TALLAHASSEE, FLA. 1/24/18-More than 125 insurance agents from across Florida, along with members of the Consumer Protection Coalition (CPC), march to the Florida Capitol on Wednesday to highlight the need for Assignment of Benefits (AOB) reform.
COLIN HACKLEY PHOTO

Almost five years after Florida lawmakers clamped restrictions on assignment-of-benefits agreements and two years after they effectively outlawed AOBs altogether, state appeals courts may have finally put an end to one creative way that had been used in attempts to get around the law.

Florida insurance industry advocates said some players, though, will likely continue to seek new mechanisms to skirt the laws that took away what was once a highly lucrative business model for a number of contractors and policyholder attorneys.

“I’m sure they’ll still come up with a way to try and get around the statutes,” said Tiffany Roddenberry, an attorney with the Holland & Knight law firm who was involved in two recent AOB appeals. “But at least on this, the appeals courts have come out against it and are in agreement.”

In the most recent decision, Florida’s 5th District Court of Appeals late last week upheld a Marion County judge’s ruling that an organization known as Holding Insurance Companies Accountable (HICA) had no standing to sue Tampa-based American Integrity Insurance Co. The case was one of several HICA had pursued for years against American Integrity and against Security First Insurance, two of the largest insurers in the state.

It all began in 2019, as the insurance litigation crisis in the state worsened. The Florida Legislature that spring approved House Bill 7065, which became the landmark statute 627.7152 and put new limits on AOBs in an attempt to reduce lawsuits.

HICA argued in the appeal that it was not a contractor, only a service that advocated on behalf of homeowners. The AOB law, including its rules requiring an itemized listing of damage to the property, signed agreements, notices of intent to file suit, provisions to allow insureds to rescind the agreements, limits on attorney fees, and other provisions, did not apply, the organization said.

Leonard Caruso, a homeowner in The Villages who had sustained some wind damage to his roof, had filed a claim and hired Noland’s Roofing Inc. to make the repairs. Caruso signed a directive to pay, essentially instructing his insurer, American Integrity, to pay the roofer. He also signed an AOB contract with HICA, which calls itself a business that helps enforce homeowners’ rights under their insurance policies, the appellate court explained.

But the courts held that HICA principals had pledged to give recovery from the lawsuits to Noland’s Roofing, its chosen contractor. That is the same as an AOB, the trial and appellate court judges noted.

“As the trial court found, this mandatory pass-through of benefits from HICA to Noland’s Roofing places the assignment within the broad reach of section 627.7152,” Judge Harvey Jay wrote in the 5th DCA’s Jan. 3 opinion. “Even though HICA will not personally scale Caruso’s house to repair his roof, it is seeking funds to facilitate those repairs.”

The Florida Legislature in 2019 had mandated that AOBs comply with all provisions of the assignments law. And because the HICA assignment agreement did not do that, it is invalid and unenforceable, the court noted.

The ruling followed similar recent decisions: one by the 5th DCA in December in another HICA suit filed against American Integrity; one in May involving American Integrity; and another in February 2024, by the 2nd DCA, involving Security First. The 2nd District Court also in 2022 ruled against another contractor, Richie Kidwell’s Air Quality Assessors, in yet another American Integrity case. The court found that Air Quality’s agreement with a homeowner was, in fact, an AOB and did not comply with the 2019 law, despite Kidwell’s arguments that it was an assessment of damage, not an assignment of benefits.

Perhaps seeing the futility of pursuing further appeals, HICA in December tried to drop its appeal of the Caruso suit. But the 5th DCA refused to accept the dismissal “because the issue presented is one of importance and for which a published decision would be helpful,” the judges noted, citing the precedent of a 2016 court ruling.

The recent appellate decisions are considered significant victories for insurance companies that have battled AOB suits for years, said William Large, president of the Florida Justice Reform Institute. Large and Roddenberry penned amicus curiae briefs in two of the 2024 appeals, on behalf of the insurance industry.

“This appeal presents an issue of paramount importance to Florida’s property insurance industry: ensuring the application of legislative reforms designed to prevent abuse of assignments of benefits,” reads the amicus brief in the December 5th DCA HICA appeal, decided Dec. 23, 2024.

AOBs may have started as a way to make it easier for storm-stricken homeowners to leave the hurricane restoration and insurance recovery work to others. But by the mid-2010s, several contractors and their attorneys had learned to game the system and take advantage of one-way attorney fees, generating thousands of unnecessary lawsuits against insurers and abusing the legal system, Large and others have argued.

“Studies have confirmed those abuses, and underlined further that AOBs were one of the driving forces of insurance-related litigation in Florida since 2000,” the Justice Reform Institute’s brief noted. The Institute’s own 2019 study, authored by industry consultants and lobbyists Mark Delegal and Ashley Kalifeh, said the number of lawsuits brought by AOB holders had increased by 16,000% in the two decades since 2020.

The recent appeals were expected after the 2019 AOB law was adopted, and it has taken five years for courts to nail down the full reach of the statute, Large noted. This means insurers can now know the extent of the law for actuarial purposes. It’s unlikely the HICA suits will be appealed to the state Supreme Court.

And although Florida lawmakers in 2022 in a special legislative session specifically put an end to assignments of benefits, the multiple lawsuits by Holding Insurance Companies Accountable shows the lengths that some contractors will go to try and get around the statutes, attorneys said.

“It always surprises me the imagination that some of these people have,” Large said.

And in instead of AOBs, some restoration companies continue to pursue similar agreements under the name of “directives to pay.” The 5th DCA addressed that issue only in passing in the Jan. 3 opinion.

“I do not think this decision was so much a commentary on ‘directions to pay’ as it is on what qualifies as an assignment of benefits under FS 627.7152,” said south Florida attorney Michael Packer, of the Marshall Dennehey law firm. “I think the 5th DCA, following the lead of the 2nd DCA, is sending a message that they are not going to look favorably on these attempts to circumvent the requirements” of the 2019 AOB statute.

Photo: In January 2018, more than 125 insurance agents from across Florida, along with members of the Consumer Protection Coalition, marched to the Florida Capitol to highlight the need for AOB reform. (Colin Hackley photo)

https://www.claimsjournal.com/news/national/2025/01/07/328273.htm

 

Fla. Tort Reform Bill Aims to Pick Up Where Lawmakers Left Off

By William Rabb | March 1, 2023

Outside of insurance attorneys, plaintiffs’ lawyers and some doctors, few people in Florida may be familiar with what are known as letters of protection.

But critics say the instruments, in which doctors agree to take a share of the judgment in an injury lawsuit, are responsible for greatly inflating some medical costs, which are often paid by liability and auto insurers.

And now, thanks to a tort-reform bill filed Wednesday, those letters would have to be disclosed by plaintiffs.

It’s just one of a multitude of what some are calling “monumental” legal changes proposed by House Bill 837, which was submitted by Florida Rep. Tommy Gregory, R-Lakewood Ranch.

Gregory

Few people this year were talking publicly about another round of reforms designed to limit litigation costs for insurers, after Florida lawmakers approved sweeping legislation in December. But after huddling quietly over the last few weeks with the Florida governor and the newly sworn Republican leaders of the House and Senate, along with some of the biggest business and legal reform groups in Florida, Gregory has drafted a bill that checks the remaining boxes that property-casualty insurers and other corporations have been asking for.

“This has been a key priority for the business community,” said George Feijoo, a former Florida insurance regulator and now a government affairs consultant at Floridian Partners. “It’s a perfect alignment of the governor and the Senate and the speaker on these issues.”

Some plaintiffs’ attorneys were caught off guard by the bill.

“This came out of nowhere,” said West Palm Beach attorney Gina Clausen Lozier, who represents policyholders in claims litigation. “They’re really trying to tie up all the loose ends.”

No more attorney-client privilege on treating physicians for plaintiffs. In Worley vs. Central Florida YMCA, the Florida Supreme Court in 2017 decided that when claimants’ attorneys refer their injured clients to doctors for treatment, the financial relationship between the lawyer and the doctor does not have to be revealed in discovery. Without that, the jury can’t fairly decide if the physician has an incentive to inflate medical treatments and costs, said William Large, president of the Florida Justice Reform Institute, which has lobbied for tort reforms.

The Worley decision has stuck in the craw of the insurance industry for years, because insurers’ payments to their own medical expert witnesses are considered discoverable in litigation. HB 837 ends the perceived double standard. “There is no lawyer-client privilege under this section when: A communication is relevant to the lawyer’s act of referring the client for treatment by a health care provider,” the bill reads.

50% at fault means no recovery. Florida statutes have allowed juries to allocate responsibility for an accident or negligent act that caused harm. HB 837 states flatly that if a plaintiff is found to be more than 50% at fault, he or she cannot recover damages in a lawsuit.

Policy limits equal damage limits. If two or more third-party claimants make competing claims on a single incident, which, taken together, would exceed the policy limits, an insurer cannot be liable beyond the policy limits, the bill reads. The claimants will be entitled to a prorated share, as determined by the court or arbitrator in the case.

Medical costs must be real. The bill would require that evidence provided by plaintiffs in injury claims must be limited to the “amount actually paid, regardless of the source of payment.” That means that if the injured party has health care insurance, the amount paid by insurance should be explained and damages should not be based on unsupported medical estimates.

Feijoo
If the claimant has signed a letter of protection with a medical provider, circumventing health insurance, the plaintiff’s demand must still be guided by what health coverage would have paid. If the injured party has no medical insurance, the Medicare reimbursement rate should be considered.

Letters of protection. The letters are big reasons why medical costs and damages in an injury verdict have often seemed higher than what a health insurer would normally pay for treatment, critics have said. A Justice Reform Institute white paper in 2019 argued that even if an injured person has health coverage, the plaintiff’s lawyer might recommend an LOP in order to avoid damage awards based on the lower, negotiated rates generally paid by health insurers to medical providers.

In addition, some providers sell their LOPs to medical lien-purchasing companies, or factoring companies, which can pay less than the doctor’s claimed amount, but still more than a health insurer would pay.

Under HB 837, all letters of protection, along with the amount the third-party factoring company agreed to pay the doctor, would be divulged in the personal injury or wrongful death lawsuit proceedings. Doctors’ bills would have to be itemized and must include procedure codes where possible.

No more multipliers. What Senate Bill 2D did for property insurance litigation, HB 837 would do for auto and liability insurance claims litigation. Thanks in part to another 2017 opinion by the Florida Supreme Court, courts have allowed plaintiffs’ attorneys to use a multiplier, on top of a “Lodestar” factor, to calculate higher fees when they prevail in litigation, in many cases. The idea is that fee multipliers help ensure that qualified law firms will accept difficult cases, or will travel distances when other lawyers can’t be found.

Gregory’s bill would allow only the Lodestar fee, except in rare circumstances when evidence shows that competent counsel could not otherwise be retained. Lodestarwas the name of a federal court decision that set out a formula for determining reasonable attorney fees and is widely followed in federal litigation.

Bad-faith claims. While SB 2A in December raised the threshold for making bad-faith claims against property insurers, HB 837 extends that to auto and liability insurance claims. Mere negligence by an insurer would not be sufficient to sustain a bad-faith action, the bill notes. And the judge or jury would have to consider whether the insured and the insured’s attorney acted in good faith and may reduce damages accordingly.

Insurers have for years complained that Florida law encourages unwarranted third-party, bad-faith claims by law firms looking to recover damages in excess of policy limits. The reform bill would give a “safe harbor,” barring a suit if the insurer pays damages or rectifies violations within 60 days of being notified.

One-way attorney fees. At the heart of Florida’s property insurance crisis, many insurers have said, were Florida statutes and court rulings that granted hefty attorney fees, even if the insured prevailed by only a marginal amount in court. Gregory’s bill simply repeals Florida Statutes 627.428 and 626.9373, which authorized the fee structure. While SB 2A ended one-way fees for property insurers, HB 873 would effectively end them for claims litigation against other types of insurers, including surplus lines.

The bill also would strike another section of state law, which now reads: “The provisions of s. 627.428 do not apply to any action brought pursuant to this section against the uninsured motorist insurer unless there is a dispute over whether the policy provides coverage for an uninsured motorist proven to be liable for the accident.”

Large
At the two special sessions of the Florida Legislature in 2022, insurance bills crafted by the governor and legislative leaders sailed through both chambers virtually unchanged. But at the regular session, which begins March 7 and lasts for 60 days, things may be a little different, Tallahassee insiders and lobbyists suggested. With more time for lawmakers to review and more corporate interests involved, it’s possible that some provisions in HB 837 could be revised before the bill is finalized.

But probably not by much.

After hearing the business community’s cries, DeSantis “is taking on the trial bar in dramatic fashion and is leading Florida towards a more predictable legal environment,” said Large, of the Justice Reform Institute. “And he’s poised to deliver.”

https://www.claimsjournal.com/news/southeast/2023/03/01/315602.htm