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CQ Roll Call

Florida assignment of benefits changes pass legislature, await governor

(April 24, 2019) - Changes in attorney fee awards in assignment of benefits lawsuits passed Florida's legislature and now awaits the governor's signature.

The proposal (HB 7065) passed the state Senate by a 25-14 vote Wednesday after passing the state House by a 96-20 vote on April 11.

 Florida Insurance Commissioner David Altmaier praised the bill's passage in a Wednesday statement, describing it as "a significant step towards stemming the insurance product affordability and availability crisis that has grown from years of compounding AOB abuse."

The bill proposes rules for awarding attorneys' fees "in a suit related to an assignment agreement for post-loss claims arising under a residential or commercial property insurance policy" depending on "the difference between the judgment obtained by the assignee and the pre-suit settlement offer."

If that difference is less than a quarter of the disputed amount, the insurer can be awarded "reasonable" attorneys' fees. If that difference is at least a quarter but less than half of the disputed amount, neither party can receive attorneys' fees. If that difference is at least half of the disputed amount, the assignee can receive "reasonable" attorneys' fees.

On Tuesday, an amendment to freeze 2019 rates and require rate cuts of 7.5 to 15 percent was defeated on a 17-21 vote, the Florida Justice Reform Institute told CQ.

Florida Justice Reform Institute President William Large told CQ before the Senate's passage that he was disappointed the House bill didn't include a fix related to auto glass. "All the principles that we've been arguing about the need for AOB reform in property litigation is just as true in windshield auto glass litigation," he said.

The industry's focus in lobbying might explain why auto glass was omitted. Large said, "I think Citizens Property Insurance did an excellent job of educating legislators about costs associated with property litigation. Because Citizens was focused on property insurance issues, I think legislators didn't understand the impact ... auto glass litigation was having in the state."

"Florida also has a unique attorney fee structure as it relates to AOB agreements as the current one-way attorney fee structure incentivizes abusive litigation in our insurance market," Altmaier said in an April 11 statement after the House passage.

"As a result, Florida remains unique as we are one of the only states currently battling a cottage industry that profits off the systemic abuse of AOBs. However, the impacts of this abuse are not so unique as every policyholder across our state is facing an insurance product affordability and availability crisis," he said.

Insurers have an incentive to pay "slightly inflated" claims because of the "one-way attorney's fees" policy, the Insurance Information Institute explained in a study about assignment of benefits agreements, released Dec. 11.

Nearly 135,000 lawsuits over assignment of benefits agreements were filed in Florida in 2018 through Nov. 9, an increase of 70 percent over the last five years, according to the Institute's report.

A related issue is policies including zero deductibles, and Large described potential downsides to zero deductibles, such as those for auto glass in Florida. "Insurance policies have deductibles for behavioral and financial reasons," he said. "When an insurance policy has a zero deductible, it causes consumers to make decisions that they wouldn't make otherwise. A deductible mitigates the risk that an insured party may engage in reckless behavior."

By Zoe Sagalow, CQ Roll Call

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