Florida now has legislation backed by the top Florida insurance regulator and the industry that promises to curtail homeowners insurance abuse under the assignment of benefits (AOB) feature.
Senate Bill 1038, filed Feb. 17 by State Sen. Dorothy Hukill and co-sponsored by Sen. Kathleen Passidomo, seeks to clarify the intent of the assignment of benefits provision for policyholders and limit the scope of benefits provided to those other than the named insured on the policy.
The bill drafted by the Florida Office of Insurance Regulation (OIR) with input from industry stakeholders, such as Citizens Property Insurance Corp., would do just that by defining the term “assignment agreement” and “prohibiting certain awards of attorney fees to certain persons or entities in suits based on claims arising under property insurance policies.”
The assignment of benefits bill would also instill specified conditions for assignment agreements to be valid. The bill stipulates that an assignment agreement will not be valid unless it meets the following conditions:
- Agreement is in writing and is executed by all named insureds
- Allows insureds to rescind the assignment agreement within seven business days without penalty
- Requires the assignee to provide a copy of the assigned agreement to the insured no later than three business days after the agreement is executed;
- And includes a written, itemized, per-unit cost estimate of the work to be performed by the assignee.
Other stipulations of the bill include: prohibiting certain provisions in an assignment agreement; specifying requirements for an assignee or transferee; and requiring an assignee to meet certain requirements as a condition precedent to filing suit under a policy.
Under Florida’s current one-way attorney fee statute, policyholders suing their insurer over a claim dispute can recover their attorney’s fees if the insurer is shown to have underpaid the claim, by any amount. The goal of the bill is to keep the assignment of benefits consumer protection in place, but take away the incentive – the one-way attorney fee – that the industry claims is driving abuse by assignees, who have included unregulated water mitigation, remediation and roofing contractors typically working with attorney groups.
If passed by the Legislature and signed into law, the bill would become effective July 1, 2017.
OIR praised the lawmakers Hukill and Passidomo for filing the legislation, which it drafted with input from Citizens, as well as other stakeholders.
“Under provisions of the bill, consumers would be held harmless, assignment of benefits could still be utilized, and incentives to file unnecessary litigation would be eliminated,” said Florida Insurance Commissioner David Altmaier. “We look forward to working with the Legislature this session on this important issue and are in full support of this bill.”
The bill was referred to the Senate Banking and Insurance, Rules, and Judiciary Committees on Feb. 23 and awaits discussion. A sponsor from the Florida House has yet to sign on and OIR said it doesn’t have any information yet on who may do so.
Altmaier has stepped up his efforts to fight the AOB abuse in recent months, telling the Florida Cabinet at the February meeting that it was one of OIR’s highest legislative priorities. Altmaier told the Cabinet that the abuse has become so rampant in the state it is now threatening homeownership because of an increase in lawsuits against insurers by assignees.
In response, insurers have been forced to raise rates and will continue to do so for the foreseeable future if the Florida Legislature does not take action, he said.
The industry’s response will also go beyond raising rates.
“Companies are going to look at certain regions of the state and determine that given these trends they can no longer operate in those jurisdictions because there is no amount of rate increase they can obtain from [OIR] to make their operations sustainable going forward so they will begin to shut down certain zip codes in the state,” he said. “Many companies already have.”
State-run insurer Citizens, which has seen a huge jump in litigation associated with water loss claims over the last several years, has also been vocal about how the abuse has impacted the company and warned that its policyholder count could start going back up if the abuse trends continue.
“We have been working closely with OIR and others to put together a proposal we believe will meaningfully benefit consumers. We think SB 1038 provides such consumer benefits and look forward to working with all stakeholders as the bill moves forward,” said Michael Peltier, Citizens spokesperson.
Industry and business groups also praised the bill saying its true purpose is to protect consumers.
“The bill addresses what we believe is the true cost driver in the homeowners’ marketplace: the use of the ‘one way’ attorney fee law by third parties who have no interest in the underlying insurance claim except to profit from it,” said Michael Carlson, president of the Personal Insurance Federation of Florida.
“Assignment of benefits fraud and abuse is increasingly a threat to keeping home ownership affordable in Florida. For many low-income Floridians, and people on fixed incomes, the premium increases being driven by AOB scams could literally put homeownership out of reach,” said Carolyn Johnson, director of Business, Economic Development & Innovation Policy for the Florida Chamber of Commerce. “The [Consumer Protection Coalition] is urging Florida legislators to pass meaningful reforms this spring and put consumers back in control of the policies they bought and paid for.”
Florida CFO Jeff Atwater, who at his own admission has been critical of the industry on certain issues, said at the Cabinet meeting the story for AOB reform needs to stay centered on consumers, who are the ones really at risk if the Legislature fails to act.
“It’s time – it’s time the evidence be presented, it’s time that the consumer story be told and relief to be provided – not relief for the industry [or] trial lawyers,” Atwater said.
Supporters expect that getting the bill passed will be difficult despite the support of OIR and insurers.
“Let’s face it, the trial bar is extremely powerful and there’s absolutely no question they are going to fight this hard. They are going to fight anything that in any way shape or form impacts their ability to take on vendors as clients and eliminates any possibility for them to get fees,” said Barry Gilway, CEO and executive director of Citizens.
There are also murmurs that other “less controversial” legislation may be introduced. PIFF’s Carlson said he expects at least two other bills will be filed – one in the House and one in the Senate – that will compete with the primary legislation drafted by OIR that would avoid addressing attorney’s fees.
In a statement to Insurance Journal, OIR said that it anticipates other ideas “related to a solution” will come up, considering the large number of stakeholders interested in the issue, however, “whether any of them are filed as legislation remains to be seen.”
Read Full Bill Text: Florida Senate Bill 1038