|Florida’s property insurance policyholders face paying higher rates due to the Legislature’s failure this legislative session to pass meaningful reforms to rein in fraud and abuse involving Assignment of Benefits (AOB).
For the fourth straight year, legislators heard testimony about a rapidly growing scam in which shady home repair vendors pressure homeowners to sign away the rights and benefits of their insurance policies as a condition of performing work. This practice has led to grossly inflated claims and an explosion of AOB lawsuits against insurers, which is driving up the cost of homeowners’ coverage for consumers.
Last week, Citizens Property Insurance Corp. warned that its policyholders in Miami-Dade, Broward and Palm Beach counties face rate increases of 10 percent annually for years to come, and that rate decreases for its other policyholders across the state are now jeopardized, due to a huge increase in water damage claims and AOB lawsuits. Citizens said it is now receiving an average 650 new lawsuits a month. The mounting losses are threatening the state insurer’s financial strength and jeopardizing its efforts to move policies to the private market.
Earlier in the session, the Florida Office of Insurance Regulation issued an analysis showing that AOB abuse and lawsuits are also a growing problem for private insurers. State insurance regulators said if the trend wasn’t stopped, private insurers also could be forced to raise rates by 10 percent or more annually just to break even.
The Consumer Protection Coalition, led by the Florida Chamber of Commerce, praised state Senator Dorothy Hukill (R-Port Orange) and state Rep. Matt Caldwell (R-Lehigh Acres) for introducing bills at the start of the 2016 session that contained strong consumer protections. However, their bills died in committee. Among the common-sense consumer protections that failed to win acceptance with legislators were provisions allowing the consumer to rescind an AOB within three days, a requirement that the home repair vendor provide written disclosure to the policyholder that they might be signing away important legal and policy rights and a prohibition against vendors interfering with the right of the insurer to communicate directly with their own policyholder.
Hukill’s bill also sought to reform the use of one-way attorney fees in AOB lawsuits, which are fueling the dramatic surge in AOB lawsuits. One-way attorney fees that exist in state law today were intended to ensure a level playing field for policyholders forced to sue their own insurance company. Instead, shady home repair vendors are obtaining the right to these one-way fees, incentivizing them to file lawsuits – because they don’t have to pay attorney fees to insurers, even if they lose.
“Unless the Legislature takes real steps to address one-way attorney fees and stop the lawsuit free-for-all, consumers will continue to pay the price of inaction in the form of higher insurance rates,” said David Hart, Executive Vice President of the Florida Chamber of Commerce, which is spearheading the coalition. “The fraud and abuse involving AOBs is real, it is getting worse and it is spreading statewide. While we are disappointed that the Legislature did not agree to a cure this session, we are 100 percent committed to ending the abuse and protecting consumers in 2017.”
The Florida Chamber and Consumer Protection Coalition, which includes a wide array of consumer advocates, construction firms, realtors, bankers, business associations, insurance agents and insurance companies, said it will continue to work to educate consumers, legislators and other stakeholders and press for real reforms over the next year.