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AOB in focus

Ted Bunker - November 20, 2017

Florida lawmakers recently began another effort to rein in abuses of the Sunshine State’s assignment of benefits policy, which lets repair contractors stand in an insured’s place in pursuing claims for things like non-storm related water damage.

Whether reformers have a chance of succeeding remains an open bet, but the odds don’t look good.

The industry has been clamoring for reforms for years. An attempt to mitigate some of the abuse faltered earlier this year when a state Senate panel failed to take up reform proposals that had passed in the House of Representatives.

But renewed movement suggests hope remains. On Tuesday, the House Judiciary committee passed a new reform bill 13-5, sending it to the chamber’s leadership to decide where it goes from there. The next legislative session begins in January.

In the state Senate, lawmakers have kicked around the idea of interposing an alternative dispute resolution process such as mediation or arbitration to head off lawsuits over disputed claims, including those that arise from AOB situations.

The panel, led by Senator Anitere Flores, a Miami Republican, blocked the reform effort that emerged from the House last Spring. Flores cited concerns that the bill favored insurers over consumers.

Meanwhile, rates for many homeowners, especially in the area around Miami, continue to rise.

Insurer of last resort Citizens has asked for 10.5 percent and 10.4 percent average rate increases in Dade and Broward Counties in the Miami metro area, as well as 9.3 percent in nearby Palm Beach County.

About 9 in 10 property insurers are seeking rate hikes for 2018 compared with fewer than half just three years ago, state insurance regulator David Altmaier told a conference earlier this month, according to the Palm Beach Post.

Citizens CEO Barry Gilway told Altmaier in an August rate hearing that without AOB reform, homeowners' premiums may rise for years to come.

Average water claims costs have doubled to $20,000 since 2015, Gilway said, noting that nearly two-thirds of policyholders are facing rate hikes compared with fewer than a third three years ago.

Making matters worse for consumers, some insurers are starting to wall off South Florida – simply walking away from the market by refusing to write new homeowners' business there, citing the skyrocketing costs stemming from AOB abuse.

It’s hard to argue that there’s no need for reforms, but whether voters feeling the pinch of double-digit rate increases in the Miami area can outweigh the influence of trial lawyers who stand behind AOB claimants remains to be seen.

A study released early this year by the Florida Justice Reform Institute said that just 11 lawyers filed a quarter of all AOB-related lawsuits from 2013 to 2016, including one who brought more than 30,000 cases. As Gilway has commented, some lawyers are making a mint on AOB.

And when it comes to elections, money talks. According to data collected and analysed by the National Institute on Money in State Politics, lawyers and lobbyists gave almost $8.5mn to Sunshine State political campaigns in the 2016 election cycle, the most of any industry group.

Money can’t vote, but it can buy a lot of advertising and fund campaign events, which can produce a decisive edge at the ballot box. And 2018 is an election year.