Insurance abuse reforms advance in legislature

Article Courtesy of The Orlando Sentinel

By Ron Hurtibise

Published 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 said.

"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.