Insurers share blame for billing disputes,
increased lawsuits, lawmakers say
Article Courtesy of The Sun Sentinel
October 31, 2017
Jean-Marie Appleby arrived at her home after work on
a Friday in May “and I opened the front door and all the water started
rushing out,” she said.
The supply line to an upstairs toilet had broken, discharging water into
a nearby AC vent and through the house’s ductwork. Carpeting, cabinets,
wood flooring, plywood under the second-floor carpet and much of the
drywall were soaked.
Appleby had no way of knowing at the time, but she was about to become a
casualty in a war between home insurance companies and water restoration
companies that began in South Florida and spread statewide. The
years-long conflict has motivated insurers to promote their lower-cost
“preferred vendor networks” over independent local companies and put
policyholders like Appleby in the middle of billing disputes and
lawsuits that can delay repairs for months.
Appleby, who lives in Ormond Beach in north central Florida, said she
now knows she should have called an independent emergency restoration
company to begin extracting water from her home immediately that night.
Instead, she allowed her insurer to send a company from its preferred
Had she hired an unaffiliated company, Appleby would have been asked to
sign an affidavit called an “Assignment of Benefits” [AOB] authorizing
the company to seek payment on her behalf.
Insurers see AOBs as an existential threat, and since 2012 have sought
laws — unsuccessfully so far — restricting their use by restoration
But companies outside of South Florida are fighting back, saying they
are being unfairly targeted in the industry’s efforts to beat back “bad
actors” from Miami-Dade and Broward counties that abuse the system by
submitting hundreds of inflated and fraudulent invoices then swamp
insurers with lawsuits to force settlements and payment of legal fees.
In workshops held by the state Senate Banking and Insurance Committee
this month, lawmakers acknowledged that some insurers are contributing
to rising costs by treating legitimate water restoration companies as
so-called bad actors.
Owners of those companies described insurers withholding or dragging out
payments and leaving them with no choice but to sue to get paid.
Dave DeBlander, owner of Pro Clean Restoration and Cleaning in
Pensacola, said he sued last week to force an insurer to pay an $863
invoice that’s been ignored for 90 days.
DeBlander told the committee that more insurers are trying to avoid
dealing with AOBs by coercing customers into using preferred vendor
networks. Dry-outs can be costly, involving multiple humidifiers, fans
and material tear-outs, and preferred vendors enable insurers to control
the scope of work.
Some insurers are “scaring the homeowner,” DeBlander told the committee,
by falsely telling them, ‘If you sign an AOB, your house is not going to
be restored. If you don’t use our preferred vendor, we’re not going to
pay for it.’”
Appleby said while she didn’t feel bullied by her insurer, the company’s
preferred vendor did not get to her home until noon the day after the
flood, leaving the water to soak the house for hours more. The preferred
vendor showed up without proper equipment and didn’t remove saturated
carpets, cabinets and drywall, she said. Ducts were still wet after a
month, mold grew in the house, and she ultimately hired an independent
company to remove the damaged materials. Five months later, the house
remains gutted and the insurer still hasn’t agreed on a price to restore
it, she said.
In interviews with the South Florida Sun Sentinel, restoration company
owners contended insurers challenge nearly every bill they submit.
Jeff Grant, a Tallahassee restorer and president of the Florida
Restoration Association, said companies often send specialists from
their preferred vendor networks to audit his work and invoices, he said.
The review always concludes that his invoice was too high “and
[insurers] want to pay us a fraction,” he said.
State-run Citizens Property Insurance Corp., which this year hired its
own preferred vendor network, decided in 2016 to hire a company called
Lynx Services to review restoration company invoices and identify
“overcharges or unreasonable charges,” according to the document seeking
approval from Citizens’ governing board.
Lynx reviewed 3,229 invoices from water mitigation contractors between
September 2016 and June 2017. The invoices averaged $5,537 and Lynx told
Citizens the work was actually worth an average of $2,258 — or 59
percent less than what the contractors billed.
But Citizens doesn’t treat Lynx’ estimates as the last word. Spokesman
Michael Peltier said the Lynx estimates are used “as a starting point”
to negotiate settlements with the water companies and “do not represent
what is finally paid on the claim.”
Josh Reynolds, owner of Wrightway Emergency Services in Venice, said he
has about 30 open lawsuits with the state’s largest insurer, Universal
Property & Casualty, because that company delays payments or offers
partial payments. In response to criticisms by DeBlander after a
committee hearing in October, a Universal spokesman said the company
employs more in-house adjusters than beforeand pays “valid claims”
faster than at any point in its history.
Reynolds said Wrightway now refuses to work for Universal policyholders
unless they pay up front from their own pockets.
Still, some contractors acknowledge that the negotiation process
requires them to build charges into their invoices that they know will
be surrendered during negotiations.
Brian Christensen, owner of Restoration 1 of Central Florida in Orlando,
called it a “horse trade,” adding, “On average, I’ll give up 6 to 12
percent” of his invoice. “I’m not greedy. I just want to pay my
In 2015, Citizens and other insurers supported a legislative bill that
would have eliminated restoration companies’ ability to use AOBs. That
proposal failed. In 2017, Citizens helped state Insurance Commissioner
David Altmaier draft a bill that would have barred any third party
working under an assignment from collecting so-called “one-way attorneys
Those fees are allowed under a longstanding law granting policyholders
the ability to recover all of their legal fees if they sue their insurer
and win any amount of money above the insurer’s initial settlement
offer. The “bad actors” are using this law to file hundreds of frivolous
suits and collect large sums when insurers decide not to litigate,
The Citizens-backed bill against one-way attorneys fees failed when
Senate Banking and Insurance Committee chair Anitere Flores refused to
bring it up for debate by her committee, saying insurers wouldn’t commit
to lowering rates for policyholders.
In the second of two workshops hosted by the committee on Oct. 24,
several lawmakers and even some insurance industry representatives
acknowledged that legitimate restoration companies have been unfairly
lumped in with fraudulent South Florida companies.
Sha’Ron James, the state’s Insurance Consumer Advocate, said both sides
have valid complaints.
“Third-party attorneys fees are definitely a negative cost driver [for
insurers] and are causing increases in rates for homeowners. That’s a
“But at the same time, many homeowners are using AOBs because they are
frustrated by the claims handling process of insurance companies. That’s
also the reality.”
Participants suggested possible reforms that would temper abuses by both
insurers and water restoration companies while protecting rights of each
Restorers suggested state licensing of restoration companies to weed out
“bad actors,” and deadlines for insurance companies’ adjusters to
inspect damage claims.
Industry representatives, including Altmaier, said if one-way attorneys
fees can’t be eliminated in suits by companies working under AOBs, some
sort of financial risk should be built into the system to penalize
abusive restoration companies that file hundreds of frivolous suits.
James said she favored requiring the sides to participate in alternative
dispute resolution — such as mediation or arbitration — before being
allowed to file a lawsuit.
That would deter litigation “which is where a lot of exorbitant legal
fees are coming from,” she said.