Florida’s insurance industry has tried for years to reign in a practice known as assignment of benefits—where a property owner signs over payment of a claim directly to a contractor or service provider. The fight is back. This time, spearheaded by state Chief Financial Officer Jimmy Patronis.
“I know my staff doesn’t like it when I call them scoundrels. Because technically, we’ve got a law on the books that’s being legally exploited," Chief Financial Jimmy Patronis told reporters in January as he announced his legisaltive priorities. Assignment of Benefits Reform is on top.
Patronis says some contractors have abused the system by filing exorbitant claims. Barry Gilway, head of the state-backed Citizens Property Insurance Corporation, says he’s seeing insurance companies leave the state as a result.
“In Dade and Broward there are eight or nine major companies that have simply stopped writing business. They don’t write new business and some are going as far to not renew the business they have within the tri-county area. If you’re not from Tri-County, why should you be worried? Well, that issue is spreading across the state," he recently told a legisaltive committee looking to make AOB changes.
"This is a problem that’s isolated to a very small number of people but the way it’s being abused is causing some awfully large problems for our consumers," says Florida Office of Insurance Regulation Secretary David Altmaier. The problems manifest themselves in higher insurance premiums and fewer companies underwriting.
AOB has been around forever. Take medicine for example. Every time a person goes to a doctor’s office they’re likely signing an AOB to let the doctor deal directly with the insurer. Only within the last several years has the state seen problems relating to the practice, and Altmaier says those problems are showing up mostly in one area of insurance loss. Water claims.
“Forty-six percent more water claims in 2015 than there were in 2010. The severity increased by 28 percent. So, there’s 46 percent more claims that cost 26 percent more than they originally did.”
Leaky pipes, water heaters breaking down, and roofing issues can all fall within water loss claims. Problems like that can happen in an instant. One of the places a homeowner is likely to call is to a company like Tallahassee’s Bone Dry, to help them air out.
“Pretty much, I am your house Doctor," says owner Jeff Grant. He's often discussed AOB over the years. Two years ago the Florida legisalture attempted and failed to pass an AOB reform packages. He says sometimes, having a homeowners sign an AOB is sometimes the only way to guarantee a company like his can get paid.
“Most of the time they’re back together and living their lives, the client. And we haven’t been paid a dime. Then they want to come and say, ‘here. Here’s $0.50 on the dollar. Take that and pound sand.”
“They” are the insurance companies. In situations like water loss, payments often come after services have been delivered. Grant says AOB gives him recourse when insurance companies drag their feet. He’s able to sue them. Terry Perkins is a state of Florida retiree. During a 2015 hearing on AOB he told lawmakers he did file a claim with his insurance company but was lowballed.
“I was first offered $6,100 to repair the damage. I checked with several local contractors and they didn’t laugh at me, but it was like, ‘you can’t get this work done for that amount.’ I eventually settled for $32,000. And I can get the work done for that amount.”
Patronis says he understands those concerns and has challenged insurance carriers to, "do your job. Pay the claims. Answer the phone calls. Take care of the customer. If we’re doing that, then the consumer who is under duress, isn’t looking for solutions outside the claims process.”
This year, the Florida legislature is once again targeting assignment of benefits. This time, with an eye on attorney’s fees. A Senate proposal would make it so that only the policy holder to recoup such fees. The idea is to make AOB less attractive to bad actors seeking to exploit the system.