New Exemptions to Commercial Insurance Rates Go Into Effect
In a session marked as much by what did not pass as what did pass, one of the most significant pieces of legislation that cleared all of the hurdles during 2011 was the Commercial Insurance Rates bill (House Bill 99, Chapter 2011-160, Laws of Florida). The first version of this passed the Legislature and was permitted to go into law by then Governor Crist. It identified a number of commercial types of insurance coverage and provided for greatly reduced regulatory review. The law permitted insurers to implement rates without OIR approval. This year’s law expanded the lines and types of coverage and reduced even further the possible regulatory review and oversight.
Effective October 1, 2011, five new types of commercial insurance are exempt from the rate filing and approval process. Insurance companies writing these types of commercial insurance will not have to obtain approval from OIR to use rates for these coverages. However, it should be noted the law does still require that the rates must not be excessive, unfairly discriminatory or inadequate. The new exempt types of commercial insurance are:
- Fiduciary Liability
- General Liability
- Nonresidential Property, but not Collateral Protection Insurance
- Nonresidential Multi-peril
- Excess Property
- Burglary and Theft
Under existing law, the following types of insurance are included in this exemption:
- Excess or Umbrella Insurance
- Surety and Fidelity Insurance
- Boiler and Machinery Insurance and Leakage and Fire Extinguishing Equipment Insurance
- Fleet Commercial Motor Vehicle Insurance for a fleet of 20 or more self-propelled vehicles
- Errors and Omissions Insurance (E & O)
- Directors’ and Officers’, Employment Practices, and Management Liability Insurance
- Intellectual Property and Patent Infringement Insurance
- Advertising Injury and Internet Liability Insurance
- Property risks rated under a highly protected risks rating plan
It should be noted that OIR takes the position the exemption does not apply if these coverages are written as an endorsement to a type of coverage that is subject to rate review.
The new law also expands the current rate filing and approval exemption process for commercial motor vehicle insurance. In the future all commercial motor vehicle insurance is exempt from the rate filing and approval process, rather than only commercial motor vehicle insurance covering a fleet of 20 or more vehicles.
Insurers must still notify OIR of the rate to be charged within 30 days. However, the law deletes some of the information required in the notice and the type of data required to be retained by the insurer to support the rate. The new law also deletes current law allowing the OIR to obtain information about an exempt commercial insurance rate at the insurer’s expense, but it still requires the insurer to incur the cost of any “examination” by the OIR of the rate charged and provides OIR with the ability to examine rates after they go into effect. This can create an unfortunate dilemma for an insurer seeking to implement a new rate for an exempt coverage.