I heard a commercial on my car radio by John Morgan of Morgan & Morgan. I’m pretty sure I got it exactly right. Without a scintilla of equivocation, he affirmatively stated as fact… “Insurance companies are our enemy and they are your enemy. Do not trust anything they do or say!”
While thinking he likely trusts insurance companies enough to pay premiums for the protection of his home and business, I also thought of the response those he insulted might render. I knew there would be none—it’s the lack of fear that there would be any consequence whatsoever that creates the necessary hutzpah to say such a thing on the open air.
Too many other trial lawyers, of course, have been caught red-handed behaving worse than those they falsely accuse. And even when not exposed, they appear to go to great lengths to increase revenues with more, and increasingly creative, litigation schemes.
Remember, the law firm that requests public records from the local municipality knowing it cannot comply with the statutory response time–just to file suits for non-compliance and collect attorney fees? How about the firm filing hundreds of multiple suits for the same homeowner so their fees can run concurrently on multiple claims vs one large event? And, how about the firms lying to the courts about relationships with appraisers, 3rd party vendors and public adjusters?
Sick schemes but, none as fertile as Assignment of Benefits (AOB).
Read reporter Michael Moline’s account of Insurance Commissioner David Altmaiers’ presentation to the Florida Cabinet. Or, the Florida Justice Reform Institute (FJRI) account revealing that for the previous three years nearly 25 percent of all AOB cases (property, auto, auto glass) were filed by just 11 lawyers. Each suit to increase profits of for profit entities.
Read Michael Moline’s separate piece revealing that AOB litigation now constitutes more than half (54%) of “ALL” lawsuits filed last year in Florida–driving a statewide increase of suits filed against insurers of 280% since 2000.
And, those “…who don’t trust anything [insurers] do or say” should consider Demotech’s conclusions. Florida’s “trusted” financial ratings company blames AOB, and by implication attorneys, for pending downgrades of carriers’ financial ratings and the many investors who “…will deploy their capital elsewhere” if lawmakers don’t address the problem. (See Note #1 below)
In its opinion titled “Florida’s Trial Bar Hurricane” the Wall Street Journal says “…lawyers, in cahoots with local contractors, are crisscrossing the state encouraging homeowners to sign away their insurance rights…”. And, “…the trial bar is filing inflated claims to coerce pre-emptive settlements from insurers that want to avoid even more expensive, protracted legal battles.”
Editors at the Journal also point to Florida’s necessary reform package, SB-1038, sponsored by Senator Dorothy Hukill (R-8) and Senator, Kathleen Passidomo (R-106). Supported but, not drafted by the industry it, too, recognizes one-way attorney fees as the real culprit.
But, it’s not a scatter gun repeal. SB-1038 preserves the true purpose of the one-way approach by guaranteeing that homeowners can avoid the threat of paying attorney fees when battling a powerful and well financed insurer. It scalpels out the fees only when policy benefits are transferred, usually unbeknownst to the homeowner, to a third party which in way too many cases was only out to inflate an invoice. Taken in tandem, the inflated fee’s and the inflated invoices are largely responsible for Florida’s homeowner’s premiums eclipsing the national average two-fold.
At the other end of the hall, house committees have unfortunately tampered with the companion bill, especially language regarding attorney fees. It’s not acceptable. And, it’s one of the oldest trial lawyer tricks–gut the bill and hope no one notices. I guess “you can’t trust anything they do or say”!
AOC vs AOB
Senator Hukill’s bill was carefully drafted, on the other hand. It thwarts even the latest of litigation schemes—this one called Assignment of the Claim: AOC vs AOB. (See NOTE# 2 below).
Already I’ve heard from two insurers confronted with the AOC phenomenon. Instead of assigning benefits of a policy, AOC purports to assign the claim and along with it…“…any right of the insured to collect for extra contractual damages, consequential damages, common law damages and statutory damages.”
Lawyers and insurer claims experts warn of its’ obvious intent. If allowed to proliferate AOC would dry up Florida’s homeowner’s market like a Sahara sandstorm.
Its purpose? To transfer the right to sue for “bad faith” from every claimant to any vendor with a signed work order. Bad faith claims, as you may know, are not restricted to just the amount of a specific claim or settlement goal. Nor are they limited by the face amount of the policy. The potential of a bad faith action is the ultimate hammer for trial lawyers and, in rare cases, can even threaten solvency. If allowed to take hold, AOC puts a guillotine in the hands of thousands of 3rd party vendors, trial attorneys and public adjusters.
Meanwhile, the claimant receives no money because of AOC. To the contrary, along with every other policyholder, they will only spend more and more money on higher premiums.
That’s why Senator Hukill’s bill must find its way to an open floor debate. SB-1038 restricts the one-way attorney provision in Florida statutes so as to benefit the homeowner, the way it was intended, not to benefit third parties, too many of which are devoid of regulation and conscience.
Stay alert–right now SB-1038 is the only available answer. Look for those lawmakers in leadership positions who may be sympathetic to the trial bar. Ask all of them, especially any who might be trial lawyers, if you can “trust” them to allow a fair hearing on SB-1038. (See NOTE #3 below)
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NOTE #1: Demotech, Inc announced potential downgrades of carriers with A ratings due to the AOB problem. “… absent meaningful improvement in the AOB situation, it is likely that insurers may face downgrades in the future, consumers may face higher and frequent rate increases, and investors who would otherwise capitalize or fund Florida-based insurance companies will deploy their capital elsewhere.” On March 16th Demotech announced that certain insurers could keep their A rating based on moves they’ve made since the original announcement. In addition to unspecified mergers or acquisitions insurers overall responded by adding $200 million in loss reserves and $155 million in capital contribution. There were a handful of exceptions but, only one downgrade; Cypress Property & Casualty lowered from A’ (A Prime) to A. Avatar Partners LP, the parent company of Tampa based Avatar Property & Casualty Insurance Company, announced it will acquire Tallahassee based Elements Property Insurance Holdings LLC and subsidiaries including Elements Property Insurance Co.
NOTE #2: two of Florida’s largest insurers contacted me regarding the phenomenon of assigning the claim instead of assigning the benefits of a policy. In both cases a public adjuster was involved. I do not know which one. Any allegation that the concept may have emanated from other than an attorney, however, doesn’t appear to hold water. You decide by reading the AOC language I received here.