Assignment of Benefits Reform Moves Forward as Florida House Passes Measure

Assignment of benefits reform legislation progressed in the Florida legislature yesterday.

Lawmakers passed House Bill 7065, one of two key pieces of insurance industry-supported legislation – the other being its companion Senate Bill 122 – that Florida’s insurance regulator and industry and consumer advocates say would help stem the property insurance claims abuse that is leading to higher rates for consumers. Both bills tackle the number one issue that AOB reform advocates say is fueling the abuse: Florida’s one-way attorney fee statute, Insurance Journal previously reported.

While Florida Insurance Commissioner David Altmaier in a statement Thursday called Florida unique for its long coastline, increasing population and complex insurance market, he added that Florida also has a unique attorney fee structure relating to AOB agreements. Altmaier stated the current one-way attorney fee structure incentivizes abusive litigation in Florida’s insurance market.

“As a result, Florida remains unique as we are one of the only states currently battling a cottage industry that profits off the systemic abuse of AOBs,” he said. “However, the impacts of this abuse are not so unique as every policyholder across our state is facing an insurance product affordability and availability crisis.”

Following the approval of HB 7065, Altmaier applauded legislative leaders for their efforts.

“Absent their continued diligence, Florida’s unique AOB crisis is here to stay,” he said.

The bill not only includes certain consumer protection provisions, but also addresses attorney fees by requiring the service provider to give an insurer and the consumer prior written notice of at least 10 business days before filing suit on a claim. The House bill also allows insurance companies to offer a residential or commercial property insurance policy or comprehensive or combined additional coverage motor vehicle insurance policy restricting, in whole or in part, the assignment of post-loss benefits under certain circumstances.

Its passage comes amid pressure from Florida’s insurance regulator and Governor Ron DeSantis in what is now the seventh year the issue has been before state lawmakers.

“After years of such bills being dismissed very early on in the legislative session, the momentum behind this year’s effort underscores the importance of this reform,” Liz Reynolds, regional vice president, Southeast, National Association of Mutual Insurance Companies (NAMIC), said in a statement.

While NAMIC also commended the Florida House for taking this step forward, Reynolds added “there remains work to be done.”

Reynolds pointed to Senate Bill 754 as one example. The bill previously passed the Senate Banking & Insurance Committee in March and applies solely to windshield glass AOB abuse, however, a similar auto glass provision was stripped from the House bill that passed yesterday.

“The amendment removing auto glass from HB 7065 will impair the bill’s effectiveness in addressing all AOB abuse,” Reynolds stated.

Insurer trade group APCIA (the American Property Casualty Insurance Association) has also expressed its support of SB 754, as it has seen the number of AOB auto glass lawsuits skyrocket from 400 in 2006 to 20,000 in 2016.

APCIA praised the House for passing HB 7065 even without the auto glass provision.

“This good public policy has the potential to stop these bad actors from preying on property policyholders and to free up our legal system that has seen AOB lawsuits make up more than half of all litigation filed against insurers statewide for eight straight years,” said Logan McFaddin, APCIA’s regional manager of State Government Affairs, in a statement.

McFaddin added that since 2013, there has been a 70% increase in AOB lawsuits, with 135,000 AOB lawsuits reported in 2018.

“These AOB lawsuits are contributing to the rise in insurance costs, which affect Florida consumers and businesses,” McFaddin stated.

Indeed, Barry Gilway, CEO, president and executive director at Citizens Property Insurance Corp., said in a statement that the passage of HB 7065 will help policyholders.

“As written, this bill will result in lower 2019 rates for some of our policyholders and shorten the time it will take us to provide relief to all of our customers,” he said.

Gilway added that Citizens actuaries are ready to incorporate these changes into their 2019 rate recommendations now pending before the Office of Insurance Regulation.

“While not providing immediate premium reductions to all Citizens policyholders, the legislation would go a long way toward stabilizing rates and shortening the time it takes for Citizens to provide rate reductions to its policyholders,” he added.

Supporters of AOB reform in Florida will look to the Senate next. SB 122 is currently waiting on a vote in the Rules Committee after previously passing the Judiciary and Banking and Insurance Committees in March.

Related:

• Southeast Officials Focus on Curbing Fraud, Rising Auto Rates, Flood Insurance, Distracted Driving
• How the Florida Insurance Industry Hopes to Rein In AOB Crisis
• Report Shows Florida AOB Abuse Worsening as Lawmakers Consider Reforms
• Florida Agents March on State Capitol in Lawmaker Push to Reform AOB
• Florida AOB Reform Efforts Fail Again as Parkland Tragedy Derails Legislative Session
• Attorney, Vendor AOB Lawsuits Top Insurance Litigation in 2017: FJRI Report