Assignment of Benefits—It’s About Rates!

Pssst… abuse of Assignment of Benefits is about insurance rates!

Sure, hundreds of lives are upset by scammers twisting the original intent of AOB.  And yes, this generates exponential increases in litigation. And sure, if you insist…it’s because some roofers, public adjusters, water firms, plumbers and attorneys are simply greedy, but…

…AOB is mostly about the gargantuan premiums we will all be paying if trial lawyers in the legislature continue to roadblock reforms. (See The Politics of AOB)

A recent study by the Insurance Information Institute (III) confirms the devastation Florida’s OIR explicitly tied to litigation—lawsuits driving “significant premium increases for almost all homeowners across the state.”

Ironically, the three juggernaut counties for AOB water-damage litigation – Dade, Broward and Palm Beach – are those where trial lawyer legislators predominantly reside. Here’s the bleak future their obstruction creates for their own constituents:

  • Miami-Dade: average rate increase from 2017 to 2022: 62.5 percent.  
  • Broward: average rate increase from 2017 to 2022: 61.8 percent.
  • Palm Beach: average rate increase from 2017 to 2022: 37.7 percent. 

Keep in mind the above increases apply to rates that already average the highest in Florida, the state with the highest rates in America–twice that of the national average. (See Herald Tribune article).

How can any public servant, even a trial lawyer, allow this to happen?

And, according to OIR, it’s not just a South Florida problem. Data shows that frequency of non-weather water damage claims increased in all Florida counties between 2015 and 2017 – and nearly all Florida counties experienced an increase in the size of an average claim.  (See NOTE #1 below)

What about Citizens with rates capped at 10% annually?

Well, since the cap is cumulative, over the next four years many of its’ policyholders will see their rates double what they were only a year ago. And, again, Citizens already has the highest rates in the state with the highest rates.

Despite a policy count reduction of more than 56 percent since 2013, the number of lawsuits filed against Citizens grew from 9,146 in 2013 to 10,357 for the first nine months of 2018. (See NOTE #2 below)

Private insurance companies have seen litigation nearly triple to 53,160 cases during that same period.

Think about it this way.

If I told you that an insurance company was sued 1,361 times over the last two years you’d likely, and understandably, be shocked. Fact is, if any insurer deserved that many lawsuits it would have already been fined and penalized out the ying-yang.

But, guess what.  Citizens wasn’t sued that many times over two years.  It was sued 1,361 times in just 22 DAYS!  I swear I’m not making this up.  For the 22 work days in the month of August, 2018 Citizens was sued 1,361 times–the bulk from AOB.

That’s a glide path to 16,000 lawsuits a year!

If Citizens litigation were to return to pre-2013 levels, nearly all of its multiperil policyholders would see their rates go down, not up.

Statewide, annual AOB lawsuits for all lines, (Auto, Property & Health) exceed 120,000—every year, year after year!

In other words…Happy New Year to homeowners from Florida’s trial lawyers!

There are approximately 6000 licensed trial attorneys in Florida. But lawmakers, so far, have been willing to saddle 6 million residential policyholders with huge price increases mostly just to satisfy the greed of 31 firms. Consider the following:

  • 40% of all property AOB lawsuits were filed by 5 law firms
  • 57% were filed by 10 law firms
  • 85% filed by just 31 law firms

Ladies and gentlemen, the Florida House has passed meaningful reforms the last two legislative sessions.  It’s poised to do so again this year (See article; House Insurance Chair). In the Senate, new Banking and Insurance Chair, Senator Doug Broxson is doing his part by sponsoring SB-122 which short-stops abuse redirecting Florida’s one way attorney fee statute to benefit homeowners, instead of for-profit entities.  (See NOTE #3 below)

The Consumer Protection Coalition (CPC) says that with  new leadership we now have “new hope” for closing the Assignment of Benefits loophole.  It urges everyone (you) to write to their lawmakers and request needed reforms for AOB.  You can also sign on to the CPC’s letter to Florida’s 46th Governor, Ron DeSantis asking him to take action here.

Point is, we’re close and getting closer.

Now is not the time to let up.  Do your part, get involved!

You can learn more during a webcast hosted by the Florida Association of Insurance Agents (FAIA).  Guests William “Bubba” Ryan, founder and President of Rytech, Inc and yours truly, will discuss the subject of AOB abuse for water losses and how agents can protect themselves and their clients. This internet broadcast, “Friday Morning Live”, will occur 9:00AM, January 18, 2019. To register click here.

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NOTE #1: Even though the tri-counties had the highest increase in number of claims (60 percent), central west Florida counties suffered the highest increase in average claim size, with a 35 percent increase.   Hillsborough County property AOB lawsuits increased from 39 in 2013 to 137 in 2017. Pinellas County suits increased from 40 in 2013 to 208 in 2017.

NOTE #2: For more see Citizens 2019 Rate Kit. Note; FAQ number 6 states “Citizens expects a litigation rate of nearly 50 percent of all water claims versus previous levels of 10 to 12 percent.”

NOTE #3: See “Restoring Balance in Insurance Litigation—Curbing Abuses of Assignment of Benefits and Reaffirming Insureds’ Unique Right to Unilateral Attorney’s Fees”; page 1:

“What makes this arrangement particularly lucrative for attorneys  are the ‘one-way’; attorney’s fees awarded to the attorney’s that represent prevailing service providers. Under Section 627.428, Florida Statutes, a prevailing party in a dispute with an insurer is entitled to his attorney’s fees and costs.  The fees are ‘one way’ because insurers that prevail are not entitled to fees under the statute”

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