On June 14, 2016, the Department of Financial Services Consumer Advocate held a public forum in Boca Raton called, “Troubled Waters: Finding a Balanced Approach to Florida’s Water Loss Crisis.” The forum was well-organized and well-attended by stakeholders from both sides of the water loss claim/assignment of benefits (“AOB”) aisle, as well as the public, who were allowed to make comments following the formal presentations.
The state of water loss claims abuse in Florida, the water loss marketplace, and water loss damage claims on a national scale were presented by the Division of Insurance Fraud, Bureau of Property & Casualty, and the National Insurance Crime Bureau, respectively. The Consumer Advocate, C. Sha’Ron James, and her panel asked thoughtful questions directed at the root cause of the water loss crises in South Florida, which is quickly spreading throughout the rest of the State.
Following the initial presentations, stakeholders including insurance carriers, agents, builders associations, public adjuster organizations, and advocates for insurance reform each made presentations representing their views on the number of water claims, water claims abuses, and the assignment of benefits debate in Florida. Many likened the water loss crises to past claims events such as mold and sinkhole claims, and all agreed that some middle ground must be reached.
The presentations revealed some very interesting statistics, including:
- A staggering increase of 46% in water loss claims between 2010 and 2015;
- The severity of water claims nearly doubled for claims with an AOB between 2014 and 2015;
- The majority of AOB claims are being pursued by a very small number of law firms in South Florida, and;
- Very high referral fees are being paid to plumbers for sending insureds to persons making AOB claims.
These statistics should come as no surprise to insurers who are receiving AOB water loss claims by the truckload. Of particular interest is the delay in reporting of AOB claims for the first time—many weeks, and sometimes months, after the loss.
Another particularly interesting statistic was the low number of referrals of suspected homeowner fraud to the Division of Insurance Fraud (“DIF”). From 2015 to 2016, a total of 1,085 complaints of homeowner fraud were referred to the DIF. Of those, 198 cases were opened by the Division. In light of the matters discussed at the forum, these numbers were surprisingly low.
A common theme from both the company and the consumer side is a call for better regulation of water mitigation vendors, as well as better consumer education on what to do in case of a water loss. Many attendees called for better education concerning the rights that may be forfeited when signing an AOB.
What becomes of these matters following the forum and in future legislative sessions remains to be seen. If you wish to view the entire length of the forum, as well as the public comments in forming your own opinions on the future of water claims in Florida, the full videos of the forum may be viewed here. The presentation slides, which include the proposed policy language changes submitted by Citizens, and the statistics and materials shared by all presenters and stakeholders, may be found here.