PROTECTING CONSUMERS AGAINST INSURANCE SCAMS
Overview
Assignment of Benefits (AOB) is a legal tool intended to ensure the prompt payment of vendors (such as contractor repairing home damage) who provide services to policyholders without requiring a policyholder to be involved in the payment process.
However, in recent years, unscrupulous trial lawyers and contractors (often water remediation firms, roofing contractors and plumbers) have devised a new legal scheme involving AOBs in which they are being used to inflate claims and file costly lawsuits against insurers. Florida Department of Financial Services records show that the number of AOB lawsuits filed against insurers has skyrocketed from 9,424 in 2005-06 to 92,521 in 2013-14 – and increase of nearly 1,000 percent. The number of AOB lawsuits involving just homeowner property claims rose from 70 in 2009 to 2,014 last year, an increase of more than 2,700 percent in five years. In December 2014, Citizens Property Insurance Corp. alone received 562 new AOB lawsuits.
When policyholders, often unknowingly, “assign” the benefits of their insurance policies to a trial attorney or vendor, they lose control of their claim and any litigation associated with it. In the vast majority of these AOB lawsuits, the policyholder has already been made whole and had their home repaired or their medical procedure performed and paid for by their insurer. Instead, their policy benefits wind up being used by trial lawyers and contractors to extract more money from insurers. This behavior is unnecessarily driving up the cost of insurance for all Florida consumers.
During a recent workshop of the House Insurance & Banking Subcommittee, there was agreement among nearly all who testified that there are serious abuses with AOBs that must be fixed. If left unaddressed, this rapidly growing AOB litigation scam could explode into a full-scale consumer crisis on a scale that Florida faced in recent years with PIP fraud and abuse and sinkhole claims abuse. The Florida Legislature must act in the 2015 session to restore AOBs to their original intended use and stop the trial lawyer and vendor schemes before they spread statewide and affect the pocketbooks of all honest Floridians.
2015 Legislative Proposals
Legislators have filed three bills in the 2015 legislative session to address AOB fraud and abuse:
House Bill 669 by Rep. John Tobia, which was approved by the Insurance & Banking subcommittee March 18, would allow policyholders to assign their benefits for claims up to $3,000. For any claim exceeding that, a vendor would not be able to use AOB. The bill also would allow policyholders to assign their benefits when paying a public adjuster or attorney for services rendered in adjusting a claim.
Senate Bill 1064 by Sen. Dorothy Hukill would allow policies to be assignable and non-assignable, depending on the terms.
Senate Bill 1210 by Sen. Alan Hays would address one-way attorney fees.
None of the proposals would restrict the policyholder from directing their insurance company to reimburse a contractor repairing their home, or prevent a policyholder from engaging an attorney to sue their insurance company if they did not believe their claim was being handled appropriately.
