February 24, 2016
It's been more than 10 years since Florida suffered the catastrophic loss and expense of a direct hit from a major hurricane.
But even as Florida avoided a physical crisis, a fiscal crisis was brewing — a scheme to take advantage of unsuspecting homeowners and extract money from property insurance companies, driving up home insurance rates for all.
Desperate for dollars as Florida suffered through a severe recession and housing slump, some contractors began figuring out another way to make money. Taking advantage of a provision of law called "assignment of benefits," or AOB, these shady operators joined forces with unscrupulous trial lawyers to take over homeowners' rights under their insurance policies, inflate damage claims and even file lawsuits in the homeowners' name — often without the homeowners' knowledge.
This month, the state Office of Insurance Regulation documented part of the fallout from the assignment of benefits scam: a 46 percent increase in water damage claims and a 28 percent increase in costs since 2010. That doesn't even take into account other damages like roof replacement claims, another favorite of assignment of benefits schemers.
Those who have made a slick cottage industry out of assignment of benefits litigation have gotten quite bold in their marketing. One advertises, "You may qualify for a NEW ROOF with your homeowners insurance." Another brazen company actually advertises a kickback: "We pay $1,000 commission. We send the invoice directly to the insurance company."
The impact of assignment of benefits-fueled claims on Floridians' home insurance costs is direct and severe. Insurance rates are strictly regulated by the state, so all Floridians' home insurance premiums go up because of unwarranted costs that insurance companies are forced to pay due to bloated and bogus claims.
Provisions that were intended to protect consumers are being exploited by scammers, further driving up costs for all homeowners — even those who don't have claims of their own.
For instance, the law appropriately says policyholders don't have to pay the costs of enforcing their policy rights — that burden falls on the insurance company. But in assignment of benefits litigation, trial lawyers and shady repair shops are pushing consumers out of the process, filing a flurry of groundless lawsuits they know won't cost them a penny, even when they're in the wrong.
Proposed legislation would create important consumer protections, including clear notice to consumers that they may be signing away legal or contractual benefits and a "cooling-off" period to fully consider whether assigning benefits is in their best interest.
These balanced reforms keep consumers in the driver's seat of their own insurance policy — as they should be. This fix won't eliminate consumers' ability to assign benefits, but will make it harder for scammers to dupe them. In short, it stops something that adds no value to consumers but greatly increases home insurance costs for everyone.
Scammers are profiting at your expense, even as your rates are going up, by seeking payment for work where they've inflated or overstated their costs. For many people, owning a home depends on affordable home insurance. The Legislature can keep that part of the American Dream within reach of more Floridians by reforming assignment of benefits rules now.