Assignment of benefits (“AOB”) have become a double-edge
sword for the consuming public. While
the public policy reasoning for their creation, to allow the insured to obtain
immediate, necessary assistance in meeting their mitigation obligation and
getting back to pre-loss condition, remains sound, the increased level of abuse
has proven to be public enemy number one.
The Florida
Office of the Insurance Consumer Advocate (“ICA”) reports that the abuse of
AOBs “allows unscrupulous contractors to overinflate or submit improper claims,
causing legal battles between the contractor and the insurance company, with
the consumer left out of the picture.” As
a result, the ICA continues to monitor the effects of AOB abuse and report on the
collected data to assist in proactive resolution of practices that may
adversely affect consumers. The collected data bolsters the need for proposed
solutions, such as the legislative attempts to invoke reforms.
The Florida Legislature (urged by Florida court decisions)
has worked on legislation designed to combat systemic AOB abuse. Unfortunately, for the second year in a row,
these legislative efforts have failed. While the immediate battle has been
lost, that momentum to win the war has grown stronger.
In 2016, several pieces of legislation were proposed to
address relevant AOB issues.
Similar legislative efforts were launched in 2017 to
combat AOB abuse.
Senate Bill 1038, filed February 17, 2017, addressed
assignment of property insurance benefits by prohibiting certain awards of
attorney fees to certain persons or entities in suits based on claims arising
under property insurance policies and requiring specific conditions before
finding that an assignment agreement is valid. Senate Bill 1038 died in the Committee
on Banking and Insurance on May 5, 2017.
Senate Bill 1150, filed February 22, 2017, related to
regulation of water damage restoration.
It defined the terms “professional water damage restorer” and “water
damage restoration” such that the Department of Business and Professional
Regulation would be required to license applicants who are qualified to
practice water damage restoration and specify the qualifications for
licensure. Senate Bill 1150 was
withdrawn from further consideration on May 1, 2017.
Senate Bill 1218, filed February 24, 2017, addressed
property repair, creating within the Department of Business and Professional
Regulation the water damage restoration services licensing program that would
provide examination requirements for applicants for professional water damage
restorer licensure. It would also require the department to license qualified
applicants who meet and maintain specified requirements, including requiring
professional water damage restorers to maintain specified insurance coverage.
Senate Bill 1218 died on May 5, 2017 in the Committee on Regulated Industries.
House Bill 1421, filed March 7, 2017, addressed property
insurance assignment agreements by providing requirements and limitations of
assignments, establishing a burden of proof, providing for an award of
reasonable attorney fees for certain claims arising under assignment
agreements, setting forth specific notice and reporting requirements, and
confirming that certain residential property insurance policies may not
prohibit assignment of post-loss benefits. House Bill 1421 died in Committee on
Banking and Insurance on May 5, 2017.
While the outcome of the May 5, 2017, massacre of AOB
regulatory bills may be disheartening as it marks the second consecutive
legislative year that AOB reform measures failed, there is a glimmer of
hope. When the Florida House of
Representatives passed HB 1421 (by a vote of 91 to 26), Commissioner David
Altmaier issued the following statement:
I applaud the Florida House
of Representatives for their favorable vote on HB 1421 today, and I
am especially grateful to Representative James Grant, the bill sponsor, and
Representative Rene Plasencia, the prime co-sponsor. This legislation
makes significant progress in protecting Florida consumers from homeowners
insurance rate increases fueled by rising litigation costs associated with an
Assignment of Benefits (AOB). We appreciate the support and efforts of the
entire Florida Legislature as they considered this legislative priority of the
Office of Insurance Regulation during the 2017 Session.
The takeaway from the past two
legislative sessions ought to be that while the battle has been lost, there has
been forward progress. Several years
ago, the AOB war was waged in courthouses.
Judges recognized the long-standing tradition and public-policy basis
for allowing insureds to assign their indemnity benefits to expedite
remediation, so they called upon lawmakers to take action. While the recent two years of effort have not
been successful, those efforts reveal the existence of an advancing campaign against
AOB abuse.
Posted by Anaysa Gallardo Stutzman
