AOB Legislation Rolled To Third Reading

Apr 23, 2019

Tuesday, lawmakers took a big step in addressing what property insurance companies have called fraud for nearly a decade. It’s called assignment of benefits. The fix makes several changes that lawmakers believe will help lower the cost of homeowner’s insurance.

Assignment of Benefits or AOB is when a homeowner signs over their rights to a contractor to negotiate directly with the insurance company.

Sometimes this can be used properly and not taken advantage of. But bill sponsor Sen. Doug Broxson (R-Pensacola) says that hasn’t been the case.

"In 2000, there were zero AOB lawsuits. In 2006 there were less than 700, and in 2018 there were over 18,000 property AOB lawsuits," said Broxson.

The reason the number has grown is because of a loophole in the current process. It’s the one-way attorneys fee provision that makes an insurance company essentially pay all the litigation costs. Citizens Property Insurance CEO Barry Gilway says this incentivizes the contractors to file lawsuits instead of trying to work with insurers.

“45% of our claims are litigated simply because we don’t have any opportunity to work with the insured or the contractor to adjust the loss. If we attempt to adjust the loss then they don’t discuss it with us they just bring suit because they know that the plaintiffs cost, there’s no risk, the plaintiffs cost are being paid," said Gilway.

The cost insurance companies must pay is then passed on to consumers through a rate increase. Sen. Broxson’s bill will change the one-way attorney fee provision by not allowing a contractor to use it when an AOB is signed.  

His bill also takes a step further by giving a homeowner the option to fire a contractor and get out of an AOB agreement within 14 days of entering into the contract.

It also requires homeowner’s insurance companies to sell policies without the AOB provision. That would ease the insurance companies mind by knowing an AOB won’t be entered into.

That’s something Sen. Janet Cruz (D-Tampa) liked but also thought it should be required that those policies not cost as much.

"For the exchange of giving up rights presently held by homeowners it only makes since that there be at least a set minimum savings for homeowners," said Cruz.

Sen. Jeff Brandes (R-St.Petersburg) says the legislature shouldn’t tie the hands of insurers by demanding a set amount of savings on non AOB policies.

"The way that its drafted simply says that insurers must provide a 7.5% discount. It doesn’t say up to a 7.5% discount, it says they have to provide a 7.5% percent discount lower cost to the consumer. So that’s just a structural problem with the amendment itself, it’s offering no flexibility," said Brandes.

But Cruz says without the writing in the bill policy holders could be left with the same rates and worse off.

Sen. Gary Farmer (D-Fort Lauderdale) tried to further clarify the logic behind it.

"Without this amendment homeowners, consumers will not get the financial relief their entitled to, based on the representation we’ve heard for years as to the need for this legislation. This is a good amendment this ensures that when we’re taking away these rights that the loss of that value is passed along to consumers," said Farmer.

The amendment failed on a 17 to 21, but not without gaining support from Sen. Tom Lee (R-Brandon).

“I just rise in support of the amendment it’s not a slam dunk, it’s a little bit of a jump ball but given everything that has been laid out in committee. The meetings where we have blocked out the sun saying the world is going to come to an end. One insurance executive after another parading up. You know what I think this is healthy medicine. And I’m going to support it," said Lee.

The bill was placed on third reading. Ultimately legislators look to pass it but wanted to give more time for debate to make sure it will close the loophole that has caused rate increases across the state.

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