Florida enacts changes for attorney fees in assignment of benefits suits
(May 24, 2019) – Florida enacted changes to attorney fee awards that some say will solve problems related to assignment of benefits lawsuits within the state.
Gov. Ron DeSantis signed the changes (HB 7065) into law on May 23, after the legislature had passed them in April.
The new legislation sets rules for awarding attorneys’ fees in lawsuits disputing claims made under assignment of benefits agreements in residential or commercial property insurance policies.
Assignment of benefits agreements allow third parties to make insurance claims. For example, home restoration companies may offer to make repairs while telling customers they will file claims with customers’ insurance companies, David Sampson, CEO of the American Property Casualty Insurance Association, described to CQ in February.
The policyholder doesn’t pay a deductible, but also doesn’t know the amount the vendor bills the insurance, because the policyholder assigned rights to the vendor through a contract.
“In many cases it’s multiples of what it would cost to actually fix the windshield or replace the windshield,” Sampson said.
If the vendor sues the insurance company regarding the claim and wins, the insurance company then has to pay the vendor’s attorney fees. Nearly 135,000 lawsuits over assignment of benefits agreements were filed in Florida in 2018 through Nov. 9, an increase of 70 percent from the total filed over the last five years, according to the Institute’s report.
Under the new legislation, the amount of attorney fees awarded depends on the difference between the damages recovered by the repair company and the payment offer the insurance company made in response to the notice of intent to sue.
If that difference is less than a quarter of the disputed amount, the insurer can be awarded “reasonable” attorneys’ fees, the law says. 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 repair company can receive “reasonable” attorneys’ fees.
Commissioner David Altmaier of Florida’s insurance regulation office praised the bill signing. “We will better protect consumers from those who would take advantage of them by abusing the Assignment of Benefits process,” he said in a statement.
“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 House passage of the changes.
“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.
Other issues might remain, though. 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.”
By Zoe Sagalow, CQ Roll Call
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