Chip Merlin | Property Insurance Coverage Law Blog | December 3, 2018
The National Association of Public Insurance Adjusters held its mid-year meeting last week and the topic of assignment of benefits, commonly referred to as AOB’s, was on the agenda. Lisa Miller, an insurance lobbyist and regulator I have come across for over twenty-five years was the speaker on the topic.
Miller is a very bright and an excellent communicator. When Lisa Miller speaks about what the insurance industry has on its legislative agenda, I listen carefully. I would suggest Florida roofers and contractors do so as well. Here is a little about her background:
As a former deputy insurance commissioner, Lisa represents and advises property insurance companies representing 25% of Florida’s six million personal and commercial residential policies. She served as lead advisor to Florida’s Property and Casualty Insurance Fraud Task Force and serves as regulatory consultant to investors who are entering Florida’s insurance market. Lisa is the exclusive insurance lobbyist and technical consultant for the Florida Realtors association with 140,000 members in all Florida counties.
She made several points about AOB’s which my notes reflect as follows:
- AOB’s were not historically required for restoration contractors to get paid by insurance companies. They are a recent phenomenon being promoted by a small group of law firms to the restoration insurance industry.
- AOB’s have led to a significant increase in first party property insurance lawsuits. She showed me statistics after her speech which indicated at least a quarter of all first party property insurance lawsuits are being brought by restoration contractors and roofers.
- Premiums are rising as insurance companies face many needless lawsuits. She claims she has many examples of lawsuits being “leveraged” by the restoration contractors and their lawyers to pay amounts greater than what is legitimately owed. She has examples of some law firms who do shoddy legal work or who represent contractors with repetitive shoddy construction practices.
- AOB’s allow some contractors to rip off policyholders duped into the belief they will get quick quality work done and a quick claims handling by the contractor. Instead, those policyholders find they get no or little work done and are outside parties to a lawsuit owned by the contractor and their lawyers. I expect that she will have a number of policyholders testify about this occurrence at upcoming hearings in the Florida legislature.
- The Florida Attorney’s Fees statute protecting policyholders was never intended to protect parties not part of the insurance contract.
Here is what she says, in part, on the topic in her blog:
The hustle is real and it’s happening every day in Florida.
Under an Assignment of Benefits (AOB) contract, unsuspecting homeowners are being duped into signing away all their insurance policy rights to a third-party repair or renovation contractor. When the contractor submits their often inflated claim to the insurance company and the insurer refuses to pay it – the contractor sues, aided by lawyers able to game Florida’s one-way attorney fees and bad faith laws to collect all their attorney fees.
It’s a vicious and costly game, where insurance companies settle frivolous lawsuits only because it’s cheaper than going to trial. AOB abuse has created an additional $1 billion of inflated insurance claims over recent years – costs eventually passed along to all homeowners through higher rates. And the problem is getting worse.
Last year, I went to Tallahassee to speak with legislators about this issue and even ended up testifying about this and other issues. In Tallahassee, I also met with several longstanding and reputable restoration contractors about all the hassles they now have with insurance companies which did not exist fifteen years ago. I agree. The insurance industry property claims departments have changed a lot since I started working in this field in 1981. Computers and big data drive claims processes with many claims processes all geared towards one goal—pay less on claims. There is a war going on in the field between restoration contractors and the property insurance claims industry. We see it every day and for every alleged “bad” example by restoration contractors, I and other Merlin Law Group attorneys are told horrendous stories by former insurance adjusters of how they are forced to underpay claims.
Our firm does represent contractors. We are not one of those mill law firms that teaches gamesmanship to contractors about how to leverage AOB’s so that insurers are in a no-win situation. A number of my attorney colleagues that do so are also horrible litigators and have had numerous significant sanctions against them. Those instances will be used by Lisa Miller and the insurance industry in their fight against AOB’s.
A number of public adjusting firms actually represent restoration contractors. Yet, other public adjusters are furious with the restoration industry and have provided me factual instances of those contractors working with those same shoddy attorneys as runners. Whether the newly elected Florida Attorney General Ashley Moody or local state prosecutors will do something about these actions wait to be seen. To the extent they are prosecuted or indicted, I can guarantee those instances will also be shown by Lisa Miller and the insurance lobby as a need for AOB reform.
How all this will play out is anybody’s guess. But, the sweeping Republican victory does not bode well for the restoration construction industry and the future of AOBs in Florida. The insurance industry is in bed with Florida Republican leaders who have stated that AOB reform is a priority for them.
I hope those republicans and other leaders remember how important it is to support reputable contractors to get paid to do a first-rate job. Cheap, illegal and improper construction is easy to do and hide—at least for a while. I made the following comment last week and believe those making public policy should reflect on it and allow good contractors a means to enforce their ability to make a living against an insurance industry hell bent on reducing claims payments anyway they can:
Contractors are a core group that help restore our communities after catastrophes. Those contractors that come from far away communities and do quality work just as they do in their own communities are very important because there is no way local contractors can do all the work demanded following a large scale catastrophe. Professional restoration contractors that build with quality methods, materials, and pursuant to all local building codes are not the enemy and should be congratulated for their entrepreneurialism and willingness to work a long way from friends and families.
I really do not like going to Tallahassee in the winter and watch legislation being made. It is like watching sausage being made, at best. But, it looks like Tallahassee will be an inevitable place for me, again. I would suggest those good and reputable Florida restoration contractors and roofers prepare for a fight because you have one on your hands.
Thought For The Day
The American legislative process isn’t well suited to large and complex measures.
—George J. Mitchell