Reforms are needed on Assignment of Benefits
Reforms are needed on Assignment of Benefits
For the decade that Florida avoided hurricanes, insurance claims to state-run Citizens property insurance continued to surge thanks to ridiculous sinkhole claims.
Once the sinkhole scam was resolved, a new one turned up.
Called Assignment of Benefits, it involves third-party adjusters offering to take over insurance claims from desperate consumers.
A homeowner summed up the dilemma well in a Florida Chamber of Commerce news release.
“When you’re standing ankle deep in water in your home,” said the homeowner, “the first thing you want to do is get rid of the water. You’ll sign anything to get the work done, and you don’t think about what could happen down the road.”
But what happens “down the road” is that once consumers turn over their Assignment of Benefits rights to the third parties, the end results are too often outrageous lawsuits and inflated claims.
Some South Florida lawyers took a rarely used loophole in the law and cynically exploited it: Florida’s one-way attorney fee law allows policyholders to recover legal costs if the insurer is shown in court to have underpaid the claim.
It’s an understandable idea, but unfortunately it has been abused on a massive scale.
In fact, 50 percent of Citizens’ claims end up in court compared to 12 percent before 2012, a Citizens spokeswoman told the Sun Sentinel.
In 2006 there were just 405 Assignment of Benefit lawsuits in Florida; in 2016 there were 28,200.
Meanwhile, the average cost of a litigated water damage claim in Florida is $34,000 while the non-litigated claim is just $6,000, according to state data.
And the scam has moved from property damage to auto glass repair work.
According to the Insurance Information Institute, the number of auto glass lawsuits increased from 3,821 to 20,367 from 2013 to 2017.
According to the Florida Office of Insurance Regulation, once consumers have signed away their rights, they can’t cancel because it’s a legally binding contract.
Trial lawyers and water remediation contractors favor keeping the current Assignment of Benefits system in place. But Florida Chamber of Commerce CEO Mark Wilson had it right when he said the Assignment of Benefits con game has become so bad that “we can’t ignore it and think it will go away on its own. We have to take action now.”
Citizens, the state’s insurance provider of last resort, has capped coverage at $10,000 for non-weather-related water damage unless consumers agree to use contractors from the Citizens list.
Meanwhile, Citizens is proposing a 10 percent increase in premiums, which doesn’t appear to be entirely due to non-weather claims.
Efforts to eliminate the scams have failed in the Florida Legislature — but there may be hope.
A House bill sponsored by Civil Justice Chairman Bob Rommel, a Naples Republican, would make a series of changes to restrict assignment of benefits.
The bill would not ban Assignment of Benefits, but it would introduce common-sense reforms such as requiring an itemized estimate of services and allowing consumers to rescind agreements within a few days.
It’s well past time for something to be done.
This editorial originally appeared in the (Jacksonville) Florida Times-Union.