Summary: Florida’s seven year wait for meaningful reform of Assignment of Benefits (AOB) abuse is over. The Florida Legislature has passed a measure to level the playing field for consumers and reduce the skyrocketing rates of litigation filed by vendors against insurance companies, driving double-digit rate increases. Hailed as a “wake-up call for the bad actors” exploiting homeowners and the insurance industry, what exactly does the reform do and what doesn’t it do? What impact is it expected to have with more than half of Florida’s insurance litigation today now involving an AOB? And what creative alternatives and other shenanigans still exist for further scams? Host Lisa Miller, a former deputy insurance commissioner, talks with insurance defense attorney Kimberly Salmon of Groelle & Salmon, and Paul Handerhan of the Florida Association for Insurance Reform. Show Notes An Assignment of Benefits (AOB) agreement is a legal contract that allows repair vendors to receive payments directly from insurance companies for work they perform at a policyholder’s home, without the homeowner having to pay money upfront. While it sounds good, unfortunately in the past seven years in Florida, unscrupulous vendors and their lawyers have taken advantage of AOB to take control of a homeowner’s policy, then inflate the scope and cost of claims and sue the insurance company if it refuses to pay the inflated bills. The number of property insurance AOB lawsuits rose 900% from 2008-2018. In late April 2019, the Florida Legislature passed HB 7065 which puts new requirements on assignees (contractors and other vendors) and insurance companies. An AOB must now provide the following: Policyholder can rescind the AOB within 14 days for any reason without penalty but must pay for work performed Policyholder can rescind the AOB within 30 days if work has not commenced within 30 days of stated start date Clear notice of consumer rights and policyholder responsibilities involved in signing an AOB Policyholder held harmless where the vendor is prohibited from charging any “fees”, excepting policy deductible Within 3 business days of the AOB execution, the vendor must provide the AOB to the insurance company Contain a written, itemized, per-unit cost estimate of services Work performed must conform with current industry standards Vendor must "stand in the shoes" of the policyholder, including filing proof of loss, producing records, and submitting to examinations under oath prior to filing suit Insurer must respond to the vendor’s notice within 10 days Emergency services would be limited to $3,000 or 1% of the Coverage A policy limit The bill also allows an insurance company to offer a policy prohibiting assignment in an effort to lower homeowners policy premiums, which have grown by double-digits. Paul Handerhan, Senior Vice President of Public Policy for the Florida Association for Insurance Reform, noted the significant consumer protections in the bill, especially a homeowners ability to get out of an AOB contract. “That’s a dramatic improvement on the way assignments have worked in the past prior to this bill. Literally, there was no statutory requirement for any rescission period. If a policyholder, in the middle of the night with an emergency service, signed an AOB, they would effectively have no way of getting out of the contract,” said Handerhan, who is a practicing public adjuster. The bill also revises the current one-way attorney fee system which was seen as incentivizing lawsuits and institutes a new formula, based on the disputed amount: the difference between the assignee’s presuit settlement demand and the insurer’s pre-suit settlement offer. If the prevailing judgment is: Less than 25% of the disputed amount, then the insurer is entitled to reasonable atto(continued)
