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Insurance Consumer Advocate

Sha'Ron James


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Mailing: 200 East Gaines St.
Tallahassee, FL 32399-0308

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Florida's Insurance Test

 

Date: May 02, 2017
Source: Wall Street Journal
Author:   

 

Does Florida’s legislature exist to enrich plaintiffs attorneys or to serve the Sunshine State’s voters? We’re about to find out, courtesy of a renewed political effort to stop a trial-bar scheme that scores insurance paydays at the expense of Sunshine State homeowners.

We’re talking about “assignment of benefits” (AOB) abuse, in which contractors convince homeowners to sign away their property insurance rights to a third party, such as a friendly plaintiffs attorney. When a pipe bursts and the kitchen floods, the attorney sues the insurer, which usually settles to avoid protracted and expensive litigation.

Thanks to court interpretations of a decades-old Florida statute, the insurer is liable to pay attorneys fees if the final payout is even $1 more than the original damage assessment. This “one-way attorney fee” loophole has attracted plaintiffs attorneys like goldrush miners to AOB lawsuits. Florida’s Chief Financial Officer Jeff Atwater counts 28,200 AOB cases in 2016, up from 405 a decade ago.

The Florida Office of Insurance Regulation, led by Commissioner David Altmaier, has launched a webpage of data on how AOB abuse has raised homeowner insurance costs, as insurers factor litigation costs into their rate filings. Buyers of a new $150,000 home in Miami-Dade County can expect to cough up $2,732.95 in annual premiums on average this year and $3,011.71 next year. The regulator calls these projections “sobering,” though homeowners may have a more colorful description.

Last week the Florida House passed an AOB reform sponsored by Republicans James Grant and Rene Plasencia 91-26. The bill would force insurers to pay attorneys fees only if a final judgment or settlement is worth 50% or more of the original settlement offer. If it’s between 25% and 50%, the parties pay their own fees. If the final payout is less than 25% than the original offer, the plaintiffs pay the insurers’ attorney fees.

The bill isn’t perfect, but the sliding scale of who-pays-what-fee would deter plaintiffs attorneys from filing the worst frivolous lawsuits and increase the incentive for reasonable settlements. The reform now moves to the Florida Senate, where President Joe Negron, a Republican, has been a reliable ally of the trial bar. The fate of the AOB reform effort will be a good test of whose side he is on.