How predictable for 2020 to kick off with attacks on 2019’s starlight insurance reform, Assignment of Benefits (AOB). 

Word arrived here that the Restoration Association of Florida (RAF) and its President, Richie Kidwell, were conducting seminars promoting a “simple” method to comply with the new reforms under HB-7065.   (See NOTE #1 below)

Its’ primary focus is the provision restricting the use of AOB’s to emergency work that is the lesser of $3,000 or 1% of Coverage A.  While there may be nuances, RAF’s approach generally appears to apply to work done on “day one” of a multi-day remediation job.

After attending the RAF seminars, Dr. Gary Rosen, sent me his summary of the approach along with what he considers its’ flaws. First, here’s his summary of the RAF approach:

  • Day 1 the remediation contractor gets the AOB signed upon arrival at the loss site. This is called the “emergency services visit” wherein water is mopped up or removed but, no actual drying takes place.  An invoice is prepared and labeled emergency services. This is under the $3,000 Emergency Services cap. Then, all subsequent work is called Non-Emergency Services and billed separately and is not under the $3,000 cap.
  • Day 2 the contractor returns to begin “non-emergency” drying under the auspices of the same AOB signed and billed the day before. When the “non-emergency” dry-out work is done, another invoice is prepared.
  • Upon completion of the drying, “mold remediation” is performed if required; again, using the same AOB but, with a new invoice only for mold remediation, then…
  • Perform the same steps above for any rebuild that may now be necessary. Allegedly, the total amount invoiced for all visits can exceed the statutory limitation of $3,000 or 1% of Coverage A and still be under an AOB. (See NOTE # 2 below)

Frankly, my reading of what appears to be plain statutory language reveals many potential problems/challenges with this approach. But, I’m not an expert, nor am I a lawyer.

The experts and lawyers I’ve contacted seem to agree, however.  One said this is likely just an attempt to “tee-up” court cases to challenge the reforms. Paul Henderhahn, spokesman for the Federal Association for Insurance Reform (FAIR) said… “It is disappointing to see individuals trying to coach third-party contractors on how best to circumvent the intent of the legislature. Moreover, the step by step directions as outlined by RAF are severely flawed. Ultimately, any contractors deploying this strategy are setting themselves up for a significant liability and/or subrogation claim. My recommendation to the restoration industry is to follow the current law and put the policyholder’s interests ahead your own financial interests.”

Dr. Rosen, a PhD, believes it would be “easy” for carriers to deny payment under the RAF/Kidwell plan “…for the following technical reasons”:

  1. Drying is an “emergency service” to stop mold growth. Just because you don’t label a dry-out invoice as an emergency service does not make it a non-emergency service.
  2. The carrier can/will claim that because there is mold, the home is not inhabitable and therefore mold remediation is an emergency service and should’ve been done on the first visit.
  3. The case will/can be made by the carrier that if there is any mold it was caused by the contractor delaying the dry-out for one day or due to “faulty procedures.”
  4. The carrier can claim that the mold was caused by failed or delayed dry out and the contractor is thus responsible for the cost of the remediation and the rebuild, if any.

To me the above points, whether valid or not, constitute good reason for any remediation firm to move very slowly and carefully employing the approach recommended by RAF/Kidwell.  And, consistent with Henderhahn’s observation, numbers three and four above might even create some exposure for the vendor.  I’ve sent Rosen’s email to RAF for comment but, at the time of this writing have not received a response.  I will, however, publish anything received from RAF once, and if, such is received in the future.  (See NOTE #3 below)

In addition Dr. Rosen provided other statutory problems to the approach, not the least of which is that the one-way attorney fee statute would still not be available. You can read his entire email here(see NOTE #4 below)

But, let’s be clear. The new law appears to be working.  Jay Adams, Chief Claims Officer at Citizens, says “..our data reflects that we are receiving fewer AOB claims than we were prior to the legislation” and “when we encounter these vendors leveraging these tactics, we fall back to our sub limit and vendor cap of $3,000 and don’t have to engage in the discussion around what defines emergency services…”  You can read his entire email and get an explanation of how the $3,000 sub-limit is applied for Citizens policyholders. There are some carriers that also have a sub-limit that renders the RAF approach substantively moot.

Also, just last month Edison Insurance Co. requested a 21.9% rate increase and during its rate hearing told regulators it would have needed a 38% increase without the AOB reforms.

In summary: it remains to be seen whether the whole RAF approach is really just an attempt to tee-up some court cases or a good faith misinterpretation of the new law. Either way, based on my inquiries RAF’s approach certainly doesn’t meet the intent of HB-7065 and should be viewed as highly suspect for that reason alone.


NOTE #1: Ways to get around the intent of the reforms were expected, of course, and began with the “Johnny Appleseed” of AOB, Harvey Cohen. Largely regarded as the founder of AOB for property insurance, Cohen published a YouTube video in 2019 immediately after the reform bill passed urging contractors to hurry up and get their AOB contracts signed and sent to his office before the July 1 effective date.  But, reformers were way ahead of him having made sure the lucrative one-way-attorney fee provision did not apply as of the day the Governor signed the bill, which was May 23rd…not July 1.

NOTE #2: beginning on line 137, HB-7065 states the following:

(c) If an assignor acts under an urgent or emergency circumstance to protect property from damage and executes an assignment agreement to protect, repair, restore, or replace property or to mitigate against further damage to the property, an assignee may not receive an assignment of post-loss benefits under a residential property insurance policy in excess of the greater of $3,000 or 1 percent of the Coverage A limit under such policy. For purposes of this paragraph, the term “urgent or emergency circumstance” means a situation in which a loss to property, if not addressed immediately, will result in additional damage until measures are completed to prevent such damage.

NOTE #3:  While there are many other provisions in HB-7065 that apply when using AOB’s, here’s a brief explanation of RAF’s approach given by Mr. Kidwell in a YouTube video posted July 1, 2019, the very day the new law became effective.  And, here’s a verbatim copy of the email sent to me by Dr. Rosen after attending one of the seminars conducted by RAF/Kidwell.  I forwarded Dr. Rosen’s email to others: an attorney knowledgeable in matters of Assignment of Benefits, executives of several trade associations dealing with AOB, and to Citizens as part of the research for this article. I also emailed RAF via it’s website and sent an email to one of its officers but had not heard back by the time of publication.

The attorney offered the following comments:

“I do agree that Mr. Kidwell’s approach will likely be unsuccessful if he’s trying to get AOBs to operate in the same manner as before (i.e. litigation cash cow). If he simply wants to use these documents as a manner to get paid directly, that is certainly fine, but it appears that is not his goal…My guess is—as President of RAF—he’s been encouraged to help tee up cases that can be appealed, in an attempt to have the courts begin to rule in a way that erodes the requirements of HB 7065.”

Dr. Rosen emailed a copy of the RAF AOB form handed out at the seminars, which includes the statutorily required warnings regarding AOB as briefly referenced in the Kidwell video.  While there may be an easy fix for this, the attorney I talked to said RAF’s format puts the estimate and disclosure on the second page after the signature lines. This makes it not part of the assignment agreement, as required by law.  “The signature block should be below the entirety of the agreement, just like any other contract.”  If accurate, this would be an easy fix but, I thought it should be mentioned here.

NOTE #4: According to Dr. Rosen, three provisions in HB-7065 would create problems for vendors using the RAF approach, as follows:  1.) the policyholder can rescind the AOB agreement for any reason within 30 days of signing and no lien rights are afforded; 2.) the carrier can demand appraisal creating a compromise payment and as a condition precedent thereto the vendor must participate in such before filing suit, and; 3.) advantages of the one-way attorney fee statute do not apply to 3rd party vendors and any litigation is subject to the provisions of HB-7065.  Dr. Rosen is and expert witness, an independent adjuster, licensed building contractor and a licensed mold assessor and remediator and author of seven books on mold and/or mold remediation. He does not provide legal opinions except as to policy language as an adjuster. For legal opinions you should always consult a licensed attorney.

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