Lawmakers to take another stab at ending claims
abuses blamed for rate hikes
Article Courtesy of The Orlando Sentinel
January 10, 2018
Will 2018 finally be the year that property insurers
and trial attorneys agree on legislation aimed at curbing costly claims
abuses and excessive lawsuits?
Insurers don’t sound too confident as they prepare for Tuesday’s start
of the legislative session in Tallahassee. Several industry
representatives say they won’t be surprised if another Florida session
concludes with nothing to show on what most say is their most pressing
Solutions have eluded lawmakers because two powerful political forces —
insurers and trial lawyers — have fought each other to a standstill.
“I would love to see both parties come up with a work product that would
pass the Legislature,” said Paul Handerhan, senior vice president for
public policy for the Fort Lauderdale-based watchdog group, Florida
Association for Insurance Reform. “Reforms are needed, and I’m hopeful
but not overly optimistic.”
Consumers, not insurers or trial attorneys, will pay the price for
another failure to enact reform. When costs increase for insurance
companies, the companies pass those higher costs to homeowners in the
form of higher rates.
This year, most South Florida homeowners will see increases of 5 percent
to 15 percent thanks to the Legislature’s failure to enact reforms in
2013, 2014, 2015, 2016 and 2017.
Insurers cited higher costs from claims abuses as they sought approval
for rate increases throughout the year, and for the most part, the state
Office of Insurance Regulation approved requested increases.
Insurers want to stop excessive lawsuits by repair contractors working
under an affidavit called an assignment of benefits [AOB]. When
homeowners sign the affidavit, contractors stand in their shoes when
seeking payment from insurers for repair work.
Insurers contend that contractors and their attorneys, primarily from
South Florida, abuse the system by submitting inflated invoices and
filing suit when insurers deny or underpay them. The abuses drive up
costs and rates, insurers say.
Thousands of such suits are filed each year. Insurers say attorneys are
motivated by a state law allowing customers to collect legal fees from
insurers if the suit results in an insurer paying any amount of money
over its initial settlement offer. Under the law, insurance customers do
not have to pay insurers’ legal fees if they don’t prevail in a suit —
and that protection enables contractors and attorneys to file unlimited
lawsuits while standing in homeowners’ shoes.
Attorneys counter that lawsuits would be unnecessary if insurers would
simply pay fair costs for repairs. Too often insurers leave homeowners
and contractors with no choice but to sue by failing to pay what’s
necessary to return damaged homes to their pre-loss conditions.
In recent years, insurers and their allies in the Legislature have tried
to enact laws barring homeowners from assigning claims without insurers’
permission. But trial attorneys and their allies blocked those efforts,
and courts affirmed assignment rights.
Last year, insurers changed strategy by helping to write a bill that
would prohibit third-party assignees from collecting legal fees from
That failed when Sen. Anitere Flores, R-Miami, powerful chair of the
Senate Banking and Insurance Committee, refused to bring the bill up for
Flores also refused to consider another bill, which passed the full
House, that would have awarded legal fees according to a complicated
formula. If enacted, contractors would get legal fees only if they win a
settlement that exceeds a certain threshold, while insurers would
collect legal fees from contractors if the settlement is less than or
just a small amount more than insurers’ initial offer.
Both bills have been reintroduced this year despite remaining
unacceptable to trial lawyers and despite insurers’ expectation that
Flores won’t place either on her committee’s agenda.
Flores instead plans to open debate on a new bill, introduced by Sen.
Greg Steube, R-Sarasota, that contains some reforms sought by insurers
but one big one they say is a showstopper.
Among the elements considered friendly to insurers are requirements that
contractors provide a written scope of work to be performed and that
consumers be allowed to rescind assignments within seven days.
Contractors would be required to notify insurers of assignments within
seven days of execution or 48 hours after beginning nonemergency
Written cost estimates would have to be submitted. Contractors working
under assignments would be barred from pursuing claims against
homeowners, except for the deductible amount or cost of work performed
before any cancellation of the assignment.
But the bill includes no restrictions on contractors’ ability to collect
attorney’s fees and in fact would prohibit insurers from passing along
to its customers the cost of those attorneys fees.
“Attorneys fees and costs paid by a property insurer … may not be
included in the property insurer’s rate base and may not be used to
justify a rate increase or rate change,” the bill states.
Flores said she knows this is as unacceptable to insurers as the bill
barring contractors working under assignments from collecting attorneys
fees is to trial attorneys.
“This is not a bill the insurance industry loves,” Flores said in an
interview Friday. “I haven’t talked to them but I’m sure they hate it.”
She said she hoped the bill would serve as a starting point for
negotiations during the session, ending with some form of compromise
between the two extreme positions.
“This bill is a start down the compromise process. Let’s see what this
accomplishes,” she said.
But Michael Carlson, president of the Personal Insurance Federation of
Florida, is one of several industry representatives lining up against
the bill. “If this is the Senate’s statement on how to reform AOB, then
I am very doubtful anything positive is going to happen,” he said,
adding the bill sidesteps the issue of claims abuses in favor of
“punitive measures against insurance companies.”
Others organizations opposing the bill include state-run CItizens
Property Insurance Corp., which expects to levy 10-percent rate
increases indefinitely if no reform is enacted, the Property Casualty
Insurers Association of America, and the Florida Property and Casualty
William Stander, FPCA executive director, called the bill “a wolf in
sheep’s clothing” that would “codify the problem into law” and cement
the ability of lawyers and vendors to continue doing what they’re
But Dale Swope, president of the Florida Justice Association, a trade
organization for trial attorneys, said insurers could avoid the issue by
following some simple advice: “If they don’t cheat their customers,
they’ll never have to pay a dime in legal fees.”