AOB…Best Laid Plans!

My plan for this report to be another on the AOB “blame game” was just preempted by the most recent in a series of hurtful court decisions.

For the past several years, insurers have been using every tool to fight AOB lawsuits that force them to pay inflated bills from water extractors and roofers. Instead of just paying fraudulent claims and/or reducing their coverage, they went to court. And, for a period of time they actually won more than they lost.

But, last month things took an ugly turn in the 4th DCA. And on Monday, June 22nd, the last hope for consumers was dashed by the 1st DCA regarding Security First Insurance Company (SFIC) vs. the Office of Insurance Regulation (OIR)–a case that’s been pending for over seven months and, in my opinion, would’ve stopped the abusers cold..

In early skirmishes a few insurers refused to be blackmailed by the threat of add-on attorney fees. They argued they had no obligation to pay obviously inflated invoices if a covered loss hadn’t been proven. Ultimately that didn’t fly. They attacked the language of the AOB documents as overly broad, saying the contractor exceeded the scope of his services. Nixed again. They even argued that the contractor had no insurable interest as required by Florida law–and made more arguments, again with mixed results.

Some opined their best point was that it didn’t make sense to assign benefits when the existence of benefits (a covered loss) had not yet been established. Others disagreed and went in different directions.

Then came Black Tuesday–May 20, 2015. The 4th DCA rendered three major and debilitating decisions, in essence rejecting all insurer defenses from lower court victories, including the assertion that an unaccrued benefit cannot be assigned.

The common thread, from both the 4th DCA and the 1st DCA, however, was not that AOB isn’t harmful. Like the OIR in denying SFIC’s form language, neither district denied the harm AOB causes consumers but, they locked arms in saying the courts cannot solve the problem.

The legislature must solve the problem!

For now Security First will weigh its’ option to appeal to the supreme court. But, even if it decides to do so, there would be no result before lawmakers next come to town.

For the best insights on why this suit was filed and why the court erred in its decision, as well as some background, check out the analysis by the Colodny Fass Law Firm, who plead the case on behalf of Security First, here.

You may want to read SFIC’s press release to get a feel for the impact this unfortunate decision will have on AOB abuse, and thus rates, going forward–said impact is not good!

You can also read the entire decision here. It’s only five pages total.

What now?

I hear from both consumers and agents. The former complaining about unsavory solicitations or mistreatment. The latter complaining about dwindling loss ratios, upset clients or the outright cancellation of a carrier appointment.

While it may sound odd to say so…consumers are depending on the insurance industry to fight this good fight; on their behalf. And, their agents are confused trying to steer clients away from the troublemakers, if they can determine who they are.

The industry must regroup, unify and focus.

Lawmakers too. Last sessions’ efforts at reform yielded little more than a choreographed performance to avoid blame.

AOB and its tributary issues have become Florida’s number one cost driver and the single greatest reason why we have the highest homeowners premiums in America after almost a decade without a storm.

Next year, insurers need to get consumers to hold their elected officials accountable for any further failures to act.


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