Senate panel hears of ‘stupefying’ increase in insurance litigation
“No other state has experience a phenomenon remotely like this.”
By Michael Moline on February 4, 2019
Florida isn’t the only state that allows assignment of benefits, or AOB agreements, involving insurance policies.
It is the only state, however, that allows the one-way attorney fee, requiring insurers to cover policyholders’ legal costs in litigation over claims since 2013.
That, an actuary with a National Insurance group says, explains a near doubling of AOB-related lawsuits against carriers in Florida.
“No other state has experienced a phenomenon remotely like this,” James Lynch of the Insurance Information Institute told members of the Senate Banking & Insurance Committee.
He also cited a Florida Justice Reform Institute study that found a more than 100-fold increase in AOB litigation since 2000.
”This is a stupefying increase,” Lynch said.
“I can comfortably say that no other state has experienced a phenomenon remotely like this — either in insurance or anything else,” he said.
That argument was the most compelling to date on whether Florida should reform AOBs and the one-way attorney fee statute, which was intended to even the odds for policyholders taking on deep-pocketed insurance companies, said committee chairman Doug Broxson, a Pensacola Republican.
“We have a dynamic that started in early 2000 with one claim, and now we have 175,000 claims,” he said. “What happened?”
Broxson has introduced legislation (SB 122) restricting one-way attorney fees to named insured and beneficiaries — and not to contractors who proffer AOBs to policyholders in exchange for quick repairs. Critics — including insurance companies, business interests, and conservative organizations, that blame the fee system for escalating litigation and premium increases.
Representatives of such organizations repeated their arguments during Monday’s hearing. Contractors were present, but weren’t able to make their points fully as the meeting ran up against its 6 p.m. adjournment.
Broxson promised they would get their chance when the committee reconvenes in two weeks. But he plans a vote on his bill at that time.
”We’re trying to get all the arguments on the table and let everybody have a fair chance of dealing with this issue,” Broxson said.