Legislators want to close a loophole they say bad actors are exploiting, ultimately leading to insurance rates increasing across the state. A bill heading to the House floor would address the issue. Lawmakers and the Chief Financial Officer of Florida are both focused on stopping the so-called bad actors.
“I can’t control hurricanes, I can’t control wildfire, I can’t control mother nature. What I can control is the man-made hurricanes and the man-made disaster that the Florida Legislature has the ability and should fix," said Florida Chief Financial Officer Jimmy Patronis.
The man-made disasters Patronis speaks of are false insurance claims he says are a result of bad apples in the industry abusing the Assignment of Benefits process. Rep. Bob Rommel (R-Naples) explains.
“Those that don’t know what an AOB is Assignment of Benefit. It is when a policy holder enters into a contract, usually with a contractor who then actually stands in their shoes and directly negotiates to the insurance company for repairs and payments," said Rommel.
He sponsors a bill that he hopes will stop what Patronis calls an exploitation.
“In 2006, we had 400 assignment of benefit related lawsuits in the state of Florida. This year were going to break over 30,000 lawsuits. So this is a pure exploitation of what used to be an option for individuals to have resolution for their policies. It’s become just an outright stealing of somebodies claim," said Patronis.
The Florida Office of Insurance Regulation reports since 2013, the number of AOB lawsuits rose by 26%. When insurance companies are forced to pay more for each claim, they ultimately get that money back by raising insurance rates.
Rommel thinks the increase in lawsuits is happening because the one-way attorneys’ fee provision that requires an insurance company to pay for a claimant’s attorney fees if they lose the lawsuit.
"That means an insurance company could offer $10,000 to a claimant, $10,000. They could file a lawsuit $10,001 could be the settled amount by the court and that insurance company would be required to pay all the attorney fees many times much more than the actual claim," said Rommel.
Rommel’s bill targets the one-way attorney’s fee provision in an effort to deter bad actors.
"This bill will allow attorney’s fees to be granted based on the settlement. If the settlement is less than 25% of the disputed amount the insurer collects the fees. If the disputed amount is between 25% and 50% neither side collects the fees. If the disputed amount is over 50% then the assignee collects the fees," said Rommel.
He says the hope is that everyone involved will negotiate in good faith. The AOB issue was formerly only known to be solely a homeowner’s insurance industry problem, but its spread to other insurance areas.
CFO Patronis says he’s dealt with it personally.
"I was in Tampa last January, at the Tampa Fairgrounds. I’m walking out to go to my car, I’m dressed in a suit, I have my seven-year-old son with me and I have an individual stop me and ask me if I have a chip in my windshield," said Patronis.
Patronis says sometimes companies even offer people gift cards to use as a reward for accepting their business, making an incentive for an individual to do business with them.
"Ultimately when you exploit that exponentially and it’s been increased you know, thousands of percent. You ultimately will drive up the cost of car insurance," said Patronis.
But AOB can be used for good. It gives a policy holder the protection and ability to hold their insurance company accountable if they need to. Rommel understands that and wants to give individuals who opt into an AOB agreement a chance to opt out.
“If a policy holder an AOB contract allow them to rescind the policy if they realize that’s not what they want to do. Currently once you sign an AOB policy and you want to get out, the only way to get out of that is to file a lawsuit yourself," said Rommel
The bill also does several other things to try and prevent bad actors from taking advantage of policy holders and insurance companies. Among them: contractors would have to itemize their work and if a claim is water-related, the person must be certified in restoration.
Contractor’s would also have to give 10 days’ notice to an insurance company before filing a lawsuit. The proposal is now headed to the full House. A similar bill in the Senate is in its last committee stop.