TALLAHASSEE— A surge of assignment of benefits fraud has left Florida residents with higher rates for their insurance, and the Florida Legislature has let another year go by without enacting changes to stop such instances of fraud.
A category of fraud has appeared in Florida in the form of assignment of benefits water claims, which, though the complaint process is straightforward enough, the settlement is far from simple, as vendors and contractors have discovered a way to be paid out far more than their actual labor would cost.
"What a group of enterprising vendors figured out with the help of their own attorneys was they could get the insured to assign their insurance policy to them, and not only would they collect on the disputed amount, but they would collect on attorneys fees as well," William Large, president of the Florida Justice Reform Institute, told Florida Record.
William Large, president of the Florida Justice Reform Institute | Florida Justice Reform Institute
The situation starts to get very complicated when the one-way attorney's fee right is added to the equation.
"Let's say there is a dispute over a repair, such a sink that began to leak in the kitchen and caused water damage," Large said. "The insured thinks that the insurer should have paid the $5,000 in repairs. That case goes to trial, and if there is a finding that the insured won, not only do they get their $5,000, but they'll get their fees paid, which will be a big number, about $50,000 to $60,000."
While the system is designed to help homeowners with the costs, the introduction of vendors taking on the policies of the insured has skewed how the Florida Legislature designed the process to be.
"The Florida Legislature believes that's fair because if an insurer is going to take on an insured, it might be a David versus Goliath situation, and we want to encourage insurers to pay claims," Large said. "Third-party vendors are not asking to be paid; they're asking for an assignment to take place, and with it comes the one-way attorney's fee provision and they get to inflate the underlying repair and if it's questioned, there will be lawsuit and attorney's fees paid to their attorneys."
But the costs related to assignment of benefits fraud are affecting a much wider group than simply the insurance companies, explained Fred E. Karlinsky of Greenberg Traurig.
"The biggest loser in any type of fraud and abuse in the insurance system is the consumer, so in this particular case, rates are going up to pay for the bad acts of a few because there is no other option," Karlinsky told Florida Record. "The insurance companies don't benefit from high rates if that money is going out the door just to pay for fraud."
Karlinsky explained why the recent legislative session failed to address the issue and who was the blame.
"The governor and the CFO and the commissioner have all highlighted the issue; the House early on in session took up a bill that would have potentially had the effect of curtailing some of that fraud and abuse. The Senate had other ideas, they went in a different direction and ultimately the bill that the House passed was not taken up by the Senate," Karlinsky said.
Anaysa Gallardo Stutzman with Zelle LLP spoke to the progress and hope for reform of assignment of benefits-related fraud in the state of Florida.
"The Legislature, through the introduction of House and Senate bills, has been trying to enact some type of reform, but unfortunately the bills have either died in committee or have passed the House but didn't get further," Stutzman told Florida Record. "2018 is a big year. We have the primary elections in August and the general elections up in November. We have 20 seats up for election and retention in the Senate, and we have 120 seats up for election and retention exactly in the House of Representatives."
Stutzman believes the outcomes of the elections will have a great deal to do with what happens regarding assignment of benefits fraud.
"I think we might see a more aggressive approach next year; it all depends on who gets voted in, who gets retained and who gets what seats," Stutzman said. "But I think what we're going to see is the continual progression of trying to make some change and reform."