Third Time’s A Charm - Will This Be The Year Of The AOB Reformation?

The Florida House of Representatives struck another blow against abusive, unequitable, and baseless assignment of benefits (“AOB”) litigation when it voted overwhelmingly in favor of reform by a margin of 82-20 last Friday.  Undeterred by the failure of previous attempts to reform AOB litigation in Florida, (Senate Bill 596, filed October 21, 2015, died in judiciary on March 11, 2016; House Bill 1097, filed January 4, 2016, died in the Regulatory Affairs Committee; House Bill 1421 filed March 7, 2017, died in Committee on Banking and Insurance on May 5, 2017; Senate Bill 1218, filed on February 24, 2017, died on May 5, 2017 in Committee on Related Industries), on January 12, 2018, Florida legislators acted decisively to address the AOB problem that has plagued the insurance industry in Florida.

House Bill 7015, titled “An Act Relating to Property Insurance Assignment Agreements,” authorizes insureds and restoration companies to enter into post-loss assignment agreements that transfer rights, including benefits to repair, replace, and/or mitigate damaged property; however, this bill seeks to impose additional requirements that may level the playing field for insurance companies facing a barrage of AOB claims by preventing them from having to defend third-party actions needlessly filed by the assignees of its insureds’ claims.  In response to the judicial cry for a legislative fix addressing underlying AOB caselaw, the bill creates section 627.7152, which provides in pertinent part as follows:
(2) An assignment agreement that does not comply with this subsection is invalid and unenforceable.
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3. Contain a provision requiring the assignee to provide a copy of the executed assignment agreement to the insurer within 3 business days after the date the assignment agreement is executed or the date work begins, whichever is earlier. Delivery may be made:
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4. Contain a written, itemized, per-unit cost estimate of the services to be performed by the assignee. If the estimate of services includes a claim for water restoration services, the estimate must also include proof that the assignee or subcontractor of the assignee possesses a valid certification from an entity that requires water remediation to be performed according to a standard that is approved by the American National Standards Institute. 

The language in H.B. 7015 also provides a pre-suit resolution mechanism where the assignee must provide the insurer and the assignor with a written notice at least 10 business days before filing suit under the policy, but not before the insurer makes a determination of coverage.  The notice must include specific detail regarding claimed damages (inclusive of cost of materials, work labor, and equipment, etc.) for the amount in dispute, the amount claimed, and any pre-suit settlement demand.  Once served with the notice of intent to file suit, the insurer has 10 business days to respond.

H.B.7015 also aims at reducing the number of unnecessary AOB-related lawsuits filed by tackling the issue of attorneys’ fees, the broad availability of which may have incentivized litigation in the past.  The bill aims at creating a sliding scale for attorneys’ fees in cases where the insurer is the prevailing party.  Currently, when the insured or assignee prevails, their reasonable attorneys’ fees are paid by the insurer.  However, the current structure does not afford an insurer any reimbursement of attorneys’ fees if the insurer prevails in litigation.  This inequity has often been criticized as the engine that is driving the AOB train.  Although there is some dispute with respect to whether this is actually the case, H.B. 7015 is structured in a manner similar to other fee shifting statutes such as Fla. Stat. §768.79 or Fla. Stat. § 57.105.

Now having passed the House vote, H.B. 7015 moves to the Florida Senate for discussion and vote.  The Florida Senate currently has a companion bill before it, Senate Bill 62.

The Florida Office of Insurance Regulation released the 2017 Assignment of Benefits Data Call on January 8, 2018.  The report illustrates an increase in the number of water-related claims that involve an AOB from 14.9% 2016 to 17% in 2017.  Additionally, the data regarding the location of these claims is particularly illuminating.


Based on Hurricane Irma’s track, it is likely that a failure to pass AOB litigation reform will result not only in an increased number of AOB claims statewide, but also in a spike of AOB-related claims in places where these types of lawsuits have been lower historically.  Because of the widespread impact of this legislation, we will continue to monitor the reform efforts and stay ahead of changes.  Perhaps the saying will ring true…the third time’s a charm.