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Citizens Property Insurance: AOB reform good for consumers, 'jury still out' on litigation portion

By Karen Kidd | Jul 20, 2019


TALLAHASSEE (Florida Record) – Assignment of benefits (AOB) reforms that took effect earlier this week will be a boon for consumers but it isn't clear whether litigation provisions will reduce lawsuit abuse in Florida, according to a spokesman for the state-backed Citizens Property Insurance Corporation.

"The jury is still out," Citizens Property Insurance media relations manager Michael Peltier told Florida Record, noting that litigation provisions AOB reform went into effect when it was signed in May. "It's still too early to tell. We don't have any hard numbers on litigation trends."

AOB litigation reform is intended to benefit consumers by forcing parties, generally insurance companies and contracts, in an AOB lawsuit to consider reasonable offers, Peltier said.

"In a situation where you have an AOB, the law sets up parameters for who pays attorneys fees based on how different the final claims amount is from what was originally offered," Peltier said. "If both offers are reasonable - and 'reasonable' is something that has to be determined - if generally speaking both parties provide reasonable offers, then each side pays their own attorney fees."

Under AOB reform, if final award in a case is much higher than the original estimate, then the insurance company will pay attorney fees, but if final award comes out to be close to or less than what the insurance company originally offered, then the contractor pays attorney fees, Peltier said.

"It puts skin in the game for all parties in AOB suits," he said. "In situations where homeowners are on their own, the law hasn't changed."

The Florida legislature created Citizens Property Insurance Corporation in August 2002 to be a  not-for-profit, tax-exempt, government entity with a goal of providing insurance protection to Florida policyholders who can't find private property insurance.

The Florida Office of Insurance Regulation defines an assignment of benefits as "a document signed by a policyholder that allows a third party, such as a water extraction company, a roofer or a plumber, to 'stand in the shoes' of the insured and seek direct payment from the insurance company."

AOBs, in themselves, don't have to be especially problematic. AOBs are common in health care, where providers will bill insurance companies on behalf of patients.

AOBs became a problem in Florida, where they became prevalent in water and roof claims across the state, according to the Office of Insurance Regulation's website.

Reform advocates for years asserted that unscrupulous contractors devised a way to game the system of AOBs at the expense of insurance companies and their policyholders and the problems mounted from there. A study issued by the Florida Justice Reform Institute reported that 11 attorneys filed about 25 percent of all AOB-related cases in Florida between 2013 and 2016.

Each new natural disaster seemed to create blooms of AOB-based litigation in Florida.

In May, Florida Gov. Ron DeSantis signed the major assignment of benefits (AOB) reform, Senate Bill 122, which passed the general assembly the previous month.

AOB reforms in the new law took effect July 1, while litigation reforms took effect the day DeStanis signed the legislation, Peltier said.

"As of July 1, consumers will have a little more time to make up their minds as far as AOBs are concerned," he said. "If they change their mind after they have signed one, the law gives them a little more time to weigh their options and make decisions after the fact."

That's important because consumers often make decisions about singing AOBs when they are under stress, Peltier said.

"Often times with AOBs, you have situations like water spewing out of your water heater at 2 in the morning," Peltier said. "Someone comes to your house and you're willing to sign anything just to get the water to stop. The underpinnings of this reform is to give consumers more of a chance made educated decisions about what can be a very expensive repair."

Consumers in Florida now have 14 days after signing an AOB to cancel that agreement if they want, Peltier said. Victims of natural disasters such as a hurricane, who find it difficult to find a contractor, now are able to cancel AOBs if after 30 days no substantial progress has been made toward repairs, he said.

AOB reform also is intended to make things easier on the consumer who finds their repairs the subject of litigation by strongly encouraging insurance companies and contractor to be agreeable about final costs, Peltier said.

"The consumer is the one who has to wait out the legal process," he said. "The faster that both parties can come to an agreement, the quicker repairs are made and the consumer can be made whole."