Florida State House in Tallahassee.
TALLAHASSEE — Lawyers in the Sunshine State may see storm clouds on the horizon as Florida officials look to shut down an alleged plaintiff-attorney get-rich-quick scheme.
Lawyers are teaming up with local contractors to make a case to get homeowners to sign away their insurance rights. This practice is known as “assignment of benefits,” or AOB.
Some Florida lawmakers have proposed legislation that would target the practices of third-party contractors and lawyers using AOB to force larger claims than what is perceived to be justified.
In exchange for this agreement, the lawyers promise to handle repairs to the homeowner’s property and fight with the insurance companies for settlement paydays. However, the attorneys fail to tell the homeowners about the steps that follow. As the Wall Street Journal recently reported, “1950s-era Florida statute dictates that insurers are liable for all legal fees if they lose in court or settle for an amount more than the insurer’s initial offer.”
Using the law as a shield, the lawyers are filing inflated claims to coerce pre-emptive settlements from insurance companies that want to avoid costly, drawn-out legal battles.
Private insurers also are witnessing this trend and are passing the costs on to their clients.
The Wall Street Journal recently reported that data from the Florida’s Office of Insurance Regulation indicates insurers may need to raise rates 10 percent or more annually to break even. In Miami-Dade County, the owner of a $150,000 home pays an average annual premium of $2,678 for multi-peril insurance from Citizens Property Insurance Corp. — higher than twice the national average
These cases also flood the legal system, as litigation-for-profit schemes become an incentive for trial lawyers and their vendor clients to take advantage of the system.
“This report details how the growing use of AOBs and the one-way attorney fee is increasing costs and litigation,” William Large, president of the Florida Justice Reform Institute, recently said. “Insurance Commissioner David Altmaier had it right last week when he told the governor and cabinet that there’s no other explanation other than the one-way attorney fee.”
The Florida Justice Reform Institute reported that approximately 25 percent of all AOB cases were filed in Florida between 2013 and 2016 by 11 attorneys.
As insurance rates continue to increase in Florida, the state’s insurance commission has expressed concerns that consumers will eventually get rid of private insurance, private insurers will shut down, or both.
If this were to happen, state law says that Citizens Property Insurance Corp. would have to offer a below-market rate policy, the Wall Street Journal reported. And taxpayers would be left holding the check as they foot the bill for the losses.
Amid this trend, Citizens has dumped more than a million policies to private insurers and trimmed its market share in recent years. With luck with weather and reforms from Gov. Rick Scott, Citizens now has a surplus, which would allow it to take on the cost itself, the Wall Street Journal said.
Florida Rep. James Grant, R-Tampa, has sponsored House Bill 1421, which would protect consumers from abusive practices. The measure would allow AOBs for residential policies but would prohibit them from altering policies requiring managed repairs. The bill also requires a 21-day notice to the insurer before a lawsuit is filed.
In the Florida Senate, Sens. Dorothy Hukill, R-Port Orange, and Kathleen Passimodo, R-Naples, co-sponsored Senate Bill 1038, which focuses on reigning in one-way attorney fees. The Florida Office of Insurance Regulation was involved in drafting the legislation.