Insurance rates set to rise as legislature fails
again to enact reform
Article Courtesy of The Sun Sentinel
January 19, 2016
South Florida property owners can expect property
insurance rates to increase because the Florida Legislature failed to
enact laws to curb abuses by contractors and trial attorneys, two
insurance industry trade associations are saying.
In a statement released as the session drew to a close last week, the
Florida Property & Casualty Association blamed Sen. Miguel Diaz de la
Portilla, R-Miami, chairman of the Senate Judiciary Committee, for
failing to bring up a bill that would have "prevented a handful of
vendors and their lawyers from stealing homeowners' insurance policy
rights and using them to pad their own pockets."
"Now, as a result, even without a hurricane making landfall, property
insurance rates are set to skyrocket for all Floridians while a small
group of greedy vendors and their lawyers get rich. Florida deserves
better," the association said.
Diaz de la Portilla, in an interview Monday, shot back at the insurance
industry, saying he brokered a compromise bill intended to rein in
abuses. But the industry "showed their true colors," he said, by
rejecting the compromise because it did not eliminate the ability of
homeowners to assign benefits of their policies to third-party
"There's no question there are issues and different causes to those,"
Diaz de la Portilla said, "including insurance companies underpaying
claims, refusing to pay claims and basically being really good at taking
insurance premiums and not paying when there's a loss."
The dispute stems from a practice known as assignment of benefits that
typically begins when a homeowner suffers a burst pipe or other plumbing
emergency and calls a contractor to dry out the home and repair the
damages. The contractor requires the policyholder to sign over the
benefit of their insurance claim as a condition of starting work without
a large upfront payment, then stands in the policyholder's shoes when
billing the insurance company.
If the insurance company rejects the claim or fails to pay the
contractor's full invoice, the contractor sues the insurance company and
names the policyholder as co-plaintiff.
The Property & Casualty Association, in its statement, claimed the
abuses are driven by "a handful of vendors and lawyers … stealing
homeowners' insurance policy rights and using them to pad their own
Another statement, by the Personal Insurance Federation of Florida,
quoted executive director Michael Carlson as saying, "To say that we're
disheartened on behalf of our policyholders is an understatement."
"It's discouraging and troubling that lawmakers have once again failed
to crack down on AOB abuse in the face of mounting evidence that the
problem is hurting a growing number of Florida's homeowners," Carlson
Several insurance companies have reported plans to increase premiums
next year because of higher claims costs stemming from assignments of
benefits and related lawsuits. State-run Citizens Property Insurance
Corp. said it foresees hiking policy rates in South Florida by 10
percent a year indefinitely unless reforms are enacted. If not for a
state law limiting Citizens from raising rates more than 10 percent each
year, the company would be seeking increases in the tri-county region
between 166 percent and 190 percent for non-wind, non-sinkhole coverage.
Before the legislative session began in January, the insurance industry
mounted an aggressive public relations campaign to support a bill
sponsored by Sen. Dorothy Hukill, R-Port Orange, that would have
prevented lawyers from collecting attorneys fees when litigating
Insurers argue that trial attorneys propelled the increase in claims
abuses over the past decade because of a state law that allows
policyholders to recover attorneys fees if a lawsuit results in an
insurance company settling a litigated claim for more money than
originally offered. The law also protects policyholders from having to
pay attorneys fees if the insurance company wins.
In addition, Hukill's bill required notification to insurance companies
within 72 hours of an assignment, required advance approval by insurance
companies of any invoice exceeding a contractor's original written
estimate and originally imposed a $2,500 cap on emergency repairs made
prior to inspection by insurance companies.
Assignments would have been voided if the 72-hour notification rule
wasn't met or if a contractor submitted an invoice that exceeded the
initial estimate, unless the insurance company approved.
With several weeks left in the session, Diaz de la Portilla convened a
meeting in Tallahassee with representatives of trial attorneys,
insurers, repair contractors and public adjusters.
After hearing the various sides' concerns, Diaz de la Portilla
introduced several amendments to a bill he had filed earlier in the
session. With the amendments, his bill would have required state
licensing of water damage repair contractors, required contractors to
give homeowners written estimates of repair work, required notice of
assignments to insurance companies within five days and limited referral
fees often paid by plumbers to contractors. Contractors with assignments
also would have been barred from placing liens on policyholders'
properties to ensure payment.
But one of the sticking points for the Florida Property & Casualty
Association, according to its statement, was that "Sen. Diaz de la
Portilla's bill would have cemented AOB abuse into place, preventing any
further attempts to stop this abusive practice."
In an interview, William Stander, executive director of the Florida
Property & Casualty Association, said that statement referred to a
provision in Diaz de la Portilla's bill stating that "nothing in this
section prohibits the use of post-loss, partial assignments in
homeowner's insurance claims."
Diaz de la Portilla countered that courts in Florida have long upheld
the rights of policyholders to assign claims benefits to contractors and
providers. "It's not accurate to say my bill would recognize the
validity of [assignments]. Courts have already done this for 100 years."
Diaz de la Portilla's bill was advanced by three committees and awaited
a hearing on the floor of the Senate during the legislature's final two
weeks. But then "I got word from lobbyists that they were working on
keeping it from coming to the floor," he said.
Bills are selected for floor votes by "the Senate president, the rules
chair and the folks who set the calendar," he said.
The Senate president is Andy Gardiner, R-Orlando. Sen. David Simmons,
R-Longwood, is chairman of the Rules Committee.
The Florida Association for Insurance Reform is disappointed that no
reforms emerged from the state legislature, said FAIR senior vice
president Paul Handerhan. FAIR participated in Diaz de la Portilla's
stakeholder meeting and supported his compromise bill over Hukill's,
"Ultimately the only person who's going to pay a price is Florida's
consumer," he said. "There are going to be rate increases. The first
might go [into effect] this summer. That's real. That's happening and
will continue to happen."