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Florida’s Worsening AOB Crisis

March 23, 2019 - 9:00am
Steve Pociask
Steve Pociask
Over the last several years, Florida’s property insurance consumers have experienced some of the largest rate hikes of any group in the country, and it’s not because of extreme hurricanes or floods. Indeed, from 2006 to 2016 Mother Nature gave the Sunshine State a remarkable reprieve from weather-related catastrophes.
So what’s driving up premiums, and how do we fix it?
The problem stems from the abuse of something called assignment of benefits (or AOB), which allows an insurance policyholder to transfer the right to collect benefits to a third party, such as a home repair contractor, who then bills the insurer directly for services. The purpose of an AOB is to streamline the billing process and make it more convenient for the policyholder, but AOBs are increasingly being exploited by unscrupulous contractors.
Homeowners seeking emergency repairs are often emotionally vulnerable and want to expedite the process -- and a growing number are being victimized by dishonest contractors, especially water mitigation companies. Once an AOB is signed, contractors have been caught leaving repairs unfinished, performing shoddy work, and even duping homeowners into paying for the repairs upfront, leaving the contractor to pocket the settlement from the insurance claim.
AOB abuse is fueled by Florida’s unique one-way attorney’s fees statute, which requires carriers to cover the legal costs of plaintiffs (including third-parties acting under an AOB) who prevail in an insurance claim dispute. The insurer is on the hook for the plaintiff’s legal fees even if the lawsuit is settled before judgment is rendered. However, if the insurer prevails, the plaintiff has no obligation to pay the insurer’s legal costs.
Though the Florida Supreme Court has made clear that the original intent behind one-way attorney’s fees was “to ‘level the playing field’ between the economically-advantaged and sophisticated insurance companies and the individual citizen,” lower courts have expanded this narrow interpretation of the statute and opened the door to widespread abuse.
One-way attorney's fees practically invite contractors to submit inflated repair bills to insurers. When the claim is rejected, the AOB allows the contractor to sue the insurance company -- often without the policyholder’s knowledge or consent. If the court awards the contractor more than the insurer’s initial settlement offer, even by just $1, the insurer is saddled with all of the contractor’s attorney’s fees, potentially totaling tens of thousands of dollars.
This structure gives insurers a powerful incentive to avoid a lawsuit and pay even inflated claims. And some contractors are having a field day. A small water leak under a kitchen cabinet can turn into a $30,000 remodel; one company was caught charging $18,000 to put a tarp on a roof. AOB abuse has become so lucrative that some contractors collect handsome referral fees, as high as $1,000, from subcontractors eager to obtain their own AOB from the homeowner so they can sue the insurance company.
Around the state, attorneys are brazen about recruiting contractors and training them on how to exploit the AOB loophole. Slick marketing materials brag that an AOB allows contractors “to stand in the shoes of the insured” and even highlight that pursuing an insurer for bad faith ”becomes an option.”
The AOB crisis has rapidly spun out of control. In 2000, there were just 1,300 AOB lawsuits statewide. But by 2013, that number had grown to more than 79,000, and to nearly 135,000 through November 2018, an increase of 70 percent in a mere five years. Today, AOB lawsuits are still increasing much faster than losses.
Data from Citizens Property Insurance Corporation, the government-backed insurer of last resort, shows that the average non-weather water claim without litigation or an AOB cost $4,430, compared to $29,889 for a litigated AOB claim. From 2013 to 2018, the number of AOB lawsuits against Citizens went up 56,000, costing the insurer $1.4 billion more than if the amount of AOB litigation had remained constant.
As insurance companies face rising legal expenses and excessive settlements, the costs are being passed on to Florida’s consumers. AOB abuse amounts to a hidden tax. A report by the Insurance Information Institute calculated that if the legal costs of homeowners and auto insurers (where AOB abuse is concentrated) had kept pace with nationwide averages, consumers would have saved approximately $2.5 billion -- $120 for every man, woman, and child in the state.
A simple change in the law would go a long way in curbing this abuse. Two bills are under consideration, SB 122 and HB 7065, by the Florida Legislature. The proposals would restore the original intent of the one-way attorney’s fee statute by making it apply only to named policyholders and beneficiaries -- not corporate third-parties. Every insurance consumer in Florida should demand that these reforms be enacted to curb the legalized fraud that has already done so much harm. 
Steve Pociask is president of the American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org.


Bernie’s Vermont prohibits lawyers from political lawmaking office because it’s an obvious conflict of interest. This is why: the laws benefit lawyers the most ... and WE ALL PAY. We need a state constitutional amendment referendum to kick out the elected lawyers from the Legislative and Executive branches. rewrite all state laws so a HS grad understands them. Only allow lawyers in the Judicial branch, or on staff positions of other two branches (to rewrite past laws). Starve a lawyer, feed the poor. Make John Morgan lose weight!

This a is complete Propoganda . Watch The Buisbess of Disaster . Look up ATLA top ten worst ins companies . The CEOs and greedy ins company's are the problem . It's been proven even with all the suits and raised claims they still profit over 30 percent . We can only imagine what they profit without major Hurricane years . 8 yrs of bliss only to fall to 25-30 per profit . Deny Delay Defend . Completely misleading . I go by Facts abs Truth 10 million dollar bonuses ect ect .

For many years ... the insurance industry has been one of Republican-governed Florida's most favored monied special interests ... and Florida has become one of the worst states in the union for consumers to buy and contend with predatory insurance companies. "De-regulate" ... as Republicans are genetically predisposed to do ... and this is what consumers get.

This is a scam and is spinning out of control. It rewards unscrupulous contractors and some attorneys. Fix the problem! This is costing consumers a lot of money and rewarding the undeserving.

Do your research . It's Propoganda Watch Buisness of Diaster Look ATLA top ten worst ins They won't even report there profits ever Because it's so high it's insane until a hurricane . Then it's at 30 percent still . Any working class man could only dream of that .

On10/18/18 following Hurriance which tendered my home unlivable due to past neuroendocrine cancer Causing the loss of my left lobe. I was also 6 weeks was out from aortic valve replacement. I was desperate to get out of my house because of mold and mildew and was assured this company would have me back in my home in about 3 mos. this I’ll fated AOB and my health was causing me significant health problemsthat were knowb in detail by the OWNER OF THE COMPANY WHO HAS TO THIS DATE REFUSED TO TALK TO ME OR REPLY TO ME HIMSELF SINCE HE SIGNED THE CONTRACT. 5.5 mos later I’m still out of my home and have had to move 5 timeS. Up until yesterday the only work on my house was a new roof and torn out insides. Yesterday aft much assertiveness I received 2 packages of outer wall insulation and repeated requests from my insurance for more money. They now have received 65000+ plus dollars timely from my ins company and asked for another 25000 from the ins company. Something is wrong with this process and the company. I did sign it after kind, caring, concerned promises to me in my time of desperation. I’m elderly, single and female and feel duped by this company. This practice is wrong and detrimental to my physical and emotional health. Help us!!

Unfortunately, the only way the insurers will ever return to promptly, fairly and accurately measuring and paying Hurricane losses will be when it makes financial sense for them to do so . If the bad faith cap was treble the amount of the claim ( as the United States Supreme Court has upheld ) , then all of a sudden it would pay off for them to treat people fairly and honestly. Now hiring the professional lowballers would become risky - unless all cards were on top of the table .

The insurers greed leads to many of these lawsuits . Perhaps make AOB contracts more formal , must meet certain requirements ( kind of like how a will must be done a certain way to be enforceable. The lawmakers should ask / require “ what does the consumer get out of this ?” if we cave into insurance lobbying pressure and remove yet another avenue for a consumer to get help ? For example , the current $500k limit on bad faith awards practically guarantees the insurers will hire so called “ independent consultants “ to lowball consumers , who are no match for them . Even if the insured hires a lawyer and pursues it’s claim , the insurers have 60 days to “ fix “ their intentional lowball offers , so where is the incentive for them to fairly and accurately measure and pay the loss - as the law supposedly requires ?


Is AOB being misused? I'm sure. But be sure to remember why. Insurance companies are why lawyers make so much money. They always leave the client wondering why they got denied. They always lowball claims. They always delay. If Insurance companies want a change. Stop the bad faith practices. No a days if you have a claim, you've got to hire a lawyer 1st. Want change. Start with the Insurance companies.

Also , as the amount of Hurricane damages increase ( think multi-family apartment communities often worth $40,000,000.00 , or more , the incentives for insurers to practice sophisticated bad faith increases - because their potential gains are in the millions vs the current cap on bad faith damages of $500,000.00 - which is less than what insurers pay their adjusters and hired gun experts in larger claims ...

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