Florida

House wades into property insurance controversy

News-Service-Florida-Logo-68x25BY | Jim Turner
The News Service of Florida

THE CAPITAL, TALLAHASSEE, November 14, 2017……… A House committee on Tuesday backed changes to a controversial practice that insurers and business groups blame for “skyrocketing” property-insurance rates in Florida.

But critics contend the proposal is aimed at reducing the power of trial attorneys and would tilt settlements toward insurance companies.

The House Judiciary Committee approved the proposal (PCB JDC 18-01) to revamp the insurance practice known as “assignment of benefits.” The bill, in part, would seek to curb litigation about claims and impose new reporting requirements.

Rep. Jay Trumbull, a Panama City Republican sponsoring the measure for the committee, called the proposal — backed by the state insurance commissioner and the state chief financial officer’s office — a “consumer protection” effort that encourages settlements to avoid the expenses of litigation.

“I believe this is something that is straightforward enough, levels the playing field enough, and honestly saves the consumer on the backend,” Trumbull said.

In assignment of benefits, homeowners in need of repairs sign over benefits to contractors, who ultimately pursue payments from insurance companies. The insurance industry has argued that assignment of benefits can lead to fraud and increased litigation, driving up costs.

Rep Joe Geller, an Aventura Democrat who voted against the proposal, said protections are needed in the bill for small contractors. He also questioned a formula that would change how attorney fees are awarded.

“This is going to chill the ability to make those claims, and it’s going to leave those homeowners uncompensated for their own damages,” Geller said.

The measure establishes a formula that would allow insurers to receive attorney fees when the difference between proposed settlements and judgments are within 25 percent of the disputed amounts.

No fees would be awarded when the differences are between 25 percent and 50 percent.

Contractors would be entitled to attorney fees when the awards are more than 50 percent of the disputed amounts.

Jason Lamoureux, representing the Florida Justice Association, a trial lawyers’ group, said the fee change would heavily benefit insurance companies.

“The way that it’s written will allow insurance companies to continue to deny valid claims, underpay benefits, and even when they’re forced to pay those benefits, they still don’t have to pay the attorney fees in most of those cases,” Lamoureux said.

The House approved a similar measure at the end of the 2017 legislative session. But the issue, which has been an annual struggle for lawmakers, still has a long way to go.

The Senate did not advance a separate proposal during the 2017 session. The House bill is filed for the 2018 session, which starts in January.

State-backed Citizens Property Insurance Corp. has blamed assignment of benefits for fraud and abuse in water-damage claims, primarily in Southeast Florida, that have led to rate hikes.

But plaintiffs’ attorneys and contractors have countered that assignment of benefits helps homeowners hire contractors quickly to repair damage and forces insurers to properly pay claims. Plaintiffs’ lawyers and contractors also contend that assignment of benefits can help prevent consumers from having to fend for themselves in insurance disputes.

Under the committee proposal, insurers would have to be notified when assignment-of-benefits agreements are executed; contractors would have to notify insurers in advance of intent to file lawsuits; contractors would have to include written estimates of the work, down to itemized costs; and policyholders could end the assignment-of-benefits agreements within seven days without penalties.

The Office of Insurance Regulation said rates will increase as much as 10 percent a year without changes to assignment of benefits, with a potential that some insurers will discontinue writing policies in certain areas of the state.

Insurance Commissioner David Altmaier said the assignment-of-benefits situation, highlighted by water damage claims in Southeast Florida, is among the top reasons property insurance rates are increasing.

“This goes a long way to moderating those water-loss trends,” Altmaier said of the committee proposal.

Also, Altmaier said the proposal protects property owners when entering into assignment-of-benefits agreements.

“If they enter into an assignment of benefits with a contractor, and that contractor gets into a dispute with their insurance company, the consumer is held harmless,” Altmaier said. “So regardless of who wins the dispute between the insurance company and the contractor, the insured is going to have their claims paid to their satisfaction.”


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