Market conduct examinations.

(1) As often as it deems necessary, the office shall examine each licensed rating organization, each advisory organization, each group, association, carrier, as defined in s. 440.02, or other organization of insurers which engages in joint underwriting or joint reinsurance, the attorney in fact of each reciprocal insurer, and each authorized insurer transacting in this state any class of insurance to which chapter 627 is applicable. The examination must be for the purpose of ascertaining compliance by the person examined with the applicable provisions of this chapter and chapters 440, 626, 627, and 635.

(2) In lieu of any such examination, the office may accept the report of a similar examination made by the insurance supervisory official of another state.

(3) The examination may be conducted by an independent professional examiner under contract to the office, in which case payment shall be made directly to the contracted examiner by the insurer examined in accordance with the rates and terms agreed to by the office and the examiner.

(4) The reasonable cost of the examination shall be paid by the person examined, and such person shall be subject, as though an insurer, to the provisions of s. 624.320.

(5) Such examinations shall also be subject to the applicable provisions of chapter 440 and ss. 624.318, 624.319, 624.321, and 624.322.

(6) Based on the findings of a market conduct examination that an insurer has exhibited a pattern or practice of willful violations of an unfair insurance trade practice related to claims handling which caused harm to policyholders, as prohibited by s. 626.9541(1)(i), the office may order an insurer pursuant to chapter 120 to file its claims-handling practices and procedures related to that line of insurance with the office for review and inspection, to be held by the office for the following 36-month period. Such claims-handling practices and procedures are public records and are not trade secrets or otherwise exempt from the provisions of s. 119.07(1). As used in this section, “claims-handling practices and procedures” are any policies, guidelines, rules, protocols, standard operating procedures, instructions, or directives that govern or guide how and the manner in which an insured’s claims for benefits under any policy will be processed.

(7) Notwithstanding subsection (1), any authorized insurer transacting residential property insurance business in this state:

(a) May be subject to an additional market conduct examination after a hurricane if, at any time more than 90 days after the end of the hurricane, the insurer is among the top 20 percent of insurers based upon a calculation of the ratio of hurricane-related property insurance claims filed to the number of property insurance policies in force;

(b) Must be subject to a market conduct examination after a hurricane if, at any time more than 90 days after the end of the hurricane, the insurer:

1. Is among the top 20 percent of insurers based upon a calculation of the ratio of hurricane claim-related consumer complaints made about that insurer to the department to the insurer’s total number of hurricane-related claims;

2. Is among the top 20 percent of insurers based upon a calculation of the ratio of hurricane claims closed without payment to the insurer’s total number of hurricane claims on policies providing wind or windstorm coverage;

3. Has made significant payments to its managing general agent since the hurricane; or

4. Is identified by the office as necessitating a market conduct exam for any other reason.

All relevant criteria under this section and s. 624.316 shall be applied to the market conduct examination under this subsection. Such an examination must be initiated within 18 months after the landfall of a hurricane that results in an executive order or a state of emergency issued by the Governor. The requirements of this subsection do not limit the authority of the office to conduct at any time a market conduct examination of a property insurer in the aftermath of a hurricane. This subsection does not require the office to conduct multiple market conduct examinations of the same insurer when multiple hurricanes make landfall in this state in a single calendar year. An examination of an insurer under this subsection must also include an examination of its managing general agent as if it were the insurer.

(8) The office shall create, and the commission shall adopt by rule, a selection methodology for scheduling and conducting market conduct examinations of insurers and other entities regulated by the office. This requirement does not restrict the authority of the office to conduct market conduct examinations as often as it deems necessary. Such selection methodology must prioritize market conduct examinations of insurers and other entities regulated by the office to whom any of the following conditions applies:

(a) An insurance regulator in another state has initiated or taken regulatory action against the insurer or entity regarding an act or omission of such insurer or entity which, if committed in this state, would constitute a violation of the laws of this state or any rule or order of the office or department.

(b) Given the insurer’s market share in this state, the department or the office has received a disproportionate number of the following types of claims-handling complaints against the insurer:

1. Failure to timely communicate with respect to claims;

2. Failure to timely pay claims;

3. Untimely payments giving rise to the payment of statutory interest;

4. Failure to adjust and pay claims in accordance with the terms and conditions of the policy or contract and in compliance with state law;

5. Violations of part IX of chapter 626, the Unfair Insurance Trade Practices Act;

6. Failure to use licensed and duly appointed claims adjusters;

7. Failure to maintain reasonable claims records; or

8. Failure to adhere to the company’s claims-handling manual.

(c) The results of a National Association of Insurance Commissioners Market Conduct Annual Statement indicate that the insurer is a negative outlier with regard to particular metrics.

(d) There is evidence that the insurer is violating or has violated the Unfair Insurance Trade Practices Act.

(e) The insurer meets the criteria in subsection (7).

(f) Any other conditions the office deems necessary for the protection of the public.

The office shall present the proposed rule required by this subsection to the commission no later than October 1, 2023. In addition to the methodology required by this subsection, the rule must provide criteria for how the office, in coordination with the department, will determine what constitutes a disproportionate number of claims-handling complaints described in paragraph (b).

(9) If the office concludes through an examination pursuant to this section that an insurer providing liability coverage in this state exhibits a pattern or practice of violations of the Florida Insurance Code during any investigation or examination of the insurer, the office must review the insurer’s claims-handling practices to determine if the insurer should be subject to the enhanced enforcement penalties of this subsection.

(a) A liability insurer may be subject to enhanced enforcement penalties if the office reviews the insurer’s claims-handling practices and finds a pattern or practice of the insurer failing to do the following when responding to covered liability claims under an insurance policy, after receiving actual notice of such claims:

1. Assign a licensed and appointed insurance adjuster to investigate whether coverage is provided under the policy and diligently attempt to resolve any questions concerning the extent of the insured’s coverage.

2. Evaluate the claim fairly, honestly, and with due regard for the interests of the insured based on available information.

3. Request from the insured or claimant additional relevant information the insurer reasonably deems necessary to evaluate whether to settle a claim.

4. Conduct all oral and written communications with the insured with honesty and candor.

5. Make reasonable efforts to explain to persons not represented by counsel matters requiring expertise beyond the level normally expected of a layperson with no training in insurance or claims-handling issues.

6. Retain all written and recorded communications and create and retain a summary of all verbal communications in a reasonable manner for a period of not less than 2 years after the later of the entry of a final judgment against the insured in excess of policy limits or, if an extracontractual claim is made, the conclusion of that claim and any related appeals.

7. Within 30 days after a request, provide the insured with all communications related to the insurer’s handling of the claim which are not privileged as to the insured.

8. Provide, upon request and at the insurer’s expense, reasonable accommodations necessary to communicate effectively with an insured covered under the Americans with Disabilities Act.

9. When handling a third-party claim, communicate each of the following to the insured:

a. The identity of any other person or entity the insurer has reason to believe may be liable.

b. The insurer’s final and completed estimate of the claim.

c. The possibility of an excess judgment.

d. The insured’s right to secure personal counsel at his or her own expense.

e. That the insured should cooperate with the insurer, including providing information required by the insurer because of a settlement opportunity or in accordance with the policy.

f. Any formal settlement demands or offers to settle by the claimant and any offers to settle on behalf of the insured.

10. Respond to any request for insurance information in compliance with s. 626.9372 or s. 627.4137, as applicable.

11. Seek to obtain a general release of each insured in making any settlement offer to a third-party claimant.

12. Take reasonable measures to preserve any documentary, photographic, and forensic evidence as needed for the defense of the liability claim if it appears likely that the insured’s liability exposure is greater than policy limits and the insurer fails to secure a general release in favor of the insured.

13. Comply with subsections (1) and (2), if applicable.

14. Comply with the Unfair Insurance Trade Practices Act.

(b) As used in this subsection, the term “actual notice” means the insurer’s receipt of notice of an incident or a loss that could give rise to a covered claim that is communicated to the insurer or an agent of the insurer:

1. By any manner permitted by the policy or other documents provided to the insured by the insurer;

2. Through the claims link on the insurer’s website; or

3. Through the e-mail address designated by the insurer under s. 624.422.

(c) In reviewing claims-handling practices, it is relevant whether the insured, claimant, and any representative of the insured or claimant were acting reasonably toward the insurer in furnishing information regarding the claim, in making demands of the insurer, in setting deadlines, and in attempting to settle the claim. Such matters include whether:

1. The insured cooperated with the insurer in the defense of the claim and in making settlements by taking reasonable actions requested by the claimant or required by the policy which are necessary to assist the insurer in settling a covered claim, including:

a. Executing affidavits regarding the facts within the insured’s knowledge regarding the covered loss; and

b. Providing documents, including, if reasonably necessary to settle a covered claim valued in excess of policy limits and upon the request of the claimant, a summary of the insured’s assets, liabilities, obligations, and other insurance policies that may provide coverage for the claim and the name and contact information of the insured’s employer when the insured is a natural person who was acting in the course and scope of employment when the incident giving rise to the claim occurred.

2. The claimant and any claimant’s representative:

a. Acted honestly in furnishing information regarding the claim;

b. Acted reasonably in setting deadlines; and

c. Refrained from taking actions that may be reasonably expected to prevent an insurer from accepting the settlement demand, such as providing insufficient detail within the demand, providing unreasonable deadlines for acceptance of the demand, or including unreasonable conditions to settlement.

(d) In addition to authorized penalties for a liability insurer that the office has determined has a pattern or practice of violations of the Florida Insurance Code at the conclusion of any investigation or examination, the office may impose enhanced enforcement penalties for insurer claims-handling practices that fail to meet the review standards of this subsection. Such enhanced enforcement penalties include, but are not limited to, administrative fines that are subject to a 2.0 multiplier and fines that exceed the limits on fine amounts and aggregate fine amounts provided for under this code.

(e) This subsection does not create a civil cause of action, a civil remedy under s. 624.155, or an unfair trade practice under s. 626.9541.