Assignment of Benefits–Conspiracies & Theories!

Gotta hand it to Citizens! It’s recent study of water losses, Assignment of Benefits (AOB), and the fraud attendant thereto was not only an irrefutable rifle shot at both the extent and root of the problem but, it’s release was impeccably timed.

So, too, was the OIR’s AOB data call report culling 561,763 water or roof damage claims from 35 carriers, other than Citizens. OIR results are in lock step with the AOB portion of the Citizens paper showing skyrocketing frequency and enhanced severity when AOB is present. And most troubling, both studies confirm the abuse is no longer exclusively a southeast Florida problem.

These documents not only preceded legislative hearings where offending parties were poised to blame the worst insurance crisis since the ’04/05 storms on greedy insurance companies and Dade county’s aging home stock. But, they also fell on the heels of a Sun Sentinel article quoting those offenders; saying they “bristled” at accusations of fraud. The article by Ron Hurtibise titled: Attorneys object to Citizens’ water damage fraud allegations”  differs from previous accounts with both its’ facts and tenor. He actually states the hundreds, even thousands, of times one of the “bristlers” had sued Citizens.

Maybe Hurtibise isn’t the only media person catching on!

In addition to the expose by Channel 10 reporter Christina Vazquez (see AOB..The Good News!), warning consumers to “Be wary when signing assignment of benefits“, watch this video by Orlando’s Channel 9 Action News exposing the activities of a roofing contractor. ELR ads state “78%” get a free roof, and my favorite: “I can explain why over the phone.”

Video’s like these are testament to an inherent downside in mere data points. Data can prove the points but, nothing resonates more than scallywags in action.

Neither do data points reveal the diabolical and conspiratorial nature of the fraud–plumbers, homeowners, roofers, water extractors, public adjusters(PA’s) and attorneys, in cahoots to cheat honest citizens.

Example: according to court documents (see a summary here), homeowners George and Vivian Debs conspired with at least two other entities to defraud Prepared Insurance Company of $117,886.84. Their co-conspirators, and the scheme’s likely architects, included ICC Public Adjusters, ARKO Plumbing and possibly others, including, an affiliated water remediation firm. (See Note #1 below).

Example: Hurtibise quoted attorney Ken Duboff as blaming many of his 2400 lawsuits on Citizens’ move to opt out of the appraisal process. But, his name appears multiple times in the “Flames and Flood” arrest affidavits, including serious accusations from a confidential informant. You decide what it all means by reading the summary of the arrest affidavits here on page 9, under “Lawyer Footnotes”. The point is, “Flames and Flood” (See Conspiracies Abound) was another massive conspiracy involving lawyers, PA’s, water extractors, plumbers, et. al.

Example: read the court documents regarding the Cardenas law firm alleging two separate water losses at the head of the firm’s Miami condo. She, allegedly, worked to create the “appearance” of two sudden and accidental water leaks that necessitated repairs by the same plumber, Lazaro Menendez, water mitigation company (Dryworld Inc) and the assistance of a “loss consultant” named Daniel Silva. Cardenas, Menendez, Dryworld and Silva, again, according to court documents: “all worked in collusion to fabricate the dates of loss, cause of loss, scope of loss and value of damages.” (See Note #2 below).

Example: The Sun Sentinel article quoted Cohen & Battisti attorney Imran Malik who said that eliminating AOB “..would put the policyholder back in the crosshairs.” But, read the decision by Circuit Judge Michelle Sisco and you get a completely different set of “crosshairs”. She accuses Cohen & Battisti of “fraud” and an “obvious lack of regard…to our court system.” Read where this judge says the evidence is “clear and convincing” that Cohen & Battisti “set in motion a scheme intended to perpetrate a fraud upon the court” here. (See Note #3 below)

Next, and one of the more blatant justifications for referral fee reform, is a Craigslist ad titled: “Plumbers Wanted!!! (Sarasota/Bradenton). The ad states “$1,000 for the 1st referral, & $900 for all referrals following!!!!.” It irrefutably verifies my testimony last year before the House Insurance Subcommittee regarding referral fees paid in cash to cheat the IRS. This particular ad, posted 8/26/15 at 12:01pm, unabashedly declared: “Real money, cash…non taxed for all jobs signed.” View it here.

And you thought I was a conspiracy theorist!?

The question isn’t whether there are conspiracies…but, WHY are there so many?

My opinion: too many plaintiff’s attorneys with literally nothing to lose.

Florida’s one way attorney fee statute, Fs 627.428, funnels millions to attorneys that fail to prove their case. (See Restoring Balance in Insurance Litigation).

I believe there’s ample evidence for any reasonable person to conclude a dirty dozen or so plaintiff firms are behind most of the shenanigans. They may not directly participate in the fraudulent claim or the fraudulent inflation of losses but, neither do they discourage such.

Too often, as the court documents and arrest affidavits indicate, they do just the opposite!

Consider the Bascuas case. Citizens initially paid its policyholder $28,000 for a water claim.   Weeks later the policyholder brought suit claiming the damages were $330,000.  Citizens defended claiming the loss was staged and the result of fraud. The jury agreed!

But, the court not only denied Citizens’ request for a return of the $28,000 it had already paid, it denied a refund of the attorney fees as well. (See note #4 below).

How can a reasonable person deny this doesn’t at least contribute to Florida’s fraud problem?

Finally, and proving the point that some plaintiff firms are horrible corporate citizens, look at those abusing the public records law. They make frivolous requests involving thousands and thousands of pages of documents, just to create a lawsuit and an opportunity for “one way” attorney fees.

Can you imagine a more shameful mindset than a business plan based on “How can we soak our local government for as much money as we possibly can?”

As always, don’t trust me on this. Listen to the testimony by Rep. Greg Steube (R-Sarasota) regarding his bill HB-1021 designed to stop the abuse by not forcing the award of attorney’s fees in frivolous cases. Fast forward to 30:29 and listen to the current abuses and the burdens created by just “one law firm”.

This “judges choice” approach to attorney fees is currently found at least 100 times in chapter 119 FS. Why not apply the same principle to FS 627.428 for AOB abuse? (See Note #5 below)

Today’s thought–Lawmakers appear poised to once again water down, perhaps even use parliamentary delay tactics, to avoid meaningful reform of America’s most expensive residential property insurance system. While AOB is a major tool in the conspirator’s toolbox, both AOB and Florida’s attorney fee statute work hand-in-glove to drive up loss costs and keep Florida homeowners paying so fraudsters can profit.

While reform still has a chance this year, maybe it’s time to delve into the politics that, to date, have worked to keep much needed reform from getting to the floor of either legislative chamber.

Stay tuned!


NOTE #1: according to the arrest affidavit Mr. and Mrs. Debs were told by the PA and the plumber to lie during their EUO (Examination Under Oath). In essence, though Debs had experienced a prior, relatively minor, water loss, he was to lie about the date the damage was discovered and file a new claim for sudden and accidental damage that would be covered and was far more extensive; with “rolling water” throughout the house. The alleged damage would appear to have been remediated by the co-conspirators, and thus Prepared Insurance was now on the hook for $117,886.84, with no opportunity to adjust the claim or verify its origin.

The case was noteworthy due to forensic evidence obtained from Exactimate (water damage estimating software), cell phone records and pictures of the damage (jpegs) that had date stamps in conflict with dates provided during sworn depositions.

Upon arrest, Mr. and Mrs. Debs admitted they’d been instructed by PA Raul Rivero and plumber Joe Jaremko to lie to Prepared Insurance Company, and that they had never suffered any water damage at all. To review the original arrest affidavit go here. All parties are innocent until proven guilty.

Note #2: according to the court filing for Case No. 15-008280 CA 01 (05), “Demand For Jury Trial” it is “common practice” for “Cardenas, Dryworld, Mendendez and Silva to work in combination” toward the end result of: delaying Southern Fidelity’s (SFIC’s) inspection of the claim; precluding SFIC from inspecting (or observing through photos/videos) the plumbing system failure that is being alleged; disposing and/or concealing the plumbing system/part that failed so as to interfere with SFIC’s ability to validate the loss; allowing water excavation to be completed before SFIC can inspect, utilizing unqualified loss consultants; shielding the claimant from speaking to SFIC; delaying communications; relying upon flees “plumbing invoices”; not submitting receipts, invoices, proposal or other documents; causing internal damage to flooring; concealing the identity of persons preparing unqualified estimates, on and on and on. All parties are innocent until proven guilty.

Note #3: read another decision by County Court Judge, John A. Moran accusing Cohen & Battisti of a frivolous lawsuit and stating they are in contempt of court, deserving of “sanctions” including a total of $108,337.72 in costs, expert fee’s and attorney fees. All parties are innocent until proven guilty.

Note #4:  the court’s rationale was that the policyholder did prevail in defeating Citizens’ counter-claim for the return of the $28,000.  The court found that the fee-shifting statute has no exception for fraud and that it is the legislature’s responsibility to enact such an exception. There is no indication as to what the attorneys’ fees were but, the decision reinforces the fact that plaintiffs’ attorneys face very little downside when filing fraudulent claims and in fact can still profit even when the fraud is exposed. All parties are innocent until proven guilty.

Note #5: cities and counties are not refusing to comply with any legal records request. The requests, often lacking in merit, are designed through sheer volume to make compliance difficult or impossible. Currently when a court rules against the defendant municipality the law states it “shall” award attorney fees to the plaintiff. HB-1021, and its senate companion SB-1220, may show the way to reform AOB by also changing the word “shall” to “may” in Fs 627.428. Similar language regarding attorney fees exists at least 100 times outside the public records statute, which currently reads as follows:

119.12?Attorney’s fees.—If a civil action is filed against an agency to enforce the provisions of this chapter and if the court determines that such agency unlawfully refused to permit a public record to be inspected or copied, the court shall assess and award, against the agency responsible, the reasonable costs of enforcement including reasonable attorneys’ fees.

History.—s. 5, ch. 75-225; s. 7, ch. 84-298; s. 13, ch. 2004-335.



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