew residential property policies on damaged properties, and notes that s. 626.9201, F.S., has no specific language on surplus lines policies for unrepaired damage. The bill would bar cancellation or nonrenewal until the earlier of completed repairs or one subsequent renewal, for both authorized and surplus lines insurers, with exceptions on 10 days' or 45 days' notice. The section directory lists amendments to s. 626.9201, F.S., and s. 627.4133, F.S., and an effective date of July 1, 2024. The fiscal analysis reports no impact on state or local revenues or expenditures.

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                                  HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #:     PCS for HB 1149 Policy Cancellations and Nonrenewals by Property Insurers
SPONSOR(S): Insurance & Banking Subcommittee
TIED BILLS:       IDEN./SIM. BILLS:

    REFERENCE                                                   ACTION                  ANALYST            STAFF DIRECTOR or
                                                                                                           BUDGET/POLICY CHIEF

    Orig. Comm.: Insurance & Banking Subcommittee                                       Fortenberry        Lloyd


                                                     SUMMARY ANALYSIS
An authorized insurer may not cancel or nonrenew any personal residential or commercial residential property
insurance policy:
 For 90 days after the dwelling or residential property has been repaired, if the property has been damaged as a
    result of a hurricane or wind loss.
 Until the earlier of when the dwelling or residential property has been repaired or one year after the insurer
    issues the final claim payment, if the property was damaged by a covered peril, but not a hurricane or wind loss.

However, an authorized insurer or agent may cancel or nonrenew a policy b efore the dwelling or residential property
has been repaired: upon 10 days’ notice (for nonpayment of premium); or upon 45 days’ notice (for: 1. a material
misstatement or fraud related to the claim, 2. if the insurer determines that the insured has unreasonably caused a
delay in the repair, or 3. if the insurer has paid policy limits).

If an insurer elects to nonrenew a policy covering a property that has been damaged, the insurer must provide at
least 90 days’ notice that the insurer intends to nonrenew the policy 90 days after the property has been repaired. A
structure is considered repaired when substantially completed and restored to the extent that it is insurable by
another authorized insurer writing policies in Florida.

Section 626.9201, F.S., governs a surplus lines insurer’s cancellation or nonrenewal of personal residential and
commercial residential property insurance policies. However, current law contains no specific language regarding
cancellation or nonrenewal of surplus lines policies issued on properties with unrepaired damage.

The bill changes when an authorized insurer may cancel or nonrenew personal residential or commercial residential
property insurance policies on properties with unrepaired damage. As a result, the standards for cancellation apply
to personal residential and commercial residential property insurance policies issued by both authorized insurers
and surplus lines insurers. An insurer may not cancel or nonrenew a personal residential or commercial
residential property policy covering a dwelling or residential property in Florida whi ch has been damaged by a
covered peril until the earlier of: the completion of repairs; or, the expiration of one subsequent renewal of the policy
that was in force at the time of the loss.

“Damage” includes flood damage related to a hurricane if flood is a covered peril under the personal residential or
commercial residential property insurance, or under a separate flood insurance policy, in effect at the time of the
loss for which the damage remains unrepaired. Additionally, if flood is not a covered peril under the policy or under a
separate flood insurance policy, and the property has been damaged as a result of flood related to a hurricane, an
insurer may not cancel or nonrenew the policy until the earlier of: the completion of repairs; or , the expiration of one
subsequent renewal of the policy that was in force at the time of the loss.

The bill specifies exceptions which will allow an insurer to cancel a policy when unrepaired damage remains. These
include failure to pay premium, a lack of insurable interest in the property, fraud, and failure to timely respond to
written inquiries by the insurer.

The bill has no impact on state or local revenues or expenditures. It may have indeterminate positive and negative
economic impacts on the private sector.

The bill is effective July 1, 2024.



This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
STORAGE NAME: pcs1149.IBS
DATE: 2/4/2024
                                                FULL ANALYSIS

                                          I. SUBSTANTIVE ANALYSIS

    A. EFFECT OF PROPOSED CHANGES:
        Background

        In general, with respect to any personal residential or commercial residential property insurance policy
        covering a dwelling or residential property in Florida, including but not limited to, any homeowner,
        mobile home owner, farmowner, condominium association, condominium unit owner, apartment
        building, or other policy covering a residential structure or its contents, an authorized insurer must give
        the first-named insured:
             At least 45 days’ advance written notice of the renewal premium. 1
             Written notice of nonrenewal, cancellation, or termination at least 120 days before the effective
                 date of the nonrenewal, cancellation, or termination. Such notice must contain the reason for the
                 nonrenewal, cancellation, or termination.2

        However, an authorized insurer may not cancel or nonrenew any personal residential or commercial
        residential property insurance policy:
             For 90 days after the dwelling or residential property has been repaired, if the property has been
               damaged as a result of a hurricane or wind loss that is the subject of a declaration of emergency
               and the filing of an order by the Insurance Commissioner. 3
             Until the earlier of when the dwelling or residential property has been repaired or one year after
               the insurer issues the final claim payment, if the property was damaged by a covered peril, but
               not a hurricane or wind loss.4

        Additionally, an authorized insurer or agent may cancel or nonrenew a policy before the dwelling or
        residential property has been repaired:
             Upon 10 days’ notice for nonpayment of premium; or
             Upon 45 days’ notice for:
                    o A material misstatement or fraud related to the claim;
                    o If the insurer determines that the insured has unreasonably caused a delay in the repair; or
                    o If the insurer has paid policy limits. 5

        If an insurer elects to nonrenew a policy covering a property that has been damaged, the insurer must
        provide at least 90 days’ notice that the insurer intends to nonrenew the policy 90 days after the
        property has been repaired.6 A structure is considered repaired when substantially completed and
        restored to the extent that it is insurable by another authorized insurer writing policies in Florida.7

        Section 626.9201, F.S., governs the cancellation or nonrenewal of personal residential and commercial
        residential property insurance policies issued by surplus lines insurers. Currently, a surplus lines
        insurer issuing a policy for property insurance must give the first named insured at least 45 days’
        advance written notice as to why the policy is not to be renewed. 8 A surplus lines insurer issuing a
        policy providing covering property must give the named insured written notice of cancellation or
        termination, including the reasons for the cancellation or termination, with certain exceptions. 9
        However, current law contains no specific language regarding cancellation or nonrenewal of surplus
        lines policies issued on properties with unrepaired damage.

1 S. 627.4133(2)(a), F.S.
2 S. 627.4133(2)(b), F.S.
3 S. 627.4133(2)(e)1.a., F.S.
4 S. 627.4133(2)(e)1.b., F.S.
5 S. 627.4133(2)(e)2., F.S.
6 S. 627.4133(2)(e)3., F.S.
7 S. 627.4133(2)(e)5., F.S.
8 S. 626.9201(1), F.S.
9 S. 626.9201(2), F.S
STORAGE NAME: pcs1149.IBS                                                                                   PAGE: 2
DATE: 2/4/2024
        Effect of the Bill

        The bill changes when an authorized insurer may cancel or nonrenew personal residential or
        commercial residential property insurance policies on properties with unrepaired damage. It eliminates
        the separate timeframes for authorized insurers to cancel or nonrenew personal residential or
        commercial residential policies following losses due to hurricane and wind and all other covered perils.

        The bill also establishes standards for cancellation and nonrenewal of such policies issued by surplus
        lines insurers.

        As a result, the following standards for cancellation apply to personal residential and commercial
        residential property insurance policies issued by both authorized insurers and surplus lines
        insurers. An insurer may not cancel or nonrenew a personal residential or commercial residential
        property policy covering a dwelling or residential property in Florida which has been damaged by a
        covered peril until the earlier of:
             The completion of repairs; or
             The expiration of one subsequent renewal of the policy that was in force at the time of the loss.

        The bill states that the term “damage” includes flood damage related to a hurricane if flood is a covered
        peril under the personal residential or commercial residential property insurance, or under a separate
        flood insurance policy, in effect at the time of the loss for which the damage remains unrepaired.

        Additionally, if flood is not a covered peril under the policy or under a separate flood insurance policy,
        and the property has been damaged as a result of flood related to a hurricane, an insurer may not
        cancel or nonrenew the policy until the earlier of:
            The completion of repairs; or
            The expiration of one subsequent renewal of the policy that was in force at the time of the loss.

        An insurer or agent may cancel or nonrenew a personal residential and commercial residential policy
        prior to the repair of the dwelling or residential property:
             Upon 10 days’ notice:
                    o For nonpayment of premium; or
                    o If the named insured no longer has an insurable interest in the property; or
             Upon 45 days’ notice:
                    o For a material misstatement or fraud related to the claim;
                    o If the insurer or its agent has made a reasonable written inquiry of the insured as to the
                        status of the repair and the insured fails to respond within 30 calendar days; or
                    o If the insurer has paid policy limits under a personal residential property insurance policy
                        for a loss to the insured dwelling that was damaged, or policy limits under a commercial
                        residential property insurance policy for a loss to each structure that was damaged.

        If the insurer elects to nonrenew a policy after the expiration of one subsequent renewal of the policy in
        force at the time of the loss, the insurer must comply with normal notice requirements in the statutes for
        authorized and surplus lines insurers.10 Additionally, the provisions prohibiting cancellation or
        nonrenewal of policies on properties with unrepaired damage do not prevent the insurers from
        canceling or nonrenewing the policies after the repair is completed for the same reasons they would
        have canceled if the unrepaired damage did not exist.

        The bill provides that a structure is deemed to be repaired when substantially completed and restored
        to the extent that it is insurable by:
             Another authorized insurer writing policies in Florida if the structure is currently insured by an
                authorized insurer; or
             Another authorized or eligible surplus lines insurer writing policies in Florida if the structure is
                currently insured by an eligible surplus lines insurer.

10 Ss. 627.4133(2)   and 626.9201, F.S., respectively.
STORAGE NAME: pcs1149.IBS                                                                                    PAGE: 3
DATE: 2/4/2024
   B. SECTION DIRECTORY:

       Section 1. Amends s. 626.9201, F.S., relating to notice of cancellation or nonrenewal.

       Section 2. Amends s. 627.4133, F.S., relating to notice of cancellation, nonrenewal, or renewal
                  premium.

       Section 3. Provides an effective date of July 1, 2024.

                            II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT

   A. FISCAL IMPACT ON STATE GOVERNMENT:

       1. Revenues:

           None.

       2. Expenditures:

           None.

   B. FISCAL IMPACT ON LOCAL GOVERNMENTS:

       1. Revenues:

           None.

       2. Expenditures:

           None.

   C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:

       Personal residential and commercial residential policyholders may experience an indeterminate
       economic impact as a result of the bill. Those policyholders who might have had to pay higher
       premiums for force-placed insurance when their existing insurers canceled or nonrenewed them due to
       unrepaired damage will remain insured by their current insurers for at least one subsequent renewal
       period. Admitted and surplus lines insurers may experience a negative economic impact by being
       forced to renew policies on properties with unrepaired damage that they otherwise would have
       nonrenewed or canceled.

   D. FISCAL COMMENTS:

       None.

                                              III. COMMENTS

   A. CONSTITUTIONAL ISSUES:

       1. Applicability of Municipality/County Mandates Provision:

          Not applicable. This bill does not appear to affect county or municipal governments.

       2. Other:

          None.
STORAGE NAME: pcs1149.IBS                                                                                PAGE: 4
DATE: 2/4/2024
    B. RULE-MAKING AUTHORITY:

        The Financial Services Commission is provided sufficient authority to and may adopt rules necessary to
        implement the provisions within the bill.11

    C. DRAFTING ISSUES OR OTHER COMMENTS:

        None.

                            IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES




11 The Financial Services
                        Commission, composed of the Governor, the Attorney General, the Chief Financial Officer, and
the Commissioner of Agriculture, serves as agency head of the Office of Insurance Regulation for the purposes of
rulemaking.
STORAGE NAME: pcs1149.IBS                                                                                     PAGE: 5
DATE: 2/4/2024


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