Although hurricane season has yet to cause havoc this year, 2015 has already been a brutal year for insurance companies which provide homeowners’ coverage in Florida.
The problem for property insurers? No one is willing to take a firm position against the surge of Assignment of Benefits (AOB) lawsuits, which are proliferating to the point where they are in danger of strangling insurers. The Courts are deferring to the Legislature but the Legislature is seemingly uninterested in making change.
The problems are endemic to Florida’s private market. The “carrier of last resort,” Citizens Property Insurance Corporation, is in the midst of a legislatively mandated, large-scale depopulation program, in which it has slashed its number of policies by about a third in the last several years. Citizens’ loss is a gain for several upstart carriers, but the AOB crisis is showing no signs of abetting and costs to defend these frivolous claims are becoming exorbitant.
AOB lawsuits are easy to understand, both from the carrier’s perspective and the insured’s point of view. The typical scenario progresses as follows:
- A homeowner has a water loss – such as a leaky pipe, an overflow from a sink or toilet that causes water to seep into the baseboards, flooring and furniture – and calls a water mitigation company for emergency dry out services;
- The water mitigation company sends a technician with a truck full of air blowers, dehumidifiers and other equipment, removes the baseboards and dries the inside of the house;
- Either before, during or after the multiple day dryout process, the water mitigation company presents the homeowner with documents including an AOB, in which the insured assigns all of his or her rights under the policy to recover insurance proceeds to the contractor;
- Days or weeks later, the insured files a claim with the insurance company.