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.
Showing posts with label AOB. Show all posts
Showing posts with label AOB. Show all posts
Wednesday, January 17, 2018
Wednesday, July 5, 2017
Down…But, Not Out!
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
Wednesday, October 12, 2016
Staying Afloat in a Sea of AOBs
What is an AOB?
The Office of the Insurance Consumer Advocate
provides the following definition for AOBs:
An
assignment of benefits (AOB) is a legal tool that allows a third party to be
paid for services performed for an insured homeowner who would normally be
reimbursed by the insurance company directly after making a claim. AOB is
commonly used when a homeowner experiences a water loss – such as a leaky pipe,
an overflow from a sink, or a damaged appliance – and contacts a contractor or
water remediation company for assistance. Most AOB agreements presented to the
insured allow the contractor to stand in the shoes of the insured for insurance
collection purposes.
How are AOBs trending?
Newly formed
at the beginning of 2016, the Consumer Protection Coalition was created to
raise awareness of AOB abuse. The Consumer Protection Coalition
reports Florida AOB lawsuits have increased 90,000 percent since 2000, with the
predominance of claims in South Florida.
The increase of AOB claims and litigation became further highlighted
when the state-run insurer, Citizens Property Insurance Corp., filed for a rate
increase this year citing AOB abuse as the driving force.
Citizens data
reveal a 46% rise in water loss claims in a 5-year period. Additionally, the Citizen’s data shows those
claims are more expensive and far more likely to lead to litigation, thereby increasing
the overall cost of the claim. Citizens data also reveals geographic
trends. It shows that nearly 1 in 4 South
Florida insureds are more likely to assign benefits to a third party (i.e. a
contractor, water mitigation company, or public adjuster) prior to submitting a
claim to their carrier.
What about judicial enforcement of contract
provisions, such as an anti-assignment clause?
For almost a century, there has been a body of Florida
case law that supports the position that policyholders have the right to assign
post-loss claims without insurer consent.
A more recent example of this area of law was illustrated in 2015, when the
Fourth District Court of Appeals entertained argument by an insured’s assignee who
brought a breach of contract action against a homeowner’s insurer for failing
to adequately compensate the assignee for emergency water removal services it
performed in the aftermath of an August 2012 water event. Specifically, the
water remediation company argued that the trial court erred as a matter of law
in dismissing its complaint based on the anti-assignment and loss payment
provisions of the policy and maintained that: (1) post-loss assignments of
insurance are valid under Florida law even if the policy contains an
anti-assignment clause; (2) the right of payment accrues on the date of the
loss; and (3) the loss payment provision does not preclude an assignment of
benefits and has never been construed to have any bearing on the issue of assignments. In making its determination, the court
explained:
“we are not unmindful of the concerns that [the insurer]
expressed in support of its policy change, providing evidence that inflated or
fraudulent post-loss claims filed by remediation companies exceeded by thirty
percent comparable services; that policy holders may sign away their rights
without understanding the implications; and that a ‘cottage industry’ of
‘vendors, contractors and attorneys’ exists that use the ‘assignment of benefits
and the threat of litigation’ to ‘extract higher payment form insurers.’ These concerns, however are matter of policy
that we are ill-suited to address…[which] are more properly addressed to the
Legislature.”
Now what?
Insurers,
consumer protection groups, state agencies and - with the additional lightening of
wallets resulting from the approved rate hikes - insureds are all affected by the AOB
crisis in Florida. Legislative efforts
to address the AOB problem have failed.
Senate Bill 596, filed October 21, 2015, died in judiciary on March 11,
2016. That same day House Bill 1097,
filed January 4, 2016, died in the Regulatory Affairs Committee.
With the
recent change of the guard from Kevin McCarty (retired May 2, 2016) to David
Altmaier, as Insurance Commissioner, a watch for change begins. The Commissioner acts as both a regulator and consumer
watchdog, and takes the heat if insurance rates go up. As the new Insurance Commissioner, Altmaier will have his hands
full with this growing problem right out of the gate as he steps into a state
of emergency caused by AOB abuse.
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