AOB… an ugly iceberg!

Some say every insurance crisis inevitably traces back to a handful of lawyers and that abuse of Assignment of Benefits (AOB) is no exception. What I’ve recently uncovered seems to bear this out in mind-boggling terms.  

Just like PIP and sinkholes, AOB has all the markings of just another sue-for-profit scheme. (See “What is an Assignment of Benefits” here).

During a recent House Banking and Insurance Subcommittee workshop trial lawyers and water extractors questioned whether AOB is even a crisis. Little was said about finding the root cause. They blamed a few bad apples; water extraction companies and roofers. And, of course, they blamed insurers, alleging they don’t pay their bills.

As it turns out, insurers are paying their bills–even the whoppers they get from AOB attorneys. And, this may drive costs even more than the fraudulent claim inflation from roofers and water extractors. (See “Water Extraction…Florida’s biggest cost driver?!” here.)

Here’s the thing. I’ve been told “property” insurer’s routinely pay attorney fees to settle AOB suits for somewhere between $3500 to $7500. Don’t know if that’s “on average” or even if it’s true, but…it sounds reasonable. Heck, at $400 an hour, it’s barely more than one day’s work.

Well, guess how many AOB lawsuits (for  all lines) have been filed against insurers in just the last two years–go ahead guess!

Would you believe 92,521?!

And, get this. Back in 2005 and 2006 there were only 9,424 AOB lawsuits–an explosion of nearly 1,000%! (See NOTE#1 below)

I swear I’m not making this up…92,521 AOB lawsuits in just the last two calendar years, for businesses mostly; not consumers.

Check out the following chart showing how the “daily” total has climbed to nearly 200 lawsuits every working day since 2004 when AOB lawsuits were virtually unheard of.

Funny, emergency contractors claim they need AOB to get paid. But, in the wake of the 04/05 seasons, after eight storms in sixteen months, they didn’t seem to need AOB at all. This jives perfectly with testimony from roofers that only bad apples use AOB and it should be abolished altogether. (See “AOB & Roofers?!” here.)

While abusers will always find a way to blame insurers, it’s hard to ignore the names and numbers from the Department of Financial Services (DFS).  Every suit filed against an insurer is in a DFS data base (available online) that can be queried any number of ways, including: by insurer, by plaintiff, by time period, and best of all, by assignee. (See NOTE #2 below).

It’s all public information. Anyone can enter any AOB lawyers name and see what pops up. Since he testified at the House insurance workshop for trial lawyers, I entered the name Lee Jacobson with Hale, Hale & Jacobson and got a 99 page report listing 1,383 AOB lawsuits.

For just two years!

Assuming the DFS data is correct and assuming Mr. Jacobson only worked one day on each suit for, say, $400 an hour, he’d make $3,200–every day! With 1,383 suits he would’ve hauled in $2,336,000 in just two years.  

Thanks to some helpful “tips” from DFS (See NOTE#3 below) I learned even more for calendar years 2013-2014:

  • Companies that include “Restore” or “Restoration” in their name sued insurers 2,757 times. That’s more than 5 times every weekday!
  • Companies that included the word “Water” in their name sued insurers 1,334 times, or 2 ½ times a day.
  • Companies that included the word “Dry” in their name sued insurers 537 times, or at least once a day.
  • A water extraction company named United Water Restoration sued insurers 266 times from 2013-2014—every other week day for the last two years.
  • Companies that included the words “Auto Glass” in their name sued insurers 8,597 times, or more than 16 times every week day.
  • Express Auto Glass sued insurers 1,341 times over the last two years. More than twice a day.
  • Atlas Auto Glass sued insurers 346 times in the last two years.

To me it seems like trial lawyers talk a lot about how much they help consumers. 

Not so much with AOB.

Rarely is the beneficiary an individual consumer. AOB is overwhelmingly used as a tool to increase profits of “for-profit” enterprises–at least according to the data.

For example:

  • During 2013 and 2014, Lee Jacobson brought 699 suits on behalf of one company, Express Auto Glass, 315 suits on behalf of Atlas Auto Glass, and 144 suits on behalf of a company named Auto Glass and More. See DFS report here.
  • Richard Hale, of Hale, Hale & Jacobson, filed 986 AOB suits in 2013-2014–all on behalf of businesses–out of 986 AOB suits none were on behalf of an individual consumer. See DFS report here.
  • Jayme Buchanan, with Cohen & Battisti, has represented only 3 policyholders out of the 980 suits filed from 2013-2014. That’s a total of nearly 2 a day and 72% of the time, about once every work day, Buchanan sues an insurer for building, construction, or emergency repairs. See DFS report here.
  • Imran Malik–out of 323 AOB suits less than 5% (16) were brought by actual policyholders. See DFS report here. In fact, 36% of the time, about once a week, Malik sues on behalf of the same carpet cleaning company. See DFS report here.

I could go on and on, searching more names and businesses, but you get the point.

Please note: I want to be fair to all sides here and am willing to print any response from anyone. But…based on the DFS data,  AOB smells like a massive lawsuit scheme,  benefitting only a few dozen lawyers and businesses.  

The cost implications of more than 50,000 annual lawsuits has got to be ginormous, so… I really hope I’m wrong.

But, the most offensive thing to me isn’t the number of suits, or whose filing them, or even why.

It’s the impact this must be having on consumer premiums and a nagging, almost inescapable notion in the back of my mind, that it may all be just the tip of an ugly iceberg!

Be sure to read my next report focusing exclusively on how the AOB scheme drives up property insurance premiums.

##end##

NOTE #1: In 2005 and 2006 there were only 9,424 AOB lawsuits. In 2007 and 2008 AOB lawsuits jumped to 19,154. In 09/10 25,155 were filed. And, in 11/12 lawyers filed 85,137 suits. And in 2013 and 2014 attorneys filed 92,521 suits where the client, usually a water extractor, roofer or auto glass repair facility, was the “assignee of” proceeds from someone else’s insurance policy.

NOTE #2: DFS is the statutorily registered agent for service of process to insurance companies. Pursuant to Ch 48.151(1), FS; all authorized insurers are required to designate the Chief Financial Officer of Florida as their Statutory Registered Agent for Service of Process.  The figure 92,521 AOB lawsuits was extracted from the DFS Service of Process (SOP) database. I tried to download the whole list but, it’s over 6,000 pages long. Don’t trust me–view it yourself by going to the DFS Service or Process search page and, under the words “Detail Report Selection Criteria” make only two entries as follows: 1) in the “Date From” field enter 01/01/31 and in the “Date To” field enter 12/31/14. Then, in the “Plaintiff Name” field enter only A/A/O which means “as assignee of”. The number of suits listed (92,521) is likely low because cases that may have only the name of the assignee without AAO do not appear.

NOTE #3: After making a public records request of DFS I was provided the following helpful advice on finding AOB information. After going to www.myfloridacfo.com click “About the Agency”. Then, click “Legal Services”. Then, click “Service of Process Reports”. I was emailed the following information as well:

  • “There is a “Suits Served” report available that will list all the companies we have served with the # of cases we have served to them during the specified timeframe.  You may sort this report numerically by the number of cases we have served to them or alphabetically by the insurance company’s name.” and;
  • There is a “Detailed Report” available that will allow you to prepare a report with the case styles (Plaintiff name, defendant name, county, court, case #, etc.) as well as the dates we received the documents and the date we served the documents.  The reports can be re-sorted on any of the columns and exported to a excel format for further research or a printable PDF format.

Tips…

  • If searching for a specific case number, only enter the unique portion of the number, (to find case # 12-CA-12345 …only enter 12345 in the case # field).
  • If searching for cases from a specific attorney, only enter the unique portion of the attorney’s name (to find Kelly M. Arias…only enter arias in the plaintiff Representative field).
  • If searching for cases where the terms “AAO” or “As Assignee Of” are part of the plaintiff’s name, only enter aao in the plaintiff name field…or “as assignee of” in the plaintiff name field.”

IMPORTANTIf you enjoyed this post you’re invited to subscribe for automatic notifications by going to: www.johnsonstrategiesllc.com. Enter your email address where indicated. If you’re already on the website at Johnson Strategies, LLC, go to the home page and enter your email address on the right hand side. Remember, you’ll receive an email confirming your acceptance, so…check and clear your spam filter for notifications from Johnson Strategies, LLC. ENJOY

 

Speak Your Mind