Insurance abuse reforms advance in legislature
Article Courtesy of The Orlando Sentinel
January 28, 2016
Trying again to reduce costs of non-weather-related
water damages for insurance companies, state legislators voted to
advance bills that would bring insurers more quickly into the claims
process and bar licensed contractors from offering referral fees in
exchange for insurance-funded work.
Both bills were advanced by the state House Subcommittee on Insurance
and Banking on Monday.
This is the fourth straight year that lawmakers have considered
restricting assignment of benefits in property damage claims. The
assignments, which damage repair companies sometimes require clients to
sign before starting work, allow companies to stand in a policyholder's
shoes when submitting insurance claims.
The problem is the assignments lead to unnecessary service, inflated
bills and increased lawsuits against insurers, reform proponents argued.
While most of the inflated claims originate from South Florida, assigned
claims are spreading to the rest of the state, argued John Rollins,
chief risk officer for state-owned Citizens Property Insurance Corp.
Rollins said a recent analysis showed that assigned claims cost the
insurer twice as much as claims without assignments. The cost doubles
again when assigned claims end up in court. Litigated claims with
assignments cost four times as much as non-litigated, non-assigned
claims, Rollins said.
A bill filed by Rep. Matt Caldwell, R-Lehigh Acres, would prohibit
assignments of benefits until after the insurance company has been
notified of the loss, except in emergencies.
The bill also would give the policyholder the right to cancel an
assignment agreement within three days and require assignment contracts
to include language notifying policyholders of the right to cancel.
Repair companies operating under an assignment would be required to
accept the same obligations as policyholders, including filing proofs of
loss and being questioned under oath.
Repair companies would be required to notify insurers of assignments
within three days and would be barred from filing liens against
homeowners to collect the difference between what the insurer pays and
what the repair company claims is owed.
In response to complaints that insurers too often drag their feet
responding to claims, the bill would tighten response time frames from
14 to 10 days to acknowledge a claim has been filed, from 10 to seven
days to begin an investigation into a claim and from 90 to 60 days to
pay or deny claims.
Caldwell called the bill an "elegant solution" that addresses concerns
of insurers and policyholders. "This bill tries to strike a balance and
keep from infuriating one side or another to the point we can't get
something done," he said.
But Lee Jacobson, spokesman for the Florida Justice Association, a
lobbying arm for trial lawyers, voiced several issues with the reform
proposals. Time restraints on policyholders' right to assign benefits
violates constitutional property rights, Jacobson said. It's also a
problem that insurers are given 10 days to acknowledge a claim while
homeowners have only three days to notify their insurers of damage, he
"That's giving them three times the amount of time to simply say, 'We
received your claim,'" Jacobson said.
The other bill, which would prohibit licensed contractors from offering
referral fees, stemmed from claims by insurance companies that water
damage repair companies offer incentives of $1,000 or more to plumbers
to alert them about policyholders with plumbing emergencies. The
referral fees, not currently prohibited, often inflate the bill that
repair companies submit to insurance companies, supporters said.
The bill also would prohibit licensed contractors from interpreting
policyholders' insurance coverage unless they are licensed separately as
insurance adjusters and would require detailed written estimates of the
cost of repairs before companies can sign contracts with policyholders.