|Date:||June 08, 2016|
One of South Florida's largest property insurance companies has been rebuffed by state insurance regulators for seeking Assignment of Benefits restrictions that were disapproved two years ago.
Clearwater-based Heritage Property & Casualty, which is seeking a 14.9 percent rate increase this year, in April sought to require a mortgage lender's approval before a policyholder can sign over a post-claim benefit to a repair contractor.
The company withdrew the request May 26, a day after regulators warned the filing would be disapproved.
Heritage officials did not immediately respond to requests for comment Wednesday.
Ken Duboff, a North Miami-based plaintiff's attorney who has filed hundreds of lawsuits against insurance companies, called the proposed restriction "an end-around the public policy permitting a post-loss assignment by the policyholder."
Assignment of Benefits is the focus of an ongoing battle between insurers and repair contractors in Florida. Insurers say repair contractors coerce homeowners to sign over the right to claim benefits before starting repair work, then submit inflated claims and sue if the claim is denied or underpaid. Numerous insurers are seeking rate increases in South Florida, citing heavy losses from water claims and lawsuits.
Contractors and their attorneys counter that insurers too often deny legitimate claims and have eroded the value of property insurance with additional restrictions and exclusions.
Insurers continue to seek Assignment of Benefits restrictions despite failure of recent efforts in the courts and the state legislature.
A May 25 email from analyst Cindy Walden to Heritage stated that its policy revision "includes Assignment of Benefits language similar to that disapproved" in filings by Security First Insurance Co. in 2014.
In the 2014 disapproval, regulators told Security First that its filing — which sought the ability to invalidate assignments that lacked written consent of all "insureds" and "mortgagee(s)" named in the policy — violated "the intent and meaning" of state law.
Prior to the disapproval, similarly worded restrictions were in policies filed by Heritage and other companies, including Federated, People's Trust, Florida Peninsula and Tower Hill, in 2012 and 2013 when the state had temporarily stopped reviewing policy language and instead allowed insurers to certify that their policy language complied with the law.
At that time, the office said changes in state law had created "a high number of form filings" that "taxed" its review resources. State law allowed suspension of review if "not desirable or necessary for the protection of the public," the office said.
Some insurers took advantage of the suspension by slipping "egregious" changes into their policies, said Jay Neal, president of the Florida Association for Insurance Reform. But with review reinstated, the state's flagging of Heritage's proposed revisions shows "if someone tries to push the issue, that's something the office will deal with," he said.
After efforts to restrict Assignment of Benefits rights failed in the spring legislative session, state-run Citizens Property Insurance Corp. secured approval of policy changes limiting spending for emergency repairs, preventing permanent work to begin until insurers have a chance to inspect damages and reducing the scope of repairs to just the damaged portions of broken systems.
State regulators signaled to other insurers that they could secure quick approval of identical revisions, and dozens of companies have filed for approval of the same language.
But Heritage went even further in its April filing, analyst Walden said, by making "significant changes" to the approved Citizens language "resulting in more restrictions in areas such as Duties After loss."
"While you do not have to submit the exact language approved for Citizens, the proposed language should not result in greater restrictions," Walden said.
Joe Ligman, a Miami plaintiff's attorney, said, "I am sure that Heritage thoroughly researched the legal consequences of their AOB restrictions and hoped to catch the [state] off guard."