Florida Insurance Chief Warns of AOB Scams as Storm Gordon Lingers Over Gulf Coast

Florida’s top insurance regulator has issued a warning to residents facing damage from Tropical Storm Gordon, the first major storm to impact the state in the 2018 Hurricane Season.

Florida Insurance Commissioner David Altmaier, an outspoken critic of ongoing assignment of benefits abuse happening in the state, urged consumers to read and understand any documents they could sign in Gordon’s aftermath in a statement Monday.

“As Floridians evaluate damages to their homes and property following Tropical Storm Gordon, it is vital they understand exactly what they are signing,” Altmaier said.

The AOB problem in Florida stems from unlicensed water remediation and roofing contractors who have homeowners sign over their insurance policy rights in exchange for needed repairs to their homes. The contractors, typically working with an attorney, file inflated or fake claims, and then pursue lawsuits against insurers when those claims are disputed or denied. Because of Florida’s one-way attorney fee statute, insurers are left footing the bill for the inflated claims and the attorney fees if the insurer is found to have underpaid the claim by any amount.

Carriers across the state have seen an increase in litigation because of these inflated claims. According to the Florida Department of Financial Services, there were 405 AOB lawsuits across all 67 Florida counties in 2006, and by 2016 that number had risen to 28,200.

Citizens, the state-run insurer of last resort, has borne the brunt of the abuse. It reported in its 2019 rate hearing in June that it would spend $70 million this year defending AOB-related litigation – equal to 17 percent of its total premium.

“AOB abuse has contributed to rising insurance rates and in some cases, unscrupulous contractors have left homeowners with unfinished repairs, liens against their homes and uncovered repair expenses,” Altmaier added. “Homeowners are encouraged to review any documents they are asked to sign and use caution when signing an AOB. Consumers can always file a claim directly with their insurance company to maintain control of the rights and benefits provided by their insurance policy when resolving a claim.”

Consumer awareness is now a key strategy of Florida regulators and consumer advocates, as reform efforts have failed in the Florida Legislature for the last several years.

Florida Chief Financial Officer Jimmy Patronis also issued a warning to consumers to protect themselves against fraud in Gordon’s wake. He has also activated the Florida Department of Financial Services Disaster Fraud Action Strike Team (DFAST) for the 2018 hurricane season. Patronis formed DFAST during the 2017 hurricane season in an effort to temper abuse during post-hurricane recovery efforts. The strike team consists of trained insurance fraud investigators with specialized knowledge of property & casualty fraud and workers’ compensation fraud.

“Possible indicators of post-storm fraud include, a contractor or restoration professional who offered to waive or discount your insurance deductible, received payment and failed to provide repairs, offered repairs at a cash-only, discounted rate and failed to provide repairs, or pressured you to sign an AOB and failed to provide repairs,” DFS said in a statement.

The Consumer Protection Coalition (CPC), made up of Florida business leaders, consumer advocates, contractors and insurance trade groups to raise awareness and fight the state’s AOB problem, echoed Altmaier’s statement.

“Thank you Insurance Commissioner David Altmaier for warning Floridians to use caution when signing an AOB to initiate repairs for potential damage caused by Tropical Storm Gordon,” CPC said in a tweet.

Tropical Storm Gordon was centered over the Florida Panhandle Tuesday, with the National Hurricane Center warning of significant storm surge. A hurricane warning was in effect Tuesday night for the mouth of the Pearl River to the Alabama-Florida border. Maximum sustained winds were near 70 mph Tuesday night as the storm headed north towards Mississippi and Alabama.

Flooding is expected as Gordon could produce total rain accumulations of four to eight inches over the Western Florida Panhandle, Southwest Alabama and Southern and Central Mississippi, as well as in parts of Louisiana and Arkansas, which could see up to 12 inches of rain in isolated areas through late Thursday.

The center of Gordon began making landfall Tuesday night along the north-central Gulf Coast and then was expected to move inland over the lower Mississippi Valley through Wednesday. The storm is expected to rapidly weaken as it moves inland, NHC said Tuesday. It could also produce tornadoes Tuesday night near the coasts of Alabama and the western Florida Panhandle.