Addressing Florida’s assignment-of-benefits crisis
Top Points
- Under an assignment of benefits, the beneficiary of an insurance contract may transfer the right to collect benefits to a third party.
- 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.
- A 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.
- 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.
- Competing bills have been introduced in the state House and Senate. The insurance industry supports the House-passed bill. The state’s trial bar supports a Senate bill that has passed the Senate Banking and Insurance Committee.
- Without reform, 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.
Executive Summary
With one month left in this year’s regular legislative session, 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.
Last year, the state House passed a measure that would strip assignees from being able to make use of the one-way attorneys’ fee. It failed to progress in the Senate. The legislation that passed the House this year would instead create a formula for attorneys’ fees. Depending on how large the spread between an insurer’s initial offer and the final payment, fees could be awarded to the plaintiff, the insurer or neither party. If this also proves too controversial for the Senate, a further compromise would be to keep the legislation’s formula for when and how large attorneys’ fees could be, while removing the provision that would sometimes shift insurers’ attorneys’ fees to the plaintiff.
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