TALLAHASSEE -- Florida assignment of benefits lawsuits involving property insurance have been dropping since an AOB reform bill took effect in July, according to preliminary data.
Citizens Property Insurance Corp. data shows that the number of AOB lawsuits filed against Citizens since July has been dropping. In October the not-for-profit company reported 167 such claims, down from 376 in September, 468 in August and 707 in July.
“Anecdotally, the flow of AOB-related lawsuits seems to have slowed since July 1,” Citizens spokesman Michael Peltier told the Florida Record.
But it’s still early in the process, according to Peltier. And it’s unclear if this trend is industry-wide as he has not been in contact with private insurers.
House Bill 7065, which Gov. Ron DeSantis signed into law earlier this year, reforms how property owners can assign their policy benefits to a third party in order to speed home repairs in the wake of storm-related damage. Critics say that “bad actors” have used the process to inflate repair costs and gain attorney fee payments through the litigation process.
Typically Citizens deals with about 2,000 new lawsuits each month, including AOB litigation and all other lawsuit categories, Peltier said.
The Florida legislature created Citizens in 2002 as a tax-exempt company to offer property insurance to residents who can’t find coverage in the private market. As of December, the company covered 440,000 policies.
Michael Carlson, president of the Personal Insurance Federation of Florida, said it’s too early to quantify the effects of HB 7065. About 12 months of data will be required to evaluate the effects of the new law, he said.
“But I have heard some anecdotal stories from some companies that the number of AOB claims is dropping,” Carlson told the Record, adding that a reduction in overall AOB residential property claims may signal a drop in litigation-associated claims.
He also emphasized that there is a lag time involved in lawsuits filed against insurance companies, adding, “Once an AOB claim is filed, it may be weeks or months before you get an AOB lawsuit.”
Jeff Grady, president of the Florida Association of Insurance Agents, said it was no surprise that Citizens would be the first insurer to begin to feel the effects of HB 7065, since Citizens was the first to bear the brunt of AOB litigation and seek ways to mitigate the associated litigation costs.
“Citizens was the canary in the coal mine on this issue,” Grady told the Record, adding that it was still too soon to tell if private insurers would reap benefits from the new law.
“The Florida property market is starting to show some signs of weakness, and Citizens is perhaps going to be taking in a few more policies because of that,” he said.
Prices to renew property insurance policies in the state have increased, and private insurers are being squeezed, according to Grady. who added, “They’re still battling the AOB mob on losses that developed before the law was changed.”
If one removes companies affiliated with Allstate and State Farm from the picture, third-quarter private underwriting losses in Florida amounted to $330 million, according to Grady.
“Those are startling figures,” he said.
It may take more time for Florida’s private insurers to feel any positive effects from the AOB reform law, according to Grady, who said, “I think there’s another six to 10 months before you’re going to be seeing some better outcomes.”
A series of recent storm-related events have complicated the insurance picture in Florida, Grady said, and companies are dealing with claims put forward by bad actors who operated under the previous law.
“It may be a little clouded from the standpoint that there has been a pretty good frequency of events in the two prior years,” he said.
In recent years attorneys handling AOB lawsuits have exploited what’s called the contingency fee multiplier, which judges can impose if the claimant wins a case, according to Grady. Those fees, in turn, are paid by the insurance carrier, putting upward pressure on overall insurance costs, he said.
The legislature in the coming year should work to reform that process, Grady said, noting “That would give carriers a little more chance to fend off these frivolous suits.”
Grady called current property insurance rates in Florida outrageous and said attorneys can be expected to come up with new avenues of litigation in the wake of AOB reforms.
“There are other tools in the shed,” he said. “They know how to pick them up and use them.”