R Street policy study urges compromise to address Florida’s assignment-of-benefits crisis
While assignments of benefits are a standard part of insurance law in every state, quirks in Florida law have made it a locus of AOB-related litigation. According to Florida Department of Financial Services’ legal-service-of-process data, the number of AOB lawsuits filed in the state grew from just 405 in 2006 to more than 28,000 in 2016.
According to R Street Director of Finance, Insurance and Trade Policy R.J. Lehmann, of particular concern is the state’s “one-way attorneys’ fee” law, which allows plaintiffs’ attorneys to bill hours directly to a losing insurer if the final settlement is even $1 more than the initial offer.
“The potential rewards for bringing litigation are considerable, while the negative consequences are virtually nonexistent,” Lehmann writes. “It is, in effect, ‘heads, I win; tails, you lose.'”
The Legislature previously tried and failed to pass AOB reforms in each of the past five legislative sessions. In the current session, the House has passed reform legislation that generally has support from the insurance industry, while the Senate Banking and Insurance Committee has moved legislation generally supported by the state’s trial bar. Alas, both chambers’ bills appear doomed in the opposite chamber.
Based on Florida Office of Insurance Regulation data, the study finds that, without reform, residential property insurance rate hikes of more than 50 percent over the next five years are projected in South Florida’s Broward and Miami-Dade counties, Northeast Florida’s Clay and Duval counties and Central Florida’s Orange, Seminole and Osceola counties.
“Florida lawmakers should pursue a compromise that includes at least those elements common to all of the legislative proposals: namely, that policyholders be granted a seven-day period to rescind assignments of benefits and that assignees be required to detail the scope of the work to be performed, as well as prove they are certified to perform that work,” Lehmann said.
The study also proposes a compromise to address the “one-way attorneys’ fee” issue. While preserving most of the formula for attorneys’ fees prescribed in the House-passed legislation, R Street proposes removing the provision that would sometimes shift insurers’ attorneys’ fees to the plaintiff.
“The fees would remain ‘one-way,’ but they would no longer be, as they are now, theoretically unlimited,” Lehmann writes.
