Assignment of Benefits…”playing too nice?”

Hats off to Florida’s Insurance Consumer Advocate (ICA), Sha’Ron James!

When any public figure conducts a public meeting, especially one dealing with insurance, it’s a tightrope at best, requiring both patience and parliamentary acumen.  Her decision to host a water loss forum in southeast Florida (6/14/16, Boca Raton) not only salutes her skill on the high wire, but… it shows determination to help consumers despite others who appear less inclined.

And there’s the Irony.  While James spent more than six hours listening to and questioning “all sides”, lawmakers, after two successive legislative sessions, couldn’t even muster a floor debate.  Not in either chamber! This, despite overwhelming state data (OIR and Citizens) that confirms Assignment of Benefits (AOB) and its tributaries may be Florida’s worst insurance crisis ever.  (See Note #1 below)

Make no mistake, the data is Gibraltar solid. No one has refuted it.  Heck, they aren’t even trying.  So…why can’t this greatest of consumer rip-offs receive a scholarly discussion in open chamber?

After the 2016 legislature adjourned the Florida Property & Casualty Association (FPCA) mentioned Sen. Miguel Diaz de la Portilla, R-Miami, chairman of the Senate Judiciary Committee (the last stop) for failing to move forward a bill that… “prevented a handful of vendors and their lawyers from stealing homeowners’ insurance policy rights and using them to pad their own pockets.  Now, as a result, even without a hurricane making landfall, property insurance rates are set to skyrocket for all Floridians while a small group of greedy vendors and their lawyers get rich. According to FPCA “Florida deserves better”See FPCA’s full op-ed.

Exaggeration?  Not according to the facts exposed at the Water Forum by Citizens President, Barry Gilway, beginning at 1:31:32 here.  The following bullets paraphrase realities he described as nothing short of “staggering”:

  • If we don’t fix this problem now, every Citizens policyholder will suffer an annual increase of 10% in their premium “for the rest of their natural lives!” (See Note #2 below)
  • These compounded 10% annual increases result in a total increase of close to 45% in just five years. That’s on top of premiums that are already the highest in America and twice that of the national average.
  • Ninety percent of water losses in SE Florida are first noticed to Citizens via an attorney or public adjuster. It’s only 27% in the rest of the state.
  • Since Citizens has decreased its policy count by almost two thirds, instead of decreasing suits by two thirds, the number of lawsuits has increased by approximately 27%.
  • And, it’s getting worse—in just the month of March Citizens was sued 1000 times–the highest in its history. May is looking worse still–a trend that brings close to 12,000 annual lawsuits to the state insurer.
  • AOB doubles the severity of non-litigated claims. Litigation then doubles the severity of the already inflated claims. And, litigation triples the severity of non-AOB claims.
  • Percentage of Citizens litigated claims with AOB was only 9.6% in 2012. In 2015 it was 46.9%–a 500% increase!
  • Seven law firms are responsible for 60% of all Citizens lawsuits. The top 20 firms are responsible for 90% of all Citizens lawsuits. See the entire list of firms on page 81 of Gilway’s power point.   At the top of the list is Cohen & Battisti which, according to Gilway, conducts seminars on AOB and distributes a computerized business card with forms and strategies to assist vendors in “taking advantage” of Assignment of Benefits.

Citizens lawsuits dovetail perfectly with FPCA’s comments: “…of the more than 85,000 lawyers admitted to The Florida Bar — and the nearly 6,000 trial lawyers — 40 percent of all assignment of benefits lawsuits involving restoration vendors in 2015 were filed by just five law firms.  And 57 percent of all lawsuits were filed by 10 law firms. In total, 85 percent of these lawsuits were filed by only 31 law firms.”

These percentages are “staggering” to be certain.  But…what are they percentages of?

According to Michael Carlson with the Personal Insurance Federation of Florida (PIFF), “Between 2005 and 2014, the number of AOB-related lawsuits grew nearly 1,000 percent, reaching more than 90,000 in 2013-14. What began as a problem in South Florida is now rapidly spreading statewide.”

And PIFF blames shady trial lawyers and vendors [looking] for ways to boost revenues in the absence of significant storm damage.”  Read the entire statement.

Not surprisingly trial lawyers (“shady” or not) indicate their fees should not be part of the equation.  This, despite Florida’s unique one-way attorney fee statute and more than reasonable doubt that none of the 90,000 AOB suits were pro bono.

In fact, my presentation on behalf of the Florida Association of Insurance Agents (FAIA) in which I made some general points on possible reform was delivered immediately on the heels of a threat.  That’s right. It came from one attorney who, according to DFS records, may be making millions off of AOB suits.  Before I approached the podium he cautioned me to “Play nice!” and threatened me with a “desist letter” if I didn’t.

I swear I’m not making this up!!  I can’t begin to describe the self-control necessary to keep from opening my presentation by sharing both the nature of the threat (a lawsuit) and the name of the individual who delivered it.

Looking back, maybe I shouldn’t have played so nice!

Following my presentation, I was approached by both water extractors and public adjusters neither of which cared too much for comments about their regulation or their fees or for what I said some members of their professions may be doing to consumers.

For what it’s worth, I will be reaching out to both FLARS (The Florida Association of Restoration Specialists) and FAPIA (The Florida Association of Public Insurance Adjusters) regarding various proposals.

Since threats aren’t my cup of tea, I will not be reaching out to trial lawyers or the Florida Justice Association.

When and if I hear from FLARS and FAPIA so will you.   In the meantime, you can listen to the entire forum here. Or, use the power point slides (particularly Barry Gilway’s) to spread the “staggering” data far and wide, especially to your elected representatives and senators.  Tell them what you think. Ask them why they refuse to fix the problem. Ask why they can’t even debate reforms on the floor of either chamber or put it to a vote.

Maybe it’s not just me.  Maybe we’ve all been playing too nice!


Note #1: Of course trial lawyers have tried to either distract from the data with “consider the source” statements and/or pointing to an alleged aging home stock in SE Florida.  But, these sources, both Citizens and the OIR, are unimpeachable in my opinion–often used by trial lawyers and others when the data is in their favor.  The Citizens study plainly debunks the “aging home stock” ruse and dovetails with the OIR report showing that AOB abuse is on the rise outside of the tri-county area.  Review the OIR report.  Review the Citizens Water Loss Study.  Review my AOB online library containing over 165 articles, pictures, court cases, advertisements, and general documents pertaining to this issue.

Note #2:  Citizens has recently announced it will file for a rate increase. Under current conditions, rates in Miami-Dade County would need to nearly triple to adequately pay claims. Statewide, personal lines rates would have to rise an average of 65 percent.  Read the full press release.  Read the article by Charles Elmore with the Palm Beach Post on possible effects.

Note #3: Citizens has also been given clearance by OIR to implement policy changes effective July 1 for both new and renewal policies.  These changes are “…to address abuses of the insurance contract that are needlessly reducing consumer control, complicating the clams, and increasing rates…” For details on the changes and the contract language read  the Citizens press release and follow the links. At this point in time another 18 carriers representing close to 90% of the market (including Citizens) have submitted “me too” filings duplicating or approaching the form changes approved for citizens.

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