The recent legislative activity around Assignment of Benefits (AOBs) has been interesting…but predictable. Almost every session, the insurance industry tells us that “the sky is falling” and that the insurance marketplace in Florida will implode if (insert alleged crisis) is not addressed. These crises can be sinkholes, regulatory oversight by the Office of Insurance Regulation, lawsuits, public adjusters, bad faith laws, replacement cost/actual cash value, insurance rates are kept artificially low, etc… Of course, the way in which the industry would like these issues addressed would have severe negative consequences for insurance consumers. For each of these issues, the solution proposed by the industry would either raise rates or make it harder for an insured to get fairly compensated for their covered loss. It is amusing that, after years of getting loads of goodies from the legislature, the industry is running out of things to ask for. But here we are … this year’s bogeyman is Assignment of Benefits.
The issue of Assignment of Benefits differs from some of the other issues referenced in the preceding paragraph because the industry is not totally off base. There are abuses associated with AOBs. I might support some changes that would curb the abuses. However, as usual, the industry has vastly overstated the problem. Let’s look at just a small portion of a position paper from an industry trade group (the position paper is in italics and my comments are in bold):
- The single biggest factor driving the explosion of AOB-related lawsuits is that trial attorneys can collect “one-way attorney fees’’ when suing insurance companies over claim disputes. One-way attorney fees allow attorneys suing insurers to collect legal fees if they win but don’t allow insurers to collect fees if they prevail. One-way attorney fees were intended to level the playing field between consumers and big insurance companies but have become an incentive for attorneys and vendors to file AOB lawsuits. In the majority of AOB lawsuits, the policyholder has already been made whole and had their home or auto repaired. Rather than a “David versus Goliath’’ issue, it has become a battle between attorneys and vendors against insurance companies.
This is precisely the point of the attorney fee statute…to level the playing field. Insurance companies have the resources to hire an attorney in every case and fight any and all claims. The insured does not have that ability. The purpose of the fee statute is to discourage insurance companies from fighting valid claims and to reimburse successful insureds if they are forced to sue. I assume the industry opposes the fee statute in all circumstances since the logic of their position hear would extend to all subjects…not just AOBs. In other words, the industry is saying that the fee statute is an incentive for attorneys to sue insurance companies in all circumstances. I understand that insurance companies don’t like the fee statute because it puts them at risk…but that is exactly why it is a great tool for consumers.
- Trial lawyers are holding workshops for contractors on how to use AOBs to boost their profits. A flier for a seminar in Orlando in 2013 advertises: “We’ll show you the insider secrets the insurance companies don’t want you to know!’’
Oh the horror! You mean people put on workshops and seminars to help affiliated professionals? Surely the insurance industry doesn’t participate in this dreadful practice? (see below for a few examples):
- What Every Insurer Should Know About Defending A “Bad-Faith” Case
- Insurance Bad Faith Claims Seminar
- Insurance Bad Faith/Coverage/ Fraud Conference
- Seminar: Insurance Coverage And Bad Faith For Claims Professionals
- Fraud and Public Adjuster Involvement
- Florida Case Law Update, Public Adjuster Fraud, Supplemental and Late Noticed Windstorm Claims
- The Role of Public Adjusters in Litigation
- Misrepresentation in the Application: When does it Become a Defense to Coverage
- Claim Investigation through Effective Examinations Under Oath
- The “New World” of Insurance Company/Attorney Relationships—Maintaining and Advancing Your Practice
- Effective Defense Strategies for Catastrophic Claims
- Good Faith Claims Handling: Minimizing Bad Faith Claim Exposure
- Ethical Issues Relating to Settlement of Claims
- Use of Expert Witnesses in Litigation Involving Property Claims
- Water remediation companies in South Florida and Tampa Bay are reportedly paying $1,500 referral fees to plumbers to get business where they can use assignment of benefits. That referral fee is passed on to insurance companies in the form of inflated claims.
Simply put, if it’s illegal report it. If the claim is unjustifiably inflated, report it or fight it. The contention that insurance companies are being victimized by plumbers and water remediation companies hogwash. Believe me, insurance companies are not in the business of overpaying claims. Let me also state that a claim is not inflated simply because it is higher than what the insurance company asserts. Disagreement as to amount of damage does not equal inflation.
In conclusion, AOB is the 2015 bogeyman. I can’t wait to see what next year’s “crisis” is.