Citizens Insurance seeks to eliminate 'one-way'
attorneys fees when suits include assignments
Article Courtesy of The Sun Sentinel
December 10, 2016
The only reason the average premium for Citizens
Property Insurance Corp. customers is around $2,500 a year is a state
law limiting increases to 10 percent a year.
Otherwise, increases in claims payouts over the past year would have put
renewing Citizens customers on the hook for an average 65-percent rate
increase, and the average renewal bill would have been about $4,000 this
year, Citizens Chief Risk Officer John Rollins said at Wednesday's
meeting in Maitland of the state-run company's Board of Governors.
But even with the 10 percent annual cap, Citizens' insurance bills are
headed to $4,000 a year unless the state legislature finally takes
action to restrict claims abuses by water damage repair contractors and
their attorneys, Citizens officials warned. Those rising costs — from
$367 per Citizens multi-peril homeowner policy in 2011 to a projected
$2,083 in 2017 — will result in premium increases for all customers and
could eat into the company's $7.5 billion surplus if left unaddressed,
warned Barry Gilway, Citizens President and CEO.
Citizens unveiled a 2017 legislative wish list for new laws officials
say would help staunch hemorrhaging losses from water damage claims,
primarily in Miami-Dade, Broward and Palm Beach counties.
Topping the list: Preventing attorneys from collecting fees in lawsuits
involving assignments of benefits.
This year, the wish list does not seek to end or restrict policyholders'
ability to assign benefits to third-party contractors. Previous efforts
to restrict assignments have hit dead ends in the legislature, and
courts have affirmed assignment rights in numerous cases.
Yet, assignment of benefits, or AOBs, are at the heart of the claims
crisis, Citizens and other insurers contend. Policyholders seeking
repairs following ruptured pipes or appliances in their homes are often
coerced by water damage restoration contractors into first signing over
their right to seek reimbursement from the insurance companies.
Armed with assignments, contractors and their attorneys then bill the
insurer for repairs and file suit if the insurer denies the claim or
offers to pay less than the invoiced amount.
A handful of law firms, mostly in South Florida, routinely file hundreds
of lawsuits, according to state civil court data. From January to
October, 8,097 new lawsuits were filed against Citizens, a 30-percent
increase from the previous year, according to Citizens documents. As a
result, Citizens projects a $100 million loss from its personal lines
accounts next year, Gilway said. That loss could swell to $184 million
in 2018 if the trend continues, he said.
"In my opinion, it is just absurd," he said. "It is a completely
Dan Sumner, Citizens chief legal officer and general counsel, said the
increase in assignments are driven by what's called the one-way
attorneys fee statute which allows plaintiffs to collect attorneys fees
from insurers "if there is a judgment or a decree in favor of the
insured and against the insurer in any amount."
In other words, if an attorney for a water restoration company named in
an assignment sues an insurance company over a claim, then negotiates a
settlement of as little as $1 over the insurance company's initial
offer, the insurance company must pay the attorney's bill for pursuing
The provision has been law since 1893 and is intended to provide access
to competent counsel for insurance claimants, according to a 2005
Florida Senate report.
Topping Citizens' legislative wish list is a call to prohibit attorneys
representing vendors working under assignments from seeking fees under
the one-way attorney fee statute when lawsuits are filed.
Other items on Citizens' legislative wish list:
Require assignments to include written itemized
estimates of work to be performed by the assignee.
Require a copy of the assignment agreement be
furnished to the insurer no later than three days after executed by
Limit assignments to just the work being
performed and not the whole claim.
Prohibit fees in assignments for check
processing, overhead, profit or cancellations.
Provide consumer protections, including the
ability to rescind the assignment.
Prohibit contractors from placing liens on
properties for work completed under assignments and paid for by
Whether reforms are possible remains to be seen,
officials said. Many Senate committee assignments have not yet been
made, including for the chairmanship and memberships of the House
Insurance & Banking Subcommittee.
In addition, proposals for laws restricting policyholders' ability to
assign benefits of their policies to third-party providers — the trigger
of skyrocketing volumes of lawsuits and legal fees — have failed over
the past four years as lawmakers loyal to insurance companies and
plaintiffs attorneys have locked horns.
Christine Ashburn, Citizens' vice president of communications,
legislative and external affairs, called the push for legislative
reforms "our number-one priority."
Ashburn warned that the claims crisis, if left unaddressed, would end up
increasing the number of customers covered by the so-called state-run
insurer of last resort following the shift of a million policies to
private insurers since 2012.
"This is absolutely looking to unravel all of our depopulation
successes," Ashburn said. That's because private insurers, whose annual
rate increases aren't capped at 10 percent, are also reporting increased
losses from claims abuses. Under the state's "clearinghouse" program,
Citizens must sell policies to homeowners who cannot find coverage
priced at or below Citizens' rates from a private clearinghouse
Plus, the number of private insurers unwilling to write policies in
Miami-Dade, Broward or Palm Beach counties — where most of the claims
abuses originate — is increasing, Gilway said, leaving many homeowners
with no choice but Citizens. Meanwhile, private companies' willingness
to participate in the state-mandated takeout program has been steadily
decreasing as the best risks have already been mined.
Citizens projects the number of personal residential policies will
increase from around 300,416 to 352,268 if the legislature fails to act
during next spring's session, which is scheduled to run during March and
April. Bills can be filed anytime before that, and committees will begin
convening in January to consider the bills.
Two organizations that last year campaigned unsuccessfully for AOB
reforms said they stand ready to support Citizens during the 2017
"Clearly, assignment of benefits abuse is leading to an alarming number
of lawsuits against insurers that are increasing the cost of insurance
for everyone,'' said Mark Wilson, president and CEO of the Florida
Chamber of Commerce, which organized the Consumer Protection Coalition,
in a news release.
Logan McFaddin, regional manager of the Property Casualty Insurers
Association of America, said by email that the reforms sought by
Citizens would "help address the cost drivers that are putting financial
strain on Florida consumers."
Lee Jacobson, spokesman for the Florida Justice Association, a lobbying
group for trial lawyers, said "removing consumer protections including
the attorneys fees is never a positive application of the legislature's
power." But he said the association agrees with some of the items on
Citizens' wish list, including the three-day notice of assignment
execution "as long as the insurance company shows up to adjust the loss
within the same period of time."