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Stop AOB Abuse and Frivolous Lawsuits Costing Floridians Billions

April 2, 2019

TAMPA, Fla.--(BUSINESS WIRE)--Apr 2, 2019--Floridians are in for sticker shock when they see their annual property insurance premium. Some might think the rate hikes are caused by recent hurricanes, but a little-known phenomenon called Assignment of Benefits (AOB) abuse is one of the main drivers causing the increase.

An AOB transfers the rights to an insurance claim to a third party, such as a contractor. It gives third parties authority to file claims, make repair decisions and collect insurance payments on behalf of, and sometimes without the knowledge of, the homeowner. AOBs are used with health insurance to streamline the medical claims process, but some contractors involved with property insurance claims use it to inflate cleanup and home repair costs. Some contractors even file claims-related lawsuits without the policyholder’s knowledge or consent.

How prevalent is this issue?

  • Florida has experienced a 90,000% increase in AOB lawsuits since 2000, according to the Consumer Protection Coalition, clogging an already overburdened judicial system with frivolous claims.
  • A December 2018 Insurance Information Institute (I.I.I.) study found that Florida’s auto and homeowner policyholders, through their insurance companies, have had to pay approximately $2.5 billion in legal costs since 2002 (Personal Injury Protection or Physical Damage auto claims in Florida are also ripe for AOB abuse).
  • These skyrocketing costs don’t include excess claim settlement payments that I.I.I. estimates have also cost Florida auto and home insurance customers billions of dollars.

Current law does not require a plaintiff’s attorney who sues an insurance company and loses to pay the insurance company’s legal fees. But an insurance company must pay the attorney’s fees if the plaintiff prevails. This “one-way attorney fee” law is the primary incentive behind attorneys and contractors conspiring to take advantage of homeowners. Florida is the only state where the one-way attorney fee is combined with an assignment of benefit.

If a contractor has a signed AOB, they can demand, for example, $40,000 for a claim that an insurance company, using claims experts, determines should cost $10,000. The contractor files a lawsuit and only needs to receive a judgment for $10,001 to trigger attorney fee awards, many totaling six figures. The policyholder does not receive a dime of these fees. In his first State of the State Address, Gov. DeSantis said, “I hope the Legislature passes legislation to reform the issue of AOB, which has become a racket.”

There are two pieces of proposed AOB legislation designed to stop this abuse– Senate Bill 122 and House Bill 7065. These bills have many consumer protections, including that the contractor must provide a written estimate of the repairs before the work begins, which often doesn’t happen currently.

The Office of Insurance Regulation estimates that consumers will see 10% annual increases (between $600 Million - $1 Billion) in their premiums for the foreseeable future because of AOB. Florida’s homeowners are bearing the brunt of this hidden tax, which is subsidizing this cottage industry that specializes in profiting off of the misfortune of others.

About Jeromy Barrett

Jeromy is uniquely qualified to speak about this issue. He is a fourth generation property insurance agent who is licensed in 12 states and has been a full-time agent for 10 years. He also has a claims adjuster license in six states and has also served as vice president of his family’s general (residential) contracting business. Visit https://www.barrettharding.com/about-us/ to learn more about his agency.

View source version on businesswire.com:https://www.businesswire.com/news/home/20190402005095/en/

CONTACT: Media Contact:

Jeromy Harding

Jeromy@BarrettHarding.com

727-505-9987

KEYWORD: UNITED STATES NORTH AMERICA FLORIDA

INDUSTRY KEYWORD: PROFESSIONAL SERVICES INSURANCE

SOURCE: Barrett Harding Insurance

Copyright Business Wire 2019.

PUB: 04/02/2019 07:30 AM/DISC: 04/02/2019 07:30 AM

http://www.businesswire.com/news/home/20190402005095/en