Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Respondent Michael Quintana is currently licensed as a general lines agent in Florida. On or about January 18, 1983, respondent went to the home of Shirley W. McLaughlin for the purpose of soliciting insurance. Mrs. McLaughlin agreed to purchase a homeowners insurance policy and "mortgage" insurance was also discussed. She supplied the necessary information and signed the applications for both the homeowner insurance and the "mortgage" insurance. While she did not desire to purchase what she understood to be strictly "life" insurance, she did understand that what she "was getting at that particular time was protection for the house, period." (TR. 32) She further understood that she was applying for coverage that would pay something if either she or her husband died, and that such would be payable to the beneficiaries. While she was given the opportunity to review all the papers she signed on January 18, 1983, Mrs. McLaughlin apparently did not understand that the premium payments for the "mortgage" insurance would be automatically withdrawn from her bank account. Sometime after her application for homeowners insurance was refused because of a space heater in her home, Mrs. McLaughlin learned from her bank of the automatic withdrawal of premium payments for the "mortgage" insurance. She thereafter cancelled such insurance and all monies were refunded to her. The cover sheet for the "mortgage" insurance policy identifies the policy as a "joint reducing term life insurance policy." The inserted printout setting forth the costs and benefits describes the basic policy as "joint reducing term life (20-year mortgage term) with disability waiver benefit." Agents within the company with which respondent was employed on January 18, 1983, typically refer to such a policy as a "mortgage insurance policy" or a "mortgage cancellation policy," as opposed to a "life insurance policy." The term "mortgage" is used to delineate that a specific policy has been purchased for a specific loss. The beneficiary of such a policy has the option of either paying off the mortgage or using the money for any other purpose.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the Administrative Complaint filed on June 11, 1984, be DISMISSED. Respectfully submitted and entered this 25th day of January, 1985, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 1985. COPIES FURNISHED: William W. Tharpe, Jr. 413-B Larson Building Tallahassee, Fla. 32301 Timothy G. Anderson 620 E. Twigg Street Tampa, Fla. 33602 Bill Gunter Insurance Commissioner The Capitol Tallahassee, Fla. 32301
The Issue The issue in this case is whether Respondent condominium association should have assessed unit owners, in proportionate shares, to pay for the replacement of hurricane-damaged balcony screens, in accordance with Petitioner's policy that repair costs which do not exceed an insurance deductible are "costs of insurance" that must be paid as "common expenses" regardless of what the declaration of condominium provides concerning reconstruction or repair after a casualty.
Findings Of Fact Respondent Fountains South Condominium No. 3C Association, Inc. ("Association") is the entity responsible for operating the Fountains South Condominium No. 3C ("Condominium"). As such, the Association is subject to the regulatory jurisdiction of Petitioner Division of Florida Land Sales, Condominiums, and Mobile Homes ("Division"). The Condominium was created——and continues to be governed by——a Declaration of Fountains South Condominium No. 3C ("Declaration"), which instrument was recorded, in 1987, in the public records of Palm Beach County, Florida. On October 24, 2005, Hurricane Wilma struck Palm Beach County, causing damage to elements of the Condominium. The damaged property included some portions of the "Common Elements." Also damaged were some parts of the "Limited Common Elements." (The terms "Common Elements" and "Limited Common Elements" are defined in the Declaration, the relevant provisions of which will be set forth verbatim below. Generally speaking, though, the Common Elements comprise all of the property of which the Condominium is composed except for that included within the residential units. The Limited Common Elements, which are a subset of the Common Elements, consist of properties or structures whose use is reserved to a particular unit or units to the exclusion of other units.) Fulfilling a statutory obligation (that will be discussed in detail below), the Association had purchased property insurance to protect the Common Elements and Limited Common Elements. Issued by Nutmeg Insurance Company ("Nutmeg"), Policy No. SW 0000071 (the "Policy") provided coverage to the Association for loss or damage to property from multiple risks, including hurricanes. The premium for the Policy——the effective dates of which were from December 31, 2004 to December 31, 2005——was $395,000. The Policy provided for various deductibles depending on the cause of the covered loss. For loss or damage caused by a hurricane, the deductible was 5 percent of the value of the insured property. It is undisputed that, at the time of Hurricane Wilma, this deductible was approximately a quarter of a million dollars. Under the relevant provisions of the Policy, therefore, Nutmeg would not be obligated to indemnify the Association for any loss or damage caused by Hurricane Wilma unless and until the total losses from that particular occurrence exceeded (roughly) $250,000. The Association paid about $5,000 to repair the damage that Hurricane Wilma caused to the Common Elements, using funds on hand that had been saved for such contingencies. Because this expense was far below the applicable deductible, the Association did not submit a claim to Nutmeg. The Association's position regarding the damage to the Limited Common Elements, consistent with its longstanding view of such matters, was that the costs of repairing or replacing such properties should be borne by the respective unit owners to whose exclusive use the damaged elements were reserved. The Association based its position on a provision of the Declaration (which will be quoted below) that assigns the general responsibility for maintenance and repair of the units, together with the Limited Common Elements appurtenant thereto, to the respective unit owners. At the time of Hurricane Wilma, Haskell and Flora Ginns (the "Ginns") owned Unit No. 201 in the Condominium. (As of the final hearing, the Ginns were still the owners of this unit.) The hurricane caused damage both to their unit and to the screens surrounding the balcony outside their unit. It is undisputed that the balcony and screens appurtenant to the Ginns' unit are part of the Limited Common Elements. The Ginns submitted a claim for these losses to their insurer, Allstate Floridian Insurance Company ("Allstate"). By letter dated January 7, 2006, Allstate denied the portion of the Ginns' claim relating to the damaged screens, asserting that the screens were not covered property under the Ginns' policy because they were within the "insuring responsibility" of the Association. The Ginns did not protest Allstate's decision in this regard. (Allstate paid the full policy limit of nearly $30,000 on the Ginns' claim anyway; thus, its denial of coverage for the damaged screens actually had no effect on the reimbursement that the Ginns received from Allstate.) The Ginns then wrote a letter to the Association's president, Milton Kutzin, requesting that the Association pay to replace the damaged screens. Dated January 16, 2006,i the letter reads as follows: Dear Milton: As you may be aware, the screens on the deck of our condo were severely damaged because of Hurricane Wilma. According to the attached memo, the condo is responsible for replacing them. For your information, my insurance company, Allstate Floridian, has refused payment and has advised us that our condo association is responsible (by law) to replace them. We do have an estimate to replace the screens. I shall be happy to discuss this matter with you at any time. Please let me know approximately when this matter will be settled. (The "attached memo" to which the Ginns referred purports to be an undated letter from the Director of Maintenance of Versailles Court (evidently a residential community) to the homeowners of that project, clarifying the responsibilities of the homeowners, on the one hand, and their homeowners' association, on the other, vis-à-vis maintenance obligations. As far as the undersigned can tell, this Versailles Court memorandum has no bearing whatsoever on the issues at hand.) If the Association responded in writing to the Ginns' letter of January 16, 2006, the document is not in evidence. In any event, the Association refused to repair the screens surrounding the Ginns' balcony because (a) it believed that the Ginns were responsible, under the Declaration, for the cost of such repair and (b) the total losses to the Common Elements and Limited Common Elements (including the screens in question) did not come near the deductible under the Nutmeg Policy, meaning that there were no insurance proceeds to distribute to unit owners for repairs to Limited Common Elements. On January 18, 2006, the Ginns paid a company called Rainguard, Inc. either $1,100 or $1,200 to replace the damaged screens around "their" balcony.ii Meantime, on January 13, 2006, the Division rendered a Declaratory Statement in In Re Petition for Declaratory Statement of Plaza East Association, Inc., Docket No. 2005059934, Final Order No. BPR-2006-00239 (DBPR Jan. 13, 2006)(the "Plaza East Declaration"). In the Plaza East Declaration, the Division made a number of statements concerning the meaning and effect of certain provisions of the Florida Condominium Act ("Act") pertaining to the duties of condominium associations as they relate to property insurance. These statements will be examined in greater detail below. For now, it suffices to quote several sentences that form the core of the Division's policy regarding the scope of an association's "insuring responsibilities": As association is not required to insure 100% of the replacement cost of the condominium property, but must have adequate insurance to replace the property destroyed by a hurricane. The board may include reasonable deductibles in replacement value insurance policies. § 718.111(11)(a), Fla. Stat. A deductible amount is part of the cost of insurance and is a common expense for which reserves might be set aside. § 718.111(11), 718.115, Fla. Stat. As such, an association may not shift the cost of an insurance common expense to an individual unit owner as common expenses must be assessed in the proportions or percentages required under sections 718.104(4)(f), 718.116(9), Florida Statutes. [An association therefore] may not shift the cost of the deductible, a common expense, to only those unit owners whose windows were damaged by the insurable event such as a hurricane. Plaza East Declaration at 16 (emphasis added). The Plaza East Declaration reflected——and continues to be authoritative regarding——the Division's firmly fixed policy, which is that the deductible under a property insurance policy is a "cost" that an association must incur, using common funds collected through proportionate-share assessments. The Division's expert witness made this clear, giving the following testimony (which the undersigned accepts as credible) in deposition: Q. Doesn't [the] Plaza East [Declaration] declare that a deductible is a common expense? A. Well, it makes the deductible a common expense because insurance is a common expense and the deductible is just a part of the insurance purchase decision. * * * Q. Let me ask you this: Is there anything in [the Act] that clearly states that a casualty loss insurance deductible is a common expense? A. No, sir, there's nothing [in the statutes] that specifically says that. Q. But [the] Plaza East [Declaration] says that, doesn't it? A. Plaza East says that, yes, sir. Q. So that's a policy of the Department? A. Yes, sir, that is. Q. And it's a general policy, isn't it? A. Yes, sir. Q. And it's a general policy that would apply to any condominium in South Florida regardless of what the declaration of condominium said? A. Yes, sir. Q. And that's being applied in this case, isn't it? A. Yes, sir. Deposition of James T. Harrison, Jr. (10/29/07) at 20-21. At some point after the issuance of the Plaza East Declaration, the Ginns sought the Division's help in persuading the Association to reimburse them for the new screens. The Division informed the Ginns of the Plaza East Declaration. Armed with this information, the Ginns again pressed the Association to reimburse them for replacing the screens. The Association, again, declined. By letter dated May 3, 2006, the Ginns made a formal complaint to the Division regarding the Association's refusal to pay for the replacement of the screens. The Division acted promptly, completing its investigation into the matter on or before May 10, 2006. Siding with the Ginns, the Division demanded, in a letter dated May 22, 2006, that the Association either reimburse the Ginns or (possibly) be fined. Yet, the Association resisted. On July 28, 2006, the Division entered a Notice to Show Cause against the Association, charging as follows: Count 1: Respondent [Association], in violation of section 718.115(2), Florida Statutes, failed to asses unit owners in their proportionate shares for the common expense insurance deductible to repair damage to condominium property caused by a hazard to be insured by Respondent under section 718.111(11), Florida Statutes. The Respondent refused to treat the hurricane damage to the wrap-a-round deck and screens in unit #201 as a common expense covered by the association's policy under sections 718.111(11) and 718.115(1), Florida Statutes. Specifically, the Respondent failed to reimburse Haskell Ginns and Flora Ginns for damage sustained by Hurricane Wilma to their wrap-a-round screens. Since the May 22, 2006, warning letter, the complainants have replaced their wrap-a- round deck screens at a cost of $1,200.00 and have requested reimbursement from Respondent. The Association demanded a formal hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Division enter a final order rescinding the Notice to Show Cause and exonerating the Association of the charge of failing to assess unit owners, in proportionate shares, to pay the cost of repairing or replacing Limited Common Elements damaged during Hurricane Wilma. DONE AND ENTERED this 10th day of January, 2008, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of January, 2008.
Findings Of Fact Liberty National Fire Insurance Company (hereinafter referred to as "Liberty National") is a licensed foreign insurer in the State of Florida and subject to the jurisdiction and regulation of the Florida Department of Insurance (hereinafter referred to as "Department"), pursuant to Chapter 624, Florida Statutes. Liberty National is headquartered in Birmingham, Alabama, and writes business in 45 states, in direct personal lines business, direct commercial lines business, and almost an equal amount of assumed reinsurance. Prior to Hurricane Andrew, as of August 1, 1992, Liberty National had approximately 40,000 personal line policies in the State of Florida. This figure includes all personal lines; the homeowners, preferred homeowners, special homeowners, industrial fire, business resale, and mobile homes. In 1987 Liberty National started writing mobile home programs with the Raymond Patterson Agency as their managing general agent. On May 19, 1993, the Department of Insurance promulgated emergency Rule 4 ER93-18. Subsection (3) imposed a 90 day moratorium on cancellations and nonrenewals of personal lines residential property insurance on the basis of hurricane claims. Subsection (4) provided: "This rule shall not apply if the insurer can affirmatively demonstrate to the Department that the proposed cancellation or nonrenewal is necessary for the insurer to avoid an unreasonable risk of insolvency." In direct response to the devastation in the wake of Hurricane Andrew and the resulting nonrenewals and cancellations of homeowner coverage by insurers, at Special Session B (1993) of the Florida Legislature, Section 1 of Chapter 93-401, Laws of Florida (HB 89-B) was passed which provided for a "moratorium on cancellation and nonrenewal of residential property coverage." This "moratorium law" was signed by the Governor on June 8, 1993, and by its terms was effective from May 19, 1993, until November 14, 1993. Subsection (1) of the moratorium law sets forth the "Findings and Purpose" of the Legislature in passing the bill: FINDINGS AND PURPOSE. -- The Legislature finds that property insurers, as a condition of doing business in this state, have a responsibility to contribute to an orderly market for property insurance and that there is a compelling state interest in maintaining an orderly market for property insurance. . . . The Legislature further finds that the massive cancellations and nonrenewals announced, proposed, or contemplated by certain insurers constitute a significant danger to the public health, safety, and welfare, especially in the context of a new hurricane season, and destabilize the insurance market. In furtherance of the overwhelming public necessity for an orderly market for property insurance, it is the intent of the Legislature to impose, for a limited time, a moratorium on cancellation or nonrenewal of personal lines residential property insurance policies. Subsection (3) describes the nature of the moratorium imposed by the Legislature: (3) MORATORIUM IMPOSED. -- Effective May 19, 1993, no insurer authorized to transact insurance in this state shall, until the expiration of this section pursuant to subsection (6), cancel or nonrenew any personal lines property insurance policy in this state, or issue any notice of cancellation or nonrenewal, on the basis of risk of hurricane claims. All cancellations or nonrenewals must be substantiated by underwriting rules filed with and accepted for use by the Department of Insurance, unless inconsistent with the provisions of this section. The Department of Insurance is hereby granted all necessary power to carry out the provisions of this section. On June 4, 1993, Respondent, Department of Insurance (DOI) filed 4ER93- 20 (published in the Florida Administrative Weekly, Vol. 19, No. 24, pp. 3398- 3400), indicating that the laws implemented included the moratorium law, Subsections 626.9541(1)(a)(d)(x) and Section 627.4133 of the Florida Insurance Code. The Emergency rule 4ER93-20 is entitled "Procedures For Applying for Moratorium Exemption and Required Insurer Corrective Action on Previous Notices of Cancellation or Nonrenewal" and indicates as follows: The purpose of this rule is to enumerate the procedures required for an insurer to be granted an exemption to that rule [the Department moratorium Rule 4ER93-18]; and to specify corrective action required of any insurer which has sent out a notice of cancellation or nonrenewal which is prohibited under the moratorium. On June 15, 1993, Liberty National submitted a request for an exemption from the Moratorium. In the request for partial exemption, Liberty National requested the nonrenewal of approximately 6,000 of 17,000 mobile home policies on one program only, which were written through Raymond Patterson Agency of Fort Lauderdale. The basis for Liberty National's request for exemption, was that subsequent to Hurricane Andrew they incurred problems with their ceded reinsurance program. Liberty National alleges that the problem with the reinsurance was that Liberty National was only able to secure foreign reinsurance and no domestic reinsurance. Liberty National is continuously trying to obtain domestic reinsurance. Effective July 1993 Liberty National's reinsurance provides caps for each county based on a Tier System dividing the counties in Florida into Tier 1, Tier 2, and Tier 3 counties. The cap for Tier 1 counties is $7,500,000; Tier 2 is $15,000,000; and Tier 3 is $25,000,000. A chart was submitted to the department as part of Liberty National's exemption application with the total exposure that Liberty National has in each county. Liberty National had also contracted with a firm, Applied Insurance Research, which does windstorm analysis for various companies, to develop loss scenarios, and this information was submitted to the Department as part of the application. On August 12, 1993, Liberty National submitted additional information to the Department, pursuant to their exemption request. In the material Liberty National reported surplus as of December 31, 1992, in the amount of $66,798,297, and a contribution by Tourchmark of $50,000,000 additional capital on July 16, 1993. On August 19, 1993, the Department held a public hearing on Liberty National's request for partial exemption at which Liberty National introduced two exhibits that contained supplemental information regarding Liberty National's application for partial exemption. On September 2, 1993, the Department issued a letter denying Liberty National's request for exemption.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Insurance issue a Final Order in this case denying the exemption sought by the Petitioner. DONE AND ENTERED this 14th day of February 1994 in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of February 1994. COPIES FURNISHED: Mark A. Cohen, Esquire Mark A. Cohen & Associates, P.A. 1221 Brickell Avenue, Suite 1780 Miami, Florida 33131 Nancy Aliff, Esquire Department of Insurance Division of Legal Services 612 Larson Building Tallahassee, Florida 32399 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neil General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300
