AOB reform not enough
The Assignment of Benefits (AOB) contract has been a favorite tool of Florida plaintiff attorneys and contractors in manipulating unsuspecting homeowners to sign over all of their insurance rights and then produce inflated claims, plus hefty (and sometimes outrageous) attorney fees. While last year’s legislative reform has helped stem the AOB abuse to a degree, there are other litigation issues driving ever-increasing costs.
Citizens Property Insurance last week reported new lawsuits from AOB were down 13% from January through April of this year, compared to the same time last year. While that’s helping keep the number of new lawsuits at bay, it’s merely providing a breather for Citizens and other carriers to catch-up on the excessive number of AOB suits filed prior to the July 2019 reform that get to operate under the old lax rules. Still, AOBs represents 27% of all new lawsuits against Citizens.
And the hurricane claims keep coming, too, months and years after the storm. Citizens reports it received 1,750 Hurricane Irma claims from January 1 to April 30. That’s about 425 per month. Claims Chief Jay Adams said he expects a spike in claims filings between now and September 10, the three-year anniversary of the storm’s Florida landfall and the statutory deadline for filing claims.
While the 2019 reform is helping, Citizens President & CEO Barry Gilway says more must be done. His comments are featured in Amy O’Connor’s must-read Insurance Journal article, a definitive description of what’s happening to Florida’s property insurance market today. Gilway says that AOB lawsuits account for just 30% to 40% of the first party litigation against insurers and that legislative reform for first party lawsuits and Florida’s one-way attorney fee statute is “critical” to turning the market around. He says reforms must ensure plaintiff attorneys “have some skin in the game relative to litigation.”
Of course, that’s just what Senator Jeff Brandes (R-Pinellas) was attempting to do in sponsoring contingency fee multiplier reform in this last session’s SB 914 / HB 7071, together with bad faith reform. He and Adrian Moore, Vice President of the Reason Foundation, make the case on why the need for tort and insurance reform in Florida has never been greater in their recent piece A Tidal Wave of Higher Property Insurance Rates is about to Hit Florida in the Tampa Bay Times.
They cite the “locust swarm of lawsuits driven by unscrupulous contractors sweeping neighborhoods” as part of the problem. In 2019, a year without a major storm, the number of lawsuits against Florida insurance companies was 16.8% higher than in 2018. Less than halfway through 2020, property insurance lawsuits have already tripled the number of lawsuits for all of 2015, with many companies experiencing over a 100% increase compared to last year.
We must remember and remind others that consumers are stuck paying the price ultimately, with regulators approving rate hikes of 20%-60%. Analysts say nearly all Florida customers should expect at least a 20% increase in their homeowners insurance premium this year as a result.
Lawsuit abuse has migrated north from South Florida to include Central Florida, the same area that companies are now canceling policies and/or no longer writing new ones. This adds to the policy count of Citizens, our insurer of last resort, which will put state taxpayers on the hook should there need to be assessments to cover losses from future catastrophic storms.
LMA Newsletter of 6-8-20