By John Haughey
The Center Square
May 24, 2019 10:36 a.m.
Gov. Ron DeSantis did a little housekeeping Thursday as he prepared to lead a 90-member Florida delegation to Israel Saturday for a week-long trade mission, signing into law 25 bills adopted during the recently concluded legislative session.
Among them was House Bill 7065, a hotly contested property insurance reform bill that revises the state’s assignment of benefits [AOB] regulations after seven years of failed attempts.
“I thank the Florida Legislature for passing meaningful AOB reform, which has become a racket in recent years,” DeSantis said in a statement. “This legislation will protect Florida consumers from predatory insurance practices.”
AOB agreements allow property insurance policy holders to sign away, or assign, benefits in insurance policies. The law allows policyholders to trade those benefits in exchange for “upfront work” in an emergency.
The controversial component of Florida’s AOB statute was its “one-way” attorney fee provision, which required insurers to pay legal costs even when they win in court. Critics contend the one-way fee clause “incentivizes” attorneys to file AOB lawsuits as a “can’t lose” business practice.
“This year, we advocated for Florida homeowners and passed reforms to help stop rampant lawsuit abuse across the state,” Florida Chief Financial Officer Jimmy Patronis. “I am proud Gov. DeSantis continues to fight for Floridians and with the signing of this bill, we are empowering families to take back control of their insurance benefits. Ultimately, Florida consumers are the biggest winners with these new and critical protections.”
In heavily lobbied presentations that began in January, two months before the legislature convened, state officials testified the increasing frequency and amounts of monetary awards associated with AOB-related lawsuits drove rate hikes of up to 36 percent for many of Florida’s 6.2 million property insurance policyholders.
According to Florida’s Office of Insurance Regulation [OIR] and Citizen’s Insurance, the state-based “insurers of last resort,” in 2008 there were approximately 90 property AOB lawsuits statewide. By 2018, AOB lawsuits had increased by more than 19,000 percent.
“I want to thank Gov. DeSantis for his quick action on this much-needed piece of legislation,” Citizens President, CEO and Executive Director Barry Gilway said. “This new law represents a major step forward in our efforts to stem rising premiums caused by unnecessary litigation and assignment of benefits abuse. It is going to make a difference.”
Under HB 7065, insurance companies can legally sell AOB-free policies. Carriers can offer three tiers of policies – those allowing policyholders to assign their benefits; those restricting assignments; and those blocking an assignment whatsoever.
The new law will only allow policyholders to collect the one-way attorney fee, prohibiting contractors and attorneys executing AOB agreements from seeking the fees on behalf of policyholders.
Attorney fees would be awarded on a sliding scale to the winning party in a suit, depending on the size of awards as compared to pre-lawsuit settlement offers.
“HB 7065 establishes important consumer protections for property insurance policies by setting forth requirements for the execution, validity and effect of such agreements, and creating a formula that will determine which party, if any, receives an award of attorney fees should litigation related to an assignment agreement result in a judgment,” the Governor’s Office said in a news release. “This reform bill is expected to curtail the exponential growth in AOB abuse that has contributed to rising insurance costs for Floridians.”
The issue was debated during hours-long hearings before committees with representatives of the insurance industry and state insurance regulators pitted against trial attorneys and the restoration industry, who said blame belongs with insurers’ for alleged “don’t pay, slow pay, or no pay” practices in handling legitimate claims.
“Finally, with the signing of HB 7065, homeowners will be armed with valuable tools to protect themselves against predatory vendors who pressure them to sign over their valuable insurance policy rights,” Florida Property & Casualty Association William Stander said. “This new law puts homeowners back in control.”
“It was a long and storied fight to get this bill enacted, but finally Florida lawmakers put partisanship aside and came together for all Floridians,” National Association of Mutual Insurance Companies Southeast Regional Vice President Liz Reynolds said. “Gone are the days of unscrupulous contractors and attorneys preying on consumers and clogging the court system with outrageous lawsuits. Gone are the days when Florida homeowners are victimized again by some bad actors who view AOBs as their personal cash cow.”