04/22/2022
Florida Insurance Carriers Say 'We Tried To Make AOBs Impossible, But Our Customers Keep Suing Us Anyway!'
written by Garrett Miller
The carrier's long hard battle against Florida Assignment of Benefit agreements seems to be coming to its natural head: individual litigation. At a Florida Office of Insurance Regulation rate hearing in September, the actuarial manager for Southern Fidelity Insurance Co was reported as saying that some contractors now avoid AOB agreements, but their attorneys have encouraged policyholders to file suits against insurers.
Prior to recent years, Section 627.428 of the Florida Statutes authorized the award of attorney's fees to certain prevailing parties in disputes with insurers. This was in conflict with a well-established common law rule applied across the majority of the rest of the nation, in which neither prevailing plaintiffs or defendants are entitled to recover attorney's fees unless authorized by contract or statute. Justice R. Fred Lewis, writing for the Florida Supreme Court in Ivey v. Allstate (2000), says "It is clear to us that the purpose of this provision is to level the playing field so that the economic power of insurance companies is not so overwhelming that injustice may be encouraged because people will not have the necessary means to seek redress in the courts."
Appointed by the late Governor Lawton Chiles, Justice Lewis sat on the Florida Supreme Court for 20 years, from December of 1998 until January of 2019. Carlos G. Muniz was appointed by Governor Ron DeSantis 11 days later, and helped to pass the sweeping AOB reform legislation in July of that year, removing the historically game-altering one-way attorney fee provision in favor of a tiered payment schedule. Previously an attorney filing suit against a carrier could collect any and all of their (reasonable) fees from said carrier if awarded even a single penny of the disputed amount. Due to the passage of SB 76 it now falls to an attorney to win fifty percent of any disputed amount in order to fully recover fees from the carrier, and only if they are directly representing the insured, as assignees (contractors) are longer eligible to receive any compensation for attorney fees.
This places an inordinate amount of power within the carrier's hands, who hold essentially all of the control in writing the contract of insurance. Not to mention the literal armies of attorneys at their beck and call, and comparatively infinite resources to defend said contract. The intention of the one-way fee was to discourage injustices perpetrated by the insurance companies against their own insureds, for whom the financial burden of costly litigation creates a massive hardship that the multi-billion-dollar corporate conglomerate carriers do not suffer.
The current argument from insurance carrier advocates goes something to the tune of the one-way provision is being abused and misused by service providers, who underhandedly and connivingly convince unwitting homeowners to sign away their insurance rights, proceed to extensively overinflate their invoices, and then sue the carriers as contractual beneficiaries of said rights. This "contractors are the boogeyman" argument is as tiresome as it is outdated, and thank goodness the average consumer has the wits to see through the sham, but many will willingly accept whatever they are told by their elected officials, regardless of which lobbyist happens to be padding their pockets that month (Brown & Brown Insurance, one of the south's largest reinsurers, donated over $34,000 to Mr DeSantis during his run for Governor in 2018 https://www.opensecrets.org/members-of-congress/ron-desantis/summary?cid=N00034746&cycle=2016 ).
Even the Florida Division of Consumer Services monopolizes on the fear mongering. Taken from their own website's description of the AOB: "Signing an AOB can be helpful with navigating the claims process, but if misused, it can lead to harmful consequences for the homeowner. For example, you have a pipe leak in your home that causes water damage. If you call a restoration company to make repairs and sign an AOB that transfers your insurance rights to the company, the company can file a claim on your behalf and be paid directly."
Forgive me if I misunderstand, perhaps someone can explain to me why this would qualify as a "harmful consequence". The work is performed, the damages remedied, and the cost covered by insurance, thus fulfilling the contract of insurance between carrier and insured. If the carrier disputes the amount of work or the amount of the invoice, under an AOB it then falls to the professional contractor who performed the service to define and defend said service. If the carrier refuses rightful payment, and the contractor uses their own resources to file suit in order to be properly indemnified, and wins regularly enough for it to be a rampant state-wide issue, why is the blame for rising insurance costs falling to the contractors?
Perhaps, and just bear with me here, if the insurance carriers had not been intentionally underpaying claims for decades, the one-way attorney fee would not have been a necessary protection to begin with. If the carriers were historically winning the suits they so adamantly point the finger at being the cause of their financial woes and rising insurance costs (Citizens reported a $129 million profit last year), they wouldn't have had to shell out so much in attorney fees to plaintiffs who won against them in court. I'm not saying that fraud and abuse doesn't exist within the industry, that would be rather naive... but I do contend that it would be equal or greater naivity to assume that none such fraud and abuse exists on the carrier's side of the equation. To pin all of the state's insurance issues on a handful of mitigation service providers in South Florida is not only disingenuous, but insulting to the intelligence of the carrier's own clientele.
Florida insurance providers and the lobbyists who bow to them are already hard at work to counteract any potential profit losses, and have passed legislation (SB76) that allows them to reduce coverage for roof replacements, only pay a set percentage of actual hurricane losses, and reduces the amount of time homeowners have to file named-storm damage claims by 33%. Additionally, it gives carriers the right to sue any contractor who presents an AOB without a "good faith estimate" up to $10,000 for each "violation". This comes close on the heels of the 2019 legislation (HB7065) which restricted contractor's abilities to impose administrative fees, check processing fees, penalties for cancelled contracts, or even collect attorney fees if forced to sue the homeowner for breach of contract. The same bill also caps emergency service fees at $3,000, and explicitly prohibits a contractor from collecting anything beyond the deductible from the homeowner. Meaning, in part, that the contractor shoulders the potential burden of non-recoverable depreciation, law & ordinance requirements, and any other line items the desk adjuster arbitrarily decides they don't pay for.
This has caused many Florida contractors to shy entirely away from Assignment of Benefits agreements, relying solely on their service agreement with the insured in hopes that the carriers will indemnify their insureds. The sad reality is, it is not in their financial interest to do so, and they will employ every possible method to avoid doing so, from propaganda to policy changes to political lobbying. This has not taken very long for the wave of mistreated customers to shift from relying on their contractor to relying on their attorneys to enforce their insurance contracts. The recent legislation stripping this right from the contractors has resulted in the natural response of educating the insureds. Where a good reputable contractor used to be able to advertise taking the burden and stress of an insurance claim away, it now falls to us to place the full industry knowledge squarely on the shoulders of the insured, and consequently all of the headaches that come with it. Unfortunately for the carriers, despite paying those lofty premiums and signing those poorly written contracts, their customers are still smarter than they think.
So in response to the ill-founded assertions and accusations of the corporate puppets, I relay the following message to the insurance carriers of the State:
"We'll stop suing you when you start playing by the rules.
Sincerely, Your Insured."
