Florida up 70% in the Number of AOB Filings Over the Past Decade

05 Apr

While the assignment of benefits (AOB) form is a pretty standard practice in the United States insurance industry, rampant fraud in Florida has led to a shocking increase in the number of AOB filings over the past decade. 

An AOB contract signs over your insurance benefits to a third party such as a contractor or roofing company and allows them to make decisions about the job and bill the insurance company directly for the repairs. This makes it easy for a policyholder to get a repair done and let the contractor deal with the insurance company. 

AOB contracts can definitely make things easier on a homeowner if they are handled fairly, when AOB contracts are abused, which has happened in Florida, it can cause headaches for all homeowners in the state as it pushes up rates due to the cost of covering the fraudulent claims or fighting them in court. 

Florida has gone to the extreme when it comes to AOB abuse. According to data from the Insurance Information Institute (III), in the year 2000 there were about 1,300 AOB lawsuits in Florida. This number was up to 79,000 just three years later and through November of 2018 there were 135,000 AOB related lawsuits, which is an astounding 70 percent increase. 

AOB fraud started in car insurance claims but has since moved into homeowners insurance claims as well as auto physical damage claims including auto glass. 

How Do AOB Claims End Up in Court?

In a typical lawsuit case, the contractor or roofing company overcharges the insurer for work done or in some cases bills the insurer for work they didn’t even perform. The insurer denies the claim due to the overcharges and the shady contractor partners with a less than honest law firm who sues the insurer. Because it is often cheaper to settle than go to court, the insurance company settles. 

Florida law requires the insurance company to cover the legal fees of anyone who brings a suit against them, regardless of who wins the lawsuit, which means there is little to no downside for law firms who bring fraudulent lawsuits. If the insurance company wins the lawsuit they still have to pay the legal fees of the contractor who brought the suit so they end up losing either way. This is why many of them choose to settle and pass their legal costs onto other policyholders via higher premiums for everyone. 

These costs can be huge, in a recent study called ‘Assignment of Benefits Report for Florida,’ the III found that homeowners and auto policyholders have paid about $2.5 billion more than necessary for insurance over the last 12 years due to increased legal costs that relate to the AOB issue. 

While AOB is currently restricted to personal policies, industry experts are concerned that it will soon make its way into the commercial lines of coverage. Commercial policies tend to be more complicated and have specific people that can sign a AOB form but many experts think it is only a matter of time before AOB abuse makes its way into commercial insurance. 

What is Being Done?

While AOB reform has been on Florida lawmaker’s wish list for years, they have not managed to get anything passed. This year, the governor has made AOB reform a priority and a couple of bills are working their way through the legislature. 

SB 122 is a bill that would award attorney fees only to the actual policyholder, not contractors or roofing companies that have a signed AOB form. This would make it more expensive and risky for law firms to bring a lawsuit that has few merits. This bill would also allow insurers to sell policies that remove the AOB clause altogether. Lawmakers believe these changes would help curb the AOB abuse that is hitting Florida. 

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