Claims abuse reform bill advances, but senators want attorneys, insurers to compromise

Article Courtesy of The Orlando Sentinel

By Ron Hurtibise

Published January 26, 2018


Score one for the trial attorneys in their long-running battle with Florida’s property insurers over third-party claims assignments, but this year’s war is far from over.

The state Senate Banking and Insurance Committee rejected a proposal favored by insurers and OK’d a bill supported by plaintiffs attorneys and water damage restoration contractors on Tuesday.

But several committee members said they expected changes to the attorney-friendly bill in upcoming hearings and called for negotiations by lawmakers to continue.

Sen. Anitere Flores, R-Miami, painted by the property insurance industry as unwilling to support reforms to prevent fraudulent claims, called for insurers to guarantee that rates would go down if changes they seek are enacted. Insurers have blamed several years of rate increases on claims abuses.

“There’s been a lot of testimony on how much rates will go up if there’s no action,” she said. “But if we take away the problem … they can’t tell us how much rates will go down. I have a real problem with that, and I think other members do as well.”

Tuesday’s meeting was the latest chapter in a years-long battle between Florida’s property insurers and trial lawyers over an affidavit called an “assignment of benefits” (AOB).

Contractors require homeowners to sign an AOB before commencing repairs because it gives them authority to bill insurers on homeowners’ behalf.

Insurers say contractors abuse that authority by inflating invoices or performing unneeded work and then filing suit when insurers balk at paying the invoice.

Attorneys counter that insurers are too slow to pay legitimate invoices, especially when policyholders try to expedite repairs by signing an AOB.

Last fall, state-run Citizens Property Insurance Corp. said its average water claim cost increased from $10,279 in 2012 to $19,800 in 2016 and the percentage of claims resulting in lawsuits increased from 12 percent to just under 50 percent over that period.

Statewide, the number of water damage claims that resulted in lawsuits increased from 989 in 2011 to 8,488 in 2016, according to data from the Department of Financial Services.

For a second year, Sen. Dorothy Hukill, an Ormond Beach Republican, filed a bill intended to prevent contractors and their attorneys from collecting attorneys fees from insurers that agree to settle lawsuits for any amount — even $1 — over their initial claim settlement offers.

Those fees are claimed under the so-called one-way attorney fee provision, in place in Florida law for more than a century, that was originally intended to allow homeowners to sue their insurers without risking having to pay for the insurers’ legal fees if their challenges fail.

Insurers, however, say that contractors and attorneys have been using the one-way attorney fee law to extract excessive money from insurers. They want to preserve homeowners’ ability to use the law for suits they file themselves while barring third parties from using it on their own behalf.

Hukill’s bill -- unacceptable to plaintiffs attorneys — was met with a competing bill by Sen. Greg Steube, R-Sarasota, that would bar insurers from including the legal fees they pay to settle lawsuits in the pool of expenses used to calculate insurance rates the following year.

Steube’s bill was equally unacceptable to insurers.

On Tuesday, the Banking and Insurance Committee rejected an amendment by Sen. Doug Broxson that would have replaced Steube’s entire bill with Hukill’s bill.

But in supporting Steube’s bill, two Republican senators on the committee — Rob Bradley of Duval County and Rene Garcia of Miami-Dade County — said they wanted to see compromise, and wouldn’t vote for Steube’s or Broxson’s versions if either advanced to a vote of the entire Senate.

“Here we go again,” said Bradley. “I encourage folks to continue talking to one another.”

Next, the bill faces consideration by the Judiciary and Rules committees.