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The insurance regulatory structure in Florida is known for its complexity. The Florida Office of Insurance Regulation ("OIR") is responsible for most regulatory oversight over insurers. The head of the OIR is the Commissioner of Insurance Regulation, who is appointed by the four-member Financial Services Commission ("FSC"). The FSC is composed of four constitutionally elected officials-- the Governor, the Chief Financial Officer ("CFO"), the Attorney General and the Commissioner of Agriculture. Although the OIR typically initiates its own actions in regulatory matters, the FSC is designated as the OIR's agency head for purposes of administrative rulemaking.2 The OIR therefore must request the FSC's approval to develop and adopt administrative rules implementing the Florida Insurance Code.

The Department of Financial Services ("DFS") operates under the direction of the CFO and administers several functions related to the insurance industry. For example, the licensing and discipline of insurance agents, agencies, adjusters and other licensees rest with DFS. DFS also operates the state's division of rehabilitation and liquidation.

Other agencies also can affect segments of the insurance industry. Rules adopted by the State Board of Administration ("SBA") in the administration of the Florida Hurricane Catastrophe Fund ("FHCF") affect property and casualty insurers. The SBA is a collegial body overseen by the Governor, CFO and Attorney General. The Agency for Health Care Administration ("AHCA") adopts rules that might affect health insurers, and AHCA is directed by a secretary appointed by the Governor.

The end result is an insurance regulatory structure in Florida that involves rulemaking by several relevant agencies overseen by different agency heads. To further complicate matters, the Florida legislature in late 2010 revised laws relating to agency rulemaking. New Governor Rick Scott soon followed by issuing an Executive Order designed to prevent agency rules from being an impediment to economic development in this state. This article briefly summarizes Florida rulemaking requirements before outlining the impact of the new law and Executive Order on the rulemaking process.

Agency Rulemaking Required Under Florida Law:

Florida law defines a "rule" to include any statement by an agency that has general applicability and implements, interprets or prescribes law or policy.3 Rulemaking is not discretionary. Whenever a Florida agency develops a position that it intends to be one of general applicability, the agency is required by law to adopt the position as an administrative rule.4 The Florida Administrative Procedure Act ("APA") at Chapter 120, Florida Statutes, sets forth the process by which agencies must adopt administrative rules. This process entails publishing notice of a proposed rule's development; holding one or more workshops to solicit input from affected parties; publishing formal notice of the proposed rule; holding one or more public hearings; and providing certain windows during which affected parties may challenge the validity of the proposed rule.5

The formal process for developing, revising and adopting proposed rules serves several important public policy purposes. First, the rulemaking process ensures that affected parties are notified of positions Florida agencies intend to apply. This allows affected parties opportunities to provide feedback that might limit the adverse effects or unforeseen consequences of the rules. In addition, administrative rules provide public notice to potentially affected parties about conduct that is either allowed or prohibited. Finally, rulemaking fosters consistency in agencies' positions over time and across similarly situated parties. Although agency rulemaking is sometimes criticized as resulting from bureaucratic overreaching, rules level the proverbial playing field by fostering a well-publicized, consistent regulatory framework.

The APA deters agencies from taking general positions that are not adopted through formal rulemaking. So-called "non-rule policy" is detrimental to business because it precludes the advanced notice and consistency in agency positions that are achieved through rulemaking. The APA therefore allows a party successfully challenging an agency statement as an unadopted rule to recover attorneys' fees for its efforts.6

Evaluation of Regulatory Costs as a Deterrent to Burdensome Rules:

Regulated industries have long complained that governmental red tape prevents them from achieving their business objectives. The Florida legislature over time has responded by requiring agencies to incorporate analyses of anticipated regulatory costs into the rulemaking process. The APA as in effect through late 2010 provided that each agency is "encouraged" to develop a statement of estimated regulatory costs ("SERC") in connection with rules it develops.7 The APA further provided that an agency must prepare a SERC when a proposed rule would impact small businesses.8 Agencies must consider options for limiting the impact of rules on small businesses, including establishing less stringent reporting requirements or deadlines for them; simplifying the rules for small businesses; or exempting small businesses from the rules altogether.9

The APA also allows a party substantially affected by a proposed rule to submit a good faith written proposal for a lower cost regulatory alternative to the rule.10 The proposal may include the possibility of not adopting the proposed rule if the proposal explains how the objectives of the underlying law still will be achieved.11 By submitting a proposed alternative, the affected party triggers an obligation for the agency to prepare a SERC if it has not previously done so. Alternatively, the agency must revise any previously prepared SERC, and ultimately must either adopt the lower cost alternative or provide its reasons for rejecting the alternative in favor of its proposed rule.12

Prior law required a SERC to include a good faith estimate of the number of entities likely to be required to comply with the rule as well as the transactional costs likely to be incurred by those entities. The SERC also included a good faith estimate of the costs to the agency of implementing and enforcing the proposed rule and any impact on small businesses or local governments.13 The SERC requirement under prior Florida law therefore required agencies to consider the costs associated with their rules and allowed affected parties to question whether other less costly means could be used to achieve the agencies goals. In the insurance industry, however, SERCs historically have not played a significant role in rulemaking. This is due in part to the emphasis of SERCs on small business and perhaps because many insurance-related rules implement specific statutes or adopt standard requirements such as NAIC reporting manuals.

Florida Legislature Overrides a Veto to Further Limit Regulatory Costs:

The Florida legislature in its 2010 regular session passed HB 1565 in an attempt to further limit the ability of Florida's agencies to adopt rules that impede business. The bill made several revisions to the rulemaking provisions of the APA, and specifically to SERC requirements. Three changes stand out for their profound impact on the rulemaking process. First, the legislature expanded the instances in which agencies must prepare SERCs. Whereas prior law required an agency to consider the impact of its proposed rule on small business, the bill more broadly required an agency to prepare a SERC if its proposed rule "is likely to directly or indirectly increase regulatory costs in excess of $200,000 in the aggregate in this state within 1 year after the implementation of the rule."14

Second, the legislature in HB 1565 expanded the factors considered in SERCs. In addition to the good faith estimates discussed in the preceding section of this article, the bill required an agency to provide an economic analysis indicating whether a proposed rule is likely to (i) have an adverse impact on economic growth, private sector job creation or employment, or private sector investment in excess of $1 million in the aggregate within five years after implementation of the rule; (ii) have an adverse impact on business competitiveness, including the ability of persons doing business in Florida to compete with persons doing business in other states, or on productivity or innovation in excess of $1 million in the aggregate within five years after the implementation of the rule; or (iii) increase regulatory costs, including transactional costs, in excess of $1 million in the aggregate within five years of implementation of the rule.15

Third, the bill required any agency proposing a rule exceeding any of the criteria listed in the preceding paragraph to submit the rule to the President of the Senate and Speaker of the House of Representatives at least 30 days prior to the legislature's next annual legislative session. Any rule subject to this requirement would not be able to take effect until ratified by the legislature.16

Through these and other changes, the legislature in HB 1565 substantially increased its involvement in the rulemaking process. However, Governor Charlie Crist vetoed the bill in a message dated May 28, 2010, stating that ". . . instead of addressing regulatory costs, this bill encroaches on the principle of separation of powers." Crist wrote that the Florida Constitution reserves implementation of laws to the executive branch, and agency rulemaking is an important part of the executive function. Crist further asserted that "nearly every rule" would have to await an act of the legislature to become final, which would end up increasing red tape and regulatory costs.17

Crist's veto did not last long. In November 2010, after the fall elections, the legislature reconvened for the purpose of overriding the Governor's vetoes of HB 1565 and several other bills. As a result, the substantial changes to the SERC process in HB 1565 have taken effect and agencies are in the early stages of understanding the new requirements. The expanded SERC requirements under the new law, including the broad mandate for agencies to consider both direct and indirect costs, likely will increase the number of SERCs agencies prepare. This presumably will affect insurance-related rules because SERCs are no longer directed primarily at assessing the impact of rules on small businesses. In some cases, these rules might trigger the legislative ratification requirement.

Florida's New Governor Seeks to Limit Regulatory Impediments to Economic Development:

Governor Crist's decision to run for U.S. Senate meant Florida would have a new governor this year. Republican Rick Scott, a former healthcare executive without prior political experience, won the election and took office in January 2011. On his first day in office, he issued Executive Order 11-01 suspending agency rulemaking and creating an Office of Fiscal Accountability and Regulatory Reform ("OFARR"). The Executive Order directed all gubernatorial agencies to immediately suspend rulemaking for new and pending rules. Rulemaking will continue only after a review by OFARR and determination that the rules will not result in unnecessary regulatory costs or burdens. The Executive Order also requested voluntary compliance by agencies not under the Governor's supervision.

The OIR and SBA are overseen for rulemaking purposes by collegial bodies comprised of the Governor and other constitutional officers. Due to Governor Scott's direct involvement with these agencies, many insurance- related rules are likely to face the increased scrutiny desired by the Governor's office. DFS, however, is under the direction of the CFO and is not subject to the mandatory terms of Executive Order 11-01. The CFO's office is reported as saying that DFS will conduct an independent review of its rules applying its own standards.18 Nonetheless, it is clear throughout Florida's government that agency rulemaking is discouraged if proposed rules are perceived to adversely affect economic development and job creation.


Since the realignment of Florida's constitutional offices and regulatory functions about a decade ago, this state has been known for its complex insurance regulatory structure. Many aspects of Florida's regulatory system fall within the sole authority of the OIR, which is overseen by an appointed insurance commissioner. Other aspects of the industry fall under the jurisdiction of the Chief Financial Officer, while still others are the responsibility of collegial bodies that include as many as three or four elected officials.

To this complex system, the state has added increased executive and legislative branch involvement in agency rulemaking. Agency rules serve valid purposes by allowing affected parties to comment on proposed agency positions, ensuring that agency interpretations are publically noticed, and facilitating consistent interpretations. Unfortunately, agency rulemaking also has come to symbolize governmental inefficiency and barriers to expansion of businesses. The Florida legislature seeks to alleviate these negative aspects of rulemaking, ironically by inserting itself into the rulemaking process. Agencies will find under Florida's new law that they are required to prepare more frequent and more extensive SERCS than under prior law. We also can anticipate that regulated industries likewise will take note of the new requirements and expand their use of proposals for lower cost regulatory alternatives.

All of this assumes, of course, that agency rulemaking moves forward in the first place. The Governor's Executive Order 11-01 coupled with the new law on SERCs sends a message to agencies they should avoid promulgating rules with adverse impacts on businesses whenever possible. This is a welcome message for companies seeking to deploy the capital that is needed to revitalize the state and national economies. However, in the long run, the state must strive to balance reducing regulatory burdens with the valid pubic purposes of rulemaking.



1. The author is president of Radey Thomas Yon & Clark, P.A. and is board certified by The Florida Bar in State and Federal Government and Administrative Practice.

2. §20.121(3), Fla. Stat. (2010).

3. §120.52(16), Fla. Stat. (2010).

4. §120.54(1), Fla. Stat. (2010).

5. See generally, §§120.54-120.56, Fla. Stat. (2010).

6. §120.595(4), Fla. Stat. (2010).

7. §120.54(3)(b)1., Fla. Stat. (2010).

8. §120.54(3)(b), Fla. Stat (2010). Small business for purposes of this requirement is defined as any independently owned and operated business concern that employs 200 or fewer permanent full-time employees and that, together with its affiliates, has a net worth of more than $5 million, or any firm based in Florida that has a Small Business Administration 8(a) certification. In the insurance context, the net worth requirement typically precludes insurers from being considered small businesses. However, the small business definition encompasses many limited licensees such as service agreement companies and prepaid health service plans, as well as many insurance agencies, third party administrators and other licensees in the industry.

9. §120.54(3)(b)2.a., Fla. Stat. (2010).

10. §120.541(1)(a), Fla. Stat. (2010).

11. Id.

12. §120.541(1)(b), Fla. Stat. (2010).

13. §120.541(2), Fla. Stat. (2010).

14. HB 1565, Section 1 (amending §120.54(3)(b) Fla. Stat.)(emphasis added).

15. HB 1554, Section 2 (amending §120.541, Fla. Stat.).

16. Id.

17. Crist, Goveror Charlie. Letter to Dawn Roberts, Interim Secretary,Florida Department of State. 28 May 2010.

18. Zink, J. (2011, January 14). Hands Off, Adam Putnam and Other Cabinet Members Tell Rick Scott. Retrieved January 14, 2011 from