Consumer protection bills are being considered in the Florida House and Senate to stop what is reportedly becoming the next great insurance crisis in Florida. The bills aim to crack down on contractors and remediation companies that agree to perform emergency repairs only if a homeowner assigns his or her rights to benefits under their homeowners’ insurance policy. An assignment of benefits (AOB) is a well-known and accepted means of allowing vendors, such as water remediation companies and roofers, to secure their right to payment for home emergency repairs without requiring up-front payment from the insured homeowner. The homeowner traditionally benefitted by obtaining immediate home repairs without having to pay the contractor first and then having to file an insurance claim to recuperate their money.
However, the mounting concern over AOB claims results from a reported 1,000 percent increase in the number of AOB claims from 2006 to 2014. Many carriers are also concerned that AOB claims artificially inflate costs with expensive and sometimes unnecessary repairs. On many occasions, homeowners are not even made aware they are assigning benefits under their insurance policy and are surprised about any resulting litigation. To make matters worse, some contractors have reportedly filed liens against homeowners when they do not obtain the settlement they believe they deserve from the carrier. Over time, a cottage industry of AOB litigation has arisen resulting in a mushrooming of claims and litigation costs; driven in no small part by the mandatory attorneys’ fees provision of Section 627.428, Florida Statutes. Some law firms are reportedly putting on large seminars for contractors to attract AOB business.
The pending bills would seek to limit AOB claim abuse, in part, by allowing carriers to sell home and auto insurance policies that prevent most post-loss AOBs and by including a provision that an insurable interest does not survive an assignment except to a subsequent purchaser of the property who acquires an insurable interest following a loss. The latter provision is aimed at preventing the recovery of attorney’s fees in cases brought by vendors under an AOB rather than an insured policyholder, since the vendor as a purported assignee would not have an insurable interest under the attorneys fees statue, Section 627.428.
As of the writing of this Note on March 26, 2015, Senate Bill 1064 has passed the Senate Banking and Insurance Committee and House Bill 669 has passed the House Civil Justice Subcommittee. If you would like to track the bills’ progress, follow the following links:
Senate Bill 1064: https://www.flsenate.gov/Session/Bill/2015/1064
House Bill 669: https://www.flsenate.gov/Session/Bill/2015/0669
