No New Rights in Florida’s Homeowners’ Bill of Rights

Florida’s passage of a homeowners’ claims bill of rights left few satisfied after lawmakers largely codified current law while avoiding controversial issues such as the practice of policyholders assigning their claims payments to contractors.

The bill of rights was a priority of the state’s Chief Financial Officer Jeff Atwater and was initially drafted by the state’s insurance consumer advocate’s office.

Atwater said the bill is needed given that about 350,000 homeowners file claims each year and his office receives 125,000 calls from policyholders either filing complaints or searching for answers about their claims.

“This much-needed bill of rights will notify Florida homeowners of their rights and responsibilities when filing an insurance claim and give them confidence that they will be treated fairly during a stressful situation involving their home,” stated Atwater.

The 12-point bill of rights is meant to inform homeowners of timelines such as one requiring insurance companies to acknowledge a claim within 14 days of being filed. Additionally, insurers must within 30 days of receiving a proof-of-loss statement, confirm a claim is covered, partially covered or denied. Within 90 days, insurers must either pay the claim in full or in part or deny the claim.

The bill of rights also advises policyholders what they need to do in case they have property damage, including that they should contact their insurer before hiring a contractor.

Insurance Consumer Advocate Steve Burgess said the purpose is to inform policyholders about the claim and repair process in plain language, thereby giving them more control and making them less at the mercy of insurers and contractors.

“Not everybody will use it but a large group will be more empowered and less intimidated,” said Burgess.

While Atwater and his allies have been declaring victory, some who participated in crafting the bill walked away disappointed in an outcome that created no new legal rights for homeowners or insurers.

What seemed at first a rather non-controversial piece of legislation turned into a heated debate over a so-called “assignment of benefits” provision.

Under this provision, homeowners can sign over their financial rights to be paid for a claim so that instead the payments are made directly to a contractor making repairs instead of to the homeowner.

The contractor also assumes the policyholder’s legal right to dispute a claim and file suit against an insurer. If the contractor prevails in court, in addition to the insurer having to pay the claim, it must also pay the contractor’s legal bills.

From insurers’ point of view, this has created a cottage industry where trial lawyers and contractors work to maximize the monies they can receive from insurers regardless of the real cost of the claim.

Personal Insurance Federation of Florida Executive Director Michael Carlson said that is a major reason his association supported doing away with the assignment of benefits.

“What we are seeing under assigned benefits is unscrupulous contractors who tell homeowners that in order to get repairs they have to sign a form signing away their rights,” said Carlson. “Then the vendor will inflate the claims costs then tell the insurer you owe us this much or we will sue you.”

Carlson said that in addition to increasing claims costs and unnecessary litigation, the assignment of benefits practice keeps consumers in the dark about their own claims. For example, he said, policyholders have had lawsuits filed on their behalf without their knowledge.

Given the circumstances, Carlson said that the assignment of benefits provision should be limited to allowing a contractor to be paid by the insurer for the work agreed to under a covered claim. “This gives the consumer the ability to say to the insurer, here is the insured loss, here is the work they have done, now you can pay them,” said Carlson.

Even some contractors favored assignment of benefits reform.

Florida Roofers, Sheet Metal and Air Condition Contractors Association Legislative Counsel Cam Fentriss said that unlike many other contractors, the FRSA supports some changes in the assignment of benefits.

“We just think it is over-reaching, after all it is the property owner that has contracted with the insurer not us,” said Fentriss.

Fentriss said that the FRSA would rather make the property owner and contractor co-payees so that the two parties would have to negotiate a price before a claim check is cashed.

Disagreements over the assignment of benefits provision threatened to undermine the whole bill. As a result, lawmakers instead approved a bill that did little to reform the law.

“It is much harder to change things than maintain the status quo,” said Fentriss.

Florida Association of Insurance Reform Executive Director Jay Neal is among those who are disappointed.

“We found the process to be superficial at best,” said Neal. “To call something a bill of rights should be comprehensive and it is not.”

“The question is whether or not we get another bite of the apple,” said Neal.

Burgess acknowledged that this year’s effort to achieve a “bill of rights” was tougher than he expected. But, he said, he is not giving up.

“I believe we will get another chance next year,” said Burgess about the assignment of benefits. “What I intend to do is to build a better case for it.”