Florida AOB Reform

AOB Reform Has Finally Come! Pending signing by the governor, the law takes effect July 1, 2019.

Florida has been plagued with problems associated with Assignment of Benefits (AOB) regarding property insurance.  What started out as a great tool to help insureds get their property repaired quickly got out of control once certain actors began taking advantage of the system.  Most AOB lawsuits are brought by a handful of attorneys. Roofing estimates began appearing for more than double the market rate. Water claims have tripled in cost.  The one-way attorney fee provisions in Florida’s insurance law made the problem worse. If a roofer or water remediation company charged double or triple, they still got paid the amount the insurance company estimated. However, they had an incentive to inflate their bills as they would get a few extra dollars and their attorneys were free due to the one-way attorney fee provision in Florida. In other words, they had no risk and everything to gain.  Now, they will have some risk.

Many of the bad actors would also take advantage of the insureds.  In the last two years, only a handful of insureds our attorneys spoke with understood they assigned their insurance claim away. Many thought the contractor accepted the amount paid by the insurer. We have been retained by homeowners to fight AOB companies for recession of the contract, lien disputes, and failure to perform. There was little recourse for the homeowner. In fact, one contractor was arrested after receiving insurance funds, the insured’s deductible, not making the necessary repairs but did file suit against the insurance company for more money.  Insureds were also caught off guard when their contractor charged 2-3 times more than other contractors estimated and that there was a lawsuit against their insurance company on their claim.

In 2000, there were approximately 1,300 AOB lawsuits which grew to 79,000 in 2013 and more than 135,000 in 2018.  In Duval County, the number increased from 1,000 AOB lawsuits in 2013 to well over 5,000 in 2018.

The Florida Legislator has finally made some changes that should bring some relief and curtail much of the fraud.  By a vote of 25-14, the Florida Senate passed SB 122 / HB 7065 on April 24, 2019.  The governor is expected to sign the bill into law.    Most importantly, the bill requires proper notice to the insureds of the AOB implications, provides consumer protection, and eliminates one-way attorneys’ fees. Here is a breakdown of the bill provisions that are most helpful:

  • The Contract must include specific language warning of the rights being given away and potential consequences, and the right to rescind without penalty.
  • AOB must be provided to the insurer within 3 business days of execution.
  • AOB must contain a written, itemized, per-unit cost estimate for services performed.
  • AOB company has burden to demonstrate the insurer is not prejudiced by the assignee’s failure to:
    • Maintain records of all services provided under the agreement
    • Cooperate with the insurer in the claim investigation
    • Provide insurer with requested records and documents related to the services provided.
    • Provide a copy of the AOB with 3 days of execution or commencing work, whichever is earlier.
  • AOB company must submit to an (EUO) examination under oath if requested.
  • Must participate in ADR if required by insurer.
  • Acceptance of an AOB is a waiver by the assignee and its subcontractors of claims against a named insured for payment arising from the agreement (no liens).
  • Must provide the named insured, the insurer, and the assignor with a 10-day written notice of its intent to initiate litigation. The notice may not be served before an insurer has made a determination of coverage under 627.70131 Florida Statute.
    • The notice must specify:
      • the damages in dispute;
      • the amount claimed;
      • pre-suit settlement demand; and
      • must provide the named insured, insurer, and the assignor a detailed written invoice or estimate including itemized information on equipment, materials, supplies, number of labor hours, and proof work was performed in accordance with accepted industry standards.
    • The insurer must respond within 10 days by making an offer, requiring appraisal, or ADR under the policy.
  • No More One-Way Attorneys’ Fees
    • If the difference between the judgment obtained by the assignee and Presuit settlement offer is:
      • Less than 25% of the disputed amount, the insurer is entitled to an award of reasonable attorneys’ fees.
      • At least 25% but less than 50% of the disputed amount, no party is entitled to an award of attorneys’ fees
      • At least 50% of the disputed amount, the assignee is entitled to an award of reasonable attorneys’ fees.
    • The insurer must inspect the property within 7 days after the first notice of loss or it waives its right to attorneys’ fees, unless the loss is the result of an declared state of emergency, factors beyond the control of the  insurer, or insured’s failure or inability to allow an inspection of the property.
  • The AOB provisions do not apply to assignees who purchased the property from the insureds or liability claims.

This change in law should help curtail the insurance fraud going on in Florida and lower the average cost of repairs on insurance claims to that of the market rates for roof replacements and general services.

The votes against the bill came primarily from Hillsborough and South Florida senators with the exception of Audrey Gibson (Duval County) and no vote by  Tom Wright (Brevard & Volusia County).

For more information or to read the bill text in full click here.